Emotion thwarting housing bear market . . . . for now

[schizo2buyORnot]

Survey finds most people believe prices will rise or at least stay steady.

http://www.mercurynews.com/realestatenews/ci_5708210

Commentary on how emotion takes control and drives market direction (up and down) regardless of fundamentals . . . at least for a time.

Emotions are a huge part of investing. Do you think it was earnings that drove the Nasdaq from 1,500 to 5,000, and then back to 1,500, all in four years time? Did earnings get 200%+ better? And then 70% worse? No. Was the Crash of ’29, where stocks ultimately fell by 89%, due to earnings? No. Emotions played a big part in both of those examples.

http://www.investmentu.com/IUEL/2002/20020620.html

The complex nature of housing as an investment (you also live and raiser your family in it) amplifies the emotional aspect.

Is it the “hope springs eternal” emotional attitude of a majority (housing will go up or stay flat THIS YEAR) that is keeping a floor under housing?????

You ignore the role emotion plays in equity markets at your peril. It is frequently the case that fundamentals are screaming one thing and the market, driven by emotion, does exactly the opposite.

[rankandfile]

“Just like the Pied Piper led rats through the streets, we dance like marionettes…swaying to the symphony of destruction.”

-Megadeth, Symphony of Destruction

[lendingbubblecontinues]

“Trolls” thwarting housing bear market….for now

NOT!

[barnaby33]

Somebody left their italics on! That’s one of my favorite Megadeth songs.

Josh

[hipmatt]

I fully agree that emotion has a huge role in this bubble. I have been saying this for a while, once emotion goes on the other side, you will see big price reductions. That time is not here yet.. people are still in denial.

[LA_Renter]

The thing that I see happening right now that can concretely impact the last vestiges of the Boom emotions are the magnitude of the loan resets occuring right now. The subprime implosion got people’s attention and then they shook it off, “what, its contained”, now we are seeing the astronomical rise in NOD’s and foreclosures. Once people truly see the scope of this foreclosure story the psychology will shift. That WILL happen in 2007. California WILL have reached all time foreclosure highs this year with much more to go. It will be bandied about in the media all year along with further talk of some sort of bailout. There WILL be some degree of panic for people that bought near the top and know they can’t make the loan reset without a higher home price. That dynamic will happen from the bottom to the top of the market. Of course this is IMHO.

[Cow_tipping]

We will ahve to see second and third rounds of repo’s.
Like this … FB defaults cos he’s upside down, the bank repos it and sells it for market value, the new FB buys it, and realises its further down from his purchase price and he dumps it, and the bank repeats the process. Maybe that will be the bottom. 3rd or 4th iteration can be OK.
Cool.
Cow_tipping.

[mixxalot]

Discounts starting to hit condo market

I looked at newer condos this weeekend in UTC and Mission Valley. After showing lack of real interest in the overpriced places, the sales person mentioned a discount of 5-8 per cent off of the 550k sales price for the largest 2-3 bedroom/2 bath units. That and they seem willing to pay most closing costs, HOA dues for 2 years and property taxes first year. SO.. this tells my gut instinct to wait at least another year because the prices will continue dropping.

Am I correct? Who knows but I would rather spend less if possible!

[4plexowner]

Cow_tipping – I’m guessing that condos in San Diego’s downtown market will go thru several rounds of foreclosure before reaching their ultimate bottom at rental value

There’s room for several FBs to lose their asses as these condos go from $700K to about $200K

[ibjames]

my wife and I went around looking at all the different for sale signs in the PB area, taking the little sheets of paper with pricing info. The prices really have to dive to make anything affordable. I just have to remember that fundamentals have to prevail

[DaCounselor]

During the last housing downturn in the early/mid 90’s, I don’t recall a massive anti-real estate sentiment here in SD. The issue confronting most folks was the local economy/job market. Of course this issue dove-tails into real estate, but I do not recall folks bashing real estate as a bad investment and therefore to be avoided. I think the general sentiment on real estate has always been to buy as soon as one can afford to do so. And there is a huge difference between not being able to afford a home versus not buying one even if it is affordable because you think the market is going down.

There is an incredible conditioned emotion of Americans to own their home. It is going to be interesting to if and how this powerful emotion will be increasingly subdued as the market evolves.

[Author]

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