Housing & economy doing great…shut down this site!

[scruffydog]

4plex – sorry I thought my post was clear. You will not get your predicted r/e financial Armageddon unless unemployment returns to 90s levels or worse.
Rust – Yes, yes sales are down but so what? When it starts to translate into meaningful lower home prices then I will take notice. So far price fluctuations are statistical noise – not like the minus 40% in above article.

[scruffydog]

4plex – sorry I thought my post was clear. You will not get your predicted r/e financial Armageddon unless unemployment returns to 90s levels or worse.
Rust – Yes, yes sales are down but so what? When it starts to translate into meaningful lower home prices then I will take notice. So far price fluctuations are statistical noise – not like the minus 40% in above article.

[JWM in SD]

“You will not get your predicted r/e financial Armageddon unless unemployment returns to 90s levels or worse.”

Scruffy, this has already been adressed by Rich. I asked you where most of the job growth in SoCal has been in the past several years. You did address that. Ask somebody who used to work at New Century how they feel about employment in the RE business right now.

[JWM in SD]

“You will not get your predicted r/e financial Armageddon unless unemployment returns to 90s levels or worse.”

Scruffy, this has already been adressed by Rich. I asked you where most of the job growth in SoCal has been in the past several years. You did address that. Ask somebody who used to work at New Century how they feel about employment in the RE business right now.

[JC]

http://en.wikipedia.org/wiki/United_States_housing_bubble

Rich has done a great job covering much of the info in the above referenced link, but thought scruffy and others might benefit from this.

[JC]

http://en.wikipedia.org/wiki/United_States_housing_bubble

Rich has done a great job covering much of the info in the above referenced link, but thought scruffy and others might benefit from this.

[donaldduckmoore]

scruffydog, I just don’t understand your mind. I thought the discussion is going to die down. Did you just buy a house and now that you see the neighborhood house prices slide and you cannot accept that house market is going south is a reality? Unemployment data – if you think all of the house bubbles behave the same way, then we do not have to predict which way this market is going to. Reality – there is a house bubble and it is deflating. How fast is it deflating, no one knows. A lot of ppl here want to buy houses but they won’t and don’t want to buy a house when it is still at the peak or near the peak. We are not fueling anti-homeownerism!!!!!

[donaldduckmoore]

scruffydog, I just don’t understand your mind. I thought the discussion is going to die down. Did you just buy a house and now that you see the neighborhood house prices slide and you cannot accept that house market is going south is a reality? Unemployment data – if you think all of the house bubbles behave the same way, then we do not have to predict which way this market is going to. Reality – there is a house bubble and it is deflating. How fast is it deflating, no one knows. A lot of ppl here want to buy houses but they won’t and don’t want to buy a house when it is still at the peak or near the peak. We are not fueling anti-homeownerism!!!!!

[LA_Renter]

“Yes, yes sales are down but so what?”

Does anybody else find it amazing how entrenched the “RE prices do not Fall” meme is with the general public? It’s almost like magical thinking on a very large scale. I run across this all the time, I feel like I am talking to people that have been hypnotized by the NAR.

Scruffy, Sales are down a whole bunch, I mean unit sales are falling below the worst levels of the last downturn in the early 90’s as I have shown using the San Fernando Valley as an example. Now to address your argument; at the peak of the current market people and economist were saying that actual home sales would not fall that much unless unemployment returned to the 90s levels or worse. As long as people have jobs they will continue to buy houses, Yet we are looking at sales transactions plummet across the entire state of California. So, yes home sales can fall with the current rate of unemployment, in fact they can fall further than anytime in this states history. Now go out on a limb with me here. If actual home sales can fall with the current rate of employment then wouldn’t it be possible that home prices can fall with the current rate of employment. I know it’s a stretch. I mean i had to agonize over this but i figured that home sales signifies demand in relation to price and supply and much to my surprise the conclusion that i came up with is that unless demand increases, like if we all win lotto at the same time, then something will have to happen to price. Maybe you can help me with my thinking here.

[LA_Renter]

“Yes, yes sales are down but so what?”

Does anybody else find it amazing how entrenched the “RE prices do not Fall” meme is with the general public? It’s almost like magical thinking on a very large scale. I run across this all the time, I feel like I am talking to people that have been hypnotized by the NAR.

Scruffy, Sales are down a whole bunch, I mean unit sales are falling below the worst levels of the last downturn in the early 90’s as I have shown using the San Fernando Valley as an example. Now to address your argument; at the peak of the current market people and economist were saying that actual home sales would not fall that much unless unemployment returned to the 90s levels or worse. As long as people have jobs they will continue to buy houses, Yet we are looking at sales transactions plummet across the entire state of California. So, yes home sales can fall with the current rate of unemployment, in fact they can fall further than anytime in this states history. Now go out on a limb with me here. If actual home sales can fall with the current rate of employment then wouldn’t it be possible that home prices can fall with the current rate of employment. I know it’s a stretch. I mean i had to agonize over this but i figured that home sales signifies demand in relation to price and supply and much to my surprise the conclusion that i came up with is that unless demand increases, like if we all win lotto at the same time, then something will have to happen to price. Maybe you can help me with my thinking here.

[JWM in SD]

One thing I’ve learned from trading stocks for a while: Volume always precedes price…ALWAYS.

[JWM in SD]

One thing I’ve learned from trading stocks for a while: Volume always precedes price…ALWAYS.

[cyphire]

Volume does precede price. Also – housing prices don’t drop like stock prices, there will be a constant drop to the downside. Right now all the marginal properties are taken off the market and the good houses are selling. They are selling at a discount, but not falling like crazy. This takes time. There may even be some price recoveries, and then they will fall again. Look for a LONG TERM drop in price. It could take 10 years or more. With a snowballing effect as the sentiment of the consumer gets darker and darker. Interest rates will be the real killer. I think that should (I think they will) interest rates creep up, perhaps by 2-3 percentage points over the next few (5?) years, that 30 years will go up also to at least 1-2% minimum and that will be a HUGE driver of house price collapsing.

I think that there is somewhat of a house of cards effect and that any large disruptions, oil crisis, war, political effects, food crisis, health scares, terrorism, will be a tipping point to a new downward trend.

Note: I am not an economist, I am generally an optimist. I think though that the country is still tipped toward a non-existent trickle down tax rationale, and that the middle class is being destroyed. The wealthy areas will not be hit as hard (at least the nice properties) and even the poorer properties will be protected because there is so much money in the various expensive towns. The middle class and even heavily developed upper-middle (Carmel Valley) will start to feel the pain in a year or so. The middle end and lower will fail dramatically. Real wages are not going up, but inflation is (true inflation) and the current mind set of the corporations and the government is to keep the high end in obscene wealth.

Consumer confidence is truly the real measure, and there is still the lagging effect and credit crunch. Credit is still open and the crunching is only starting to happen. Major buyouts and mergers are pointing to lower salaries, not employment – but the trend is increasing.

It’s not a good time to be an optimist – optimists get killed in the early stages of a long-term downward trend!

Just my thoughts… the future will tell!

[cyphire]

Volume does precede price. Also – housing prices don’t drop like stock prices, there will be a constant drop to the downside. Right now all the marginal properties are taken off the market and the good houses are selling. They are selling at a discount, but not falling like crazy. This takes time. There may even be some price recoveries, and then they will fall again. Look for a LONG TERM drop in price. It could take 10 years or more. With a snowballing effect as the sentiment of the consumer gets darker and darker. Interest rates will be the real killer. I think that should (I think they will) interest rates creep up, perhaps by 2-3 percentage points over the next few (5?) years, that 30 years will go up also to at least 1-2% minimum and that will be a HUGE driver of house price collapsing.

I think that there is somewhat of a house of cards effect and that any large disruptions, oil crisis, war, political effects, food crisis, health scares, terrorism, will be a tipping point to a new downward trend.

Note: I am not an economist, I am generally an optimist. I think though that the country is still tipped toward a non-existent trickle down tax rationale, and that the middle class is being destroyed. The wealthy areas will not be hit as hard (at least the nice properties) and even the poorer properties will be protected because there is so much money in the various expensive towns. The middle class and even heavily developed upper-middle (Carmel Valley) will start to feel the pain in a year or so. The middle end and lower will fail dramatically. Real wages are not going up, but inflation is (true inflation) and the current mind set of the corporations and the government is to keep the high end in obscene wealth.

Consumer confidence is truly the real measure, and there is still the lagging effect and credit crunch. Credit is still open and the crunching is only starting to happen. Major buyouts and mergers are pointing to lower salaries, not employment – but the trend is increasing.

It’s not a good time to be an optimist – optimists get killed in the early stages of a long-term downward trend!

Just my thoughts… the future will tell!

[Allan from Fallbrook]

Scruffy, instead of continuing the argument using 1990s employment statistics and how the uber-rich are likely to be unaffected by the downturn, how about discussing this in terms of monetary policy and macroeconomic theory.

This run-up in prices has not been driven by any sense of fundamental underlying value. Hence, it is not sustainable. Rather, it has been driven by cheap, easy money, combined with virtually non-existent loan underwriting standards and kept aloft by real estate “professionals” who fervently believe that prices never go down.

You can look at any market in California right now and the metrics have completely reversed themselves. Sales are down (in some markets like Sacramento, Bakersfield and the San Fernando Valley they are plummeting), and NOD/NOT/foreclosure notifications are skyrocketing, in some cases 150% on a YoY basis (San Diego County is my example here).

How on earth can you believe, let alone push, the assertion that all is well and this is nothing more than a hiccup? I grant that Armageddon is strong word, but a 20% correction in most markets will be devastating, and that is certainly not outside the realm of possibility in that it is occurring right now. Looking at some of the neighborhoods in and around Sacramento right now (Rancho Cordova, Galt, Elk Grove) there are price corrections in excess of 30%. Factor in carrying costs, realtor fees, and closing, and you are talking about a major haircut, especially when you consider that the houses in question are already substantially overvalued to begin with.

You’re not actually David Lereah or Lawrence Yun, are you?

[Author]

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