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The-Shoveler.
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July 4, 2007 at 9:52 PM #63937July 4, 2007 at 9:52 PM #63994
patientrenter
ParticipantI am constantly questioning others here who believe a big price drop (>30%) is in the bag. Nevertheless, I have seen very recent prices on a few properties that truly surprised me. For the last 5 or more years, there wasn’t any such thing as a property with no major problems being offered for more than 20% less than all the others. Now we’re seeing one or two of those in several places at once, and it seems it’s becoming more common very quickly. We know it’s just a sprinkling in the better areas now, and it’s anecdotal.
So do the standard broad price measures show double-digit price drops? Not yet, but it does seem more likely than before. If it happens, it’ll be at the low end first, where inability to pay for loans is most severe. Mortgage investors are beginning to realize repayment of the loan with full interest is a problem, and one no one else will fully take care of for them. A spreading from there to more expensive or desirable markets is not assured, but it makes the higher end markets more vulnerable, and we’ll just have to see how that plays out in 2008 and later.
I don’t see stbh as a troll. His mixture of conviction and evidence is not all that different from many others here, if in a different direction. While we are looking to provide mutual emotional and other support for our position that prices will drop a lot, we should also be challenging group-think, and stbh and others can help serve that purpose.
Patient renter in OC
July 4, 2007 at 9:57 PM #63939LA_Renter
ParticipantThe credit debacle has been unfolding with historically low rates throughout the last year. This is not so much an issue with interest rates as it is the quality of the loans given. It was a financial experiment that went gravely wrong. If interest rates fall it will help a little but not much.
This correction is occurring from the bottom up. The neighborhoods that you speak of are at the top of the food chain. The bottom of the food chain is literally being wiped out. You cannot erase the move up buyer and expect the top of the market to be immune. I will admit this is a very difficult market to read. We have never seen a housing market correction stemming from a credit bubble.
July 4, 2007 at 9:57 PM #63996ParticipantThe credit debacle has been unfolding with historically low rates throughout the last year. This is not so much an issue with interest rates as it is the quality of the loans given. It was a financial experiment that went gravely wrong. If interest rates fall it will help a little but not much.
This correction is occurring from the bottom up. The neighborhoods that you speak of are at the top of the food chain. The bottom of the food chain is literally being wiped out. You cannot erase the move up buyer and expect the top of the market to be immune. I will admit this is a very difficult market to read. We have never seen a housing market correction stemming from a credit bubble.
July 5, 2007 at 12:00 AM #63941SD Realtor
Participantstop the hype I am glad that you have posted. My brother actually works for KHov so I actually do have insight as to what is going on.
As far as the developers go, I have no doubt that that will survive because they always do. Agreed that this year we have not seen massive price reductions but what many new home buyers have not seen is the way that the phases have been released. Builders have substantially slowed down the phase releases in order to keep the demand strong. It is worked and will continue to work.
I should have been more succint in my description as to what I envision for the future. It is not such that I see the developers lowering their prices. It is such that I see people who could not afford the new homes running into defaults.
Scruffy seems to conveniently step around the hundreds/thousands of condos that were built in downtown SD not more then a few years ago that have already gone down. I personally have been tracking a beautiful multimillion dollar home in Del Mar Heights that has been offered several hundred thousand below purchase price of just 2 years ago and is in default.
Finally, if you read these posts you may have seen that I am one of the few that actually is understanding of people who buy now. That in fact I have been looking to buy for myself with full acknowledgement that there are other reasons for buying homes other then the sheer economics of the decision. If it was only my choice I would not buy but it is a family decision and harmony in the family is more important to me.
I also believe that the depreciation cycle will have different effects on different neighborhoods. All I can say is that I wish you the best of luck and we will see what happens. Like you I will be purchasing soon as well.
If you like I can post several cases of depreciation for higher end homes over a million dollars that were built within the past 5 years.
Should I post some for you?
SD Realtor
July 5, 2007 at 12:00 AM #63998Participantstop the hype I am glad that you have posted. My brother actually works for KHov so I actually do have insight as to what is going on.
As far as the developers go, I have no doubt that that will survive because they always do. Agreed that this year we have not seen massive price reductions but what many new home buyers have not seen is the way that the phases have been released. Builders have substantially slowed down the phase releases in order to keep the demand strong. It is worked and will continue to work.
I should have been more succint in my description as to what I envision for the future. It is not such that I see the developers lowering their prices. It is such that I see people who could not afford the new homes running into defaults.
Scruffy seems to conveniently step around the hundreds/thousands of condos that were built in downtown SD not more then a few years ago that have already gone down. I personally have been tracking a beautiful multimillion dollar home in Del Mar Heights that has been offered several hundred thousand below purchase price of just 2 years ago and is in default.
Finally, if you read these posts you may have seen that I am one of the few that actually is understanding of people who buy now. That in fact I have been looking to buy for myself with full acknowledgement that there are other reasons for buying homes other then the sheer economics of the decision. If it was only my choice I would not buy but it is a family decision and harmony in the family is more important to me.
I also believe that the depreciation cycle will have different effects on different neighborhoods. All I can say is that I wish you the best of luck and we will see what happens. Like you I will be purchasing soon as well.
If you like I can post several cases of depreciation for higher end homes over a million dollars that were built within the past 5 years.
Should I post some for you?
SD Realtor
July 5, 2007 at 7:29 AM #63951stop_the_bubble_hype
ParticipantSD,
I’d be very interested in seeing those cases.
Thanks, Hype
July 5, 2007 at 7:29 AM #64008ParticipantSD,
I’d be very interested in seeing those cases.
Thanks, Hype
July 5, 2007 at 7:37 AM #63953The-Shoveler
ParticipantScruffydog Dude !!
If there is a recession sometime in the next 1-3 year’s I believe that there will be a significant housing crash, I think the outer area’s (inland) it’s already happening in a big way. Now the question is ? will heli-Ben come to the rescue (screwing every holder of dollars) who knows ??? But, at the same time I think that the U.S. goverment knows there is no way it (we) can afford a serious recession so there will be continuous heroic efforts to avoid any serious economic slow down.
This should make for interesting times over the next few years.
July 5, 2007 at 7:37 AM #64010ParticipantScruffydog Dude !!
If there is a recession sometime in the next 1-3 year’s I believe that there will be a significant housing crash, I think the outer area’s (inland) it’s already happening in a big way. Now the question is ? will heli-Ben come to the rescue (screwing every holder of dollars) who knows ??? But, at the same time I think that the U.S. goverment knows there is no way it (we) can afford a serious recession so there will be continuous heroic efforts to avoid any serious economic slow down.
This should make for interesting times over the next few years.
July 5, 2007 at 8:22 AM #63955Bugs
ParticipantFrom the bottom up. It’s true that the high dollar buyers are bringing cash to the table so there is still come volume there.
At Magnolia Estates in Bressi ($2 million homes), they’ve been selling just under 1 unit a month, and they have 5 completed units standing vacant. This, despite the fact they slowed their construction process down to a snail’s pace. Oh yeah, and their list prices have come down 10%, not including the freebies they’re now including that were additional last year.
These markets are all connected and Carmel Valley isn’t immune.
July 5, 2007 at 8:22 AM #64012ParticipantFrom the bottom up. It’s true that the high dollar buyers are bringing cash to the table so there is still come volume there.
At Magnolia Estates in Bressi ($2 million homes), they’ve been selling just under 1 unit a month, and they have 5 completed units standing vacant. This, despite the fact they slowed their construction process down to a snail’s pace. Oh yeah, and their list prices have come down 10%, not including the freebies they’re now including that were additional last year.
These markets are all connected and Carmel Valley isn’t immune.
July 5, 2007 at 8:40 AM #63957JWM in SD
ParticipantThey have resulted in price drops. The problem, which I thought was already well documented here, is that the median price is a lagging indicator and useless in a market where the deterioation occurs from the bottom up. It’s called the plankton theory (move up buyers).
Regarding deflation, that is also what I’m looking for and credit contraction is a strong indication that this is happening. When the CDO market finally cracks, the underlying loans will be marked to market and there will be an impact to pricing.
The trolls posting on this thread, yes they are trolls, can continue to spew a bunch of micro economic nonsense, but I take solace in having a much larger perspective on this and let me tell it is going to be UGLY.
Helicopter Ben….don’t make me freaking laugh. He has one job in the end and that is to protect the dollar. For all of the “ben will inflate away my overpriced housing debt” let me clue you into something. The hyperinflation has already happened my friends. It was M3 credit which resulted in an asset price bubble(s). First in stocks and then in real estate. The only place we are headed is into deflation.
July 5, 2007 at 8:40 AM #64014ParticipantThey have resulted in price drops. The problem, which I thought was already well documented here, is that the median price is a lagging indicator and useless in a market where the deterioation occurs from the bottom up. It’s called the plankton theory (move up buyers).
Regarding deflation, that is also what I’m looking for and credit contraction is a strong indication that this is happening. When the CDO market finally cracks, the underlying loans will be marked to market and there will be an impact to pricing.
The trolls posting on this thread, yes they are trolls, can continue to spew a bunch of micro economic nonsense, but I take solace in having a much larger perspective on this and let me tell it is going to be UGLY.
Helicopter Ben….don’t make me freaking laugh. He has one job in the end and that is to protect the dollar. For all of the “ben will inflate away my overpriced housing debt” let me clue you into something. The hyperinflation has already happened my friends. It was M3 credit which resulted in an asset price bubble(s). First in stocks and then in real estate. The only place we are headed is into deflation.
July 5, 2007 at 9:02 AM #63959PD
ParticipantInterest rates went down during the last crash and it did no good, yet people keep trotting this out as the magic elixir. Japan lowered rates to nearly zero and it did very little to revive their sick housing market.
It has been obvious for many years that we were about to enter a down cycle. I have been surprised however, by a couple of events that will make it even worse, IMO. First, there is the massive amount mortgage fraud taking place like the Murrietta scam. It has happened all over.
The second is the craziness we are seeing with the hedge funds, etc. It is clear that the appetite for investments in mortgages created a frenzy of bad loans, the likes of which we have never seen before. http://www.startribune.com/462/story/1236301.html
Although many things are the same, this bust will be different than the last one. Like last time, affordability is too high and must revert to closer to the mean. But many things are different. This bust is happening in a bottom up fashion. Instead of water pouring in from the top, it is seeping up from the bottom. The market will drown regardless of which direction the water comes from.
It is going to be worse this time.
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