June 13, 2006 at 10:00 AM #6711barnaby33Participant
I actually got teary eyed reading it. <*sniffle*> Goodbye Rich, you were a paragon of truth and virtue in a sea of shysters.
Its been very interesting to watch your opinions grow and morph over the last year or so. At first it was strictly about the numbers. I assume this was a more or less defensive measure during the heady times, when there was no way you could fight the sentiment battle.
As the months went by you started hinting at buyer/seller sentiment as also being an important aspect of the irrationality of the local RE market. Now that your housing reports are ending, you end with a statement about sentiment being the most important driver. I find that interesting.
I must say however that I would disagree. Sentiment was an enabler to be sure, but cheap money was the genie let out of the bottle. Take the contra position, could sentiment have changed if interest rates had remained low, or gone even lower? I know its a hypothetical, but had mortgage rates continued on down to zero, wouldn’t a 1/1 in City Heights now be 750k? Maybe at best the two are inseparable.
JoshJune 13, 2006 at 10:27 AM #26721powaysellerParticipant
The employment data is skewed to lower the actual real estate and construction jobs, because many of them are private contractors and don’t show up on the payroll surveys. CA has 1.5 million employees who are not counted in the payroll survey, and 20% are believed to be in construction and real estate. Landscapers and cosmetologists are other big groups in that sector.
If you add the informal employment, which is 10% of CA employment, the picture for RE job loss is much worse.June 13, 2006 at 11:57 AM #26726BugsParticipant
It took me a long time to really understand that market psychology is one of the fundamentals in the RE markets. It’s a mistake to focus on the numbers to the exclusion of human emotion. I’ve made that mistake in the past and I’d like to think I’ve learned my lesson from it.
I would argue that the expectation of price increases existed before the easy credit. It migrated from the stock market into the RE market, and now the RE is over it’s migrating over to commodities and stocks again. It’s a demand to get rich quick in search of an asset class to ride and a mechanism to ride it.
In my opinion, the easy credit acted like oxygen to a fire, enabling what would otherwise have been a flare-up to rage out of control. That’s why (I think) the availability of the same credit terms everywhere in the nation has had varying effects.June 13, 2006 at 1:30 PM #26732powaysellerParticipant
The greed and false expectation of easy gains in RE was a necessity for this get out of control. Having 1% interest rates alone is not enough.
As Bugs said, other areas in the nation also had access to 1% rates. Why didn’t prices in Lincoln NE shoot up?
I had access to 1% interest, 0% down, but I didn’t have the get-rich-quick mentality, so I didn’t buy into an overvalued market.
The psychology was the force that moved this market, and the low interest rates made it possible.
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