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  • July 2, 2007 at 4:28 PM #9431
    housingfreefall
    Participant

    http://www.housingtracker.net/askingprices/California/SanDiego-Carlsbad-SanMarcos/
    This is interesting the inventory levels are once again trending upward as they did the same time last year.

    Let’s put our thinking caps on and see what the piggingtons can come up with in response to these inquiries.

    The question is has housing reached its zenith point? Think business model!!

    Is it sustainable? Why?

    The inventory of for sale homes in San Diego link above represents a repeat scenario from last year, inventory trended upward, difference is last year inventories fell back as people took homes of the market ~because they could can they now? Will some thing be altered this time around if so what?

    There are strong signs indicating we are headed into no mans/women’s land

    We have a 21K plus inventory and rising (that is a repeat from 06)

    This is NOT

    The colossal figures of ARM reset many beginning in the next months?

    We have margin calls coming in on CDOs?
    (My dad, use to say you can hide a dead body for a long time, but once it starts stinking all bets are off, bless his sole he was a true soprano)

    Déjà vu flash back to San Diego 1987-91? Remember the “all it takes is one dollar campaign”? Remember that market? For those of you just joining us, have you ever seen people literally come out of there house with suitcases, no not to go on vacation, but because they were abandoning their homes. It was frightening think it can happen again? Think not? Why?

    Mathematics 101: If home sales continue at this pace based on link above, there are about 10 months of unsold homes floating in the market? My worry isn’t that sanity has been devoured by the hysteria in housing, but it is that the universal truth of mathematics has some how been altered and 1+1 no longer equals 2.
    Based on today’s figures 21K plus added inventory of circa (500) new listings weekly equals 2000 monthly.
    Sales of 1700, ok I will fake it and be a bull for a moment 2200, results in a minimal dent in inventory if at all. It seems to me the sales minus the inventory leaves us, YET again with 10 months of inventory. Mathematically you can not have diminished inventory in a set time span if the time span continuum is moving forward and adding more inventory Right?
    Oh forgive me I accidentally did not include “for sale by owner” in my calculations conservative figure is about 150 new listings weekly 600 monthly. OMG the denial just broke my arm off as I realized in a flash we will deplete No INVENTORY and instead it will rise!! What part of housing bubble do I not understand?

    Other things to take note of:
    1. Declining home values are going to keep declining, if you must waste your money go to Las Vegas at least what happens there stays there.
    2. The sub-prime fiasco is unraveling in such a large way and there is this eerie quietness. What do they say about secrets?
    3. It looks like the market value of CDOs, attached to all those sub-primes is worth 30 cents on the dollar. When mathematics makes its come back this will translate into, every dollar I thought I was putting in to my portfolio is worth 30 cents and a chain reaction of OH *&^% moments are about to decend on us.
    4. The 10-year treasury is on the rise and will continue ticking up the correlation is the rise will bump interest rates. This is good news, I will save this analysis for a later forum.

    What does this all translate to? THE PSYCHOLOGY WILL SHIFT FROM, YEAH I CAN MAKE A FORTUNE BY BUYING A HOUSE~ TO IF I DO NOT SELL NOW I WILL BE STUCK WITH THIS DEBT. EQUALING 100 HOUSES ADDED TO INVENTORY DAILY. Think it can happen? Think not? Why?

    Anatomy 101. The bottom line is the financial markets are all interconnected and we have been diagnosed with a very bad disease, it is systemic and will probably mean loosing a few limbs. WHAT LIMBS AND WHY?

    Fairy tale 102 Housing has been the driving force of the economy and God knows we all love the story of the “little train that could” grow up! That little train is now reached the zenith of its journey and it has no breaks and has sputtered right to the peak of the mountain. Oh no all that work all that wealth and effort only to find what comes up must come down.
    Any questions?

    ZB

    July 2, 2007 at 9:05 PM #63478
    patientrenter
    Participant

    Not much to oppose… ZB, your general views about housing are largely shared by most other piggingtonians. There might be a little controversy around the edges, but not in the center. As SD Realtor has just said in another thread, we’re mostly now just watching for specific data to better judge when to strike… er, buy our specific little piece of paradise.

    Patient renter in OC

    July 2, 2007 at 9:05 PM #63533
    patientrenter
    Participant

    Not much to oppose… ZB, your general views about housing are largely shared by most other piggingtonians. There might be a little controversy around the edges, but not in the center. As SD Realtor has just said in another thread, we’re mostly now just watching for specific data to better judge when to strike… er, buy our specific little piece of paradise.

    Patient renter in OC

    July 2, 2007 at 10:06 PM #63496
    NotCranky
    Participant

    I think your post is very nice. I also think it proves we need a seperate section for housing bubble stuff somewhere behind the religion,public school,liberal-neocon ideology thread topics. Just kidding. Maybe we should try the big chunk about to be ripped out slow decline thing again?LOL

    July 2, 2007 at 10:06 PM #63551
    NotCranky
    Participant

    I think your post is very nice. I also think it proves we need a seperate section for housing bubble stuff somewhere behind the religion,public school,liberal-neocon ideology thread topics. Just kidding. Maybe we should try the big chunk about to be ripped out slow decline thing again?LOL

    July 2, 2007 at 10:11 PM #63505
    bubble_contagion
    Participant

    In 2005 inventory peaked in October, in 2006 in July. Will 2007 be like 2006 or like 2005? Why the difference? My feeling is that 2007 will be more like 2005 but it is just a guess. A lot of people gave up selling in late 2006 to wait out the rebound. This didn’t happen. Now these same people have to compete with foreclosure and “need to sell” inventory from the ARMs resets. Big price drops could be around the corner but don’t count on it. The housing market has proven to be very resilient and an imminent crash has been called since 2004.

    July 2, 2007 at 10:11 PM #63558
    bubble_contagion
    Participant

    In 2005 inventory peaked in October, in 2006 in July. Will 2007 be like 2006 or like 2005? Why the difference? My feeling is that 2007 will be more like 2005 but it is just a guess. A lot of people gave up selling in late 2006 to wait out the rebound. This didn’t happen. Now these same people have to compete with foreclosure and “need to sell” inventory from the ARMs resets. Big price drops could be around the corner but don’t count on it. The housing market has proven to be very resilient and an imminent crash has been called since 2004.

    July 2, 2007 at 10:45 PM #63517
    SD Realtor
    Participant

    Pretty insightful post bubble_cont… I agree with your analysis but I think the sellers who are not “must sell” will hide back in their turtle shells… Some will not but I think most will… So to me I see 2007 mimicking 2005 in the sense that inventory will be higher later in the summer like 05…

    SD Realtor

    July 2, 2007 at 10:45 PM #63570
    SD Realtor
    Participant

    Pretty insightful post bubble_cont… I agree with your analysis but I think the sellers who are not “must sell” will hide back in their turtle shells… Some will not but I think most will… So to me I see 2007 mimicking 2005 in the sense that inventory will be higher later in the summer like 05…

    SD Realtor

    July 3, 2007 at 6:59 AM #63550
    PD
    Participant

    There are still lots of people out there who are hanging on by their fingernails and waiting for prices to go back up. Eventually, they are going to either be forced to sell or will realize that prices are not going to recover any time soon.

    July 3, 2007 at 6:59 AM #63604
    PD
    Participant

    There are still lots of people out there who are hanging on by their fingernails and waiting for prices to go back up. Eventually, they are going to either be forced to sell or will realize that prices are not going to recover any time soon.

    July 3, 2007 at 9:40 AM #63587
    Bugs
    Participant

    I subscribe to the point of diminshing returns theory when it comes to sales volumes vs. inventory. I think that after a certain point of adding more inventory it no longer matters how much excess inventory we have. What’s the difference if we have 12 times as many listings as monthly sales or 9 times as many? Too many is too many, and the only sales that do go off will be the ones where the sellers were sufficiently desperate that they were willing to accept those losses.

    What’s really relevant is the number of “must sell” listings vs. the sales volumes, ’cause that’s the combo that will drive the pricing structure towards equilibrium between supply and demand.

    July 3, 2007 at 9:40 AM #63640
    Bugs
    Participant

    I subscribe to the point of diminshing returns theory when it comes to sales volumes vs. inventory. I think that after a certain point of adding more inventory it no longer matters how much excess inventory we have. What’s the difference if we have 12 times as many listings as monthly sales or 9 times as many? Too many is too many, and the only sales that do go off will be the ones where the sellers were sufficiently desperate that they were willing to accept those losses.

    What’s really relevant is the number of “must sell” listings vs. the sales volumes, ’cause that’s the combo that will drive the pricing structure towards equilibrium between supply and demand.

    July 3, 2007 at 9:59 AM #63597
    no_such_reality
    Participant

    Good points Bugs. The listings even if they are not selling have a peer pressure of conformity. If everybody else is listing at $800K, even if they aren’t selling, must people will think the market is at $800K, instead of seeing the 1 in 10 that is selling at $700.

    For “must sell” inventory, I wonder if we won’t get an additional spike this fall. When I look at the ARM reset chart, I see the option ARMs sitting out starting at month 30 and going on. To my knowledge, most option ARMs were written with 5 or 7 year reset windows and equity reset that trips at 110% or 115% of value which is the timebomb on the option ARM. People using the option ARM minimum payment, that’s the majority why else do you get an option ARM, hit their loan limits on average in 29 months.

    I eyeball the teal, map that to a 60 month original reset period and then move it up to a 29 month equity reset, and that teal hump that starts as a small trickle in month 30, slides all the way over to month 1. Which puts currently about at where the teal part starts to get thick and then get real thick this fall/winter.

    I think the chart would have been made using the time bound reset parameters and not the optional reset parameters of excess equity burn.

    http://piggington.com/arm_reset_timeline

    Anybody else have thoughts on that?

    July 3, 2007 at 9:59 AM #63650
    no_such_reality
    Participant

    Good points Bugs. The listings even if they are not selling have a peer pressure of conformity. If everybody else is listing at $800K, even if they aren’t selling, must people will think the market is at $800K, instead of seeing the 1 in 10 that is selling at $700.

    For “must sell” inventory, I wonder if we won’t get an additional spike this fall. When I look at the ARM reset chart, I see the option ARMs sitting out starting at month 30 and going on. To my knowledge, most option ARMs were written with 5 or 7 year reset windows and equity reset that trips at 110% or 115% of value which is the timebomb on the option ARM. People using the option ARM minimum payment, that’s the majority why else do you get an option ARM, hit their loan limits on average in 29 months.

    I eyeball the teal, map that to a 60 month original reset period and then move it up to a 29 month equity reset, and that teal hump that starts as a small trickle in month 30, slides all the way over to month 1. Which puts currently about at where the teal part starts to get thick and then get real thick this fall/winter.

    I think the chart would have been made using the time bound reset parameters and not the optional reset parameters of excess equity burn.

    http://piggington.com/arm_reset_timeline

    Anybody else have thoughts on that?

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