More Lies from Alan Gin

[Bugs]

Mr. Gin,

I apologize for my tone and my insinuations and my negativity. And you’re right about Alan Nevin – he’s very optimistic.

Now with that out of the way, perhaps you’d care to drop a couple pearls here for us. The article that started off our shootout here in the OK Corral attributed the following to you:

“Meanwhile, overall home prices across San Diego will plateau, Gin predicted.”

So that we can all understand the context of your prediction, would you care to share with us what your definition of “plateau” is at is relates to pricing here? Are we talking about staying generally even with yr2005 prices, yr2004 prices or at some other level?

“The conditions aren’t there for a big rebound in prices or for a big drop,” he said.

When you use the term “big drop”, how would you define “big”? I mean, to some people a 10% loss as has already occurred in a few neighborhoods is a pretty big drop. I’m sure there are other people who wouldn’t admit to anything less than 50% as being big. Where in this scale do you define “big”?

I guess what I’m asking is exactly where would the market have to go before you would get quoted as referring to the Soft Landing or plateau scenarios as being unfounded?

[masayako]

Mr. Gin,

You still did not answer my 2 honest questions:

1. “… Sir, you’re saying the price is not going to drop significantly, how do you explain the current situation in which some area have already dropped 10% while many other area have dropped as much as 15%!?

The second multiple choice question is asked:
2. Are you one of the following:
(A) investigated too much in flipping houses?
(B) simply a liar or
(C) ignorant? …”

Mr. Gin, you cannot accuse people challenging (or questioning you being a liar) simply because you’re giving the wrong impression of the market the general public. Throughout your long reply, you never ONCE defends your optimistic point of view of the housing market.

Once again, I did not call you a liar, I merely ask if you are one. Please get your fact straight and don’t jump to conclusion too far (like your opinions).

[privatebanker]

Alan, with all due respect, I find it very strange that a well known economist (locally anyway) would be affected by comments in an online forum. I think you are certainly better than that. But please remember that when you are in the public eye with something that is very emotional, in this case, real estate, people are going to have different opinions about you.

[an]

Mr. Gin,
What difference does it make if you know what my real name is? Will you go hunt me down and beat me up? My whole post was basically saying that you’re a smart man and simply looking at the data, I’m sure you know what’s happening in San Diego RE. So yes, that’s why I basically said you must be lying. If you’re not lying, then, I apologize and have to assume that you’re not as smart as I thought you were.

I’m pretty sure you mentioned that RE only drop during a situation where there’s job loss. Well, how do you explain price dropping below the 2005 level and there’s no job less yet. Also, can you explain your view on the many jobs related to RE. Will they not lose their jobs if sales # continue to decline at this pace?

[Anonymous]

What annoys me about Alan Gin is he masquerades as an expert on San Diego real estate. For some reason the UT considers him the abosolute subject matter expert and quotes him for almost all stories. His commentary has consistenly demontrated that he has no clue what is happening, and more importantly what is going to happen with the bubble bursting. Alan Gin’s commentaries in UT articles have added very little if any insight, UT might as well interview a random real estate agent on the street. He has no credibility as far as I’m concerned so I wish the UT would wise up and talk to someone who has at least some clue what is happening.

The only “so called” economy expert who is more clueless is that idiot George Chamberlain on KOGO. Chamberlain outright denies the existance of a real estate bubble. What cave is he pretending to live in?

[powayseller]

A quote from Jim the Realtor. Look for his take on Alan Gin.

QUOTE
“Last year, sales dropped 17.5% between June and July, this year it’s 28%. (It was a 9% drop in 2004)

The statistics don’t reflect the buyer psychology though. They are being very picky about what they buy, and very careful about the price they pay.

The buyer psychology is all that matters. I am getting so sick of guys like Alan Gin saying there won’t be a problem unless we have significant job loss. He’s an idiot, and obviously he has never sold houses.

I lost all respect for him a couple of years ago when I went to his annual forecast. He trots out a handful of his students at USD to report on their findings about the real estate market. These kids have never owned a house, never thought about buying a house – they are just college kids guessing at what might happen, yet his forecasts are supposed to be credible?

The North County Association of Realtors keeps reporting the same, no bubble to burst here.

Looking at these numbers, you might come to the same conclusion, that the median sales price is flat.

But the median sales price is a lousy indicator. If it would have dropped down one more sale, the median sales price would have been $573,750. That’s probably a better reflection of things to come.”
END QUOTE

Alan, the reason I say you are lying is well explained in the post I made which starts this thread.

As a professor of real estate, you couldn’t possibly believe this stuff. You ought to know that
* prices on many homes are back to 2004 levels,
* sellers are bringing money to closing (one $480K sale brought $60K to closing last month),
* 3 condo developers downtown are cancelling projects,
* 30% of listings are vacant,
* sales are down 30% vs. June 05,
* prices softenend in 04 for low end and in 05 for the mid and high end, while median went up because the distribution of homes sold has shifted,
* $1.7 trillion nationwide ARM resets will cause massive foreclosures in 2007-2008,
* you don’t need a recession to cause high foreclosures because ARM resets cause the inability to make mortgage payments just as a job loss would,
* high use of exotic loans will cause payments to rise 30-70%, causing more foreclosures
, I could go on on and on.

Families in Poway are in foreclosure, even those who bought in the 1980s and refinanced out all their equity.

I sold my house in January 06, for 5% below last summer’s price. I signed a 2 year lease.

The median is a 2 year lagging indicator. The market turned 2 years ago, and the median is not showing it yet. It is unbelievable that not ONE real estate professional has come out to educate San Diegans about the true state of this market. Instead, we are told that everything is fine, prices will plateau. Alan, what do you make of the chart on the main page of this blog, showing the ratio of per capita income to median house price? Why do you not talk about that? Is this a new idea to you, to calculate such a thing? Why don’t you mention rising months supply, low HAI? Why do I seem to know more about real estate than you?

So either you are uninformed about this market, in which case I will happy to meet with you and educate you about the market, or you are lying.

Schahrzad Berkland
Poway, CA

[privatebanker]

I’m sorry but the more I think about this, I find it absolutely hilarious that Alan Gin (if that really is him) would jump on this forum and attack individual posters. How unprofessional can a guy be? Truly a great moment in the history of the real estate/credit bubble, take note of this day.

[powayseller]

Why do you think it is unprofessional to defend himself? It was definitely unprofessional to make such inaccurate statements about the real estate market. As my friend said, if he doesn’t do good research, he should keep quiet.

[masayako]

Powayseller,

You make my day. I have absolutely no doubt you have more knowledge of the current housing situation than Mr. Gin. That’s for sure.

We only need facts, not lies.

By the way, Mr. Gin, in case you don’t know, my true name is Masaya Ko (masayako), smart guy.

[SD Realtor]

Alan

I also responded but you did not address any of my comments. I thought many of my points were valid and I was hoping you would address them. Again, as a Realtor and an engineer my main problem is the presentation of the data. I believe there is a systemic failure in that presentation which then leads to faulty analysis. I am not insinuating that there is anything behind it, yet it is very sad because I have to spend a substantial amount of time at listing appointments educating people. When they ask me why there are not any stats about cancelled, expireds and withdrawns I don’t have a good answer. When I perform my own statiscal analysis of there zip code and throw out the extreme high and low listings that is also useful. Using active to pending ratios also gives them a more realistic view. When you tell a seller hey for your home there is 1 pending and 16 actives and 5 solds but 4 cancelled, and 3 expireds in a given timeframe it really changes there outlook and is much more effective then a 1% MEDIAN sales price reduction from year over year sales.

Again this is not an attack on you. This is the way it goes at most all of my listing appointments.

[rankandfile]

Toughen up a bit, Mr. Gin. You ask where all the civility has gone in our society? Well I ask where has the toughness and accountability gone? I’d venture to say we are over-civil to the point where we can’t question or call anybody out on things for fear of being sued, demanded to apologize, or whatever. So I called you a liar…BFD-prove me wrong. Yes, this is the internet and I am anonymous, but I’d call you out straight to your face if you had the gaul to feed me that bunk in person. But that’s just me. You want some advice? Instead of going into damage control mode and trying to retort us on this post, just give it to us straight, baby. Otherwise, take the snowjobs elsewhere…the warm weather is about the ONLY thing keeping many of us in SoCal these days.

[rankandfile]

Toughen up a bit, Mr. Gin. You ask where all the civility has gone in our society? Well I ask where has the toughness and accountability gone? I’d venture to say we are over-civil to the point where we can’t question or call anybody out on things for fear of being sued, demanded to apologize, or whatever. So I called you a liar…BFD-prove me wrong. Yes, this is the internet and I am anonymous, but I’d call you out straight to your face if you had the gaul to feed me that bunk in person. But that’s just me. You want some advice? Instead of going into damage control mode and trying to retort us on this post, just give it to us straight, baby. Otherwise, take the snowjobs elsewhere…the warm weather is about the ONLY thing keeping many of us here these days.

[rankandfile]

As my Dad used to say, the shoe is on the other foot.

[an]

I also love the quote, “In God I trust, everyone else, bring data”. So Alan, if you believe you’re not lying, show us your data.

[JohnHokkanen]

I am not too familiar with the lag time issue for the median, so I can’t add anything meaningful in that regard. My experience (anecdotal evidence) was that the market changed in July of last year. That said, there were many, many sales in the fall that continued to set records for the various communities in which they were located. There were some sales that were lower, and some homes were just pulled from the market, but I can honestly say that the market activity that I saw was erratic. There was still considerable buyer confidence in the market, and many people still payed top dollar for homes.

In January and February, sale occurred as is the historical trend. March saw an increase of sales and into April. BUT THEN, the numbers of sales on the records clearly show that buyer confidence/willingness was lacking because sales have declined each month after that initial rally.

I’ve run the numbers, and the number of additional homes on the market each month was not significantly different that the historical trend. However, the drop in sales activity meant that month after month, the inventory has climbed. That had been occurring since January of 2005, but the significant drop in sales gave a hockey stick jump to the inventory this spring. This overnight jump in inventory by 50% was not missed by buyers, and the talk on the street has not stopped since.

So, here’s my point (or what’s my point, maybe)….For the second half of 2005, it was not possible to determine exactly what was going on in general because the data points were a scatter graph. One neighborhood was rallying while another was falling. I can think of one Carlsbad neighborhood in particular whose prices had risen too close to a nearby new construction area, and the result was that all sales stalled (because you could buy a new home for just a bit more), and once they stalled, some sellers got nervous and discounted and that started a slide in that ONE neighborhood. Meanwhile there could be a record price set just a few miles away.

There were many of us who thought the spring rally would burn off some of the excess inventory, and things would remain stable. What is interesting is that some geo/price segments HAVE remained stable and have more inventory than 2 years ago, but it’s not a code red situation. I really like the Months of Inventory calculation better than Median Price because I can see what is happening in different geo/market segments at the same time and have a meaningful comparison.

For example, here’s the Months of Inventory for a couple of markets which are good talking points:

Carlsbad
<600K 8 months of inventory
600-750K 6 months of inventory
750-$1M 7 months of inventory
$1-1.25M 9 months of inventory
>$1.25M 24 months of inventory

Vista
<600K 6 months of inventory
600-750K 9 months of inventory
750-$1M 8 months of inventory
$1-1.25M 18 months of inventory
>1.25M 70 months of inventory

Escondido
<600K 8 months of inventory
600-750K 9 months of inventory
750-$1M 13 months of inventory
$1-1.25M 16 months of inventory
>$1.25M 35 months of inventory

It is pretty clear to me, that of the three, Carlsbad is the healthiest, with it’s high price point at 24 months of inventory. If I told you that there are 52 homes in Escondido’s high price point, but it has had only 1.5 sales per month in that bracket, it becomes pretty obvious about what it takes to be the one-out-of-50 that will go into escrow this month. Meanwhile, look at Vista, with its 6 months of inventory at the low end…that’s 187 homes on the market today with an average sales rate of about 29/month. I think that’s pretty healthy, and I would expect that the low end segment of one of the lower-end
markets to remain healthy even while its high end goes off the charts.

Watching these numbers change over time makes it clear to me that median sales price may not be a good indicator simply because it is too coarse a measure. It doesn’t allow one to see into the specific micro-markets that you need to examine for decisioning purposes. If a buyer needs to move here, you can show these numbers, and they help explain, in pretty clear terms, I think, where the short term risks lie in terms of value adjustment. I’m not saying that the low end in Vista might not adjust down a few points, but it is clear to me that the risks in buying in that market are one helluva lot less than the risks of buying in upper end Escondido. I’ve made the point in other posts, but the Months of Inventory indicator shows, pretty clearly, that the Inland markets are in a far more precarious position as we enter the fall than the Coastal markets. I do not believe that the correction that we are about to see will be evenly distributed because the inventory buildup is not evenly distributed.

In summary, I like the median as a way of getting a coarse idea of what’s happening, but I think it should be avoided as any sort of decision-making tool. If you have a better indicator, please tell us about yours.

As a final note, I’d like to say that my median price indicators have shown that Encinitas, strangely enough, has already experienced a correction while the other communities like Escondido have not. The other side of that coin is that Encinitas has one of the healthiest inventory levels compared to its neighbors. So, while some of its neighbors have, for the short term, been able to maintain the median price for sales, they have teed up a situation where the abundance of inventory could result in a sharper correction. I think I prefer the more-stable Encinitas situation because buyer confidence isn’t completley lost as it might be in other areas this fall.

John Hokkanen

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