More Lies from Alan Gin

[sdrealtor]

PS
I wouldnt hold my breathe waiting for a response from Alan Gin. I took his response as a 1 time stance against being ridiculed and would suspect that even if he was lurking we’ll never hear from him again as he has nothing to gain.

[cooperthedog]

“In God We Trust. Everyone Else Bring Data”

This is a great mantra, unfortunately many of the posts in this thread either resort to name calling or improper analysis of the data (or a lack of understanding of statistics).

First off, calling anyone a liar is irresponsible. If you really think it was Mr. Gin’s intent to deceive the public, then provide proof. Otherwise, agree to disagree respectfully. Economic/market forecasting is extremely difficult, and countless professionals from the fed chairman to small business owners are humbled regulary. This does not mean that they are lying, deceitful, or overtly biased.

The previous post by “kristinejm”, discussing forecasting models is spot on. It is obvious that “powayseller” disagrees with Mr. Gin’s model, yet s/he proffers an alternative that relies on one data point:

“Sales prices are down 10-20% or MORE! My friend who’s a
realtor told me his buyer just got a house for $480K, that
the seller had paid $540K, so the seller had to bring
$60K to closing.”

A convincing anecdote, caps and exclamation point to backup the veracity. Any hot stock tips while were at it?

masayako proposes 2 “honest” questions:

Paraphrased, the first chastises Mr. Gin for not stating that prices will drop significantly, while saying prices in areas have dropped 15%. This is like an securities analyst stating the overall stock market will not decline significantly, while a critic challenges that by citing certain stocks or sectors are already down 10-15%. The overall market analysis is never going to be congruent with all sectors, and labeling someone a liar due to this is in very poor form. The question in itself is valid (i.e. Mr. Gin, how does your model account for significant pockets for weakness in the market, and will this eventually spread to all sectors, etc.).

The second multiple choice question is just asanine, and masayako’s analysis is very biased. To claim to not have called one a liar, but merely asked if one is a liar, yet offering the accused two alternatives (bias or ignorance) is a loaded question. Mr. masayako, I think its fair to ask, are you ignorant, uneducated, or both?

In this thread their is discussion of the median price data as “useless”, yet another member “JohnHokkanen” sites hard data regarding the dramatically increasing inventory & sales slowdown at the high-end of the market (an excellent post, with very reasonable conclusions). Since the median is derived from splitting the population at the midpoint, and inventory data at the high-end is much higher (and sales, presumably much lower), it would mean than more houses in the lower price ranges are selling, which would skew the median DOWN, not up.

Also, granularity of data is important. It is akin to stock market averages. If the Dow or SP500 is up, that gives a good approximation of the overall market, yet various sectors will have there on averages and medians that may be inverse of the overall market. This filters down to an individual stock, which is can vary wildly. A correlation can be made to the housing market. JohnHokkanen’s approach of housing “sector” analysis by neighborhood (or by condo vs. SFR, or what have you), is a great way to increase the granularity for decision making, yet, as he notes, the median is still a valid and useful overall indicator (especially when viewed in a longer timeframe). Also, another correlation to the equities markets can be noted in housing inventory to future housing prices, similar to the bid-ask on a security. The more inventory/supply at the ask, with a weakening bid signals declining prices in the future.

In essence there is alot of data, and numerous ways to intepret it. I think almost everyone on this board would agree that the hard data points to flat or decreasing market prices overall, the degree & timeline is up for debate, and no one on this thread, including Mr. Gin, said otherwise.

The botton line: Put up or shut up.

I assume that the posters on this board who are convinced that the overall SD market is in collapse are trading CME housing futures for windfall profits, since the “powayseller” quoted 10-20% price drops don’t match the modest (1-2%) decline in the August 06 contract (nor the 3% decline in the May 07 contracts…).

Here is a link to a chart of the Aug06 San Diego contract:
http://chartsrdc.cme.com:443/cs/charts.jsp?_symbol=SDG&_month=-1

Note that these contracts are indexed to the Case-Shiller data, which is generally regarded as an accurate indicator of overall housing prices. I’ve appended the index values for San Diego since 2004:

January 2004 186.33
February 2004 189.89
March 2004 196.40
April 2004 203.64
May 2004 210.94
June 2004 218.18
July 2004 224.22
August 2004 227.67
September 2004 230.64
October 2004 232.28
November 2004 232.63
December 2004 233.08
January 2005 233.78
February 2005 235.64
March 2005 236.56
April 2005 239.58
May 2005 242.00
June 2005 245.35
July 2005 247.33
August 2005 248.45
September 2005 249.03
October 2005 249.79
November 2005 250.34
December 2005 248.55
January 2006 247.46
February 2006 247.89
March 2006 248.09
April 2006 249.35
May 2006 249.15

Note that the CME Aug06 contract is trading at ~247 and May07 at ~242 (1% & 3% declines from May06, respectively). I don’t believe I’ve seen this data on the site, so I may repost the futures information as a new thread.

With that said, the posters who feel so strongly about the unrealized housing market decline and the “lies” that are being spread, now have a great opportunity to profit. Hopefully they will focus their energies is such a constructive manner, vs. inane name calling.

[lendingbubblecontinues]

I am curious about what the Options and Futures markets for the major stock market indices (SP500, NASDAQ, DOW) looked like heading into 2000, 2001, 2002. Seems there was an awful lot of optimism back at the end of the Nineties…since an awful lot of prognosticators seem to have gotten it wrong back then, wouldn’t it have made sense that the futures markets might have looked eerily similar to what the CME housing market futures look like today ?(you know…predicting extremely modest declines of 1-3%, but no major risks ahead)

Just curious..I do not have the facts with me, just questions.

[lindismith]

Thanks for this very good, long post, cooperthedog.

Just two things:
1. I believe sometimes powayseller is just trying to be provocative, to draw us into the conversation, to stimulate discussion. She is essentially looking for rebuttal, looking for more information. And, the nice thing is, she usually gets it when others respond.

2. The article does quote Mr. Gin as saying, “There is no panic with people trying to sell their homes.” Personally, I know of 2 people who are very panicked, trying to sell their homes. There is a lot at stake for both of them. Both are in condos, both have already lost money, both will be very lucky to get out with their credit not completely ruined. One is here in SD, another is out of state.

[Anonymous]

I think the current forecasting is underestimating risk,(portfolio analysis, anyone) in ways that may not be already factored in. As most here know, the mortgage market is much more than the front end realty and origination. There are warehouse banking, servicing rights, as well as the fact these loans are bundled together, based on risk, (both individual credit risk and when the mortgage will mature due to payoff, foreclosure, refi, etc.)and sold as securities. How do they determine risk–frankly who knows exactly, but no surprise its based on forecasting and modeling. There has been a lot of funny paper out there in originations, which underestimates risk, as well as the economic factors delineated in this blog. People talk about the collapse of Freddie or Fannie, but they back conventional loans. Who is holding the riskiest paper? Are we going to see these mortgage and assest backed securities become the junk bonds of 00s with similar effects to the stock and bond market? I certainly don’t have the answer.

The information is out there, but it is in the hands of the big companies who will only turn it over when their auditors refuse to sign on the dotted line. They might not know yet what to do with all the information they have, but they sure as hell don’t want to turn it over to anyone who could figure it out before they do. So we get pundits playing crystal ball with medians, and the contrarians who “cry wolf.”

“You wanna know the DATA? You can’t handle the DATA!”

[cooperthedog]

In response to lendingbubbleco: I do not have the historical data for that time frame, but I recall that the stock market top occurred around mid 2000 (depending on the index), and by late 2000 I believe most of the optimism was gone.

Your point is valid in that the current CME housing futures may be way off the mark, which is why I recommended the more vocal posters take advantage of it (instead of name calling), especially if they are so sure of massive widespread price declines which have already occurred, yet seem to be under reported.

[powayseller]

cooperthedog – I carefully read your post, but missed your rebuttal to my critique of Gin’s analyis, with regard to the job market, MEW, foreclosures, the 2 year lagging indicator of the median, and the granulated data of various markets which show that homes have fallen by 10-15% (except the high end is 10% of sales vs. 8.5% last year, skewing UPWARD the median). I gave you ONE example for your benefit of someone upside down on their mortgage, but you will find many more by 3 members here with their own blogs, tracking foreclosures in the SD County area. Three families in my son’s school have lost their homes to foreclosure – NOD in very nice areas of Poway, near Tierra Bonita School. These price drops are occurring everywhere, yet the median is down only 1%? Did you guys ever think of asking WHY? Or perhaps you don’t know that prices are dropping because you are not talking with realtors, and are ivory tower educators?

I will not trade the Case-Shiller index, because it is not liquid enough. Chris Johnston, a trader, warned us to avoid these, as they are illiquid.

I do not use the L word lightly, but in Gin’s case, it was well put. I gave you the reasons WHY I called him ignorant or lying. Instead of saying my name calling is childish, go after my arguments as well. cooperdog, rebut me and make me look like a fool!

[cooperthedog]

powayseller, I do not wish to make you look like a fool, & any efforts I put forth couldn’t match your own…

I do not disagree that real estate in San Diego is a risky proposition, especially for recent purchasers, and that prices have peaked and are starting to decline, but to what degree and extent is currently unknown. I do not agree with Mr. Gin’s analysis, my point is that citing anecdotal evidence and conflicting data is no better than lashing out at someone for errors in their (Gin’s) forecasting model. Also, labeling someone ignorant is vastly different than calling them a liar.

As for conflicting data, above you quote a 10-15% decline in *price* and then qualify it with an increase in *sales* of upper end homes (?). You state that “price drops are occurring everywhere”, which I assume you mean to be all price brackets, couple this with recent statistics of a huge buildup of inventory on the upper-end and slowing sales in the high-end bracket, which would pull the last reported median down (more than 1%). Also, the Case-Shiller index is also down less than 1% as of May06 from what appears to be the peak in San Diego prices 4Q/2005 (and its up yoy). So what you’re observing in the market vs. what is actually occurring *overall* may be different -OR- it may be the same and about to be reported in the new numbers (since these indexes lag a month or two)… which brings me to the point about CME futures.

Since you possess a wealth of insider knowledge regarding local conditions in the *overall* market, and have tracked a major disparity between current real prices and the last reported median & Case-Shiller index values, selling housing futures would present a perfect opportunity for you & others (I’ve considered these myself). Also note that the Case-Shiller index compares *same* house sales where possible, vs. median prices, also note that the co-creator of the index (Shiller) went on record last year proclaiming a housing bubble, so I doubt the index is biased to the upside or that he is “lying”…

You’re statement that you would not trade the Case-Shiller index because it is not liquid enough does not make sense.
Liquidity isn’t an issue with the large price disparity you are quoting. As you put it, “a 10-20% drop or MORE!” (which has yet to hit the index) would easily cover the spread, and you could sell a May07 contract and wait unitl “delivery”, avoiding any trades, or buy a put option to limit your downside.

Also, you appear to quote numerous books, columnists, and other sources, yet appear to have no insights of your own. By posting these viewpoints you are benefiting users on this board, generating discussion and the like, but you must ultimately come to your own decisions, based on your own values and analysis, not because someone else said it was so (which is what got alot of real-estate “investors” in trouble in the first place).

[barnaby33]

Wow look at you two go! Remember PS I said two paragraphs I meant it. Cooper, you weren’t at the meet so I’ll assume my proverbial wisdom, and yes its proverbial didn’t get passed to you.

The internet is short attention span theatre, when you attempt to wite long posts, you lose people. This is only important as a function of your desire to A)make a point and B)convince or enlighten people as to your point. Your willingness to write long posts directly implies your desire to influence others.

I don’t know how long you have been reading this site, but the civility, lack there-of seems to flow in waves. Sometimes PS does go off the deep end, mostly she provides research that the rest of us are far too lazy to do.

I tend to agree with bugs, its not the analysis thats the problem, its the attending lack of civility in discourse.

As to the argument over Alan Gin, RE is more than a bit risky at this point. To not be publicly and loudly saying so is to be either a hypocrite, stupid, or a liar. There are VERY real consequences to what is happening, I know I have lived through them before. When you hear people who have a bully pulpit not using it honestly then you have a right to call them on it. The more mis-leading they are, they more vigorous your call-out should be.

Damn I went over 2 paragraphs, I am such a hypocrite, too stupid to get it right. Besides my whole post was a lie anyway.

Josh

[sdrealtor]

Admit it, your name isnt really Josh;)

[powayseller]

cooperdog, I put my money on real estate going down: I sold my custom built home in January 06. Gourmet kitchen, views to the ocean, it was beautiful, but I sold because I am walking the talk. I am a client of Chris Johnston, a successful trader. He posts here sometimes. This is what he advises about the CME:

QUOTE
“Submitted by Chris J on July 25, 2006 – 5:50pm.

Chris Johnston

There is no volume at all in the housing futures contracts. I trade more contracts every day in my own accounts by far than the total amount traded there. Do not bother with that until volume increases dramatically.”
UNQUOTE

So cooperdog, no offense to you, but I will take Chris J’s advice over yours when it comes to investing.

I believe housing prices will drop by 30-50%, and will buy again when they hit bottom, even if that is at 30%. I will look for leading indicators, NOT the lagging indicator of the Case-Shiller index or the median. I am learning why they are lagging, and I tried to explain this to the media. I think Mr. Gin should have been explaining this to ME, instead of vice versa.

The house price data I gave you came from various realtors who track the market. It is consistent.

There are FEWER sales of homes this year. I believe we are down 30%. But the high end is holding up better. The % of homes sold in each price category has shifted. Last year, 8.5% of homes sold were over $1 mil, and this year it is 10% of homes sold. This shifted up the median, despite the price drops of each home. But the $1.5 mil home of 2005 is probably worth $1.1 mil today.

If you need more help in understanding the median and how the market is doing, talk to some realtors. I get ALL this data by TALKING with realtors. The economics stuff I get by reading and studying labor market Excel files. But the price stuff and what is going on in San Diego real estate comes from realtors who are out there experiencing this first hand.

[cooperthedog]

powayseller, what you choose to invest in is completely your own business. I am merely suggesting that the disparity you claim to be witnessing between the leading indicators (a 10-20% decline) & lagging indicators, (such as the Case-Shiller Index), along with your strong belief of an accelerating crash would make CME housing futures/options a perfect outlet.

Their liquidity is irrelevant to your situation, if you can sell a few contracts or buy a few puts, even with a horrible spread, you would make a killing at settlement, *if* your leading indicators are correct. If your’re wrong, and realize it in time, then you do run the very serious risk of not being able to get out of an illiquid market, something I would assume a professional system trader, such as your advisor, would want to avoid. But, we are working under the premise that your data is a sure thing, and that prices plummet all the way to settlement…

I guess I’m just being overly sarcastic now. I’m glad you got out when you did. Even though I think the market will deflate for years vs. pop, and that all the RE data can be intepreted various ways, I wish you luck in your investments & eventual repurchase.

[North County Jim]

As to the argument over Alan Gin, RE is more than a bit risky at this point. To not be publicly and loudly saying so is to be either a hypocrite, stupid, or a liar. There are VERY real consequences to what is happening, I know I have lived through them before. When you hear people who have a bully pulpit not using it honestly then you have a right to call them on it. The more mis-leading they are, they more vigorous your call-out should be.

Well put Josh. That’s the thing that has me scratching my head. How a PhD in economics with an emphasis in RE can’t acknowledge the risk in SD real estate right now is mind-blowing.

I don’t want to impugn the professor’s motives but if the market tanks, I think he should be called to account in no uncertain terms.

[Anonymous]

Just heard there will be a “Real estate expert” on KUSI morning news Thursday AM to talk about the bursting of the housing bubble. Wonder who this “expert” will be? If anyone has a chance to watch that report tomorrow please fill us in.

[lendingbubblecontinues]

moved to “feelgood” comments topic

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