Slow decline or is a big chunk about to be ripped out?

[waiting hawk]

The big declines most are hoping for will come once a recession comes in. If we do not see one by the end of this year I have told the wife I have to rethink 2 years worth of plans, but I am only watching land in an area that is not as popular so I have more faith. Watch the long rates and economy. You need one of those to go to get what you really want. You want to buy when most cannot and that my friends is why it gets cheap.

[sdduuuude]

I think it will be like a bouncy rubber ball going down a long flight of steps.

Down up down a little more up down a little more up down up a little down alot back up down more.

One thing you must understand about markets in general is that they are where they are for a reason. Those reasons need to change in order for the market to change. Change is difficult and takes time.

Also, in a market where transaction time from “I think I’ll sell” to “closed” can take many months, that prevents anything from happening quickly.

I get the feeling people view the housing market like the stock market when they talk about bubbles bursting and such.
Lets see …
Stocks – millions of transactions a day, transaction time of 1 second.
Houses – hundreds of transactions a day, transaction time of 3 months.

How fast can it possibly move ?

The closest thing we had to a “pop” was the subprime market collapse. Still, the effects of that on the housing market wasn’t immediate. The effects of even a “pop” like that take months to fully affect the market.

Furthermore, you can’t short sell houses. The market has to drop by people not buying. The act of not buying is a passive act and doesn’t force the market down. It drops bit by bit as sellers reluctantly decide to lower prices.

Lastly, as Rich said in one of his recent posts – there are forces pushing the other way. They aren’t just going to disappear overnight.

They typical down months could be fairly dramatic – but the the Spring will always bring buyers who think the bottom is here and we’ll get little up bounces.

This is soooo the story of the boiling frog.

D

[sdduuuude]

I think it will be like a bouncy rubber ball going down a long flight of steps.

Down up down a little more up down a little more up down up a little down alot back up down more.

One thing you must understand about markets in general is that they are where they are for a reason. Those reasons need to change in order for the market to change. Change is difficult and takes time.

Also, in a market where transaction time from “I think I’ll sell” to “closed” can take many months, that prevents anything from happening quickly.

I get the feeling people view the housing market like the stock market when they talk about bubbles bursting and such.
Lets see …
Stocks – millions of transactions a day, transaction time of 1 second.
Houses – hundreds of transactions a day, transaction time of 3 months.

How fast can it possibly move ?

The closest thing we had to a “pop” was the subprime market collapse. Still, the effects of that on the housing market wasn’t immediate. The effects of even a “pop” like that take months to fully affect the market.

Furthermore, you can’t short sell houses. The market has to drop by people not buying. The act of not buying is a passive act and doesn’t force the market down. It drops bit by bit as sellers reluctantly decide to lower prices.

Lastly, as Rich said in one of his recent posts – there are forces pushing the other way. They aren’t just going to disappear overnight.

They typical down months could be fairly dramatic – but the the Spring will always bring buyers who think the bottom is here and we’ll get little up bounces.

This is soooo the story of the boiling frog.

D

[NotCranky]

BUGS
Excuse me for mis-paraphrasing you bugs. Obviously the big “chunk language” is mine.Since I have been on this blog you sure seemed like you were expecting more drama then you have spelled out in your last post.

So here you are…Middle of the Road? I am scared to make my own interpretations.

Your words….
“Truth to tell, I doubt the correction will include a big chunk, although I think the pace of correction might move relatively quickly for a couple years, starting at beginning of the year.”

I am flexible on the “big chunk” as posted already, it really doesn’t matter as a bearish outlook from me hurts no one… maybe? Now you say we will see status quo until the start of the next year?
Thanks as always for your input.

[NotCranky]

BUGS
Excuse me for mis-paraphrasing you bugs. Obviously the big “chunk language” is mine.Since I have been on this blog you sure seemed like you were expecting more drama then you have spelled out in your last post.

So here you are…Middle of the Road? I am scared to make my own interpretations.

Your words….
“Truth to tell, I doubt the correction will include a big chunk, although I think the pace of correction might move relatively quickly for a couple years, starting at beginning of the year.”

I am flexible on the “big chunk” as posted already, it really doesn’t matter as a bearish outlook from me hurts no one… maybe? Now you say we will see status quo until the start of the next year?
Thanks as always for your input.

[NotCranky]

Drunkle,
Re-read your last post You said in part:
“something seems screwed up about it anyway. like, the commoditization of ownership. but i can’t put my finger on it.”

There is nothing principled about private land ownership.
The land got divided up some how,(I know some of the history but not enough to blab on about it) it got expensive,we want it , and we have what we have. Do the bankers/lenders have it rigged?I’m sure someone here would say yes and explain why & how. I hope that is pertinent to your comment.

[NotCranky]

Drunkle,
Re-read your last post You said in part:
“something seems screwed up about it anyway. like, the commoditization of ownership. but i can’t put my finger on it.”

There is nothing principled about private land ownership.
The land got divided up some how,(I know some of the history but not enough to blab on about it) it got expensive,we want it , and we have what we have. Do the bankers/lenders have it rigged?I’m sure someone here would say yes and explain why & how. I hope that is pertinent to your comment.

[Bugs]

I dunno about having a middle or the road perspective. If we go by the RE clock, a 1% per month change in value is a rapidly moving market. At 2% per month it’s flying. If I believe in a 1%/month declining market that makes me a pretty solid bear compared to anyone the Union-Trib interviews for RE stories.

When people here talk about big annual losses I always get the impression they’re thinking 30% or more at a whack. I guess that could happen, but I’m not anticipating that.

Of course, I was wrong about how long the last bust would last (I called it 2 years too early), I was wrong about when the last peak would top out (3 years early), and I was way wrong about how far that peak would reach (by 200%). It’s not like I have a great track record or anything.

I knew this peak would end at some point (duh); I knew there would be declines in volume and an increase in forced sales of various types (duh); and I knew that as those added up they would add to the decline (duh). In other words, I know about as much as anyone else who follows Piggington’s and probably not an ounce more.

You know what they say about opinions….

[Bugs]

I dunno about having a middle or the road perspective. If we go by the RE clock, a 1% per month change in value is a rapidly moving market. At 2% per month it’s flying. If I believe in a 1%/month declining market that makes me a pretty solid bear compared to anyone the Union-Trib interviews for RE stories.

When people here talk about big annual losses I always get the impression they’re thinking 30% or more at a whack. I guess that could happen, but I’m not anticipating that.

Of course, I was wrong about how long the last bust would last (I called it 2 years too early), I was wrong about when the last peak would top out (3 years early), and I was way wrong about how far that peak would reach (by 200%). It’s not like I have a great track record or anything.

I knew this peak would end at some point (duh); I knew there would be declines in volume and an increase in forced sales of various types (duh); and I knew that as those added up they would add to the decline (duh). In other words, I know about as much as anyone else who follows Piggington’s and probably not an ounce more.

You know what they say about opinions….

[sdworker]

I agree with the post about the 10 year Treasury yield. Being a sideline watcher of the market where I live (Torrey Highlands area of Rancho Penasquitos) I saw a decline in the value of my property of over $100K in a fairly short period. I would say over a 6 to a 12 month period. That represented almost a 15% drop from peak pricing. My very non-expert/scientific opinion was that three things turned the values down the biggest being 1)the yield on the 10-yr T-Note started going up (and therefore mortgages rates started going up), followed by 2) gas prices increased alot 3) there was a general perception that the market had turned. Those three things combined to drop prices over $100K in a short period of time. Funnily enough in the last couple months what have we been seeing? 1) Yields on the 10-yr T-Note going up alot and ave. mortgage rates going up as a result 2) Gas prices going up. So it will be interesting to see what happens to sales prices that come up in a month or so when we see escrows closing from current sales right now. Just can’t get a pulse on 3) – that is the buyers perceptions at this moment….a few recent sales have been both way lower and then one way higher than previous comps. Very confusing.

Anyway, I do watch the 10-year yield on the T-Note religiously every day and honestly have been getting a sick feeling in my stomach every day lately as I see it tick up and tick up and tick up……

I have quoted this guy before (Chief Investment OFficer for Wells Capital Mgmt). I heard him say once in regards to the American consumer that his feeling was their mentality could be stereotyped as something like “you can mess with gas prices, you can mess with taxes, you can mess with anything (his list went on and on)…but don’t mess with my mortgage payment”. So I believe that once you see the 10-year Treasury note yield going up much more…the tipping point will be hit and the next $100K plus drop will be less than 6 months to fruition. This is just specific to San Diego area of course.

[sdworker]

I agree with the post about the 10 year Treasury yield. Being a sideline watcher of the market where I live (Torrey Highlands area of Rancho Penasquitos) I saw a decline in the value of my property of over $100K in a fairly short period. I would say over a 6 to a 12 month period. That represented almost a 15% drop from peak pricing. My very non-expert/scientific opinion was that three things turned the values down the biggest being 1)the yield on the 10-yr T-Note started going up (and therefore mortgages rates started going up), followed by 2) gas prices increased alot 3) there was a general perception that the market had turned. Those three things combined to drop prices over $100K in a short period of time. Funnily enough in the last couple months what have we been seeing? 1) Yields on the 10-yr T-Note going up alot and ave. mortgage rates going up as a result 2) Gas prices going up. So it will be interesting to see what happens to sales prices that come up in a month or so when we see escrows closing from current sales right now. Just can’t get a pulse on 3) – that is the buyers perceptions at this moment….a few recent sales have been both way lower and then one way higher than previous comps. Very confusing.

Anyway, I do watch the 10-year yield on the T-Note religiously every day and honestly have been getting a sick feeling in my stomach every day lately as I see it tick up and tick up and tick up……

I have quoted this guy before (Chief Investment OFficer for Wells Capital Mgmt). I heard him say once in regards to the American consumer that his feeling was their mentality could be stereotyped as something like “you can mess with gas prices, you can mess with taxes, you can mess with anything (his list went on and on)…but don’t mess with my mortgage payment”. So I believe that once you see the 10-year Treasury note yield going up much more…the tipping point will be hit and the next $100K plus drop will be less than 6 months to fruition. This is just specific to San Diego area of course.

[NotCranky]

Bugs I don’t think you are not too far off form what might be considered a big chunk by me. 20% or more in a 12 month period keeping in mind that %20 on the downside starting now will eliminate more than the 30% added, roughly speaking that happened around 2004. sdr started the post with this idea of a big chunk like this…”On the other side we have those that believe a large chunk of pricing (10% or more) is about to be taken out of the market quickly (LS2008, Rustico etc.)” I think 10% would have to be 3-6months to qualify as a “big chunk”. + or – 10% might be hard to notice with all the “noise” anyway.

sdr SD R,
I hear what you are saying about people just refusing to sell. In the last cycle I heard time and time again that “it is just a loss on paper doesn’t bother me at all”. Those people are all fine now if they haven’t done stupid things since.
So it will as, Rich has said, be all about the must sell and what buyers will do in view of that inventory.That said what is going to be must sell? From Anectdotal perspectives and and analytical ones as well this cycle got way further out of whack than the last.Who knows? Maybe San Diego has experienced the San Francisco effect and will never be affordable again? Outmigration doesn’t support this but who knows when those people and many new ones will come in to support prices?
Too many variables really.

You all have a good day!

[NotCranky]

Bugs I don’t think you are not too far off form what might be considered a big chunk by me. 20% or more in a 12 month period keeping in mind that %20 on the downside starting now will eliminate more than the 30% added, roughly speaking that happened around 2004. sdr started the post with this idea of a big chunk like this…”On the other side we have those that believe a large chunk of pricing (10% or more) is about to be taken out of the market quickly (LS2008, Rustico etc.)” I think 10% would have to be 3-6months to qualify as a “big chunk”. + or – 10% might be hard to notice with all the “noise” anyway.

sdr SD R,
I hear what you are saying about people just refusing to sell. In the last cycle I heard time and time again that “it is just a loss on paper doesn’t bother me at all”. Those people are all fine now if they haven’t done stupid things since.
So it will as, Rich has said, be all about the must sell and what buyers will do in view of that inventory.That said what is going to be must sell? From Anectdotal perspectives and and analytical ones as well this cycle got way further out of whack than the last.Who knows? Maybe San Diego has experienced the San Francisco effect and will never be affordable again? Outmigration doesn’t support this but who knows when those people and many new ones will come in to support prices?
Too many variables really.

You all have a good day!

[sdrealtor]

Thank you everyone for a nice civil exchange.

Rustico,
You are right on with my point regarding what would constitute a ‘big chunk about to be taken out of the market”. In my mind if something is about to happen, that’s the next 3 month time frame and certainly no more than 6 months. A 10% decline would be very substantial from the seller’s perspective. Of course, bearish buyer’s would only consider it a good start.

I dont think this market was ever affordable. When I bought my first home here very close to the bottom of the current cycle for around 200K, I felt like I had paid nearly 2X what I should have based upon from where I came. I didn’t come from Kansas either. I came from on of the 10 largest metropolitan areas in the country which was and continues to be well above the national averages.

[sdrealtor]

Thank you everyone for a nice civil exchange.

Rustico,
You are right on with my point regarding what would constitute a ‘big chunk about to be taken out of the market”. In my mind if something is about to happen, that’s the next 3 month time frame and certainly no more than 6 months. A 10% decline would be very substantial from the seller’s perspective. Of course, bearish buyer’s would only consider it a good start.

I dont think this market was ever affordable. When I bought my first home here very close to the bottom of the current cycle for around 200K, I felt like I had paid nearly 2X what I should have based upon from where I came. I didn’t come from Kansas either. I came from on of the 10 largest metropolitan areas in the country which was and continues to be well above the national averages.

[Author]

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