Smells like a dead cat to me

[sdduuuude]

I’m starting to wonder if the dead cat has hit the ground and is about ready to bounce.

Inventory is starting to slow. Lots of realtors saying this is a good time to buy. Not too many ARMS have adjusted so sellers aren’t desperate yet. Not too many economists talking recession. Stock market is doing well. And, of course, this:

Greenspan Comments

I can see the general public starting to buy into the soft landing theory pretty heavily for the next few months, maybe even for the next year, giving some support to the housing market and forcing prices back up a bit, on a year-over-year basis.

Even if Rubini’s recession hits in Q2 2007, we won’t really know the numbers until almost Q3, and then it hits the fan.

[The-Shoveler]

Nor_LA-Temcu-SD-Guy

Yea smells like a dead cat alright, really don’t see speculators jumping in again (got to get about 15% to make a profit I figure), And I sure as heck don’t make enough (even if I had a six figure salary) to buy a decent house to live in (30 year fix 20% down). So I would say that this horse is good and dead and won’t be getting up again for awhile. But that’s just my opinion.

[LA_Renter]

Here is Bob Casagrand’s Sept report.

“–Sales for September were 2,150 homes sold; this is down 42% from last September’s 3,602.

–If we look at the sales over the last 4 quarters we see steady erosion in sales from quarter to quarter. Last quarter of 05 was down 10% from prior year, 1st quarter 06 was down 20% from prior year, 2nd quarter 06 was down 26% from prior year and the 3rd quarter this year is down 33% from prior year, with the last month of the quarter down 42%.

–While the absolute number in inventory has declined the important inventory supply has increased slightly to 314 days. This is due to sales declining faster than the decline in inventory.

–The typical detached home sold was 2,050 sq ft with an average selling price of $626,296, this is down about 9% versus last years average of $691,608 for the same home. We see the same trend with attached homes, with this year’s average of $395,936 down about 6.5% from last year.”

We are now over 10 months inventory and prices are falling. This looks like a dead cat, no bounce, just a dead cat.

[(former)FormerSanDiegan]

I agree with LA_renter. The change in the inventory numbers is just the cat doing a flip in mid-air. Not a bounce. Save this post topic for 2008.

[sdduuuude]

I forgot two others:

Lower interest rates and homebuilder stocks have stopped falling.

[lindismith]

yeah, I think you’re on to something sdduuud. Whatever it is, it shows how this ‘crash’ is sticky on the way down.

I think we’re going to see more people saying it’s just temporary.

I think we’re going to see more manipulation of oil prices by the government (as needed before elections etc.)

I think we’re going to see more businesses hit hard, but the media or general public response will be, ‘it’s just an isolated case.’

Is it really a crash, if it is so sticky? Or is it merely a burst, albeit a slow leak. Does it matter what we call it?

[Carlsbadliving]

I think we’re just in the “denial” stage right now. Many sellers have pulled their houses off the market and will try again in the spring, thinking things will improve. I think by spring when sales are still down, things will really start to tumble.

[mixxalot]

Wait another year until next fall to really see if anything happens

At least thats my game plan. Besides, I really do not want to buy anything until the client decides whether or not to renew my contract for another year. I am saving right now for the downpayment and cannot risk losing work and being stuck in a 6,000 monthly payment with no cash in the bank. That would be suicide. For the next year to 18 months, wait and ride it out. I need another year to build up cash and credit anyways. Fortunately a cheap room does the trick and we can revisit the market a year or two from now. My co-worker who owns a home in Moorpark/San Fernando Valley pulled his home off the market and cannot sell it for the 1.1 million he wants. So it is starting to come back down but VERY SLOW process. Patience. Yeah and it sucks to pay massive tax but the year of per diem cuts down on taxes since I also use my room in San Diego as primary residence and pay little tax for the next year on the contract. Once it is decided to renew or not, I can cross the bridge of whether to buy a place in Ventura or Agoura Hills.

Scott

[waiting hawk]

Yup it’s time to buy. The home builders keep stating lower profits but its time to buy up those stocks. Oh yeah and all the 1.5 trillion in arms have reset.

It is almost like the home builders are screaming lower profits to tell people to STOP buying their own shares but people are like, “shut up you will make money later this is a new era”. LOL

My website tracking Inland Empire

[jacksandgo]

Speaking of pulling houses off the market, my buddy’s grandmother died, leaving a very plain house and small rental on a good sized lot in North County. There are 8 heirs, and it was supposed to be sold according to her wishes. It was appraised at something like $750-800k, and it’s basically a couple of boxes. They were offered $650k for it a couple weeks ago, and turned it down. No kidding. They didn’t think it was enough.

Here’s the kicker: They’ve colluded and decided to pull it off the market, and hold on to it for 2 years…when the market “will be better and we can get more for it” (their words). It would be funny if it wasn’t so sad. Mind you…we’re talking about 8 people in their 60’s and 70’s, native San Diegans, who’ve been through multiple real estate cycles and should know better. But they’re buying into the soft landing premise and the concept that this little crap property tripled in price over the last 8 years because of sound fundamentals, and will continue to go up. This time, you see, it’s different. Uh huh. Pure greed is what it is.

I’ve pretty much given up explaining to people about stock bubbles, real estate bubbles, real wage decline, and well…common sense. It’s pointless. I’ve been pointing them to the many sites like this and they still don’t get it. As I said, it’s pure greed.

[powayseller]

One more anecdote to show that people are expecting a spring rebound that will lead another a real estate run-up, and that we bubble believers are in the minority.

I’m holding my breath for the ARM resets. The next 2 years are going to see huge drops in real estate. One of my favorite writers is ocrenter; he has a great writing style and digs up the most interesting information. Just today he had a story about a guy who used his house as an ATM; the house cost in the $300s and the guy took another $300K out in cash over a 5 year period. Now the bank owns it. Multiply this story by tens of thousands of homes in the next 2 years, and we’re going to see huge inventory jumps and price increases.

Inventory always drops in the fall, but sales are falling too. Bob C. wrote that sales are down over 40% in September. Where is the bounce? A bounce would mean that the October price drop is less, if Oct 06 sales are down less than Sept 06 sales (i.e. only 20% down from Oct 05), then that would be a bounce.

We’ve got bubble denial. People think this price drop is real but temporary.

[LA_Renter]

There are still alot of people that have it in their mind this is only a dip and the boom will resume. I was one of those people back in 2000 knowing my Ariba stock was going back up to 150 from 5. Right now any data point that is favorable to RE is being devoured. There has been a slight seasonal dip in inventory, on Wall Street you have Cramer with a blow horn screaming don’t listen to the HB CEO’s they are too doom and gloom, BUY BUY BUY. The money managers on Wall Street have a tendency to feast on novice shorts, they have made a nice meal of them lately. The soft landing argument is still fresh and alive even as these horrendous numbers show no sign of abating.

I saw where somebody posted the headlines on the last RE downturn from the LA Times, starting in 88 through about 96. You can see the reporting of many false starts during that downturn. I don’t anticipate this will be any different. Downturns are not totally linear, there will be months where sales will show a slight YOY increase then fizzle. Home prices in San Diego have dropped 9% since this time last year and they are currently dropping, thats about as much of a drop that you can get in an asset class like RE. And as everybody has pointed out we haven’t seen the full brunt of the ARM resets. This thing is far from over.

[DrHousingBubble]

Below is the link to the history of a housing bubble:

http://www.rntl.net/history_of_a_housing_bubble.htm

If you read through the headlines there were many false starts during that time.

[LA_Renter]

Here come the foreclosures

“Thanks to a 19 percent increase in foreclosure activity, California leapfrogged past Texas and Florida to report the most new foreclosure filings of any state in September, it says. The state documented 14,806 properties entering some stage of foreclosure, nearly three times the number reported in September 2005 and a foreclosure rate of one new foreclosure filing for every 825 households — 1.3 times the national average. The state’s foreclosure activity has risen more than 40 percent over the last two months.”

[pencilneck]

If this is a dead cat bounce, which I think it is, the bounce happens to be right on long term support according to this long term look at the House Builders index as seen on this CNN Finance page. (Sorry for the long link)

http://money.cnn.com/quote/chart/chart.html?pg=ch&symb=nasdaq&time=10yr&compidx=aaaaa%7E0&comp=&ma=0&maval=60&freq=1dy&type=2&uf=0&lf=1&ind_compind=hom%7E171546

To make a prediction, this rally will break down again next year.

[Author]

Posts