So you still think that a 50% correction or more is crazy???

[JWM in SD]

Let out friends Ramsey Su and Calculated Risk enlighten you a bit:

http://calculatedrisk.blogspot.com/2007/10/reo-auction-in-san-diego.html

Ugly doesn’t begin to describe what is going to happen to FBs in SD and SoCal in general. If you still have doubts, you have been warned……..

[Ex-SD]

Great information. Yep, it’s going to get uglier & uglier as the months pass. It’s actually moving quicker than I thought it would. I thought that most of the Banks would try for one more spring-summer selling season at higher prices. As more & more REO’s hit the market at lower & lower prices, people who need to sell will have to compete with them which will start a low price war between the REO’s & private sellers. The buyer will be the winner. Just wait until all of those ARM re-sets peak.

[JWM in SD]

This is the point that I think a lot of people still don’t understand about this whole thing and why even if you can afford to buy right now you are still in jeoporday. This will launch a vicious cycle that feeds on it self. As comps get slaughtered, an incresing number of homeowners that might have otherwise weathered the storm will get dragged into this mess. It will stretch back into earlier layers of homeowners as the comps go down.

[Alex_angel]

If its in a blog and on the internet then it must be true. lol

[JWM in SD]

yes alex, I guess we should stick with the MSM since their track record has been so good. Integrity in reporting…who needs it right? Certainly not the sheeple.

[HereWeGo]

Usually real estate cycles unwind slowly, but in this case there may be a “tipping point” as the REOs and unsold builder inventory pile up. If that happens, the 50% hit prediction may very well be realized.

[HereWeGo]

Usually real estate cycles unwind slowly, but in this case there may be a “tipping point” as the REOs and unsold builder inventory pile up. If that happens, the 50% hit prediction may very well be realized.

[JWM in SD]

yes alex, I guess we should stick with the MSM since their track record has been so good. Integrity in reporting…who needs it right? Certainly not the sheeple.

[kewp]

You know, in all the MSM blurbs I read about the housing crash, there is always some comment like ‘recovery late ’08, maybe early ’09’.

Really now.

I have to wonder, where will all the buyers come from to pick up the record amounts of inventory? Particularly, when there are a record amount of home owners already?

The FB’s are going to have no money and [email protected] credit, so they are going to be lucky to find someone to rent to them.

The small pool of willing buyers with good credit and cash in the bank are gonna wait till the bottom. We ain’t stupid.

Am I missing something?

[JWM in SD]

“The small pool of willing buyers with good credit and cash in the bank are gonna wait till the bottom. We ain’t stupid.

Am I missing something?”

No, my horizon is 4 years. Cash and time are my friends.

[JWM in SD]

“The small pool of willing buyers with good credit and cash in the bank are gonna wait till the bottom. We ain’t stupid.

Am I missing something?”

No, my horizon is 4 years. Cash and time are my friends.

[NotCranky]

“You know, in all the MSM blurbs I read about the housing crash, there is always some comment like ‘recovery late ’08, maybe early ’09’.”

“Am I missing something?”

If we have a radical alignment downward in prices we could see a “relative” recovery. That is relative to today 2009 could be an improved market from the numbers standpoint but even if it isn’t there “could” be “good to buy” properties out there…maybe even some deals as good as it will ever get.

I am not waiting or recomending waiting until there is wide proof of a “recovery” to buy. I didn’t in the 90’s and I won’t do that now. So many people I know did fantastic with investments and personal residences they purchased in 92′-98′ with 98′, or there abouts, being the official bottom of the market.

I read the article JWM has posted on this thread and the recent stuff Rich, Artifact, sdr and others have posted here it is very clear that that macaroni is hitting the fan. It isn’t really worth looking for “good to buy” properties yet, at least for average home buyers and average small time investors like me. I know you guys already know that. I am just saying it because I don’t want to get accused of being a shill for the above paragraphs.

Oh yes, I like to joke about a 50% correction but I don’t expect we will see a broad 50% correction as long as we are a first world country.Maybe the relative “wealth factor”. of the house comes down that much. I have always said that I expected dramatic “chunks” to come off starting when we had that converstion on sdr’s thread,the charts and stats seem to being showing it.I take a wait and see attitude on the final answer as to the overall correction. Applying what someone here said about the stock market, there are too many ways to be wrong.

[kewp]

Rustico,

Thank you for your insight.

The thing the worries me about the current situation is that during the last five years our whole economy has basically been running backwards. Instead of housing trailing a booming economy, loose lending standards fueled a booming housing market which itself *became* the economy.

So I’m very interested in how this will play out in the reverse. Especially in San Diego.

[NotCranky]

You bet,

This is way to grandiose for me to say but I will do it anyway. We want to be good investors, not prognosticators beyond the scope of what we are trying to accomplish. Something about forest and trees follows I guess?

[hipmatt]

I have no doubts now that 50% off or more is in the bag throughout most of socal, Las Vegas, Phoenix, etc. I have time, and cash, and will wait out the drama, however I do have another question…

Will the imminent housing crash ruin the economy? One part of me is saying that those who foreclose, may possibly end up spending more money in the economy once they abandon their insane mortgage payments. what are your thoughts on this? I already see it happening. I have a friend that threw in the keys to his home, found a nice rental at a great price, and now has more money to spend?

On the contrary though, jobs are and will be lost. Especially RE related like mortgage officers, RE agents, construction, landscape, pool, paint, etc. These people will obviously be spending less in our consumer driven economy?

your thoughts are welcomed

[HereWeGo]

One part of me is saying that those who foreclose, may possibly end up spending more money in the economy once they abandon their insane mortgage payments.

I speculated that may be the case some time ago. The tightening of credit resultant from mass foreclosures would offset that benefit, IMO.

[little lady]

In my area prices have taken a nose dive. Yes, there are the feeble minded folks still asking “585k, for a SFR 1300sq ft, 1972, no ups no extras”. They are clearly in the minority. All the good deals are REO’s and short sales.

However, when a decent size, good neighborhood, with pool, comes on @ 385k to 399k it’s quickly scooped up. These are regular loans. If they are going that fast still, to me that says people who can afford to buy, are gonna buy at that price, so how can it go lower? Over 50% would be several hundred dollars less than going rent…….

[brian_in_la]

Bob – People get divorces and lose jobs (and get nice offers in Chicago, Atlanta, etc.) There are other reasons why people put houses on the market besides financial distress on the one hand or wanting to trade up to a nicer McMansion.

Lady – Yeah, 50% is harsh. However, if I remember correctly, rents also declined slightly during the last bubble-burst in SD. With lots of supply of sfr and condos coming on-line, rents may go down. So, going rent may be going down. Just for the record – I’m with you…50% in nominal terms seems unlikely (though, inflation adjusted in 8 years?….who knows….)

[brian_in_la]

Bob – People get divorces and lose jobs (and get nice offers in Chicago, Atlanta, etc.) There are other reasons why people put houses on the market besides financial distress on the one hand or wanting to trade up to a nicer McMansion.

Lady – Yeah, 50% is harsh. However, if I remember correctly, rents also declined slightly during the last bubble-burst in SD. With lots of supply of sfr and condos coming on-line, rents may go down. So, going rent may be going down. Just for the record – I’m with you…50% in nominal terms seems unlikely (though, inflation adjusted in 8 years?….who knows….)

[JWM in SD]

“Over 50% would be several hundred dollars less than going rent…….”

Yes, but you are not accounting for what credit standards may be like at that point in time. Most likely much harsher than even now.

I think some of you are still not getting it. No, the rest of the country willn not suffer 50% losses (not nominal), but SoCal very well might. Sorry if you don’t like that, but historically things overshoot the mean in a correction. I wouldn’t bet against that happening.

[patientlywaiting]

I agree with ibjames. We need to stop thinking in terms of SD and California.

If SD drops 50%, that doesn’t been the national economy will suffer the same fate.

Look at Las Vegas, Phoenix or Florida. The prices are 1/2 San Diego’s but the prices keep on dropping.

I think that a 50% nominal drop is very likely.

[Raybyrnes]

patientlywaiting

“I think that a 50% nominal drop is very likely.”

I think you need a refresher on statistics. If you think a 50% drop is likely, what then would be unlikely drop, 75% or 80%. A 50% drop is statisticly an unlikely event. Not an impossible event but highly unlikely. It would fall as an oulyer in any sort of standard deviation curve.

Mount Soledad is collapsing and it is not seeing this type of drop so I think your numbers are off.

[Raybyrnes]

patientlywaiting

“I think that a 50% nominal drop is very likely.”

I think you need a refresher on statistics. If you think a 50% drop is likely, what then would be unlikely drop, 75% or 80%. A 50% drop is statisticly an unlikely event. Not an impossible event but highly unlikely. It would fall as an oulyer in any sort of standard deviation curve.

Mount Soledad is collapsing and it is not seeing this type of drop so I think your numbers are off.

[patientlywaiting]

I agree with ibjames. We need to stop thinking in terms of SD and California.

If SD drops 50%, that doesn’t been the national economy will suffer the same fate.

Look at Las Vegas, Phoenix or Florida. The prices are 1/2 San Diego’s but the prices keep on dropping.

I think that a 50% nominal drop is very likely.

[JWM in SD]

“Over 50% would be several hundred dollars less than going rent…….”

Yes, but you are not accounting for what credit standards may be like at that point in time. Most likely much harsher than even now.

I think some of you are still not getting it. No, the rest of the country willn not suffer 50% losses (not nominal), but SoCal very well might. Sorry if you don’t like that, but historically things overshoot the mean in a correction. I wouldn’t bet against that happening.

[little lady]

In my area prices have taken a nose dive. Yes, there are the feeble minded folks still asking “585k, for a SFR 1300sq ft, 1972, no ups no extras”. They are clearly in the minority. All the good deals are REO’s and short sales.

However, when a decent size, good neighborhood, with pool, comes on @ 385k to 399k it’s quickly scooped up. These are regular loans. If they are going that fast still, to me that says people who can afford to buy, are gonna buy at that price, so how can it go lower? Over 50% would be several hundred dollars less than going rent…….

[bsrsharma]

This is from Michigan; but I am not conviced it can’t happen in California or SD.
——————————————————-

The Flint Journal from Michigan. “Kevin and Kassie Gast listed their four-bedroom home in Grand Blanc’s tony Kirkridge Hills subdivision last July for $267,000.”

“When it didn’t sell in three months, they repainted and recarpeted, and lowered the price to $230,000, then to $220,000 and again to $203,000. Finally, in July they slashed it to $199,000.”

“No luck yet. ‘I haven’t received a single offer,’ said Kevin Gast, who moved from the area with his family to work.”

“Gast might have to lower his asking price even more to compete in today’s local housing market. During the past year, the average sale price of homes has dropped in every school district in Genesee County, according to a new survey by the Flint Area Association of Realtors.”

“There are more than 8,000 homes for sale across the county, a number that’s been climbing by about 1,000 each year for the past three years. Real estate agents say a whopping 45 percent of area homes for sale are foreclosures, the bulk of them in Flint. Agents said banks are accepting offers so low they are driving down the price of other homes.”

“Gast said he’s willing to take a hit in the pocketbook just to unload his 2,800-square-foot home, which he bought seven years ago for $215,000.”

[bsrsharma]

This is from Michigan; but I am not conviced it can’t happen in California or SD.
——————————————————-

The Flint Journal from Michigan. “Kevin and Kassie Gast listed their four-bedroom home in Grand Blanc’s tony Kirkridge Hills subdivision last July for $267,000.”

“When it didn’t sell in three months, they repainted and recarpeted, and lowered the price to $230,000, then to $220,000 and again to $203,000. Finally, in July they slashed it to $199,000.”

“No luck yet. ‘I haven’t received a single offer,’ said Kevin Gast, who moved from the area with his family to work.”

“Gast might have to lower his asking price even more to compete in today’s local housing market. During the past year, the average sale price of homes has dropped in every school district in Genesee County, according to a new survey by the Flint Area Association of Realtors.”

“There are more than 8,000 homes for sale across the county, a number that’s been climbing by about 1,000 each year for the past three years. Real estate agents say a whopping 45 percent of area homes for sale are foreclosures, the bulk of them in Flint. Agents said banks are accepting offers so low they are driving down the price of other homes.”

“Gast said he’s willing to take a hit in the pocketbook just to unload his 2,800-square-foot home, which he bought seven years ago for $215,000.”

[betting on fall]

I too agree that the foreclosures will cause a lot of short term pain, but we will have a healthier and better local economy when people are only spending 30% or less of their income on housing, and the rest is either saved or spent in the community. San Diego employeers will have a much easier time attracting workers too.

Funny how affordable housing is supposed to be a good thing until all houses are suddenly getting more affordable at the same time.

[bsrsharma]

all houses are suddenly getting more affordable at the same time.

Some people consider it as becoming less "Wealthy". Since most of the national "Wealth" is home equity, cutting it by a factor of two or more can have strange psychological effect on who we are and how well we are. This is what economists are afraid of. Fear of "Poverty" can produce some bad effects like real poverty. Just the opposite of the “Wealth Effect”

[betting on fall]

bsrsharam-
good points, and I agree that wealth effect will reduce spending, but its probably spending that shouldn’t have been going on in the first place.

My frustration is that for years we pay lip service to the fact that we want the “middle class” and “public servants”- teachers, police officers, military personnel- to be able to buy a house in the communities in which they work.

The answer to this problem to date has been building 50 or 100 income restricted units a year, which clearly is next to useless.

Now, falling prices might make this possible again- a teacher’s salary might be enough to buy a house, like it was for my wife in 1996 (I married into San Diego housing wealth).

Instead of the next housing article featuring someone whining about how their loan officer lied to them and now they can’t afford their house, I want the reporter to talk to a local cop or local teacher who has been renting- or commuting absurd distances- who is now thinks they may actually be able to buy in the community in which they work.
Heck- I don’t know many reporters who make enough to afford a house in San Diego. They could just interview themselves and make my point.

[drunkle]

lbjames: welcome to 5 years ago.

fall:
“Heck- I don’t know many reporters who make enough to afford a house in San Diego. They could just interview themselves and make my point. ”

probably because they’re worthless to begin with.

[drunkle]

lbjames: welcome to 5 years ago.

fall:
“Heck- I don’t know many reporters who make enough to afford a house in San Diego. They could just interview themselves and make my point. ”

probably because they’re worthless to begin with.

[joebaduba]

"Instead of the next housing article featuring someone whining about how their loan officer lied to them and now they can't afford their house, I want the reporter to talk to a local cop or local teacher who has been renting- or commuting absurd distances- who is now thinks they may actually be able to buy in the community in which they work. Heck- I don't know many reporters who make enough to afford a house in San Diego. They could just interview themselves and make my point."

Reporters can't talk to any locals and they don't need to buy a house in San Diego. Or anywhere else in this country for that matter. They've been outsourced. Check out the byline and source on this article from the UT posted on Patrick

http://www.signonsandiego.com/news/business/20071009-0637-s&p-economy-global.html?ref=patrick.net

[joebaduba]

"Instead of the next housing article featuring someone whining about how their loan officer lied to them and now they can't afford their house, I want the reporter to talk to a local cop or local teacher who has been renting- or commuting absurd distances- who is now thinks they may actually be able to buy in the community in which they work. Heck- I don't know many reporters who make enough to afford a house in San Diego. They could just interview themselves and make my point."

Reporters can't talk to any locals and they don't need to buy a house in San Diego. Or anywhere else in this country for that matter. They've been outsourced. Check out the byline and source on this article from the UT posted on Patrick

http://www.signonsandiego.com/news/business/20071009-0637-s&p-economy-global.html?ref=patrick.net

[betting on fall]

bsrsharam-
good points, and I agree that wealth effect will reduce spending, but its probably spending that shouldn’t have been going on in the first place.

My frustration is that for years we pay lip service to the fact that we want the “middle class” and “public servants”- teachers, police officers, military personnel- to be able to buy a house in the communities in which they work.

The answer to this problem to date has been building 50 or 100 income restricted units a year, which clearly is next to useless.

Now, falling prices might make this possible again- a teacher’s salary might be enough to buy a house, like it was for my wife in 1996 (I married into San Diego housing wealth).

Instead of the next housing article featuring someone whining about how their loan officer lied to them and now they can’t afford their house, I want the reporter to talk to a local cop or local teacher who has been renting- or commuting absurd distances- who is now thinks they may actually be able to buy in the community in which they work.
Heck- I don’t know many reporters who make enough to afford a house in San Diego. They could just interview themselves and make my point.

[bsrsharma]

all houses are suddenly getting more affordable at the same time.

Some people consider it as becoming less "Wealthy". Since most of the national "Wealth" is home equity, cutting it by a factor of two or more can have strange psychological effect on who we are and how well we are. This is what economists are afraid of. Fear of "Poverty" can produce some bad effects like real poverty. Just the opposite of the “Wealth Effect”

[betting on fall]

I too agree that the foreclosures will cause a lot of short term pain, but we will have a healthier and better local economy when people are only spending 30% or less of their income on housing, and the rest is either saved or spent in the community. San Diego employeers will have a much easier time attracting workers too.

Funny how affordable housing is supposed to be a good thing until all houses are suddenly getting more affordable at the same time.

[HereWeGo]

One part of me is saying that those who foreclose, may possibly end up spending more money in the economy once they abandon their insane mortgage payments.

I speculated that may be the case some time ago. The tightening of credit resultant from mass foreclosures would offset that benefit, IMO.

[lonestar2000]

Many of those who are losing their homes due to foreclosure today are going to want to purchase again, havnig learned from their mistakes.

I see a majority of them saving, rather then spending the extra money freed up after the foreclosure, so they can do it right the next time.

There are going to be those who will spend the extra money, there always are, but I think many of them will use the experience to re-evaluate their habits.

A significant portion of the population still would prefer owning over renting.

[ibjames]

A lot of people get carried away by this, a lot of the nation did not have the same problems as SoCal in the crazy mortgage biz. Many people in a large part of the country used low interest rates with 30 year loans to buy a house. You didn’t need a crazy mortgage.

I don’t understand why the general thought process is that if southern CA, AZ, and LV take a big dive the whole country will.

I’ve lived here for almost two years and I don’t know many people, but I do know people that are leaving/have left already because of the mortgage fiasco and inability to buy a home. White collar professionals.. who have worked to have the american dream and live here, looking through the glass window wondering if they will ever own. Many are asking why the hell are they here? It’s not a question in most of the US with their income, so they are leaving for greener pastures.

Honestly, look at the numbers, a LOT of great wage earners would have to be here to keep prices near current levels. So has the median household income in SD up to 140k now? If not, it just seems like a big stack of cards is being built up and it’s just being added and added to. There will be a time when that card pile falls down.

I do not expect prices to be the same as the midwest or other affordable places, but I just can’t see how prices will not adjust dramatically either.

Or perhaps I should just be looking for greener pastures..

[ibjames]

A lot of people get carried away by this, a lot of the nation did not have the same problems as SoCal in the crazy mortgage biz. Many people in a large part of the country used low interest rates with 30 year loans to buy a house. You didn’t need a crazy mortgage.

I don’t understand why the general thought process is that if southern CA, AZ, and LV take a big dive the whole country will.

I’ve lived here for almost two years and I don’t know many people, but I do know people that are leaving/have left already because of the mortgage fiasco and inability to buy a home. White collar professionals.. who have worked to have the american dream and live here, looking through the glass window wondering if they will ever own. Many are asking why the hell are they here? It’s not a question in most of the US with their income, so they are leaving for greener pastures.

Honestly, look at the numbers, a LOT of great wage earners would have to be here to keep prices near current levels. So has the median household income in SD up to 140k now? If not, it just seems like a big stack of cards is being built up and it’s just being added and added to. There will be a time when that card pile falls down.

I do not expect prices to be the same as the midwest or other affordable places, but I just can’t see how prices will not adjust dramatically either.

Or perhaps I should just be looking for greener pastures..

[lonestar2000]

Many of those who are losing their homes due to foreclosure today are going to want to purchase again, havnig learned from their mistakes.

I see a majority of them saving, rather then spending the extra money freed up after the foreclosure, so they can do it right the next time.

There are going to be those who will spend the extra money, there always are, but I think many of them will use the experience to re-evaluate their habits.

A significant portion of the population still would prefer owning over renting.

[hipmatt]

I have no doubts now that 50% off or more is in the bag throughout most of socal, Las Vegas, Phoenix, etc. I have time, and cash, and will wait out the drama, however I do have another question…

Will the imminent housing crash ruin the economy? One part of me is saying that those who foreclose, may possibly end up spending more money in the economy once they abandon their insane mortgage payments. what are your thoughts on this? I already see it happening. I have a friend that threw in the keys to his home, found a nice rental at a great price, and now has more money to spend?

On the contrary though, jobs are and will be lost. Especially RE related like mortgage officers, RE agents, construction, landscape, pool, paint, etc. These people will obviously be spending less in our consumer driven economy?

your thoughts are welcomed

[NotCranky]

You bet,

This is way to grandiose for me to say but I will do it anyway. We want to be good investors, not prognosticators beyond the scope of what we are trying to accomplish. Something about forest and trees follows I guess?

[kewp]

Rustico,

Thank you for your insight.

The thing the worries me about the current situation is that during the last five years our whole economy has basically been running backwards. Instead of housing trailing a booming economy, loose lending standards fueled a booming housing market which itself *became* the economy.

So I’m very interested in how this will play out in the reverse. Especially in San Diego.

[NotCranky]

“You know, in all the MSM blurbs I read about the housing crash, there is always some comment like ‘recovery late ’08, maybe early ’09’.”

“Am I missing something?”

If we have a radical alignment downward in prices we could see a “relative” recovery. That is relative to today 2009 could be an improved market from the numbers standpoint but even if it isn’t there “could” be “good to buy” properties out there…maybe even some deals as good as it will ever get.

I am not waiting or recomending waiting until there is wide proof of a “recovery” to buy. I didn’t in the 90’s and I won’t do that now. So many people I know did fantastic with investments and personal residences they purchased in 92′-98′ with 98′, or there abouts, being the official bottom of the market.

I read the article JWM has posted on this thread and the recent stuff Rich, Artifact, sdr and others have posted here it is very clear that that macaroni is hitting the fan. It isn’t really worth looking for “good to buy” properties yet, at least for average home buyers and average small time investors like me. I know you guys already know that. I am just saying it because I don’t want to get accused of being a shill for the above paragraphs.

Oh yes, I like to joke about a 50% correction but I don’t expect we will see a broad 50% correction as long as we are a first world country.Maybe the relative “wealth factor”. of the house comes down that much. I have always said that I expected dramatic “chunks” to come off starting when we had that converstion on sdr’s thread,the charts and stats seem to being showing it.I take a wait and see attitude on the final answer as to the overall correction. Applying what someone here said about the stock market, there are too many ways to be wrong.

[kewp]

You know, in all the MSM blurbs I read about the housing crash, there is always some comment like ‘recovery late ’08, maybe early ’09’.

Really now.

I have to wonder, where will all the buyers come from to pick up the record amounts of inventory? Particularly, when there are a record amount of home owners already?

The FB’s are going to have no money and [email protected] credit, so they are going to be lucky to find someone to rent to them.

The small pool of willing buyers with good credit and cash in the bank are gonna wait till the bottom. We ain’t stupid.

Am I missing something?

[Alex_angel]

If its in a blog and on the internet then it must be true. lol

[patientlywaiting]

Very true indeed. I expect a bloodbath in the next couple of year.

Another thing is that homeowners are adjusting to paying fully amortized mortgages without prospects of appreciation. People aren’t going to buy unless they can see subtantial appreciation in a 5 year time frame. They panic if prices decline within 1 year of ownership.

i’ll bookmark this thread and come back to it in a couple of years. We shall see….

[patientlywaiting]

Very true indeed. I expect a bloodbath in the next couple of year.

Another thing is that homeowners are adjusting to paying fully amortized mortgages without prospects of appreciation. People aren’t going to buy unless they can see subtantial appreciation in a 5 year time frame. They panic if prices decline within 1 year of ownership.

i’ll bookmark this thread and come back to it in a couple of years. We shall see….

[farbet]

Mortage payment is due today to avoid penalty.
How many will send in that check,plus HOA,plus Mello Roos?
Ouch !!!
Taxes are due Nov 1st.Will they make it

[farbet]

Mortage payment is due today to avoid penalty.
How many will send in that check,plus HOA,plus Mello Roos?
Ouch !!!
Taxes are due Nov 1st.Will they make it

[JWM in SD]

This is the point that I think a lot of people still don’t understand about this whole thing and why even if you can afford to buy right now you are still in jeoporday. This will launch a vicious cycle that feeds on it self. As comps get slaughtered, an incresing number of homeowners that might have otherwise weathered the storm will get dragged into this mess. It will stretch back into earlier layers of homeowners as the comps go down.

[Ex-SD]

Great information. Yep, it’s going to get uglier & uglier as the months pass. It’s actually moving quicker than I thought it would. I thought that most of the Banks would try for one more spring-summer selling season at higher prices. As more & more REO’s hit the market at lower & lower prices, people who need to sell will have to compete with them which will start a low price war between the REO’s & private sellers. The buyer will be the winner. Just wait until all of those ARM re-sets peak.

[bob2007]

Two things I’m not clear on:

1. JWM: “This will launch a vicious cycle that feeds on it self. As comps get slaughtered, an incresing number of homeowners that might have otherwise weathered the storm will get dragged into this mess.”

Who are you referring to? If they are “weathering the storm”, the what difference do the comps make? It seems like the referral to these type of people on this board categorize them as having affordable mort. and want to live in their house long term.

2. patientlywaiting: “People aren’t going to buy unless they can see substantial appreciation in a 5 year time frame.”

I don’t think this is true. Someone has asked the question before about where the desire to move every 5 years came from. I don’t know, but I people in general don’t need to move every 5 years. Housing should not be a revenue generator, ideals will return to buying a house as a place to live.

[gn]

Who are you referring to? If they are "weathering the storm", the what difference do the comps make? It seems like the referral to these type of people on this board categorize them as having affordable mort. and want to live in their house long term

Bob2007, I think JWM was refering to the following case:

John Doe bought his house in 2002 with a 3yr-ARM. In 2005, when the ARM resetted, he had a lot of equity & was able to refinance into another 3yr-ARM.

In 2008, when the ARM will reset, if prices go down significantly, John Doe may not have the equity need to refinance again. Some people may think that home prices in 2002 was "low" enough for people who bought at that time will be able to "weather the storm", but it all depends on the financing used to purchase the house.

 

[gn]

Who are you referring to? If they are "weathering the storm", the what difference do the comps make? It seems like the referral to these type of people on this board categorize them as having affordable mort. and want to live in their house long term

Bob2007, I think JWM was refering to the following case:

John Doe bought his house in 2002 with a 3yr-ARM. In 2005, when the ARM resetted, he had a lot of equity & was able to refinance into another 3yr-ARM.

In 2008, when the ARM will reset, if prices go down significantly, John Doe may not have the equity need to refinance again. Some people may think that home prices in 2002 was "low" enough for people who bought at that time will be able to "weather the storm", but it all depends on the financing used to purchase the house.

 

[bob2007]

Two things I’m not clear on:

1. JWM: “This will launch a vicious cycle that feeds on it self. As comps get slaughtered, an incresing number of homeowners that might have otherwise weathered the storm will get dragged into this mess.”

Who are you referring to? If they are “weathering the storm”, the what difference do the comps make? It seems like the referral to these type of people on this board categorize them as having affordable mort. and want to live in their house long term.

2. patientlywaiting: “People aren’t going to buy unless they can see substantial appreciation in a 5 year time frame.”

I don’t think this is true. Someone has asked the question before about where the desire to move every 5 years came from. I don’t know, but I people in general don’t need to move every 5 years. Housing should not be a revenue generator, ideals will return to buying a house as a place to live.

[kewp]

Ok lets get down to brass tacks.

Assume that SD RE drops 50% overnight.

Pro’s for the economy:

People/businesses migrate to SD

People spend less on mortgage payments, freeing equity.

It becomes cheaper to own than rent (and a tax break), freeing more equity.

RE becomes a decent investment in SD, drawing more folks/money.

Neg’s for the economy:

Construction and related industries are dead until all the overhang is cleared.

Massive HELOC’s are a thing of the past, so big downturn in sales of luxury goods.

Reverse wealth effect, people feel poorer when their homes aren’t worth as much. So more saving and less splurging.

My guess is overall its a much bigger loss than a gain. After all, we are basically rolling back to how SD was in ’98, which wasn’t exactly a boom town.

[HereWeGo]

Rents will likely fall with prices, given the massive oversupply of residential units. The whole “rent/own” equation will be more dynamic than many think.

[little lady]

I rented during the start of the last downturn, and I vaguely recall the rents being a little lower. The house I rented was I believe 925$. I think they may have dropped 50 to 100$. Not a huge amount. My mortgage payment was 1100$ when I bought in 1995.

[cr]

Guys you’re forgetting all the immigrants that will come in and buy $500,000 homes, and the increase in employment of nurses, teachers, bar tenders, and hotel maids that will clearly support this market to a turn around sometime early 2008.

Seriously though, I’m betting 4-5 conservatively, 7-10 non-best case scenario.

The buyer/owner sentiment will follow prices and perpetuate the correction. I honestly think we will see an over correction. Why? (asks the person who thinks people here pull opinions out of their arse) Look at the last 2 down turns, and adjust for inflation.

Still disagree? Then go buy a house today, and I’ll buy one in 4 years and we’ll see who pays more.

[kewp]

I think you need a refresher on statistics.

This is predicting the future and has nothing to do with statistics.

If the trend follows whats happened historically, then a reversion to the mean is very likely. And thats a 50% drop at least.

[kewp]

I think you need a refresher on statistics.

This is predicting the future and has nothing to do with statistics.

If the trend follows whats happened historically, then a reversion to the mean is very likely. And thats a 50% drop at least.

[Doofrat]

Cooprider14,

I’ll buy a house today, and in four years compared to you I’ll have:

* Saved a bunch in taxes because I can write off my payments on my taxes

* Saved all that money you’re throwing away in rent

* Made money on the appreciation on the house when the market picks back up (and from the granite countertops I plan to add)

* I’ll be living in a house, and you’ll be priced out and probably have to live in your car, or move to North Dakota to afford a house

* You’re SO will have left you because you didn’t provide a
stable nest to live in with a good school district

This is what my Realtor Suzanne told me and she’s researched it.

http://www.youtube.com/watch?v=Ubsd-tWYmZw

[Ex-SD]

doofrat: That looks like a clip that was directed by Joseph Goebbels.
ROTFLMAO

Makes you want to run out and buy a home, doesn’t it?

[Ex-SD]

doofrat: That looks like a clip that was directed by Joseph Goebbels.
ROTFLMAO

Makes you want to run out and buy a home, doesn’t it?

[cr]

doofrat-

Are you serious? You must be if you’re getting your real estate facts from someone as inherently wise, superbly intelligent and deeply researched as a realtor.

Nonetheless, it’s probably not worth it to refute your clear lack of information, but WTH. You said:

* Saved a bunch in taxes because I can write off my payments on my taxes
Okay, but who paid those taxes? What about maintenance, HOA, Mello Roos, repairs, and don’t forget how much you pay even with the tax benefits.

* Saved all that money you’re throwing away in rent
How YOU save money I AM spending is beyond me, but unless you’re paying a $1000/mo mortgage, I doubt you’re saving more than me.

* Made money on the appreciation on the house when the market picks back up (and from the granite countertops I plan to add)
You’re joking, right? Appreciation in today’s market? You must have that confused with depreciation. Even if it was flat you’d be losing money to inflation, and be better off saving.

* I’ll be living in a house, and you’ll be priced out and probably have to live in your car, or move to North Dakota to afford a house
You’ll be living in a house that even if you can afford, will be worth less than you paid for it, and I’ll be saving money so when people like you go into foreclosure I buy it at a discount from the bank who repossesed it from you.

* You’re SO will have left you because you didn’t provide a stable nest to live in with a good school district
LOL – I didn’t know you were on such good terms with my SO to be able to determine their level of materialism.

Look if you want to buy, don’t let me stop you. Just don’t expect me to bail you out when you can’t afford it, sell it, or refinance.

I’m sure your realtor explained all of that to you already though. House prices NEVER go down right? Right…

[Doofrat]

Cooprider14,

I was joking, but it does sound like the typical justification for buying a house, doesn’t it?

[JWM in SD]

“I was joking, but it does sound like the typical justification for buying a house, doesn’t it?”

Yes, it does sound like that it. The scary thing in retrospect is that the issues you cited were amongst the more tame agruments that permabulls used circa 18 to 24 mos ago when a lot of us earned battle scars. If you go to Housing Panic or Irvine Housing Blog, you will still see some that kind of post.

[JWM in SD]

“I was joking, but it does sound like the typical justification for buying a house, doesn’t it?”

Yes, it does sound like that it. The scary thing in retrospect is that the issues you cited were amongst the more tame agruments that permabulls used circa 18 to 24 mos ago when a lot of us earned battle scars. If you go to Housing Panic or Irvine Housing Blog, you will still see some that kind of post.

[cr]

doofrat-

I wondered that after I posted, and I was thinking, man has this guy read anything on here? Typing just doesn’t convey the sarcasm you sometimes hope it does. Then again, there have been people who have responded like that and meant it!

Because you’re right, I used to think I was financially saavy because I didn’t want to rent and “throw money out the window.”

Looking back at your post, I should have figured out the taking advise from a realtor part.

Happy waiting.

[cr]

doofrat-

I wondered that after I posted, and I was thinking, man has this guy read anything on here? Typing just doesn’t convey the sarcasm you sometimes hope it does. Then again, there have been people who have responded like that and meant it!

Because you’re right, I used to think I was financially saavy because I didn’t want to rent and “throw money out the window.”

Looking back at your post, I should have figured out the taking advise from a realtor part.

Happy waiting.

[Doofrat]

Cooprider14,

I was joking, but it does sound like the typical justification for buying a house, doesn’t it?

[cr]

doofrat-

Are you serious? You must be if you’re getting your real estate facts from someone as inherently wise, superbly intelligent and deeply researched as a realtor.

Nonetheless, it’s probably not worth it to refute your clear lack of information, but WTH. You said:

* Saved a bunch in taxes because I can write off my payments on my taxes
Okay, but who paid those taxes? What about maintenance, HOA, Mello Roos, repairs, and don’t forget how much you pay even with the tax benefits.

* Saved all that money you’re throwing away in rent
How YOU save money I AM spending is beyond me, but unless you’re paying a $1000/mo mortgage, I doubt you’re saving more than me.

* Made money on the appreciation on the house when the market picks back up (and from the granite countertops I plan to add)
You’re joking, right? Appreciation in today’s market? You must have that confused with depreciation. Even if it was flat you’d be losing money to inflation, and be better off saving.

* I’ll be living in a house, and you’ll be priced out and probably have to live in your car, or move to North Dakota to afford a house
You’ll be living in a house that even if you can afford, will be worth less than you paid for it, and I’ll be saving money so when people like you go into foreclosure I buy it at a discount from the bank who repossesed it from you.

* You’re SO will have left you because you didn’t provide a stable nest to live in with a good school district
LOL – I didn’t know you were on such good terms with my SO to be able to determine their level of materialism.

Look if you want to buy, don’t let me stop you. Just don’t expect me to bail you out when you can’t afford it, sell it, or refinance.

I’m sure your realtor explained all of that to you already though. House prices NEVER go down right? Right…

[Doofrat]

Cooprider14,

I’ll buy a house today, and in four years compared to you I’ll have:

* Saved a bunch in taxes because I can write off my payments on my taxes

* Saved all that money you’re throwing away in rent

* Made money on the appreciation on the house when the market picks back up (and from the granite countertops I plan to add)

* I’ll be living in a house, and you’ll be priced out and probably have to live in your car, or move to North Dakota to afford a house

* You’re SO will have left you because you didn’t provide a
stable nest to live in with a good school district

This is what my Realtor Suzanne told me and she’s researched it.

http://www.youtube.com/watch?v=Ubsd-tWYmZw

[cr]

Guys you’re forgetting all the immigrants that will come in and buy $500,000 homes, and the increase in employment of nurses, teachers, bar tenders, and hotel maids that will clearly support this market to a turn around sometime early 2008.

Seriously though, I’m betting 4-5 conservatively, 7-10 non-best case scenario.

The buyer/owner sentiment will follow prices and perpetuate the correction. I honestly think we will see an over correction. Why? (asks the person who thinks people here pull opinions out of their arse) Look at the last 2 down turns, and adjust for inflation.

Still disagree? Then go buy a house today, and I’ll buy one in 4 years and we’ll see who pays more.

[kev374]

If we use history as a guide we can say that this downturn will be much more severe than the early 90s downturn. During that time prices plummetted 20-25% nominal. So using a 1.5 multiplier you get at least 30% nominal decline. That is the MINIMUM. I don’t see how it cannot go down by at least that much, there is nothing right now to prop up the market. But the decline may be delayed by the guerrila government intervention.

[kev374]

If we use history as a guide we can say that this downturn will be much more severe than the early 90s downturn. During that time prices plummetted 20-25% nominal. So using a 1.5 multiplier you get at least 30% nominal decline. That is the MINIMUM. I don’t see how it cannot go down by at least that much, there is nothing right now to prop up the market. But the decline may be delayed by the guerrila government intervention.

[little lady]

I rented during the start of the last downturn, and I vaguely recall the rents being a little lower. The house I rented was I believe 925$. I think they may have dropped 50 to 100$. Not a huge amount. My mortgage payment was 1100$ when I bought in 1995.

[HereWeGo]

Rents will likely fall with prices, given the massive oversupply of residential units. The whole “rent/own” equation will be more dynamic than many think.

[kewp]

Ok lets get down to brass tacks.

Assume that SD RE drops 50% overnight.

Pro’s for the economy:

People/businesses migrate to SD

People spend less on mortgage payments, freeing equity.

It becomes cheaper to own than rent (and a tax break), freeing more equity.

RE becomes a decent investment in SD, drawing more folks/money.

Neg’s for the economy:

Construction and related industries are dead until all the overhang is cleared.

Massive HELOC’s are a thing of the past, so big downturn in sales of luxury goods.

Reverse wealth effect, people feel poorer when their homes aren’t worth as much. So more saving and less splurging.

My guess is overall its a much bigger loss than a gain. After all, we are basically rolling back to how SD was in ’98, which wasn’t exactly a boom town.

[bob007]

a drop is likely. guessing the decline is as futile as predicting the original bubble.

[mixxalot]

When SD prices come back to earth

Then I will buy my modest 2bedroom/2bath townhome. It should be by 2012 since average incomes not that high in the area.

[JC]

Just for fun, here is a close to 50% drop: http://www.sdlookup.com/MLS-076060789-4509_Idaho_St_8_San_Diego_CA_92116

How they EVER thought they could get 350k for this is beyond me…

[pertinazzio]

So most people are predicting that this will take some time to play out specially in the “stickier” (i.e. better areas). I am wondering whether the resolve of stubborn sellers could be cracked if waves of wisecracking bears started working with ” buyer agents” (yeah like they represent you) and then just started offering the prices now that they want for 2012 or whenever.

Beatus ille qui procul negotiis … paterna rura bobus exercet suis, solutus omni fenore….. Horace

[gn]

I am wondering whether the resolve of stubborn sellers could be cracked if waves of wisecracking bears started working with " buyer agents" (yeah like they represent you) and then just started offering the prices now that they want for 2012 or whenever.

The bears don't have to do anything. In a free market, whenever sellers far outnumber buyers, prices will falls.

It's inevitable.

[farbet]

Repeat after me. “Greater fools are still buying”
why would sellers reduce?

[farbet]

Repeat after me. “Greater fools are still buying”
why would sellers reduce?

[gn]

I am wondering whether the resolve of stubborn sellers could be cracked if waves of wisecracking bears started working with " buyer agents" (yeah like they represent you) and then just started offering the prices now that they want for 2012 or whenever.

The bears don't have to do anything. In a free market, whenever sellers far outnumber buyers, prices will falls.

It's inevitable.

[pertinazzio]

So most people are predicting that this will take some time to play out specially in the “stickier” (i.e. better areas). I am wondering whether the resolve of stubborn sellers could be cracked if waves of wisecracking bears started working with ” buyer agents” (yeah like they represent you) and then just started offering the prices now that they want for 2012 or whenever.

Beatus ille qui procul negotiis … paterna rura bobus exercet suis, solutus omni fenore….. Horace

[JC]

Just for fun, here is a close to 50% drop: http://www.sdlookup.com/MLS-076060789-4509_Idaho_St_8_San_Diego_CA_92116

How they EVER thought they could get 350k for this is beyond me…

[mixxalot]

When SD prices come back to earth

Then I will buy my modest 2bedroom/2bath townhome. It should be by 2012 since average incomes not that high in the area.

[JWM in SD]

“a drop is likely. guessing the decline is as futile as predicting the original bubble.”

Why? Just because you don’t want to acknowledge the possibility?

Too Bad.

[JWM in SD]

“a drop is likely. guessing the decline is as futile as predicting the original bubble.”

Why? Just because you don’t want to acknowledge the possibility?

Too Bad.

[bob007]

a drop is likely. guessing the decline is as futile as predicting the original bubble.

[poorgradstudent]

A popular rhetorical question around here is “who are the buyers who will step in if prices drop X%?”

*raises hand*

I’m graduating with my PhD this late spring/early summer (’08). Assuming I can find a job in my field, I’ll immediately start saving for a down payment. If prices fall 50% from their peak, you’re damn certain I will have bought when they were down 40%.

That said, they’re still way too high for me to afford on my expected future salary, which is above the median. I still think 50% is a bit high for what the final number will be, but time will tell.

[cr]

pgs-

The point we (those of us who think 50% is reasonable) are trying to make is that the numbers out there – rising foreclosures, prices, inventory levels, rents, and incomes – all point to a downward direction.

The last two bubbles saw declines all the way back down to more or less where they started.

I forget how many months of inventory there are currently, but I believes it’s close to a year. Foreclosures in CA are up 400% from 1 yr ago, and even the CA association of Realtors now expects a 9% drop. What does THAT tell you?

There’s simply not enough people making enough money to sustain these prices, so they will fall. I think they will fall past what would be an equilibrium because of how housing moves and how people react.

[davelj]

I don’t think the median price/sqft will decline by 50% peak to trough here in SD in nominal terms. I think we’re down about 11%-12% now (after almost two years) and I’ve been saying for some time that a 35%ish decline is possible. But I may be too bearish on that prediction. Now, clearly, there will be plenty of individual properties that do decline by 50% and more, but that’s not the “market,” those are anecdotes.

Recall that the government will help (however little) to put a floor on the decline by way of cockamamie bailout schemes and the Fed will fire up the inflation furnaces. In addition, you’ll see plenty of money enter the market once we start seeing larger price declines. Despite its issues, SD is still widely considered one of the more desirable places to live in the U.S.

Clearly, a 50% drop in the median p/sqft isn’t impossible. But it seems HIGHLY unlikely even under the most bearish interpretation of the data. Although I’d welcome it, I just don’t see it happening. Just my two cents.

[davelj]

I don’t think the median price/sqft will decline by 50% peak to trough here in SD in nominal terms. I think we’re down about 11%-12% now (after almost two years) and I’ve been saying for some time that a 35%ish decline is possible. But I may be too bearish on that prediction. Now, clearly, there will be plenty of individual properties that do decline by 50% and more, but that’s not the “market,” those are anecdotes.

Recall that the government will help (however little) to put a floor on the decline by way of cockamamie bailout schemes and the Fed will fire up the inflation furnaces. In addition, you’ll see plenty of money enter the market once we start seeing larger price declines. Despite its issues, SD is still widely considered one of the more desirable places to live in the U.S.

Clearly, a 50% drop in the median p/sqft isn’t impossible. But it seems HIGHLY unlikely even under the most bearish interpretation of the data. Although I’d welcome it, I just don’t see it happening. Just my two cents.

[cr]

pgs-

The point we (those of us who think 50% is reasonable) are trying to make is that the numbers out there – rising foreclosures, prices, inventory levels, rents, and incomes – all point to a downward direction.

The last two bubbles saw declines all the way back down to more or less where they started.

I forget how many months of inventory there are currently, but I believes it’s close to a year. Foreclosures in CA are up 400% from 1 yr ago, and even the CA association of Realtors now expects a 9% drop. What does THAT tell you?

There’s simply not enough people making enough money to sustain these prices, so they will fall. I think they will fall past what would be an equilibrium because of how housing moves and how people react.

[poorgradstudent]

A popular rhetorical question around here is “who are the buyers who will step in if prices drop X%?”

*raises hand*

I’m graduating with my PhD this late spring/early summer (’08). Assuming I can find a job in my field, I’ll immediately start saving for a down payment. If prices fall 50% from their peak, you’re damn certain I will have bought when they were down 40%.

That said, they’re still way too high for me to afford on my expected future salary, which is above the median. I still think 50% is a bit high for what the final number will be, but time will tell.

[Author]

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