Spring Housing Prediction

[sdduuuude]

I haven’t posted on this one yet but I have to say I have been reading and thinking about it all day.

I’ve poured a stiff drink and I’m going to write a long one that will tickle both sides of the argument and present a few ideas that are barely connected but not really say anything.

First off – I’m not so sure sdr has really stuck his neck out there too far. Why? There’s no numbers in his prediction. Sales will be “strong” not “over 5,000 in May.” Come next August as we are looking back on Spring, there will undoubtedly be arguments over whether or not it was “strong”, regardless what the numbers are.

Still, I value his perspective and it is an unexpected one and one I’m warming up to. Also, I’m taking notice because I expected “holy shit” this fall, which we got on Wall Street as I expected but not so much in the housing market. Sales are definitely up.

The distinction between strong sales and strong prices, though, is an important one. I mean – when the DOW is down on heavy trading, it is still down. Only the brokers are happy in that market, which is really what sdr is saying.

Something really striking about this housing market is the difference in behavior from neighborhood to neighborhood. I wish I had all day to dig into this and really understand the dynamics of each ‘hood and how hard Carmel Valley will get hit and when will Clairemont recover, and are condos really at a bottom now, but sadly I’m not one of the 10% unemployed and don’t have time. It would make a great research project for one econ prof’s students. Maybe he’ll offer me a teaching job and I’ll get right on it.

As I was thinking about this thread, ideas similar to TG’s post came to mind. 10% unemployment means 90% employment and that means plenty of buyers. It is a little more complicated than that, though. Housing is priced on the margin, so it is somewhat volatile. It takes relatively few distressed sellers to turn a market bad but it also takes relatively few well-funded buyers to send the market soaring. Maybe that is the hypothesis for the research project – a few well-funded buyers in the good neighborhoods, and a few distressed owners in the bad ‘hoods explain the dichotomy.

I say – if you haven’t mentioned a zip code in a prediction, you haven’t really made a prediction.

Another thing that strikes me about this housing market – and economics in general – is how slowly things move. In mid 2006, Roubini predicted a recession in Jan 2007. I said it would be Q1 2008, and that was even too soon. What really makes me nod when I read sdr’s observation and “prediction” is the fact that if he is right, it will drag the housing collapse out longer and longer. And that jives with my perception of a long, slow slide.

Now, it seems to me that most everyone is expecting prices to come down more in the next year and a half. Even sdr said prices “may even creep up a little in some markets” Could you be any more tentative in predicting a price increase ?

I’m thinking if sales are up now, yet we are still expecting prices to come down over the next 12 to 18 months, today’s buyers are just another group of future upside-down homeowners. Upside-down homeowners means more distressed sales, though they may not hit for another couple years.

As an aside – it seems to me that there has to be a “school district” bubble that pops one of these years. Right now, I think a clean, upgraded 3br/2bath 1,600 sq. ft home in Clairemont that is on a canyon, built in the early 60’s on a 7,000 sq. ft lot is worth about $530,000. In Carmel Valley (with no Mello Roos), about $850K. I have to believe that people will eventually decide that 300K for their kids to go to school in that district is too much.

From sdr’s post, I gather this as the bottom line – this market is dying hard.

But I think it is still dying. After the Spring bounce, the bloodshed has to continue, especially at the 600K – 1M range as businesses feel the pain of the macroeconomic environment. In short – I’m pushing all my expectations for price collapses in this range out another year.

I’m thrilled to be discussing real estate also.

[ocrenter]

sdr, so you don’t think the drop in conforming loan limit from 697k to 525k is going to make a difference for 2009?

[ocrenter]

sdr, so you don’t think the drop in conforming loan limit from 697k to 525k is going to make a difference for 2009?

[ocrenter]

sdr, so you don’t think the drop in conforming loan limit from 697k to 525k is going to make a difference for 2009?

[ocrenter]

sdr, so you don’t think the drop in conforming loan limit from 697k to 525k is going to make a difference for 2009?

[ocrenter]

sdr, so you don’t think the drop in conforming loan limit from 697k to 525k is going to make a difference for 2009?

[Nor-LA-SD-guy]

Just to be contrarian sometimes I think we are overstating the effect of this downturn,

We are desperately trying to talk ourselves into making this downturn as worse as it could possibly be it seems to me.

I have always found that the Traffic indicator is the best indicator of the economy,

I can’t speak for SD because I never drive there during rush hours, but in L.A. there seems to be no recession judging by traffic at rush hour. Busier and busier is all I see.

Not trying to be an L.A. bigot or anything, but what happens, happens in L.A. first I have always experienced.

Oh one last thing , working ridiculously long hours (qcom or else where) is not a sign of bad things happening at that company, it’s just business as usual in High tech.

[Nor-LA-SD-guy]

Just to be contrarian sometimes I think we are overstating the effect of this downturn,

We are desperately trying to talk ourselves into making this downturn as worse as it could possibly be it seems to me.

I have always found that the Traffic indicator is the best indicator of the economy,

I can’t speak for SD because I never drive there during rush hours, but in L.A. there seems to be no recession judging by traffic at rush hour. Busier and busier is all I see.

Not trying to be an L.A. bigot or anything, but what happens, happens in L.A. first I have always experienced.

Oh one last thing , working ridiculously long hours (qcom or else where) is not a sign of bad things happening at that company, it’s just business as usual in High tech.

[Nor-LA-SD-guy]

Just to be contrarian sometimes I think we are overstating the effect of this downturn,

We are desperately trying to talk ourselves into making this downturn as worse as it could possibly be it seems to me.

I have always found that the Traffic indicator is the best indicator of the economy,

I can’t speak for SD because I never drive there during rush hours, but in L.A. there seems to be no recession judging by traffic at rush hour. Busier and busier is all I see.

Not trying to be an L.A. bigot or anything, but what happens, happens in L.A. first I have always experienced.

Oh one last thing , working ridiculously long hours (qcom or else where) is not a sign of bad things happening at that company, it’s just business as usual in High tech.

[Nor-LA-SD-guy]

Just to be contrarian sometimes I think we are overstating the effect of this downturn,

We are desperately trying to talk ourselves into making this downturn as worse as it could possibly be it seems to me.

I have always found that the Traffic indicator is the best indicator of the economy,

I can’t speak for SD because I never drive there during rush hours, but in L.A. there seems to be no recession judging by traffic at rush hour. Busier and busier is all I see.

Not trying to be an L.A. bigot or anything, but what happens, happens in L.A. first I have always experienced.

Oh one last thing , working ridiculously long hours (qcom or else where) is not a sign of bad things happening at that company, it’s just business as usual in High tech.

[Nor-LA-SD-guy]

Just to be contrarian sometimes I think we are overstating the effect of this downturn,

We are desperately trying to talk ourselves into making this downturn as worse as it could possibly be it seems to me.

I have always found that the Traffic indicator is the best indicator of the economy,

I can’t speak for SD because I never drive there during rush hours, but in L.A. there seems to be no recession judging by traffic at rush hour. Busier and busier is all I see.

Not trying to be an L.A. bigot or anything, but what happens, happens in L.A. first I have always experienced.

Oh one last thing , working ridiculously long hours (qcom or else where) is not a sign of bad things happening at that company, it’s just business as usual in High tech.

[La Jolla Renter]

TG, great point that with 10% unemployment 90% are still employed.

The 90% that are still employed are making a heck of a lot less income, have no housing ATM income to tap, and their credit cards are maxed out. I think our San Diego economy is ugly now, and people haven’t even started to really hunker down yet.

[La Jolla Renter]

TG, great point that with 10% unemployment 90% are still employed.

The 90% that are still employed are making a heck of a lot less income, have no housing ATM income to tap, and their credit cards are maxed out. I think our San Diego economy is ugly now, and people haven’t even started to really hunker down yet.

[La Jolla Renter]

TG, great point that with 10% unemployment 90% are still employed.

The 90% that are still employed are making a heck of a lot less income, have no housing ATM income to tap, and their credit cards are maxed out. I think our San Diego economy is ugly now, and people haven’t even started to really hunker down yet.

[La Jolla Renter]

TG, great point that with 10% unemployment 90% are still employed.

The 90% that are still employed are making a heck of a lot less income, have no housing ATM income to tap, and their credit cards are maxed out. I think our San Diego economy is ugly now, and people haven’t even started to really hunker down yet.

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