Talked to Thornberg

[sdappraiser]

IMO the doomsday scenarios some of you are wishing for won’t happen. What most of you fail to analyze or consider is the average person’s PERCEPTION of price levels.

The average cost of gasoline in April 2003 was around $1.67 per gallon.

http://www.cnn.com/2003/US/04/06/gas.survey/

What’s it today, $3.30 plus or minus? Does the average person yearn for $1.67 gas again? Probably, but if it dropped just below $3 I reckon the average person would PERCEIVE the price had dropped so much they are now getting a good deal. I bet that would register as an increase in consumer confidence and a PERCEIVED increase in disposable income.

Sure the fundamentals have to correct… sure prices must come down to make sense.. but they will not go down to the levels some of you predict because human nature will not allow it. 2002 levels is my guess – that is when things last appeared to be in a general state of balance.

There are some smart people around here, but most of you are blinded by over-analysis and a lack of real world contact with the AVERAGE person. Many of you have expressed your amazement at how friends/family refuse to listen to your spiels. Instead of pounding them with facts and figures, next time take a few minutes to talk to them about their expectations and how they perceive whats going on.

I know there are holes in this theory, and I don’t have the time or inclination to argue it.. but I really believe there is some basis here.

I would like to hear what Bugs and the realtors think about this, since they are out in the field talking to the average person.

[barnaby33]

To quote George Carlin, “Think of how stupid the average person is, and realize half of them are stupider than that. A house is just a place to keep your stuff while you go out and get more stuff.”

If you don’t have time or inclination to argue, then don’t posit a theory. Why are you even here? What really pisses me off about your post is that its long. Perhaps you expect others to read it, but not comment on it?

My personal favorite is this, its so dismissive. Sure the fundamentals have to correct… sure prices must come down to make sense.. but they will not go down to the levels some of you predict because human nature will not allow it. Since when is reversion to the mean not allowed by human nature?

My other favorite is this There are some smart people around here, but most of you are blinded by over-analysis and a lack of real world contact with the AVERAGE person. Why yes I live in a rarified bubble where I don’t deal with the people who make me food, or fix my car. I avoid eye contact with them except on that rare occassion when I beat them over the head with why I am economically superior. Take that you AVERAGE people!

My other other favorite is this! Hi, I’m Larry. This is my brother Daryl and this is my other brother Daryl.

Josh

[barnaby33]

To quote George Carlin, “Think of how stupid the average person is, and realize half of them are stupider than that. A house is just a place to keep your stuff while you go out and get more stuff.”

If you don’t have time or inclination to argue, then don’t posit a theory. Why are you even here? What really pisses me off about your post is that its long. Perhaps you expect others to read it, but not comment on it?

My personal favorite is this, its so dismissive. Sure the fundamentals have to correct… sure prices must come down to make sense.. but they will not go down to the levels some of you predict because human nature will not allow it. Since when is reversion to the mean not allowed by human nature?

My other favorite is this There are some smart people around here, but most of you are blinded by over-analysis and a lack of real world contact with the AVERAGE person. Why yes I live in a rarified bubble where I don’t deal with the people who make me food, or fix my car. I avoid eye contact with them except on that rare occassion when I beat them over the head with why I am economically superior. Take that you AVERAGE people!

My other other favorite is this! Hi, I’m Larry. This is my brother Daryl and this is my other brother Daryl.

Josh

[Anonymous]

SDA, you’ll be disappointed to hear, but I finally — after nearly three years of very soft selling by me — convinced one of our ‘average guys’ at work to sell his home in RSM now.

Better a bit late than trying to get out next year, when there will be a mass exodus.

[Anonymous]

SDA, you’ll be disappointed to hear, but I finally — after nearly three years of very soft selling by me — convinced one of our ‘average guys’ at work to sell his home in RSM now.

Better a bit late than trying to get out next year, when there will be a mass exodus.

[Anonymous]

The AVERAGE persons PERCEPTION doesn’t make much difference in the long run. In the long run, prices will continue to fall until the AVERAGE person can actually afford to purchase an AVERAGE priced house based on their AVERAGE salary. This is COMMON SENSE, not a doomsday prediction or wish.

[Anonymous]

The AVERAGE persons PERCEPTION doesn’t make much difference in the long run. In the long run, prices will continue to fall until the AVERAGE person can actually afford to purchase an AVERAGE priced house based on their AVERAGE salary. This is COMMON SENSE, not a doomsday prediction or wish.

[DaCounselor]

Bugs – the $386K sale closed in April ’04 and the $459K sale closed in June ’04. Same complex, same floorplan. Four other sales in the neighborhood in ’04 (same floorplan) ranged from $390K – $455K. A detailed discussion of the figures and supporting data is really irrelevant – my only point is that if someone says that my neighborhood is going back to ’04 pricing, I ask what do you mean by ’04 pricing? I use my own neighborhood as an example of how referring to a year’s pricing is far too vague (at least in my example – other areas may have had sales in a very tight range – I don’t know). That’s it.

[DaCounselor]

Bugs – the $386K sale closed in April ’04 and the $459K sale closed in June ’04. Same complex, same floorplan. Four other sales in the neighborhood in ’04 (same floorplan) ranged from $390K – $455K. A detailed discussion of the figures and supporting data is really irrelevant – my only point is that if someone says that my neighborhood is going back to ’04 pricing, I ask what do you mean by ’04 pricing? I use my own neighborhood as an example of how referring to a year’s pricing is far too vague (at least in my example – other areas may have had sales in a very tight range – I don’t know). That’s it.

[little lady]

“It appears that prices are already at 2004 levels in many parts of San Diego. I think Mr. Thornberg is living in a time warp.”

I am seeing some closer to ’03 prices already in my neck of
the woods…….but things are gettin snatched up!

[little lady]

“It appears that prices are already at 2004 levels in many parts of San Diego. I think Mr. Thornberg is living in a time warp.”

I am seeing some closer to ’03 prices already in my neck of
the woods…….but things are gettin snatched up!

[Bugs]

DaC

For model match homes in that price range a $70,000 variance in pricing – even during that period – indicates to some differences that go beyond floorplan. That’s why I asked for specific addresses so I could look them up and see what those differences are.

If you don’t want to put up the addresses, that’s fine by me. However, you need not delude yourself into thinking that I am incapable of reconciling those prices and finding a baseline for that neighborhood.

————–

SDAppraiser,

I completely agree with you that the element of the emotional response is ALWAYS present in the residential markets; and indeed should be considered to be among the fundamentals that contribute to the pricing. Based on what happened during the last downturn I would say that almost anyone who can avoid booking the loss during this downswing will do so, the “rational” alternative notwithstanding.

However, all the action occurs in the margins. In my opinion the combination of significantly reduced sales volumes and rapidly increasing rates of “must-sell” transactions will combine to increase the size of those margins. Surely you are already seeing that in your own work.

I would say that in 2001 NOBODY could have guessed what 2006 prices would have looked like. Why should we consider is the reverse of those increases to be beyond reason?

[Bugs]

DaC

For model match homes in that price range a $70,000 variance in pricing – even during that period – indicates to some differences that go beyond floorplan. That’s why I asked for specific addresses so I could look them up and see what those differences are.

If you don’t want to put up the addresses, that’s fine by me. However, you need not delude yourself into thinking that I am incapable of reconciling those prices and finding a baseline for that neighborhood.

————–

SDAppraiser,

I completely agree with you that the element of the emotional response is ALWAYS present in the residential markets; and indeed should be considered to be among the fundamentals that contribute to the pricing. Based on what happened during the last downturn I would say that almost anyone who can avoid booking the loss during this downswing will do so, the “rational” alternative notwithstanding.

However, all the action occurs in the margins. In my opinion the combination of significantly reduced sales volumes and rapidly increasing rates of “must-sell” transactions will combine to increase the size of those margins. Surely you are already seeing that in your own work.

I would say that in 2001 NOBODY could have guessed what 2006 prices would have looked like. Why should we consider is the reverse of those increases to be beyond reason?

[kewp]

I think Thornberg is in a bit of a bubble himself.

Meaning, that his predictions hinge on declining housing prices having no impact on the SD economy.

[kewp]

I think Thornberg is in a bit of a bubble himself.

Meaning, that his predictions hinge on declining housing prices having no impact on the SD economy.

[Author]

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