Temperature Check for 2008 – Now how low do you think it will go?

[JWM in SD]

Ah Yes, the ‘…I just don’t see it…’ line of thought. I would call that denial.

I think Vizcaya has it right. I challenge all of you to go back one year and think about what you ‘didnt see happening’ and compare to what is currently happening. If you are honest with yourself, you will realize just how serious this really is.

[stansd]

I’m not making that assumption by any stretch of the imagination. Not when I work for a fortune 50 company that has cut my function 30% in the last 3 years and continues to outsource with abandon. I’m acutely aware of the challenges the median will face with a strong recession (I was an economics major, and my idea of a good read is the economist).

That said, an increase in the unemployment rate from 5% to 10% is commonly considered catastrophic. Keep in mind, though that it’s only a 5% reduction in the number of people who want to have jobs. People underestimate how quickly things rush toward equilibrium in situations of extreme stress. You can’t assume that with housing prices, but forget it with the labor market.

Lets assume the median income drops 10%. That’s a pretty bearish scenario, but one that’s a possiblity. Based on the fundamentals we all talk about (3X income for a house), you are only talking about a 15K-30K reduction in the intrinsic value of a house. That’s a far cry from anything that would precipitate a 70-80% decline in housing prices, the fact that we are way above instrinsic value now notwithstanding.

This thread is a good reminder to me that there are both bears (I consider myself one) and lunatics on this board. Anyone that thinks the price of a house in San Diego is going lower than the price of a house in Omaha (or rural germany for that matter) is bat poop crazy.

Stan

[stansd]

I’m not making that assumption by any stretch of the imagination. Not when I work for a fortune 50 company that has cut my function 30% in the last 3 years and continues to outsource with abandon. I’m acutely aware of the challenges the median will face with a strong recession (I was an economics major, and my idea of a good read is the economist).

That said, an increase in the unemployment rate from 5% to 10% is commonly considered catastrophic. Keep in mind, though that it’s only a 5% reduction in the number of people who want to have jobs. People underestimate how quickly things rush toward equilibrium in situations of extreme stress. You can’t assume that with housing prices, but forget it with the labor market.

Lets assume the median income drops 10%. That’s a pretty bearish scenario, but one that’s a possiblity. Based on the fundamentals we all talk about (3X income for a house), you are only talking about a 15K-30K reduction in the intrinsic value of a house. That’s a far cry from anything that would precipitate a 70-80% decline in housing prices, the fact that we are way above instrinsic value now notwithstanding.

This thread is a good reminder to me that there are both bears (I consider myself one) and lunatics on this board. Anyone that thinks the price of a house in San Diego is going lower than the price of a house in Omaha (or rural germany for that matter) is bat poop crazy.

Stan

[stansd]

I’m not making that assumption by any stretch of the imagination. Not when I work for a fortune 50 company that has cut my function 30% in the last 3 years and continues to outsource with abandon. I’m acutely aware of the challenges the median will face with a strong recession (I was an economics major, and my idea of a good read is the economist).

That said, an increase in the unemployment rate from 5% to 10% is commonly considered catastrophic. Keep in mind, though that it’s only a 5% reduction in the number of people who want to have jobs. People underestimate how quickly things rush toward equilibrium in situations of extreme stress. You can’t assume that with housing prices, but forget it with the labor market.

Lets assume the median income drops 10%. That’s a pretty bearish scenario, but one that’s a possiblity. Based on the fundamentals we all talk about (3X income for a house), you are only talking about a 15K-30K reduction in the intrinsic value of a house. That’s a far cry from anything that would precipitate a 70-80% decline in housing prices, the fact that we are way above instrinsic value now notwithstanding.

This thread is a good reminder to me that there are both bears (I consider myself one) and lunatics on this board. Anyone that thinks the price of a house in San Diego is going lower than the price of a house in Omaha (or rural germany for that matter) is bat poop crazy.

Stan

[stansd]

I’m not making that assumption by any stretch of the imagination. Not when I work for a fortune 50 company that has cut my function 30% in the last 3 years and continues to outsource with abandon. I’m acutely aware of the challenges the median will face with a strong recession (I was an economics major, and my idea of a good read is the economist).

That said, an increase in the unemployment rate from 5% to 10% is commonly considered catastrophic. Keep in mind, though that it’s only a 5% reduction in the number of people who want to have jobs. People underestimate how quickly things rush toward equilibrium in situations of extreme stress. You can’t assume that with housing prices, but forget it with the labor market.

Lets assume the median income drops 10%. That’s a pretty bearish scenario, but one that’s a possiblity. Based on the fundamentals we all talk about (3X income for a house), you are only talking about a 15K-30K reduction in the intrinsic value of a house. That’s a far cry from anything that would precipitate a 70-80% decline in housing prices, the fact that we are way above instrinsic value now notwithstanding.

This thread is a good reminder to me that there are both bears (I consider myself one) and lunatics on this board. Anyone that thinks the price of a house in San Diego is going lower than the price of a house in Omaha (or rural germany for that matter) is bat poop crazy.

Stan

[stansd]

I’m not making that assumption by any stretch of the imagination. Not when I work for a fortune 50 company that has cut my function 30% in the last 3 years and continues to outsource with abandon. I’m acutely aware of the challenges the median will face with a strong recession (I was an economics major, and my idea of a good read is the economist).

That said, an increase in the unemployment rate from 5% to 10% is commonly considered catastrophic. Keep in mind, though that it’s only a 5% reduction in the number of people who want to have jobs. People underestimate how quickly things rush toward equilibrium in situations of extreme stress. You can’t assume that with housing prices, but forget it with the labor market.

Lets assume the median income drops 10%. That’s a pretty bearish scenario, but one that’s a possiblity. Based on the fundamentals we all talk about (3X income for a house), you are only talking about a 15K-30K reduction in the intrinsic value of a house. That’s a far cry from anything that would precipitate a 70-80% decline in housing prices, the fact that we are way above instrinsic value now notwithstanding.

This thread is a good reminder to me that there are both bears (I consider myself one) and lunatics on this board. Anyone that thinks the price of a house in San Diego is going lower than the price of a house in Omaha (or rural germany for that matter) is bat poop crazy.

Stan

[temeculaguy]

I like 50% a fair estimate, but agree with Bugs that there will be variables by community but overall it will be close to 50%. I think the more desirable areas built pre-bubble will see the lowest decline in percentage and be at those levels for the shortest amount of time, but at the same time, waiting for bottom, I would hold off on setting an exact dollar amount for re-entry, we are in a paradigm shift. There are too many unanswered questions, there is no historical model for the cycle we are in, these are interesting times, to say the least.

My personal favorite post of Bugs’ (and one that has saved me at least 100k to date) was where he outlined a “knife catching prevention diet” of sorts and how every time you think things have reached re-entry prices, evaluate the inventory numbers, wait 6 or 8 weeks and see if thing went up or down in both price and inventory. This ship won’t turn around in two months and buying within two months of the bottom won’t be so bad so it is a good plan, one that prevents you catching a falling knife and from missing out on that same La Costa/Encinitas place for 500k, if that happens to be in the cards. It is more likely that is a possibility than having it shoot up to 650k within two months of you spotting it at 600k.

[temeculaguy]

I like 50% a fair estimate, but agree with Bugs that there will be variables by community but overall it will be close to 50%. I think the more desirable areas built pre-bubble will see the lowest decline in percentage and be at those levels for the shortest amount of time, but at the same time, waiting for bottom, I would hold off on setting an exact dollar amount for re-entry, we are in a paradigm shift. There are too many unanswered questions, there is no historical model for the cycle we are in, these are interesting times, to say the least.

My personal favorite post of Bugs’ (and one that has saved me at least 100k to date) was where he outlined a “knife catching prevention diet” of sorts and how every time you think things have reached re-entry prices, evaluate the inventory numbers, wait 6 or 8 weeks and see if thing went up or down in both price and inventory. This ship won’t turn around in two months and buying within two months of the bottom won’t be so bad so it is a good plan, one that prevents you catching a falling knife and from missing out on that same La Costa/Encinitas place for 500k, if that happens to be in the cards. It is more likely that is a possibility than having it shoot up to 650k within two months of you spotting it at 600k.

[temeculaguy]

I like 50% a fair estimate, but agree with Bugs that there will be variables by community but overall it will be close to 50%. I think the more desirable areas built pre-bubble will see the lowest decline in percentage and be at those levels for the shortest amount of time, but at the same time, waiting for bottom, I would hold off on setting an exact dollar amount for re-entry, we are in a paradigm shift. There are too many unanswered questions, there is no historical model for the cycle we are in, these are interesting times, to say the least.

My personal favorite post of Bugs’ (and one that has saved me at least 100k to date) was where he outlined a “knife catching prevention diet” of sorts and how every time you think things have reached re-entry prices, evaluate the inventory numbers, wait 6 or 8 weeks and see if thing went up or down in both price and inventory. This ship won’t turn around in two months and buying within two months of the bottom won’t be so bad so it is a good plan, one that prevents you catching a falling knife and from missing out on that same La Costa/Encinitas place for 500k, if that happens to be in the cards. It is more likely that is a possibility than having it shoot up to 650k within two months of you spotting it at 600k.

[temeculaguy]

I like 50% a fair estimate, but agree with Bugs that there will be variables by community but overall it will be close to 50%. I think the more desirable areas built pre-bubble will see the lowest decline in percentage and be at those levels for the shortest amount of time, but at the same time, waiting for bottom, I would hold off on setting an exact dollar amount for re-entry, we are in a paradigm shift. There are too many unanswered questions, there is no historical model for the cycle we are in, these are interesting times, to say the least.

My personal favorite post of Bugs’ (and one that has saved me at least 100k to date) was where he outlined a “knife catching prevention diet” of sorts and how every time you think things have reached re-entry prices, evaluate the inventory numbers, wait 6 or 8 weeks and see if thing went up or down in both price and inventory. This ship won’t turn around in two months and buying within two months of the bottom won’t be so bad so it is a good plan, one that prevents you catching a falling knife and from missing out on that same La Costa/Encinitas place for 500k, if that happens to be in the cards. It is more likely that is a possibility than having it shoot up to 650k within two months of you spotting it at 600k.

[temeculaguy]

I like 50% a fair estimate, but agree with Bugs that there will be variables by community but overall it will be close to 50%. I think the more desirable areas built pre-bubble will see the lowest decline in percentage and be at those levels for the shortest amount of time, but at the same time, waiting for bottom, I would hold off on setting an exact dollar amount for re-entry, we are in a paradigm shift. There are too many unanswered questions, there is no historical model for the cycle we are in, these are interesting times, to say the least.

My personal favorite post of Bugs’ (and one that has saved me at least 100k to date) was where he outlined a “knife catching prevention diet” of sorts and how every time you think things have reached re-entry prices, evaluate the inventory numbers, wait 6 or 8 weeks and see if thing went up or down in both price and inventory. This ship won’t turn around in two months and buying within two months of the bottom won’t be so bad so it is a good plan, one that prevents you catching a falling knife and from missing out on that same La Costa/Encinitas place for 500k, if that happens to be in the cards. It is more likely that is a possibility than having it shoot up to 650k within two months of you spotting it at 600k.

[Enorah]

That is a great plan tg, by way of Bugs.

Thank you

[Enorah]

That is a great plan tg, by way of Bugs.

Thank you

[Enorah]

That is a great plan tg, by way of Bugs.

Thank you

[Enorah]

That is a great plan tg, by way of Bugs.

Thank you

[Author]

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