“…The forecast was so shocking that I hesitated to print it.”

[JWM in SD]

I submit for your reading pleasure.

http://www.thestreet.com/_tsccom/newsanalysis/opinion/10356410.html

The money quote: “Months ago, Robert Z. Aliber, retired University of Chicago economics professor, told me home prices would drop 30%. The forecast was so shocking that I hesitated to print it.”

Worse still: “To be blunt, Shilling is forecasting a drop of 40% to 50% in home prices in the more overpriced areas such as California, Florida and Las Vegas or downtown condo markets.”

Okay, have at it.

[JWM in SD]

Hey Alex, this one is for you buddy 😉

[NeetaT]

Well that’s just fantastic news. So lets all get rich by shorting the market. I know that there are many creative investment vehicles that allow one to short any market be it directly or indirectly. Don’t any of you understand that markets are meant to be unpredictable so that none of us will quit our jobs and get rich off investing alone?

[JWM in SD]

yeah, how about that CFC huh? Just keeps defying gravity while angelo continues his “planned sales” of shares. How about that eh?

Just remember folks, everything is great until it isn’t. Examples:

Recent comments by our buddy David Lereah upon exiting from the NAR. Gee, we were going into an upturn and the subprime debacle happened. Everything was great until then.

Or how about the fact that NEW was rated as a strong buy less than a week before it cratered. How about that. Interesting how works isn’t it?

[latesummer2008]

Schiller is the Only One speaking the truth here. Remember he called the last Stock Market Bubble on the money. Could it be, that he is the only one with credibilty? I believe so.

Let The Show Begin….

http://westsideremeltdown.blogspot.com

[JWM in SD]

hey LS08, my in-laws live in the No. Hollywood and Sherman Oaks areas. What news do you have about those locales?

[latesummer2008]

Nothing for the Valley Yet. Perhaps in the future. I would imagine prices have begun to drop there as well. Check out the (RBX) formula on my site and try it with comparable sales from Zillow.

Good Luck!

http://westsideremeltdown.blogspot.com

[HereWeGo]

CFC is a tempting put candidate, no doubt. If an investment bank buys CFC out, though, your puts will become worthless in the blink of an eye.

[JWM in SD]

Buyout won’t happen for CFC, it would destroy their business model because that would cut them off from their wholesale lender supply. I don’t have any puts in CFC yet. I’m waiting for more definitive Alt A events to occur first.

[CAwireman]

JWM,

Good find. Here are many of the other high points in the
article:

Using historical data compiled by Robert Shiller, he says that home prices would have to drop 45% to get back to their historic normal levels.

Existing-home prices peaked in October 2005 and are down about 4% on a national basis through March 2007. But Shilling says the worst is yet to come, because he estimates that it takes about 18 months from when home prices first start to slide for homeowners to recognize that this is not a fleeting blip. Now the “interval of denial” is about over, and homeowners will start realizing that if they want to sell, they’ll have to cut prices, says Shilling. But actual recorded sales at lower prices will take a few more months to show up in statistics.

Even worse, Shilling says there is no way this problem can be confined to the housing market. He estimated that overbuilding has resulted in at least 2 million “excess” homes — a factor that will depress not only homebuilding but related industries as well in the coming years. Already, housing starts have fallen 33% from their peak of 2.265 million in January 2006, to 1.518 million in March. Shilling predicts an additional 25% decline in housing starts and says there is no way that capital spending by businesses can pick up the slack. Ugh!

Shilling predicts “an American recession to commence later this year, and to extend globally in 2008.” Time will tell.

In the meantime, under the heading of “mortgage news you can use:” Washington Mutual (WM – Cramer’s Take – Stockpickr – Rating) has just announced a new mortgage product that will provide the flexibility of an adjustable rate mortgage with the ability to lock in a fixed rate at any time with no cost the first time you make a change. In fact, you can relock your fixed rate again if rates drop, or return to an adjustable rate — all without a new closing as is typical with refinancing. This process is allowed up to two times per year and costs only $250 after the first free change is made.

HiggyBaby

[capeman]

Why wait for the Alt-A event. It is going to happen and at that point the prices of the puts will shoot through the roof. I bought $40 Jan-08 puts this week since the insider sales sheet is smoking and the stock is just off its all-time high.

[Ozzie]

Well, if it takes 18 months as the article states then we should be down that 40% by now because the height of the market was in the summer of 2004. We’re about 30+ months past the peak.

[PD]

The peak in many areas was not until August 05. If you take that 18 months and then extend it a couple of months through the spring selling season (where you almost always see in an increase in prices even in down markets), you get where we are right now.

[sdrealtor]

Ozman,
PD is correct in that peak pricing hit different areas at different times. In your hood it was Spring/Summer 2004. By the way, there is a house on Calle Oliva (I’m sure you know which one) that sold for 1.35M in 2004 and resold for 1.16M last year. Throw in 3 years of inflation at 3 to 4% and that looks like a real (not nominal) loss of around 30%.

[Ozzie]

The sale price for that house reflects a few circumstances including he took a job elsewhere and a relocation bailed him out so he probably didn’t take a loss. It also fell out of escrow at least once at a higher price when the buyers wife flat out refused to move from the Bay Area after they had been in escrow 20 days. The seller kept the deposit. I would estimate you could have gotten $1.25 for that house this spring.

Regardless it wasn’t too bright to buy at that price unless you intended on staying a long time OR maybe the other job offer was so great that it didn’t matter. Everyone has different motivations.

[Author]

Posts