VOTE: state of the bubble collapse, Worse, OR Better than your expectation?

[(former)FormerSanDiegan]

This ain’t the 90’s. Back then, ARM loans were the exception, not the norm. 100% financing in the 90’s? Unheard of.

BUT, they did have 100% financing back then. Also, instead of option ARMs, the killer loan back then were loans with balloon payments. No rate adjustment, nothing, you HAD to refinance after X years or pay it off completely.

[Ex-SD]

It’s pretty much where I thought it would be. Condos would be first to take some hard hits, then the outlying areas of SFR’s…….then it will work it’s way towards the more desirable areas. I think it’s going to take a long time (mid to late 2011 or mid 2012 to hit the bottom). Time will tell.

[farbet]

ECONOMIC REPORT
New-home sales plunge 8.3% to seven-year low
Median sales price down 7.5% in past year, biggest drop in 37 years
WASHINGTON (MarketWatch) — Sales of new homes dropped 8.3% in August to a seasonally adjusted annual rate of 795,000, the slowest sales since June 2000, the Commerce Department estimated Thursday.
Sales are now down 21.2% in the past year, with no sign of a bottom in the crippled housing market. Read the full government report.
August’s sales pace was weaker than the 825,000 expected by economists surveyed by MarketWatch. See Economic Calendar. In addition, sales in May, June and July were revised lower.
The sales figures do not account for canceled sales contracts.
The median sales price fell 7.5% to $225,700 compared with a year earlier, the largest year-over-year decline in 37 years. The median price can be affected by the mix of homes sold between and within regions, and the price does not include nonmonetary incentives, such as upgrades, free vacations and new cars.

http://www.marketwatch.com/news/story/new-home-sales-plunge-83-seven-year/story.aspx?guid=%7B22E1E083%2DBA8B%2D4355%2DAC85%2D57D8B99C1C81%7D

WORSE WORSER WORST.

[bigtrouble]

I expected the credit crunch to start in January of this year, not August. The banks knew it was coming late 2005 (first payment defaults in the pipeline get spotted pretty quick.)

[farbet]

What other bloggers are Saying… read on

http://www.haloscan.com/comments/calculatedrisk/4866976334395776554/

[(former)FormerSanDiegan]

It is happening FASTER than I expected.

As of July we are already down almost 14% from the peak on an inflation adjusted basis
see here …

July Case-Shiller Home Price for San Diego

At the peak we were at a point where one would expect about 45% correction in price + inflation to return to “normal”.
It seems we are just getting started, but are already a third of the way there (not counting the rotten conditions in August-September).

I expect to see another 5% or more taken out by the end of the year in HPI, based on seasonal factors and mortgage turmoil. Combined with another 1-2% of inflation from July to end of 2007, that would put us nearly half-way through the magnitude of decline expected (assuming we were 45% overvalued in real terms).

At the end of 2007, we’ll already be half-way down the hill (or more), in my opinion. Definitely faster than I expected.

[Bugs]

In terms of percentages I think we’re about on track for what I expected. Some of you may remember at the very beginning of the year we were speculating that the third quarter of this year was when we thought it would get really interesting and things would start moving more quickly.

However, I was wrong about which of the fundamentals would have the most impact. I thought the foreclosures would go to REO resale more quickly and I didn’t think the financing would dry up as quickly as it did. It’s been a little shocking to see the volumes dry up so quickly, looking in hindsight I should have realized that was the only way it could really go.

Some of you may think it’s moving real slowly but you have to keep some perspective. The bust of the 1990s took 6 years, and the price spike it corrected for was only 1/3 as distorted as this one.

The other thing I think is messing up some people is when you make a distinction between s/w Riverside County and San Diego County. Some of you go beyond that and focus more narrowly on your favorite neighborhoods, which by definition would be among the last to show declines.

Sure, there’s a county line separating the two counties, but economically it’s still basically one region operating off the same employment base. Actually, s/w Riverside is about split between our weaker employment base and the stronger employment base of LA/OC. I have a feeling that if s/w Riverside had to rely solely on SDs employment base it would be doing even worse than it is right now.

The unwinding of this distortion will come from the outskirts in, so I’m not at all surprised to see all the action in s/w Riverside and the outlying areas of SD County and relatively few problems in the central areas. I do think that some of the “coastal will never go down” folks will come to realize differently before this is all over.

[bubba99]

Given I am a glass half empty type of economist, the liquidity meltdown was worse than I ever expected. I did not realize that mortgages were packaged in CMO’s and CDO’s that were then leveraged in REPO’s by “un-educated” hedge fund managers.

I expected prices to fall quicker as interest rates increased, but did not expect financing to all but dry up.

Now I am truly worried about what happens to the dollar – at its lowest level ever – with further interest rate cuts from the FED pending. Could it be that the FED intends to let inflation remedy the mortgage default problem by inflating prices above the “break even” line?

[NotCranky]

From a perspective of three years ago it is happening more slowly than I expected.I certainly thought there would be bargains for rehab and rental type deals by now. Things still don’t pencil out for much in the way of detached houses for those purposes. In the last downturn the market was flooded with VA and HUD Repos. This time those two agencies are not holding many SOCAL properties. As we know the holders of distressed properties have been adverse to dumping properties of any type.

From a perspecitve starting 6 months back, which is about when we were having discussions about “big chunks” coming off prices I am satisfied with the pace as compared to my expectations. I expect the holders of distressed properties to continue to capitulate faster and more broadly from here on out. It would be great to know what the inflationary vs deflationary components of the return to affordability will be.

Yours truly is shocked that we basically have a good interest rate situation at this time. I thought that issue would have gone to hell by now. I still expect it too, but would be happy to be wrong.

[sdrealtor]

Prices have fallen as I expected but the credit situation defintely happened faster than I expected. We are in for a cold Fall/Winter over the next 3 months but I still believe we will have a relatively good Spring. I agree with FSD that we will be about halfway through the downturn by years end.

[farbet]

Rustico Just a matter of time. The rates have to go up. helicopter Ben is “The Great Appeaser” haven’t you noticed.Its election time,dollar plumetting.Must go up.

[cr]

I’d have to say it’s been better than I expected, though I must say I expected my area, LA to see at least 10% drops, and it’s been at the most that much.

Then I step back and think, it took 5 years of reckless buying and lending to get here, it’s going to take at least that to get it right, particularly when Congress and the FED step in the try and smooth things over.

However all that does is delay and worsen the inevitable in my opinion.

[LA_Renter]

I did some research about previous housing downturns as I began observing this market, so I was mentally prepared to watch ice cream melt. The slow process did not surprise me. As many posters have pointed out the credit crunch was probably the most profound event that resembled a true POP. To me that’s the point that it really hit home this was a credit bubble, housing just happened to be the asset of the day. I knew that people couldn’t make these mortgage payments but I hadn’t connected in my mind exactly what that would look like in the financial markets. In that regard the credit bubble is far worse with greater reaching consequences than I had anticipated. We are not at a post mortem on this event just yet.

[PadreBrian]

With the death of the liar loans and zero down, I’m not surprised. It’s what enabled prices to artificially be inflated by people “buying” homes that they didn’t worry about selling because “the value would always rise”. So they tended to buy a house that was too expensive for what they could afford. This enabling the flippers to feed off of them. A vicious circle.

[AKguy]

Credit explosion took me off-guard–I wasn’t looking for the Wile Coyote moment in the CDO markets. Live and learn, I guess.

As for price declines, these seem to be accelerating in the more marginal areas (spectacularly in some), while more affluent/desirable areas are going down ever so slowly by comparison. I was anticipating an initial fall, followed by years of stagnant nominal prices/real price erosion. Clearly the dynamics of the decline are going to vary by region and within regions, with possible false bottoms here and there. Predicting the bottom for a particular area will take careful analysis of local conditions combined with global conditions. In other words, knowing when next to invest in RE will be obvious only in retrospect.

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