What if it doesn’t collapse?

[SD Realtor]

Will do HWG…

As a side note, the monitor that I post (Scripps and a few other zips) as well as the sdr Carmel Valley Monitor all have enough stats in them for some nice analysis. It is simply a matter of somebody taking the raw data and plotting it out. You can get great active pending ratio’s and other stuff that when read weekly is not much to look at but when plotted over several months will yield really useful information.

As a second side note yesterday I was showing homes to a client in Clairemont. Lots of well attended open houses. I peeked at 4 different logs from homes we visited and the numbers 8, 11, 12, and 11 which is not bad for an open house. How serious those people were is another story. Also the two open houses on Reisling near my home in Scripps seemed to have more activity then usual. However I have no clue about the quality of the activity.

SD Realtor

[Chris Scoreboard Johnston]

Good topic, and bound to be met with a wave of anger. I have no idea where prices will go next, but I can say that I look at both sides of the argument constantly. One sided thinking has never made me any money. A lack of willingness to acknowledge even a chance that one’s opinion could be wrong is rarely a trait of successful people that I have met. The fact that you are itleast willing to consider that a crash may not happen bodes well for your investment future.

The news is horredous everywhere, but what matters is what price actually does as a reaction to it, not what it should do. We have had awful volume for a long time now, and prices have not gone down much. If somehow prices hold up over the next year in the face of this avalanche of negative news, that would be a very bullish sign. I do not know if they will or not, but I am willing to consider that it is a possibility.

Put your helmet on, you may get hammered suggesting this.

[Chris Scoreboard Johnston]

Good topic, and bound to be met with a wave of anger. I have no idea where prices will go next, but I can say that I look at both sides of the argument constantly. One sided thinking has never made me any money. A lack of willingness to acknowledge even a chance that one’s opinion could be wrong is rarely a trait of successful people that I have met. The fact that you are itleast willing to consider that a crash may not happen bodes well for your investment future.

The news is horredous everywhere, but what matters is what price actually does as a reaction to it, not what it should do. We have had awful volume for a long time now, and prices have not gone down much. If somehow prices hold up over the next year in the face of this avalanche of negative news, that would be a very bullish sign. I do not know if they will or not, but I am willing to consider that it is a possibility.

Put your helmet on, you may get hammered suggesting this.

[Chris Scoreboard Johnston]

Good topic, and bound to be met with a wave of anger. I have no idea where prices will go next, but I can say that I look at both sides of the argument constantly. One sided thinking has never made me any money. A lack of willingness to acknowledge even a chance that one’s opinion could be wrong is rarely a trait of successful people that I have met. The fact that you are itleast willing to consider that a crash may not happen bodes well for your investment future.

The news is horredous everywhere, but what matters is what price actually does as a reaction to it, not what it should do. We have had awful volume for a long time now, and prices have not gone down much. If somehow prices hold up over the next year in the face of this avalanche of negative news, that would be a very bullish sign. I do not know if they will or not, but I am willing to consider that it is a possibility.

Put your helmet on, you may get hammered suggesting this.

[Anonymous]

What could cause prices to not collapse? I think that would be an interesting question on which to speculate.

Right now, there are tons of negatives for housing: interest rates rising, tighter lending standards, lack of income growth, bad savings rate, huge oversupply and little demand to name a few.

I’ve yet to hear good arguments from anyone as to why we are at bottom and housing should take off again from here. I think “they aren’t building any more land” and “everyone wants to live here” should be put to rest.

I would love to hear some good bullish cases for housing – if for nothing else, something that I might not have considered. 40-, 50-, 100-year mortgages? Houses being designed for multiple families to buy/live in together? Houses designed for European-style extended families? Super -low Fed rates, or maybe foreign banks buying MBS that all becomes guaranteed by our gov’t? Huge wage inflation?

None of these scenarios seems as likely to me as prices going down though.

[Anonymous]

What could cause prices to not collapse? I think that would be an interesting question on which to speculate.

Right now, there are tons of negatives for housing: interest rates rising, tighter lending standards, lack of income growth, bad savings rate, huge oversupply and little demand to name a few.

I’ve yet to hear good arguments from anyone as to why we are at bottom and housing should take off again from here. I think “they aren’t building any more land” and “everyone wants to live here” should be put to rest.

I would love to hear some good bullish cases for housing – if for nothing else, something that I might not have considered. 40-, 50-, 100-year mortgages? Houses being designed for multiple families to buy/live in together? Houses designed for European-style extended families? Super -low Fed rates, or maybe foreign banks buying MBS that all becomes guaranteed by our gov’t? Huge wage inflation?

None of these scenarios seems as likely to me as prices going down though.

[Anonymous]

What could cause prices to not collapse? I think that would be an interesting question on which to speculate.

Right now, there are tons of negatives for housing: interest rates rising, tighter lending standards, lack of income growth, bad savings rate, huge oversupply and little demand to name a few.

I’ve yet to hear good arguments from anyone as to why we are at bottom and housing should take off again from here. I think “they aren’t building any more land” and “everyone wants to live here” should be put to rest.

I would love to hear some good bullish cases for housing – if for nothing else, something that I might not have considered. 40-, 50-, 100-year mortgages? Houses being designed for multiple families to buy/live in together? Houses designed for European-style extended families? Super -low Fed rates, or maybe foreign banks buying MBS that all becomes guaranteed by our gov’t? Huge wage inflation?

None of these scenarios seems as likely to me as prices going down though.

[Bugs]

I think the question is, how long can these lenders hang on to their REOs, literally throwing good money after bad? The numbers of buyers ARE decreasing, foreclosures WILL increase, and those properties WILL have to eventually be sold at whatever the market at that time will bear. There’s no IF involved.

Those distressed sales will eventually be sufficient in number relative to the sales volume that they WILL drive it, thereby resulting in an ever-declining market level.

Those people who can hang on will do so, but they aren’t the ones setting prices. It’s the must-sell transactions that will do that.

Really, the only thing that’s even halfway surprising so far is the pace at which the credit markets are unwinding. Everything else up until now has been moving along according to earlier projections.

– The outlying areas got it first while the more central areas have lagged.

– The investors have left the building and the inventory has racked up as a result.

– The builders have tapered off on those developments they were in a position to walk away from, and they’ve played games with concessions and deceptions to avoid showing the losses in their neighborhoods so they could continue selling off their units.

– Jobs in the RE sector are drying up and all the retail sectors are sucking gas.

If you’re looking at the cycle as showing catastrophic losses between months 12-18 then you’re bound to be disappointed. The last downturn lasted 5 years and they were correcting from a spike that was only 1/3 the size of this one.

We’re not kidding – this will take years. Sign the 2-year lease and relax ’cause you might have to sign another one before this is all over.

[Bugs]

I think the question is, how long can these lenders hang on to their REOs, literally throwing good money after bad? The numbers of buyers ARE decreasing, foreclosures WILL increase, and those properties WILL have to eventually be sold at whatever the market at that time will bear. There’s no IF involved.

Those distressed sales will eventually be sufficient in number relative to the sales volume that they WILL drive it, thereby resulting in an ever-declining market level.

Those people who can hang on will do so, but they aren’t the ones setting prices. It’s the must-sell transactions that will do that.

Really, the only thing that’s even halfway surprising so far is the pace at which the credit markets are unwinding. Everything else up until now has been moving along according to earlier projections.

– The outlying areas got it first while the more central areas have lagged.

– The investors have left the building and the inventory has racked up as a result.

– The builders have tapered off on those developments they were in a position to walk away from, and they’ve played games with concessions and deceptions to avoid showing the losses in their neighborhoods so they could continue selling off their units.

– Jobs in the RE sector are drying up and all the retail sectors are sucking gas.

If you’re looking at the cycle as showing catastrophic losses between months 12-18 then you’re bound to be disappointed. The last downturn lasted 5 years and they were correcting from a spike that was only 1/3 the size of this one.

We’re not kidding – this will take years. Sign the 2-year lease and relax ’cause you might have to sign another one before this is all over.

[Bugs]

I think the question is, how long can these lenders hang on to their REOs, literally throwing good money after bad? The numbers of buyers ARE decreasing, foreclosures WILL increase, and those properties WILL have to eventually be sold at whatever the market at that time will bear. There’s no IF involved.

Those distressed sales will eventually be sufficient in number relative to the sales volume that they WILL drive it, thereby resulting in an ever-declining market level.

Those people who can hang on will do so, but they aren’t the ones setting prices. It’s the must-sell transactions that will do that.

Really, the only thing that’s even halfway surprising so far is the pace at which the credit markets are unwinding. Everything else up until now has been moving along according to earlier projections.

– The outlying areas got it first while the more central areas have lagged.

– The investors have left the building and the inventory has racked up as a result.

– The builders have tapered off on those developments they were in a position to walk away from, and they’ve played games with concessions and deceptions to avoid showing the losses in their neighborhoods so they could continue selling off their units.

– Jobs in the RE sector are drying up and all the retail sectors are sucking gas.

If you’re looking at the cycle as showing catastrophic losses between months 12-18 then you’re bound to be disappointed. The last downturn lasted 5 years and they were correcting from a spike that was only 1/3 the size of this one.

We’re not kidding – this will take years. Sign the 2-year lease and relax ’cause you might have to sign another one before this is all over.

[LA_Renter]

Here is the home prices won’t actually fall that much argument by Lou Barnes at Inman.

“Housing in the Bubble Zones is still sliding, inventory accumulating,
foreclosures rising, all likely to continue for years. Those ignorant of
housing propose resolution by sellers cutting prices, but it doesn’t work
that way: overextended prices stay flat until purchasing power accumulates
to support them. The farther the boom pushed prices beyond purchasing
power, the longer it takes. This time, years and years.

Financial market commentators now speak casually of home prices falling 7
percent or 10 percent or another percentage du jour. Prices will fall that
much in some micro-markets, but most of the country did not join the
Bubble party, and will experience nothing of “falling prices.” The stock market
can fall single-piece in a heap (99 percent of the S&P 500 stocks fell in
Thursday’s wreck); homes are a neighborhood-by-neighborhood affair.”

Southern California is one of the micro-markets he is talking about. Basically he sees a 7% to 10% drop and thats it, San Diego is already 7% from the peak so I guess we won’t see much depreciation from here on out according to Lou. I personally try to keep my mind open to all possibilities, it’s not so much being proven right as it is wanting to know the truth of the situation. One thing I would say to Lou is that we (especially California) have never experienced home prices become this disconnected from incomes and rents….Never. I think the markets he is speaking of historically have maybe hit 5 to 6 times incomes at their peak and fall back to 3 to 4 times incomes. So yea, time heals all wounds in that case. By the way thats what happened to Southern California during the 90’s downturn and nominal home prices fell over 25%. We saw home prices hit 9 to 12 times incomes during this last boom. It will take a really, really , really long time for purchasing power to catch up this.

[LA_Renter]

Here is the home prices won’t actually fall that much argument by Lou Barnes at Inman.

“Housing in the Bubble Zones is still sliding, inventory accumulating,
foreclosures rising, all likely to continue for years. Those ignorant of
housing propose resolution by sellers cutting prices, but it doesn’t work
that way: overextended prices stay flat until purchasing power accumulates
to support them. The farther the boom pushed prices beyond purchasing
power, the longer it takes. This time, years and years.

Financial market commentators now speak casually of home prices falling 7
percent or 10 percent or another percentage du jour. Prices will fall that
much in some micro-markets, but most of the country did not join the
Bubble party, and will experience nothing of “falling prices.” The stock market
can fall single-piece in a heap (99 percent of the S&P 500 stocks fell in
Thursday’s wreck); homes are a neighborhood-by-neighborhood affair.”

Southern California is one of the micro-markets he is talking about. Basically he sees a 7% to 10% drop and thats it, San Diego is already 7% from the peak so I guess we won’t see much depreciation from here on out according to Lou. I personally try to keep my mind open to all possibilities, it’s not so much being proven right as it is wanting to know the truth of the situation. One thing I would say to Lou is that we (especially California) have never experienced home prices become this disconnected from incomes and rents….Never. I think the markets he is speaking of historically have maybe hit 5 to 6 times incomes at their peak and fall back to 3 to 4 times incomes. So yea, time heals all wounds in that case. By the way thats what happened to Southern California during the 90’s downturn and nominal home prices fell over 25%. We saw home prices hit 9 to 12 times incomes during this last boom. It will take a really, really , really long time for purchasing power to catch up this.

[LA_Renter]

Here is the home prices won’t actually fall that much argument by Lou Barnes at Inman.

“Housing in the Bubble Zones is still sliding, inventory accumulating,
foreclosures rising, all likely to continue for years. Those ignorant of
housing propose resolution by sellers cutting prices, but it doesn’t work
that way: overextended prices stay flat until purchasing power accumulates
to support them. The farther the boom pushed prices beyond purchasing
power, the longer it takes. This time, years and years.

Financial market commentators now speak casually of home prices falling 7
percent or 10 percent or another percentage du jour. Prices will fall that
much in some micro-markets, but most of the country did not join the
Bubble party, and will experience nothing of “falling prices.” The stock market
can fall single-piece in a heap (99 percent of the S&P 500 stocks fell in
Thursday’s wreck); homes are a neighborhood-by-neighborhood affair.”

Southern California is one of the micro-markets he is talking about. Basically he sees a 7% to 10% drop and thats it, San Diego is already 7% from the peak so I guess we won’t see much depreciation from here on out according to Lou. I personally try to keep my mind open to all possibilities, it’s not so much being proven right as it is wanting to know the truth of the situation. One thing I would say to Lou is that we (especially California) have never experienced home prices become this disconnected from incomes and rents….Never. I think the markets he is speaking of historically have maybe hit 5 to 6 times incomes at their peak and fall back to 3 to 4 times incomes. So yea, time heals all wounds in that case. By the way thats what happened to Southern California during the 90’s downturn and nominal home prices fell over 25%. We saw home prices hit 9 to 12 times incomes during this last boom. It will take a really, really , really long time for purchasing power to catch up this.

[HereWeGo]

With the weak dollar, foreigners could try the landlord game.

[HereWeGo]

With the weak dollar, foreigners could try the landlord game.

[Author]

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