Forum Replies Created
-
AuthorPosts
-
an
ParticipantI’m sure you already know this, but every industry have different metric for P/E and how much is expensive/cheap. So, that 4x might look cheap compare to other sector but in line with its peer. It would make more sense to compare it to its peer, here are some P/E i pull up from builders: KBH = 4.16, MTH = 3.64, TOL = 4.95, and the who builder industry average P/E is 4.25. So I would be very careful touching those two that you listed at the current point. I think prefab builder doesn’t have as big of a margin as the traditional builders, so they would have to sell much more to match the profit the traditional builders get.
ParticipantLike my comment on the other thread, I truly believe the FED dropping rates from high single digit to 1% that cause this major spike (RE bubble). Their intention was to save the stock market and the side effect was RE bubble.
ParticipantThose two you listed got killed recently. One lost 66% and the other lost around 75%. It might be a good time to start looking into them. Maybe after they drop a little more. I would say, wait till it get to a point like Lucent and Nortel were at when they’re in their $0.50-$0.75 range. Good bottom feeder stock that get oversold.
ParticipantI’m also using the method you’re referring to, PS. All I’m saying is we can’t point out the exact bottom but if we keep an eye on things, we can fall w/in 5-10% of the bottom, hence my first few posts saying I’ll be happy to buy when I see price start rising in earnest. I also will be buying several rental properties when time is right, just like you. I think we both agree to the same thing, just stating things differently and misunderstanding each other. When rental properties once again have positive cash flow is when I will start considering buying rental properties. Best of luck to you and everyone else on here.
The reason I think 9/11 affected this cycle is if you look at the short term rates in 2001, it was in the high single digit range. After 9/11, the stock market start crashing hard. The Fed start lowering rates to the bottom of 1%. Because of this super low rate, I think that’s what spur the spike between 2002 and 2005. If rates stay in the high single digit where it was in 2001, I think we would be seeing it winding down in a “soft landing” like it did the last cycle.
ParticipantWow, I’ve been following DQNews data for awhile now and the declining rate of appreciation is increasing. It’s -1.8% in San Diego now. It was 0.8% last month.
ParticipantSDAppraiser, that’s my thought exactly. In normal condition where long term rates are higher than short term rates, it makes total sense to lock in a CD. But in current flat and inverted yield curve, it’s better to keep it liquid in online savings account or money market account.
ParticipantI put my money in GMAC savings account making 5% and it’s completely liquid. To me, it doesn’t make sense to lock in for long term when a liquid account can give you w/in .5% of the CD.
ParticipantWho ever is over fixated on catching the absolute bottom will probably catch the dead cat bounce, that’s all I’m saying. No one can every say they can time the market, any market and prove it. If you can, you’ll be making millions showing others to do it as well.
FormerSanDiegan: of course we all can survive at the last dead cat bounce. We all can survive right now too if you use 30 yr fixed mortgage and have stable jobs. That’s not the point. The point is no one can time the market and be able to call the top and bottom when it happens.
deadzone: That’s exactly what I’ll be doing. I’ll wait till things start turning up in earnest before I start buying.
ParticipantThere’s no way I can give you data of the last bounce in 1994 for all 3 of your indicator. However, if you take a look at Rich graph in the bubble primer, you see that 1994 is well under the longer term average, so my guess is the HAI is pretty good at that point. Also, do you noticed some of the realtor who are ahead of the curve call the top of this cycle at least 1 year before it show up in the OFHEO median? So can it also apply on the way up from the bottom? Could it be possible that they might call the bottom 1 year before it turn positive for the first time? Which is 1994 by the way. The HAI can be shown with graph from Rich but the realtor sentiment is only my guess since I did not talk to any realtor back then. I don’t think I can find inventory data back then since the data is not widely available on the Internet like it is now.
I also showed that an event like 9/11 can change a cycle. W/out 9/11, there were on their way back down. But if you’re still strongly believe you can time the bottom and top, good luck to you. The school of life has very expensive, make sure you’re prepare to pay. I sure paid my share.
ParticipantHere’s data of median price from the last and current cycle. I’m not sure if you have this link or not, but here it is: http://www.housingbubblebust.com/92SoCalRecession.html. According to the data, the highest negative y-o-y decrease is around 1994. The rate of negative y-o-y median price start decreasing and it turn positive in last Q 1995 and 1st Q 1996. That’s 6 months of data in the + y-o-y after a 5 year – y-o-y, would you call that a good time to buy? after all, things are turning positive again. Well, if you say yes, the next year would be quite hard for you, it turn back down again and the house you would have bought probably doesn’t break even until 2 years later. That to me is a dead cat bounce.
Now, lets look at this up cycle. It’s not as obvious but if you keep too close of an eye on things, you might get trigger happy. Here’s one example. Using that same site you see that rate of appreciation increase every Q since 1996 until end of 2000. Around that time is when I remember first start reading about housing being over priced in SD from SD UT. Rate of appreciation start decreasing after 4th Q 2000 from 15% y-o-y to 4th Q of 2001 or 1st Q of 2002 @ 11%. I don’t know about you but seeing appreciation slow and fundamental is already out of whack and people talking about bubble, that might be a signal to sell, right? Well, we all know what happened after that. It would probably continue to go down from that point if Sept. 11 didn’t happen. But since it did and the Fed start slashing rates, that’s why we’re here today.
So there’s a possibility that the next time you see price start turning back up again and you think it’s safe to buy, there might be another economic shock that will drive it down further, such as major oil shortage or a war that will drive oil through the roof and cause inflation to go rampant, which will cause the fed to raise rates. Those and many factors that will affect the RE market although it has nothing to do w/ RE.
Participantsdccu 5 month CD is 5.5% as well. You can also go here: http://www.fatwallet.com/t/52/320690/ to see a collection of different CD rates from different banks. They’re submitted by users.
ParticipantWhat you described as a bottom can also occur in a dead cat bounce. People will think it can drop any lower, and now is the time to buy again. Some will start buying and cause the dead cat bounce. This bounce can possibly make you think it finally turn around. In stock market, dead cat bounce can last 1-2 months before it start turning down again. Since RE is much slower, my guess is it can bounce for many months in RE before it turn down again. That’s why it’s impossible to predict the bottom or top. That’s also the reason why many people sold in 2003. They start hearing about the bubble and believe it and sold. So, bottom line is, we all hope and try to time the bottom, but I’ve been humbled by the market too many times to think I can truly time the market. I would be happy to by when it’s makes financial sense to me, i.e. compare to rent, even if it drop some more.
Also, although good realtor will know more about the movement of the market than the average person, they still can’t have a feel of the whole market. They might know about 200-300 houses personally and know the sentiment of the buyers and sellers of those houses, that’s still only about 10% of the market. There’s a possibility that 10% of the market move in the wrong direction of the market and cause the dead cat bounce scenario.
ParticipantI don’t think timing RE is any easier than timing the stock market. Sure stock market moves much faster than the RE market, but that doesn’t mean the same “fundamental” for timing are not there. Timing the market is impossible. You might get lucky and get 1 or 2 timing right, but to say you can truly time the market, you have to be able to point out every peak and valley. If you truly believe you can time the RE market, then you should buy 10 houses and rent out 9 and make a killing and retire.
ParticipantDiego Mamani, I agree about dead cat bounce. the 10% i gave is just arbitrary. My point is that, you don’t know where the bottom is until you’re well past it and on your way up. Same with the top. So that’s why I throw out that 10% number.
-
AuthorPosts
