[brian_in_la]

New Numbers out today from S&P – these are the numbers for price changes in August. Twas a bad month for SoCal. San Diego was down 1.28% and LA was down 1.06% for the month. YOY, San Diego is down 8.32%, while LA is down 5.75%. I am sure Rich will be posting a more authoritative post at some point, but I believe that these August numbers still don’t reflect most of the summer credit crunch, which should be reflected more in the September data.

Just for reference, the typical August Case-Shiller price change from 1986-2006 was +.71% for SD and +.86% for LA. Using the Case-Shiller data, August is the fifth strongest month for San Diego. So, this really puts the -1.28% change for SD in an even worse light.

[brian_in_la]

Hi Daniel – I’m not really a commodities trader sort of person, but here is what I know. I believe that the CS futures are traded on the chicago mercantile exchange (or, maybe CBOT, but I think Merc). So, any full service broker should be able to put in a trade through either their own house or an affiliated agent with a seat on the exchange. I don’t think it is anything exotic. Apparenetly trading is very thin, but looking back on its short history it has “forcast” actual CS index levels pretty well.

[brian_in_la]

Hi Daniel – I’m not really a commodities trader sort of person, but here is what I know. I believe that the CS futures are traded on the chicago mercantile exchange (or, maybe CBOT, but I think Merc). So, any full service broker should be able to put in a trade through either their own house or an affiliated agent with a seat on the exchange. I don’t think it is anything exotic. Apparenetly trading is very thin, but looking back on its short history it has “forcast” actual CS index levels pretty well.

[brian_in_la]

Hi Daniel – I’m not really a commodities trader sort of person, but here is what I know. I believe that the CS futures are traded on the chicago mercantile exchange (or, maybe CBOT, but I think Merc). So, any full service broker should be able to put in a trade through either their own house or an affiliated agent with a seat on the exchange. I don’t think it is anything exotic. Apparenetly trading is very thin, but looking back on its short history it has “forcast” actual CS index levels pretty well.

[brian_in_la]

Bob – People get divorces and lose jobs (and get nice offers in Chicago, Atlanta, etc.) There are other reasons why people put houses on the market besides financial distress on the one hand or wanting to trade up to a nicer McMansion.

Lady – Yeah, 50% is harsh. However, if I remember correctly, rents also declined slightly during the last bubble-burst in SD. With lots of supply of sfr and condos coming on-line, rents may go down. So, going rent may be going down. Just for the record – I’m with you…50% in nominal terms seems unlikely (though, inflation adjusted in 8 years?….who knows….)

[brian_in_la]

Bob – People get divorces and lose jobs (and get nice offers in Chicago, Atlanta, etc.) There are other reasons why people put houses on the market besides financial distress on the one hand or wanting to trade up to a nicer McMansion.

Lady – Yeah, 50% is harsh. However, if I remember correctly, rents also declined slightly during the last bubble-burst in SD. With lots of supply of sfr and condos coming on-line, rents may go down. So, going rent may be going down. Just for the record – I’m with you…50% in nominal terms seems unlikely (though, inflation adjusted in 8 years?….who knows….)

[brian_in_la]

bsrsharma, what is your hunch about the degree of currency collapse? I’m not discounting the role of foreign buyers in certain markets like SF, Miami, Manhattan, but do you really think that is going to save the inland empire and san fernando valley? Maybe downtown LA luxery condos….but, really anything else? I just don’t see it.

I agree that if we have Weimar Germany type inflation, housing will be some sort of hedge. If it isn’t burnt down by the angry mobs.

I still stick with housing being massively overpriced and if you are looking for an inflation hedge, there are better options.

[brian_in_la]

Deflating faster than I expected. Much faster. LA is actually deflating later and slower than SD, so SD is leading the pack down…still, declines all through what is normally the strong months of the market. Nov. – Jan. are going to be brutal.

[brian_in_la]

Surveyor, totally agree with you that cashflow is the way to go. And if you run the numbers and they look good on a property, then yes, I’d totally agree. If the article was titled “there are still some markets with properties where you can generate positive cashflow” I wouldn’t have ridiculed it. But, the focus still seems to be the capital gain (from the rebound!!!!), not the cash flow. The problem with the bubble is that people stopped worrying about cash flow. This article is more of the same.

[brian_in_la]

Hi — I was on the page with you, I could tell it was a mis-type. Yeah, I remember a year or so ago when discussing this that many thought that the declines were too little, too slow. My take then (and now) was that the housing bust is going to be pretty boring….long and slow. Actually, it has been alot faster and more “exciting” than I ever imagined (in 2005, early 2006) that it would be….

[brian_in_la]

Hi – you can check out the indices at the Chicago Merc. I think you have to register with their site, but I think you can get charts of price data without having to pay any money. Someone more savvy than me probably knows other routes (Bloomberg?) as well.

[brian_in_la]

Here are the ugly Realtytrac numbers

            NOD     NTS     REO

Jul-07   27,071  7,498     4,444

Aug-07 41,714   7,590     8,571

Yikes…very nasty months ahead…isn't about now that someone piles on with that ARM reset chart?

ps…

Aug-06 10,862    1,437      207

[brian_in_la]

oy, I can’t stand it….make it stop…

[brian_in_la]

Yeah bugs, where I was going with this thought is that I think during the boom years, supply was limited by the bottleneck of designing/permitting/building and this constricted supply (coupled with marketing and buyer mania) fueled the price increases.

If we are now back to 2004 prices, then it would seem to me that home builders could make good money at these prices, IF they can get the land at 2003/4 prices. Even if we collectively have “too many” houses, if developers can build and sell stuff lower than what resellers are willing to take, then why wouldn’t they keep building and selling until they reach a true break-even proposition?

I am just trying to think this through from the point of view of a home builder who is approaching development & construction decisions from a cash flow and/or survival point of view.

It doesn’t seem obvious to me that individual builders will stop producing homes (they need to in order to generate cash) even if they – collectively – would benefit from reduced supply. They are like OPEC, reduced supply increases price, but they need to build & sell to generate cash. Right?

[brian_in_la]

Well, our jumbo-sized cali loans just got a bit pricier…interesting to see another lender raising rates…between the subprime shutdown and jumbo’s rate increase it is getting ugly….thanks for info you guys…

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