[Bugs]

It’s all window dressing. As far as prices go over the long term I don’t think it matters what happens with the conventional rate. The only difference it can make is with respect to the timing, and I don’t think that difference will be significant.

The peak was built by excess demand, courtesy of the short term investors and flippers. Many of the FBs who were just buying a home for themselves were competing with these speculators.

The investors have left the building, and they took the excess demand with them. Absent this excess demand the pricing will eventually stabilize based on wage and population trends. That means we won’t be going back into growth mode until the investors decide there’s some short term profits to be made.

Housing pricing here in most neighborhoods peaked between mid-2005 and mid-2006. The beginnings of the downturn in the mid-2005 neighborhoods were already underway by mid-2006. The subprime problems didn’t really start coming to light until several months after that. The way I see it, the subprime problems, while inevitable, didn’t cause the problem, they just made it worse. Likewise, their demise didn’t start our downturn, it only makes it worse.

For the most part, a FB who couldn’t afford the conventional rate when it was 5.5% back in 2004/2005 isn’t going to be able to afford the 6.5% rate in 2007, regardless of which investors are buying it on the secondary market. Not everyone’s career is on an upward trajectory. Besides that, refinancing a 100% debt requires some equity, and equity is in decline in most areas in SD County. As far as I can tell, virtually all of the marginal loans in 2004/2005 are still going to be marginal or unfeasible in 2007. Unless these borrowers have accrued some downpayment money in the last couple years there isn’t going to be enough equity to refinance.

I think that having reasonable liquidity coupled with reasonable underwriting is a good thing for everyone. The excesses of the market will still sort themselves out over time.

I’m a lot more annoyed at the fed for printing money to throw at these lenders.

[Bugs]

Any sales concession of value is effectively a price reduction. On a $700,000 transaction price, a concession package of $80,000 yields an 11% price reduction to a $620,000 sale price.

Whether they acknowledge it or not, these builders are significantly reducing prices until they can find their buyers. It’s one more reason the reported medians are somewhat misleading.

[Bugs]

Any sales concession of value is effectively a price reduction. On a $700,000 transaction price, a concession package of $80,000 yields an 11% price reduction to a $620,000 sale price.

Whether they acknowledge it or not, these builders are significantly reducing prices until they can find their buyers. It’s one more reason the reported medians are somewhat misleading.

[Bugs]

Any sales concession of value is effectively a price reduction. On a $700,000 transaction price, a concession package of $80,000 yields an 11% price reduction to a $620,000 sale price.

Whether they acknowledge it or not, these builders are significantly reducing prices until they can find their buyers. It’s one more reason the reported medians are somewhat misleading.

[Bugs]

Well, at least one Pigg has demonstrated a knack for predicting the future.

LendingBubble, please stand up and take a bow.

[Bugs]

Well, at least one Pigg has demonstrated a knack for predicting the future.

LendingBubble, please stand up and take a bow.

[Bugs]

Well, at least one Pigg has demonstrated a knack for predicting the future.

LendingBubble, please stand up and take a bow.

[Bugs]

Tongue in cheek, I know, but this one ranks right up there with the discussion we had going earlier this week about the right wines to eat with canned goods. Pretty funny.

On a more serious note, I wonder if handing out fliers at the door warning of the various “tricks” the auctioneers use to hype the crowd might mitigate some of the irrationality.

[Bugs]

Tongue in cheek, I know, but this one ranks right up there with the discussion we had going earlier this week about the right wines to eat with canned goods. Pretty funny.

On a more serious note, I wonder if handing out fliers at the door warning of the various “tricks” the auctioneers use to hype the crowd might mitigate some of the irrationality.

[Bugs]

Tongue in cheek, I know, but this one ranks right up there with the discussion we had going earlier this week about the right wines to eat with canned goods. Pretty funny.

On a more serious note, I wonder if handing out fliers at the door warning of the various “tricks” the auctioneers use to hype the crowd might mitigate some of the irrationality.

[Bugs]

I must have exercised a lot more restraint here over the last couple years in conveying my personal opinions in reference to the extent of correction than I realized. Otherwise, some of you wouldn’t be interpreting my recent exit from the closet as jumping on a bandwagon. I always thought my opinions about the long term projections were pretty obvious. Because of where we peaked “return to trend” has always meant a correction of at least 50%, otherwise it isn’t really a correction.

The more I think about it the more I now realize my lapse in restraint was counterproductive to what I’ve been trying to do on this blog.

I confess to attempting to influence the way people see things, but I prefer to think that my usual mode of persuasion has been oriented to providing the reasoning I’ve been using to get to my conclusions rather than to ask people to trust the opinion itself.

I am somewhat distressed at seeing a couple people comment about changing their opinions (apparently) based more on me stating my conclusion than on the reasoning I used to get there. That was never my intent. This is particularly problematic for me because my past track record for projecting timing and extent of these trends has been pretty poor.

I guess what I’m trying to say is if people share my point of view because my reasoning resonates with them then I’m good; but if they’re changing their opinions just because I came out and put a number on my opinion then I can’t feel too good about that.

Sorry. That wasn’t the plan.

[Bugs]

I must have exercised a lot more restraint here over the last couple years in conveying my personal opinions in reference to the extent of correction than I realized. Otherwise, some of you wouldn’t be interpreting my recent exit from the closet as jumping on a bandwagon. I always thought my opinions about the long term projections were pretty obvious. Because of where we peaked “return to trend” has always meant a correction of at least 50%, otherwise it isn’t really a correction.

The more I think about it the more I now realize my lapse in restraint was counterproductive to what I’ve been trying to do on this blog.

I confess to attempting to influence the way people see things, but I prefer to think that my usual mode of persuasion has been oriented to providing the reasoning I’ve been using to get to my conclusions rather than to ask people to trust the opinion itself.

I am somewhat distressed at seeing a couple people comment about changing their opinions (apparently) based more on me stating my conclusion than on the reasoning I used to get there. That was never my intent. This is particularly problematic for me because my past track record for projecting timing and extent of these trends has been pretty poor.

I guess what I’m trying to say is if people share my point of view because my reasoning resonates with them then I’m good; but if they’re changing their opinions just because I came out and put a number on my opinion then I can’t feel too good about that.

Sorry. That wasn’t the plan.

[Bugs]

I must have exercised a lot more restraint here over the last couple years in conveying my personal opinions in reference to the extent of correction than I realized. Otherwise, some of you wouldn’t be interpreting my recent exit from the closet as jumping on a bandwagon. I always thought my opinions about the long term projections were pretty obvious. Because of where we peaked “return to trend” has always meant a correction of at least 50%, otherwise it isn’t really a correction.

The more I think about it the more I now realize my lapse in restraint was counterproductive to what I’ve been trying to do on this blog.

I confess to attempting to influence the way people see things, but I prefer to think that my usual mode of persuasion has been oriented to providing the reasoning I’ve been using to get to my conclusions rather than to ask people to trust the opinion itself.

I am somewhat distressed at seeing a couple people comment about changing their opinions (apparently) based more on me stating my conclusion than on the reasoning I used to get there. That was never my intent. This is particularly problematic for me because my past track record for projecting timing and extent of these trends has been pretty poor.

I guess what I’m trying to say is if people share my point of view because my reasoning resonates with them then I’m good; but if they’re changing their opinions just because I came out and put a number on my opinion then I can’t feel too good about that.

Sorry. That wasn’t the plan.

[Bugs]

There is a full-scale counterassault going on right now. RE boosters are fighting back agressively against the media depictions of a distressed RE market. The boosters are breaking out all their big guns:

– San Diego has great weather

– Everyone wants to live in SD

– Counting the 200% spike in the 2000s, RE prices have increased an average of 5%/yr since 1980 (this one is my personal favorite)

– There are plenty of great jobs here to support these prices

– Interest rates are going to go back down and stay down

– The government (or God) is going to intervene and bail the RE markets out

– Etc, etc, etc

There are people who believe the boosters, some out of fear that maybe their 2005 purchase wasn’t such a good move after all and others because they literally don’t know any better.

[Bugs]

There is a full-scale counterassault going on right now. RE boosters are fighting back agressively against the media depictions of a distressed RE market. The boosters are breaking out all their big guns:

– San Diego has great weather

– Everyone wants to live in SD

– Counting the 200% spike in the 2000s, RE prices have increased an average of 5%/yr since 1980 (this one is my personal favorite)

– There are plenty of great jobs here to support these prices

– Interest rates are going to go back down and stay down

– The government (or God) is going to intervene and bail the RE markets out

– Etc, etc, etc

There are people who believe the boosters, some out of fear that maybe their 2005 purchase wasn’t such a good move after all and others because they literally don’t know any better.

[Author]

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