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September 17, 2007 at 2:29 PM in reply to: Are the developers as a whole in trouble? Big TROUBLE???! #84854
cyphire
ParticipantBe careful – there are a lot of agents in a lot of trouble economically right now. Make sure to preserve your rights and get the agreements or the cancellations thereof in writing.
September 17, 2007 at 9:23 AM in reply to: Are the developers as a whole in trouble? Big TROUBLE???! #84805ParticipantWow – I guess if you are in the building business – especially as a small developer, you probably have taken all your profits and plowed them back into more projects. These projects are probably going to soak up the profits thus erase the paper money gains from before.
I wonder if the banks who made the construction loans are in trouble….
Where I used to live, Olivenhain, there are 2 brand new mini-developments of 3 houses and 2 houses along Lone Jack Road. I notice that they have come down in price also from the 2M’s to 1.4M’s… And still aren’t selling…
Participantstarted new thread…. Are the developers as a whole in trouble?
http://piggington.com/are_the_developers_as_a_whole_in_trouble_big_trouble
ParticipantWe haven’t had a recession yet, we have only seen the froth come out of the real estate market. Prices were still jumping like crazy in 2005, 2006 still had lots of high prices paid, 2007 has been a bust, but the level of transactions has dimmed, there are huge numbers of homes which were pulled, are not going on the market, despite it making economic sense for the seller, etc.
I think the problem is that we haven’t really had a downturn in real estate, just a quick reversal of the excesses. The rats are still in the ship, the ship is taking on water but the rats haven’t fled. It took years and years of price increases to fuel the insanity which has become the housing market here in San Diego (and California and to a much lesser extent the US).
[img_assist|nid=4763|title=housing costs as a percentage of wages|desc=|link=node|align=left|width=466|height=466]
Hey folks… This is the AVERAGE! It includes all the these people have lived in their home for years…. It is the average for the state. The number of people who pay 50% is huge as well. So for each dollar earned, there are lots of people out there paying .40 cents of it on housing. This is unsustainable
When prices went up, and up, and up, the market turned over, people cashed out and left, others picked up the high costs. We are now experiencing a huge shift in employment and there are no places to pick up that employment.
The Fed is claiming a 1 in 3 chance of recession. They are always wrong to the optimistic side. Most of the markets believe that the number is 1 in 2. The folks with a real understanding of risk think it is inevitable.
We will look back at this period and laugh (or cry). The risk has just been shifted with lots of the players jumping ship. The mortgage brokers, banks, wall street, Realtors, construction companies, and all the ancillary businesses have just realized that the game is over. The economy is just starting to shift from it. Inflation is out of control (but not according to the government). Health care, oil, commodities (milk & wheat especially) are raising like crazy. Our engine is sputtering, the world is replacing our growth vehicle, and they will suffer along with us, but prices are high, job prospects are low, and the housing market will go down accordingly.
To go back to the original point. Did I have an original point?! It will take years of unwinding, huge job losses, a recession, pricing pressures, and an unwinding of the US dominance in many markets.
Not the least of our problems:
– A hugely expensive war which shows no signs of letting down.
– Recession in jobs and wages.
– Housing costs which will have to deflate significantly and will keep a huge brake against the ability to get out of recession.
– A negative savings rate (it’s only the savings of Asia which has propped us up so far – it is unsustainable) as per the Fed.
– Loss of manufacturing base.As it gets worse, and it will get worse, the way our society is set up will accelerate the pain for the vast portion of our society. Just as in the depression, the folks with real money will hunker down, and the others will starve. It’s called capitalism and while we have all been taught that it is the best system, it really is the best system for the folks with significant money, and brutal for most others.
During the excessive downturn the following will happen:
– Our farmers will ship goods to where they can maximize profits.
– Our jobs will be / have been outsourced for the 5% of our population’s benefit.
– Job security which has never been strong will be non-existant.
– Wage deflation will be rampant along with downsizing.
– Our politicians support the wealthy vs. the middle class / lower class.
– The world will move to a better hedge than the US economy, while it suffers as well.Oh well – sorry for the rant. I have to go to the gym now, personal defense and strong muscles will be critical for the bad times!!! Hope I’m just kidding!
ParticipantThe realtor might be right on one score – prices aren’t coming down in lots of areas… Before everyone attacks – I just want to point out that the houses that are selling are the really good ones, the rest of the market can’t sell!
There are NO buyers! Many of the houses which would be on the market are withdrawn or not there. I know of 2 people who HAVE to sell their homes, but they have opted to ‘wait it out’ and have withdrawn their homes. There is a huge, huge phantom inventory out there – people who economically want / need to sell but won’t give it away… Yet…
Wait till the market stays negative for the next couple of years. It will be a bloodbath.
ParticipantI understand FormerSanDiegan…. I see this market going sideways for a couple of years or down dramatically. I don’t see it going up. Thats why I would not be in stocks right now. But I understand your position. If I wasn’t worried about a long downtrend I wouldn’t sell either… But as I am, I think that you will lose 5-20% of your portfolio over the next year.
p.s. I don’t have a crystal ball and good luck!!! I could EASILY be wrong.
p.p.s. Glad you have stop orders Asianautica!
ParticipantWhy would I care if my kids see me naked???? I think that it’s pretty normal.
We have never made a big deal of wearing clothes around the house. I think the Japanese say “Nakedness is often seen, but never noticed…”
Naked Cyphire….
ParticipantI don’t get it….
I understand about re balancing, but why?
If we are going to have a recession – then the market will swoon. Period. If you believe that there is more potential good news than bad over the next year, then rebalance by all means….
If you believe that the housing market has just begun to have an impact on the economy, and if you believe that the party is over for profits in the large caps (as the economy cools, the profits will shrink), the p/e’s get higher, the market dips and stays down for a while. Then get out….
You can always buy after a couple of thousand points get shaved…
p.s. The DOW was between 8K and 10K in 2003…. That was a period of intense earnings… Why do you think it couldn’t go back to 10K… 9K… 8K????
ParticipantI like the closet being in the bathroom – our last bathroom was large and had two separate walk in closets. As long as there is a separate toilet room, I consider this a nice feature. It’s nice not to have extra doors in the bedroom, by putting it in the bathroom, you save 2 doors (for the bathroom).
ParticipantI’m with you ocrenter… Most people, even on this forum, can’t imagine prices resetting to the late 90’s… Coupled with inflationary pressure, wow what a hit to home prices.
Just look at the percentage increases over the last 10 years… Then look at where the line should be.
ParticipantFormerSanDiegan…. Just because you look long term (something I haven’t been famous for) doesn’t mean that you just rebalance. Head for them thar hills dude!
I have 0 debt and sold my company about 4 months ago. As of last week I sold off every single stock. I am now 1/3rd California municipal bonds, and 2/3rds in the money market.
I really like the idea of shorting the S&P 500 and investing as a bear. As most people aren’t sophisticated investors I think that shorting the market might be a brilliant move. I agree – it’s not safe. So I might take 25% of my money and buy gold / short the market.
Hey asianautica… be careful about the emerging markets / asian markets. When the consumer stops spending in the US the markets will tumble. I sadly think that the recent jobs report is just the first leg of a steady decline into a vast recession. While it’s hard to time a market, it’s less hard to see the writing on the wall and go against the flow. Soon the flow will be dramatically shifting, with people bailing on their portfolios.
And let me state what we always say on this forum – but in more certain terms…. The housing market will correct BRUTALLY to the downside. It will take years. We haven’t even begun to experience how much air will be let out of this market. In 2005 120K people a month took the real estate exam… this month… 6000. What a difference a couple of years make.
Homes are illiquid. Think of the housing market as a huge supertanker which was gaining speed each month through the 2005’s… It started slowing in 2006 and now they have put the brakes on HARD…. But it’s still a supertanker and it takes a large portion of the market to turn over before the corrections get finalized. Damn I am bad at analogies…. But you can catch my drift!
ParticipantCashman… In an economic downturn (recession – brutal recession?) that area is going to be ugly. Gentrification comes from a shortage of inventory at reasonable prices….
Coming from NYC, the “Alphabet City” area was about as nasty as it could get in the 70’s… The 80’s were still awful… 90’s and recently its a yuppified area – the vagrants were pushed out. Manhattan is a small brutally expensive market which has still seen price increases. LA isn’t the same deal.
The difference is that as the economy gets worse the potential gentrified areas stay stagnant and the investors don’t sink any more money in. A lot of people are left holding the bag. I believe that prices will go down for years – and the same potential buyers will spend their money on better areas which could hold value. Crime will start going up as jobs get cut. Always happens. I would hate to be in downtown LA over the next 10 years.
Just my opinion!
p.s. I love the urban lifestyle
ParticipantAre those the ones by the shopping center? Just up the road from the 56?
September 5, 2007 at 5:48 PM in reply to: cannot wait anymore, buying a condo now instead of a house at 4S Ranch, and wait to buy a bigger house later? #83518ParticipantYou certainly will if you don’t buy a house in todays market!!! I think that anyone who stayed on the sidelines will have a built in prosperity allowance.
I remember the stories of the depression – how some individuals both wealthy and not made money in the market – then sold and went very safe when they realized that the market was somewhat a house of cards. It’s a good time to get safe when the value of stocks wildly change, and people who shouldn’t even be given a credit card start buying houses because of greedy financial programs.
I don’t hope for a recession / depression, but I’m not afraid to position myself for one. I might lose in the short run, but I’m pretty concerned for the next few years. I guess time will tell!
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