[Eugene]

I don’t see any mention of an economy-wide deflationary spiral. He’s merely predicting a Japanese-style slump in house prices (sustained declines for 5+ years).

The good Professor is a smart man; but with Helicopter Ben in charge of FED, How can there be a sustained deflationary spiral? If Ben sets the FEDs rate to near zero and issues long term repo’s on funny paper, I can’t see how there can be deflation.

Agreed. Nationwide deflation is the boogeyman of modern economics. As long as we have an academic like Helicopter Ben in charge of the Fed, he will do everything in his power to prevent it. Repo’s on funny paper aren’t even necessary. You’ll find out what he’s really going to do if you read his speech that gave him his nickname. (The fact that it’s an election year makes this strategy very likely)

All you need is to prop up consumer spending somehow. Main deflationary risk right now is that people might choose to reduce discretionary spending and it would hurt prices of nontradables and services. Falling dollar is good because it puts more dollars in the hands of workers of exporting industries. Tax cuts or bailouts will work toward this end too.

Once you cause/induce reasonable perception/suspicion that US $ is not valuable, inflation has to kick in.

Inflation will kick in regardless of perception whether the US$ is valuable. This is a complex issue, anyway. It’s not enough to think that the US $ is valuable. You also need a good valuable alternative.

And infation in reality, i.e. not “core inflation” is WAY up. Anyone recall what milk was a year ago?

Inflation indexes include three broad categories of goods/services – non-discretionary tradable goods (milk, wheat, oil), discretionary tradable goods (cars, electronics, apparel), and nontradables (hotels, car insurance, restaurants). U.S. economy is 70% third category. Consumer retrenchment will not lead to consumers cutting down on milk. It will mean that more people stop travelling, buying car insurance and eating in restaurants. Thus decreasing prices of restaurant meals and hotel rooms, leaving some fraction of people in the restaurant and hotel business unemployed. Thus further lowering the amount of money available for discretionary spending. That’s the kind of deflation everyone is afraid of.

[Eugene]

I don’t see any mention of an economy-wide deflationary spiral. He’s merely predicting a Japanese-style slump in house prices (sustained declines for 5+ years).

The good Professor is a smart man; but with Helicopter Ben in charge of FED, How can there be a sustained deflationary spiral? If Ben sets the FEDs rate to near zero and issues long term repo’s on funny paper, I can’t see how there can be deflation.

Agreed. Nationwide deflation is the boogeyman of modern economics. As long as we have an academic like Helicopter Ben in charge of the Fed, he will do everything in his power to prevent it. Repo’s on funny paper aren’t even necessary. You’ll find out what he’s really going to do if you read his speech that gave him his nickname. (The fact that it’s an election year makes this strategy very likely)

All you need is to prop up consumer spending somehow. Main deflationary risk right now is that people might choose to reduce discretionary spending and it would hurt prices of nontradables and services. Falling dollar is good because it puts more dollars in the hands of workers of exporting industries. Tax cuts or bailouts will work toward this end too.

Once you cause/induce reasonable perception/suspicion that US $ is not valuable, inflation has to kick in.

Inflation will kick in regardless of perception whether the US$ is valuable. This is a complex issue, anyway. It’s not enough to think that the US $ is valuable. You also need a good valuable alternative.

And infation in reality, i.e. not “core inflation” is WAY up. Anyone recall what milk was a year ago?

Inflation indexes include three broad categories of goods/services – non-discretionary tradable goods (milk, wheat, oil), discretionary tradable goods (cars, electronics, apparel), and nontradables (hotels, car insurance, restaurants). U.S. economy is 70% third category. Consumer retrenchment will not lead to consumers cutting down on milk. It will mean that more people stop travelling, buying car insurance and eating in restaurants. Thus decreasing prices of restaurant meals and hotel rooms, leaving some fraction of people in the restaurant and hotel business unemployed. Thus further lowering the amount of money available for discretionary spending. That’s the kind of deflation everyone is afraid of.

[Eugene]

I wonder what the bottom will be in this area. $125 per sq ft? 32% cheaper?

The decline will meet some resistance if and when larger houses like those two start going for 420-450k. So you can put 10% down and get a conforming loan on the rest. Imagine getting a new 3400 sf house for 2500/month fixed. Also imagine what it’ll do to resale values in older neighborhoods.

For now, though, I’d like to see the whole market come down to $150/sf. Just over one month ago, 1233 Pinehurst Rd (5/3, 3000 sf) sold for 710k. 1308 Silver Hawk was already listed for 616k.

[Eugene]

I wonder what the bottom will be in this area. $125 per sq ft? 32% cheaper?

The decline will meet some resistance if and when larger houses like those two start going for 420-450k. So you can put 10% down and get a conforming loan on the rest. Imagine getting a new 3400 sf house for 2500/month fixed. Also imagine what it’ll do to resale values in older neighborhoods.

For now, though, I’d like to see the whole market come down to $150/sf. Just over one month ago, 1233 Pinehurst Rd (5/3, 3000 sf) sold for 710k. 1308 Silver Hawk was already listed for 616k.

[Eugene]

I wonder what the bottom will be in this area. $125 per sq ft? 32% cheaper?

The decline will meet some resistance if and when larger houses like those two start going for 420-450k. So you can put 10% down and get a conforming loan on the rest. Imagine getting a new 3400 sf house for 2500/month fixed. Also imagine what it’ll do to resale values in older neighborhoods.

For now, though, I’d like to see the whole market come down to $150/sf. Just over one month ago, 1233 Pinehurst Rd (5/3, 3000 sf) sold for 710k. 1308 Silver Hawk was already listed for 616k.

[Eugene]

I wonder what the bottom will be in this area. $125 per sq ft? 32% cheaper?

The decline will meet some resistance if and when larger houses like those two start going for 420-450k. So you can put 10% down and get a conforming loan on the rest. Imagine getting a new 3400 sf house for 2500/month fixed. Also imagine what it’ll do to resale values in older neighborhoods.

For now, though, I’d like to see the whole market come down to $150/sf. Just over one month ago, 1233 Pinehurst Rd (5/3, 3000 sf) sold for 710k. 1308 Silver Hawk was already listed for 616k.

[Eugene]

I wonder what the bottom will be in this area. $125 per sq ft? 32% cheaper?

The decline will meet some resistance if and when larger houses like those two start going for 420-450k. So you can put 10% down and get a conforming loan on the rest. Imagine getting a new 3400 sf house for 2500/month fixed. Also imagine what it’ll do to resale values in older neighborhoods.

For now, though, I’d like to see the whole market come down to $150/sf. Just over one month ago, 1233 Pinehurst Rd (5/3, 3000 sf) sold for 710k. 1308 Silver Hawk was already listed for 616k.

[Eugene]

1389 Old Janal Ranch Road, 5/4, 3,534 sf, just listed for $545,000 to $615,000 ($154 to $174 / sf). That’s more sf for less dough than 1308 Silver Hawk, less than half a mile away.

[Eugene]

1389 Old Janal Ranch Road, 5/4, 3,534 sf, just listed for $545,000 to $615,000 ($154 to $174 / sf). That’s more sf for less dough than 1308 Silver Hawk, less than half a mile away.

[Eugene]

1389 Old Janal Ranch Road, 5/4, 3,534 sf, just listed for $545,000 to $615,000 ($154 to $174 / sf). That’s more sf for less dough than 1308 Silver Hawk, less than half a mile away.

[Eugene]

1389 Old Janal Ranch Road, 5/4, 3,534 sf, just listed for $545,000 to $615,000 ($154 to $174 / sf). That’s more sf for less dough than 1308 Silver Hawk, less than half a mile away.

[Eugene]

1389 Old Janal Ranch Road, 5/4, 3,534 sf, just listed for $545,000 to $615,000 ($154 to $174 / sf). That’s more sf for less dough than 1308 Silver Hawk, less than half a mile away.

[Eugene]

can you add graphs that chart the rate of change of the particular areas?

any specific areas you want?

also, (maybe you did this already? or case-shiller did?) apply filters that weed out 95, 90, and 75 percentile data?

What do you mean?

Homes like mine were around 500K in late 2000. They hit a peak of around 950K. Realistically, it is probably somewhere between 825 and 850K today which puts it 70% above its 2000 price and down around 13% from the peak

My model says that a house worth 500K in late 2000 hit a peak of around 1M in 2005-2006 and it’s still worth around 950K. So the issue is really that your 13% decline from the peak is not reflected in statistical data for the area.

It’s not reflected because of transactions like these

http://www.sdlookup.com/Property-7798B5DD-8152_Calle_Catalonia_Carlsbad_CA_92009
$1.45m in 10/2005, $1.54m in 11/2007

http://www.sdlookup.com/Property-B8C49119-7567_Circulo_Sequoia_Carlsbad_CA_92009
$1.01m in 4/2005, $1.01m in 11/2007

http://www.sdlookup.com/Property-AAE222CA-401_Swamis_Ln_Encinitas_CA_92024
$629k in 3/2005, $693k in 11/2007

Maybe your specific neighborhood is different, but it seems that some houses in 92024 and 92009 do sell for 2005 prices and above.

There is just too much noise in the data. I dont trust any data points.

Every single data point is suspicious in the same way. If you have lots of points, underlying trends will start to show up behind the noise.

In the chart Normal Heights is lumped with Mission Valley. These two zips have very little in common

Good observation. I’m actually aware of that. I was trying to cover all zip codes of Greater San Diego. For 92108 I only had a total of 11 resale pairs (it’s mostly a condo area) and it didn’t naturally fit with any of its neighbors. Coronado is in a similar situation. It’s different from OB and Point Loma, and it’s too small to estimate its rate of decline with reasonable precision.

Most areas in the chart have at least 40-50 resale pairs in each half-year period, enough to get the rate of decline down to within a few per cent.

[Eugene]

can you add graphs that chart the rate of change of the particular areas?

any specific areas you want?

also, (maybe you did this already? or case-shiller did?) apply filters that weed out 95, 90, and 75 percentile data?

What do you mean?

Homes like mine were around 500K in late 2000. They hit a peak of around 950K. Realistically, it is probably somewhere between 825 and 850K today which puts it 70% above its 2000 price and down around 13% from the peak

My model says that a house worth 500K in late 2000 hit a peak of around 1M in 2005-2006 and it’s still worth around 950K. So the issue is really that your 13% decline from the peak is not reflected in statistical data for the area.

It’s not reflected because of transactions like these

http://www.sdlookup.com/Property-7798B5DD-8152_Calle_Catalonia_Carlsbad_CA_92009
$1.45m in 10/2005, $1.54m in 11/2007

http://www.sdlookup.com/Property-B8C49119-7567_Circulo_Sequoia_Carlsbad_CA_92009
$1.01m in 4/2005, $1.01m in 11/2007

http://www.sdlookup.com/Property-AAE222CA-401_Swamis_Ln_Encinitas_CA_92024
$629k in 3/2005, $693k in 11/2007

Maybe your specific neighborhood is different, but it seems that some houses in 92024 and 92009 do sell for 2005 prices and above.

There is just too much noise in the data. I dont trust any data points.

Every single data point is suspicious in the same way. If you have lots of points, underlying trends will start to show up behind the noise.

In the chart Normal Heights is lumped with Mission Valley. These two zips have very little in common

Good observation. I’m actually aware of that. I was trying to cover all zip codes of Greater San Diego. For 92108 I only had a total of 11 resale pairs (it’s mostly a condo area) and it didn’t naturally fit with any of its neighbors. Coronado is in a similar situation. It’s different from OB and Point Loma, and it’s too small to estimate its rate of decline with reasonable precision.

Most areas in the chart have at least 40-50 resale pairs in each half-year period, enough to get the rate of decline down to within a few per cent.

[Eugene]

can you add graphs that chart the rate of change of the particular areas?

any specific areas you want?

also, (maybe you did this already? or case-shiller did?) apply filters that weed out 95, 90, and 75 percentile data?

What do you mean?

Homes like mine were around 500K in late 2000. They hit a peak of around 950K. Realistically, it is probably somewhere between 825 and 850K today which puts it 70% above its 2000 price and down around 13% from the peak

My model says that a house worth 500K in late 2000 hit a peak of around 1M in 2005-2006 and it’s still worth around 950K. So the issue is really that your 13% decline from the peak is not reflected in statistical data for the area.

It’s not reflected because of transactions like these

http://www.sdlookup.com/Property-7798B5DD-8152_Calle_Catalonia_Carlsbad_CA_92009
$1.45m in 10/2005, $1.54m in 11/2007

http://www.sdlookup.com/Property-B8C49119-7567_Circulo_Sequoia_Carlsbad_CA_92009
$1.01m in 4/2005, $1.01m in 11/2007

http://www.sdlookup.com/Property-AAE222CA-401_Swamis_Ln_Encinitas_CA_92024
$629k in 3/2005, $693k in 11/2007

Maybe your specific neighborhood is different, but it seems that some houses in 92024 and 92009 do sell for 2005 prices and above.

There is just too much noise in the data. I dont trust any data points.

Every single data point is suspicious in the same way. If you have lots of points, underlying trends will start to show up behind the noise.

In the chart Normal Heights is lumped with Mission Valley. These two zips have very little in common

Good observation. I’m actually aware of that. I was trying to cover all zip codes of Greater San Diego. For 92108 I only had a total of 11 resale pairs (it’s mostly a condo area) and it didn’t naturally fit with any of its neighbors. Coronado is in a similar situation. It’s different from OB and Point Loma, and it’s too small to estimate its rate of decline with reasonable precision.

Most areas in the chart have at least 40-50 resale pairs in each half-year period, enough to get the rate of decline down to within a few per cent.

[Author]

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