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January 4, 2007 at 10:56 AM in reply to: Shoddy Construction of 2000-2005 Housing Boom: Beware of National Builders #42674
(former)FormerSanDiegan
ParticipantI wouldn’t label the 1994 buy signal such a bad call.
In retrospect the sell signal in 2002 was much worse.
Prices peaked at least 40-50% above 2002 values.ParticipantBook recommendation :
Downsize Your Debt: How to Take Control of Your Personal Finances – by Andrew Feinberg
I bought this when I was finishing college with 40K in debt and it helped immensely. Looking at the book now the strategies seem obvious, but they didn’t at the time.
ParticipantI had this very same problem. However, I got it out of the way in my 20’s and 30’s after running up ~20+ K in credit cards and ~20K in student loan debt during college/graduate school.
I quickly learned the time-value of money and how to dig myself out by paying the highest rate cards first, then working my way out. It took me until my early-thirties to clear out both the habits and the debt.Breaking the habit of adding additional debt is the key
I would advise against a “bail-out” loan. They need to work on eliminating additional charges to the cards. Once they do this, it will be easier to pay them down. If they can maintain the payments until the house is paid off, they can apply the amounts they have been paying towards mortgage to the credit cards. This only works if they stop the habit of using the cards.
A bail-out loan will not solve the underlying problem.
ParticipantThe number has just been revise … AGAIN … down to 2.0%.
So, jg and qcomer. When will you settle your bet ? Based on the first number, the first revision or the second revision.
ParticipantSD R –
Excellent point regarding the pent-up supply. I suspect that 2007 will have comparable sales numbers to 2006, maybe down another 10% or so. A lot of this pent-up supply will still be out there after the next 12-24 months and 10-20% decline in prices.
ParticipantI don’t believe that this will happen, but if resale median prices drop 7% in both 2007 and 2008, making a three year drop of around 20%, then the number of foreclosures will be astronomical, and the market could take 10 years to recover.
Isn’t this nearly exactly what happened in the last cycle. Prices peaked, dropped about 20% over about 4 years, then returned to the previous peak levels ~8-10 years later.
Could it happen again ?
I think so.
This is more likely than doomsday (put your money in non-dollar denominated gold bond) scenarios.December 20, 2006 at 1:38 PM in reply to: Report: 2.2 Million Subprime Borrowers Face Foreclosure #42154ParticipantIt was something like 90% of all ARMS taken out in the last two years would default.
ParticipantHave you taken a look at Amarillo ?
ParticipantHow is the Case-Shiller index calculated anyway? If they take same-house sales, would they take a May 2000 sale at $350K, and then look at the most recent sale in October 2006 at $600K, and figure that house gained in price? How do they figure out the peak, and subtract the price of the October 2006 house from the actual peak?
Interesting question. It’s an index, so they can use statistics over whatever was sold in a period (quarter), but how do they normalize/relate the data so that they have meaning relative to the mix of sales in other quarters ?
At least we understand the median and can try to understand it’s flaws and sometimes counter-intuitive trends (e.g. market spiking because high end sales continue, while low-end sales evaporate as the market started to soften).
ParticipantPS –
Prices on each home have fallen more than 5%.I agree 100%. However, this does not mean that the median is not a good barometer of the overall market. Ignoring a useful indicator like the median price (even with its flaws) could be just as dangerous as ignoring changes in inventory, changes in job creation, and net migration. After all, it was used extensively here to make arguments that we were in an unsustainable bubble.
Anyone who thinks the median is accurate would have to believe that most homes in San Diego have fallen 5% off their peak. I have to disagree 100% with this. We are intelligent enough to know that the median is the midpoint of all homes sold. We are also intelligent enough to know that it reflects both any changes in the mix of homes sold as well as price inflation/deflation. Those who have done their homework also know that it does not represent the change in price of any particular home, including our own, the one we rent, or the one we will some day purchase. It simply reflects the mid-point of homes that people are now purchasing.
ParticipantThe next 24 months will be the worst segment of the housing downturn. As the 2nd and 3rd (or 3rd and 4th, depending how you measure) year of the slowdown, this is typically where prices accelerate to the downside.
I expect a drop in median SFR Central SD of 5-10% each of the next two years. I’d guesstimate ~15% over the next 24-30 months in the median, putting the total drop in median somewhere around 20% from the peak within 2-2.5 years.
That said, individual homes will likely experience more significant declines. But you asked about the median.
ParticipantOf the housing slump, Lazear said, “it looks like the precipitous decline that we saw earlier is not going to occur in 2007.”
Whew ! That was easy. Let’s go out and buy houses. Yippee.
Do you think they might have a different definition of “precipitous decline” than I do ???
ParticipantThe median is one of several market indicators and as such is a perfectly legitimate indicator of the market. How can one use it to justify the fact that the market is overvalued and due for a correction up to mid-2005, then toss it out as irrelevant in 2006 ?
Having said that, it is not accurate as a measure of what a particular home would sell for, nor does it adequately capture the trajectory of the market. It does not tell you what your house is worth. But as an indicator of market conditions ? Sure, it’s reasonable.
The median price has been used to demonstrate the following :
1. There was a large run-up in SD real estate above fundamentals (rental rates and incomes) from ~2000 to 2005.
2. There was a softening in sale prices starting in 2005.
3. That softening has led to declines in prices and continues to persist through November 2006.Combined with sales activity, I find the median to be one of many useful barometers of the market, particularly for SFRs in established areas. If we toss out all of the useful estimators that have flaws, then we’ll be left with only anecdotal evidence (which is also quite useful, but not without other confirmatory evidence).
Personally I found the use of median prices by Rich in the Primer on this site to be quite useful for illustrating the extent of the residential real estate bubble in San Diego. It may not be perfect, but if it’s a legitimate parameter for making the case of the bubble, it ought to be useful for evaluating the extent of the bust.
ParticipantMoney saved by renting vs mortgage: $800
Insurance Savings: $150
Saving on repairs: $300
Gas savings by living closer to work: $250Publicly delving into ever-nutty conspiracy theories : Priceless
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