[LA_Renter]

Lovely – Living without a car in Paris

Dismal – Living without a car in LA

[LA_Renter]

This is an interesting thread. I think the next great bubble is the biggest current fear with Central Banks. I am reading article after article on why the FED needs to lower interest rates, which by the way is the source from which bubbles arise. The articles never seem to mention the risk associated with such a move. I saw an interview with Martin Feldstein (Greenspan’s first choice for Fed Chair and probably THE top economist in the country) this week on CNBC. He is the biggest advocate of a 100 bps cut to avert what he sees as a disaster looming. Even if the Fed cuts he indicated we only may avert a major recession…..with a little luck. The reporter did confront him in the interview about cutting in the face of $80 oil, a historically weak dollar and $715 Gold. He acknowledged those risk which are very inflationary / stagflationary and indicated that rate cuts were the lesser of two evils. In my mind rate cuts totaling 100 bps over the next 6 months equates to a Hail Mary pass. If that injection of liquidity finds its way to energy, commodities, precious metals, AG etc and momentum builds to form a bubble that will be a disaster. If a bubble forms in these areas that just means everybody pays much higher prices which is better known as inflation. The market is anticipating a fed rate cut and we have $80 oil (and going up), a historically weak dollar (and going down) and $715 Gold (and going up), that is not a good sign of things to come. I guess we can hope Larry Kudlow is right and a rate cut will strengthen the dollar…we will see.

[LA_Renter]

“I’m just keeping my powder dry and seeking feedback from persons such as yourself as to the the significance of what could, or could not, be an early leading indicator of a turn.”

Welcome to the club!

[LA_Renter]

The market is melting up today, looks like a short squeeze. Gold is still over $715, oil is still pushing 80 and will probably go on a run, the dollar index broke 80 and hasn’t looked back, commercial paper is for the most part still locked up. Here is a good article from on the credit crisis and how it may deepen

Why the credit crunch may deepen
With the $2 trillion commercial paper market locked up, it’s harder for banks to lend money.
By Grace Wong, CNNMoney.com staff writer
September 13 2007: 10:19 AM EDT

LONDON (CNNMoney.com) — Stock markets have regained some of their poise on rising hopes that the Federal Reserve will cut interest rates on Tuesday. But investors appear to be looking past one key warning sign: The $2 trillion market for commercial paper remains locked up – suggesting there could be more pain ahead for borrowers around the world.

http://money.cnn.com/2007/09/13/markets/credit_crunch/index.htm

Bottom line is we have a long way to go to get through this mess. The market will trade like a cat on a electrical wire for the rest of the year. IMO

[LA_Renter]

Look at this plotted to a Roller Coaster, Enjoy!

http://video.google.com/videoplay?docid=-2757699799528285056

[LA_Renter]

from DataQuick

Aug 06 Aug 07 chng med 06 med 07
San Diego 3,853 3,104 -19.4% $495,000 $475,000 -4.0%

http://www.dqnews.com/RRSCA0907.shtm

Looks like a 19% drop from last year which was really really bad. The median is actually showing erosion

[LA_Renter]

Suppose for argument sake that inventory levels stabilize (by that I mean they stabilize according to seasonality meaning peaking about this time of year and then falling in winter and picking up in spring) according to OC Renter’s blog, http://bubbletracking.blogspot.com/search/label/SD%20Inventory , we are at population adjusted all time high inventory levels, and lets suppose that sales transactions level off at this level which are running at or below some of the worst levels of the mid 90’s. And lets suppose that NOD’s and NOT’s level off at where they are today, substantially higher than they were at the worst levels of the mid 90’s. What are the consequences for San Diego RE if things just level off right now where they are for 24 to 36 mos?? Case Shiller is showing that sales/inventory/NOT’s at these levels are producing steady home price declines. Point is right where we are right now is bad enough and if it stays this way it will result in a more pronounced downturn than the 90’s.

[LA_Renter]

SD Realtor, Pretty much agreed although if you see a big drop in Sep 07 vs Sep 06 the mask will be pretty transparent. It will be interesting to see the REIC go into full gear this winter. That’s all they have, the market is basically in hibernation so it gives them an opportunity to play “Lets Pretend”. I imagine the FED will be lowering into the winter and this will give to a narrative of a big Spring rebound, They have alot of money and media contacts to drive this story line home. I don’t look forward to it.

[LA_Renter]

The numbers are actually surprising. I’m looking at these juxtaposed to the OC and LA numbers which are producing dramatic panic inducing “Oh My God!” moments. I guess my thoughts are that San Diego has been leading this downturn with significant drops in volume for the last two years. It’s the fact that they are still going down after all this time that is becoming the story. We are getting to a “how low can they go?” moment here. I don’t think you will see dramatic declines from here given they have already happened. Isn’t San Diego seeing sales volumes at or below what they were in the 1990’s without being adjusted for population? Does anybody have any info that?

Keep in mind that Sept will be the month that shows the full shock of the credit event in Aug. There are many reports that pendings are falling out at pretty dramatic rates. Those numbers will be interesting to see.

[LA_Renter]

From everything I gather the rate cut either 25 bps or 50 bps is more about establishing confidence than anything else. Just throw some money at it and the credit markets will loosen up sums up the argument here. Housing is wave that rose, crested, and crashed. There is no turning back now regardless of what the FED does. Mr. Orange (mozillo) said so himself. The FED will cut but here is what has much stomach twitchy right now……The US Dollar is cratering, it broke 80 and never looked back……Gold is racing to 750…..Oil is pushing $80. That is what the market is telling the FED if it lowers interest rates. Damned if you do, Damned if you don’t.

[LA_Renter]

“if the commercial paper crisis is allowed to continue unabated.”

That one has me more than a little bit worried I have to admit. Next week looks to be interesting

“Banks face 10-day debt timebomb”

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/09/09/cndebt109.xml

[LA_Renter]

I wonder what that writer thinks of this data, This is from the LA times blog. I previously posted this on the LA Loft thread.

“L.A. sales down 50% in August
News item: The first look at August home sales in L.A. County shows sales dropped by 50% from year-ago levels. That is not a typo — half the sales market disappeared.

Los Angeles Business Journal: “The expanding morgage crisis and credit crunch slammed the Los Angeles housing market in August, with home sales plunging 50% from the same month last year and 25% from July … The pain was widespread, as only a handful of the county’s nearly 300 ZIP codes managed to eke out any sales gains…. August’s median sales price dropped slightly from its record July level to $579,000.

More: “Everything was great until about a month ago,” said Beverly Hills real estate agent Syd Leibovitch. “Then, on one day — Thursday, Aug. 9 — everything changed as lenders shot up rates on jumbo loans to 9% and further tightened guidelines…. It became almost impossible to find a jumbo loan.”

Our take: We wonder if a drop-off like this is unprecedented — anyone out there remember a month when the market dropped this sharply — 25% from the previous 30 days? 50% from the previous year’s level? We only ask because we’re starting to believe the current downturn may not look like previous slumps. Yes, California real estate is cyclical, but as Countrywide said yesterday, this cycle is different.”

http://latimesblogs.latimes.com/laland/2007/09/la-sales-down-5.html?cid=82112091#comments

No sign of a bubble popping in LA right now. No Sir. Watching denial crack in LA is becoming quite entertaining!!

[LA_Renter]

Here is an update for Aug home sales in L.A from the LA Times blog. I don’t think that San Diego experienced anything like this. I guess you can rely on that old saying “the bigger they are the harder they fall”. If LA goes into a very hard landing recession it will feed into San Diego’s downturn, you may have another shoe to drop. I would be very leary about those lofts right now

“LA sales down 50% in August
News item: The first look at August home sales in LA County shows sales dropped by 50% from year-ago levels. That is not a typo — half the sales market disappeared.

Los Angeles Business Journal: “The expanding morgage crisis and credit crunch slammed the Los Angeles housing market in August, with home sales plunging 50 percent from the same month last year and 25 percent from July … The pain was widespread, as only a handful of the county’s nearly 300 ZIP codes managed to eke out any sales gains … August’s median sales price dropped slightly from its record July level to $579,000.

More: “Everything was great until about a month ago,” said Beverly Hills realtor Syd Leibovitch. “Then,on one day — Thursday August 9 — everything changed as lenders shot up rates on jumbo loans to 9 percent and further tightened guidelines … It became almost impossible to find a jumbo loan.”

Our take: We wonder if a drop-off like this is unprecedented — anyone out there remember a month when the market dropped this sharply — 25% from the previous 30 days? 50% from the previous year’s level? We only ask because we’re starting to believe the current downturn may not look like previous slumps. Yes, California real estate is cyclical, but as Countrywide said yesterday, this cycle is different.”

http://latimesblogs.latimes.com/laland/2007/09/la-sales-down-5.html#comments

[LA_Renter]

“Why are ONLY the down days reported here?”

In many ways volatility in the stock market validates the housing bubble argument. People chime in on down days due to it validating their position. Actually most of the down days this year have been associated with housing and the mortgage crisis. I think there was a show on CNBC, something like Fast Money, where they characterize the bull/bear debate on the economy using Godzilla representing the global growth story and King Kong representing the credit problems. Godzilla ran the show through about July much to many bears disbelief, then came King Kong and he’s pissed. I have to admit i have been bearish on the stock market since early in the year and was flat wrong…..through July. When King Kong started slapping everybody around I felt shedenfrude, now I just want somebody to put him back in his cage but I am beginning to believe that nobody knows how.

[LA_Renter]

I agree bubba99, it’s the trend being established here. The Aug number and June and July revisions reflect the job market before the real impact of the credit crunch. Thats what is scary. Last I looked the credit crunch was still intact. So what you are seeing is a substantially weakening job market going into the credit crisis. Not good! The Fed will lower but that won’t be felt in the economy for next 7 to 9 mos and it won’t turn this thing around but only buffer the fall. Interesting that the ECB came out and said they have not ruled out further rate hikes which puts the FED in an even tighter spot. The dollar index has broken 80 which is a MAJOR MAJOR technical support level. You will have Fed Governors putting up a big fight against any rate cut due to the risk of inflation. All in all this is shaping up to be a pretty nasty recession. Nobody likes to vomit but sometimes you have to go to the toilet bowl and just get it over with. Right now the economy is holding its hand to its mouth and running for the bathroom.

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