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LA_Renter
ParticipantScruffy,
This is a quote from Rich’s last article
“The early-1990s recession and housing bust have both been universally blamed on declining employment in the defense and aerospace manufacturing industries. In truth, that recession saw more job losses in real estate and construction than in manufacturing. The housing-related job losses that resulted from an unsustainable real estate boom had a big impact on the early-90s economy. They are doing so today as well.”
LA will not escape this. Here is a quote from David Streitfeld in the LA Times a while back;
“San Diego had the wildest run-up among major California cities, with prices tripling since the mid-1990s. … The market also began to fade first in San Diego. …
Whatever happens here, optimists and pessimists agree, will happen later in the rest of the state.”
IMO you are mistaking LA’s lag in the current cycle with market strength. It’s about year behind San Diego, that’s all. Orange County is taking the big hit right now in regards to volume.
LA_Renter
ParticipantScruffy,
This is a quote from Rich’s last article
“The early-1990s recession and housing bust have both been universally blamed on declining employment in the defense and aerospace manufacturing industries. In truth, that recession saw more job losses in real estate and construction than in manufacturing. The housing-related job losses that resulted from an unsustainable real estate boom had a big impact on the early-90s economy. They are doing so today as well.”
LA will not escape this. Here is a quote from David Streitfeld in the LA Times a while back;
“San Diego had the wildest run-up among major California cities, with prices tripling since the mid-1990s. … The market also began to fade first in San Diego. …
Whatever happens here, optimists and pessimists agree, will happen later in the rest of the state.”
IMO you are mistaking LA’s lag in the current cycle with market strength. It’s about year behind San Diego, that’s all. Orange County is taking the big hit right now in regards to volume.
LA_Renter
ParticipantArraya,
It’s no fun eating peanut butter sandwiches every night for dinner in your new house. I think one of the things we have to keep in context here is that as SD Realtor pointed out prices are in the process of falling. The Case Shiller index is a much more accurate measure of this and it shows prices are actually falling from the peak. In some cases they are falling as fast as they can in RE. The affordability issue is not going to go away. Without lax lending these home prices can’t work. Even if we are at full employment the entry level and move up buyer still cannot afford those homes. We don’t have an underlying recession, yet. So basically we have a bunch of homes for sale that employed people can’t buy with today’s ever tightening credit. The people that own homes and did not HELOC themselves to death don’t have to move because they still have a job. The primary pricing pressure is at the bottom of the market due to foreclosures. What we are seeing is the resulting drop in sales volume. And that is where the true danger lies. The lower the volume the harder it is on the local economy for everyone. The best thing that could happen to San Diego’s economy right now is if home sellers adjusted their home prices to the prevailing wage and credit realities. That ain’t going to happen and we are going full sail into a recession as a result IMO.
LA_Renter
ParticipantArraya,
It’s no fun eating peanut butter sandwiches every night for dinner in your new house. I think one of the things we have to keep in context here is that as SD Realtor pointed out prices are in the process of falling. The Case Shiller index is a much more accurate measure of this and it shows prices are actually falling from the peak. In some cases they are falling as fast as they can in RE. The affordability issue is not going to go away. Without lax lending these home prices can’t work. Even if we are at full employment the entry level and move up buyer still cannot afford those homes. We don’t have an underlying recession, yet. So basically we have a bunch of homes for sale that employed people can’t buy with today’s ever tightening credit. The people that own homes and did not HELOC themselves to death don’t have to move because they still have a job. The primary pricing pressure is at the bottom of the market due to foreclosures. What we are seeing is the resulting drop in sales volume. And that is where the true danger lies. The lower the volume the harder it is on the local economy for everyone. The best thing that could happen to San Diego’s economy right now is if home sellers adjusted their home prices to the prevailing wage and credit realities. That ain’t going to happen and we are going full sail into a recession as a result IMO.
LA_Renter
ParticipantI think what you are seeing is the bottom half of the market in San Diego and much of Southern California basically becoming an unmitigated disaster. The top half of the market not as much. I like reading this blog for the regular updates from the resident SDRealtors and how the more desirable areas are performing. This housing correction is different than any other housing correction in California primarily due to it not stemming from a recession. This downturn stemmed from a credit bubble, a really really big credit bubble. That’s what makes it so interesting, we have no historical context to gauge where this thing is going and how each segment of the market will perform.
The thing that has been lacking in this correction is a profound shift in psychology. People in the top half of the market obviously don’t see the inherent risk in the market so they keep paying those prices. I think we are at a point right now where the market is becoming so bad and the news so prevalent that we actually crack through denial in all segments. People understand “Record High Foreclosures in California”. That’s not confusing. We are now entering a phase where Mr Sunny Happy Face Realtor (no offense to any realtors on this board) can no longer hide and spin the disaster that is unfolding right now. I would like to see how the top half of the market will perform once we get through this inevitable shift in psychology. I would also like to add that I don’t think that California will escape recession which would take this market to the next level in the correction.
LA_Renter
ParticipantI think what you are seeing is the bottom half of the market in San Diego and much of Southern California basically becoming an unmitigated disaster. The top half of the market not as much. I like reading this blog for the regular updates from the resident SDRealtors and how the more desirable areas are performing. This housing correction is different than any other housing correction in California primarily due to it not stemming from a recession. This downturn stemmed from a credit bubble, a really really big credit bubble. That’s what makes it so interesting, we have no historical context to gauge where this thing is going and how each segment of the market will perform.
The thing that has been lacking in this correction is a profound shift in psychology. People in the top half of the market obviously don’t see the inherent risk in the market so they keep paying those prices. I think we are at a point right now where the market is becoming so bad and the news so prevalent that we actually crack through denial in all segments. People understand “Record High Foreclosures in California”. That’s not confusing. We are now entering a phase where Mr Sunny Happy Face Realtor (no offense to any realtors on this board) can no longer hide and spin the disaster that is unfolding right now. I would like to see how the top half of the market will perform once we get through this inevitable shift in psychology. I would also like to add that I don’t think that California will escape recession which would take this market to the next level in the correction.
LA_Renter
ParticipantSpeaking of the dollar I found this on Forbes
“CMC Markets’ chief analyst Ashraf Laidi said the US dollar’s latest decline should now be raising alarm for the US Treasury and the Federal Reserve as the greenback’s trade-weighted index (as measured against six currencies) has now fallen to below the 80.40 level, its lowest level since 1992.
He said previously, the yen’s continued weakening had acted as a major stabilizer of the US dollar when the US currency hit all-time lows against the euro and multi-decade lows against the Australian dollar, Canadian dollar, sterling and New Zealand dollar.
‘But as the periodic revelations of sub-prime troubles boost the yen on falling risk appetite, the US dollar’s decline becomes increasingly pervasive,’ Laidi said.”
I could be wrong but to me this looks dangerous. I would give anything to be a fly on the wall sitting in those meetings at the US Treasury and the Federal Reserve. This subprme thing is really turning out to be something don’t you think!
LA_Renter
ParticipantSpeaking of the dollar I found this on Forbes
“CMC Markets’ chief analyst Ashraf Laidi said the US dollar’s latest decline should now be raising alarm for the US Treasury and the Federal Reserve as the greenback’s trade-weighted index (as measured against six currencies) has now fallen to below the 80.40 level, its lowest level since 1992.
He said previously, the yen’s continued weakening had acted as a major stabilizer of the US dollar when the US currency hit all-time lows against the euro and multi-decade lows against the Australian dollar, Canadian dollar, sterling and New Zealand dollar.
‘But as the periodic revelations of sub-prime troubles boost the yen on falling risk appetite, the US dollar’s decline becomes increasingly pervasive,’ Laidi said.”
I could be wrong but to me this looks dangerous. I would give anything to be a fly on the wall sitting in those meetings at the US Treasury and the Federal Reserve. This subprme thing is really turning out to be something don’t you think!
LA_Renter
ParticipantI think somebody mentioned that public officials have to carefully craft their language so as to not inspire panic. I have a feeling the dollar is a main concern behind those doors. BB did come across as “dollar……..what dollar?…….oh you mean our dollar…….got me!” I find it odd that the dollar is sitting this low and under pressure but no one seems to care or talk about it much. The negative impact of a weakening dollar is expensive oil, high interest rates and inflation. Does anybody care about those things anymore?? If our economy is heading into recession or just a slow down which the latest job numbers from California seem to attest to, how can the FED lower interest rates in this environment? It seems like everybody else in the world is doing fine except us. Wouldn’t lowering interest rates yield the opposite effect of stimulation?? It seems to me they have absolutely no room to maneuver if the economy starts heading south. Am I missing something here?
LA_Renter
ParticipantI think somebody mentioned that public officials have to carefully craft their language so as to not inspire panic. I have a feeling the dollar is a main concern behind those doors. BB did come across as “dollar……..what dollar?…….oh you mean our dollar…….got me!” I find it odd that the dollar is sitting this low and under pressure but no one seems to care or talk about it much. The negative impact of a weakening dollar is expensive oil, high interest rates and inflation. Does anybody care about those things anymore?? If our economy is heading into recession or just a slow down which the latest job numbers from California seem to attest to, how can the FED lower interest rates in this environment? It seems like everybody else in the world is doing fine except us. Wouldn’t lowering interest rates yield the opposite effect of stimulation?? It seems to me they have absolutely no room to maneuver if the economy starts heading south. Am I missing something here?
LA_Renter
Participant“Cunningham added that if the number of real estate foreclosures begins to increase substantially – which he doesn’t think will happen – a recession could be more severe.”
I guess this guy has never seen Rich’s chart on NOD’s and NOT’s. We all see the data, you can see where this thing is going. We still have the worst portion of the ARM resets to hit. I am going to go out on a limb here and say “Put a fork in it” California, at least, is going into a housing led recession. There is one thing I’m curious about and maybe somebody can shed some light on. In the face of a weak dollar what is it that Southern California makes that we can see an increase in exports that would help buffer this? It would be nice to have aerospace back. American made airplanes are on sale right now.
LA_Renter
Participant“Cunningham added that if the number of real estate foreclosures begins to increase substantially – which he doesn’t think will happen – a recession could be more severe.”
I guess this guy has never seen Rich’s chart on NOD’s and NOT’s. We all see the data, you can see where this thing is going. We still have the worst portion of the ARM resets to hit. I am going to go out on a limb here and say “Put a fork in it” California, at least, is going into a housing led recession. There is one thing I’m curious about and maybe somebody can shed some light on. In the face of a weak dollar what is it that Southern California makes that we can see an increase in exports that would help buffer this? It would be nice to have aerospace back. American made airplanes are on sale right now.
LA_Renter
ParticipantFor the past year, Cunningham and Gin have been predicting that San Diego would be able to survive the real estate slowdown without falling into a recession. Now they say they are not sure.
http://www.signonsandiego.com/news/business/20070721-9999-1n21jobs.html
I’m totally shocked!
LA_Renter
ParticipantFor the past year, Cunningham and Gin have been predicting that San Diego would be able to survive the real estate slowdown without falling into a recession. Now they say they are not sure.
http://www.signonsandiego.com/news/business/20070721-9999-1n21jobs.html
I’m totally shocked!
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