[LA_Renter]

Just giving these guys the benefit of the doubt still spells massive problems down the road. Even if there is not one foreclosure as a result of these ARM’s resetting you are still going to have 5 million people whose monthly payments are going up. They pointed out many will not be able to go out to eat as much, or for that matter purchase furniture, or take that vacation, or buy that new car, or…..etc etc etc. Areas of the country such as So Cal where you have a higher percentage of these types of loans will be hit hardest in their local economies. You are right Poway Seller the numbers are staggering. I try to keep an open mind listening to advocates of a soft landing. More and more their arguments sound like empty rhetoric.

[LA_Renter]

Why? I guess the way I see it is that this media needs an audience. If George “Money in the Morning” Chamberhead starts spouting that RE is way overvalued and is getting ready to tank, most people who listen to his show will change the station. Nobody really wants to hear that their largest investment is going down in value. Even if many of them know this to be true. You can sell a lot more advertising singing to the choir. George’s job is to maximize his audience or he will lose that job.

I look at the media as a barometer, not a source of info. Right now the media reporting on RE says there is still an awful lot of denial out there. But I do see some signs that denial is beginning to crack.

[LA_Renter]

I found this hedge fund report on one the hb yahoo chat boards. This is one of the top hedge funds in North America. Basically they are saying that at this time housing is beyond saving. They also use words like “collapse” to describe its current state, and they admit to using housing bubble blogs for anecdotal evidence. All in all it is a great read for our current state of affairs that I have come across. I would like to mention they are heavy in commodities so their is a little bias in that direction. Enjoy the read

http://www.sprott.com/pdf/marketsataglance/05-2006.pdf

[LA_Renter]

I found this on a yahoo chat board for home builders. Great read!!!! This is from a top North American Hedge Fund

http://www.sprott.com/pdf/marketsataglance/05-2006.pdf

[LA_Renter]

Here is something to consider; Bob indicated that the rise in inventory is not the result of increased listings just slower sales and I have no reason to doubt that. I think this possibly paints a picture the worst is yet to come. I check OC Renters site bubbletracking daily and always wonder to myself exactly how high are these inventories going to go? I see no signs of any slow down in the rate of increase. Lets face it, prices ain’t going up anymore not with growing inventory, so there is no longer any profit motive to flip and what I read from this report is that flippers have not noticeably added to the increase in listings. I take this to mean there is still a great deal of inventory to be added. Does anybody have any thoughts and analysis on how high San Diego inventory can go? What will the peak be and how many months of inventory are we potentially looking at sitting on the market.?

[LA_Renter]

C’mon Man, that article was absurd. Besides I hadn’t finished my first cup of coffee when I read it.

[LA_Renter]

I quickly wrote this e-mail to the author of this article ([email protected]). There are obviuosly many more points to make but I just had to say something.

Diane,

In my opinion this article is totally misleading and does not reflect the reality of the current market conditions in Southern California. There is no mention of the home price to income and home price to rent ratios. There is no mention of the ballooning inventories in California that show no signs of abating. The record inventory for San Diego was in June 95 at 19,250 (bottom of last downturn), according to zipreality right now they have 21,290. The record inventory adjusted for population growth is 22,174. They should break that record in a month or two. Orange County inventory has increased from 7245 units on 1/2/2006 to 15,048 on 5/30/2006 – DOUBLED, Los Angeles county is adding 3000 to 4000 units to inventory every month. Unit sales are down throughout the entire region.

“The main culprit behind the latest price hike is the unrelenting demand for limited housing, a problem fueled by record-low mortgage-interest rates, adjustable-rate financing and a population stampede into Southern California that shows no sign of slowing.”

If this is true then why are areas of Southern California approaching RECORD HIGH inventories. That statement is very backward looking. I request that you being a journalist try this exercise, go to UHAUL.com, find a truck and get a quote of how much it cost to move into California verses moving out of California, I used Irvine and San Antonio. It is 1000% more to rent that UHAUL out of California than to move into the state, 1000%. What does that say? I am not saying the structural problems outlined in this article do not exist, they do. What I am saying is you can only take the structural problems of building restrictions and immigration so far. Yes they will make homes more expensive but the rate of appreciation in the bubble areas such as California transcend any of these structural problems. I am very surprised that the LA Times would run this article now. The implication is that current home valuations in the area are economically justified, the empirical data of rising inventories, declining unit sales, and rising foreclosures tell a completely different story.

Now really think about this, San Diego is the bellwether for Southern California real estate, we are only in the first stage of this downturn and SD is already at the historical high inventory. This is a quote from a San Diego realtor Bob Casagrande about the reality of the California housing market

“The reason that both the average and median prices have increased during the past year is that the sales distribution has shifted dramatically. The low end of the market has been crushed by the loss of buyers due to the increasing interest rates, especially the ARMs. The net effect is that the mix of homes sold has proportionally more expensive homes than previously. So comparing the average/median price now to the average/median price a year ago is like comparing an apple to an orange. Price reductions are real and ongoing and increasing.”

This is probably not the only e-mail you will get. Astute observers of this real estate market will call you out on this. This market is heading for a major correction and that argument is being backed up by the data everyday.

Thank you,

[LA_Renter]

I agree with you lendingbubble. The laws of econ 101 will come into to play. The development that I am following this week is the “melt down” of the HB’s on wall street. TOL just broke 30 as I write this. I am also monitoring OCRenters bubbletracking. San Diego’s inventory is steadily rising and I don’t see that trend stopping anytime soon (I am on record for the population adjusted record inventory to be reached on July 15 by the way). HB’s are seriously under the gun right now. So you have a situation where inventory is piling up and HB’s are moving into survival of the fittest mode. Bottom line is they will cut prices to move inventory period. And as you mentioned “how ’bout that increase in notices of default, by the way?”. All of the elements that put downward pressure on prices are in place. I am open minded to prices flattening out but if these trends sustain themselves I just don’t see how.

[LA_Renter]

I find myself in a conundrum in this situation. I am rooting for home prices to come down to their fair valuation. I have no problem with paying the CA coastal premium. Current valuations transcend that premium. Yet when looking at the decline in sales and rising inventories in San Diego I feel a knot developing in my stomach. I believe that 25% to 30% of jobs created in the past several years have been related to RE. Outside of RE related jobs, job growth has been weak throughout the entire state of CA . If San Diego breaks that threshold into falling prices, that means a significant downturn in these jobs. The R word will be floating all over the place by that time. If this scenario is to play out instead being happy that home prices are more affordable now I am going to be worried about keeping my job. Point being don’t count on all the people sitting on sidelines to jump in when their sweating layoff notices. Many times that money sitting on the sidelines is the last gasp of the current appreciation cycle, or what some call a “dead cat bounce”. I can tell you one thing all eyes are on San Diego.

[Author]

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