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ltokuda
ParticipantThe OC Register has some information which shows what’s going on.
Banks are offering about 20% less than last year for foreclosed properties:
http://mortgage.freedomblogging.com/2008/05/13/banks-offer-20-off-foreclosed-homes-in-oc/
Lower priced homes are experiencing the most distress:
http://mortgage.freedomblogging.com/2008/05/19/supply-of-oc-distress-homes-for-sale-up-again/
Lower priced homes are seeing the most buying activity:
http://lansner.freedomblogging.com/2008/05/19/where-did-aprils-surge-in-home-sales-come-from/
Lower priced homes are seeing the shortest market time:
http://lansner.freedomblogging.com/2008/05/19/cheap-home-rush-cuts-oc-supply-under-6-months/
So the basic story is that people are buying where the discounts are. In markets where there aren’t as many discounts, there isn’t as much buying.
ParticipantIt is not that I do not agree with the plankton theory because I do. However, that would suggest that at some point in the future we will exhaust the number of buyers correct?
I don't think the theory says you'll eventually run out of buyers. We're not talking about the extinction of the plankton population. We're just talking about a crash in the plankton population. This would be analogous to a crash in starter home values. Even in the worst of times, people will buy starter homes and people will sell starter homes. There's always going to be some population of plankton around. But the size of that population affects everyone up the food chain.
However to get a good idea of when that will be we have to know how many buyers are move up buyers, and how many are still out there waiting to buy with move up money. To me it is a very plausible theory that makes sense, however, it is also kind of open ended as to when and how long the plankton theory will seriously thin out the buyers pools in these other desireable areas. Not saying it cannot or will not… I just tend to think like everything else, it will vary on a per area in timing and amplitude so to speak…
Yeah, I agree with this. The theory doesn't tell you exactly when the high end areas will fall. But I think if you keep an eye on the surrounding markets, you can get a pretty good idea. If you see the $500k homes start to crash … then the $1M homes crashes later … then the $1.5M homes crashes after that … If you believe the plankton theory, then you would predict that the $2M homes are next in line. The theory can't give you the exact timing, but it can tell you the order in which different markets will move. That information in itself can be very useful.
ParticipantIt is not that I do not agree with the plankton theory because I do. However, that would suggest that at some point in the future we will exhaust the number of buyers correct?
I don't think the theory says you'll eventually run out of buyers. We're not talking about the extinction of the plankton population. We're just talking about a crash in the plankton population. This would be analogous to a crash in starter home values. Even in the worst of times, people will buy starter homes and people will sell starter homes. There's always going to be some population of plankton around. But the size of that population affects everyone up the food chain.
However to get a good idea of when that will be we have to know how many buyers are move up buyers, and how many are still out there waiting to buy with move up money. To me it is a very plausible theory that makes sense, however, it is also kind of open ended as to when and how long the plankton theory will seriously thin out the buyers pools in these other desireable areas. Not saying it cannot or will not… I just tend to think like everything else, it will vary on a per area in timing and amplitude so to speak…
Yeah, I agree with this. The theory doesn't tell you exactly when the high end areas will fall. But I think if you keep an eye on the surrounding markets, you can get a pretty good idea. If you see the $500k homes start to crash … then the $1M homes crashes later … then the $1.5M homes crashes after that … If you believe the plankton theory, then you would predict that the $2M homes are next in line. The theory can't give you the exact timing, but it can tell you the order in which different markets will move. That information in itself can be very useful.
ParticipantIt is not that I do not agree with the plankton theory because I do. However, that would suggest that at some point in the future we will exhaust the number of buyers correct?
I don't think the theory says you'll eventually run out of buyers. We're not talking about the extinction of the plankton population. We're just talking about a crash in the plankton population. This would be analogous to a crash in starter home values. Even in the worst of times, people will buy starter homes and people will sell starter homes. There's always going to be some population of plankton around. But the size of that population affects everyone up the food chain.
However to get a good idea of when that will be we have to know how many buyers are move up buyers, and how many are still out there waiting to buy with move up money. To me it is a very plausible theory that makes sense, however, it is also kind of open ended as to when and how long the plankton theory will seriously thin out the buyers pools in these other desireable areas. Not saying it cannot or will not… I just tend to think like everything else, it will vary on a per area in timing and amplitude so to speak…
Yeah, I agree with this. The theory doesn't tell you exactly when the high end areas will fall. But I think if you keep an eye on the surrounding markets, you can get a pretty good idea. If you see the $500k homes start to crash … then the $1M homes crashes later … then the $1.5M homes crashes after that … If you believe the plankton theory, then you would predict that the $2M homes are next in line. The theory can't give you the exact timing, but it can tell you the order in which different markets will move. That information in itself can be very useful.
ParticipantIt is not that I do not agree with the plankton theory because I do. However, that would suggest that at some point in the future we will exhaust the number of buyers correct?
I don't think the theory says you'll eventually run out of buyers. We're not talking about the extinction of the plankton population. We're just talking about a crash in the plankton population. This would be analogous to a crash in starter home values. Even in the worst of times, people will buy starter homes and people will sell starter homes. There's always going to be some population of plankton around. But the size of that population affects everyone up the food chain.
However to get a good idea of when that will be we have to know how many buyers are move up buyers, and how many are still out there waiting to buy with move up money. To me it is a very plausible theory that makes sense, however, it is also kind of open ended as to when and how long the plankton theory will seriously thin out the buyers pools in these other desireable areas. Not saying it cannot or will not… I just tend to think like everything else, it will vary on a per area in timing and amplitude so to speak…
Yeah, I agree with this. The theory doesn't tell you exactly when the high end areas will fall. But I think if you keep an eye on the surrounding markets, you can get a pretty good idea. If you see the $500k homes start to crash … then the $1M homes crashes later … then the $1.5M homes crashes after that … If you believe the plankton theory, then you would predict that the $2M homes are next in line. The theory can't give you the exact timing, but it can tell you the order in which different markets will move. That information in itself can be very useful.
ParticipantIt is not that I do not agree with the plankton theory because I do. However, that would suggest that at some point in the future we will exhaust the number of buyers correct?
I don't think the theory says you'll eventually run out of buyers. We're not talking about the extinction of the plankton population. We're just talking about a crash in the plankton population. This would be analogous to a crash in starter home values. Even in the worst of times, people will buy starter homes and people will sell starter homes. There's always going to be some population of plankton around. But the size of that population affects everyone up the food chain.
However to get a good idea of when that will be we have to know how many buyers are move up buyers, and how many are still out there waiting to buy with move up money. To me it is a very plausible theory that makes sense, however, it is also kind of open ended as to when and how long the plankton theory will seriously thin out the buyers pools in these other desireable areas. Not saying it cannot or will not… I just tend to think like everything else, it will vary on a per area in timing and amplitude so to speak…
Yeah, I agree with this. The theory doesn't tell you exactly when the high end areas will fall. But I think if you keep an eye on the surrounding markets, you can get a pretty good idea. If you see the $500k homes start to crash … then the $1M homes crashes later … then the $1.5M homes crashes after that … If you believe the plankton theory, then you would predict that the $2M homes are next in line. The theory can't give you the exact timing, but it can tell you the order in which different markets will move. That information in itself can be very useful.
ParticipantFearful, I’ve heard this theory referred to as the “Plankton Theory”. The basic idea is that plankton are the tiniest of creatures at the bottom of the ocean’s food chain. They are eaten by small fish. The small fish are eaten by bigger fish. These fish are eaten by even bigger fish, etc. The food chain continues all the way up to the great big sharks. If you kill off the plankton, the little fish are affected first since they have no food to eat. They start to die soon after. The bigger fish die next as the small fish population disappears, etc. The sharks may not notice any effects for a while. But eventually, the sharks will die too. So the health of the biggest creatures in the ocean ultimately depends on the health of the smallest of creatures … the plankton.
In the real estate market, the plankton are the money in starter homes/condo’s. Extremely loose lending standards allowed many more people to “qualify” for home loans. This increased the competition for the starter homes and drove the prices way up. Money poured into the starter homes (i.e. plankton population boom). This allowed owners of starter homes to sell their houses and use it as a down payment for a bigger house. This increased the demand for these bigger houses, driving the prices up (small fish population boom). Eventually, the process works its way up to the multi-million dollar mansions (shark population boom).
Now that lending standards have tightend (and the bubble has popped), the demand for starter homes has dropped off a cliff. The value of these homes are crashing hard. The money is disappearing. The plankton population is dying.
The effects are rippling up the food chain. The smaller homes felt it first, followed by bigger homes, etc. Its only now, years later, that the big mansions are beginning to notice a change.
So that’s basically how the plankton theory models the housing market. I don’t think you can apply this model to describe all housing bubbles. For example, the 90’s SoCal housing bubble didn’t seem to work this way. But I think the plankton theory does fit the current bubble we’re in.
I don’t have any hard evidence to back the plankton theory up. I’m not sure if anyone does. But the theory seems logical and does explain why the housing market is moving the way it is (lower tier houses dropping the first and fastest, with the middle tier following, and the higher tier lagging). If the theory is true, the sharks are going to die too. We shall see.
ParticipantFearful, I’ve heard this theory referred to as the “Plankton Theory”. The basic idea is that plankton are the tiniest of creatures at the bottom of the ocean’s food chain. They are eaten by small fish. The small fish are eaten by bigger fish. These fish are eaten by even bigger fish, etc. The food chain continues all the way up to the great big sharks. If you kill off the plankton, the little fish are affected first since they have no food to eat. They start to die soon after. The bigger fish die next as the small fish population disappears, etc. The sharks may not notice any effects for a while. But eventually, the sharks will die too. So the health of the biggest creatures in the ocean ultimately depends on the health of the smallest of creatures … the plankton.
In the real estate market, the plankton are the money in starter homes/condo’s. Extremely loose lending standards allowed many more people to “qualify” for home loans. This increased the competition for the starter homes and drove the prices way up. Money poured into the starter homes (i.e. plankton population boom). This allowed owners of starter homes to sell their houses and use it as a down payment for a bigger house. This increased the demand for these bigger houses, driving the prices up (small fish population boom). Eventually, the process works its way up to the multi-million dollar mansions (shark population boom).
Now that lending standards have tightend (and the bubble has popped), the demand for starter homes has dropped off a cliff. The value of these homes are crashing hard. The money is disappearing. The plankton population is dying.
The effects are rippling up the food chain. The smaller homes felt it first, followed by bigger homes, etc. Its only now, years later, that the big mansions are beginning to notice a change.
So that’s basically how the plankton theory models the housing market. I don’t think you can apply this model to describe all housing bubbles. For example, the 90’s SoCal housing bubble didn’t seem to work this way. But I think the plankton theory does fit the current bubble we’re in.
I don’t have any hard evidence to back the plankton theory up. I’m not sure if anyone does. But the theory seems logical and does explain why the housing market is moving the way it is (lower tier houses dropping the first and fastest, with the middle tier following, and the higher tier lagging). If the theory is true, the sharks are going to die too. We shall see.
ParticipantFearful, I’ve heard this theory referred to as the “Plankton Theory”. The basic idea is that plankton are the tiniest of creatures at the bottom of the ocean’s food chain. They are eaten by small fish. The small fish are eaten by bigger fish. These fish are eaten by even bigger fish, etc. The food chain continues all the way up to the great big sharks. If you kill off the plankton, the little fish are affected first since they have no food to eat. They start to die soon after. The bigger fish die next as the small fish population disappears, etc. The sharks may not notice any effects for a while. But eventually, the sharks will die too. So the health of the biggest creatures in the ocean ultimately depends on the health of the smallest of creatures … the plankton.
In the real estate market, the plankton are the money in starter homes/condo’s. Extremely loose lending standards allowed many more people to “qualify” for home loans. This increased the competition for the starter homes and drove the prices way up. Money poured into the starter homes (i.e. plankton population boom). This allowed owners of starter homes to sell their houses and use it as a down payment for a bigger house. This increased the demand for these bigger houses, driving the prices up (small fish population boom). Eventually, the process works its way up to the multi-million dollar mansions (shark population boom).
Now that lending standards have tightend (and the bubble has popped), the demand for starter homes has dropped off a cliff. The value of these homes are crashing hard. The money is disappearing. The plankton population is dying.
The effects are rippling up the food chain. The smaller homes felt it first, followed by bigger homes, etc. Its only now, years later, that the big mansions are beginning to notice a change.
So that’s basically how the plankton theory models the housing market. I don’t think you can apply this model to describe all housing bubbles. For example, the 90’s SoCal housing bubble didn’t seem to work this way. But I think the plankton theory does fit the current bubble we’re in.
I don’t have any hard evidence to back the plankton theory up. I’m not sure if anyone does. But the theory seems logical and does explain why the housing market is moving the way it is (lower tier houses dropping the first and fastest, with the middle tier following, and the higher tier lagging). If the theory is true, the sharks are going to die too. We shall see.
ParticipantFearful, I’ve heard this theory referred to as the “Plankton Theory”. The basic idea is that plankton are the tiniest of creatures at the bottom of the ocean’s food chain. They are eaten by small fish. The small fish are eaten by bigger fish. These fish are eaten by even bigger fish, etc. The food chain continues all the way up to the great big sharks. If you kill off the plankton, the little fish are affected first since they have no food to eat. They start to die soon after. The bigger fish die next as the small fish population disappears, etc. The sharks may not notice any effects for a while. But eventually, the sharks will die too. So the health of the biggest creatures in the ocean ultimately depends on the health of the smallest of creatures … the plankton.
In the real estate market, the plankton are the money in starter homes/condo’s. Extremely loose lending standards allowed many more people to “qualify” for home loans. This increased the competition for the starter homes and drove the prices way up. Money poured into the starter homes (i.e. plankton population boom). This allowed owners of starter homes to sell their houses and use it as a down payment for a bigger house. This increased the demand for these bigger houses, driving the prices up (small fish population boom). Eventually, the process works its way up to the multi-million dollar mansions (shark population boom).
Now that lending standards have tightend (and the bubble has popped), the demand for starter homes has dropped off a cliff. The value of these homes are crashing hard. The money is disappearing. The plankton population is dying.
The effects are rippling up the food chain. The smaller homes felt it first, followed by bigger homes, etc. Its only now, years later, that the big mansions are beginning to notice a change.
So that’s basically how the plankton theory models the housing market. I don’t think you can apply this model to describe all housing bubbles. For example, the 90’s SoCal housing bubble didn’t seem to work this way. But I think the plankton theory does fit the current bubble we’re in.
I don’t have any hard evidence to back the plankton theory up. I’m not sure if anyone does. But the theory seems logical and does explain why the housing market is moving the way it is (lower tier houses dropping the first and fastest, with the middle tier following, and the higher tier lagging). If the theory is true, the sharks are going to die too. We shall see.
ParticipantFearful, I’ve heard this theory referred to as the “Plankton Theory”. The basic idea is that plankton are the tiniest of creatures at the bottom of the ocean’s food chain. They are eaten by small fish. The small fish are eaten by bigger fish. These fish are eaten by even bigger fish, etc. The food chain continues all the way up to the great big sharks. If you kill off the plankton, the little fish are affected first since they have no food to eat. They start to die soon after. The bigger fish die next as the small fish population disappears, etc. The sharks may not notice any effects for a while. But eventually, the sharks will die too. So the health of the biggest creatures in the ocean ultimately depends on the health of the smallest of creatures … the plankton.
In the real estate market, the plankton are the money in starter homes/condo’s. Extremely loose lending standards allowed many more people to “qualify” for home loans. This increased the competition for the starter homes and drove the prices way up. Money poured into the starter homes (i.e. plankton population boom). This allowed owners of starter homes to sell their houses and use it as a down payment for a bigger house. This increased the demand for these bigger houses, driving the prices up (small fish population boom). Eventually, the process works its way up to the multi-million dollar mansions (shark population boom).
Now that lending standards have tightend (and the bubble has popped), the demand for starter homes has dropped off a cliff. The value of these homes are crashing hard. The money is disappearing. The plankton population is dying.
The effects are rippling up the food chain. The smaller homes felt it first, followed by bigger homes, etc. Its only now, years later, that the big mansions are beginning to notice a change.
So that’s basically how the plankton theory models the housing market. I don’t think you can apply this model to describe all housing bubbles. For example, the 90’s SoCal housing bubble didn’t seem to work this way. But I think the plankton theory does fit the current bubble we’re in.
I don’t have any hard evidence to back the plankton theory up. I’m not sure if anyone does. But the theory seems logical and does explain why the housing market is moving the way it is (lower tier houses dropping the first and fastest, with the middle tier following, and the higher tier lagging). If the theory is true, the sharks are going to die too. We shall see.
Participant[img_assist|nid=7162|title=
GRM, Real Case-Shiller HPI, Real Rent|desc=|link=node|align=left|width=466|height=315]Here’s an update to the Gross Rent Multiplier chart. I also added the inflation adjusted rent (in orange) and the inflation adjusted Case-Shiller HPI (in green). I normalized the rent and HPI data to match the GRM value in 1913. So all 3 data series start at the same value and we can see how they diverge over the years.
The recent housing boom sent prices into uncharted territory. Before that, prices remained relatively flat with a slight upward trend.
Rents went down a lot between 1930 and 1950. After that remained pretty flat with a slight downward trend.
The GRM has generally been going up over the years. As noted earlier, it seems like the GRM has gone up in steps.
Participant[img_assist|nid=7162|title=
GRM, Real Case-Shiller HPI, Real Rent|desc=|link=node|align=left|width=466|height=315]Here’s an update to the Gross Rent Multiplier chart. I also added the inflation adjusted rent (in orange) and the inflation adjusted Case-Shiller HPI (in green). I normalized the rent and HPI data to match the GRM value in 1913. So all 3 data series start at the same value and we can see how they diverge over the years.
The recent housing boom sent prices into uncharted territory. Before that, prices remained relatively flat with a slight upward trend.
Rents went down a lot between 1930 and 1950. After that remained pretty flat with a slight downward trend.
The GRM has generally been going up over the years. As noted earlier, it seems like the GRM has gone up in steps.
Participant[img_assist|nid=7162|title=
GRM, Real Case-Shiller HPI, Real Rent|desc=|link=node|align=left|width=466|height=315]Here’s an update to the Gross Rent Multiplier chart. I also added the inflation adjusted rent (in orange) and the inflation adjusted Case-Shiller HPI (in green). I normalized the rent and HPI data to match the GRM value in 1913. So all 3 data series start at the same value and we can see how they diverge over the years.
The recent housing boom sent prices into uncharted territory. Before that, prices remained relatively flat with a slight upward trend.
Rents went down a lot between 1930 and 1950. After that remained pretty flat with a slight downward trend.
The GRM has generally been going up over the years. As noted earlier, it seems like the GRM has gone up in steps.
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