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powayseller
ParticipantYou guys are right – at times, I was belligerent and argumentative, a real a**.
I thought I knew everything. My forecasts were aborted by government stimulus, which I did not expect. I’ve learned to be humble.
I just want to apologize to anyone that I offended, especially Rich, since he is the person who really gave me my start in real estate and led me to sell my house at the right time.
Having my own business has forced me to grow up, and to mind my own business.
My outlook is still the same – further declines in real estate and stock market ahead, after government stimulus ends. Damn, how could I not have predicted the stimulus?? In hindsight, it was stupid to miss. The Fed and gov’t have blown a bubble after every crash the past few decades.
The video were shot at random, and I was hoping to find someone who would slam realtors, since that would have made a funnier video. However, only one person would do that and all he said is they are too expensive. I’ll make another attempt soon.
ParticipantYou guys are right – at times, I was belligerent and argumentative, a real a**.
I thought I knew everything. My forecasts were aborted by government stimulus, which I did not expect. I’ve learned to be humble.
I just want to apologize to anyone that I offended, especially Rich, since he is the person who really gave me my start in real estate and led me to sell my house at the right time.
Having my own business has forced me to grow up, and to mind my own business.
My outlook is still the same – further declines in real estate and stock market ahead, after government stimulus ends. Damn, how could I not have predicted the stimulus?? In hindsight, it was stupid to miss. The Fed and gov’t have blown a bubble after every crash the past few decades.
The video were shot at random, and I was hoping to find someone who would slam realtors, since that would have made a funnier video. However, only one person would do that and all he said is they are too expensive. I’ll make another attempt soon.
ParticipantYou guys are right – at times, I was belligerent and argumentative, a real a**.
I thought I knew everything. My forecasts were aborted by government stimulus, which I did not expect. I’ve learned to be humble.
I just want to apologize to anyone that I offended, especially Rich, since he is the person who really gave me my start in real estate and led me to sell my house at the right time.
Having my own business has forced me to grow up, and to mind my own business.
My outlook is still the same – further declines in real estate and stock market ahead, after government stimulus ends. Damn, how could I not have predicted the stimulus?? In hindsight, it was stupid to miss. The Fed and gov’t have blown a bubble after every crash the past few decades.
The video were shot at random, and I was hoping to find someone who would slam realtors, since that would have made a funnier video. However, only one person would do that and all he said is they are too expensive. I’ll make another attempt soon.
ParticipantYou guys are right – at times, I was belligerent and argumentative, a real a**.
I thought I knew everything. My forecasts were aborted by government stimulus, which I did not expect. I’ve learned to be humble.
I just want to apologize to anyone that I offended, especially Rich, since he is the person who really gave me my start in real estate and led me to sell my house at the right time.
Having my own business has forced me to grow up, and to mind my own business.
My outlook is still the same – further declines in real estate and stock market ahead, after government stimulus ends. Damn, how could I not have predicted the stimulus?? In hindsight, it was stupid to miss. The Fed and gov’t have blown a bubble after every crash the past few decades.
The video were shot at random, and I was hoping to find someone who would slam realtors, since that would have made a funnier video. However, only one person would do that and all he said is they are too expensive. I’ll make another attempt soon.
ParticipantMy beef is with the content of the reports.
He implies that falling $/sq ft is due to price drops, but in fact, it is due to a shift in the mix of homes sold. Although prices are dropping, it is not reflected in $/sq ft. That measure suffers from the same problems as median. As the distribution of homes sold changes, and we sell fewer entry level homes, the median rises, the average rises, and the $/sq ft falls. This occurs even if prices are flat.
He wrote that NODs are must-sell inventory, but in fact most homes in NOD status are not even listed for sale on the MLS, and even REOs are still listed too high. Few people in foreclosure list their homes for sale; they just don’t have the equity to care, or to pay a realtor. Consequently, the rise in NODs and REOs is not yet affecting prices. REOs seem to be among the worst, as lenders in faraway places think the San Diego market is still on fire; after all, the hear the median is rising! (I emailed him about this as soon as I read the story.)
He wrote that high NODs could be due to duplicate entries for the same home from piggyback loans, but there is no proof. foreclosure.com shows only 1 entry per home. (I emailed him about this as soon as I read the story.)
Brooke, if you really want to help Rich, then encourage him to improve his analysis and stop jumping to conclusions. Push him to do better.
My reports:
ParticipantNew Guy,
I had the same thought, and I ran the numbers for houses of different sizes a few months ago, and the data is surprising: $/sq ft goes up and down for the past year for each size range. $303, $307, $302, $308, $306, $305, $309, etc. just citing from memory.
So $/sq ft is not declining, even when grouping homes by size. The reason is that in a rising housing market, everything sells. In a declining housing market, only the pretty ones sell.
In March 07, the average price was up 3% over March 06.
So forget the average, median, Case-shiller, OFHEO, $/sq ft, because they don’t account for the distribution mix, remodels, and whatever else. The data lies. The data lies. The data lies.
The homebuilding analysts at Credit Suisse devoted an entire report to “Data Masks Grim Reality”, where they say the data lies. I have a summary of their findings on my website.
If you want to know what is really going on with prices, talk to realtors. Find out how much house A is worth today and how much it was worth 6 months ago, 1 year ago. Then you know what is happening with prices.
I am coming to the realization that real estate prices cannot be culled into one number, and that data is misleading or lies.
If there is one number I have to pick, it’s months supply, because it tells me if prices will move up or down.
Participantwooodrow, I am sharing the ANALYSIS of her article with my subscribers. The Credit Suisse article itself is not posted.
Most important, Ivy read the article and liked it.
Just curious….what are you doing in a ghost town?
ParticipantI suspect MEW is the source of funds for many people. This Marketwatch story explains people tap equity, then credit cards, then their 401(k)s. Maybe that’s why the prime borrowers are not yet defaulting, as they have access to more credit and that retirement savings. Soon, that will be used up too.
As Warren Buffett said, you don’t know who’s swimming naked until the tide goes out.
Just wait a couple years, and then we will know the true financial condition of the people around us. Then we will know who truly could afford their lifestyle vs. who was living on credit.
Participantcheck out Rich’s Bubble Primer on the top of the home page. Look for the charts on home price/per capita income, and rent/income.
Housing prices are dependent on
1) WAGES, ie. how much people can afford to pay, and is typically 2-2.5x your household income if you get a 30 year fixed rate mortgage at 6-7%.
So a city’s median wage is a proxy for the prices that city can have on housing. High wage cities like San Francisco have higher housing prices, because the higher demand drives prices up. In San Diego, prices are higher than 2-2.5x income, because people are willing to pay a little more of their income to live here (sunshine tax), so the ratio is just a little higher. Thee graphs use per capita income, and with 2.x people per household, you can convert it to household income.
2) RENTS, i.e what an investor would be willing to pay to break even on buying a house and renting it out.
Lately, investors purchased based on appreciation, but traditionally they buy based on cash flow. Similarly, in exhuberant stock markets like today (yes, it is exuberant!), investors don’t care about dividend yields or cash flow because they bet on a stock rising in price. The earnings don’t matter as much as the appreciation.
ParticipantChris, Peter Schiff would have been right, but a few external events aided the flailing US economy. Schiff could not have predicted the Bush tax cut, the Federal Reserve 1% Fed Funds rate, and little known: the Bank of Japan would print 35 trillion yen to buy $320 billion of US Treasuries in 2003, reflating the global economy and creating the US housing boom. If the BOJ had not done that, the housing bubble would have popped in 2003. Now, in spite of any efforts to reflate, the US consumer cannot service any more debt.
I think Peter Schiff is great, although I disagree with him on the commodities boom. Looking back at 2000/2001, when the US had a tiny capital spending led recession, but the US consumer kept spending. What happened is that the stock markets all over the world plunged, and so did commodities (except gold). This time, it will be even worse. Commodities and global stock markets will take a big hit as the world’s #1 consumer cuts back on spending. What can save the export countries is if they would stop relying on exports. China is a bubble waiting to pop.
Schiff is right, that we should keep our assets outside of US dollars.
In the 1980s, the dollar lost 50% against the yen, and in early 2000’s, the dollar lost 30% against the euro. I think the next leg down is soon. Timing these things is difficult, as I have been waiting for a recession for over a year, that is finally approaching. Even now, I am amazed that stock investors are not pricing in the upcoming recession. I am early too, like Schiff, but our logic still holds true and what he predicts is likely to pass. His arguments are solid.
ParticipantAccording to Credit Suisse, “on a trailing 6 month basis, roughly 700,000 homes have entered foreclosure based on Realty Trac’s data”. Some of them may be cured, but the foreclosure rate for the US is 1%! The top 10 foreclosure rates range from 1.4% to 2.7%, and do not even include CA.
I realize why Cagan is so optimistic, after a recent conversation with him. He assumes that prime borrowers have loans at 30% DTI, and did not take on teaser rates; thus their resets will be relatively minor and their low DTI will allow them to take on an increase in payments. I asked him where he got the 30% DTI for primes, since CTLV is not reported, and 70% of all loans in the last few years were not fully documented, and he could not cite any reason. So I now think that Cagan is not reliable in his analysis. The better analysis is by Credit Suisse’s homebuilding team, led by Ivy Zelman.
ParticipantI did not include MEW in my original list above. But I forgot to add: I was the only person to notify that the San Diego MLS is not counting all inventory, that March sales are about to be 2000 (vs. 3K – 4K usually). I was one of the first to explain why the median is wrong.
I first learned about the housing bubble from Rich. He only writes original work. I don’t agree with all of it, but so what? I have piggington in my links, and I recommended Rich Toscano as a financial planner in a story from earlier this week about investing. I also put up links to his Bubble Primer in my Housing Basics section. I think my readers check out the links every day (Roubini, CR, Mish, Big Picture, piggington, Jim Klinge, ocrenter), so no need for me to make posts every day just copying what those guys wrote! Likewise, they don’t copy me either. Surprised some reader is offended by someone not copying someone else. Kind of a strange request, that I should go around copying other bloggers?
ParticipantMy Bloomberg quote was original. Haven’t read anyone else saying that oldtimers have refinanced their equity out, even prime foreclosure rate will be high, that foreclosures are lagging, that housing prices will fall 50%, that housing prices depend on supply and demand, that population decline is continuing and leading to lower demand, credit crunch would lower housing demand (as is happening now), 8% of all homes on MLS are short sales, housing prices are not dropping because the stupid buyers are bidding on the same few good homes, and much much more. None of the previous have been written anywhere else.
jg, foreclosures and recessions are lagging indicators. NODs released by RealtyTrac now, are for NODs recorded in February, which are for payments not made in November, December, and January. So the guy not paying his mortgage since November is only now getting noted as having an NOD. Credit Suisse report from last week noted the 1 year lag from no payment to REO! So your regression analysis, which is exactly like the regression analysis I did in 1988 as part of my MBA work in Phoenix is very good, but not as good as supply and demand. I hope that someday your religion will bring you inner peace. Your comments, full of hostility toward me (what have I ever done to you??), show that church alone cannot bring fulfillment.
ParticipantI agree that the duplicate posts are annoying. I have asked squarespace to fix that.
I wonder if your CPA does your taxes for free…after all, you could just do them yourself on Turbotax. Does your kids’ kindergarten teacher work for free? Hmmmm…people actually expect to get paid for their work? What is this world coming to?
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