[powayseller]

I thought you had an Open House. Please don’t credit yourself with keeping anything going, because I left once due to your insults and name calling.

[powayseller]

Yes, it does seem odd that we should be educating the media, because they certainly are NOT educating us.

[powayseller]

I am waiting until the bottom, whenever that is, regardless of whether it’s 30% or 50% off from today.

Do not use the median to find the bottom, bec. it lags by 2 years, as we are now seeing. While the low end prices softenend in 2004, the median is just this month negative yoy.

Find the bottom by looking for an uptick in prices. A realtor with his feet on the street can tell you when this is happening. Data to check: months of inventory starts decreasing, HAI changes to increased affordability. As soon as months inventory reverses, buy. We are looking for a reversal of a trend. At that time, the median will still be going down, and all your friends will say you’re crazy to buy. Banks will want 20% down, and the REO departments will probably be very busy.

So we need to use the data, but NOT the median, and keep in touch with a good realtor to know when the downturn SHIFTS and reverses. At first sign of reversal, you will get the best price. By the time the median is up, you will be paying 10-20% more than the bottom. This is my own opinion and analysis.

For your survey, put me down for a 50% nominal drop over the next 5-7 years.

[powayseller]

Missed it. Wha did he say, and what did *you* say?

[powayseller]

The problem is that these are cash-out refis. People are not refinancing for a lower interest rate or to transfer into a more stable product, but to take out cash.

[powayseller]

Why does a landlord have an Open House for a rental property? How does this work?

Rents cannot exceed income, so there is a ceiling to how high it can go. Eventually, it will come down, as more people leave San Diego and foreclosures and job losses reduce people’s ability to pay these high rents.

Apartment rentals will come down when condo conversion go back on the market, and the 30% vacant listings cannot be sold and are rented instead.

But in the short term, there is more demand for rentals than for housing. Someone posted the other day that he saw 20 other people at a rental open house. So the SFR rental market is tight, and that causes prices to rise.

All this is my opinion.

[powayseller]

Great post, John, and I like your website and use of videos. Internet appeal, curb appeal, home appeal… the 3 selling essentials, right?

I feel like the posts by John and SD Realtor should be cross linked to the Alan Gin Lies thread, because he is in dire need of education. Does Gin have MLS access? As a real estate analyst, he surely needs MLS access and a good Excel program for his analysis. I am perplexed why he does not publish any MLS analysis. Either he lacks the knowledge of its importance, or the ability to do it. Either way, it leaves him woefully inadequate for the job of analyzing SD real estate.

[powayseller]

Do you think the NAR is getting the public ready to accept the housing bust? They have to gradually prepare us. This survey could be the way they did it. After all, the questions were posed by NAR, and their purpose was to show the serious situation of housing.

Does NAR want to pressure the Fed to lower interest rates? David Lereah talks about the problems of rising interest rates.

[powayseller]

Yes, the Chinese planners and government take a long term view, and are patient. There is a long term plan, whereas I feel that in the US, we just “wing it”. One of my friends believes that China will keep us dependent on them until they have the one thing they are lacking today: technology patents. Once they get our manufacturing for software, hardware, and other high tech products over there, they can more easily copy and manufacture those items. In the meantime they are buying up natural resources globally and striking deals with other countries to get access to resources like oil, uranium, gold, lumber. By the time of the Olympics, they will be ready to show off their economy. Afterward, I expect they will dump us, if they are ready by then. One interesting thing is when the Chinese President came to the US recently, his first stop was Seattle and dinner w/ Bill Gates. His LAST stop was Pres. Bush, and he spent only 30 minutes! Isn’t that a strong signal that China has the upper hand?

[powayseller]

Why do you think it is unprofessional to defend himself? It was definitely unprofessional to make such inaccurate statements about the real estate market. As my friend said, if he doesn’t do good research, he should keep quiet.

[powayseller]

partypup and theplayers – great posts!

partypup wrote “Do you really want to be in the position of having to stay in a house for 10 years in order to recoup your equity? That’s what happened to me in 1992.” My neighbor said she doesn’t care if her house price falls in half, because when she sells, she would buy a bigger house and that house would be 1/2 off also. That made sense to me. What do you think?

chris, did you see edna_mode’s posts, about a new paradigm shift than can move the ratio of income to house prices permanently higher, just as global warming is causing a new median temperature, some other unknown factor could cause a new median home price. I told her not to compare biological systems to asset bubbles, and that Grantham challenged 2400 professional investors to find just one exception to an asset bubble reverting to the mean; no one could think of one, and Grantham has shown that all asset bubbles returned to mean. Do you want to add to this?

Foreclosure: you will owe the IRS taxes at your tax rate, NOT your capital gains tax rate, on the forgiven amount. Lender gives you a 1099. If you refinanced or took out a HELOC, you cannot avoid this. Only if you kept your original mortgage you are safe. Google recourse loan and non-recourse loan for California.

[powayseller]

flinger, since the oil companies buy their oil on the open market, wouldn’t their profits fall as the price of their input goes up? If the price of apples would double, the Farmers Market wouldn’t have record profits; the profits would be unchanged. So why are oil company profits higher? The answer must be that they own a lot of reserves, and they do NOT pay mineral rights in the US. So the oil companies can charge market rates for all oil they drill in the US. Plus, they get millions of dollars of government subsidies.

The book you recommend is better than Peak Oil or Twilight in the Desert? Did you read Stephen Leeb’s book: The Coming Economic Crisis?

All those who believe oil prices will hit $100 or $200: do you own any oil company stock?

hs, about your question: why does Bush allow China to buy our debt? Actually, Japan owns twice as much Treasury debt as China. We need someone to fund our budget deficit. The government needs $2 billion daily from foreigners, to keep running. Without China and Japan and other countries buying our debt, how would we pay the salary of Bush, the paving of our roads, and all the other government bills? And if we were to stop selling them our assets, they wouldn’t be so keen on dollars anymore. The cheap imported goods has kept our inflation much lower. The US is a debtor nation. This is a sad statement. We were once mighty and powerful, but now are a debtor nation. Will we ever regain our glory days?

[powayseller]

SDLaw – what do you mean about the Chinese letting the dollar plummet? Can you explain?

Here is another comment from Fleck about this question. Another reader gave his opinion. I don’t understand the reader’s comment, nor Flecks’.
QUOTE
Re: ‘What do you think about our toll roads and bridges being purchased by Australian companies? Are they trying to find something to do with their US dollars, or are they bullish on US assets?’

Neither of the above. Like so many other things, it is purely a function of the availability of credit. There will be a price to pay at some point.

Go get ’em, son.
• Good point.
UNQUOTE

NOTE: I changed END QUOTE to UNQUOTE. That is better English…thanks.

[powayseller]

A quote from Jim the Realtor. Look for his take on Alan Gin.

QUOTE
“Last year, sales dropped 17.5% between June and July, this year it’s 28%. (It was a 9% drop in 2004)

The statistics don’t reflect the buyer psychology though. They are being very picky about what they buy, and very careful about the price they pay.

The buyer psychology is all that matters. I am getting so sick of guys like Alan Gin saying there won’t be a problem unless we have significant job loss. He’s an idiot, and obviously he has never sold houses.

I lost all respect for him a couple of years ago when I went to his annual forecast. He trots out a handful of his students at USD to report on their findings about the real estate market. These kids have never owned a house, never thought about buying a house – they are just college kids guessing at what might happen, yet his forecasts are supposed to be credible?

The North County Association of Realtors keeps reporting the same, no bubble to burst here.

Looking at these numbers, you might come to the same conclusion, that the median sales price is flat.

But the median sales price is a lousy indicator. If it would have dropped down one more sale, the median sales price would have been $573,750. That’s probably a better reflection of things to come.”
END QUOTE

Alan, the reason I say you are lying is well explained in the post I made which starts this thread.

As a professor of real estate, you couldn’t possibly believe this stuff. You ought to know that
* prices on many homes are back to 2004 levels,
* sellers are bringing money to closing (one $480K sale brought $60K to closing last month),
* 3 condo developers downtown are cancelling projects,
* 30% of listings are vacant,
* sales are down 30% vs. June 05,
* prices softenend in 04 for low end and in 05 for the mid and high end, while median went up because the distribution of homes sold has shifted,
* $1.7 trillion nationwide ARM resets will cause massive foreclosures in 2007-2008,
* you don’t need a recession to cause high foreclosures because ARM resets cause the inability to make mortgage payments just as a job loss would,
* high use of exotic loans will cause payments to rise 30-70%, causing more foreclosures
, I could go on on and on.

Families in Poway are in foreclosure, even those who bought in the 1980s and refinanced out all their equity.

I sold my house in January 06, for 5% below last summer’s price. I signed a 2 year lease.

The median is a 2 year lagging indicator. The market turned 2 years ago, and the median is not showing it yet. It is unbelievable that not ONE real estate professional has come out to educate San Diegans about the true state of this market. Instead, we are told that everything is fine, prices will plateau. Alan, what do you make of the chart on the main page of this blog, showing the ratio of per capita income to median house price? Why do you not talk about that? Is this a new idea to you, to calculate such a thing? Why don’t you mention rising months supply, low HAI? Why do I seem to know more about real estate than you?

So either you are uninformed about this market, in which case I will happy to meet with you and educate you about the market, or you are lying.

Schahrzad Berkland
Poway, CA

[powayseller]

enda_mode, I understood the point you were trying to make in your first post.

I don’t think you can compare evolution and changing environmental conditions to asset bubbles. So once again I ask you the question I posed above:

To date, has any bubble ever corrected to a new mean? This is the Grantham challenge I noted above.

[Author]

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