[powayseller]

Thank you. They are beautiful homes, and I dream of owning one like that someday.

[powayseller]

I hope their discussion stayed cool, and didn’t go off the emotional deep end, as did mine with my spouse when we discussed if we could have got $20K more for our house by holding out for a higher offer. That caused a huge fight. Somehow, homes buying and selling bring out the most basic emotions in people.

[powayseller]

The problem with shorts and puts is that they can rally and turn on you.

“The latest rally in GM from roughly $18 to $29+ is explainable as well. There were simply too many people betting too heavily against GM (via put options expiring in 2007), and now they are taking those bets off realizing they were wrong. Unwinding of massive numbers of GM puts creates an underlying bid and GM rallied.” From Mish’s Blog

[powayseller]

studenteconomist, are these savings withdrawals from CD accounts, or are these people closing their savings and checking accounts? What is the 6 month CD rate at that bank, compared to others? Does she think it is due to higher CD rates elsewhere? Banks know how their rates compare to others. I think a 5-10% drop in deposits is a cause for concern.

[powayseller]

That is my impression too. I was told thought that the homes are open for 2 hours for a walkthrough, prior to auction. You need cash or 20% cash at the auction. Can you get a bank loan for $300K, to have on hand at the auction? Or would a bank not give that type of loan?

[powayseller]

I have a friend, who follows indian gurus around the country and world, says they are predicting a very bad time starting in September. I don’t know if this is economic or war related.

What would avert a recession? Another liquidity injection? But that is unlikely. We’ve had a global liquidity glut, and all central banks particpated in that, so all are unwinding and raising their interest rates.

Recessions are a natural cycle of the economy. They are necessary to cleanse excesses, even more necessary in economies no longer backed by gold. The longer we avoid having a recession, the worse the eventual one will be. Oceans have waves. They rise and fall. How can we keep a wave from rising? Our day has light and night. How can we avoid nightfall? It’s just a natural rhythm of things. The question is one of severity, and the severity of the recession is proportionate to the excesses which preceded it. That is why this next one will be huge. We had years of federal funds rate below inflation. Investor buying MBS from mortgages at 100% financing given to high risk borrowers without demanding any kind of risk premium. Crazy stuff. The derivates collapse potential is huge, but it is a thing I do not understand.

The masses think the economy is good because the read the headlines: low unemployment. They listen to Bush trump the success of his tax cuts, and that the budget deficit is less than projected. They think housing will stay flat for a yeaer and start rising again. I don’t know anyone outside this forum who understands what is going on now. Not one person. The masses are clueless. They don’t care about the economy or politics. How many people even care that we could be starting a major war in the middle East over the Israel matter?

We are happily ambivalent because life is still good. The tsunami is coming, but it is calm at the beach, and we are happily playing in the sun. You tell me a tsunami is coming, and I look at you puzzled, because the ocean is smooth and the sun is warm and the sand is soothing under my feet. Life is good.

Use this information to prepare. That puts you ahead of your competitors.

As Bugs said, if everyone rushed out at once, we would have a disorderly decline. I needed a bullish real estate view so I could sell my house and find a rental. I needed people to buy stocks so I could cash out mine. So the early bird wins. I have moral guilt over this, but I am living in a capitalistic society so I play the game.

[powayseller]

Thanks for catching that. Yes, unemployment figures remain low for 9 months – 1 year after the consumer spending weakens, giving the illusion that the economy is strong, while in reality it is weakening. In the same way, when unemployment is high, and stock market prospects are poor, you can look for signs of rising wages or more consumer spending, and know that it is the early part of the next bull cycle.

Up In Arms, how much is it down? Will your job be okay? I hope that we can all regroup to keep our jobs and our financial security during this mess. Our income is dependent on government spendings, so we will be hit eventually.

[powayseller]

I jumped too soon…it’s the same story that we had online yesterday. It came on their online newspaper at late morning, and then made it to print today.
Here’s the e-mail I sent the writers:

You two did a fabulous job covering a difficult topic. You provided a complete, factual account. Although you will probably get hate mail from real estate bulls, you can rest assured that you covered the facts.

I liked the personal stories of the 3 sellers, which show us the true reality out there today: homes are taking longer to sell, driving down prices. Sellers are getting frustrated.

I would like to see an improvement in the quality of the real estate professionals interviewed. That part of the article was tainted toward the bull case, and those people made many wrong statements.

John Karevoll said that between now and fall, pricing will go up and down. He doesn’t see the drama in the price declines. Ask him to explain how the median is up so much, when individual home prices are down over 10%. I can
give you many examples of people coming to closing, owing money. Most who bought in 2004 and 2005 and are selling, are losing money today. This is not a matter of a few homes going up or down in price. Real estate doesn’t work like that. It’s a slow moving ship, and the ship has reversed course.

Ask Karevoll to dig inside the numbers. Ask him , “Isnt’ it true John that median is up because sales are skewed to the higher end because the first time buyer is priced out due to rising interest rates and high home prices. Isn’t it true that each individual home is worth less today than it was last winter?”

My thought is that Karevoll wants to toe the real estate line, since the NAR is one of his biggest clients. He would be uninterested in providing data to show you the true state of the market.

Steve Doyle, Brookfield Homes’ president, is likewise interested in spinning the facts. He says that ‘When you look at economics, we still have positive job growth”.

He’s right, but it’s a much smaller positive than it was a few years ago. Most employment in the last few years was in construction, real estate, and lending, and in retail and restaurants as people took our the home equity of ever rising home prices to go on shopping sprees. As housing cools, thse industries that have been our major growth, will keep weakening. Our manufacturing sector is shrinking. Nokia is now thinking of leaving. The 44,000 people per year leaving has left many vacancies for doctors, police
officers, engineers, cashiers. I keep seeing Hiring signs at so many stores. I read that high housing prices are making it harder for SD to recruit surgeons! The outlook for the San Diego job market is bleak. My hope is that biotech will some day take off again. Our biotech companies
are small, and my friend who is a manager at one of them, is concerned for her job prospects and is interviewing in the other big biotech cities.

All in all, a good article, although a little slanted toward the idea that real estate might go up again in the fall. This is not a soft landing, but a landslide.

Schahrzad Berkland
U-T Subscriber

[powayseller]

sdr, do you think the buyers at Arroyo Vista in Carlsbad got a good deal? (The one at Avenida de Sueno) Nice house…

[powayseller]

murray, can you quantify what you mean with Dramatic shifts? Less supply, more demand? Rough figures for number of units or pricing? Interesting that your renters are prior homeowners, like me. I am renting waiting for prices to drop 50%. More bearish than you. Did you read Rich’s articles off the main page, showing we are double our prior peaks? Why do you think we’ll have only a 10% drop?

[powayseller]

Thanks sdr, and I will not publish your personal information either.

[powayseller]

I see Hiring Signs every day. Yesterday, on the back of a Sears technician service van. At my bank. At Henry’s, the Verizon store. How can this not lead to higher wages?

I see commercial/retail building vacancy signs, more than before.

[powayseller]

How do you reduce the value of your currency?

Someone posted here recently that he would invest in Canadian dollars, not in euros.

Since I can’t figure out which currency is strongest, and I know the dollar has many problems (and so do the others), it makes sense to diversify.

Is there a reason I should hold all my cash in dollars?

[powayseller]

But while upper income buyers come out here to visit, how many leave their high paying East Coast jobs to move to San Diego and buy a home? The East Coast guy cannot replace his job or salary here. We have a net outmigration. So I don’t buy that we’ve got a bunch of wealthy individuals moving in to buy the glut of $1.2mil and up homes.

So the question remains: how many $1.2+ mil homes are on the market, and how many qualified buyers are there for those homes? And how do they afford them?

[powayseller]

I wish I knew a location of a glut of real estate For Sale signs. That would be the best. I am willing to drive around some neighborhoods to find such an area, if anyone has a lead.

I like a Voice photo of two downtown condos at night. Only a couple lights were turned on, showing they are mostly vacant. The shot was taken between two towers.

My friend suggested if you want to be dramatic, a picture of a house auction. I think they are held Thursday mornings at the downtown court house on Broadway at 10 am. The auctioneer stands outside on the courthouse steps, and the bidders stand around him. It went on for 30 minutes the day I was at the courhouse a few weeks ago.

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