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powayseller
ParticipantTiming the bottom is easy. You look for the leading indicators to reverse. The leading indicators in housing, as far as I know, is the rate of change in inventory (year over year), days on market, months of inventory, ratio of sales price/list price. You’ll need MLS access for this. When these change, you’ll know the bottom has passed. And you will be 3 months ahead of the general public, which is relying on dated information from Dataquick.
Dataquick is 3 months behind the market. We are just now getting data on January offers. January offers close in February – March, and are reported the following month, either March or April.
I plan on checking back to see what Rich’s data holds, too.
What could be different this time is the magnitude of change in the early years. More people will be forced into foreclosure, probably 10 million (see OfTwoMinds.com, and check his Housing Bubble and Financial Meltdown articles, this guy has all the data on the national scale). The bulk of foreclosures will come on-line in 2007. After that, the rate of decrease might slow down. If interest rates pick up to 8% or 9%, the mortgage interest deduction may balance out with the loss of equity as the market continues its decline.
We also should ask why we yearn for a house. Do you want something to fix up? Do you not like the paint? Do you want a bigger yard? I believe a rental house can offer all this. I am planning to do some painting this summer. I will do some myself, and hire out the rest. I’ll plant some flowers, too. I’m adding A/C, in cooperation with the landlord. A rental house is a home, too. To maximize financial gain, we have to expect a wait of 5-7 years.
ParticipantI’m not sure what you’re asking. I don’t mind when my threads get hijacked. Some of my threads don’t get any responses at all, because I tend to ask questions that no one can answer, so at least this one generated a discussion.
I’m attending the UCLA Anderson Forecast seminar downtown tomorrow, and I’ll ask them, if I get a chance, how long they think it will take to hit bottom, and how they arrived at their conclusion. Is that what you wanted to know?
I was repetitive also in my question, since we’ve discussed this before. It seems most people think it will take 7 years. Check out the Bubble Primer: it took as long to go down as it took to go up in the other 2 downturns.
I just spoke with a friend, and we expressed our impatience with how long it takes for this bubble to unwind. Our impatience doesn’t help. These things jut take time to unfold. Next year, more ARMs will reset, but there are other people who won’t be forced into foreclosure for many years, like the buyers of my home who got a 5/1 ARM in 2006. It will be 2011 before they find out if they can afford the higher payments. So we’ll see continued struggles among homeowners until at least 2011, and as long as people are facing foreclosure, there’ll be downard pressure on prices. Sure, we can go out and buy a home now, but the person whose ARM adjusts in 2011 and has to sell quickly, will bring whatever prices exist at that time, even lower. If you want to wait for the very bottom, to minimize your entry cost, you’ve got to wait 7 years at least. That’s my opinion,and that’s what we’re prepared to do.
ParticipantIf the Fed sees rising commodity prices as inflationary, because they’ll increase producer prices, manufacturing costs, and ultimately show up in the CPI, then the recent rise in gold, copper, oil, silver, etc. would be considered inflationary and a reason for further tightening.
But the rising prices will in and of themselves lower consumer spending, as consumer goods rise in cost. There is no need for the Fed to tighten. Furthermore, even if they tighten, would that have any effect at all on gas and commodity prices? Demand is dampened already by the fact of the higher prices.
It seems the commodity and oil prices are going up independent of monetary supply, since their prices are rising in other currencies too. Excess demand is causing the prices to rise, not inflation.
So if price inflation can exist outside of monetary inflation, why does the Fed look only at CPI?
If they are causing inflation by issuing more bonds, why don’t they stop issuing so many bonds? It seems in my simple reasoning that the government is the cause of the inflation, but then take it out on the consumer by raising interest rates. Then the government has to service higher debt. Does this even make sense?
ParticipantI need to focus on the bigger picture. From now on, I won’t call anyone’s bluff. There’s a great saying, “Live and let live.”
ParticipantRich, what do you think about my comments about price vs monetary inflation? I got this from my brilliant brother, and it makes sense, but have never read about inflation separatd into 2 components before.
ParticipantYou’re definitely a trendsetter, Rich. Your writings predate those of Talbott, I think. He just happened to have the time to write a book. People’s lack of understanding of pricing homes is a big contributor.
As far as the stickiness comment from Chris, we can see that homeowners are reluctant to lower their prices to a level to meet current demand. It’s the homeowner ego that prevents his good decision making. He holds the belief that “I can’t sell my house for less than my neighbor”, and he holds on to get his paper profit, thinking that paper profits are real. Thus, it is basically the homeowner’s lack of understanding of markets, and supply/demand that make him list his house too high, and hold on to that high price, and turn down reasonable offers, and this causes the delay of prices dropping.
ParticipantThat VanEeden site is great. He insists gold is money, and people get confused about its price moves when they treat it as a commodity. He also explains why jewelry demand and the ETF are so small compared to the total daily trades, that they have no effect on price movement.
One month ago, he predicted the weaker dollar would lead to higher oil and gold prices.
He makes simple logical points: continued supply of Treasuries will cause their prices to drop and yields to keep rising. As interest rates rise, more of our government money goes to finance our debt.
He reminds us that the US consumer is responsible for China’s growth (we are 40% of their exports), so when the US consumer slows, so will China’s growth as well as the prices for commodities. Good stuff…
ParticipantIn Sell Now, John Talbott devotes an entire chapter to housing as a Ponzi scheme. Ponzi schemes are pyramid schemes in which early investors are paid extraordinary returns on their capital, supplied by later investors, and nothing productive is ever invested in. Because housing markets and values are so poorly understood by the people buying them, it is perfectly suited for a Ponzi scheme.
“Homeowners won’t like to hear this, but their naivete about investment valuation in general plays right in line with the Ponzis. A simple review of the reasons many people give for the housing boom, such as those presented in chapter 5 [population growth, higher incomes, increased construction costs, strong economy, supply/demand] demonstrates that they have very little knowledge about how markets really work or what the real historical price data show. Most homeowners do no more pricing or valuation analysis than asking what their bank will lend them, or what a similar property sold for across the street. If markets can go completely Ponzi on you, then depending on market-based appraisals is self-defeating….
The timing of this housing bubble also couldn’t be better for a Ponzi scheme. We live in a casino society in which profits are being created with great risk but not much hard physical effort….
The central question, and the key difference between a casino economy and a healthy productive economy, is whether anything of real value is being created in the process…If all we are doing [in the housing market] is shuffling assets back and forth, it is hard to argue that any great value is being created…A great deal of our investment capital is gonig to increasing consumption to the detriment of real, meaningful, productive investment….
Rather than learning their lesson when the Internet stocks crashed, people seemed thrilled to move to the housing market to continue their money shuffling ways….
At some level Ponzi schemes have to be corrupt. If you are trying to sell to a greater fool before the market crashes, with no regad for how he recovers his investment, you are part of the moral problem [that’s me, powayseller]. If you are a real estate professional who is pushing a personal profit agenda rather than providing the best advice to your clients, you are a part of the moral problem….[He also holds accountable regulators who don’t crack down on the GSEs, Congress, Fed, FDIC, lenders]
[The Midwestern states are] more grounded, more skeptical, more conservative. Such qualities usually don’t play well to a Ponzi scheme promoter….
Market economists do their analysis a disservice if they totally ignore the possible behavioral effects of herdlike investing. If sellers and homebuilders are realizing extraordinary profits, buyers must be paying extraordinary prices. If they are hoping for greater fools to pay even higher prices in the future they may get caught in the deceitful web of Ponzi.”
ParticipantIt sounds like Carmel Valley is an ideal place to live, and after the housing bubble bursts, hopefully I can afford a house there. My husband really wants to live closer to the coast.
ParticipantMy realtor friend sold several homes in Rancho Sante Fe, and during her transactions, spoke w/ various homeowners, appraisers, inspectors, etc. She told me she met 3 families who took their girls out of Torrey Pines High School and are home schooling them, due to the high promiscuity and drug use at that school. I’ve also heard of many kids who are materially spoiled, getting a brand new luxury car, sometimes more than one, in high school. However, I have read only about high test scores, and about the kids from TP who won at science fairs and went to the best colleges. What do you think about the personalities and child rearing results of the kids at Torrey Pines?
ParticipantToo much time on my hands. I’ve never met Rich.
The NAR campaign would be a Realistic Pricing campaign. The only way for realtors to keep their transaction volume, is for sellers to get real. Seller stubbornness is the reason for lower transactions. So we have inventory up from 9,000 last year to 20,000, sales down 35% from 6,000 to 4,000, and only 4 out of every 20 properties is selling. [The numbers from last year are estimates]. With sales down from 6,000 last year to 4,000 this year, that’s a much smaller pie to be split between all those realtors out there. If the NAR is really representing the realtors, they need to change the Realtor Ethics campaign to a Seller-Get-Real campaign.
ParticipantWickedHeart, Are these his total sales for his career? Or are they all from this year and how do they compare to last year?
How did you get sdr’s identity and sales info? Are you his friend? Or a fellow realtor who figured out who he was and looked up his sales on the MLS?
P.S. What do you mean with baiting? Victim?? Complaining?? I’m just taking your punches…And being a super duper good sport, too!
ParticipantI’m a foreigner also (German citizen), and learned English in 3rd grade. I’m also half persian and speak farsi. So I took some liberty with her, since we both have the persian ancestry.
Plus, she has been ridiculed here before and it was suggested to her that she gets someone to proofread her reports prior to publishing. She’s had her chances to avoid this last round of teasing…I think she was just asking for it.
ParticipantThe pilots I know have had to make big wage concessions.
There is no agenda, other than inquisitiveness, and trying to learn. I am trying to learn how a Delta pilot can get a raise when the company is struggling.
It’s possible for a realtor to make more money in a declining market, but again taking an analogy from the airline industry, it’s the low-cost business models who survive. Southwest Airlines is doing well, as presumably are HelpUSell and iPayOne.
There are a myriad number of ways to back up your statements. You could state your # of sales or sales volume compared to last year.
You could tell us how your DOM compares with industry average, how you are able to get sellers to price their houses to sell (when most realtors cannot), how you can find buyers who qualify (when most new buyers are squeezed out and move-up buyers can’t sell to move up).
Instead of bantering shots at me, you could educate us about what’s going on the streets. I’d love to hear how sellers and buyers are coping, how lenders are doing, what others in your industry think about the slowdown, and if any are looking for new work. A mortgage broker on HousingBubbleCasualty.com, SoCalMtgGuy, was such an insider. He gave us the inside scoop. He’s a fabulous writer. He wrote about the tough times, and how 25-yr-old loan officers used to making $100K/year were suddenly struggling to make their Beamer payments, and facing bankruptcy. He finally got out. I thought you would be such a guy, giving us insider info. Instead, you get mad and defensive, and hurl insults at me. I hope we will have a realtor on this forum who will write about what’s going on in the field. It would be very welcome.
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