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powayseller
ParticipantInventory and sales both decline in the fall and winter. Look at months supply. That is still rising. What matters is the relationship between inventory and sales, not the change in just one of them. Again, more BS from people who are trying to spin the story.
Mimicking a real estate bull: “Oh, inventory is dropping so houses are getting harder to find, mortgage rates are down so sales will pick up, employment is up and this economy is growing, go buy buy buy. Get yourself one of those superior properties”. More spin….
Participantsdcellar, balasr suggested I might think it’s different this time. The Bubble Primer lays it our current situation, and if we extrapolate the lines, we can picture how low it will go. so far, all events are unfolding just as we would expect.
cabinboy, I am not anonymous. I frequently sign my posts with my name, Schahrzad Berkland. I post in Roubini and Jim’s blog with my real name. I agree with you that we have to use our real names when we challenge another person. Too many people throw potshots hiding behind their anonymity, which is just chicken. Do you think my disagreement was an insult? You ought to see insult – I’ve had a lot of anonymous insults thrown my way. I take serious the ones where people sign their names.
Anyone who tries to tell you to buy real estate now is misguided. Are you afraid that Jim will be mad and stop posting his bearish analysis? Or are you saying it really is a good time to buy, as he proposes?
ParticipantRoubini has an amazing ability to stay focused on the facts. He is not distracted or blindsided by headlines.
ParticipantFor that price, I am renting a 2100 sq ft townhouse in Poway. The temporary imbalance in supply/demand in causing rents to increase. Eventually, rents will come back down. In my charts from past cycles, I can see that rents varied as a percentage of income over past housing cyles. Soon enough, as more people leave San Diego and as the recession causes unemployment to rise, rents will fall.
ParticipantSan Diego’s reliance on housing for recent growth makes us a perfect reflection of Roubini’s post today. His conclusion: “we already have a housing recession, a coming non-residential construction recession, an auto recession, a manufacturing recession, a durable goods recession, an industrial sector recession, and now signs of faltering of the service sector starting with the retail sector and the fall in consumer confidence. Q4 growth is headed to be even worse than the dismal Q3 and the economy is highly likely to enter into an outright recession by Q1 or at the latest Q2 of 2007.”
Mr. Hamilton, when bubbles burst, no amount of lowering of interest rates can save the bubble. We are experiencing a credit contraction. Mr. Hamilton, did you see what happened in Japan – not even a reduction to 0% interest rates could increase consumption. We are not Japan, but the idea that lower interest rates can spur spending works only at the beginning of a credit cycle, not at the end. Second, interest rates are TOO high even today for the today’s housing prices. For people to afford homes, we need 1% interest rates again. A .5% decrease is a joke – it is not nearly enough to stimulate demand. Third, when home prices are dropping, buyer psychology has shifted from “we better buy now before prices rise more” to “we better just hold off and see how low prices will drop”. So there you have 3 reasons why a rate lowering will not jump start housing.
Housing cycles take 5-7 years to play out. Credit contraction, reversed buyer psychology, years of clearing up excess housing inventory, foreclosures, REO departments growing quickly at banks, bank foreclosures, rising unemployment, recession due to housing bust… these are all part of the housing cycle that we have yet to experience. You simply cannot wish it away. Anyone who claims that we are at the bottom is simply deluded. There is no precedence in history that says housing booms end in one year. History shows that housing busts are accompanied by all the unpleasantness and long duration of a hangover.
The only people saying this is almost over are the people who have something to gain when houses are sold: builders, lenders, realtors, politicians. Astute students of markets and economies and history know better. We know this is just the tip of the iceberg.
Furthermore, this bubble is going to 3-5x as painful as others when it pops because:
1) his bubble dwarfed the prior ones in size, i.e. appreciation was much higher
2) we increased credit so much due to MBS market, that we increased the nation’s homeownership rate by 5 points, and we gave too much credit to anyone who wanted it. We created a credit madness
3) most of our employment gains in this recovery were related to housing, so the jobs lost in housing will be extra painful; housing has become too big a part in our economy, so its contraction is going to cause more pain than at any other time in history
4) Related to opint #2 above, this easy credit not only allowed people to buy more house than they should, it also enabled them to spend more than they earn. Mortgage equity withdrawal was used to support spending. Negative savings for the first time in our history. THe repercussions when this MEW is taken away will be very very bad.Population in San Diego is declining, and soon our unemployment rate will be over 7%. I predict 8%, and it will be all on my website (gee, if I ever get it done…). Once I have enough subscribers ( I will charge $10 max per month for my charts and forecasts), I can pay for more data. I am anxious to buy some foreclosure and mortgage data, but for now have only invested in Dataquick data.
So we are in store for a long and nasty recession.
ParticipantExcellent points.
ParticipantThe falling dollar as a possibility comes from several recent articles. I will post the next time I see one.
balasr, did you read the Bubble Primer?
ParticipantThe blog is a marketing tool. It attracts potential buyers, like you JES and his other fans who defended him above. Jim is a great guy, smart, honest, has integrity, very knowledgeable. He’s super smart too. Did I mention he is smart… a hard worker. However, he is a salesman, and he is trying to sell real estate. The blog is a marketing/advertising venue for him.
For a salesman, it’s always a good time for a client to buy. So of course the blog is self serving. He’s hoping to get clients. He’s arguing that now is a good time to buy, because 1) we are not that far off the bottom, and 2) when a superior property comes along you should buy it before it slips away, and 3) superior properties don’t drop much in price. I disgree strongly with all 3 of those statements.
For what it’s worth, I recommended Jim to my neighbor who is selling a house, but she had to use her relocation company realtor. If I were selling, I would feel very comfortable with Jim over another agent; he knows how to position a home in a difficult market. I would hire him too for my buyer’s agent, but now is not the time. In 5 years, I would hire Jim to help me find a house. He’s just a darn good realtor. But now is not the time to buy, it’s as simple as that! Now is the time to sell and hold on to your cash. Maybe load up on some gold. All these recent comments from Treasury officials, the debt, and the falling dollar are really starting to scare me. A lot!
ParticipantThere are 3 ways to calculate what the housing prices should be today. Draw a trendline to 1997, and keep going from there. Where do you end up? I’ve done this for SD and US, and am now working on the other So CA counties, and it will be for fee on my website ($10 or less per month). So I won’t give you my results, but here are the 3 methods:
1) historic prices
2) price/income ratio
3) price/rent ratioSo look at the data until 1997, and then extrapolate the trendline. Why 1997? That’s when the tax law changed to allow you great tax benefits for owning real estate. You no longer had to pay capital gains tax on huge profits. Shortly after 1997, the real estate prices started a rapid acceleration.
This is my opinion, but the charts are powerful.
Look also at the great charts Rich and jg have made.
ParticipantI say he’s desperate because he’s trying to convince people that now is a great time to buy. We haven’t even started the massive foreclosures and bank failures yet… why would anyone be buying now? This is a horrible time to buy. His advice on superior properties is self serving. He’s trying to get people to buy now, because that his how he earns a living. He doesn’t get paid writing a blog; he gets paid when he buys and sells houses. I do respect him immensely for his candor, and his intelligence, but his attempt to say this is a great time to buy is simply false. This is one of the worst times in the history of the U.S. to be buying real estate. Buying a home in San Diego today is like buying AOL in 2000 (or whenever it was that Time Warner grossly overpaid). Sure, they wanted AOL and they got it, but wouldn’t it have been financially wiser to wait few years?
Jim, my post was respectful disagreement. I hope you make lots of sales, I wish you success, and I hope I can still link to your blog from my site. I like your data and candor, but disagree strongly that now is a good time to buy a house.
Your statement that prices won’t matter if you find the right house, or that it’s hard to time the market, is ludicrous. I may not be able to time the market, but I’m fairly confident that after every bank has a large REO department and AFTER $1 trillion of mortgages has reset, prices will be a lot better than they are today. But of course a realtor has to promote selling houses. Would you expect a broker to tell you in 2000, not to buy stocks?
ParticipantJES, I’m referring to the comments in the other forums, where off topic comments have increased in the last few weeks…. I’m not a moderator, just voicing my opinion.
It’s interesting how much attention is bestowed on Kerry’s failed joke. We’ve got gullible people who don’t even know it was a failed joke. PD is misinterpreting a failed joke as an assault on service people. Meanwhile, the politicians once again got away with not discussing the failing economy, the precipitous position of the US dollar, the shrinking middle class, and the millions of people who will lose their homes to foreclosure. Why don’t they talk about topics which actually matter?
ParticipantKerry opened his speech with one-liner jokes about Bush. His last joke was the comment which made the media rounds, and it flopped because he omitted the word “us”, which was in his written speech.
His written speech said, “…if you’re not educted you will end up in Iraq like us”, meaning you make bad decisions like Bush has done.
So the context was 1) jokes, and 2) a flopped joke because he omitted the word “us” when he delivered the speech.
This story is more of an example of the danger of relying on soundbites.
Signed, powayseller
not a Republican or a Democrat, just someone trying to figure out what’s what, and learn the truthOh, and jg, please keep your personal views on cars, religion, and politics in off topic. Please use some restraint.
ParticipantSounds like I missed some of the good communities in RP. I did check out some of the newer areas in 2000, like Park Village, but didn’t like the small lots, so we passed it up. RP has cooler weather than Poway; Poway weather pretty much sucks. We looked at RP first, but passed it up due to old neighborhoods, small lots, and road noise. Probably the really good houses were out of our price range, as I didn’t get to see them. I’m surprised that someone is taking my views of RP personally. Get real! This is a housing blog and we are supposed to give our ideas of housing. Personally I passed up RP because it was unappealing to me, and for those folks living out of the area, they won’t get this practical information off the MLS photos. If you like RP, by all means, go live there. The weather is really good, you are close to the coast, and have good freeway access.
In general, be aware of road noise on many properties, eveywhere in SD County. SD is quite hilly, and road noise travels for miles, going up hills. Noise travels just as a fire, uphill. That’s something you wouldn’t catch looking at MLS photos. When we looked at houses in 2000, we passed up at least half just because of the road noise. It’s too bad that the view lots are often accompanied by road noise.
Participantjg, the problem is figuring out which median and which rent price to use. I used average rent, which is $2066 today, and you used average rent of 3 bedroom and 4 bedroom residences, coming up with $2322 in rent. Are you assuming the median home is 3.5 bedrooms? I think either assumption could be made, although for my purposes, the average rent is better. I want to show the fundamentals that are supported by our wages, by the average rent, not what some higher-end renters are paying. I want to capture the average renter, the average wage earner.
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