[powayseller]

We pound on Lereah because he is misrepresenting the facts, i.e. he’s definitely lying because he has something to gain. No matter how much I would debate him, I’m certain he would not change his tune, because he is married to his agenda. So is Alan Gin, and that’s why I called Alan Gin a liar, and I signed my name to that. There is no use in debating with them, as their main goal is protecting their agenda, not learning or spreading the truth.

I don’t think anyone on this forum intends to mislead. In a forum, disagreements should be handled as they are in a debate, where you win not by shouting louder, but by arguing better. Logic trumps.

We don’t have agendas here. We’re willing to change our minds if a better argument is made. For example, when I first came here, I was sort of anti-realtor, but now I’m more pro-realtor, I was anti-gold and now am pro-gold. I don’t have an agenda to protect, just a sincere desire to learn with you all. I compliment people who are better than I. I compliment Chris on his trading, jg on his models, Rich on his early bubble call, lindismith for being an entrepreneur, etc. I started this thread mainly because some people like picking on me just because they disagree, and I was hoping this forum wouldn’t degenerate like so many others. Let’s keep it positive, folks.

[powayseller]

I’m a novice with shorting, so can someone tell me if I did the right thing by not shorting or getting put options on homebuilders. But with put options, you still have a chance of making money if the stock goes down before the option expires, right?

[powayseller]

jg, good stuff. When was the sell signal in this cycle?

FormerSanDiegan, you’ve corroborated that prices move up when fundamentals are back in place: when home price = 8-10x income. It would be interesting to make a model of that, but the home rent data is probably not available.

[powayseller]

It’s a very valid comment.

The market slowed in spring 04, but I was told SFH prices peaked in summer 05. I sold in December 05, so I took a 5% cut from summer 05 prices. Not a single house in my neighborhood has sold since then. When exactly was the peak? Spring 04, the time to have sold your condo, or summer 05, the time to have sold your SFH (ripple effect of real estate takes about one year).

Today, we are 18 months past the peak. Selling now gives you a loss of 10 – 20%, but if you sold at the peak, you could have $50K – $100K more. If you own many properties, then it’s to your advantage even more, to time it right.

So you make more money if you sell while days on market is low and demand is still high. Campbell and others, like jg and I, would like to know when is the peak and trough so we can optimize our entry points.

If you miss the perfect entry point, that is okay as you pointed out, because real estate is a slow moving ship. You can take 1 – 2 quarters to make sure the cycle has turned, and still have a pretty good entry point. But even then, you’re still stuck with having to define what makes a good entry point: how do you know the cycle has turned? Will you wait 18 months until the main stream media covers it?

[powayseller]

Many people have successfully sold and bought homes without a broker. I tried selling FSBO twice, and had no sale for many months, until finally I listed with an agent. I was not on the MLS while I was FSBO, as these sales were in the late 1990’s. I’m kind of biased on behalf of realtors since I have friends who are realtors. I’ve had good luck with discount brokers, and don’t see any need to pay each agent 3%. 1% for each side should be sufficient. Any more than that, and we’re not paying directly for our service, but for their marketing time in wooing clients they did not get.

[powayseller]

Calling someone a consistently bad analyst is a personal statement. I agree with justme, that we show someone’s analysis is bad by showing the weakness in their arguments and then everyone can see it was a bad analysis.

Professionals debate the topic, not the person. Hugo Chavez’s inability to stick to that dictum made him look like a “comic strip cartoon”. Instead of laying out why he disagrees with our policies, he started name calling. That made him look like a kid with a tantrum, and it was hard for anybody at the U.N. to take him seriously after that. (Any other comments about Chavez, please start a new thread; let’s save this one for “staying on topic”).

[powayseller]

jg, using this model, what are the buy/sell dates that it gives? Or am I misunderstanding what it does? According to the model, when would it have signaled that a person should be selling their home? 2004, 2005, or 2006? What month? When should a person have bough in the 90’s? 1995? 1996?

[powayseller]

“evidence of myopia”, “misleading spin”, very colorful language. But what does that accomplish? Isn’t it better to present your forecast, your interpretation? Maybe not as entertaining, but certainly more constructive.

woodrow,daniel,NCJ, how many threads have you started, vs. how many do you like to tear apart? It is in giving that we receive, it is in creating that we accomplish. This is an invitation for all 3 of you to create your own analysis.

[powayseller]

When does this model show the inflection point? Does it provide a number or a buy/sell signal? I understand the inputs, but not how to use it.

[powayseller]

Cagan did not say “chance of default”, but “risk of default”. He EXPECTS them to default. I did not say “1 mil loans WILL default”, but that Cagan expects it.

That is exactly what I meant: the expectations for defaults are rising. No longer are we hearing that everything is okay. The analysts are waking up to the risks in these loans.

To the trio: please put personal comments in the off-topic forum.

[powayseller]

Sorry, I didn’t explain it right. I meant that dropping oil prices will lower the number of dollars coming in.

When oiil prices rose, Saudi and the other oil countries ended up with more dollars since oil is sold in dollars. So they needed to buy a lot more Treasuries and mortgage backed securities. The Federal Flow of Funds report shows more dollars flowing into the US during the period when oil prices were higher. Now that oil prices are falling again, there will be fewer dollars heading our way, lowering bond prices again.

[powayseller]

NCJ, what? I didn’t make any forecast, so why are you asking ME? Ask Cagan!

[powayseller]

Motion him to come real close, make a frightened look, and then whisper in his ear, “Haven’t you heard the IMF warning about the global recession from the housing crash? I’m waiting for MLS to reach 60,000 so I can pick up one of the 20,000 REOs. Come back when we get there..”

[powayseller]

I prefer using rate of change over absolute value. When I chart % change quarter over quarter, I can clearly see the trend reversed in 04. You are much better at statistics than I am, so perhaps you can explain why the derivative is a better predictor than the absolute value. Actually, I see the second derivative as important: the point where the slope is zero. It is usually at those points, that indicate a reversal in the cycle. If the data point reverses only a teeny bit, or for only one or two times, then it turns out to be noise. That is my conclusion from looking at the second derivative, visually.

Likewise, building permits clearly peaked 6 months earlier if you use % change. I think looking at the rate of change more clearly indicates a reversal in the trend. So using this method, I get a sell signal as I noted above when the building permits and sales peak at the top or bottom, and change direction.

Maybe there is nothing to modify. I’m just not clear when your model generates a buy or sell signal.

[powayseller]

jg, the OFHEO index peaked in 2004 Q3, so I wonder if we used the same data series. Also, OFHEO data is not lagging, so I don’t understand why these two series are so closely correlated. I expected median to lag OFHEO by 1 – 1.5 years.

Another factor we haven’t considered is population change. In the early to mid-90’s, as unemployment rose due to aerospace and defense cutbacks, many people left San Diego.

Building permits indicate builder optimism; builders respond to the turning market faster on the upturn, since they can just ramp up production. On the downturn, they have to finish out their phases, which can take up to a year? Building permits increased in October 96, marking the begining of builder optimism.

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