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September 25, 2006 at 1:44 PM in reply to: The Descent: Real nationwide prices may fall 20 – 30% by next year #36345
powayseller
ParticipantOh, the paper made a mistake. He said prices will drop nationwide 20% – 30% over THREE years, not in one year.
ParticipantNODs stayed above 800 in every month from from 3/91 to 8/97. If we use NODs as a predictor, then we would stay out of real estate until 9/97, the month in which NODs went below 800 and stayed there (only one month, 3/98 was slightly above 800).
It looks like the median turns up in January 1996. However, two things we have to keep in mind about the median:
1) it lags by 12-18 months
2) on the way down, the median overstates the housing prices, and on the way up, it understates it I think.I think at the trough, sales pick up on the low-end, as investors get back into the market, and first time home buyers once again start the chain of sales. Once the starter homes are sold, those starter home sellers can go and buy the mid-priced home, and those sellers can get their high end homes. So I’ve been saying that the increased activity of lower end homes at the trough, would actually make the median go down, even though the price of each indiviual home would be rising.
OFHEO data, which tracks the price of the SAME house, indicates that prices dropped from 1989 Q2 to 1995 Q2, rose from 1995 Q3 until 2004 Q3, and fell from 2004 Q4 on. Except for some minor zig zagging in 1992 – 1995, the price trends are fairly clear. I had discarded OFHEO data, bec. it only tracks homes with conforming mortgages, but the data shows they are accurate on the pricing trends. Although only a small percentage of San Diego homes are tracked with OFHEO, the price movement of those homes is accurately captured.
ParticipantIf you’re going to be someone else, why not call yourself someone important, like RichToscano or NourielRoubini? I’d love to see Roubini on the cover of Vanity Fair!
Participantanxvariety, the World Cup shows the results for the bond futures trading he does, which is exactly the service he offers his clients. When you sign up for his service, you are given those exact same trades that he does for himself, and which are recorded by the Robbins group.
And who cares how many people go to the Robbins site?
I don’t know why I’m sticking up for Chris, since he never sticks up for me, but what the heck….
Chris, the post date when you start a thread is always December 31, 1969, but then it corrects after it’s posted. What bugs me the most is the slow load times. aaarrrrggghh
ParticipantCR makes an interesting case that since most of our consumption is foreign goods, any reduction in spending due to MEW will be felt by foreigners. This is why Roubini says when the US sneezes the rest of the world catches a cold.
However, let’s remember how we obtain the foreign goods. It takes ships, trucks, stores, personnel to deliver all those goods to us, so as imports decrease, so will profits of American retailers who sell us those imported goods Retail has been one of the biggest source of new jobs.
MEW has definitely been used to remodel homes, buy 2nd homes, and cars, so a reduction will hurt the construction and auto industry in this country.
Thus, a drop in MEW will hurt the US first, and then ripple out to the rest of the world, first to our suppliers (China, Germany), and then to their suppliers (Australia, Canada, other SE Asian countries). These countries will end up with fewer dollars to recycle. This is why I made that comment in CR’s comment section, that we will see less demand for US dollars, lowering bond and Treasury prices and raising their yields. (Of course, the drop in oil prices is going to lower imports in the next month, so the next drop we see will be due to falling oil prices not to the drop in imported goods.)
ParticipantI’m not allowed to be right. My husband says that’s gloating, LOL.
The article gives a list of lenders with the amount of defaulted loans, but doesn’t explain why Merrill Lynch, Morgan Stanley, and Deutsche Bank are buying these distressed lenders.
September 25, 2006 at 2:53 AM in reply to: Maisel Presley…why would anyone buy, buy, buy from you??!?!?! #36285ParticipantWhy is he going to hell, hell, hell?
ParticipantMichael Gallon, CPA, 619-440-4780.
ParticipantI get it now. The real estate market picked up in late 1992 for one year, but rising unemployment nipped that recovery in the bud, making the market go down in late 1993 to late 1995.
Despite the up and down of sales, median price did not start rising until 1996. Perhaps inventory would explain some of this; maybe sales were increasing in 1992, making it appear that there was a recovery, but rising unemployment was causing inventory to spike as well, making months inventory stay high. Perhaps using months inventory as a predictor would not have given a false signal that the market had turned. I am back to wondering about inventory as a predictor, since the data doesn’t seem to be available.
So my theory is that on the way down, inventory is not as important, as slowing sales indicate the market is turning, and the slower sales pace causes inventory to rise. As the cycle turns down, inventory rises not only due to a fall in sales, but also due to distress and REOs. When sales pick up, there is no correlation with price as long as REOs are still high.
Maybe none of this makes sense, since you already accounted for NODs.
ParticipantWhy do we need employment and income data? If unemployment is high and income is low, then wouldn’t sales also be low? So sales would be a proxy for employment and income, just as they are a proxy for inventory (as you explained to me before, thank you again).
The first chart shows a false recovery, something that asianautica was referring to before. What exactly happened to make sales increase for a few years, just to turn back down? Do we need to consider tax policies, inflation?
I mentioned in a post yesterday or Friday, that my friend bought a killer house in Poway in late 1995 for half the price/sq ft of her neighbor w/ the idential lot size and square footage just 18 months prior. So the market was still weak in late 1995.
Perhaps some old newspaper articles, or the memory of an appraise or realtor could be called upon, to explain the 3 year surge in sales.
I’m also wondering if anybody who bought in the early 90’s would have lost money if they sold in the mid-90’s.
Participant4plexowner, could you elaborate on your knowledge of trashy construction.
ParticipantGood advice from carlislematthew. Get an accountant to help you out. I can give you the name of a guy in San Diego, but perhaps you prefer meeting with someone face to face in your area.
ParticipantRent in San Diego is very high, but as no_such_reality pointed out, there is a basic cost for renting even the smallest studio, and the incremental cost for something larger or nicer is not too much. So you can pay $1500 for a crappy studio, or $2000 for a nice condo on the beach. And if you are single, you can even upgrade to the $3000 rental just by getting a roommate.
ParticipantWay to go, Chris, and hopefully your trading system will continue working for you. I have definitely not beat that return, as I have been in CDs since early this year. Damn, I missed the Fed-is-done rally this month. Who cares that I slept well, I missed the market going to a peak. Who would have thought the bulls can’t tell a recession is coming? Anyway, congrats Chris on having a great year!
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