[powayseller]

Good one; I didn’t have the guts to bring it up.

Another one is principal. The amount borrowed is principal, not principle.

[powayseller]

I still plan to buy gold, but the volatility makes me question my sanity. How do you think the government is manipulating gold? You think they are releasing more gold from the vaults to bring down the price?

Since gold is linked to inflation, and high liquidity/M3 is causing more inflation, gold should keep rising.

[powayseller]

Realtor Jim Klinge predicts that superior properties will fall only 10%, while the inferior properties fall 40-50%, for a median fall of 33%. See his write-up here. Good write-up, and I had a great rebuttal, based on the number of resetting option ARMs in San Diego (100,000 – 300,000), and an estimated MLS listing of 50,000 – 80,000. This is based on the estimate that half of option ARM holders will default. John Dugan, Comptroller of the OCC, is concerned about I/O loans, but *very* concerned about the most risky loan of all: Option ARMs. He explained that a resetting Option ARM payment increases 50%; if the interest rate rises from 6% to 8% on the loan, then the payment *doubles*! How many people can handle a doubling of their mortgage? My estimate is that at least half of option ARM borrowers will go under. My post was so bearish, he completely erased my post. Even a bearish realtor can only take so much bear; the thought of superior properties falling 35-50% is scary to a lot of people, so they don’t even want to hear it. However, it is where I believe we are headed, simply because of the crazy loans that people took.

The only way that the superior neighborhoods would be safe from 35-50% drops, is if nobody over there took out a resetting loan, if they all keep their jobs, i.e. they can all ride out this bust cycle. I guess it’s possible. But not realistic.

We’ve had Mr. Lexus Dealer in DelMar pull out equity just as much as Mr. JoeSixPack in south Poway. NODs and forclosures are all over the nice areas of Carlsbad too, and we haven’t even got in to the bad years yet. The next 2 years are the worst year in the housing bust cycles. The first 2 years are the easiest, as most sellers can easily sell.

[powayseller]

Fallback plan: Raise taxes.

[powayseller]

Wow, I am impressed. You’ve just proven that real estate cycles can be predicted. Good stuff!

Let’s remember that median prices lag by 2 years, so in reality your model is only lagging by 1 year on the way up. This would be one more indicator that we can use to confirm the top or trough.

I recall prior posts where we discussed whether real estate cycles can be predicted, and some people insisted that real estate troughs cannot be predicted, since there would be false bounces/rallies.

[powayseller]

He completely missed the tech bubble. Tech stocks and housing are such obvious bubbles, that anybody who is not recognizing either one is not worty of my time. Don’t listen to Cramer. The homebuilers, and housing prices, have a long way to fall. Nothing goes up or down in a straight line, so the temporary rallies do not indicate a reversal.

[powayseller]

Another great project by jg!

Inflation is fought by lowering the money supply. Raising interest rates has a weaker effect on squashing inflation that lowering the money supply.

If the Fed truly wanted to reduce inflation, they would reduce the money supply.

All this “we are raising interest rates to reduce inflation expectations” is just talk: they are using a weak method to reduce inflation, because they hope they can control it by changing the *expectation* of inflation. That is my theory at least. I think they hope to pull the wool over peoples’ eyes in this way.

So if they are serious, they should also require higher reserve lending.

They are clowns. Fleck is right.

[powayseller]

Yes, gold is correlated with inflation, we’ve discussed this here before. Gold mining stocks leverage the gold price. That’s why Bill Fleckenstein is long Newmont Mining. But I don’t recall anyone ever posting the charts here to prove it. Way to go, jg!

[powayseller]

Here’s another priceless quote from that article, from the realtor

” ironically buyers were afraid not to jump into the market as they saw prices going up $10,000 to $20,000 each month. Now, buyers are waiting for prices to bottom out.”

When prices were rising, demand was stronger. Now that prices are falling, demand is weaker.

This just proves what I’ve been saying, that lower prices actually reduce demand.

Some on this forum say they will buy when prices fall. Maybe you will, maybe you won’t. Certainly in the marketplace we are seeing that the public at large will NOT buy when prices fall.

We are back to 2004 prices, but we are not back to 2004 demand. We are not even back to 2003 demand. Where the heck are we, demand-wise?

[powayseller]

jg, these are great charts! You could remove the seasonal volatility in sales by plotting “percent change in sales year over year” instead of the absolute number. What would that look like?

Since the median price is a 1-2 year lagging indicator, it makes sense that your data would trail the median price by 2 years. Does the model show the early 90’s downturn, the late 90’s upturn, and August 2004 downturn?

[powayseller]

duplicate

[powayseller]

bubba99, my prediction is with you on the short term. However, as unemployment increases next year and people continue moving out of San Diego, rental prices will decrease a little bit. Housing prices will fall to meet 8 – 10x annual rents.

[powayseller]

So the “ask a professional realtor” model seems to be the most time sensitive. sdrealtor has been saying all along that the market turned in spring/summer 04. I didn’t believe him at first, and thought it was in August 05 (per piggington data), which is the time Campbell gave his sell signal. So sdrealtor was one year ahead of Campbell’s model and the piggington data.

A quantifiable model, while lagging one year to the “ask the realtor” model, would remove the personal factor. But which model would you trust?

Remember that Campbell told people to sell in 12/01. If you had listened, you could very well have been priced out 13 months later when his model changed its mind and told you to get back in.

Following Campbell’s model would have resulted in you missing the biggest real estate boom in California history. If you sold in 12/01, or just didn’t buy because of the Sell signal, you could very well have been priced out when he issued the Buy signal in 1/03.

I am working on getting data for a model, but it may not work either. I tried some things with a national model, and it was a dud. So in the meantime, the “ask the realtor” model is the most reliable. sdrealtor will know when the market turns long before any quantifiable model will tell us. So will a pickup in sales, a decrease in foreclosures, less seller incentives.

Now that the internet makes data so easily accessible, we don’t have to rely on these models as much. Back in 1990, how would anybody know the market turned without a model of some sort? There was no blog where you could ask a realtor.

[powayseller]

Bugs, is it fair to assume that each area will revert to its own mean, i.e. the price it would be today if it had followed the rate of inflation. So National City went up a greater percentage than La Jolla, so it will fall a greater percentage as well. Also, La Jolla will maintain its premium over National City. However, the percentage increase this time was about double or triple (?) of the last bubble, so the percentage decline will be double or triple of the last bubble as well. If London prices could go down 60%, so can San Diego’s.

[powayseller]

Not any realtor, I specifically mentioned SD Realtor and sdrealtor. I should include Bugs to the list.

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