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August 28, 2006 at 8:14 PM in reply to: Biggest Drops in 2007 and 2008; housing will fall 50% nominal terms #33806August 28, 2006 at 8:10 PM in reply to: Biggest Drops in 2007 and 2008; housing will fall 50% nominal terms #33805
powayseller
Participantsdrealtor said, “All the points you make relate to the sellers distress rather than the buyer’s willingness to buy. I am looking at things from the buyer’s side which your comments ignored.” WRONG, FONG! Read my post – the whole thing was about a buyer; they won’t buy depreciating asset.
biggest drops 2007 – 2008 as ARMs reset, inventory doubles, buyer fear sets in; all those looky loos at Open House will be sitting at home next year; sales will keep dropping;; fear in reverse; tighter credit; months inventory puts more downward pressure, as does REOs;
how can you get a feeling about the future? one cannot “feel the future”, it’s Delusional Dreams.
ParticipantWhy doesn’t the buyer just lower his price then? No chance of any appraisal later on coming in higher.
ParticipantSteve, months inventory, you’ve got to use the last month of sales, not the average of past 6 months. market has shifted too much! How many pendings since 7/1, use that to get months inventory. inventory/avg monthly pendings since 7/1 – months inventory.
Steve, you should know better than to use March or April sales to compute today’s months’ inventory! Not in a falling market, where sales are dropping by 10 pts each qrtr, 10%, 20%, and now 30% for the last quarter…
For more accurate months inventory, discount the many escrows that fall out of escrow- wow!!! only 4 closed sales but 18 pending; did the market pick up that much, to go from 4 to 18 sales, or are most of the pendings falling out of escrow, so that only 6 of these 18 escrows will actually close? Can you find out?
PD is on the right track. Give her more data, and let her compute away. T
33 in escrow, but all under $3 mil, so the only homes selling in Coronado right now are the under $3 mil homes.
If you can do the statistics/calc right, months inventory in C. is probably much worse than 18 months. And remember, nothing over $3 mil is even selling
ParticipantSD Realtor, I love exchange of ideas and debates. I’m always impressed with people who can do so without losing their cool. In the politics thread, some people really lost their cool, and it happens in housing too. You however know how to exchange ideas. I like that so much! Heck, if I’m wrong, I’ll admit it. I love kicking around ideas to see if someone can show a flaw in it.
I have provided my research for the 50% drop in the past. One of my friends encouraged me to make another post about the 50% drop, to counter some of the bullish comments we’ve had recently.
If you have data to show 35%, then let’s hear it.
Rich has a very laid back style. I am much more outspoken than he is. Perhaps some people prefer his style, while some people will prefer mine, and most will like us both. When you are laid back, you don’t ruffle any feathers. I like ruffling feathers, creating excitement, being contrarian. It balances all the BS we’ve been hearing.
I back up my claims with data. I’ve presented the data for a 50% drop before, which consists of reversion to the mean, and a second method which takes median price/per capita income back to a historical ratio of 7.
My new job will involve forecasting. While Rich does a great job laying out the data and problems facing us, he doesn’t do much forecasting. And the forecasts provided by Alan Gin, SANDAG, and Thornberg, are woefully incorrect. Is the forecast a sore spot for you sduuuude?
Participantquick answer – read Zeal, Chris Johnston; parabolic move and above 200dma, will correct further,wait and buy on dip
ParticipantParticipantan – lots of consumer companies did well during the 2000-01 recesion, bec. it was NOT a consumer recession, but a capital spending recession.
2000-2001 was a capital spending led recession, and the consumer kept on spending, so none of the consumer stocks went down, they just kept going up. That won’t happen this time. I bet JJ is overvalued, so they will go down with everyone else.
In 2000-2001, all Asian exporter stocks went down, except China, bec. it was selling mainly textiles and people were buying clothes, but not business goods. Commodity went down too. Check out Richard Duncan’s The Dollar Crisis.
an – you’re a smart guy, so I love debating with you. But here’s my problem – I am ready to start my own website, so I need to take a break from piggington to work on my own stuff.
Whole Foods is down now, I think. The others you mention – any have PEs below 12?
August 28, 2006 at 1:51 PM in reply to: “A History of Home Values” graph by Robert J. Schiller #33741Participantasianautica – I wouldn’t pick a bottom off a national chart. I would use months inventory for my city and zip code.
pencilneck – John Talbott wrote that the housing boom started in 1997, when the tax laws changed to allow tax free capital gain from housing sale.
August 28, 2006 at 1:37 PM in reply to: “A History of Home Values” graph by Robert J. Schiller #33738Participantan- your dead cat bounce is simply a merging of opposing trends in various areas of the country. Real estate does not move up, down, like that. It picks up steam slowly, accelerates, slows down, turns. Its direction goes for many years. It is highly illiquid, slow moving. It doesn’t trade like stocks. I completely disagree with you about a dead cat bounce. Since this is a nationnal chart, you would obviously not use it to time the market.
ParticipantThe problem is that China cannot create a consumer. Did you read in the story that the shopping malls are empty, as the people are either too poor, or too much savers. The wages are not high enough for them consume their own goods. For this reason, they need to revalue their currency. As long as they remain export dependent, they will have a recession right along with us. Read Roubini = he explains why the entire world will go into a bear market when the US goes into a recession.
ParticipantI would stay away from anything real estate related…
ParticipantIn the 2000-2001 recession, the S&P 500 lost the following in each of quarter of 2001: -23.2%, -39.4%, -35.4%, -24.2%.
In the 1969 – 1970 downturn, the quarterly losses from Q4 1969 – Q4 1970 were: -7.5%, -10.3%, -7.5%, -11.7%, -14.5%. Not as bad that time.
I don’t have the data for the other recessions.
In any case, you two have to ask yourselves this: which stocks went up and earned more than CDs, without taking on any more risk, AT THE SAME TIME that the quarterly loss in the S&P500 was anywhere from 7.5 – 39.4%. That is a tall order. If you can pull that off, you can earn millions on Wall Street. Document your portfolio, and then show it to the traders when this is all over, so you can build your legacy. The odds are certainly against you.
I researched this spring which stocks to buy during a recession. The problem is everything is so darn overvalued right now. Storage places and pawn shops are two of the best recession proof industries, but at 25 x earnings, no way am I interested.
If we had a 35% decline in 2001, which was a very mild recession (and the 1969-70 was just a downturn not a recession), a 50% drop is very likely.
Now the ball is in your court to show how any stock can rise more than the risk-free yield on CDs, at a time when housing starts are falling over 25% year over year, which has led to a recession every time except when we were engaged in an expensive war. In the history of our markets, has this ever happened? Not to my knowledge.
What sector is going up? Where can you earn more than risk-free 5.5%? Anywhere? I have been posting about this since February at least, and I nobody has given any answers, other than shorting which I won’t do. If someone has some ideas, I am all ears…
Schahrzad Berkland
ParticipantMy investment advisor, who is rated #1 by Timers Digest, advises 100% cash. Stocks are going down, gold is overpriced, and real estate is going way down.
100% US dollars is risky, so I am spreading it out among various currencies.
I’m curious, why do you think being 100% cash is risky?
I may lose some money to inflation, but only 1-2%. With any of those other investments, I could lose 30-50% easily. I am staying far away from that list. Nothing personal, but that is the list I have been describing on this forum as an avoidance list: sell your home, sell your stocks, and buy 5% gold when the price comes down.
ParticipantThanks for that chart, I was also wondering why they started in 1996.
But the fact is: every housing downturn since WWII has caused a recesion. Leamer’s work. Check it out.
Yes, you can make money in the market when it goes sideways, but only if you are very lucky. How many of us bought gold in 2000? I was smart enough to load up on index funds in 1999, and did very well. But I didn’t think about gold.
Chris J, a trader, can make money on small moves in the market, catching the rallies which occur even in a bear market. I don’t know how to do that. So I stay away from bear markets.
asianautica, How will you make money in the stock market, when everything is falling? Commodities are a bubble too. Any risk you take on could be richly rewarded, or you could lose most, even all.
Recession will lower inflation and oil prices, so oil company profits will go down. Higher costs to extract from oil shale will eat into profits too. Zeal is what I follow for commodities, as it is their forte and I know little about it.
How many people clearly said in 1999, “This tech bubble won’t last, so I’m loading up on gold, oil, and real estate”. I doubt too many. iTulip’s guy is the only one I know. Goldbugs have been goldbugs for years, so it wasn’t a clear decision made to switch from stocks to gold. The point is: the next hot thing is not obvious. In a recession, all drops: oil, real estate, telecom, stocks. It all drops. Gold rises with inflation, so I don’t expect gold to rise just because we are in a recession.
Well, if you can figure out how to make money in a falling stock market, I will put you on my list of people to call for financial advice when this is all over.
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