[powayseller]

I have not seen an economist who did so.

In a personal e-mail to John Talbott, he recommended TIPS. Because he believes the government CPI numbers. Here is his defense of the CPI: “I don’t think CPI is perfect, but it is hard to believe it is far off or else all bond investors are being fooled by it. Remember, they are lending money at 5% which doesn’t get much of a real return if you are right about inflation levels. ” Needless to say, I ignored this advice.

Since Talbott is wrong about CPI, his investment advice is useless to me.

If I met an economist whom I trust on all points, then I would consider his advice. Roubini is the only economist who fits the bill for me. He is the first economist who sees the big picture, and who forecasts everything that I believe PLUS more. So I look up to him, but not to Thornberg.

Even the guys in the Bubble Bloggers, like Tim Iacono, are bullish on commodities and don’t want to acknowledge that commodities will go down in the global recession. All you have to do is look at the commodities prices in the 2000-01 recession, and see the big price drops. Likewise, Jim Rogers is just a salesman for his commodities index fund, so I wouldn’t implicitly trust him either. In my opinion, he is wrong about the commodity bull market. How can you have a commodity bull market in a global recession? Maybe after the recession? Anyone buying commodities ought to wait until the bottom of the pricing, at the end of the recession. Perhaps that is a good time to get in on commodities, before the next boom.

[powayseller]

Rich’s updated chart is on this link, using numbers instead of percents.

The ratio is between 7 and 9.5. So the median home price in San Diego varies between 7x per capita income – 9.5x per capita income. Today, we are at 14.5.

Family size is 2.2, so family income would be around $51K I think.

Median home prices vary by neighborhood. One thing that I don’t know is whether this ratio varies by neighborhood. Let’s compare Lakeside to DelMar. Does Lakeside’s lower income correlate with lower median home prices in that zip code, so that the ratio is still 14.5? Or do homeowners in that zip code represent the lowest 25% of wage earners, who stretched to get into the median priced home, and the ratio is even higher?

[powayseller]

Yesterday I told my son’s orthodontist we’re heading into a recession, and he was kind of taken aback by that. I don’t think that the R word is on anyone’s radar screen. It would be interesting to find out. Instead of a leading question, we could ask, “What’s the likelihood of a recession vs. an economic boom in the next few years”?

[powayseller]

http://getforeclosures.blogspot.com/

“The largest monthly increases in new foreclosure rates among states with more than 300 new foreclosures were recorded in Alabama (up 21.3 percent); Colorado (up 12.9 percent); Illinois (up 11.6 percent); Michigan (up 38 percent); Minnesota (up 31.1 percent); Missouri (up 48.2 percent); and Ohio (up 14.3 percent).”

“‘New residential foreclosures across the nation are up this year, driven in large part by increases in adjustable-rate mortgages,’ said Brad Geisen, CEO.”

Interesting that the highest foreclosure rate increases are in the Midwest, and not in the bubble cities. Again proving that this housing bust is nationwide.

[powayseller]

VCJIM, this is your project. I am following your lead. I will ask the question: “Do you think housing is a good investment over the next year? Over 5 years?”, and tally my results, and post any comments I get. Whoever has these 10 tallies first, can start a thread for this topic. We should be able to get a few hundred people this way.

I don’t know much about statistics, but I know for accuracy we should poll a variety of neighborhoods (check, we live all over San Diego) and income/education/ethnic levels.

Another question: when you guys get gas, check how many people filled up their tank. If they don’t fill up, they are either hoping gas will be cheaper next time, or they can’t afford it. I strike up conversations, and I get the “I can’t afford it” story a few times. I just say to the other people, “Can you believe the price of gas? Do you think people can afford to fill up?” And people start talking…

[powayseller]

Only the purchase mortgage in non-recourse. If you refinance, you are screwed. So HELOCs and refis are not protected under this law. Also, you will capital gains taxes on the unpaid balance.

Worst of all, what can you do when you’re penniless and evicted from your home?

To rent our house, we needed $4500 cash for deposit + 1st months rent, plus $1200 or so for movers (credit card was okay). How likely is someone, freshly evicted or in foreclosure, to have $4500 laying around, and some credit for moving expenses? If they had that much money, wouldn’t they have used it for the mortgage? I think people will spend their retirement money before they let their house go back to the bank.

What are the options for people in foreclosure? They’ll probably leave San Diego to rent in a cheaper area. Moving and renting costs money. Where from? Most likely scenarious is that these folks will move back home with mom and dad, or siblings, or other family. With no money and shot credit, what else could you do?

[powayseller]

Seasonal trends show sales are way down in the fall, but you have fewer looky-loos, i.e. more serious buyers. I think that by fall, more sellers who were just testing the market will retreat, and the remaining listings will be weighted toward motivated sellers.

I think the pace of price declines will increase after August. Buyers know that the remaining listings are motivated sellers, and will bargain for good deals. More ARM adjustments and financial shocks from higher interest on revolving credit will increase the pool of motivated sellers. Sellers know there are fewer buyers, and start dropping their price. Until summer ends, sellers still have hopes of snatching a summer buyer.

I would think that anyone wanting to sell would rush to get on the MLS, at a competitive price. Time is against the seller.

[powayseller]

Ok, I’m “in”. Can we start a new thread though for a tally? Can we also ask about “the next year”?

[powayseller]

Thanks for the Toll conference call link. I listened to the entire call, and it was my first time listening to a homebuilder call. Robert Toll was open and forthcoming, but he did give our clever Ivy a little spin, which she did not allow.
Let me paraphrase

Toll: Growing pentup demand from buyers on the sidelines, and rising household formations. When inventory reduces and buyer sentiment changes and demand again improves, the current building slowdown will result in a shortage of homes.

Feldman: Haven’t we “pulled forward” demand in 04 and 05? Where is this pent-up demand?

Toll: [changing topics] interest rates are still low. The 30 year rates went up from 5.5% in 04 to 6.126% today, so that is a negligible increase.

Feldman: But you are looking at only half the picture. The mortgage payment consists of interest rates AND the mortgage amount. Prices have really gone up, and people are spending 40% of gross income on mortgages…..I am very disappointed that builders have not come forward to talk about demand. It’s not just about supply. It’s concerning that builders are acting like this is a short-term phenomenon.

Toll: Yes, affordability is tougher.

Feldman: Asked about impairment risk

Toll: [refused to speculate about future impairment risk]

Another analyst asked about demand in each market. Toll gave a grade to each market, mainly C, D, and F.

What has helped Toll is their policy of requiring 7% non-refundable deposits on the homes prior to building them. This approach makes buyers less likely to walk away from the homes. Yet, their cancellation rate is a problem too.

A big surprise is that most of these analysts acted morel ike reporters than accountants. I expected more hard number questions about the financial statements, backlogs, deposits, land, DOM of their homes,e etc. Perhaps this is already covered in their written statements.

[powayseller]

I agree with you, VCJIM. Even a story meant to show both sides should have some tough questions for each side. What is the IQ of the typical reporter anyway?

[powayseller]

It says, “while he was gone, someone had filled his old job.”, and that he took 2 other jobs which combined paid less? So PerryChase, he did lose his job. Anyway, I am against the massive spending on military and our government’s offensive use of military. I was just feeling bad for this guy. As barnaby said, many join the military because they have few good options in life, so this guy may not have been the sharpest card in the deck, and was uninformed about his rights.

[powayseller]

While on the subject of potential buyers, I am reminded of comments on this forum about people with boatloads of cash sitting around. According to this WSJ article, “the top 1% held 33.4% of the nation’s net worth in 2004… the wealthiest percent owned 70% of bonds, 51% of stocks and 62.3% of business assets. Housing Wealth Effect Shifts Into Reverse

So these people with boatloads of cash probably represent 1% of the population. For all intents and purposes, they are meaningless in terms of affecting the housing market. The 80% of people who took out exotic loans to get into a house: that group will drive this market.

[powayseller]

A recent KPBS discussion on this issue, mentioned that joint military/civilian airports exist in some other cities. I assume it is viable, because the Airport Commission made a short list of viable sites. The only obstacle to the Miramar site is the government’s insistence that they don’t want to be bothered with it.

But why does San Diego need a bigger airport? With all these people moving out and the fiscal problems, plans for a bigger airport and bigger port should be shelved for 20-30 years.

[powayseller]

Chris, do you think this would still be a good time to get some puts on homelenders or builders? It’s obvious they are going down, and if a short squeeze is not a concern, then I don’t see a reason to stay out of it. These people posting are all making great money, while I’m at a measly 5% in cash. But then I wonder, if it’s such an obvious purchase, why doesn’t Yamamoto Forecast recommend it? He’s got us in 100% cash. Why haven’t you recommended it – is it because you stay focused more on the bonds?

[powayseller]

bmarum, this is a solid concern. I discussed my landlord’s intentions before I signed my lease. He is a professional real estate investor since he started buying foreclosures in San Diego in the early 1980’s and has deals in various US cities and in Mexico. He seems very savvy, but could be overleveraged; how can one ever really know another person’s finances? So we put a clause in our 2 year lease that says if he is foreclosed, he reimburses us for some costs.

Before I signed my 2 year lease, I consulted with tenant attorney Steven Kellman. He explained if this house is sold, the new owner must honor the lease. If this house is foreclosed, my fate hangs on the layering of lease vs. loan: the most recent wins. If the lease was signed, then he refinanced, the lease is in effect despite a foreclosure. If the lease was signed after his last refinance, a foreclosure means I am booted too.

But Mr. Kellman told me if we need to move for any reason to break our lease, or a foreclosure or anything happens, we should stop by to see him, and he can help us out. This guy is as passionate about tenant rights as I am about the housing bubble.

Any renters out there, jot down this link for the Tenant Legal Center. It is a low cost legal service, so expect to be treated like just another of their low income clients, but once you get in to see Mr. Kellman, he gives you all the time you need. The guy knows tenant rights, is energized about it, and really nice. And he doesn’t even know I keep recommending him, unless for some reason he found piggington.

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