[SDbear]

Have you seen how Indian rupee has fared against dollar? $ has lost nearly 20% against the indian currency within around a year. Gold has increased close to 15% during the same period. So demand for gold from the jewellery industry (majority of it coming from the sub-continent) from a price point of view has actually increased from mid 2006.
Much of the Rupee appreciation against $ happened during mid-late 2006. Although $ depreciated against other currencies in 2005-2006. That is the reason why gold did’nt breach the 2005 high of 720 in 2006. We have to look at the loss in monetory value of fiat currency along with the demand to understand its price moves. Currently investment demand (due to people buying gold to hedge against $) is low compared to jewelry demand (around 70% last time I checked). But this might change very soon as Rich noted. This will need central banks, individuals start putting portions of their assets in gold. Last I checked the european banks are still selling their gold reserves. But if $ keeps depreciating against rupee I think the jewellery industry can easily prop up the prices until people realise and push up the investment demand

[SDbear]

sdrealtor,
I was just wondering, if the lender forecloses and then puts it on market for ~100K more, why would’nt the seller do the same. Also according to Ramsey’s commentary couple of weeks ago foreclosure costs for the lender is around 5-10% (I don’t remember exactly, but the agent cost itself would be atleast 3%. So why would the lender go through the trouble of foreclosing. Is’nt it in their interest to accept a short sale unless the short sale is > say 15% of what they can sell for.
I’m guessing the best scenario for the lender is for the owner to keep making the payments. So my bet is that they would try to keep the owner solvent and squeeze all interest out of them over the years.

[SDbear]

SD Realtor,
I meant the other sdrealtor. Sorry for the confusion and thanks for all ur insider inputs.

[SDbear]

Nice model. An improvement would be to charge per offer submitted. Similar to retailing the home walk-throughs I as a customer wud like it if someone retails the paper work. If I’m buying a home for say 600k and I submit an offer to a single home that I found and negotiated the price for, I don’t think the broker deserves 6k to 12k (even with redfin model) for the work he does.
Is there anyone who offers such a service?

[SDbear]

How is that different from having a buyer’s agent. The buyer’s agent gets 3% of the sale price and the seller pays him/her. So what is the financial incentive for him/her to work for the buyer’s interest. If I were a buyer’s agent it wud be in my interest to get the buyer to agree for the highest price possible.
Then it would be more like represent the seller for 6% and the buyer represents himself. Feel free to take the pants down and bend over for 2 people.

[SDbear]

“I believe most of these predictions are based on sour grapes (regretting missing the opportunity to buy earlier) or just general resentment of people who became wealthy in the boom market”

Most active people in this forum (who beleive that housing will decline 30-50%) are actually people who sold at the peak and are sitting pretty on a lot of cash. A lot of them are actually pretty wealthy. So I don’t see ur point here.

[SDbear]

Interesting! I had thought about it too. If you correlate QCOM stock price and housing between 2000 and 2006 you’ll get some answer. I don’t think that high tech jobs were the sole reason, but sure think it was a contributor. I know some people who sold a bunch of QCOM options to put down around 30% for ~600k homes. I think these people bid up the prices and others started relying on exotic mortgages to compete with them, which sort of fed the frency.

[SDbear]

“The problem is not the amount of additional credit or interest paid, but the number of people affected.”

PS,
This in itself shows that U can’t use this argument against Credit Suisse’s statement. The statement says that the arm increase amount is small compared to net disposable income and hence would keep money flowing in the economy. Which is true. Whether this affects n% of people is not their concern.
Consumer spending demographics may change due to this but the economy as a whole might not be affected much. I’ve seen quite a few people who knew this long back and moved their investments in favour of this eventuality. It is up to you whether U see this and take advantage in your investments or be completely -ve about it.

[SDbear]

“next year, when $1.5 trillion of ARMs adjust?”

PS,
Is that the ARM payment increase or the loan amount? If it is loan amount total arm payment increase might be around $50 bil, probably not as significantly more than $20 bil that credit suisse is quoting for this year. I would think $50 bil out of $9 tril disposable income is small.
If it is arm payment increase, I would agree with you.

[SDbear]

Awesome analysis. What was the correlation at the bottom? How much lag did we see between sales and prices?
I hope it is easy for you extend your plot.
Thanks in advance.

[SDbear]

“I really think this banking collapse and govt’ bailout will require so much printing of money, that the dollar will be seriously devalued.”

In that case all hard assets including Real estate and stocks will appreciate in dollar value.
Gold is a commodity and usually 60% of world buying in tonnage is bought by jewellers in India. But with the high prices last quater buying by this section has decreased by over 60% YOY. In dollar terms this might be around 30%. In addition to that some European central banks are expected to dump a significant portion of their annual sellable gold into the market before the sept 30 deadline. Gold market actually looks bleak for the next few weeks.
You should look at the gold market objectively like we are looking at the RE market. I’ll put some nos. off the cuff here, but it would be more or less close to the actual nos. Around 5% of annual gold (including mine production, scrap metal conversions and the central bank liquidations) is consumed for industrial applications, 20% for investments, 60% for the jewellery market in India. This no. used to be similar for both tonnage and dollar values until last year. Jewellery consumption in India is actually an indirect investment which will create huge divergence between tonnage and dollar value demand. So there will be some significant upward resistance in tonnage demand as the prices increase. Only 5% of gold will not have a direct effect on demand due to prices (although some indirect effect).
Gold is way more liquid than RE, so can go down much faster. If you are planning for an eventuality of Fed printing more money you are actually better off owning RE than Gold. Only problem with it is that most RE investments are leveraged and increases risk. Even if it is not highly leveraged it has to be a significantly big investment.

[SDbear]

“… with some money in gold is the preferred option now, due to the upcoming recession.”

Has’nt GOLD done bad during recessions? Only time GOLD goes up is during periods of moderate inflation and high inflation. So if you people are speculating a recession why be in GOLD? I would understand if you are planning for an eventuality of fed printing money like crazy to ward off the recession.

[SDbear]

Did you guys listen to David Lereah today after the housing resale nos. appeared? He was saying that sellers should reducing prices if they want to sell. These people do what they are meant to do i.e. increase transactions. Now their talk wud be encouraging price reductions. So why complain? Don’t kill them just when their talk is going to help us RE bears. Wait until they disseminate pessimism (on prices).

[SDbear]

Does anyone have info about unsold inventory in Airoso? I think this project can be the most important factor in reducing prices in 1300sqft range townhomes in CV. I think we should closely monitor this. Also any info about new projects that are similar to Airoso? I remember someone mentioning that there are a lot of projects coming up along 76. I think Daniel, asianautica and others are monitoring this closely. I wud appreciate it if you guys could share your info.

[SDbear]

This is unraveling faster than I thought. I saw a halcyon unit for sale today at 450k (1316sqft). I remember similar units selling during the peak for above 550k. I understand we can’t compare two different units. But I never thought that I wud see a halcyon unit with similar sq.footage for under 450k so early.
With so much of inventory, such steep decreases wud be real nasty.

[Author]

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