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Just checked this thing out on Zillow. Final sales price was $599K…I’m not sure if that includes realtor commission (per the auction process they ran), so maybe it’s as high as $636K???

Regardless, sold for a lot less than the guy hoped, and that puts it at late ’04, early ’05 prices.

Stan

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This isn’t news…happens pretty much every time a stock plummets if there is any chance of misdeeds causing the plunge.

Stan

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Posted this as a comment in Rich’s post, but no one has answered yet…SDR…anyone?

Can someone help me put this in perspective? We had nearly 1K NOT’s in the county this month. Isn’t average county sales volume running 2K-3K and likely slowing down?

I’m assuming I’m missing something, but if correct, wouldn’t that imply that we will have 30-50% of sales coming from REO’s soon???

Stan

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One key piece missing from your analysis: There has been tremendous income growth in these areas due to the meth lab employment sector…146K may not be entirely reasonable…just like growing poppies in afghanistan.

Stan

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Availability bias…look it up.

Stan

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“catch my drift” boom boom ching.

I had a good chunk of change in California Munis but moved it…fear in my mind was that as dependent as this state has been on the housing market, even State Munis could get creamed…didn’t do a lot of research on that thesis, but just a thought.

Stan

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I keep thinking of dropping some dough into debt consolidation…what do you think some of the better picks out there in that space are?

Stan

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Agree…25bps cut in the offing. I think helicopter Ben doesn’t actually want to lower rates, but given the state of the market and market expectations, there will be chaos if he doesn’t. His recent speeches would have set the market up for dissapointment if he wasn’t going to act.

Stan

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Thanks for the feedback, Reiser…I’ve known for awhile that the way I was capturing appreciation/depreciation wasn’t quite right (one of the things I had in mind on the simplifying assumption comment). I’ve been struggling with a way to characterize that correctly. You’ve given me a few ideas on how to mull that one.

I think the 0% gain assumption effectively assumes housing appreciation=inflaction. Anything more is gain. I might think about taking that number and discounting it back to present value over 5-7 years using the interest rate on the mortgage…far from perfect, but that would mute the impact some, which I agree needs to be done given the cash flow considerations.

No time to mess with it right now (spreadsheets to work on for my real job:), but I’ll have to take a stab…that sheet has been a continual work in progress, but it’s really helped me to think about things.

Stan

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Holy Crap!

I’d never quite looked at it like this. I modeled what it would take economically for a $600K house in 4S to be equivalent to rent or buy. Obviously there are a host of assumptions inherent in any kind of analysis like this. One key one I made is that the housing market would be flat for the foreseeable future.

If that were the case, a $600K house in 4S that currently would rent for $2,300/month would have to fall to $310K for buying and renting to be equivalent. If you move assumptions a bit and assume a 3% annual appreciation rate, that number goes up to $626K. Regardless, the mello-roos there is an absolute killer to the equation.

Bottom line is that it’s all very dependent on what you think will happen to appreciation/depreciation.

There are some simplifications in the model that if fleshed out would change the picture a bit. Regardless, given the current situation in the market, that $310K figure surprised me. Tells me that you could easily make the case that a $150K drop in 4S is very possible.

Here is the link to the file I used (excell 2007, so hopefully it’s openable):

http://www.swoopshare.com/file/7f07d88ac69f4d03b5ec60a0bf6c014a/Housing_Cost_Model.xls.html

Stan

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A Rate cut won’t move T-Bill yields or mortgage-Treasury risk premiums much. In that sense, it won’t help. OTOH, if the fed were not to cut rates, you’d probably see yields (possibly-recession fears would offset) and risk premiums (for sure) rise. In that sense, the cut will help.

I expect the Fed, and quasi bailout moves announced this week to have small “beneficial” (if all you care about are housing prices)impacts.

A strong headwind is enough to slow down a FAST moving freight train a bit, but not enough to stop it.

Stan

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I have a model I could use to easily estimate this…if someone can tell me how to post an excel table, jpeg, etc. in here.

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I think people think of these types of questions as binary-that there is no overlap between an Escondido or Temecula buyer and a 4S buyer.

Sure, most people have an area they are interested in and stick to it. That said, if you can get the same house in Temecula as 4S for less than half the price, you will see people make that trade-off, which will pull buyers out of the desirable areas.

Nicer areas will hold up better, but the relative price difference can only go so high-prices in very different areas will, to a significant degree, move in tandem.

Stan

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The screaming will, inevitably come. The NAR will come out like a child screaming to it’s mommy to kiss the knee it just skinneed.

Right now, they are in between denial and rabid fear. When rabid fear wins out, they’ll be right there with the investment banks crying to mommy.

Stan

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The alternative view is that a recession is needed and is actually a good thing. We are rapidly approaching a state where if the excesses (specifically, the debt/income ratio of americans, the current account deficit, the capital surplus, the impending retirement of the baby boomers, the debasement of our monetary base, etc.) aren’t purged, we will wind up with a greater or depression later on.

We’ve already avoided at least one as the dot com bubble imploded-we need the positive sobering impacts of this one. The great depression changed the mindsets of that generation toward money forever. I pray that we don’t need to go that far, but a recession would go along way toward reminding this generation that you can’t outpsend your income forever and that the beat the joneses hedonism, narcissim, and ostentatious displays that have become so common are not worth the financial risks most must take to sustain them.

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