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stansd
Participant75% 2 years from now (70% with inflation). I think there is some permanent change to the market due to new financing vehicles avaiable and the “super star city” phenomenon. Couple that together with the behavioral effects of the market dropping further, and I think that’s as low as it will go without a country-wide depression.
That would put an 1,800 3-4BR house at around 400K, which I think is the sweet spot given the demographics of the area and this country’s crazy infatuation with the “American Dream.”
Stan
ParticipantObviously, an initial surge is not uncommon, and some upside is usually priced in by the underwriters. That said, a surge simply means the initial sellers left money on the table…I wouldn’t count on it…Blackstone isn’t likely to leave large sums on the table.
Stan
ParticipantObviously, an initial surge is not uncommon, and some upside is usually priced in by the underwriters. That said, a surge simply means the initial sellers left money on the table…I wouldn’t count on it…Blackstone isn’t likely to leave large sums on the table.
Stan
ParticipantBuying into a private equity IPO strikes me as one of the worst investments one could make right now…the market is already flooded with liquidity, and they are selling because they think the market is frothy. A professional investor doesn’t sell $2 for $1 the desire for a liquidity event and tradeable market notwithstanding.
Stan
ParticipantBuying into a private equity IPO strikes me as one of the worst investments one could make right now…the market is already flooded with liquidity, and they are selling because they think the market is frothy. A professional investor doesn’t sell $2 for $1 the desire for a liquidity event and tradeable market notwithstanding.
Stan
ParticipantSome comments from a local real estate agent’s recent newsletter. For your reading enjoyment (the last paragraph in particular):
“In recent weeks, interest rates have climbed sharply. Now 30-year fixed rate mortgages, which were hovering around 6%, have jumped to almost 7% in just a few weeks. Rates are currently the highest they have been in the past ten months.
I don’t profess to be an economics expert. However, from what I read in the Wall Street Journal, this is all related to a dramatic drop in the bond market and hikes in interest rates in several foreign countries.
Apparently new home builders saw this coming because they started reducing prices or offering incentives to reduce their inventory a couple of months ago. As a result, new home sales have been at a record pace recently while home resales have been sluggish.
Another side effect of the bond market slump is that the interest rates on existing adjustable rate mortgages are spiking. For example, a homeowner who took $500,000 adjustable rate loan two years ago might find his or her payments increased by $900 per month.
Some experts have predicted for a long time that the low interest rates would not last forever. They say it would not be surprising to see mortgage interest rates in the 8-9% range in the not-too-distant future.
What does this mean for prospective home buyers and sellers? Well, if I intended to purchase a home, I’d do it before interest rates climb any further. And, if I wanted to sell my home, I’d get it on the market before too many buyers are no longer able to qualify for a loan with higher mortgage interest rates.”
Stan
ParticipantSome comments from a local real estate agent’s recent newsletter. For your reading enjoyment (the last paragraph in particular):
“In recent weeks, interest rates have climbed sharply. Now 30-year fixed rate mortgages, which were hovering around 6%, have jumped to almost 7% in just a few weeks. Rates are currently the highest they have been in the past ten months.
I don’t profess to be an economics expert. However, from what I read in the Wall Street Journal, this is all related to a dramatic drop in the bond market and hikes in interest rates in several foreign countries.
Apparently new home builders saw this coming because they started reducing prices or offering incentives to reduce their inventory a couple of months ago. As a result, new home sales have been at a record pace recently while home resales have been sluggish.
Another side effect of the bond market slump is that the interest rates on existing adjustable rate mortgages are spiking. For example, a homeowner who took $500,000 adjustable rate loan two years ago might find his or her payments increased by $900 per month.
Some experts have predicted for a long time that the low interest rates would not last forever. They say it would not be surprising to see mortgage interest rates in the 8-9% range in the not-too-distant future.
What does this mean for prospective home buyers and sellers? Well, if I intended to purchase a home, I’d do it before interest rates climb any further. And, if I wanted to sell my home, I’d get it on the market before too many buyers are no longer able to qualify for a loan with higher mortgage interest rates.”
Stan
Participanthttp://www.autodogmatic.com/forum/viewtopic.php?p=1226
Subprime ARM resets are really starting to heat up now and will continue for about the next 18 months. Then there will be a second wave (though less subprime)starting in about June of ’09
Participanthttp://www.autodogmatic.com/forum/viewtopic.php?p=1226
Subprime ARM resets are really starting to heat up now and will continue for about the next 18 months. Then there will be a second wave (though less subprime)starting in about June of ’09
ParticipantNope…if I did, I probably wouldn’t need help answering the question:) I have no intent to trade them in the future.
Stan
ParticipantNope…if I did, I probably wouldn’t need help answering the question:) I have no intent to trade them in the future.
Stan
ParticipantSo I’ve been lurking for awhile, and figured it’s time to post. I work in corporate finance, have an MBA, and live in Rancho Bernardo…trying to put my arms around the economics of the San Diego market and must sell inventory. Below is how I’m thinking about it, and I’d love any corrections/insights as I know the figures below are rough.
-Total # SD houses 700-750K
-Normal Turnover 3%, current turnover 2%.
-3% translates to 21,000 sales per year or thereabouts.
-Forclosures first 4 months of the year were 1,700. Annualized, that’s 5,100 sales from foreclosures.
-Others who would need to sell would include houses that are vacant, and short sales.
-5,100/21,000 total means a bit under 25% of the market will be foreclosure sales. I’ve heard anecdotal evidence that another 10% of the total are short sales, and of the three houses on my street that are for sale, 3 are vacant.
That math tells me that it’s not unlikely that 40-50% of sales that will occur over the next year will be people who are willing to price very aggressively. Add to that the fact that financing is drying up in subprime, that psychology has shifted, that the 10 year yield is up, and that a lot of ARMs will reset this summer, and you have a fairly toxic mix offset by what is still, by all accounts, a very solid job market.
That’s the state of the market in my mind…the second half of this year will be very interesting. I’ve been renting for three years, and my instincts tell me that even with all that, we are in for a slow, steady, 2-3 year decline of 20% or so unless the economy tanks. That must sell % is a bit scary, though.
Any thoughts/insights, or modifications to the numbers above would be appreciated.
Stan
ParticipantSo I’ve been lurking for awhile, and figured it’s time to post. I work in corporate finance, have an MBA, and live in Rancho Bernardo…trying to put my arms around the economics of the San Diego market and must sell inventory. Below is how I’m thinking about it, and I’d love any corrections/insights as I know the figures below are rough.
-Total # SD houses 700-750K
-Normal Turnover 3%, current turnover 2%.
-3% translates to 21,000 sales per year or thereabouts.
-Forclosures first 4 months of the year were 1,700. Annualized, that’s 5,100 sales from foreclosures.
-Others who would need to sell would include houses that are vacant, and short sales.
-5,100/21,000 total means a bit under 25% of the market will be foreclosure sales. I’ve heard anecdotal evidence that another 10% of the total are short sales, and of the three houses on my street that are for sale, 3 are vacant.
That math tells me that it’s not unlikely that 40-50% of sales that will occur over the next year will be people who are willing to price very aggressively. Add to that the fact that financing is drying up in subprime, that psychology has shifted, that the 10 year yield is up, and that a lot of ARMs will reset this summer, and you have a fairly toxic mix offset by what is still, by all accounts, a very solid job market.
That’s the state of the market in my mind…the second half of this year will be very interesting. I’ve been renting for three years, and my instincts tell me that even with all that, we are in for a slow, steady, 2-3 year decline of 20% or so unless the economy tanks. That must sell % is a bit scary, though.
Any thoughts/insights, or modifications to the numbers above would be appreciated.
Stan
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