“The Sky Is Not Falling, It’s Mainly Market Forces”
It’s desk clearing time for this blogger. “If you are squarely in the ‘blame the media for the housing slowdown’ camp, you are going to love this. The vast majority of Americans are optimistic about what will happen with home prices, according to a nationwide survey.”
“‘The poll clearly debunks the more sensational media reports speculating on the demise of the housing market,’ says David Pressly, president of the National Association of Home Builders, which commissioned the survey.”
The Sydney Morning Herald. “‘The softness in the outer suburbs of Sydney is really biting,’ said John Symond, the founder of Aussie Home Loans. Symond says credit has never been easier to obtain in his 30 years in property. ‘We have never before seen lenders offer 100 percent finance in a softening property market,’ he says.”
“‘I reckon that over the last two or three years those who have borrowed more than 95 per cent [of the purchase price of the property] are in negative territory,’ he says.”
The Globe and Mail. “When Stephen Webber and his wife put their Vancouver-area townhouse up for sale in September, they expected to close a deal within a month. After several open houses, nearly a dozen private showings and two price cuts, they’re still waiting.”
“‘It seems there is a lot of supply out there. Buyers have more choices. There is not that rush. And there might be hesitation because of what’s going on in the States,’ Mr. Webber says.”
“The sizzle has gone out of Calgary’s housing market as rising inventories and cautious buyers have ended the bidding wars and soaring prices that marked the first half of the year. Price reductions of $40,000 or $50,000 have become common, realtors say, and some top-end buyers have even tried to back out of deals after realizing they may have overpaid by hundreds of thousands of dollars.”
“‘Anybody who thought it was going to continue forever was smoking something funny,’ said John Riseborough, a 23-year veteran of the industry in Calgary.”
The Star Telegram. “More than 12,000 Tarrant County homeowners faced foreclosure this year, a record high. This month, the North Texas Real Estate Information System reported that home sales declined in eight of the year’s first 10 months.”
“Jim Brown, who has published the Tarrant County Foreclosure Report for more than three decades, said the numbers are high because borrowers have adjustable-rate mortgages. Many foreclosures are on high-end houses and occur the same year the loan was taken out, Brown said. ‘I don’t see any help or effort being made to stop this. It’s going to continue.’”
The Arizona Daily Star. “The state’s jobless rate still increased, albeit slightly, in October. The state’s housing market has been in the doldrums recently as the speculators stopped investing and housing prices flattened - and, in some cases, actually declined. The big difference, said economist Don Wehbey, is that home builders may not be making as much on the homes as they were before.”
The Arizona Republic. “Verrado developer DMB Associates Inc. announced Thursday that Vancouver-based resort developer Intrawest Corp. let expire an option to buy 56 acres within the Buckeye community. Late last year, the housing market and economy were booming. Now, both have slowed.”
From KCPW News in Utah. “After several years of record growth, Washington County’s population boom seems to be cooling a bit. Ken Sizemore of the Five County Association of Governments says it’s because of housing: ‘It’s a function of the housing market, the fact that housing prices escalated so rapidly during the year,’ says Sizemore. ‘So it’s not a function of land or water or roads. It’s mainly market forces.’”
The Columbian from Washington. “Scott Mikel, a Vancouver real estate broker, said some buyers may be waiting for prices to drop. Those conditions are difficult to explain to home sellers who still want to list homes at top-dollar, he said. The market just isn’t where it was six months ago, he said. ‘If they purchased (the home) last April or May, that was probably at the top of the market,’ he said.”
The Reporter. “Solano’s real estate market has seen the steepest decline in the Bay Area, whose nine counties averaged a 24.1 percent year-over sales decline in October, as did the Northern California region. Despite the sales downturn, broker Bob Dorsett said, ‘The sky is not falling at all, by any stretch of the imagination.’”
Another great week folks! My thanks to those who support this blog. Please check back this weekend for news, your market observations and topics.
The october dataquick numbers are out for so cal.alot of yoy declines showing up.
Please pray tell, ‘When does the spring selling season start ?’ hehehehehehe
March of the Lemmings
April Fools
May but probably won’t
June swoon
July to die for
August not so robust
September to remember
October all over
April come she will
When streams are ripe and swelled with rain
May she will stay
Resting in my arms again
June she’ll change her tune
In restless walks she’ll prowl the night
July she will fly
And give no warning to her flight
August die she must
The autumn winds blow chilly and cold
September I remember
A love once new has now grown old
Spring selling season starts right after “winter, which is a great time to buy because the kids will get settled in their new schools and make new friends before summer arrives.” And right before “you don’t want to miss summer, everyone is moving in the summer” and “little known fact: fall is the strongest of the four quarters.”
Housing permits in Washington County (St George) are down 47 % from last year. We are swimming in new houses for sale.
-33% used SFR YOY median price decline (10/05-10/06) in my zip code (Rancho Bernardo West — 92127). Move along folks, nothing to see here…
http://www.dqnews.com/ZIPSDUT.shtm
Prices up 478% at the Rancho Santa Fe post office.
(Right, up 478% on the basis of one sale!)
Looking at DQ news is weird. Was trying to see how median price in SLO county is up when median in almost every town in SLO county is down. Just shows what a slippery statistic the median is.
Trust me - it’s down 12-15% YOY.
Very nice numbers for SD!!!!
Darla of Fairfield, ‘Come here my dear, and drink some more of the cup’. ‘Watch out that the red Koolaid doesn’t stain when you dribble out your mouth’. hehehehehehehe
QUICK QUICK anybody who’s not on Eastern Time — turn on Newshour w/ Jim Lehrer tonight. (Ray Suarez sitting in) — first major segment is about the housing crash and how it will impact the rest of the economy. Nouriel Roubini for “our” side, and a bullish Wall Streeter for the opposition. Don’t miss.
Sweet - I might have to miss watching a bit of the Lakers game to watch this. Should have shelled out for tivo…
Absolutely. Everybody should shell out for Tivo. I absolutely love mine. Only downside - I can’t watch live TV anymore, as I just can’t stand watching all of the commercials. Normally this isn’t a problem, unless I’m at someone’s house who doesn’t have Tivo.
Ray Suarez–I can’t stay awake watching this guy but I’ll try.
I just watched this part of the show (maybe 10 minutes total out of the news hour) - pretty lightweight stuff. Both sides agree that housing is in a recession, one guy says this will carry over into the broader economy, the other guy says no it won’t. The naysayer asks the other guy, what’s the worst that will happen, your $2 million loft will drop to $1.5 million, so what, you paid $800k for it. He also said: “Americans aren’t stupid - they aren’t buying houses that they can’t afford.”
Oh yeah, they acknowledged that there are foreclosures in places like Ohio and a few other bad areas of the country - not that these might be harbingers for what’s to come elsewhere.
Why they decided to focus on two economists who live in Manhattan, which has a decidedly atypical housing market, is not clear.
Agree with you it did not add to OUR knowledge, but I think it is definitely of interest to see what MSM is admitting to the so-called thinking classes. I am always glad when they add to any buzz about housing bust.
you can subscribe and listen to their podcast too
Newshour with Jim Lehrer podcast link
>>> Americans aren’t stupid
Roubini = predator smarts, explained the housing bubble blog case on national TV in plain English with Italian hand gestures for dramatic effect
Yardeni = bovine stoopidity, possibly feigned, reciting mainstream consensus that the rest of the economy is somehow immune to housing slowdown
Case = Shiller coauthor, wonders why wealth effect does not go into reverse along with prices (I personally think there is a lag with respect to psychological and behavioral adjustment to falling prices which he fails to grasp)
Shiller’s famous graph showed up w/parabolic bubble price blowout through 2006
Why wealth effect doesn’t go into reverse? Besides 1990, when has there been much of a “reverse” in housing prices?
Doesn’t seem like there’d be much reliable data to draw any conclusion on a reversal of “wealth effect” at this point.
Transcript here. MP3 link inside.
One down - One to go!:
http://bakersfieldbubble.blogspot.com
This doesn’t mean you have to change your screen name, does it?
And, I love the fact that the guy claims he wants to spend more time with his family yet he is just going to work at another brokerage (granted, it’s with family, but I don’t think that’s what he meant). And, how is that not competing?
I need to change my name to:
Crispy&Coal - LOL
YES!!! How is that not competing? SPIN! SPIN! SPIN!
SPIN: It’s all the REIC knows how to do. BTW, any thoughts on this “amicable” breakup? Think he might be trying to distance himself from the firm because he fears something bad might be coming down the pike?
Rumor has been these guys have been asking local bankers for a loan to buy out each other?
Remember my local paper “refuted” all of the “vicious lies and rumors” - so there is no way any of them are true. BAHAHAHHAHA
One of the rumors was that Cole was leaving to set up his son in a business. So far one rumor TRUE - How many others will do the same?
The vast majority of Americans are optimistic about what will happen with home prices, according to a nationwide survey.”
Yep they are. Its why homes are still at record prices. Check back in after the spring folks. Let’s see if they are still saying the same things…
2Q 2007 folks… that’s when it gets interesting.
Neil
Yep! Interesting, indeed, Neil. The slight decrease in inventory might be those who figure that they will get their asking price in spring ‘07. They are forgetting that the ATMers are coming as well.
IMHO, the small decreases in inventory that we’ve been seeing are nothing more than regular seasonal adjustments (people taking house off the market for the holidays, lower buyer traffic, etc.) The problem is that inventory is still at historic highs and will build in the Spring from very high levels to completely crushing levels. I agree with many others here that estimate Q2 ‘07 is when capitulation and the subsequent rout begin. Any RE shills that say otherwise are just whistling past the graveyard in a weak attempt to flush out a few more buyers.
I’m extremely optimistic about what will happen with home prices and I’m thrilled with the direction they are headed. What was the question again?
Prices are already falling, and Americans are nonetheless highly optimistic. Sounds like a recipe for a hard landing once denial gives way to reconciliation.
In light of imploder’s point below, perhaps I should have ended the second sentence “when abysmal ignorance gives way to frightened perception.”
We’ll continue marching through the emotions… we’ll stay in denial through Christmas. Next stop Fear, then Desperation, and only then panic. But don’t buy yet… wait Capitualation to Despondency. For its Despondency through Depression that has the lowest prices.
My old (but my personal favorite) blog entry:
http://recomments.blogspot.com/2006/10/market-cycles-time-to-buy-2008-or-2009.html#links
Neil
The wait for home price drops looks to this renter like my old Win2000 machine - I see a spinning hourglass, spinning and spinning and spinning. Wait, it’s stopped spinning…Oh, nevermind it’s spinning again. Maybe I should power cycle the MFer. Nah, I’ll wait some more. Spinning…spinning..spinning…..spinning…
Toss it out the window.
Target practice.
This is how you design a poll to get the outcome you want; sample question follows:
How much ‘more’ do you think your house will be worth a year from now? Please check only one box.
[ ] 5-10 pct more.
[ ] 10-15 pct more.
[ ] 15- 20 pct more.
[ ] _____ pct more.
Gee… Americans think their homes will be worth ____ pct more a year from now. As a result, we can all stop being so negative b/c polls are scientific and pollsters can’t be wrong and they never ask questions like the above.
Nothing like an interested party conducting a poll. Notice that the time period is 5 years, because even homeowners who think the market might go down for a few years will ignorantly believe that prices will have rebounded by then. And, how many people were optomistic about the stock market at the end of 1999? Americans are financially illiterate (to put it kindly), so what they believe will happen in the future really has no impact on what actually happens. This is just another piece of REIC BS propaganda.
Also, most people don’t realize how much their home would have sold for at the peak.
Q2 2007? Neil my friend, you are an optimist.
There are a whole lot of people who are just now getting around to thinking that real estate is a good way to make money. It will be another 18 months before it really sinks in that RE = certain death, mark my words. All through the decline, greedy suckers will jump in at the wrong time, thinking that the bottom has come at last and that they have found an honest-to-goodness, sure-thing, can’t-lose bargain that will rocket them to riches.
And they will be wrong.
Chris,
I have no doubt it will take 18 months to scare away the last GF’s… Maybe longer.
But by 2Q 2007 I believe enough will be in place that prices will be dropping quick and those in 100% option ARM land will be *trying* to run for the doors. Ok, not all of them. Probably only a fraction. But a large enough fraction to start the stampede.
There just isn’t the savings rate to ride this out as in 1991 through 1995. At the rate I’m watching San Deigo forclosures rise, they’ll be by June at the same rate as the worst they’ve seen in the past. OC will only lag them by a quarter. LA? Alas, we seem to be lagging by two quarter behind San Deigo.
By that time frame, your 18 months would be right… but I’m thinking a credit tightening is coming. And Los Angles cannot take any sort of credit tightening. People will want to buy… what happens when they realize they’re “priced out forever” at a price below what sellers need to keep from bringing cash to the closing…
Note I have not said the bottom was in 2Q 2007. I’ve been saying that’s went the floor falls out and it gets interesting. Its going to be a long slide…
Neil
As markets move from bull to bear there are three phases. The first decline creates fear but some people are conditioned to buy the dips. A bear market advance results. I think we are in the bear market advance position presently.
It is the “rally failure” that generates panic and the realization by the masses that real trouble is dead ahead. A look at the building stocks tells the same story. A 50% decline into 2006 and the present advance.
It is probable that 2007 will see the second decline. Second declines or “rally failures” are the crash phase. The odds are high that 2007 will be a very bad year for real estate.
There should then be a much weaker advance and a number of years of bottoming in a third decline before a serious recovery is possible. Best guess 2010 for a low.
” The vast majority of Americans are optimistic about what will happen with home prices, according to a nationwide survey.”
Gee I wonder what the results would have been if they contacted 2000 people who’s homes are currently on the market?
The average Joe who’s not selling or planning to sell his home of course is optimistic. Why not? It doesn’t cost him anything to be so, does it.
Depends on how the questions were phrased, though. I’m sure all of us are optimistic about home prices…over the long run (10-20 years).
“RT Strategies, an Alexandria, Va., polling firm, contacted 2,000 households and found 81 percent of homeowners think the value of their homes will rise during the next five years. Only 13 percent felt their home would fall in value, while 4 percent expected no change and 3 percent were unsure.”
“5 years” From the way it’s written it sound like everyone in the poll was a “homeowner!” Gee, no inherent reason to be optimistic there, huh? Talk about loading the deck! That automatically eliminates “EVERYONE CURRENTLY NOT BUYING!” which is what all the “media reporting” is about! It also eliminates anyone who believes in a downturn and SOLD THEIR HOUSE to rent!
Oh, gosh, I don’t think so. Unless optimism means being able to pick one up in any old town you might want to move 10-20 years down the road for next to nothing.
people are optomisitic?
why the record inventory?
why the plunging sales?
It’s because everyone who could fog a mirror already bought…
optimistic about home prices…over the long run (10-20 years)
I doubt that house prices will reach their 2005 peaks again in the next 20 years, once you adjust for inflation.
Agree. Perhaps not ever.
Not if you consider inflation, but that’s what they’er going to do, don’t we all know it???
You are right imploder.
“‘Anybody who thought it was going to continue forever was smoking something funny,’ said John Riseborough, a 23-year veteran of the industry in Calgary.”
The whole REIC is High. “PermaTokers”
Yea, Realatokers™
What’s interesting about California’s situation is that I recall another blogger from Florida a year ago saying that Florida was a year ahead of Cali in terms of bubble deflation action. I remember looking at the RE news in Florida, which at the time was just starting to fizzle, with very similiar numbers to the current CA numbers. It appears that he was right. California is in for an interesting ride.
I don’t know - I think San Diego and Sacramento were as leading edge as anywhere, and certainly north Florida is nothing like Palm Beach County or Naples. Was sleuthing here last weekend both in person and on the ‘net, and modest 1950s-1960s style houses in decent neighborhoods in southside Jacksonville that have risen 80% in value over the past four years don’t seem to be under any real selling pressure yet. No doubt, though, they can be had on average a tad cheaper than six months ago, so that’s at least a start.
2006 is a good down payment on the housing price downturn nationwide, but a down payment only. 2007 will very likely be considered (5 years from now) the defining year in the housing price crash.
Paul in Jax,
You are correct. Your neck of the woods and pretty much everywhere north of Gainesville is like a different region from south of Gainesville area. Spot on.
Looking on Realtytrac.com over the past few months for Ventura County has been interesting. A couple months ago, you’d be lucky to see a couple homes on auction, now there are over 100. Also, it shows 336 bank owned-properties. Compare that with 407 resale properties. Seems like Cali’s numbers are getting really bad, really fast.
From the Sacramemto Landing blog, a smart reader picked up on a D.R. Horton add….
“Look at the builder adds this morning in the (Sacramento) Bee. Here is one: 2,570 sf home, $362,591 + $10,000 closing costs. You may also take your mother in law Realtor and get another 3% off, as they will cooperate with her now!
So there you have it: $133/sf for a brand new home. That is a 32% reduction from the level at which they sold 100s of the same models ($504,164). And we are still in 2006.”
The point is this: It does not really matter if the resale market get in line with the price adjustments. If fact, the builders would probably prefer not to have the competition. You see, they will keep building as cost drop, as profits narrow, and as the buyer pool shrinks. All the way back to prices established in 2001-2002. So all you FB’s, get with the program now or get F’d later.
I agree. The HB’s are in pole position until foreclosures and REO’s get to critical mass while the FB’s are trying to figure how to put the key in the ignition.
Yep, HB’s still have plenty of room to still squeeze out decent profits - they will keep building and they will keep selling. FB’s who bought any time in the last 3 years have no hope of profits; they can only hope of breaking even, and I bet that is a stretch in many cases.
Over the last 2 years I’m sure the more experienced homebuilders were laughing their a$ses off at “the Chumps”,… “the flippers” and “investors” they were selling 10-20 houses to. Just sizing up the stupidity of their soon to be “Competition”.
“Cleanen-em out on the ride up, Busten-em out on the ride down.”
“Thanks Chumps!”
Hey Andy,
Remember the movie goodfellas?
Bust em out.
Thats what the mob guys in the movie refered to about when they took all the inventory from a guys restaurant and torched it. I havent heard this term applied to a situation like this in a long time. Great reference.
“Over the last 2 years I’m sure the more experienced homebuilders were laughing their a$ses off at “the Chumps”,… “the flippers” and “investors” they were selling 10-20 houses to. Just sizing up the stupidity of their soon to be “Competition”. ”
I’ve been laughing at them - and I’m not a homebuilder.
Nothing I enjoy more than watching people get what they deserve (plus a little extra for good measure).
Does anyone know if there have been any articles about buyers who are angry and have gone back to the builders to complain after builders dropped prices lower than the FB bought for?
Someone posted the other day that people who have bought are angry with their builder when they learn that newer buyers of their area have obtained a better deal. I havent seen any articles about this yet. I may have missed something though.
I know builders here are making new buyers sign confidentiality agreements. Not sure what happens if they breech it though…
Too funny. What do they do if you don’t sign? Not sell you the house?
What’s next? They won’t sell to you unless you have a security clearance?
I don’t know any buyers who were angry when it was the other way around. This only works one way?
The people who are buying now keep refering to the preface that “if you don’t own you wont build any equity”. Problem is that they have been speaking to people who bought a few years ago when the market was still increasing. Sure if you don’t own you can not build any equity in an appriciating market, but like I explained to them if you buy in a declining market you are negative equity.
Yes, but nevertheless building equity but in the wrong direction
Maybe they don’t notice the “minus” sign in the math.
It seems that a lot of people are waiting till spring and hoping for the best. I also have read in this blog that a lot of people can’t believe that the stock market hasn’t tanked yet (me too!). Could the big awakening for both come next spring?
I have followed Robert Prechter’s Elliottwave analysis for the markets for many years. Many times he has called the tops and bottoms quite well (although he has not called the DJ top for this bull run correctly). It IS interesting that he feels if the market holds up he is calling for a crash around March 13, 2007 from a DJ level of between 12937 to 13007. I have the date on my calendar. It will be fun to watch this all unfold next year. EW believes the market reflects peoples mood. The mood could certainly sour if the spring selling season doesn’t go well.
Beware the Ides of March, Caesar!
prechter has a fabulous track record — in fact he’s called 4 of the last 1 market crashes!
Wall Street Journal had an interesting quote today that went something like this. “There is a small god in the trading pits that allows everyone to call the top correctly once and the bottom correctly once, and to be wrong as many times as he or she likes.”
Forget who they attributed it to.
Having pissed away several years of my life in a trading pit, I can say you really only need to call one top and/or bottom to be set for life.
I know several people who made well into seven figures just on the crash of ‘87.
I’m sure there’s a lot of flippers thinking the same thing.
Thanks NoDak for the Prechter post. If he’s got it right, it’s the call of the year. Wouldn’t it be something if both are right?
NoDak: I’ve lost a lot of money following Prechter in previous years. EW theory is a good tool to explaining market in a rear looking mirror but I’ve found it hit or miss as a predictor. Too many gotchas in hindsight of 4 vs A or extended “x-y-z” vs start of a start of a 5th up etc. I find combinations of MAs, RSIs, MACD Stochastics and others are better tools for trading. I look at weeklys and monthlys for market turn opportunities.
Prechter and his overpriced newsletter bunch will use any justification for market crash. The final straw for me was his correlation to sun spot activity going to a top in the market. (It never happened.) He is a quack that lives off an old reputation. He may be right about the mood change but if you’d listened to him from 2003, you’d have lost a lot of money. There are many others commenting about 2007 but I don’t give Prechter the credit for this. If you want to get some good market opinions, try http://marketviews.tv/ For $100 per year, it is good value. I don’t know what EWI charges anymore but I’d imagine that their monthly rates are not too far off what you’d pay annually on marketviews.
Something else which is value for money (it is free !) are discussions under http:\\www.stockcharts.com \ “public charts”.
I know Bob Prechter well (since 1986). He is more interested in the issues of crowd psychology then in calling markets. He was a sych major at Yale. If you look at his total record for all markets it is excellent.
I have used Wave Theory for over 30 years. It is most useful for structures of intermediate time. I have made a lot of money long and short with six to twelve week structures. A third advance or fifth wave with poor market breadth is money in the bank.
Those of you on this blog that are being squeezed in housing stock shorts should look at the May/June decline. Three clean Dow declines and strong breadth in the third decline. Result the best advance of the structure.
“‘The poll clearly debunks the more sensational media reports speculating on the demise of the housing market,’ says David Pressly, president of the National Association of Home Builders, which commissioned the survey.”
How does the poll do that? The “sensational media reports” are about factual occurrences. Sales Volume is dramatically down. Prices are falling or stalling. Foreclosures are rising dramatically. CEO’s of Home Builders are calling a downturn. Just because John Q. Public doesn’t have it on his radar screen yet (which is all the poll really proves) doesn’t “debunk” reported factual realities.
While they were at it, they should of polled the same 2000 on their knowledge of ARM and Option ARM loans (h&ll, even poll them on knowledge of THEIR OWN MORTGAGES)
… Oh well, they’ll be “educated” on that subject all too well… starting next year.
Imploder, sorry my post below sounds so much like yours. I did not copy, I promise
Stucco, considering the format that blogging entails, that just wouldn’t even come into my mind.
imploder, it is becoming clear that you and I have the same thought process. That is exactly what I thought as well when I read the NAHB statement. Facts are facts, and Joe Average’s hopes and wishes, let alone his economic forescast means jack $hit! This is a population that can barely balance their checkbook, and these fools are polling them on where home prices are headed! Can I please have a six figure job where I can commission my own industry surveys and spout mindnumbingly stupid thoughts? This NAHB “survey” is a clear sign of desperation to try to wag the dog and stop the bleeding. Good luck with that one, you over-building a$$-hats.
Imploder and Get Stucco are my heroes, and in addittion to Ben, are mentors for all.
Hail Hail Stucco and Imploder.
Sorry I forgot you P’cola Popper.
Ben, When you consider having the first induction into the housing bubble hall of fame I hope that the first class includes Tx Chick, Market Maven Fl, P’Cola Popper, Get Stucco, and Imploder. It would be like when baseball’s hall of fame first class included Ty Cobb, Babe Ruth, Christy Mathewson, Lefty Grove, etc. when the hall of fame debuted. Just a thought.
That’s a very kind thing for you to say, but in all honesty imploder is but a rookie, and an admittedly crude one at that!
I read this blog for a year and a half before I ever posted, so I felt like I knew it and the various posters. This blog further confirmed my convictions concerning the housing situation as I was already determined to sell my house, which I did in Aug. 2005.
There are many bloggers that have written here with way more intelligence, knowledge and insight than imploder including Robert Cote, (knows his sh#t) Auger Inn (the true “Spokesman” of this Blog!, LOL, The Guy who did “Bubbles the Clown” again LOLand SMLandlord with his clever song rewrites, and countless others..) so in the comparison I feel honored.
Yeah, where is Rainman18??? We’re seriously in need of a new BTC fix!
Thanks Imploder.
yes I agree Rainman….. and where be darthtoll?
All hail, Macbeth! hail to thee, thane of Glamis!
All hail, Macbeth, hail to thee, thane of Cawdor!
All hail, Macbeth, thou shalt be king hereafter!
Well, *obviously* the offhand musings of a bunch of Joe Sixpacks with no economic training whatsoever is more than enough to debunk report after report of actual facts.
Don’t you know your epistemology, people?
“epistemology” Wow. That made imploder hit the old Wikipedia! For a minute I thought you might be St.“Thomas” Aquinas!
Imploder said, “Just because John Q. Public doesn’t have it on his radar screen yet (which is all the poll really proves) doesn’t “debunk” reported factual realities. ”
Imploder,
I also bet that John Q public did not have any idea that the great Depression was on it’s way either. Some sophisticated types may have had an inkling, but the man on the street did not. That’s all this poll is about is the man on the street.
Captian Jack posts Imploder,
I also bet that John Q public did not have any idea that the great Depression was on it’s way either.
I don’t want to step on your thread…. I do agree with you guys. The worst part of your statement is radio was going good but…. just look at all the info you can get in near real time. Some people will never learn or care too.
If you use your computer only for fun games etc. You will stay dumb.
sorry radio was info for 1929…. but in 2006 come on?
Yes, there are a lot more options for Johnny Lunch Pail to get his information. But that also means there are that many more sources of bull$hit to confuse and distract Johnny as he fills out the application for his HELOC. CNBC alone will phuck the average joe’s mind up beyond reason.
More information does not equate to a better, more informed public. How many average Americans are using the Internet to read about the ZOG, the fake moon landing and the divorce of Britney and Kevin? They will rot in their over-priced McMansion caskets while their minds spin from all of the static.
“I also bet that John Q public did not have any idea that the great Depression was on it’s way either.”
It was worse — the MSM denied the depression was underway for long past the point in time when the lense of history shows it was already in the bag.
! ! ! News Flash ! ! !
L A S T T O K N O W S T I L L D O N ‘ T K N O W
“If you are squarely in the ‘blame the media for the housing slowdown’ camp, you are going to love this. The vast majority of Americans are optimistic about what will happen with home prices, according to a nationwide survey. ‘The poll clearly debunks the more sensational media reports speculating on the demise of the housing market,’ says David Pressly, president of the National Association of Home Builders, which commissioned the survey.”
This demonstrates once again that the REIC has some highly capable propagandists, and also that oft-repeated claims from Realtors(TM) that falling prices are somehow due to the media scaring off the buyers are complete bunk.
Stucco,
Could this be the REIC’s ploy? They are trying to get the masses to believe their propaganda. Read this. I think it is the REIC’s mantra.
Play on People’s Need to Believe to Create a Cultlike Following
People have an overwhelming desire to believe in something. Become the focal point of such desire by offering them a cause, a new faith to follow. Keep your words vague but full of promise; emphasize enthusiasm over rationality and clear thinking. Give your new disciples rituals to perform, ask them to make sacrifices on your behalf. In the absence of organized religion and grand causes, your new belief system will bring you untold power.
Considering that telephone polls generally reach only people who still have land lines, I’m not sure that the participants are particularly clued-in.
Pardon if this was already posted, but this AP story has a great quote:
‘”A tornado hit the housing sector in October,” said Joel Naroff, chief economist at Naroff Economic Advisors, a private forecasting firm. “Builders have seen the light from the housing market meltdown and are now moving as rapidly as possible to reduce supply.”‘
link
The drop in construction was led by a 26.4 percent decline in the South. Construction fell by 11.7 percent in the Midwest and was down 2.1 percent in the West.
How long until the West starts posting up numbers like the South?
P’cola, the South’s numbers are probably skewed by the hurricane related starts. The drop in permits is telling, but not the whole story. The HBs in Nor Cal had higher sales in Oct 06 than in Oct 05 (and tried to get big mileage out of it). What is really happening though, is the Nor Cal home builders are cutting costs, re-bidding work, cancelling land deals, offering huge incentives, and thus a BETTER DEAL. Bottom line, they continue to build at a pretty rapid pace, selling below the market established by home sellers. Go to this site and see something very interesting
http://tinyurl.com/y3ma4x
Max, at Sacrealstats blog charts the price reductions and how D.R. Horton is leading the pack, including underselling their own prior customers, in price reductions.
Meanwhile, the resale market is down 35%. The FB’s get F’d again…..
Seems like those who want a “fire sale” in prices would want the opposite of what housing starts have done in the South. There, they are dropping construction as fast as possible which means the supply/demand will balance much faster…..and so will prices.
The greater the inventory, the lower prices will go
Dan, I think it is a double edged sword. Some people see low starts equals slowing economy and even more imbalance. But you are right, the more product, the more imbalance developes. That is what is so interesting with all the public home builders. Everyone is an “employee”, so they all want to find a way to keep building to make money, or at least maintain cash flow. So we still see a lot of home builders in Nor Cal building new product. They are selling at 10-30% discounts from 18 months ago, so they are taking all the buyers. This continues to add new product, while vacant homes owned by Flippers just sit and gather dust. The occupied homes for re-sale are being taken off the market, since they don’t have to sell, or are hoping for a spring rebound.
Still, the home builders are building at a greatly reduced rate and we see lots of layoffs in Sacramento. So the “perfect storm” is this: HB’s keep building, FB’s keep holding out, layoffs widen, economy softens, retail slows… and viola, pretty soon you have a huge surplus of sellers to buyers and the real damage starts. Otherwise, we just get the 40% correction, since the HBs can deliver at those prices.
Thanks guys.
I agree the HB’s will build until they die. See my prior post above which is consistent with Dan.
The slow down in homebuilding will result in significant layoffs for the construction industry and related support industry (nothing new there). Calculated Risk has a range of 400,000 to 600,000 job losses through April 2007 based on current starts. If the West falls off significantly in future months those layoffs will probably double which probably doesn’t include illegals. Although present employment data is a lagging economic indicator, forward projections of job losses are rather useful. I find it hard to believe that our insane stock market can ignore job loss projections of 1M to 1.5M over a twelve month period in the construction industry which will happen if the West posts up numbers like the South.
Wall Street will take notice when consumption retracts after the consumer runs out of credit. This is already beginning to happen (look at ppi and cpi).
Xmas will be interesting. One thing I’ve noticed: a lot of the PS3 hype is centering on how much the first “lucky” buyers could get for the thing on eBay, not on how much they’ll enjoy playing it. I wonder if the frenzy is more about making money than playing with a “hot” toy.
The issue with a decrease in 500,000 house builds is the substantial impact on GDP. The impact =
500,000 homes X $250,000 / house X 2.27 multiplier = ~$275 billion
If we think about US GDP being around $13 trillion,
$275 billion / $13 trillion = ~2% points of GDP growth
Negative GDP growth
I sometimes find it shocking how little most people know. This includes some of the most prominent builders, developers, and brokers around. The obvious conclusion is timing is everything for most people, and seemingly unbeknownst to them, their timing is about to get really bad.
It is strange. I was casually chatting with a mortgage broker in Miami a month ago - a guy who claims to be writing lots of business on the luxury condo tower developments in north downtown - and the guy was as confident and relaxed and upbeat about his business as could be.
I’ve been trying to figure it out ever since and have come to the conclusion that he has simply made an executive decision to always be upbeat about business - and, moreover, that the decision is a rational one. This may apply to many of the other cheerleaders who are castigated on this blog - we may despise their fairied optimism, but they may be behaving very rationally.
It just means he is a good salesman.
I have a friend who is a very good salesman - occassionally I call him, and ask how things are going business-wise, and he invariably replies “Great!”. He could be boiling his belt for dinner, but he knows that optimism is a key sales tool - people don’t like to buy from depressives.
Good time to rewatch Glengarry Glen Ross. Even though I’ve seen it several times, I have found myself still vulnerable to their tricks. Shame on me.
Great film, saw it twice, LMAO since I too had once bought a TIME-SHARE for Chrissake, and other POS “investments”. Great Jack Lemmon role.
Re Lemmon: Performance of his career. Gawd, they all deserved Oscars. Loved the scene between Pacino and Pryce, the whole I’m-your-friend thing. When I met my realtor for the first time, I told her I did not want a realtor because she’ll pressure me to buy a house I don’t want. “I would never pressure you, blah blah.” And you know how it goes…I let her pressure me. I bought an ugly 1960s Shakey’s-Pizza-Meets-French-Provincial with carpet and paneling as far as the eye could see. And I hired her again five years later. I have only myself to blame.
Only closers get coffee.
Kporn wrote, “I have a friend who is a very good salesman - occassionally I call him, and ask how things are going business-wise, and he invariably replies “Great!”. He could be boiling his belt for dinner, but he knows that optimism is a key sales tool - people don’t like to buy from depressives. ”
Law 10 pretty much synopsizes this observation.
The 48 Laws of Power
by Robert Greene and Joost Elffers
Law 10
Infection: Avoid the Unhappy and Unlucky
You can die from someone else’s misery – emotional states are as infectious as disease. You may feel you are helping the drowning man but you are only precipitating your own disaster. The unfortunate sometimes draw misfortune on themselves; they will also draw it on you. Associate with the happy and fortunate instead.
“The 48 Laws of Power”
Sure…cannibalism, not community.
Another good-life tip: McDonald’s Ray Kroc, “What do you do when your competitor’s drowning? Get a live hose and shove it in his mouth.”
Psychology lags reality! Reality sales of resales down. New home sales and prices down. Psychology we are at the bottom.
What do you think?
I agree with your premise that psychology lags reality. However, I disagree with your statement of “Psychology we are at the bottom.” The psychology of Joe Sixpack is, what do you mean prices are down? Only the REIC is spouting the “we are at the bottom” line, hoping to sucker in some more GFs. Joe Sixpack will stick take some convincing that prices have come down, and that they are still falling. Just my $.02
I do not disagree with you. My point is the psychology will change in the next six months or so after prices fall much further. When the bottom is really here, several years from now, no one will believe it and the thinking will be real estate is a bad investment. And of course NAR will be telling everyone “its a good time to buy” all the way down.
In the 90s in Ca when prices were depressed the “recovery in Re” was just around the corner. Many articles were written about the improving conditions but they didn’t happen for many years.
I agree with that - psychology will change in the spring ‘07 and no one will believe we are at the bottom when we do finally get there (of course, it’s always hard to know when you’ve actually reached the bottom, but Joe Sixpack will only believe it about a year after it actually bottoms out).
Yep, when we are hearing that “real estate is a terrible investment” and “why would you buy when you can rent for the same price” a few years down the road, and people consider you crazy for wanting to buy, that’ll be the time to get into the market.
at some point they’ll be right.
There is a Vancouver in the USA - north of Portland, OR.
Hendrick said the Pacific Northwest has weathered the national housing market downturn better than other regions where home values have sharply declined — San Diego, Phoenix, Las Vegas and Miami, for instance, he said.
“It’s not happening here because this is an in-migration area,” he said “We have a good job market. It’s a very favorable environment.”
Yes, 50,000 people moved into Oregon last year. Yes, jobs are being added now. But… it’s leveled. Oregon and and the Portland/Vancouver MSA respond 1-2 years late to an upturn in the economy. We’ve had a good year. But that can and does turn here. If he weren’t a realtor, his opinion would be, like mine, “cautious optimism.”
Prices might not be down(yet), but sales sure are. Here in Norcal we’re talking about 25-30%.
This seems to me to the 800lb guerilla no one is talking about.
Heck, if my business saw that kind of drop in volume I would be in deep doodoo.
I guess these realtors just don’t know it yet, but by my reckoning many of them are unemployed.
And downturns in RE follow the same pattern. First sales decline, then the price declines (usually about a year after the sales declines started in earnest). Look at the markets leading the charge down (S. Fl., LV, SD, etc.). They’re sales started to decline in 2005, and the price declines really only started for them this summer. Other markets are following, it just takes time.
In case you prefer to see a graphic of this, please look through this presentation and you will find a very good one:
(Caution: .pdf file)
http://www.realestateclubla.com/pdf/Cagan_FireBurn_1104.pdf
It’s on p. 6.
Also don’t miss the “Important note: Psychology lags reality.”
Man, scrolling through those maps on p. 11-36 is definitely something - it’s kind of chilling.
GS: Thanks. Very good reading (well, OK, mainly looking at graphs, but good info). Nice that he had to add a new purple color for over 50% appreciation. And nice to see some language in there that we’ve seen in some quotes, like “Buyers strike.”
Don’t let the purple pages scare you. Mark Hulbert has assured us today (on marketwatch.com) that parabolic price increases have little predictive power for where future prices are headed…
GS, this is awesome. Has he done anything more recent?
The Real Estate Cycle in 2006
Evaluating Market Position,
Identifying Turning Points and
Constructing Scenarios
May 18, 2006
http://tinyurl.com/yad9d2
Enjoy!
Cagan implies that low interest rates drive housing prices upward, but there is little discussion of the role the GSE(s) play. Without the GSE(s), there likely wouldn’t be the RE cycles that California experiences. Think about it: If some bank had billions to lend they could afford to get “loose” with their borrowers if rates were high, e.g., the credit card industry. But when mortgage money is dirt cheap (low rates = high risk) the brokers look for any loser with a pulse, and sign them right up — because the GSE(s) will take fall. What ever happened to the free market system?
Cagan does some cool presentations, but either he does not get the picture, or willfully ignores it as a job requirement.
“Without the GSE(s), there likely wouldn’t be the RE cycles that California experiences.”
Actually, Robert Shiller documented the first California real estate bubble burst in the early 1890s, long before GSEs were invented. And for that matter, the gold rush was quite similar to a real estate bubble — lots of fools thinking they would all be able to get rich doing the same stoopid thing, and a few profiteers on the sidelines (like Sam Brannan — Robert Toll’s spiritual ancestor) who made a mint by selling to a burgeoning herd of fools.
“price declines really only started for them this summer”
Exactly. August was the first month of YOY declines. It’s only been 4 months yet people are already calling a bottom.
This is exactly what we are seeing in the Detroit Michigan area. Sales started to decline, inventories swelled the past two years. We are just starting to see prices decline to significant levels (not just 1-5%, more like 20%.)
How does a guerilla outrun the federales when he weighs 800 pounds?
Just like a rhino. It can reach high speeds in short bursts, and is very dangerous.
I was just being a smarta** about the use of “guerilla” for “gorilla.”
Che Guevara wouldn’t be an icon of cool if he’d been 800 pounds obese.
Two poeple I work with have just recently purchased condo’s in the Richmond VA area, Against my informatoin provided by this sacred blog.
It is amazing how they try to tell me that renting is throwing money away. First the cost to rent vs. purchase is less in Richmond. When an asset is depreciating you are only renting at a higher price. What they don’t realize is how much money they are loosing by buying a property that is renting for 60-70% of what they are paying. Obviously the housing prices in Richmond have not become insane compaired to the real hot markets but when do the math. Even with the cost of the upkeep of ownership taken out of the equiation it does not make sense to buy. Then they have tried to tell me that you get a tax break - tax broke off in you A$$. You can reduce the amout of taxes you pay but compaired to what the cost of interest is that is marginal.
Oh well, in some ways I can’t wait to say “I told you so” on the otherside you wonder just how they manage to get through life.
Also — Did everyone see the “Hard landing for the housing market” today on msn. HAHAHAHAHAHAHAHAHHAHAHAAHAHAH!.
A few days ago, I downloaded all the data from the OFHEO website for Richmond, and plotted it to see if there was a bubble. The results clearly show that there is one. It’s not very big and nothing compared to LV, Sac, SD, or PHX, but from the data there should be about a 15-20% loss in value over the next few years. House prices are also not so high, so the total dollar loss will also not be so big. But you’re right, there is definitely a bubble.
As far as tax breaks go, it depends on your
situation. The standard deduction for jointly
is pretty generous so your deductions have
to clear the hurdle of the standard deduction
before they become useful. I suspect that most financial advisors ignore this fact when
pitching that you buy the most house that you can get a loan for.
That tax deduction could go away or change in the future too.
HELP:
HOW DO YOU LOAD FDF FILES ON BLOGGER??
“The sizzle has gone out of Calgary’s housing market as rising inventories and cautious buyers have ended the bidding wars and soaring prices that marked the first half of the year. Price reductions of $40,000 or $50,000 have become common, realtors say, and some top-end buyers have even tried to back out of deals after realizing they may have overpaid by hundreds of thousands of dollars.”
“‘Anybody who thought it was going to continue forever was smoking something funny,’ said John Riseborough, a 23-year veteran of the industry in Calgary.”
Here is Western Canada, we are about 1 year behind the United States in terms of the progression of this RE cycles. Things have only just slowed down about 3-5 months ago, and we’re already getting the articles saying, “it’s just a lull, wait for the Spring market!”
I was speaking to a friend in Winnipeg tonight and she claims her home is now worth 350,000 for what used to be worth no more than 130,000. She has heard nothing on any declines in her area. In fact there are very few homes up for sale in that neck of the woods right now.
Does anyone have any predictions or any blogs that focus on Western Canada including Winnipeg? I would appreciate it.
Here in a nutshell is what’s wrong with everything
http://losangeles.craigslist.org/sfv/clt/236350288.html
Next year’s must have stocking stuffer: 4close-me-Elmo.
This posting has been removed by craigslist community.
(The title on the listings page will be removed in just a few minutes.)
I never get to see your craigslist posts as they’re always removed too fast. Do they have
some software that automatically removes craigslist posts when they’re linked from this blog?
The Tampa Tribune. “A New York lender fears it is on the hook for millions of dollars in loans that now total more than the New Port Richey properties are worth. Lehman Bros. filed suit in Tampa on Tuesday against a group of investors, title companies, a mortgage company and an appraisal company involved in potential mortgage fraud at a Pasco County condominium complex.”
“Fifteen defendants used overvalued appraisals in a ’scheme to defraud’ the bank, according to the lawsuit. The 13 properties each were appraised for $733,000. The lawsuit says the triplexes are worth ‘barely one-third’ of that value.”
Full Post:
http://radar.planetizen.com/node/17452
These are hilarious. Education in the RE market.
http://www.sptimes.com/2006/11/17/Tampabay/Sitter_s_fears_set_ar.shtml
http://money.cnn.com/2006/09/22/real_estate/help_home_for_sale_young_ballanco/index.htm
http://money.cnn.com/2006/10/24/real_estate/help_home_for_sale_Morrisett_maldve/index.htm
http://money.cnn.com/2006/09/15/real_estate/help_home_for_sale_Eaton/index.htm
http://money.cnn.com/2006/09/08/real_estate/caught_in_the_bubble/index.htm
PBS’s “NewsHour with Jim Lehrer” has a report tonight on the housing slump. For those of you in So. Cal., you can see the NewsHour on KCET 7:00PM to 8:00 PM.
Here’s a link to the transcript on the web site:
http://www.pbs.org/newshour/bb/business/july-dec06/housing_11-17.html
Thanks for that URL — very entertaining. The Manhattan crowd just doesn’t understand that manufacturing means wealth; a services economy won’t have a middleclass. What we gleefully label as corruption elsewhere is called lobbying here. Things haven’t changed much, just the faces.
YOY decline in Central San Deigo is 7.5 %. I find it hard to believe, but that is what the numbers say. The median price in cental SD was $545k in Oct 2005, and the recently published number for Oct 2006 is $505k.
I wonder what the real numbers would be if they factored in incentives. I had to offer incentives on two places I sold in the last 10 months, none on the 3 places I sold in 2005. I think if you factored in incentives it would add another 5-10%.
Bob Dorsett said, ‘The sky is not falling at all, by any stretch of the imagination.’”
The sky will never fall but, home prices certainly will.
‘We have never before seen lenders offer 100 percent finance in a softening property market,’ he says.” (Australia)
Who says the US doesn’t export anything anymore? Looks like Oz got a big shipment of stupid.