“Predictions Of What 2007 Brings?”
Readers wanted to know what you see in the year ahead. “How about predictions of what next year brings? 2007.” And here are some predictions from the mid-year 2006 thread. “It appears the call I made late last year, of a y-o-y decline in June 2006 for national US median existing home sale prices, was incorrect, or premature.”
“One interesting thing though; I’ve started to see the first references to Calendar Year national median prices never falling. That sounds to me like some RE players are starting to worry that we will indeed see y-o-y national declines by the end of this year, and are preparing a fall back position where they compare all of 2005 with all of 2006.”
One from Virginia. “My prediction is that the house we are looking to rent is also for sale and has be reduced from $710k to $659k just since March ‘06 and it will only continue to fall. It’s in Loudoun County, VA - Potomac Falls area. We saw several 800-700k homes with prices slashed out and reduced several thousands. I predict this will continue.”
From California. “Predictions are a dangerous game. 40%-45% Real declines in So Cal. 15-25% nominal declines in So Cal. Certain properties will go for less but as far as the nearly useless stats tracked by the RE industrial complex that is my prediction.”
“I am thinking late 2009 for the bottom in So Cal. I don’t think any appreciation will happen until later about 2012″
A general projection. “Inventory will continue to rise and the buyer seller stand-off will continue while both sides dig in fro the rest of 2006. Areas which have already experienced extreme appreciation will continue to slowly deteriorate, while outlying areas will continue slow appreciation as the outer reaches of the shock waves propagate outward.”
“I would not expect meaningful downward price action until the coming wave of foreclosures and much anticipated workforce reductions associated with building and real estate begin to have an impact. This will be the BIG news for 2007 thru 2011 and when the storm abates I predict the middle class will be a whole lot smaller, the poor poorer and the rich richer.”
“Property prices may well decline below the 40 year trend line as lenders swell their inventory of foreclosed properties and are forced to begin dumping en masse.”
One from Washington. “I predict that by the end of the year, the Seattle area will finally start showing signs of the bubble seen in the rest of the country.”
One from Florida. “I predict numerous Florida cities median prices will be negative yoy for Q2, several already are as of May. I think all of the following will show negative for Q2:
Cities YOY% as of May
Sarasota/Bradenton 2%
West Palm Beach 0%
Punta Gorda -2%
Panama City -1%
Melbourne 0%
Ft Lauderdale 3%
Naples 1%
Ft Myers 5%
Ft Walton Beach -9%
Ft Pierce 0%
“Already heard the first excuse for negative medians from a Realtor: ‘Oh, this just means more first-time buyers were jumping in ahead of the rate increases. Median indications aren’t that reliable…’”
A couple on rates. “8% mortgage rates by 1/1/07, skyrocketing inventory, double digit mortgage rates by July, 07 as lenders overreact to defaults, which were caused by the lack of underwriting. Bye bye middle class.”
Another, “If the Fed. decides to go to 5.5% at the next meeting, simultaneously stating they intend to pause at that level (barring dramatic economic changes) until the impacts have worked through. This would mean at least a 6 month pause (and wouldn’t be a bad strategy IMHO).”
“If the Fed. did this, I think long rates might go up a bit as the yield curve renormalised, but more importantly I think the housing market in many places would crater as the Great ARM Reset progressively kicked in.”
One updated a view. “I retain my prediction of last year that this mid year the Fed will pause once here at 5.25% and resume. This is part because they need time to judge the effects of so many past increases and to avoid looking like they are meddling in the mid-term elections.”
“No more cashing out, no more equity nomads, no more flipping. We’ll see the first halting stumbling steps this fall after a summer where no one budges and to the surprise of both sides nothing happens (except in the markets). Sellers won’t budge on price and buyers won’t pay those prices.”
“Expect a groundswell of corporate relocations away from Bubbletown. Expect people to adopt the single word Bubbletown to stand-in for Bay Area, LA, San Diego, Phoenix, Miami, Orlando, etc.”
Another had specifics. “EOY: Fed Funds Rate: 6% EOY. 1st National housing price YOY decrease : 9/06. State with biggest hit: Florida. 2Q Economic growth: 3.6%. 3Q Economic growth: 3.1%. 4Q Economic growth: 2.5%.”
One from California. “High-level prediction: Stubborn Orange County sellers will not start making real price concessions until late 2006. 2007 will be a steady slide downward.”
An economic viewpoint. “Personally, I think that a recession is baked in the cake.”
1) Inverted yield curve.
2) MEWs are practically done.
3) RE prices are reversing.
4) Declining leading indicators.
“There is no more fuel left to burn. IMHO we are headed for a deflationary debt collapse that will crash the economy. People will not borrow to buy more RE when prices are following. A deflationary psychology reinforces behaviour, just as an inflationary one does.”
From San Diego, “San Diego: less desirable areas will start to see real (>10%) reductions. Downtown condos will drop even more. Sellers are hanging on to their unrealistic prices in more desireable areas (but rarely selling).”
“Numbers of listings might start to drop or level off for 2-3 months as some sellers pull out, realizing they missed the boat….. And of course the Realtors will have to compare to 2004, because YoY will show declines.”
And finally, “Mid year Prediction, 6-month forecast: 1. *Major* decline in the buyer pool by October, across the nation. 2. Continued growth of inventory at a steady pace over the rest of the year. 3. 1/4 point rate hikes at the next three fed meetings. 4. ‘For Sale’ prices will tend to remain at the peak, despite onset of seller panic in fall, or the peak minus 10-15%. People will hold onto their suicide loans hoping for a turnaround until all resources are exhausted and the bank forecloses and sells at auction.”
“Cultural attitutes on renting vs. owning shift over the first half of 2007.”
To start off, here are a few from recent topics threads. Note: these are not my predictions!
‘1 Stagflation
2 Home prices median declines 10%
3 Fed holds
4 Dollar down
5 El Nino normalizes leading to more active hurricane season..therefore Gulf oil facilities hit.
6 Chinese oil demand drives oil to $90 late 2007
7 Uranium breaks $100 gold $700
8 US equties rise on high profits due to outsourcing and M&A driven by easy credit (read Chinese money)
9 US income ratio worsens.’
‘1) recession
2) home prices down 20%
3) FED easing mid year
4) dollar down 10%-20% against EURO
5) Stock market down 20%’
‘1) Soft Landing
2) Home Prices down 20%
3) Fed easing mid year
4) Dollar flat, Oil up
5) US Equities up 20%’
‘Fed easing = up market’
‘Prediction: China will blockade or Invade Taiwan, The US and other countries will threaten or start a war, China dumps hundreds of billions in Bonds crashing the market 40-50%.’
‘1) Yield curve curve inversion reversed, long bond at 7%
2) Housing debacle deepens as desperate traders cling to 2005 pricing.’
‘I predict a major crackdown on blogsters attempting to torpedo housing values. Violence escalating against anyone remotely anti-housing market. Labeling you a communist or somehow unAmerican if you don’t own a house.’
I ‘When all is said and done, however, homeowners will get a repreive from the gov’t in some sort of ‘chump change,’ payable by taxpayers of course. S&L scandal all over again.’
‘1. 2M homes in forclosure
2. Home sales down 20%
3. median prices down 6%
4. SD, Sacramento, Phoenix, SW & SE Florida prices down 15%
5. GDP 2007 in at 0.2%
6. La Palma Volcano erupts in Canary Islands–30m Tsunami strikes East Coast— prices then down 60%, GDP -9.4%’
Sorry if this is a repeat - original post did not show up after 10 minutes
I will stick to what I know more about (some what off alignment here)
The predictions about China doing anything aggressive are highly unlikely. I would put it on par with Bush being elected to a 3rd term (yes I know the constitution does not permit it). The reasons behind it are thus:
1) China is working to bolster its image as a noble world power ahead of the Beijing Olympic Games. This event is of monumental symbolic importance to the ruling Communist Party as well as the people of China. China will take no overt action to lower its standing on the world stage. They do in fact fear something like the 1980 USSR boycott might take place, diminishing the importance of the China games.
2) China is not yet ready to challenge the US Navy on the high seas. The PLAN (China’s Navy) is working hard to modernize their forces and equipment, but unless they could secure a foothold on Formosa in less than 72 hours they would be defeated by the 7th and 3rd fleets at sea. Frankly put, while the PLA and the ruling party would love to bring Taiwan to heel, they lack the military capability to do it at this time. They are, however, working hard to put that kind of power in place. Most likely not possible until 2012 at the earliest.
3) China is about to have bigger problems. Like it or not, the way we have been doing business for the past decade with China means we are economically welded together. The nature of this has been well documented in comments here, and insightful posts at places like iTulip.com and Calculated Risk (and others). Our economy us slowing down. It may slow down to the point of recession. As we slow down China will face a harsh reality as they suddenly have less money coming at, while at the same time they face the worry of the value of the dollar (which their currency is pegging to) sliding lower. Not to mention that as the Credit bubble deflates they are going to be holding the bag.
On a completely different geo-political tangent, I love watching the flight to the Euro. What makes it even more fun is the near religious belief that some folks have that it is a essentially stable currency and will fare better than the Dollar in the coming slow down. Has has been documented here by many of our European commenters, they have bubbles there too. In addition the Euro is an entirely synthetic currency - it is not backed by any nation, just a promise of a group of nations that they will support it. The EU itself is facing some political challenges, and I think folks who are betting long on the Euro might just be ignoring some of the outcomes.
Sigalarm — nice post.
Yes, I agree that the Euro is not nearly as good an alternative to the “dollar” as many think. Best to stick with the “golden oldies”: the Swiss Franc and of course gold itself.
The Euro is a junk currency, but politically favored at this time as an alternative “Western” currency to the USD.
Got gold?
China is already the most powerful military nation in the world besides being a manufacturing powerhouse but the flag wavers in the US just cannot accept the fact that John Wayne is dead.
China is still a YOUNG economic giant with a future. As for the US going up against China? The US military fell back in the Korean War when Chinese troops joined the North Koreans and, if Iraq is an example of US military prowess, I doubt if China is that worried. Since the Korean War, China has become far more powerful.
This is not an anti-american post. It’s a fact of life post. The US has had it’s time in the sun like all imperialist countries in history. Greeks, Romans, Spanish, French, Germans, etc. It will not show up for a long time because it takes decades for a once powerful country to decline.
US dominance of the world stage, both politically and militarily, could have lasted longer but in the last 40 years, the US has elected Presidents and politicians who were media and tv camera acceptable but were bad politicians. FDR could NEVER get elected today but a Hollywood actor who played a hero in a war movie can. Presidents today are perfect for spouting sound bites. Attractive on tv but useless at leading. George W. Bush being the poster boy for incompetence and bad judgement is a classic example.
However, the good news is that China isn’t interested in doing anything which will get in the way of it’s rise to #1 super-power politicially and militarily in the next 30 years. China is much to busy stacking up money while the US wastes it. China isn’t going to attack anyone. Including Taiwan. It isn’t in their best interests.
Finally, the US has to wake up and realize the old way of fighting wars by using massive firepower like shock and awe (lol) is OVER. War from now on will take on one of two kinds. Nuclear or terrorist style. Nuclear will mean one nasty event by organized gavernment back military which will kill hundreds of thousands. Then world leaders will move quickly to try and stop anymore nuclear attacks.
The other kind of “war”, which is far more likely, will be with many different factions from many different countries, fighting one entity. Bush has already stirred up a hornets nest in the Islamic world, with millions and millions of muslims hating the US. Americans do not understand these countries because Americans cannot think ahead of next Saturdays NFL game but these nations do NOT forget and the US is going to see problems from these muslim areas which will last for 100 years or longer. Ask the Armenians concerning the Turks. The IRA concerning the British. Thousands of different factions or splinter groups who have the same objective (call them terrorists if you like) conducting hit and run attacks on foreign civilians or the military who are trying to occupy them. Just like we are seeing in Iraq. Just like the British found out in Africa, Cyprus, Malaya and a dozen other places.
Finally, wave the flag all you want. Boast about the US firepower but bear in mind one thing. The US has not won a war in 100 years unless it had other nations with it and, again because of Bush, there are very few nations around the world who think the US has any credibility and CERTAINLY wouldn’t throw their lot in with the United States in the future.
Mike,
China needs a 15% economic rate of growth to maintain political stability. You think they’re a money hoarding, economic powerhouse? LOL. Their banking system is unregulated. They stave inflation by not investing their trade surplus into their currency. They artificially depress wages by maintaining a low currency valuation. They do this to maintain their trade surplus.
However, they have the nasty little problem that they cannot reinvest their debt instrument profits into their own country because that will create uncontrolled inflation (do you remember the ‘97 Asian crisis?). They have the same problem as Norway, who cannot invest a $100b+ in savings because it would create even more inflation problems there.
China are a so called industrial powerhouse, but they cannot shut down overproducing sectors because they cannot afford the massive layoffs. This is why they overproduce steel and are causing its value to fall.
An economy run by a central government will NEVER compete with a free market. NEVER!!! America has 5% of the world’s population and 55% of the world’s profits. There is a reason for that.
So keep glorifying your pseudo-communist buddies. You will be embarrassed to admit it in the future.
I do believe America is headed for another tough recession, possibly depression. However, it is nothing compared to what China is setting themselves up for. They cannot take the corrective measures necessary because it will topple the government. You’re betting on a limp horse.
China reminds me of a bum in a cardboard box under the freeway with a $1,000,000 savings bond.
Good post Mike, but I would point out that if China were to attack Taiwan that the US would not be doing it alone there. We would have Taiwan, along with possibly Australia, Japan and maybe a few others from that part of the Pacific. I can understand how folks in this day and age think we are without friends and allies, but if a crisis were to pop up like this, I can assure you the first “oh shit” call would go out to the US. Flag waiving that might be, but it would be the case.
You are free to suspect the US military’s prowess if you care to, but I would submit to you that it is irrelevant because the Chinese have nothing to gain from starting any action with Taiwan (see first post).
And for the record - “Shock and Awe” was not to impress the folks in the US watching CNN or Fox News - it was to send a message (not just to the Iraqis). I can assure you that the message was received. The sad truth is that name was not ever intended to be for public consumption, but some Neo-Con types had some loose lips.
Mike,
You make many good points.
I’m in the same camp. NOT because I’m un-American, but because the truth is right before our eyes. There are billions of people around the world with great production capacity and consumption capacity. To assume that we are somehow “superior” is the core reason we arrogant Americans are despised so much.
We left behind those things which made our country great: a strong work ethic, respect for a person’s private property, civil liberties, a government by the people & for the people, AND compassion for those less fortunate than ourselves. We once believed that we should maximize our individual potential so we could build something greater than ourselves.
And so another empire dies…
Amen, CArenter -
China doesn’t stand a chance because we have Ralph Reed on our side, and god talks to him, so they’ll never win.
I hate to be the Gekko of war but facts are the US conquered a more or less modern country with a population of 26 million people. From the beginning of operations till the present we have lost slightly over 3,000 soldiers. The fact is that by any historical comparison the war is a great victory. Financially its a total loss which is the real problem that needs to be sorted out and taken into consideration in future engagements.
The US has lost approximately 3,000 soldiers in conquering and occupying a country with a population of 26 million. By extropolation we would lose approximately 231,000 soldiers to conquer a country with a population of 2 billion! Of course this is nuts but it puts the results in Iraq in perspective. Our boys and our war machine have done an incredible job.
In sorting out the end game my suggestion would be to take a few pages out of the playbooks used by the British in South Africa and the our own pacification of the Indian territories. In both instances insurgents with home field advantage were eliminated.
With a tab or on a slab the United States is presently the most powerful country in the world although the window of opportunity is shrinking.
Unlike Iraq, China does have nuclear weapons.
Before you crown China the next world superpower, they’ll need to overcome a number of pressing social issues: mass illiteracy; mass poverty; a very, very large delta between the rich and the poor; poor infrastructure outside of urban areas; and regional corruption that drawfs what is seen in Western nations.
They have the manufacturing base, yes, and the population (although that is shrinking and will continue to do so while the 1-child policy is in effect), but it takes more than a lot of factories and a lot of bodies to make a nation the #1 superpower.
Man, do I wish the whining about the good old USA will stop. Our military is so far beyond any other military in the world. And everytime there’s a war, it’s a tremendous learning experience and it just gets stronger and stronger.
That’s just the military - we’re stronger in so many other areas as well. Anyone who would say that we’ve not had a military victory in Iraq either is uninformed or has their own ulterior motive for spewing such nonsense.
A lot of time has passed since our initial invasion and the abandonment by our Eurostrash ingrate friends with the short memories. It’s now time to bring them back in so that they can share the work and expense. But we mustn’t leave. Until such time that the Islamascum are defeated - and it could be 50 years, we need to stay there.
When you are number one there will always be a bunch of sore losers who resent you. They can’t be number one themselves or even number 100 so they take shots at you and team up with fellow weak losers. Frankly, the Islamaterrorism is nothing but an organizing principal for all of these losers to unify against us. I don’t car if it’s ten countries or ten hundred countries, these weak losers will never match our might militarily, monetaraily or in any way. A thousand years ago they were world merchants and have been left behind. Name more than a handful of great contributors to civilization that have hailed from the motherlands harboring the Islamavermin. There are billions of these folks. But almost no real contributors. Look at the Jewish population of the world. It’s a tiny fraction of the population in these Islamavermin harboring lands. Yet look at the thousands of contributions the Jewish people have made in almost every possible discipline.
In the U.S., we are great for a lot of reasons and one of these is the hybrid vigor that derives from our diverse backgrounds. But it’s also our incredible freedoms and opportunities.
Unfortunately, in our Democaracy, the greatest form of government on earth, we allow our whiners to whine and complain. It’s OK to criticize, and in fact healthy to a point, but many of the whiners have nothing better to do than to bitch full time about how screwed up our country is.
Well folks, wake up and take a look around. There aren’t too many places where you can bitch and moan the way you can here. Cherish your freedoms and respect your country. And respect your President. If you don’t like whose in office, go to the voting boot next time, something the majority of the whiners don’t do.
I don’
t have a problem with China or India or any civilization that’s emerging. We’ve had a tremendous amount of success and it’s great that others can partake as well. Actually, it’s pretty amazing how cheap some of the stuff they make is. If we didn’t have their cheap labor we’d be paying a ton more. So that’s OK to a point.
I’d be surprised if home prices don’t come down by a solid 10% or more in many of the hyperbubbly markets. And if this is followed by home price staganation for a few years, the dip in real terms could be 20%-25%.
Personally, I think that’ll be one hell of a buying opportunity and if you’re saving your hard earned pay for a downpayment now, your didcipline will pay off. But to wish some sort of terrible economic plague on this country just because you’re pissed off that at age 28 you can’t have your own home - well that’s childish. Do what the rest of us did and put in your years of hard work and thrift and your time will come to.
I promise you that if the economic and other collapses some of the whiners wish on this country were to materialize, they’d be the first to cry and the loudest. Nothing but spoiled, soft, ungrateful punks.
Apologies to all the good people who had to read this.
Apologies to all the good people who had to read this.
That I agree with. But the real question is why you wrote it. Do you really think you will convert anyone here to your cult?
Technovelist - Reads pretty mainstream to me, I don’t see how he has to convert most Americans.
Perhaps a little articulation on your part about why this is cultish would be helpful. Or perhaps you are objecting to the length and just didn’t bother to read the whole thing.
I believe that you are wrong about (radical) Muslims hating the U.S. because of George Bush or because we don’t understand them. Radical Muslims believe that all non-believers, that’s you and me, should be coverted to Islam or destroyed. Period.
The last “Hollywood actor” in the White House ended the Cold war. Europe defeated Hilter because the U.S. decided to get involved in the European conflict, even though the Pearl Harbor attack only involved the Japanese. When other countries get in trouble they will still look to the U.S. to bail them out.
I may not “wave the flag” but I make it a point not to step on it.
By the way, what’s going on with the housing bubble.
Peak Oil ended the Soviet Union for the most part, which relied on oil exports to survive. Manipulation of OPEC markets to drive down oil prices and reduce revenue of USSR’s oil exports was beneficial. Bleeding the Red Army dry by supporting the Bin Laden-ites in Afghanistan helped.
Sigalarm, you make a lot of sense. All things being equal, you are probably right. However, you yourself said that China will be facing serious problems of its own. There is an outside possibility that they might decide to excercise external muscle to shift the focus to foreign policy. Recovering Taiwan would be a major vindication for them, but they might also want to grab the oil of Kazakstan (spelling?)….
China has major issues. Land use decisions and property grabs are one of the major things causing unrest and ill will. This is also an example of a situation where China and the US share a great deal, in this case polluted cities becoming increasingly dense and thirsty for resources, power, water, and waste dumps. In the US ecologically sustainable building is having a huge upsurge because of return on investment savings, and in China the same kinds of approaches are being used to convert open sewers into livable canals and tame severe flooding and drainage problems. China and the US are ahead even of Europe in terms of problems with pollution and unsustainability caused by out of control urban development and poor land use decisions.
Next year in China, it’s the astroligical year of the Pig. Buy pork !
Posted Question ” “Predictions Of What 2007 Brings?”
If there is one more dumb thing left in Iraq to be done GWBush will do it.
The full weight of the debt from the unfunded war will come “front and center”
The rampant fraud in the lending ind. will be seen for what it really is.
How about the home builders? I continue to think that TOL will be bankrupt by the end of 2007. And WCI will go before TOL.
A general projection. “Inventory will continue to rise and the buyer seller stand-off will continue while both sides dig in fro the rest of 2006. Areas which have already experienced extreme appreciation will continue to slowly deteriorate, while outlying areas will continue slow appreciation as the outer reaches of the shock waves propagate outward.”
Agreed, but it is important to recognize that water leaks out of the bottom of the dam. It is the homes that are priced to sell (i.e., priced low compared to the comps) which will sell most quickly, and these become tomorrow’s comps.
I have to disagree with you on this one.
Many of the outer bound areas were built because more core areas were way over-priced. With loss of time and money on commutes, these areas will fall in tandem with the core areas, only harder.
Why would you pay an inflated price when you can get something cheaper close to town?
You misunderstand my post. I am comparing homes for sale in the same part of town, not in the core versus outlying areas.
Think about all the homes for sale in some nice zip code closer to town. The ones that are priced to sell (especially bank REO) will move, and the ones that are priced at 2005 levels will sit forever. The ones that move become the new comps.
My prediction is from my own economic situation. Much spending and living off CC’s. I calculated out all my debts and figured it at $500mos/36months to be free and clear. This doesn’t really include interested and unexpected. It was quite the shock when I spelled it out clearly simple terms.
Suffice to say, 1 car is up for sale, some random goods I don’t need around the house etc. to try and work about $5k off the debt. I’m retrenching, and I think other people are going to start doing the same.
Not sure how I’m going to pay for an upcoming wedding, more debt I suspect. Go me, and my consumerwhoreism. =)
If it’s not your wedding, feign having the flu and send a card wishing the couple, “Every Happiness.”
hehe, it is my wedding so my only way out now is a bachelor party that goes horribly wrong and pictures to the bride. =)
I can arrange that, for a price
(cash only)
Sorry my HELOC is tapped out, I’m upside down and eating raman noodles. No cash for you, but I have some empty beer bottles that I use to drown out the pain.
Dude, do yourself a favor. Elope and give your wife to be a 10k rock or gold. Keep your money in the family.
Better idea. Confess to your future bride that you think you might be gay. That should work.
Or just tell her you need to retrench and want to start with wedding costs. My sister and bro-in-law had a gorgeous wedding with 100 guests for $3000 (including engagement ring and wedding dress) a couple of years ago.
Might as well find out right away whether you’re marrying someone who’s going to be a real partner, or someone you’re going to have to carry for your whole married life.
I second that emotion.
Yes, that is the best course of action indeed. Open your finances to each other and think about how to get out of the hole. If she can’t deal with it, she is the wrong one.
Best wedding I ever attended was my best friends. It was classy, simple and cheap! 100+ people a DJ, food, beer, even a champagne toast for under 2000.
Josh
I have to agree, ask her to work with you to come up with a decent budget you can both live with, and if she won’t, RECONSIDER… Bridezillas make even more difficult wives.
Simply don’t. Do not pay for the upcoming wedding. I applaud you on taking immediate measures to draw down your debt as fast as you can. Do not take on any more debt. Someone will “have to” adjust their wedding plans to meet your economic reality or pay for the wedding herself (daughter)? It’s that simple.
Village BC,
Listen to these posters. If you find yourself in debt, the first thing to do is stop charging things!
Weddings, like McMansions and flashy SUVs, are simply a means to separate idiots from their money. Do yourself a favor and suggest eloping (or a nice backyard/park) wedding. If she balks, time for you to seriously reconsider your decision to marry her.
Without a doubt, the very best weddings I’ve attended were the cheapest. No unrealistic expectations or formal “pomp & circumstance”. The bride and groom actually get to talk to their guests, and everybody has a good time.
REALLY think this one over. Good luck!
CA RENTER,
“Weddings, …….. are simply a means to separate idiots from their money.”
With your permission I’m going to use that line in the future when I’m confronted with two pennyless youngsters looking to drop 10k.
If you come from a large, rich family, the idiots are your relatives, and the winner is you!
congratulations VillageBC! There’s never a wrong time to marry, enjoy, and good luck to you both.
As for weddings - we went for super-cheap and cheerful for ours. Local wedding chapel - complete with atrocious plastic flowers and chatchkies. Followed by an outdoor lunch at a local Italian. One of our friends made us an awesome wedding cake and everything (including my dress and our honeymoon in San Francisco) came to under 5K. Husband rented a morning Suit, and I had a opal for my egagement ring - half the price and twice the beauty of a diamond.
I made all the invitations myself (thank god for a degree in graphic arts!) and the biggest bill was for the flowers and bouquets. Cheap disposable cameras at the wedding chapel and on each of the lunch tables meant that guests could take photos, so no need to hire a photographer.
Many people commented on how nice it was to go to a ’sane’ wedding, where the bride and groom were obviously enjoying themselves and had time to speak to each of the guests, and didn’t look haunted by the bill at the end!
Our wedding may have been cheap money-wise, but was a day we’ll never forget, and certainly didn’t feel like it was in any way cheap emotionally or spiritually. Money won’t buy you happiness, so you might as well start as you mean to go on.
Here it is - just select “United States” from the dropdown menu and you will see there has never been a YOY price decline.
http://www.ofheo.gov/HPIRegion.asp
On the other hand, national figures have little meaning as they obscure turbulence within individual geographies. Use the dropdown arrow to pick some smaller areas and you will see YOY declines.
Don’t expect a national decline any time soon. But look for some serious slippage in loser markets like San Diego and Miami.
Huh? We just had a record 4 straight months of YOY declines, per the NAR.
“Don’t expect a national decline any time soon”
Are you sure about this? Please elaborate.
Never sure about the future. But history says prices don’t drop nationally. Part of this is because each component geographic area declines and increases at different times.
Really? Which geographic areas declined in 2005?
In 2005, there may not have been any declines.
Sorry, my bad. I meant 2004. The point being which area when down in each bubble year 2002-05.
Sometimes no areas go down. Right now we’re seeing some go down, while others continue up. There have been many times when all have gone up together. But there has never been a year when all areas (aka the whole country) went down.
So you are saying prices will not fall nationally due to a Pricing Axiom which is demonstrably false in recent memory. May I humbly suggest that since the “local” markets synchronized recently to the upside that a similar synchronization to the downside in the near future is more than just “unlikely.”
Or to put it another way, “what goes up…”
Look at the URL I posted. Prices fall by state and city. But they never fall nationally. I take reasonable sustenance from this broad swath of history.
The data presented starts in ‘75. I’m older than that.
It says that prices did not decline nationally during the inflationary ‘70 (inflation does that), nor during the Great Boom from ‘82 - ‘94 (booms do that), nor during the hyperliquidity ‘94-present (liquidity fuels loans which distorts pricing).
On a longer scale not presented in the graph, before the inflation years there was the Family Boom of postwar GIs starting families and getting homes.
On the long term, do you really think housing prices went up somewhere each year during the Great Depression? How about during World War II when everyone was buying bonds like crazy as a way of pitching in on the war? Do you think Housing Prices rose during this bond frenzy?
After a bubble, you simply have to anticipate prices declining unless a Reason comes in to moderate or erase the inevitable declines. Without postulating a Reason or Cause for the effect, you are speaking the exact style of reasoning I used to hear about how the stock market never declines as a whole over a period greater than five years.
Market behavior in the past decades had actual reasons for behaving the way it did. It did not do it because there was a magic “declines don’t happen” rule. There were causes to every trend. We can all see causes which could decrease prices nationally, and none to prop it up. So you’ll have to cough up an actual reason rather than “this is how things behave.”
For example, you might say Fed-initiated stagflation could do it. I not convinced that would work, but at least it would be a reason.
So your reasons are?
Not all areas got that bubbly. The bigger they are, the harder they fall. And the non-buubbly areas may not fall. Do you have figures predating 1975? The site I cited only goes back to 1975, but 30 years is a long time.
Population just hit 300 million and if you think we went from 200 to 300 fast, look out for 400.
I’ll try and find out when 2006 will be reported.
Water is densest at 4 degrees centigrade which is why ice floats and eventually the floating ice gets thick enough so as to insulate the wtaer below from icing. Once prices drop sufficiently in real terms, buyers come back in. A new generation and immigrants will always want to take their shot at getting into the game.
In many markets I would not rush in and buy a house right now, as I think in many markets we’ll see some easing in price. Thankfully, we have a house which has appreciated as our mortgage has gotten paid down and made to seem samll by inflation. On balance, there’s more danger being out of the market than in it. No, I wouldn’t buy now, but I sure would be careful not to fall asleep at the wheel. Eventually the upward movement will resume. The next couple of years may be safe to stay out and save a downpayment.
Drentzel, It sounds like you’ve really convinced yourself. Good luck. But IMHO you’ll need far more than that.
Global warming. The ice caps are melting.
“Water is densest at 4 degrees centigrade which is why ice floats and eventually the floating ice gets thick enough so as to insulate the wtaer below from icing. Once prices drop sufficiently in real terms, buyers come back in. A new generation and immigrants will always want to take their shot at getting into the game.”
I think this graph tells you all you need to know…
http://www.nytimes.com/imagepages/2006/08/26/weekinreview/27leon_graph2.html
“Water is densest at 4 degrees centigrade which is why ice floats and eventually the floating ice gets thick enough so as to insulate the water below from icing. Once prices drop sufficiently in real terms, buyers come back in. A new generation and immigrants will always want to take their shot at getting into the game.”
Uh, no. Ice floats because water, at all temperatures, is denser than ice. Period. Your factoid about water being densest at 4 degrees C is as irrelevant to floating ice as it is irrelevant to the housing market.
More drivel from Drentzel: “Population just hit 300 million and if you think we went from 200 to 300 fast, look out for 400.”
Not sure why you believe the US population went from 200M to 300M “fast”. Population was 200M in 1968. In 2006 (38 years later) it’s up 50% to 300M. Big deal.
How does that stack up historically? Well, we went from 150M to 225M (another 50% increase) from 1950 to 1979. That’s only 29 years. So our population growth rate actually has decreased somewhat. We’re expected to reach 400M no earlier than 2043 — 37 years from 2006.
Yet you make it sound like the increase to 400M is approaching relatively fast. It’s not.
There is nothing unusal
When you’re stuck in traffic that won’t move or wondering why there are no parking spaces, remember you said this.
The figures do not include undocumented aliens. They will be a bigger factor in going from 300 to 400 than from 200 to 300. They have above average birthrates.
Wrong again. The U.S. Census Bureau absolutely includes illegal immigrants in the census numbers.
As for traffic in the future, that’s just fear mongering. For some reason, you think that we are running out of space in this country. Next time you take a transcontinantal flight, get a window seat and stare out the window for about 5-6 hours. This country has an incredible amount of open space, especially between the Rocky Mountains and the Appalachians. The reason why we seem crowded is because people tend to want to live near other people. But business centers will expand beyond the urban centers in the future out of the necessity to prevent over-crowding. Luckily, we have plenty of space to do so.
I stand corrected. However the estimates undercount illegal aliens.
which didn’t in 06?
if you weren’t drilling for oil- you went down
The 2006 figures have not been released. I’m not sure of the release date. Not all markets’ home prices will be down though. That would be without precedent.
I think it would be easy to put together a case showing the run-up of the past few years has been ‘without precedent.’
In 2005, the Fed guys were saying over and over, ‘we are in uncharted waters.’ Even AG did. Notice nobody dares to publicly mention that now?
Fed officials also started issuing thinly-veiled warnings to speculators in Spring 2005. Anybody who was paying attention had fair warning to get out of the sea before the parted waters collapsed back together. Don’t fight the Fed.
Present says Realtwhores cover up evidence of past price declines as best they can.
I remember reading that the ofheo statistics are majorly scewed. They include appraisals of home resales and refinancings, for loans that are backed by FNMA and FreddieMac etc… Appraisals for refinancings are a joke, since they dont reflect true marketing conditions.
Right. Further problems are that they only reflect home prices up to a cap which pretty much prices the coasts (most of the country!) out of the index, and they only reflect used home (repeat) sales, which pretty much avoids the sinking new home prices.
LOL. With respect, that is the second-to-last place place I’d look for the truth. These folks work for the same employer that predicted a slew of hurricanes this year, etc. etc.
I don’t think the government would lie about housing prices. The figures are what they are - seriously.
the figures are what they are…until they’re revised…
LOL
Or until the base number used is changed, or until detail is added, like incentives, which are not reflected in sales price, or ….. hedonics accounting, or ……
I work for a federal union, so I deal with alot of employees at a bunch of agencies. And if the executive wants a number they get it. There can be termendous pressure from the top. Numbers are manipulated all the time, maybe not as much as in the private sector but it happens.
I work for a federal union, so I deal with alot of employees at a bunch of agencies. And if the executive wants a number they get it. There can be termendous pressure from the top. Numbers are manipulated all the time, maybe not as much as in the private sector but it happens.
I work for a federal union, so I deal with alot of employees at a bunch of agencies. And if the executive wants a number they get it. There can be termendous pressure from the top. Numbers are manipulated all the time, maybe not as much as in the private sector but it happens.
no idea why that happened I posted once.
in 07 will will still have a job
Why in this world would you not think the govt would lie about housing statistics? Have you ever looked at inflation #’s, or how about employment or GDP trends? Oh, how about that messy little thing in Iraq…no, our govt lie…surely you joke…be for real, all our govt does is LIE!
Not on things like housing stats - seriously. Sorry but the Walrus was not Paul. It was just the Walrus.
“Sorry but the Walrus was not Paul. It was just the Walrus. ”
Ok, now you’ve gone too far.
The single biggest reason I love this blog: Here, the ’60’s mentality of “accept nothing at face value, question everything” lives on, especially when the “facts” are being spewed from government or establishment sources. You say “X”, we say “prove it”.
Paul WAS the walrus; John WAS the eggman. Goog goog ga joob.
‘Paul WAS the walrus; John WAS the eggman. Goog goog ga joob’
lol
I’m not sure about the government lieing about housing prices, I would bet my last dollar that their internal controls over accurate reporting are just a pile of crap, which makes their numbers unreliable.
I’m not sure how the data is collected and processed, but you seem to know so please elaborate.
I have had the misfortune of auditing several governments entities from the local level to the state level and I can honestly say the internal controls for most were just garbage. Especially at the State level.
Well, thats it for you.
“I don’t think the government would lie about housing prices. The figures are what they are - seriously.”
You’re assuming those who run the GOV have the same interests as you do. You need good information to make the best decision for you. The GOV (and those that can influance policy) know you don’t keep and anaylise the data yourself. Therefore, they can manipulate the data for thier benefit; to gain an edge. All’s fair in Predatory Capitilism.
Also, that’s why the main stream media are such cheerleaders for the RE industry.
Oh to be young and have this level of trust in our government, the Easter Bunny, Santa and the Tooth Fairy.
ahhhhh, those were the days….
The trick is to construct a price index methodology which produces the desired result without requiring you to blatantly ignore or lie about the data.
Case in point: CAR’s updated “affordability measure,” which resulted in an overnight increase in California’s share of households which can “afford” to buy a home from below 10% to above 20%. There is no need to directly lie about your data when a suitable black box statistical methodology can get the job done with the added advantage of plausible deniability.
“you will see there has never been a YOY price decline”
Then I guess 2006 (or 2007) will be the first time. Just because it hasnt happened in the past, doesnt mean its not impossible.
It already happened in 2006, according to Businessweek’s editors (see much further below…).
If you believe the OFHEO stats, I know a wealthy Nigerian student who will give you a third of his inheritance if you help him retrieve his millions… just give him your bank account.
HEre is where you can select individual markets (MSA’s) to see YOY price declines:
http://www.ofheo.gov/HPIMSA.asp
If NAR has recently been willing to report national prices declines, I see no reason to disbelieve them. They have a vested interest the other way. A few days ago, GetStucco suggested that Drentzel is a troll from the REIC. How bout it, Drentzel, do you have any disclosures to share?
I don’t work in the RE industry. Write software having nothing to do with RE. If you want to dispute the government figures dating back to 1976, there’s nothing I can do.
I’m not sure what you mean by a troll?
My apologies — I am sure I unfairly misconstrued your post.
Ho ho ho. Gasp. The gov’t doesn’t lie. Hmmm, who are you?
Are you saying as a whole nationally prices will decline but that somewhere in some market there will be appreciation? I think that could happen there are a lot of markets, but if lending standards tighten I think it is unlikely. (although I dont know how you define a market)
You write software and don’t know what a troll is?
“People will hold onto their suicide loans hoping for a turnaround until all resources are exhausted and the bank forecloses and sells at auction.”
As I posted in an earlier thread, if you can’t bring the requied check to closing, you can’t sell. There are a lot of people in this situation already and as prices fall that number is going to sky rocket. Prices will be ’sticky’ untill sufficient numbers exhaust all their resources and go BK but it’s not just because they want to hold on.
I know of an elderly couple in their 80’s here in AZ. Need to sell their house due to health/finances, but have pulled out too much equity and cannot sell house for what is owed. I suspect that this may be more common than most realize.
Yes, I agree there are probably a lot of older people in this situation. I have a relative who would have done the same if I hadn’t stepped in and sold the house for her earlier this year. Selling a house (and moving) is a monumental effort, especially for older people.
Unfortunately, this is certain to be common. This will force the market to stagnate and we’ll see inventory climb to unbelievable levels.
However, in areas where there is land, builders will buy vacant land for 50 cents on the dollar, materials at 50 cents on the dollar, and bid labor at 60 to 75 cents on the dollar (of the previous prevailing wage). They’ll sell at 60 to 70 cents on the dollar until they no longer can.
Do recall, building starts are *still* 50% above the natural absorption rate. The overhang is expanding. When Wells Fargo (or whatever bank) forecloses on the builder, they’ll do a cold hard calculation. In many cases, that calculation says finish the homes and sell for 30 to 50 cents on the dollar.
Happy new year,
Neil
Neil — I’ve pretty much bet all my chips on this scenario playing out, or close enough to it, including new houses continuing to be built, but at selling prices at least 30% off last year’s for same-same quality, assuming good negotiating skills.
There’s alot of people in their 50’s who went from dot.com/dot.bomb unemployed to living off equity. Many have used up the equity and need another draw as credit cards are reaching limits, but we know that the ATM is empty this time around. I live in Monterey County, and there are many here and in aoubt 7 surrounding counties, from Monterey County, Santa Cruz, San Benito, Santa Clara, San Mateo, San Francisco, Marin, Alameda, and further, who are living from equity. Those who went on unemployment from Silicon Valley and who lost a bundle from th NASDAQ popping at 5000 are hanging on with cat claws but there’s no more bubbles appearing and the end of the float looks near for most. Many stories around here. Also, here and in LA and Orange county — plastic surgeons have been a burgoeing business. Watch that falter too.
If last time provides any indication, foreclosures max out about three years after a bubble pops (when you also see the deepest price declines in the down leg of the cycle). Look for this to happen again in 2008.
Get Stucco, I’m with you. That is the way it played out in the mid90’s in LA. I don’t see many real bargains for 2007…
Agree with you, GS, that 2008 will see the most turmoil. Still think it’ll float down quite a bit more from there. I’d say 2009-2012 might be safe to buy **IF** we do not enter the “Mother of All Depressions”.
Stucco, actually, in CA foreclosures maxed in 1995, a full 6 years after the bubble popped in 1990. And prices stayed soft thru 1998-99. We are even more out of balance and upside down now, than in 1990. However, we do not have a declining economy and negative migration….yet.
My prediction: Pain for millions, free entertainment for others.
Bread and circuses for the masses. Remember the dance marathons of the Great Depression? Maybe we can bring those back for TV.
THREE PREDICTIONS:
1) World Peace
2) My Cats Will Crap Gold
3) Real Estate Prices Will Rebound
Yes, all of these seem equally likely. Of course, I don’t know your cats, perhaps (2) is more likely than (1) or (3). Especially if you feed your cats small round nuggets that can pass through their intestines without causing lacerations.
Good luck with them cats. What do you feed them? Green paper?
That was beautiful.
Dollar up in 2007 due to no rate cuts and bigger problems elsewhere.
US personal savings rate increases.
CA housing prices decline 25-30%, on their way to an ultimate 50% haircut from peak prices.
Recession in US, Canada, western Europe.
Oil prices continue to slide.
Casey indicted.
Dubai is finally recognized by the media as a chimera, a sea of empty condo and apartment towers.
Trump bankrupt again, Rosie gets last laugh.
Ben interviewed in the WSJ.
Congress holds hearings, does nothing except reaffirm support for Fannie and point fingers at each other.
Casey indicted would be my hope for the new year since he can’t pretend that he was ignorant of the fraud he committed, and he did it to “get rich.” Oh, and he has no remorse and the thought of working for a living still doesn’t seriously occur to him.
Dollar up in 2007 due to no rate cuts and bigger problems elsewhere.”
I assume you mean against other currencies? The USD has largely collapsed against real goods like commodities and real estate.
The USD has just plain collapsed in the USDX and in the broad dollar index it’s even worse.
The USDX during Regan it was at 160 and it closed Friday at 83.65. That’s a collapse.
From this chart, the USDX does not appear to have spent more than a month above 160 during Reagan’s 8 year administration.
You’ll need to scroll down for the USDX chart.
http://globalgold.blogspot.com/2006/12/us-dollar-index-usdx-elliott-wave.html
You could also say it was at 85.50 during the Reagan admin. as it seems to have spent the same amount of time around that number.
2007 prediction;
Barring another 9-11 type event, or Katrina event, the bubble will continue to deflate slowly the 1st half of the year with the media cheerleaders saying the economy is great and now is a great time to buy.
After invetory sky rockets from a number of factors, new homes coming on the maket, re-sales coming on the market, etc., the 2nd half of the year will see some (house sellers) start to panic. The FED may lower rates to save the housing market causing the dollar (and then the stock market) to crash (or start to crash if you believe in the controlled/soft landing, which I do).
The crash will not be a straight line down but may hit botttom by 2010 - 2012.
I will say with a fair amount of certainy, that the world will be a different place by 2012.
My humble predictions.
-A recession in 2007 or 2008. Not for any specific reasons but just basic logic. It’s been 6 years or so since the last one and its rare to go for many years without one.
-If we do have one it will be much more painful. Lowering rates alot is basically impossible due to massive debts at all levels of society. Central banks don’t want to change the status quo but their hands are on the trigger and their eyes on the forex/gold markets. People have no savings and real inflation is rather bad. It’s not like 2001 at all with which had low inflation, a strong dollar, low debt and alot more wiggle room.
-My short term prediction. We will have a sharp little correction this winter. Everything is just to rosy for both bonds and stocks. maybe 5 or 10 percent then the market resumes until next recession. Maybe it will happen in january-its just too rosy to be true short-term wise.
-We’ve been lucky with gas/oil. That luck will run out and oil will be a factor again due to who-knows-what.
1. 20% year-over-year national median price decline by the end of 2007. (Yeah, I’m predicting the market psychology snowballs)
2. 20% year-over-year California median price decline by the end of 2007
3. A beginning of calls for changing the new bankruptcy laws to allow people less responsibility. But it won’t pass until 2008.
4. Jan 1 2008 will have cheaper Oil than Jan 1 2007 either due to Arab countries stocking up on money to finance the civil war in Iraq or due to Arab countries noticing the increasing worthlessness of their American investments and compensating.
Watch for some cracks in the Islamist movement - small victories for the West, which will create enough hope so that Western resolve stays intact. It would be great to see Bin Laden’s neck as wrenched to the side as Saddam’s.
. Jan 1 2008 will have cheaper Oil than Jan 1 2007 either due to Arab countries stocking up on money to finance the civil war in Iraq or due to Arab countries noticing the increasing worthlessness of their American investments and compensating.”
Their largest american investment is the USD. Unlikely they would compensate by grabbing more USD. In fact, these countries are already diversifying out of USD. Also, oil demand is global and growing. I disagree that prices will fall. Look for prices to rise as a result of depreciating USD, increasing demand, and geopolitics.
here are some of my bold predictions:
1. RE bubble will bust very slowly over many years. People waiting for RE market to crash like stock market did, will be disappointed.
2. Lot of vulture fund money will come in to buy under-priced condos. Very few “normal” everyday people will be able to get great deals on condos in desirable areas.
3. People who bough an overpriced house with ARM loans will cut back on their lifestyle before they go into fore closure. I know of people getting rid of cars, etc to pay mortgage.
4. Most normal people (ie people who are not “professional” investors) who bought multiple houses will lose all their houses and will end up with a large debt that they will have to pay off over time due to stricter brankrupcy laws. Most normal people who bought multiple properties have atleast one property that they have good equity in…in the end, they will lose everything.
5. Some people with normal loans (who cant afford payments) will get toxic loans and postpone the inevitable.
6. More young adults will choose to live at home with family as they cant afford to buy a house. These yound adults will help family pay the mortgage (in cases where they are in trouble).
7. More foreigners will invest in real estate (Miami, NY, San Fran and other cosmopolitan areas) as the dollar weakens. This foreign investment will be limited to a few cities that foreigners typically like to visit/live….Miami being the primary city where this will happen.
8. Construction job layoff numbers will not be accurately reflected in stastics since so many illegals were working on construction sites.
Summary: This will be a long drawn out crash and there will not be a single indentifiable time period when the crash occurs. The crash will occur in the form of small drop in prices and stagnation for many years….no dramatic moments like stock market where stock drops 90% in a few months.
I agree with this poster.
What about the price of gold? If people need money, won’t they sell it, like all their extra cars and toys? In a flight to safety, won’t US treasuries be popular, thus strengthening the US$ and lowering the price of gold (POG)?
People who own gold now are not likely to sell. Gold is not widely held because it has not been in a bubble. Do you know anyone who owns gold? Also, gold is still very cheap in real terms. See Ben’s gold blog for information on gold.
Treasuries are definitely not safe. Yields are very low, and the only thing riskier than holding depreciating dollars is holding IOUs for depreciating dollars, to be paid in the future.
I’ve been buying gold since it was $311. Buy low. Sell high. I haven’t sold any yet and in fact have been buying more on all dips, the metal itself and mining stocks.
Gold has been real money in most civilizations on earth for five thousand years. Beat that.
I also accumulate, Ruth. You also prove my point about buyers not selling. Most people who accumulated over the last few years are shrewd and won’t sell just as gold is taking off. There will be much more gold demand than supply, going forward.
I’ll beat that Ruth. Silver!
I do signor. Silver and Platinum are also quite interesting.
Gold is money, the hardest money on earth. Do you sell your hard (i.e., nondepreciating) money to get soft (depreciating) money when the soft money is getting softer all the time? Not unless you have no other choice. People pass the bad (soft) money and keep the good (hard) money; that’s why the government just banned exporting… cents and nickels! Even base metals are “too valuable to use for money” these days; that is, they aren’t worthless enough to represent the truly worthless “dollar”.
Interesting isn’t it? The mint is telling me what I can do with my property. I earn the coins by working, but I am not allowed to melt them.
1. The RE market is already crashing.
2. The buyers over the next 5 to 7 years will be catching a falling knife — buying into a falling market and all buyers will lose.
3. People are maxed to the hilt. They could afford their ARMS due to low rates. The ATM is empty.
4. Agree.
5.
6. Young adults have been living at home for years now. The majority of kids into their 20’s are living at home.
7. Agree.
You’re predictions are passe.
ruth……a few responses to your comments
1. This blog exists to point out that RE market is crashing. Yes..market is crashing and crash started in late 2005.
2. owning your own home is a powerful motive to buy. Most new cars drop 10-20% in value in their first year….but people do buy new cars…just like that, people will buy homes/condos even if they go down in value.
3. There are many people who have nice 30 yr fixed mortgages who cant afford the payments due to other costs (insurance, property tax, gas, etc) going up. So to lower their payments, they will switch to ARM loans from fixed loans to lower their payment and thus get into bigger trouble down the road when RE prices dont go up.
6. I dont know too many yound adults who choose to live with their parents. Most of my friends left home permanently after they gradauted from college (even in cases where parents lived in the same town where the kids went to college). I gradated from college less than 10 years ago and maybe have a different perspective than people who are older than me.
8. to eloberate further on my comment…the RE industry will have an easy time manipulating the job stastics in the construciton industry due to the high number of illegal immigrants working in that industry. So the numbers of job losses will not look too bad (but in reality, they are bad).
Angry, torch-bearing mob of FB’s pays a visit to DL’s house?
Using the acronym DL for David Lareah is pretty funny. Few people know who DL is, and among those few, half of them read this blog.
Oh. She didn’t mean Dave Letterman? Or Dalai Lama?
I think that reversion to mean prices will affect virtually all areas that do not have a specific countering event, such as construction of a new auto plant. Late in the bust, the areas that suffer most could be the small backwaters, as more desirable areas that had been most overpriced also drop the most and suddenly have renewed appeal. In general, I think that by 2009, we’ll see 1998 prices + one-third, to account for inflation.
The difference between this bust and the S&L one is the “equity that ain’t there” because of all the subprime loans and the huge amount of MEW by so many homoaners. This could, I think, drag out the process of lenders shedding their REOs, as their percentage of loss-per-house could be significantly higher than last time around.
” This will be a long drawn out crash and there will not be a single indentifiable time period when the crash occurs. The crash will occur in the form of small drop in prices and stagnation for many years….no dramatic moments like stock market where stock drops 90% in a few months.”
I agree with this. I think that inflation will account for more than 50% of the real price declines.
This long sideways market will eventualkly give way to “it’s not an inestment but rather a place to live” menality. With such revised expectations, new plankton will enter the food chain which will set in motion the next up cycle, probably by 2010-2012.
Do you predict Sponge Bob will buy a home in the 2010-2012 period as well?
Predictions :
BB will hold the current rate for most of 2007 but high inventory in housing will create more declines of 10 to 15 % for the year in bubble areas ,especially where there was high speculation and sub-prime lending .
BB will raise rates .50 % toward end of year in 2007 , and up another .50 % in first half of 2008.
From 2008 to 2010 additional declines in high forclosure/speculation areas of another 10 to 20% .
From 2010-2015 real estate prices will be flat will some areas just beginning to get appreciation in keeping with inflation of around 3 %to 5 % .
Some S& L bailouts in 2008 with sub-prime lending changing to only allowed at 30% down payments .Numerous lawsuits with everybody blaming everybody else . Additional disclosure requirements on toxic loans .
Normal demand in housing doesn’t build up until around 2015 ,so limited new housing starts until that time .Many projects cancelled for the next 3 years .
Wages only increasing by 3 to 5 % per year with unemployment rate
increases for the next 5 to 7 years in which the highest rate increases will be from 2009-2011.
Mortgage insurance will be required on any loan that the borrower puts 10% or less down . (This starts in 2008 per the demand of the secondary market and new regulations ).
Many congressional hearings in the next 5 years .
I predicted rates will go down but I hope the FED is forced to raise them. But The FED ignores inflation data now what would force them to raise rates? The 10 year is lower than the FED Funds rate. Inflation is back and will get worse even as housing slumps.
“I would not expect meaningful downward price action until the coming wave of foreclosures and much anticipated workforce reductions associated with building and real estate begin to have an impact. This will be the BIG news for 2007 thru 2011 and when the storm abates I predict the middle class will be a whole lot smaller, the poor poorer and the rich richer.”
This is it in a nutshell! All of the happy ending, soft landing etc types are ignoring the comming flood of foreclosures heading down the pike. Figures of 2.2 million seem to be floated, although I have heard anywhere between 2 and 5 million by the time it all ends. Can you imagine that many foreclosures on the market in a short time period? However this will not really kick into gear until the second half of 2007 and really will not be full-blown news until 2008 when things are likely to be really rocking and rolling.
In 1991 after we bought our first house, I remember a friend saying that real estate prices were going to sit still for 15 years. What was scary is that this friend was the chief business/Wall Street reporter for a major national publication. He also admonished me for buying IBM because IBM was like the railroads, an imperiled dinosaur.
Well, he was wrong about both. I know we’re both glad RE zoomed, as it built up our equity. And at least I was happy when I sold the IBM stock at a nice profit and paid off some of my then mortgage which accelerated the retirement of debt. After that, one of my biggest thrills each month was opening up Quicken and watching our principal grow every month.
The point I want to make is that 15 years is a very long time. Add another five years and it’s almost an entire generation. With population growing all the time, somehow, some way, the steady upward movement resumes. As they said in Jurrassic Park, “life will find a way”. And so will homebuyers.
In the meantime, in certain years and in certain markets, prepare for some definite plunges.
Well, IBM did lose about 50% from 91-93 and didn’t do start doing good until Gerstner was named CEO.
I can remember watching friends who had bought in Orange County CA at the peak of the boom back in 91. They did not see a break even point for a decade and then only in actual dollars. They could not sell, they could not get credit, they could not move and they barely scraped by each month until the late nineties when wages really took off.
On the whole, you are correct about the march up, and it holds historically true, but in areas like Southern California, be prepared for at least a decade of plunge, because this is one of those times and one of those markets.
I sometimes joke that it would be a cheaper mistake to go down to the TV store and line my enteir apartment with big screen TV’s than buy a house in San Diego today. Time will tell, but I like many others cannot afford mistakes on that kind of scale, and while life often does find a way, only where there is the smallest of chances, and then only a very few in times of hardship.
I too look forward to the time I can buy a home, but buying into something with a $4000 combined payment would send us to bankruptcy court in short order if anything went wrong at all, as many are about to discover in our new world. A bit negative? Sure, but then look at the facts.
“We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don’t let yourself be lulled into inaction.”
- Bill Gates
“640 K ought to be enough for anybody.”
– Bill Gates, 1981
“The Internet? We are not interested in it”
– Bill Gates, 1993
(Just reminding everyone that Mr. Gates has been wrong many times, too. Quoting him as if his word is gospel is just silly.)
tl:
You’re nailed it!!!
$4000 a month after the effect of its tax deduction is “only” about $2,500 a month. Longterm, it’s a lot less when you back out the inevitable appreciation.
There is always risk, but sometimes it pays just to think positive and realize nothing is likely to go so wrong that you can’t keep making your payments. If you are relatively early in your career and likely can expect raises over the years, you may just need to worry about making it to your first raise at which point the monthly payment will become easier to handle. Can you have a heart to heart talk with your boss about your future? There are never any guarantees, but you might come away feeling more confident.
If you are convinced prices are coming down substantially in your market - wait. Just realize that once prices come down far enough for demand to increase, nobody will be making an official announcement. And the selection may dwindle.
“$4000 a month after the effect of its tax deduction is “only” about $2,500 a month. Longterm, it’s a lot less when you back out the inevitable appreciation.”
Longterm, that “inevitable appreciation” will be just 1-2% over inflation. It doesn’t make up for much of your mortgage payment at all.
Also, your math EXCLUDES taxes, insurance, upkeep/repairs. You need to add those into the expense of owning a home if you are going to give a fair description of what owning a home costs.
BTW, I’m not knocking owning a home, per se. I own one myself — but I bought it in 1998 when I felt prices were fairly valued.
tl,..Since I’ve only had a real job for 16 years (’retired’ at 45) and living very well as a RE investor I would have to disagree with you about your statement>>Over time mortgage leverage give you a big return.
Of course, buying at the right time in the right place can make a huge difference….and avoid Houston.
$4000 a month after the effect of its tax deduction is “only” about $2,500 a month.
Unless you lose your job; the tax deduction doesn’t do you any good in that case. So you’re out of work and have to pay more for your house. That will do wonders for your budget!
Longterm, it’s a lot less when you back out the inevitable appreciation.
Tell it to the brilliant investors who bought Florida real estate in 1926. How long is that “longterm” anyway? 1000 years?
“Can you have a heart to heart talk with your boss about your future? There are never any guarantees, but you might come away feeling more confident.”
Do not EVER EVER trust your boss !!!
Americans priced out of jobs.
High cost of living in America + Low cost of living in emerging markets = High skilled, well paying jobs sent overseas
The next ‘Google’ or ‘Microsoft’ will not be in America.
Why Realtors and others don’t see this equation or don’t care is a mystery to me.
Especially since many of the realtors used to work in jobs that went overseas.
Thats already well known in Silicon Valley.
mild stagflation w homes off another 8 to 10% nationwide
I met someone who lives in a Jersey Shore coop building at a holiday party. Smart retired engineer on the board of a building with about 100 units.
He says sales volume is way down, but the price of the two units that have sold is down 15-20% from the peak. Plus inflation. And the available data says the NY area market has not declined!
I’d say half the correction may have already occured, based on what the same house might sell at at market. The other half may indeed finish by the end of 2007, as the NAR says, which will mean 33% to 50% down inflation-adjusted in NYC.
When it will show up the data who knows.
I don’t see it here in Hoboken yet. 1 BR’s condos in the building I rent in have been about $440k since early 05. One sold at the beginning of the year for $425k, and then not a whole lot sold for the rest of the year. But in September, 2 of them sold for $440k. Although there’s been another one for sale by owner (sitting empty) for six months now. The rate for rentals of 1br’s has supposedly gone up 20% in each of the last 2 years, but the rent/buy equation still doesn’t work out. Still a long way to go in the NYC market if you ask me.
Future of the Orange County, California, housing market:
Every owner is praying for the spring rebound, inventories are up, and buyers are scarce. The median sales price peaked in June of 2006 at $640K; the median in December 2006 was $620K.
First, sellers will list their houses early this year to get a jump on the other sellers, so inventories will spike up quickly. Seeing this, buyers will become ever more reluctant. Also, since the median rose for the first 6 months of 2006, even if the median holds at $620K (which is unlikely), the YOY median will show steady declines. This will increase the desperation of sellers and make buyers even more reluctant. Panic ensues.
By June of 2007 due to a combination of the 2006 rise in the median sales price serving as a basis for calculation, and the spring 2007 panic selling, Orange County will be sporting a YOY median sales price decrease of at least 10% with 15% to 20% being a real possibility. The median home sales price may dip below $500K.
By fall of 2007 the panic will subside and volume will decline significantly. There will be a small dead-cat bounce, and David Lereah and all the usual suspects will call the bottom. They will be wrong. The flood of foreclosures will increase the supply of homes for sale to record levels. The close of 2007 will see median sales prices at or near the low of the year and poised to make another big drop in 2008.
The story of the year will be the largest YOY decline in home prices since the Great Depression, possibly the largest decline of all time.
Yes most of CA is a ghetto and people will start to say that and move out just like mid-90s. I just went for a job here in Los Angeles county, they have a sign on garbage trucks that is huge and says “DONT ABANDON YOUR BABY” with some phone# to call to give it up. Nice place.
I havent tripped on a baby in a while, the program must be working!
The stock market should top by March 2007. There might be a test or a slightly higher high into the spring of 2008. 2007 will either be the start of a huge bear market or more topping into 2008 prior to the bear. The dollar will probably have an advance into mid to late 2007 and then look out below. Home prices should fall 10% in 07 with much greater declines after 2008’s election.
Take a look at the four year presidential/congressional election cycle. Note the great moves up from the congressional election years. Examples 2002,1998, 1994, 1990, 1986, 1982, 1978,1974, 1970,1966,1962,1958, 1954, 1950, 1946, 1942 back to the passage of the Federal Reserve act. Why the cycle from these lows into the presidential election year two years later? Those in power want things to look relatively good during the presidential year. This means efforts to lower rates and gun the economy with tax cuts and spending to juice the economy.
The only thing this economy has going for it is the self interest of those in power to look temporarily good in 2008’s election. There is only one example of this cycle failing. That was the 1930 congressional low. It was followed by a brief advance and then a huge decline into the summer of 1932. Also followed by the depression. In a sense depressions market situations in which central governments lose control.
There is little doubt in my mind that after 2008, the game is over. The only question is wether things get out of control prior to 2008 as in 1930-32. Sometime in the next few years I expect a deflationary economy with the worse time caused by a run on the dollar forcing the FED to raise rates. In a sense a perfect negative economic storm. All commodities including gold should decline.
Other then that Mrs. Lincoln how was the play?
P. Bear, I am not so sure this time around that this will be the case. For 2008 I think both Republicans and Dems want to distance themselves from the White House, plus, the Dems will have control of congress for just a short bit so the “party in power trying to make things look good” argument seems a bit fuzzy. I suppose both reds and blues can try to make the punch bowl last by relaxing lending standards further, but as we are seeing now, mortage insurers might not play their game.
My prediction: there is not enough lax credit or suckers left in the world to sufficiently dent inventory in 2007. It will likely soar, and prices will likely go down a minimum of 10 percent (more in bubble zones). They’re not making any more home buyers in 2007.
The only prediction on which I’m putting much of my money where my mouth is. In the past 3 months, US dollar fell from 1.33 Australian dollars to 1.27 Aust dollars. I predict in another 6 months it will be around 1.22 Australian dollars, adding a lot to the 5.7% AUD yield now avlb on the Aust govt bonds of 6/15/11.
Interesting strategy. But from what I gather, Australia is having a RE bubble of its own. Why would you buy Aust bonds to shield yourself from a declining US dollar?
Indeed. All the major currencies are inflated. If I was going to buy a foreign currency, it would be rubles.
I would not buy rubbles. Sorry. Do you by how much Russia inflated the money supply this year ?
If you think the printing at the FED is bad Plus 10%, try Russia!
PLUS 45% !
If you have to buy something buy cheap cheap cheap american and canadian oil and gas producers and never mind the russian funny money.
Prediction
The finger pointing will pick up speed.
Who could have allowed this slaughter to happen?
Could it be some fool talking about an “OUNERSHIP SOCIETY”,that with his henchman A. Greenspan,and the banks have stolen the retirement of millions.
Reagan created the S&L collapse to enrich his friends and GWBush took the idea and reused it.
Oh And NONE of the Bush children will serve in any war.
Yeah it’s the ownership society. You will be owned by the bank!
In certain countries like charming and quaint Pakistan, one of your most wonderful allies, when you can’t pay, you sell the children or the wife if she is still lookable. Hey next step reintroduce slavery like in the good old days!
I am sure Golman Sachs, Paulson and Rubin would find this a great idea to erase the deficit and make a couple of sheikels for the boys at Golman Sach in Washington and New York.
The owner is the one you think.
What is the IP address of this “Drentzel” ?
Never a YOY decline - Please put on your glasses and read here. YOY declines have ALREADY happened!
He sounds like Gekko!
D@mn! Just when Ben added Gekko to the spam filter, Drizzle comes to haunt us…
I like Gekko’s posts better.
NY
Nothing has been done to Gekko. Posters come and posters go.
Wishful thinking on my part…
i enjoy the back and forth of stucco and gekko
Yes, we need to have our resident bulls here to keep us bears in check! As long as they use logic and facts…
My neighbors gather around this blog to listen to GetStucco!!
True GetStucco is very interesting, articulate, funny and informed.
Ohh nevermind - the immigrants and baby boomers kids will save us, err… polar ice caps!??!:
_______________________________________________
“Water is densest at 4 degrees centigrade which is why ice floats and eventually the floating ice gets thick enough so as to insulate the wtaer below from icing. Once prices drop sufficiently in real terms, buyers come back in. A new generation and immigrants “will always want to take their shot at getting into the game.
Not nationally since 1976 for any calendar year.
Check it out at: http://www.ofheo.gov/HPI.asp
Sorry - that was a little hard to read. I’vr straight averaged each years quarterly numbers below:
Year Annual % Chg.
1976 6.14
1977 10.93
1978 13.46
1979 13.38
1980 8.13
1981 5.47
1982 3.08
1983 3.64
1984 4.54
1985 5.87
1986 7.62
1987 7.76
1988 6.28
1989 5.71
1990 2.67
1991 1.27
1992 2.26
1993 1.74
1994 1.91
1995 2.72
1996 3.56
1997 3.49
1998 5.12
1999 4.95
2000 6.84
2001 7.92
2002 6.93
2003 6.85
2004 10.69
2005 13.25
Again - the spource is: http://www.ofheo.gov/HPI.asp
(The Office of Federal Housing Enterprise Oversight).
I think the yield curve will return to contango, which is actually bad news in our new bizarro economy. Housing bubble continues to deflate somewhat slowly, unless a sudden rate rise accelerates things. Inflation continues to grow, especially if the fed eases, which I doubt they will do. Most importantly, I believe 2007 will be the year of the black swan; the unpredictable event that tips things. America and the world are painted in a corner, economically, geo-politically, you name it. Everything is totally leveraged and an unexpected event can spin it all out of control. IMO, we are past due for such an event.
“I think the yield curve will return to contango, which is actually bad news in our new bizarro economy.”
I agree, Diceman, but not so bizarre at all. Spreads don’t contract as an economy enters recession — they blow out, as market participants realize they’ve mispriced everything.
WOW that would make a great title for a novel !
“The Year of the Black Swan.”
I will stick to what I know more about (some what off alignment here)
The predictions about China doing anything aggressive are highly unlikely. I would put it on par with Bush being elected to a 3rd term (yes I know the constitution does not permit it). The reasons behind it are thus:
1) China is working to bolster its image as a noble world power ahead of the Beijing Olympic Games. This event is of monumental symbolic importance to the ruling Communist Party as well as the people of China. China will take no overt action to lower its standing on the world stage. They do in fact fear something like the 1980 USSR boycott might take place, diminishing the importance of the China games.
2) China is not yet ready to challenge the US Navy on the high seas. The PLAN (China’s Navy) is working hard to modernize their forces and equipment, but unless they could secure a foothold on Formosa in less than 72 hours they would be defeated by the 7th and 3rd fleets at sea. Frankly put, while the PLA and the ruling party would love to bring Taiwan to heel, they lack the military capability to do it at this time. They are, however, working hard to put that kind of power in place. Most likely not possible until 2012 at the earliest.
3) China is about to have bigger problems. Like it or not, the way we have been doing business for the past decade with China means we are economically welded together. The nature of this has been well documented in comments here, and insightful posts at places like iTulip.com and Calculated Risk (and others). Our economy us slowing down. It may slow down to the point of recession. As we slow down China will face a harsh reality as they suddenly have less money coming at, while at the same time they face the worry of the value of the dollar (which their currency is pegging to) sliding lower. Not to mention that as the Credit bubble deflates they are going to be holding the bag.
On a completely different geo-political tangent, I love watching the flight to the Euro. What makes it even more fun is the near religious belief that some folks have that it is a essentially stable currency and will fare better than the Dollar in the coming slow down. Has has been documented here by many of our European commenters, they have bubbles there too. In addition the Euro is an entirely synthetic currency - it is not backed by any nation, just a promise of a group of nations that they will support it. The EU itself is facing some political challenges, and I think folks who are betting long on the Euro might just be ignoring some of the outcomes.
My leading housing market predictions for 2007:
1. Subprime lending and appraisal fraud go out of fashion.
2. Builder incentives follow suit (no point in giving away free stuff when you can’t get the buyer to finance it on the mortgage loan).
3. Market values of homes reflect the absence of subprime lending, appraisal fraud and builder incentives by year’s end (subtract another 20% off real market values, but add back something for inflation to get to the year-end nominal price).
Despite shrill predictions of The Apocalypse, life will go on in 2007 - and there will be a 2008.
I agree, George. So stick around if you want to see some really deep price discounts in residential RE.
Depends on the area. My bet is that the newly built exurbs will suffer the most. I never understood why anyone would want to life an hour or two from work just to own a house.
Quality residental RE, in good neighborhoods, with good schools and reasonable commutes, will see only modest declines.
Modest = 20% real, 15% nominal.
You forgot to factor in the vanishing speculator, subprime and appraisal fraud premiums, which especially helped push the price of quality residential RE in good neighborhoods with good schools and reasonable commutes up to a level where only those willing to become newly-christened subprime borrowers could afford to buy.
“Modest = 20% real, 15% nominal” is in line with what I’m thinking.
Such a decline will burn true speculators; however, for the average homeowner/occupant, it will hardly mean the End of Times.
” it will hardly mean the End of Times. ”
STRAW MAN ALERT!!!
George — I believe that a 20% decline in real prices would more than wipe out the total equity of a huge number of “homeowners.” That is fairly close to the end of times for a good number of housing bears. In the end, though, I want 1997 prices + 3.5% per year thereafter for the fiat currency effect.
“Despite shrill predictions of The Apocalypse”
STRAW MAN ALERT!!!
A straw man argument is a logical fallacy based on misrepresentation of an opponent’s position. To “set up a straw man” or “set up a straw-man argument” is to create a position that is easy to refute, then attribute that position to the opponent. A straw-man argument can be a successful rhetorical technique (that is, it may succeed in persuading people) but it is in fact misleading, because the opponent’s actual argument has not been refuted
You also use a straw man if you are in the mob. Bankers and laywers specialised in offshore banking are specially good straw men, specially those in Cayman Islands, Vanuatu, Nauru, Virgin Island, Luxembourg, London, Zurich, Monaco. etc….. etccc…..
OK, I retract my prediction. The world as we know it will end on October 11, 2007. Buy lots of guns and ammo.
LOL
Now don’t get too excited, Mr. Salt. You were right in the first place when you said the world is not coming to an end — unless you are a REIC employee.
BTW, I am sorry to say that I have to subtract another 5%-10% from my price decline prediction because I forgot to factor in the inventory elephant hiding under the rug which will come to light in 2007 as well.
“the world is not coming to an end — unless you are a REIC employee”
I don’t doubt that there will be some pain. Those closest to the fire will get burnt the most. I’d say there is a good chance of a recession starting in 2007, and it may be nastier than the last two. Yet, I suspect that the vast majority of folks will muddle through somehow.
Happy New Year!
“I don’t doubt that there will be some pain.”
Some pain? Are you joking? We have 1.3 million realtors in this country. Many of them own multiple homes. They are not selling anything. They have no cash flow. As a class alone, they will experience the type of pain reserved to most Turkish torture chambers.
The world will continue in 2007. There is no doubt about that. Suicides will be up by a huge number. The fundamentals of housing will continue to crash. There is going to be monstrous levels of economic and psychological pain.
Save, save, save and maybe you won’t get sucked in to the abyss with all of the real estate crazed boobs that are still out there.
NYCityBoy –
Don’t you think a newly Democratic congress will figure out how to balance the pain between the real-estate-crazed boobs and everyone else? Or are there just too many crazed boobs to redistribute the pain?
Not a chance, Stucco. By the time the Dems pull their heads out of their butts this thing will be beyond their control. Their socialistic remedy will come ex post facto.
I don’t think the housing crash is really on the radar for Congress. Yet. They’re focused on Iraq. The ibank and RE economists are in the main still suggesting the effects of the crash can be “compartmentalized”, and are low-balling the odds of a recession. Besides,for the feds with their “hedonic” inflation numbers and their cooked employment numbers and their questionable gdp figures–reality is going to be a shock. All you can do is stay debt free and save what you can.
“I don’t think the housing crash is really on the radar for Congress.”
Did you see this? It is most definitely on Congress’s radar screen.
http://www.gao.gov/htext/d061021.html
Stucco,
thanks, i have seen that, but I reread it just the same. The sense of urgency is what is lacking…no clue that the financial storm is well-underway and gathering force. The question is whether the upcoming recession and ARM resets and rising foreclosures will force Congressional attention from Iraq and back to domestic concerns. Quoting:
…”federal banking regulators stated that most banks appeared to be managing their credit risk by diversifying their portfolios or through loan sales or securitizations. However, because the monthly payments for most AMPs originated between 2003 and 2005 have not reset to cover
both interest and principal, it is too soon to tell to what extent payment shocks would result in increased delinquencies or foreclosures for borrowers and in losses for banks and other lenders.”
“the world is not coming to an end — unless you are a REIC employee”
or if you live in some remote off-world a**end part of the IE/high desert area of Scal such as Banning ,Victorville, Hemet,Coachella,Barstow, ect. Exurban apocalyptic hell.
” … Banning ,Victorville, Hemet,Coachella,Barstow, ect. Exurban apocalyptic hell.”
It’s been that way since the last RE crash in the early 90s, at least.
I’ll never understand why anyone would want to live there.
George, you echo something I post here when I can; no matter how much hits the fan, life will go on. That being said, there are a convergence of factors coming together that I am not sure have ever happened before. Anyone who tells you they know how this thing will unwind is either the smartest person on the planet or trying to sell you something.
There are multiple economic hazards in place waiting to detonate either together, in a chain or (if we get lucky) not at all. There are enough forces in play for this to turn into one of the worst economic downturns of my lifetime.
That being said, I sure hope it does not happen. Given history it probably will not become epicly bad. But we are in uncharted territory right now.
Yes. It will get dark at night with increasing lightness towards the mourning.
Georgesalt-Thank goodness there is still some common sense left on this blog. Some folks have become way too negative.
Must read:
http://www.2000wave.com/article.asp?id=mwo122906
This requires a password.
It’s Mauldin’s site, a guest column by Barry Ritholtz about the housing market. Go here and just enter an email address.
http://www.2000wave.com/index.asp
Try this one, same article no password or E-Mail. Worth reading.
http://www.safehaven.com/article-6603.htm
Very good article! Sure deflates the economy is good argument.
Thanks txchick. Good article.
The author asks: “What was the impact of MEW [mortgage equity withdrawals] on the economy? It was absolutely essential to the expansion. Without it, the economy would have been expanding at a 1% rate - or worse….”
As a result, one can easily conclude with falling home prices and shrinking home equity values, consumer spending will certainly stall in the future and a hard landing recession is inevitable.
The economy has been contracting.
Without the war in Iraq (mfg. of war equipment) and the rebuilding in Afghanistan (American companies) and the MEW to pump the economy, we would already be in a recession at least. Then there was Katrina.
This country has been gutted. We don’t mfg. Service sector has been shipped out or immigrants are doing the Silicon Valley jobs for half the pay Americans got. Illegals have flooded the hospitality, construction and gardening sectors, supressing wages and gutting safety standards.
What’s left besides government workers (on the tax dole) and government contractors, SSI, Disability payments and an inflated housing market whose participants have been living on MEWs.
There you have it.
Whats left? lawyers suing Home builders.
I agree, must read. Clear, concise, factual and logical support for what many on this blog believe has and will happen with housing and the economy. Thanks txchick57
Apologies if already linked, I haven’t had time to go thru all the threads today
http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_sperling&sid=aEMGTIycjgH4#id=mwo122906
Late 2007:
First time the mainstream media takes note of squatters, taking up residence, in ghost towns, in a city near you.
The new Hoovervilles~
No they will be called the “Bushyvilles”.
or “Greenyvilles”
People were furious at Mellon during the depression, but they did not call them Mellonvilles because they respected the chain of command, and also of course because that would sound silly. Seriously, the blame game will largely follow existing anger flows which have a kind of grand rapids forming over the white house. Greenspan is still considered a super genius by most of the public, to the extent they have any awareness of him at all.
Agreed. However unfairly, the CIC always takes the blame (or the credit) for whatever today’s economic weather happens to be (and no matter whether the last guy in the White House or somebody else is really to blame!).
Two things will be all that matters:
(1) Its all about the inventory - If the listing surge as they did last year then its all downhill. Most market are up 50-100% YOY with regard to listings.
(2) Credit - Even a minor tightening in the prime AND sub-prime will price even more buyers out. LIBOR based rates have been in the same spot for 7 months now - around 5.35%. Any increase in the risk spread will cause the apocolypse, oops, will cause the pool qualified buyers to drop.
http://www.321gold.com/editorials/riverbend/current.html
Iraq will only get uglier and more costly in blood and treasure for the US. The current neo-con controlled Administration will “stay the course” learning nothing from its mistakes. The true costs of the war - economic and human - will start becoming more evident. The dwindling productive sectors - the hard-pressed middle and working classes - will grow increadingly resentful as they pay ever-more-extortionate taxes that bring no discernable improvements to their own neighborhoods, schools, and communities. The Democrats will gain a permanant stranglehold on the levers of power through traditional patronage politics, granting citizenship to millions of DOAs (Democrat-on-Arrival illegal aliens) and felons who will get their voting rights restored, and all manner of other blandishments, so long as they vote Democratic en bloc. The Republicans, owned outright by Wall Street and as venal and corrupt as the Dems, will fade into well deserved obscurity.
But, the sun will still rise and and the sun will still set.
The sun is setting on the american empire.
And what have you done to prevent this?
And why would we want to prevent this?
Death to the empire. Long live the republic!
You guys make me think of the fall of the Roman Empire. The thing is, when it did fall, no one really realized exactly when it happened. It was a very protracted process, just like I thind this one will be.
Diemos, sad as it is, the Republic is not coming back, but, like someone said above, the sun will still rise and set every day….
the roman empire is still with us. catholic church. albeit much more benign.
What’s sad is our fathers fought wars to protect unappreciative complainers who have nary a clue how well we have it in this country. Our poor people have widescreen TV’s.
Our poor people have widescreen TV’s.”
No they don’t, but even if true I think they would rather have subsidized health care, or advanced education.
“the roman empire is still with us. catholic church. albeit much more benign.”
Yes! In praise of modern governments (which are often tarred and feathered by posts on this blog), it is to their credit that it is presently much more difficult for the Catholic church to burn anyone who disagrees with them at the stake.
“Our poor people have widescreen TV’s.”
Yes — also nicer surround-sound systems than lots of wealthier folks who don’t blow money on such frivolities. Believe it or not, throwing away money on stuff you don’t need and living in poverty are highly correlated!
Control of government was the Republican’s to lose. For a while back in the mid 90’s they were running a good play book, and to some extent President Clinton went along with some of it (marks to him). The tide turned this decade and the bad old ways came back, and the Republicans threw away a good chance to forever change the course towards the better.
Sammy, the whole Iraq thing can no longer be about if we should have gone. I know some folks cling to that, and in this country it is their right to do so. Iraq is really down to the fact that we, as a nation, are responsible for the state of that place now. It is incumbent on us to try and leave it in the best repair we can make it. To quote Colin Powell, “We broke it, we bought it”.
The good news is that most of that place is not doing too badly. I would not walk the streets of Baghdad alone at this time, but there are other towns that are quite safe. The majority of the people like Americans, and are genuinely happy that Saddam was thrown out.
I think that if they can get rid of “Fatso” (al Sadr) and reduce Iran’s trouble making, we may prevent the public from forcing us to snatch defeat from the jaws of victory.
But you are dead on, expect more dead and more money spent on Iraq for 2007. The price of defeat there is too terrible to contemplate, trust me.
Excuse me but the place isn’t doing too badly?
Even the powers that be are finally admitting there is a civil war over there now.
You are welcome to your opinion. I am just going by first hand knowledge. There are some parts where everyone is trying to kill each other, there are plenty of towns, cities and villages that are not allowing the forgien fighters in, and turn them over to our guys as soon as they spot them. Their goal is to live in peace and try to finally make a better life for their families and their clans.
Recently someone’s cousin from Jordan was visiting a village and cause a huge fuss because the local eldars were certain he was a bad actor and insisted our guys take him into custody.
This is a housing board, sorry for the Iraq response - if anyone wants to talk Iraq feel free to email me - sigalarm@gmail.com. I check it when I can.
Ruth, please quote me accurately - I wrote “The good news is that most of that place is not doing too badly”. I stand by that assessment based on what I have seen and what units are seeing what kind of action. As the previous post stated, there are areas that are hell - I would put about 20% of Iraq in the bucket, the other 80% are trying to move ahead with life.
Only 20% of your house is on fire.
Is that good news to you?
A better analogy might be:
Hurricane Katrina destroyed New Orleans, did that make San Diego un-liveable?
> I would put about 20% of Iraq in the bucket
What about Baghdad? A state with a civil war in its capitol seems to have an unstable future.
Quite right Peter, that is a huge threat to getting Iraq in the kind of shape where it won’t suck for them for the next 1000 years.
Maybe moving the capitol to a smaller city could help? Most big ministries could be dissolved and their duties moved to provinces instead (except defense, finance, oil, foreign affairs). I don’t know much about Iraq, however.
Bush’s folly will be the end of the British WW1 plans for the national borders in the Middle East. The Persian empire will rise and destroy the Arabian Sunni tribal based kingdoms. Isreal and, eventually the US, will sit back and enjoy the show.
http://riverbendblog.blogspot.com/
Iraq is really down to the fact that we, as a nation, are responsible for the state of that place now.
Wrong. The people of Iraq are responsible for their own destiny. We’ve “helped” them enough with twelve years of sanctions, arbitrarily firing 400,00 members of the only institution - the Iraqi military - capable of holding the country together, and allowing Iranian-backed militias to effectively take over the “Iraqi” government. Instead of trying to impose our own solutions on them, based on hallucenitory neo-con visions of a “secular pro-Western democracy,” we should just let them sort out their own affairs.
“Avoid needless foreign entanglements” was George Washington’s sage advice. Too bad the world-improvers inside the beltway didn’t listen.
George Washington was right Sammy. I think we are responsible because we took overt action to change the course of events in that nation. You also correctly point out that the Iraqi people really are ultimately responsible for how things turn out. I completely agree there, and I think in general the Iraqi people are on board with that.
I think the world is a better place with Saddam out of power and (now) dead (my opinion), but we changed that country through use of force. We bear some responsibility to make things workable there.
Agreed. Mass murders should not be allowed to live. I’m sure if Britain ran Iraq, they would have jailed Saddam for life.
In hindsight, and after reading about the late President Gerald Ford’s stance against the U.S. involvement in Iraq, I wonder what Reagan would have done? I am confident that with Reagan as CINC, we would have been done with Iraq well before the spring of 2004 (within a year of involvement). But I do think this Islamo-fascism worldwide network is going to be a very tough nut to crack. Unless we do notwant western civilization to survive, we’re going to have many years of war against fundamentalist religious terror worldwide. It’s a disease we could have and should have nipped in the bud in 1978 or 1979 during the hostage crisis.
We are still paying a price today for having the weakling Carter as our President. Clinton’s weakness also emboldened the Islamavermin, but it all started with Carter.
Saddam’s hanging, while justified and long overdue, illustrates the nature of our “allies” in Iraq. A video circulating on the Internet shows Saddam being taunted on the gallows, and then officials of the government dancing around his body. That kind of spite and vindictiveness doesn’t bode well for national reconciliation and shows the blatantly sectarian nature of the Shia thugs that constitute the new Iraqi government.
Bill in Phoenix, you and other Reagan-worshippers ignore the fact that he never retaliated for the Hizbollah attacks against the Marine barracks, the kidnappings of US citizens, the hanging of Marine Colonel Higgins, or the beating death of a US Navy diver on a hijacked airliner by Hizbollah thugs. Please don’t tell us how Ronnie Reagan would have “stood up to the terrorists.”
Rather than a slow burn I think the first 2 or three years of the crash we will get the most in declines in price corrections because of the speculation and sub-prime lending making it impossible for these sellers to hold out .
So even with prices going down creating more buyer demand ,at the same time less buyers will qualify because of the tighter lending requirements .So, it will take a long time for the supply to be absorbed .
I just think there is going to be a shocking amount of inventory in 2007 with nothing to up the demand for this supply.
Perhaps the coming revolution will create a shortage of houses because so many will have been burned in the fighting.
You’re always such a ray of sunshine.
HW posts ” Rather than a slow burn I think the first 2 or three years of the crash we will get the most in declines in price corrections because of the speculation and sub-prime lending making it impossible for these sellers to hold out”
I agree and I hope you are right. I am on the sidelines for now. I need a house for alot of reasons. If I can get one at a reasonable price I will wait out the gore and flat to sideways years in bliss. I will buy when the sooner is the better!
1. The house I sold in Bowie, MD in spring 2005 will go into forclosure.
2. A house in my new development will sell for less than I paid for my house (no biggie, i put lots of the funny money from the Bowie sale down so I won’t go upside down)
3. The senate and house will hold hearings on subprime lenders impact on minority homeowners. They will not suceed in agreeing on a bailout.
4. Freddie Mac will experience pain as a result of forclosures. Their stock will take a hit.
5. The idea of a house being a good investment will finally be laid to rest by buyers.
6. Some sellers will stay committed to ‘not giving the house away’
7. Stock market will end 2007 below 10000
5. The idea of a house being a good investment will finally be laid to rest by buyers
If you’re right about this, prices are toast. With no appreciation to bank on, how many buyers will be willing to take on these price levels?? For what??
“5. The idea of a house being a good investment will finally be laid to rest by buyers.”
I agree that this will happen at the bottom, but I don’t think it will be in 2007.
Just reported in the NY Times:
Brokers agreed that the market in Manhattan has become extremely tight above the $10 million mark.
“I’ve never worked in a tighter market,” said Sharon E. Baum, senior vice president and director of the exclusive properties division of the Corcoran Group.
As of Wednesday, there were 29 apartment listings in the $20 million to $40 million range in New York City, and 15 single-family houses, from $20 million to $100 million. And there are many more buyers than sellers. Ms. Baum has had offers for the mayor’s residence, Gracie Mansion — not for sale.
http://www.nytimes.com/2006/12/31/weekinreview/31hamilton.html?_r=1&oref=slogin
I guess there’s no end to the money the rich can steal from everyman.
hey if you can buy a property for over 10m you pay cash
it is the lower priced properties for the average person i am concerned with that stuff is for the uber rich anyway
hey if you can buy a property for over 10m you pay cash
That’s what everyone thinks, and maybe it was once true, but it ain’t necessarily so any more.
So maybe Donald Trump will get the last laugh after all.
And the rich get richer ….
my predictions-07
malibu homes will go down by a million
san diego will stay the same like it always does
nevada will have state taxes
phoenix will build a bullet train to los angeles
denver will get snowed in five more times
texas will export their property taxes
the corcorin group in NYC will finally tell the truth
boston will see class wars like those busing riots
florida will become the first “only spanish spoken here’ state
my landlord will default and i can break my lease and move
my sister will see a therapist for buying two condos with cash
my snobby bay area friend will apoligize for calling me a blankin’ idiot for not buying a house!
my friends who own multiple properties will stop talking and just go in the fetal position.
my agency bonds will go to 5.5 or 6
intel corp with rise from the ashes and
income tax will come down not up to help all the poor house owners.
i am not basing any of my predictions on fact,,,just my imagination. thanks for reading. ann
INTC will rise…I agree.
Prediction:
1. Renters will forgo home purchases when they calculate that renting is “X” dollars less than buying a home.
2. Renters will resolve to sock this money way for an eventual downpayment
3. Life will happen and very few will sock that difference away
4. One day the renters will finally buy a house and kick themselves in the butts for not saving, but rather squandering their money on fancy restaurants and vacations
I wonder how many homeowners who took out HELOCs will “kick themselves in the butts for not saving, but rather squandering their money on fancy restaurants and vacations” At least renters won’t go bankrupt as a result.
I predict newer homes will be cheaper than older homes in 2007.
Many newer home buyers will get forclosed while many pre bubble home owners who bought way back and way cheap will just go on with life and choose not to sell. I also think many buyers will not want to buy into new home ghost towns with disfunctional HOA fees unable to maintain common areas. Older homes the city does the work. Many newer home communities are way out from jobs and shopping, etc.
DEPRESSION IN ‘07
The stealth recession that started in ‘05 becomes sorely evident to everyone in ‘07.
* Foreclosures & bankruptcies soar as inventory climbs beyond 12 months nationally and homebuilders lead median prices lower (15+%) trying to maintain sales. Sub-prime lending is decimated.
* Plummeting retail sales & mounting REIC job losses send stock markets into a tailspin (down 20%+), reasserting the secular bear that started in 2000. More than a few hedge funds self-destruct.
* Oil tops $90 a barrel as production at Ghawar declines precipitously and mideast tensions heighten over Iranian nukes.
* Blatantly obvious inflation aggravated by the weakening dollar force both the Fed Funds & Treasury rates higher; mortgage rates climb 2+% to offset increasing risk.
* Auto sales evaporate, pushing GM & Ford into bankruptcy.
* Plunging tax receipts push all levels of governmental budgets seriously into the red.
In 2008, it gets worse.
I think this scenerio has a good chance of happening in an ‘07 to ‘09 timeline.
However, what if the FED cuts rates in order to try to save the economy/housing?
How would this affect your scenerio?
Not at all.
First, the long bond market is inflation-sensitive, therefore any cut in rates would signal a surrender by the Fed to inflation and force long rates higher.
Second, cutting the FFR while the economy’s weakening would accelerate the dollar’s downfall, discouraging investment in US securities and therefore (again) forcing rates higher.
The end result is always the same: The dollar is going down, and rates are going up.
“First, the long bond market is inflation-sensitive, therefore any cut in rates would signal a surrender by the Fed to inflation and force long rates higher.”
Since the gubmint controls the supply of both money and T-bonds of all durations, why do you think they would not control supply to avoid the appearance of a telltale inflation risk premium at the long end?
They cannot control supply of T-bonds without reducing their borrowing, which they can’t do without reducing spending. That will be more difficult than usual because since tax revenues will be in free fall this year. Of course, if they do cut spending enough to keep up with the drop in revenues, the screaming from the usual suspects will be deafening. The Democraps want to win in 2008, so they will cave in if it even gets that far, which I doubt.
As a result of all this, say goodbye to the “dollar”. 2007 is the year it starts its final tailspin into the dustbin of history.
My mid-year prediction was:
Comment by CA renter
2006-07-02 01:07:04
My prediction for San Diego:
Negative 5% to positive 5%, YOY, for the remainder of the year (IMHO, it’ll bounce and give NAR/CAR the ability to call a “bottom” over and over again - HA!). Inventory rises to about 25,000 by September/October before sellers pull listings off the market until spring 2007. In Jan/Feb 2007, SD has YOY price declines of 10%, on average, but inventory will be lower than expected until the short sales and REOs show up in about June 2007. This trend will accelerate through 2009/2010. RE might bottom in 2011/2012 and remain there for a couple of years, unless there is a depression. In that case, all bets are off, and RE might not bounce back for many, many years to come.
—————
Nationwide, by Dec 2006, appreciation is 2%. By Dec 2007, we see national housing prices down by 10% to 15%, and we are in a very bad recession/depression.
MSM economists and “experts” will be **simply shocked** by this.
———————
Add to that the Fed will allow the dollar to depreciate further by “printing” up more money and I believe they will lower rates in Q2 by a quarter point.
The 2006 Christmas shopping season will be reported as slow, BUT the reality hits when retailers’ numbers come out and show their margins were low/negative, in many cases.
Housing inventories build, but more slowly than most of us expect…until around March, when the dam breaks on foreclosures. 10-30% of the listings by the end of Q2 will be foreclosures.
Between retailers taking a hit, slowing housing market, & stagflation, the stock market will take a hit by June 2007.
Oil remains in a $55-$70 channel, gold is very volatile, going from current price to almost $1,000/oz., then back down again.
More violence in the Middle East; and Iran and North Korea threaten to go to war with the US.
A new govt-backed lender is brought out to take care of all the failing loans. Homedebtors will be able to refinance 100% of their loans with an I/O loan over 40-50 years. No ammortization, but the principal will be due upon sale. Loan can be refinanced at end of term, but dollar will be toast, enabling people to pay off loans at that time.
Free money for everyone!!!!!!!!!!!
———————————————————————————-
” But Siebert believes that pension funds and other investors will be shopping for equities next week.”
“There’s fresh money that comes in at this time of year,” she said. “There’s just so much money sloshing around. The hedge funds and the private equity people have put so much money into this market.”
AND
“Something beautiful happened in the last six months,” Acampora added. “For the first time in four years, all the old-line stocks are starting to come back — Time Warner (Charts), Citigroup (Charts), General Electric (Charts), Coca-Cola (Charts), Avon Products (Charts), Campbell Soup (Charts), Heinz (Charts), Xerox (Charts) and even Microsoft (Charts) … All of a sudden, vintage stocks are back in style.”
Why?
“There’s just so much liquidity out there,” he said. “You see it in IPOs, private equity, bonds. You’re looking for where there’s value.”
———————————————————————————-
I predict this will end in 2007
I predict many more MSM articles to come in 2007 about the subprime lending sector (the first have just appeared in recent weeks).
I predict 2007 will be all about subprime loans failing.
2008 will be prime-time.
I just found the following article which seems to support what I was saying earlier.
“Housing slump in 2006 not nationwide”. http://www.heraldnet.com/stories/06/12/31/100bus_kelly001.cfm
Don’t get me wrong, I think some of the markets - many of the markets that got superheated and saw huge stupid price increases are in for a definite haircut. But you won’t see every individual geographic market falling. And when you roll all of this up into national level reportage, you won’t see negative number for an entire year over the previous 12 months. And if it does dip into the negative - a first since 1976, it won’t dip much based on the historical patterns.
If one takes the annual figures shown above and creates two year rolling averages, although the average national home price gain in 2005-2006 is a lofty12.0%, this is not the highest runup we’ve experienced. For example, 1978-79 was up by 13.4%.
If you create rolling averages of other durations such as 3 year, 4 year or 5 year, you will see the same thing. The gains now are high, just not highest.
Two year national home price rolling averages calculated from http://www.ofheo.gov/HPIRegion.asp:
1976
1977 8.54
1978 12.20
1979 13.42
1980 10.76
1981 6.80
1982 4.28
1983 3.36
1984 4.09
1985 5.21
1986 6.75
1987 7.69
1988 7.02
1989 6.00
1990 4.19
1991 1.97
1992 1.77
1993 2.00
1994 1.83
1995 2.32
1996 3.14
1997 3.53
1998 4.31
1999 5.04
2000 5.90
2001 7.38
2002 7.43
2003 6.89
2004 8.77
2005 11.97
Notice the little national bulge there are the end? And the herald runs articles the realtor pays to have published, I believe.
But you won’t see every individual geographic market falling.
Yeah, and when the dot-coms imploded, only those holding stocks were hurt. Uh, wait a minute…
Drentzl, you don’t need to have had a gain in order to feel the pain.
“this graph tells you all you need to know…
http://www.nytimes.com/imagepages/2006/08/26/weekinreview/27leon_graph2.html”
I’m not sure it tells me much to do with my contention that home prices don’t fall because Shiller’s chart is in today’s dollars and the figures I’ve been citing are in absolute dollars. Also his exclude new homes.
The fact that his chart IS inflation adjusted makes it way more meaningful than your nominal-dollar figures. For instance, you point out the RE run-up of 13.4% from 1978-1979 as being historically significant. It’s not. Inflation at that time was about 14%. Therefore, any appreciation in RE values was negated by inflation. BTW, that’s typically how RE values work: they rise with inflation, or perhaps 1% above.
(Adding to my comment above)
The fact that RE values have been rising way above inflation with no underlying demand explosion is why we see a bubble. Plus, you pointed out that there is a new construction (which is not included in Schiller’s graph). There is a TON of new construction. Yet with all that new supply, prices kept rising (until recently). Makes no sense from an economics perspective, does it?
Will prices drop in every single part of the country? No. Surely, there are numerous tiny rural towns that were untouched by the RE craze.
I never said his chart wasn’t more meaningful. I just said prices have not gone down nationally and the data I cited was not inflation-adjusted so countering my data with inflation adjusted data was apples and oranges.
Of course prices go down nationally when we look at real dollars. And that is exactly why I feel that a very big portion of the current down cycle in RE will be due to inflation outside of RE, not nominal home price decreases.
Someone who hasn’t been able to affoird a house, but who gets raises over the next couple of years as home prices stay flat, WILL be able to buy a house. What’s so bad about that?
The idea that nominal prices will drop by say 40% (which one reads here not infrequently) is not a likely scenario but rather wishful thinking.
Let’s have a friendly wager.
I believe nominal prices will drop by 40% by 2010.
The only reason this won’t happen, IMHO, is if the PTB decide to bail everyone out via a “Ownership Society Tax Credit” or some such nonsense. Perhaps, we will enact trade barriers and require all business to buy at least 50% “Made in America” materials/services. Maybe the unions will pull themselves up by their boot straps and demand 200% wage increases for all. Maybe a new RTC is set up to offer those 40-year I/Os with principal only due upon sale of the home.
Barring all those things, I’ll bet you a bottle of wine (or beverage of your preference), not to exceed $50 (in today’s dollars) that prices will fall 40% by 2010.
Deal?
Gentleman’s bet is OK with me. We’re talking national and nominal.
Sorry, I should have clarified. I meant 40% in bubble areas (I’ll be very specific and say San Diego).
But, I will go with 25% nationally — and nominal declines. Still a deal?
Still a bet.
More “next 2-10 years” than ‘07 specific, but:
1) Murder rates, particularly in urban areas, climb noticeably. (This one’s a no-brainer - already sadly much in the end-of–’06 news.)
2) I’m in the “big crash” camp - don’t see how all those defaults on “silent seconds”, liar loans, suicide loans - and then lending capital drying up — could result in anything less than a spectacular fireworks show. Lotsa bargains…if you have C*A*S*H.
3) RE “Bargain hunting” comes largely from overseas - gathering real momentum around early ‘08.
4) Political winds trend to protectionist & anti-immigrant in a big way. The ‘08 elections are a Pat Buchanan wet dream - all about assigning scapegoats for our sorry lot. Foreign ownership of US property is legislatively curtailed or even illegalized outright.
I predict an end to some of the bogus terms used in the past by realtors but also predict a whole new bunch of bogus terms to replace them.
Lake Superior State University just released its annual list of banished words for 2007 and you gotta love this one:
“BOASTS — See classified advertisements for houses, says Morris Conklin of Lisboa, Portugal, as in “master bedroom boasts his-and-her fireplaces — never ‘bathroom apologizes for cracked linoleum,’ or ‘kitchen laments pathetic placement of electrical outlets.’”
http://www.lssu.edu/banished/current.php
Harry Dent predicts (in his free newsletter online) the Dow will get to 20,000 by late 2009, followed by a severe crash in stocks and real estate, to rival the 1930s Great Depression. He expects the next depression to last through 2022. He basis his lower expectations on the Dow to the unpredictable events that happened recently, such as the 9/11 in 2001 and the stepped up Islamic fundamentalism war against western civilization. He originally predicted a Dow 40,000 by 2009. But he still sticks to his prediction of a major economic crash in the USA and European nations based on demographic patterns. He foresees oil at $100 per barrel in 2009. http://www.hsdent.com/
Dent’s demographic data is fairly compelling and echoed by other’s research. His “boom through ‘09″ prediction will be cut short though, IMO, by the housing bust. [Had housing not been allowed to supernova he may have been right.] Regardless, the “big-spender decline” is one of the (many) factors that contribute to my belief that a depression is all but inevitable.
Here are my LA county predictions for 2007, Re and other odd happenings:
1. Scal and LA area sees a continuing downward overall decline in prices, with foreclosures spiking in such areas as IE and scentral. Funny loans get cut off in most marginal areas,the spigot gets shut off for those suicide loans in LA ghettos. I say 10-15 %yoy declines LA county by end of 2007.
2. A slow rise in unemployment from 4.6% to 6% by year-end 2007. The layoffs in contruction and RE will finally be counted in the stats and start having adverse impacts upon the overall Scal economy.
3. All the laid-off umempolyed illegals will head back across the border to their family farms in mexico/CA and take extended vacations till the economy rebounds.
4. Criminal activity rises sharply.
5. It will be stagflation: A 3-4 % inflation rate combined with a slowing economy or recession.
6. Energy prices go up due to continued Mideast turbulence. There will be some big mideast event in 2007 which will result in oil prices spiking to near $100/gal. Gas prices will be at $4.00 by mid-2007.
6. FEd will keep rates at between 5 and 5.5%. Long rates will go up to at least 7-8% by end 2007.
& 60’s style war protests return: democrats ramp up pressure to get US out of Iraq.
7. Environmentism will recede in favor of increased domestic oil drilling: big push to fund alternative fuels, with massive gov’t subsidies for exotic paneceas as biofuels.
8. and yad ayada yada. happy new year everyone!
I find your predictions totally compatible with mine.
4. Criminal activity rises sharply.
Residing in LA County, this one rings especially true.
Businessweek’s “The Worst Predictions of 2006:”
“PREDICTION: The national median home price will rise about 6.1% in 2006. Over a full year, it “has never declined since good record-keeping began in 1968.” — National Association of Realtors, Dec. 12, 2005
THE REALITY: Through October, the median price of residential properties was down 3.5% from a year earlier.”
“THE REALITY: Through October, the median price of residential properties was down 3.5% from a year earlier.”
What is your source for this?
Drentzel –
Did you notice the link there? I guess THE REALITY of a drop in the national median price came from whatever Businessweek’s editorial staff considers to be a credible data source.
I am curious where you came up with the b^lls!t about national US prices never falling that you were adamantly posting here yesterday?
OFHEO as discussed. Please see:
http://www.ofheo.gov/HPIRegion.asp
2006 has not been reported yet, so it will be interesting to see.
Please read above to edumuckate yourself why the OFHEO series presents a seriously biased picture of the national RE market.
The National Assocaition of Realtors (aka real estate clerks) - As we have stated several times to you.
The OFHEO is a joke. They claim my market was up this year. LMAO.
Have you actually read how they come up with their numbers? Please read it.
When you use the word “we”, you sound like you are the Groupthink Wizard at a Klan meeting.
Also a magazine called Business Week - Please take eyes off REIC handbook and click links - Thanks!
In 2000 we had the collapse of the Dot.coms.
In the last couple of years there has been an explosion in Internet advertising and consequently the valuations og Internet-related companies have been increasing. I see this continuing throughout 2007 but at some point the industry will question the efficacy of Internet advertising versus traditional media such as TV. At that point, look for Dot.com bust II. This will negatively impact stocks and also hurt certain markets particularly hard like NYC.
For the D.C. area:
During 2007, Loudoun and outer counties are the first to show the reality of the lax lending standards of the last runup with foreclosures approaching the Denver level. I’ve seen REOs already listed out there. This will be especially true in the lower-end areas. Those REOs will be snapped up by cash flush people when they can rent them for a profit but not until then as the lower-end areas of Loudoun and the outer counties are not particularly safe any more. Until the values reach that profitability level, the REOs will sit. It won’t be pretty in these neighborhoods.
Overall, I predict a county wide price drop of 20-30% more in the outer counties for 2007, some of which have already seen a 20% drop off.
In Fairfax and Arlington it will be sticky but get more desperate as the year progresses. It’s true that most people want to live closer in whether they rent or buy, but what I have noticed is that a lot of houses were simply flipped and not updated in the closer in areas. So, you have older homes with 40 year old windows, etc. I’m not so sure anyone will be willing to jump with a 20% decline from 2005 levels with so much money required to update these houses. We haven’t seen 20% declines closer in yet (a few cases but not overall) but in the long run I do expect greater than 20% declines. I can’t begin to predict how long this will take closer in.
My general feeling about the overall state of the market nationally is that things are much worse than anyone realizes. For years now I’ve seen that same old commercial playing over and over with the guy with the perfect house, golf membership, etc., etc. who is “in debt up to [his] eyeballs.” Up until last year, people could pull out equity to get rid of the 29% interest credit card bills and if they were lucky they were able to afford the new payment and changed their lifestyles, but the news on this blog indicates otherwise. That’s just my gut feeling.
Some on this blog have suggested a bailout by congress in some form of tax credit. I don’t think this will happen b/c if I have learned one thing living in D.C. is that ultimately, be they one party of the other, the people in congress are primarily concerned with their own longevity. If a bailout was perceived as an outrage by the average citizen, they won’t risk it. It doesn’t matter which party. Even if some kind of bailout does occur that allows people to hold on to their homes I still believe that prices will go down.
I can’t begin to predict what will happen with the economy. But based on the disaster that is coming in housing and its impact on the overall economy it’s hard for this neophyte to believe there will not be a recession in ‘07.
Happy New Year everyone.
Novasold
I predict that in some areas land prices will plummet as it becomes impossible to build a house for a profit at current land prices. There will be articles that mention that land prices are falling at a faster percentage rate than houses.
My prediction: David Lereah will no longer be employed by the NAR by the end of 2007 (involuntarily).
Also, prices in Northern Virginia will drop another 8-10% in 2007, foreclosures will rise to record levels, and risk premiums on mortgage loans will rise in response to high defaults and foreclosures.
Hmm, I predict that Dave L. WILL keep his job UNLESS he starts telling the stark truth: housing is a mess. If he does that, he will be fired.
Roidy
The expectations that more buyers will buy than in spring 2006 will be tested in February and March 2007. I believe that
April is the cruelest month,
swelled inventories without release,
dashing the hopes of sellers,
keeping buyers from falling.
Realtors will wage a war to trim inventory and prices by not accepting inflated prices. This strategy will seem counterintuitive to most realtors but it’s a way to jumpstart the spring.
In theory it may work. But it may not work in practice if some of the brokerages don’t go along and buy listings with feelgood prices.
Why should sellers reduce asking prices? Haven’t they heard from many experts about the spring bounce when the market (and prices) should recover?
Casey Serin’s wife will a. leave him or b. have him whacked for insurance money
The NAR will continue to spin wretched housing data to less effect
Consumer confidence will go in the toilet and lead to a moderate recession
The fed will once again drop rates to little effect
Most of the nation will begin a long slow correction of housing prices that will take 3-5 years.
SoCA, SoFl, AZ will experience a brief sharp 20%-30% drop followed by a dead cat bounce, followed by a long slow declined
Ben will be interviewed next December by the MSM and hailed as a visionary
Trolls/Realtors will continue to call us crazed/bitter etc, but our ranks will grow.
I wrote on December 1st 2007
“SCENARIO:
‘Massive Job Losses’
When? ‘Early Next Year’
‘Pushes stick forward on housing collapse’ (Airplane reference. Pushing the stick forward on a plane puts it into a steeper dive)
‘Leveraged Assets Fail’
‘Pension Plans Fail’
‘Commotion’
‘Reactionary pullback in spending speeds collapse’
Later on I expect; “despair,anger,violence, and political upheaval”.
August of ‘06 I posted the following on the web but took it down later-
“As I sat in the Costco food court, sipping a coke, a visual image along with a feeling came into my mind. I saw my wife and I at some future date having a despaired discussion. A feeling of hopelessness hung like a pall over the scene. We were cleaned out and unable to make a house payment. The money we had put down was gone and we had nothing. The American dream had become a noose around our necks. I sensed that this was at least a nationwide thing and that there was pain everywhere.
This was back in March of 2006. I had watched the housing market and was contemplating purchasing a house. Something didn’t feel right so I was trying to tune in. I have always felt that I had some level of intuition but also have had a lot of doubt about my ability to “bet the farm” on that intuition. I heard that the conscious mind is the intuition’s biggest critic, so I decided to open the door and listen, but to back that up with LOTS of research.
I discovered that astute analysts have been warning about the housing bubble for at least two years and that the warnings have gotten louder in the last several months. The mass awareness of the bubble broke wide open yesterday, August 23rd when the bubble was the lead story on ABC, CBS, NBC, and The Drudge Report. The domino effects of this process will be admitted into the mass awareness later and with great resistance.”