Saturday, February 11, 2006

Our Local Bearish Realtor's Latest Article

The local Marin realtor who writes for the Home Owner's Economist is at it again with this article about the down-trending housing market here in Marin and abroad; there are insightful comparisons to the Japanese real estate market crash. Marin sellers are, naturally, in denial; they don't want to hear it! Like Sgt. Schultz from Hogan's Heros they are saying "I know nothzing, I hear nothzing, I see nothzing!". Well, deal with it.

Some choice quotes:
The esteemed (our mentor in political-econ-market-wit -- he doesn’t know it) Alan (no no no the Good Alan), Alan Abelson (not the Evil Alan who left the building), brought some hard evidence into the previous week’s Barron’s magazine. He wrote, “On that score, our conviction has been mightily strengthened by clear signs that the great housing boom is rolling over. Exhibit A is last month's steep drop in the sales of existing houses -- 5.7%, to be precise.

"Yes, we're well aware that the Commerce Department reported that sales of new single-family homes rose 2.9% in December. But the figures don't jibe with the rather downbeat findings of the housing industry. And as to which we find more credible -- Uncle Sam's or the builders themselves -- it's no contest.”

He seems to be saying that he’d trust the building industry (that has every reason to pump their numbers for stock purposes) more than he’d trust Official U.S. Government stats. Well so would we, and we’ll spare you our usual diatribe about phony job stats, and, worse, the thing they call Inflation. The CPI, the “Core.” Etcetera Their Inflation numbers are out of whack, don’t ring true with reality, with Real Inflation. You oughta know – you buy things – are prices up???

Anyway the Good Alan pointed to his buddy, David Rosenberg of Merrill Lynch who brought some very interesting stats to the House Party. (Which is over and we think you should literally and immediately sell-high residential property investments right now if you want to have funds to buy-low when the next party starts up after the current one is only left standing in History Books.) Fourth Quarter existing single-family homes took a deep dive, bringing in a 36% annual rate reduction. All three of us: Alan, David and we are convinced housing has moved to a bear market. Heartening to buyers. First Time Buyers? Let’s take a look.

Last year 43% of first-time buyers, had no down payment, whereas in 2004 only 28% used that creative financing option...In 2005 more than 25% of all mortgages (nationally, not just your “frothy” Coast lines) were not actually home acquisitions (oh yeah sure, the nice folks did get on Title), but, with no money down, no proof of actual employment, option ARMS, negative amortization (not even paying the entire monthly interest rate and the balance going onto the top of the loan, on the top of principal which is not being paid down at all), it’s really not much different than renting. Except, much more costly, and liable to cost those folks their credit and good reputation if … if … when.

And, here comes credit. About to get more expensive? Inevitable! Unsold inventory in the resale market jumped 26% above December '04, leaving a 5.1 months' supply, and anyway you cut it, that leads to a Buyer’s, probably a Strong Buyer’s market going forward. If that’s not enough inventory for you to make a selection from, we have the highest new home inventory level in nine years. Condos? Can you find one for sale? Oh Yeah. No Problem. Condos are showing a 6.2 month supply. Out our way in Marin County, California, total sales from December 6, 2005 through February 4, 2006 (two months) were 308 homes and condos. An amazing 211 out of 308 sales (69%), had price reductions. No typo, sixty-nine percent, had price reductions.

Ouch, and believe us the Sellers don’t want to believe it, and don’t want to hear it, because they don’t want to believe it.

26 Comments:

Blogger mad_tiger said...

You have the best photos--I'm laughing even before I've read the post. I like the complete refrain: "I know nothzing, I hear nothzing, I see nothzing!"

Feb 11, 2006, 1:47:00 PM  
Blogger fredtobik said...

I love statistics.


Are the photos from other sites or do you take the time to find them yourself?

Feb 11, 2006, 2:33:00 PM  
Blogger fredtobik said...

Not to suggest our #1 blogger would mislead anyone with statistics, but all numbers lovers should read this.

http://tinyurl.com/8ykxq

Feb 11, 2006, 2:56:00 PM  
Blogger Marinite said...

Fred -

You sure as hell better not be making such an accusation. I may make mistakes but I'll never deliberately mislead.

As I have a degree in statistics I know very well how they can be misused. The fact that they can be misused does not mean they are always misused. It is healthy to be sceptical but foolish to the extreme to dismiss anything that makes use of statistics. You just have to think for yourself when evaluating a claim based on statistical arguments and ask if the author is providing all relevant and reasonable statistics or just a subset that is favorable to the argument. Some people seem to take such extreme views and are so sceptical as to seem to think that statistics are by their nature deliberately deceptive. Nothing could be further from the truth. It is truly amazing how well the natural world conforms to mathematics in general and statistics in particular.

Feb 11, 2006, 3:15:00 PM  
Blogger Marinite said...

Are the photos from other sites or do you take the time to find them yourself?

I almost always do a google image search myself. It can be difficult because I have to know exactly what I am looking for. On occasion I will use in image from some other site (like the previous post about the Barron's article -- I used the image on the article itself).

I will change to the 'complete refrain'.

Feb 11, 2006, 3:24:00 PM  
Blogger fredtobik said...

This comment has been removed by a blog administrator.

Feb 11, 2006, 5:44:00 PM  
Blogger fredtobik said...

I counted 13 references to statistics in that article, which is a bit over whelming for the guy that got a c- in stats.

"Some people seem to take such extreme views and are so sceptical as to seem to think that statistics are by their nature deliberately deceptive."

I think authors are naturally deceptive, and statistics just get a bad rep.

Guns don't kill people, people kill people.... right?

Feb 11, 2006, 5:45:00 PM  
Anonymous Anonymous said...

fredtobik sez:

"I love statistics"

Well fred, if you love them so much, why don't you bring some stats to the table to support your contrary view of the Marin RE scene? Simply saying that Marin RE won't crash because Marin is "god's country" and "all my relatives in the Midwest want to live here" doesn't cut it.

Feb 11, 2006, 5:49:00 PM  
Blogger fredtobik said...

no more anons.

Feb 11, 2006, 6:19:00 PM  
Blogger Marinite said...

no more anons.

Some people feel more comfortable remaining anonymous. I respect that and will continue to allow anonymous commenting as long as people remain respectful. It started to get border line there in one thread but things stayed cool mainly because rejunkie remained cool. So anonymous commenting is staying on for now (besides, there were only two votes to turn them off which was hardly decisive).

But I happen to agree with this anon. Put up or shut up fred. If there is something that you want to say, then make it plain. If you have any quantifiable or otherwise substantiated facts that you want to put on the table to back up your up to now subjective claims, then do so now.

I counted 13 references to statistics in that article, which is a bit over whelming for the guy that got a c- in stats.

So? If you are just objecting to the article's author's decision to use 13 references to statistics (I didn't count them but I'll take your word on it), then take it up with the author. Or if you want to make a constructive contribution to this blog, then explain exactly how these 13 statistics are flawed or otherwise not to be trusted or believed. You may very well be right and we should dismiss this article on those grounds, but you'll have to provide a reasonable basis for that dismissal.

I think authors are naturally deceptive, and statistics just get a bad rep.

I find that statement utterly absurd. Some authors are deceptive; others are not. An honest writer will use statistics honestly. Not so of a dishonest writer. But the state of being an author does not make one dishonest.

Or are you throwing an obfuscated insult my way?

Feb 11, 2006, 8:24:00 PM  
Anonymous Anonymous said...

Fredtobik, are you a Marin reator watching your future income stream go down th toilet bowl? I think so...truth is sometimes painful.

Feb 11, 2006, 8:42:00 PM  
Blogger fredtobik said...

"I think authors are naturally deceptive, and statistics just get a bad rep.

I find that statement utterly absurd. "

No insult intended, authors are people, and unfortunately most people are not out for the truth, they are only interested in getting out at a peak (make money).

The only fact I know of, is that most people are dumb, always will be, and only change when something catastrophic happens.

I did not respond to the anon because I never said anything it suggested.


Maybe the disconnect here is that you think people are honest and righteous and always willing to do what is best for the majority?

Feb 11, 2006, 11:35:00 PM  
Blogger fredtobik said...

"Fredtobik, are you a Marin reator watching your future income stream go down th toilet bowl? I think so...truth is sometimes painful."

I am not a RE agent sorry..

Feb 11, 2006, 11:41:00 PM  
Anonymous Anonymous said...

fredtobik sez:

"I did not respond to the anon because I never said anything it suggested."

Then either (1) somebody has hijacked your user name, or (2) you are a liar.

I know what I read, and I know it came from a poster named fredtobik.

Feb 11, 2006, 11:54:00 PM  
Blogger fredtobik said...

anon should read the archives

Feb 12, 2006, 11:25:00 AM  
Blogger BigDaddy63 said...

Fred,

Let's ASSUME you are right. SO WHAT? Are you trying to say with a straight face that the current Marin Real Estate market is NOT overvalued? Forget that... how about MOST markets?


I for one wish there was an iggy button. I think you are a troll realtor or "brokster." Ditto on the put up or shut up. (holding my breath)

Feb 12, 2006, 2:49:00 PM  
Blogger fredtobik said...

I never said anything that the anon suggests.

I guess I will just shut up.

Feb 12, 2006, 5:16:00 PM  
Blogger Marinite said...

Deliberately offensive and insulting comments with no redeeming value will get deleted.

Feb 13, 2006, 11:25:00 AM  
Anonymous Anonymous said...

Quite right. Quite right.

I would ask you, though, why you seem to take such as an inoridnate amount of glee in the prospective finacial distress of people you do not know.

I can understand you wanting pure speculators to be 'punished' for articially inflating real estate values... but about 'ordinary' people who stretch to buy a home in a good school district, in a neighborhood they like... who plan to stay for many years. Do you not agree there is a difference?
What percentage of people who bought RE last year were speculators? I say 5-10%, in Marin.

Feb 13, 2006, 4:25:00 PM  
Blogger Marinite said...

I would ask you, though, why you seem to take such as an inoridnate amount of glee in the prospective finacial distress of people you do not know.

If this was directed at me, and I'm not sure that it was, my answer is that I take no such "glee". How could I? If there is distress then I think it could have been avoided for the reasons that have been described at great length over the course of the existence of this blog (please do not make me go through it again). The only way we can hope to avoid a speculative mania again about something as important as housing is by taking note of what is happening with this bubble and try to learn from it. Blogs report on things while they are happening and without vested interest as opposed to what usually went on in the past where reflection on a past speculative mania was always in hindesight and any reporting in real-time had vested interests (just look at the IJ).

Feb 13, 2006, 5:21:00 PM  
Anonymous Anonymous said...

Your recent response to (another, not me)"anonymous" got me thinking, since I actually had a similar sense that you have been hoping that this bubble would burst (not just slow down, or take a bit of a downturn), which of course would hurt at least some well-meaning people, not just the evil speculators. But where exactly did I get this impression? So I scrolled through some recent posts of yours, and found this comment, made by you on 1/25:"...So I really won't feel terribly sorry for people who knowingly bought into this insanity and ultimately get burned for it. Personally, I think a steep, sharp decline would be easier on everyone but it looks like we are in for a long, slow, excruciating decline. I'm sorry to say that people get what they deserve..." Please link to any economist that believes that a "steep, sharp decline" would be a good thing. I'm not "trolling", I read your blog regularly, but I can't figure this angle out.

Feb 13, 2006, 6:53:00 PM  
Blogger Marinite said...

Yes, well probably everyone will get hurt to some extent by a decline especially if it leads to a recession (or worse).

I happen to think that the faster we get it over with the sooner we can get back to normal. Sort of like ripping a band aid off quickly is less painful than slowly peeling it off. Either way it's coming off. If we are going to get hurt I guess getting it over quickly is better. This might make for a good discussion thread.

And yes, sure, if people knowingly entered into this craziness with their eyes open and ultimately get hurt by it then they get what they deserve. The operative word here is "knowingly". There is no excuse for not doing one's homework, thinking for oneself, and educating oneself in a little history which I don't find to be unrealistic because we are talking about serious amounts of debt; this isn't like a natural disaster; this one was human made. But I think this mania went to the extremes it did not only because of a flood of liquidity but also because a lot of folks just didn't stop to think about what happens when things aren't so rosy. (Maybe I'm just an insufferable idealist.) Unfortunately, a lot of innocent folks will get hurt too and people who stayed out of it will get hurt some too. Some people on other blogs even go so far as to speculate that those folks who stayed liquid and didn't fall for the mania will be required to bail out those who did; the prudent savers get punished. I don't know if that will happen or not of course but it is another way in which people will get hurt and so another possibility to prepare for.

I can only hope that this episode in history will be learned from and won't be repeated or at least will be minimized.

Feb 13, 2006, 7:32:00 PM  
Anonymous Anonymous said...

I think the "ripping the band aid off" analogy is a bit of a false dichotomy in that the possible outcomes of the current market imbalance aren't limited to a sudden drastic correction or a slower, extended but sizable reduction. The best possible outcome, defined as the best outcome for the economy, in my opinion would be a flat or very slightly declining market over an extended period of time. Who loses in this scenario? Short term speculators and potential homeowners who are currently priced out of the market and don't want to wait (rent) until their savings/income stream grows to the point that they could or would want to buy. Who wins? Current homeowners, and the economy in general that would avoid the shock of a sudden large price decrease or the "slow pull of the band aid" malaise you describe. Is this the most likely scanario? I don't know, but your blog intermixes anecdotal evidence of a potential bubble burst with occasional statements of opinion of what you would like to have happen, and you would like to see a sharp decline. Who wins in your scenario? Those who want to by NOW and aren't willing to wait, and bankruptcy attorneys. Who loses? Just about every existing homeowner, and the economy in general that like it or not has some ties to the real estate market.

Feb 13, 2006, 9:20:00 PM  
Anonymous Anonymous said...

Ha ha ha. I would not bet on a long slow gradual flattening or minaor depreciation over a period of years. You are just deluding yourself. It would take like over 15 years for wages to catch up to prices! Nearly every speculative bubble has burst and its not the first time real estate has done so. And this is the Mother of all speculative bubbles. People who bought in the last few years are so screwed if they don't get out now.

Feb 13, 2006, 9:53:00 PM  
Anonymous Anonymous said...

I'm not "betting" on anything. I'm simply making the point the the best scenario, not necessarily the most likely scenario, is a flattening market. There seems to be an attitude here that a significant bursting of the bubble would be a good thing. For some people, maybe, but for the economy a whole, I would say no.

Feb 13, 2006, 10:09:00 PM  
Blogger Marinite said...

There seems to be an attitude here that a significant bursting of the bubble would be a good thing.

I have received A LOT of email from people who read this blog and I have been surprised to learn that there is a lot of anger "out there" re this RE bubble; I had no idea. And I don't think the anger is about people being priced out or anything like that because many people who write me and express their anger say they are home owners. So there's something else going on. It's been a real eye-opener.

Feb 13, 2006, 10:31:00 PM  

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