Wednesday, April 11, 2007

Real Estate Roller Coaster

US Home prices adjusted for inflation plotted as a roller coaster

the graph is here:
http://www.speculativebubble.com/videos/real-estate-roller-coaster.php

19 Comments:

Anonymous Anonymous said...

Geeze Walley, I wonder what happens next ?

Apr 11, 2007, 11:50:00 PM  
Anonymous gull watcher said...

Don't believe that a fall is inevitable.
This is the first plateau and higher heights are right around the corner.

Every RE person that I have spoken to in Marin assures me that this is a great time to buy.

Check it out...... Meet 'em!

This is what they say.

A buyers market..... get in now.

Apr 12, 2007, 1:18:00 AM  
Anonymous Anonymous said...

Some Thurs Humor if You Will.

Excuse the quick change of topic here, but we all need a good chuckle now and then.. some of these are priceless..

enjoy all, now back to blogging..

http://themessthatgreenspanmade.blogspot.com/2007/03/pencils-down.html

Apr 12, 2007, 5:27:00 AM  
Anonymous Anonymous said...

Sorry, the last part of that link should have been ...

/2007/03/pencils-down.html

kid's humor at it's very best..

Apr 12, 2007, 5:30:00 AM  
Anonymous Anonymous said...

Gull watcher.. Keep eating those fancy crackers your Realtor buddies are feeding you, but you better be sure there are no alka seltzer tablets in the mix..

Apr 12, 2007, 5:36:00 AM  
Anonymous Anonymous said...

gull watcher, I'm not sure if you're serious or being sarcastic. I'm being honest. Over 188,000 Bay Area residents have already packed up and moved in 3 years. So my question to you is how to stack a growing house of cards with less cards?

Apr 12, 2007, 10:59:00 AM  
Anonymous tom stone said...

I talk to a couple of realtors i trust on a regular basis,both have been in the business well over a decade,know their markets very well,and are thorough professionals.one is in santa rosa,specializes in midrange homes,and has been doing a lot of short sales the last 8 months.he told me there are no buyers in the under $700k range.the other broker is in sebastopol,and handles homes in the $800k plus range,he told me homes that are priced right are still moving,but there is some slowing in the market,which he attributes to the fact that most of his buyers sell their existing home and pay cash or mostly cash here...fewer buyers are using bridge loans,and days on market are a getting longer.personally,i would not hesitate to buy a home now if i washed down 250,000 mikes of acid with two bottles of whiskey,or maybe not.

Apr 12, 2007, 9:06:00 PM  
Anonymous gull watcher said...

Sorry for the ambiguity.

I was being sarcastic, but several Marin RE brokers have recently advised me to "get in now".

They assure me that this is the ultimate time to buy.
This "slowdown" is a mere blip before the next big runup.

The local SF news was touting DataQuick's latest findings tonight.

Median price up 3% in one month!

30% less sales than a year ago.

What could this mean?

Any opinions?

Apr 12, 2007, 11:43:00 PM  
Anonymous tom stone said...

SOS on the "median" when the bottom end drops away,the homes still selling are larger and more expensive,because the well to do are less affected by tightening lending standards etc.look at price per sq ft.also realize that you are looking at a lagging indicator when you examine existing home sales since these deals were made 60-90 days ago,and do not forget that dataquick includes foreclosures in their sales figures,for the loan amount,at one day on market.this can substantially skew figures in a rapidly falling market,especially with so many homes having 95-100% financing.It is still a pretty good time to sell,but unless you are buying your dream home and money does not matter to you,it is a bad time to buy.If you decide to go ahead,i'd be happy to do your loan,good service,reasonable price,honest advice.

Apr 13, 2007, 7:59:00 AM  
Anonymous Anonymous said...

It is different this time..

My projections remain regarding housing and the economy, which is that both are in for a shock.

With that said, I will say that housing will never be the same again, so it is different this time. This time, many people made a ton of money. We probably all know someone who has. However, we also know that there will be almost as many who will lose lots of money as this ponzi scheme continues to unfold. It is those people and those stories that are (now) being blasted across the Internet that will forever change the psyche of the American housing consumer I think.

This housing bubble, and the bursting thereof, has done many things (almost all of which are very negative), but one of them clearly is that it has nicked, correction, ripped open, the “housing only goes up” shield that the RE machine has so effectively sold to all of us sheeples. Yes, the adult generations of American consumers alive today will never look at housing the same way again in our lifetimes. Our psyche has forever been changed with the ongoing crash. So, I don’t think we’ll see the runaway prices again after all the blood is spilled on this one.

Most everyone loves to make money, and when we do it makes us happy. If we invest in something and don't make money (don't lose, but don't make either), we don't necessarily get upset. We normally understand that those things sometimes happen.

However, everyone also hates to lose money. When it happens, it hurts and can sometime lead to many ugly outcomes, such as divorce, depression, job loss etc etc.

I believe the fear of losing money is a greater motivator than the desire to make money, and the stories that will come out of this crash will reinforce this lesson with all of us.

Apr 13, 2007, 8:38:00 AM  
Anonymous Anonymous said...

My only longstanding hope in the matter comes from the fact that over 60% of all homes purchased here in the last few years were with IO loans.To me The term "IO" translates into: can't afford. As soon as the IO and ARM loans get banned, then one could suppose that roughly half of the potential buyers out there would be out of luck. Cut 50% of the potential buyers out of the market and suddenly sales dip 50%. But with sales dipping in the double-digits ever quarter for over a year now, that hasn't translated to significant drops in prices.

From what I've seen here, it would seem that it takes way MORE damage and erosion in the housing market to start dropping prices that I would have thought. So despite the fact that foreclosures, short sales, a drop in sales, median values,hundreds of thousands moving out, and a media mouthpiece that has changed it's tune from "the house is great!" to- "the house is bad!", those prices are STILL very, very high.

I'm also interested in what I see as more of a national housing market less reliant on state and regional borders. It is true that many of the big housing developers are national. Some are even international. They build all over the country. They must continuously find places to build that are profitable. Their latest trend seems to be building in previously less developed regions. If nobody lives there, then how do you sell houses to people that don't live there? Easy.

If you read the papers and publications these days, you'll continuously see articles regarding the " best places to live". This year, Raleigh NC was at the top of that list right along with Austin and Atlanta. If you take a glance at what's happening in these regions, they are building houses there as if they're going out of style. The tactic in these areas seems very different from here in CA. They build insane row after row of generic looking small to medium-sized homes in the 75-150k range versus some the immense, humongous expensive homes in CA. My guess is that since they can build in quantity, they can still make a killing in profit. As you can see, these articles are really marketing tools to sell more real estate, but using some of the oldest tricks in the book. They realize that the coasters are fed up with high prices. Sell them a home elsewhere.

These articles are NOT written for the locals. They are for those who live in places like NYC, Boston, Miami, and SF. In other words- to people of moderate to even good financial means who find their region tapped out. These people likely have more money, more equity in their homes if they bought years ago, and a shell-shocked unrealistic assessment of home values.

So what do you get when you advertise a city that has a ton of room to develop, plenty of places to make subdivisions, and more importantly- prices that are 1/4th the cost of their current city? You get a stampede of people with fistfulls of cash, only all too willing to buy up those houses. PLUS, there exists the added incentive of having people that will likely pay way more for a house. 300k sounds cheap to Californians doesn't it? So what are the homebuilders doing in Raleigh? Why they're making row upon row of massive 350-400 'cheap' homes for all those out-of-staters. So the homebuilder wins, make more money, and thus can continue the prophecy of building out yet one more area, creating the same kind of price escalation machine that was created on the east and west coasts.

Bottom line- it isn't just CA and NY anymore. It's national and in my opinion, as long as the RE machine can invent new markets on par with Raleigh, people will move there and pay above the levels that are acceptable to the local population. The fact that CA is now cooked is no matter to them for as seen from the latest census, close to 2 million 'domestic' Americans moved from classic coast metros and into the " best places to live" within 7 years. Who cares if the houses they buy are in Little Rock, Memphis, Austin, Dallas, or beyond?

Apr 13, 2007, 9:39:00 AM  
Anonymous Anonymous said...

The local SF news was touting DataQuick's latest findings tonight.

Median price up 3% in one month!


According to the chart for March on DataQuick, Marin went negative at -0.1%

Apr 13, 2007, 10:20:00 AM  
Anonymous Anonymous said...

I'm referring to this DQNews chart:

http://tinyurl.com/2bjkma

Yet the IJ says that the DQ data is diffeent...Marin detached up 0.5% and condos up 8%.

I don't understand the conflicting data.

Apr 13, 2007, 10:34:00 AM  
Anonymous Anonymous said...

Ah yes, the data... who holds the keys to the data I wonder?...

All the data in the world will not change the simple fact that home prices have forever been, and will eventually will be again, tied to wages.. factor in "location premiums" and it remains a very simple relationship..

All the RE machine's posturing and press about the pending turnaround are merely feet stomping and arm waiving distractions to try and convince the masses that this simple relationship does not exist.. we'll just have to see about that now won't we..

50-70% price drops across the board in most locations.. Marin will be buzzed too, but it will take a bit longer and perhaps not be quite so deep, but it's toast.. bank on it !!

Apr 13, 2007, 12:22:00 PM  
Blogger sf jack said...

A perfect example of medians holding or rising in a declining sales environment... in the below, taken from the HBB.

Re: DataQuick, who claims they don't do predictions, is claiming the worst of declines in prices is over in San Diego.

*****

"Comment by SD_FotBotD
2007-04-13 12:34:20

'March home sales turned in their biggest year-over-year decline since 1995, but the region’s median sale price rebounded to $490,000 in a possible sign that San Diego County’s housing slump is easing.'

It’s funny. I ran a median of 10 imaginary houses, priced $100k to one million, and got a median of $550k. Then I chopped off the lowest five prices and reduced the prices on the remaining five by a full 30%. Y’know what I got for a new median? $560k. Hooray! The median price went up! The dark days are, indeed, behind us…"

Apr 13, 2007, 2:36:00 PM  
Blogger sf jack said...

gull watcher said:

"Median price up 3% in one month!

30% less sales than a year ago.

What could this mean?

Any opinions?"

*******

In Marin?

It means dark days are ahead.

Apr 13, 2007, 2:39:00 PM  
Anonymous tom stone said...

I am looking forward to the day when a careful investor can make a dollar in real estate again.an honest dollar.when this market overcorrects,there will be a lot of good properties available at prices that make sense,and some real bargains.so those who are careful and thorough,and are willing to do the necessary work will do well once again.it is not that far off in time,and those who want to make a buck when things change would be well advised to start doing their homework now.47% of the homes on the market in sonoma county are in some stage of foreclosure right now...and the BIG wave of 2/28 resets will hit in the next few months.Be patient,wait for the screaming to die down a bit,and move.be conrary,buy low,sell high.

Apr 13, 2007, 6:27:00 PM  
Anonymous Anonymous said...

I agree Tom..

I think it will be quite a while before that day will come back again unfortunately. This market has been ruined by the dirtiest of all businesses and business people.

Man, how I'd like to be a fly on the wall in some of these local broker to broker meetings or phone calls to find out what they are actually planning and doing with this ongoing crash.

Apr 14, 2007, 6:47:00 AM  
Anonymous Bob said...

I agree that if we have a slight correction, there will be a long term impact on people's attitudes. I grew up in Denver and saw a market with 20% to 30% declines in 2 years. I was a summer intern at a local bank and had many a bosses who lived in neighborhoods with tons of forclosures. Speak to them about housing, even when Denver recovered, and I never once heard "RE is a great investment"

This is why I never believed that housing prices can go up forever and in the long term prices must be tied to income. If we even get 1/4 of this type of correction that I witnessed first hand, you can bet those younger people in their late teens and twenties will never again buy the coolaid that prices always go up -- and 10 years from now these are the buyers we will need to support future house price gains.

So this could be a much more profound event than a large one time correction in the market and return to a normal market with marginal yoy price increases. I think we have seen this in the stock market.

I can't help but think the NAR is aware of this issue -- hence why they are sooo desperate to at almost any cost support the notion that housing goes up and up and up. If long term perceptions change, it will take at least 10 possibly 20 years to change attitudes.

Apr 14, 2007, 1:12:00 PM  

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