Tuesday, November 06, 2007

IndyMac's Picture of the U.S. Housing Bubble

IndyMac Bancorp has a PDF out with their housing price correction predictions. I am reproducing the following graphic from that PDF below as it provides a nice picture of the U.S. housing bubble and includes Marin as one of the "high risk" areas (click on the image to get a larger view):

I found this PDF first referenced over on the Calculated Risk blog so please go there to get the analysis (in the post itself as well as the informative comment section) and why the very conservative predicted -10% drop in prices is off by a factor of three or so (hey, IndyMac wouldn't want to scare the investors, right?).

13 Comments:

Blogger marin_explorer said...

I note in the map detail how Sonoma county is evaluated as "moderate" risk, versus "high" for closer SFBay counties. Based on what news I hear from Sonoma, I think exposure there is just as bad.

Nov 6, 2007, 1:11:00 PM  
Blogger sf jack said...

Interesting that they expect a Q3 2008 home price "turnaround" nationally - with a price spike afterward.

That particular projection appears it could have had input from realtors, for it's wildly optimistic.

Nov 6, 2007, 6:15:00 PM  
Blogger Lisa said...

It's the same shell game as the banks with re-valuing their CDO junk. No one really knows. And of course they don't want to freak anyone out, so they'll just continue to revise estimates in increments that the market and J6P can stomach. Net result will be the same. And here in Marin, I'm sensing we're already 10% off peak in a lot of cases.

Nov 7, 2007, 8:14:00 AM  
Blogger Holland said...

Just received a newsletter from McHugh. He has the following comments:

"But the Dollar is in collapse, closing at 75.56 Wednesday, and is very close to only being worth half of a Euro. Can you believe the devaluation that is going on here? The cost of living is going through the roof. This is morally and ethically wrong, and forces your children into debt they otherwise would not have as they must pay more for houses, college tuition, medical care, etc... Massive hyperinflation is being thrown at markets to keep them from collapse, but the very act of this hyperinflation is crushing the dollar and causing markets to crumble. Artificial Economics."

Nov 7, 2007, 7:12:00 PM  
Blogger beebs said...

Re: the dollar and housing.

Inflation has devalued the dollar.

And now our Treasury is deliberately letting the dollar fall on world markets.

It's not that housing is high. Part of the puzzle is that the dollar is low.

beebs

Nov 7, 2007, 8:44:00 PM  
Blogger marin_explorer said...

It's not that housing is high. Part of the puzzle is that the dollar is low.

What a relief! And I thought Marin's RE stalemate was due to high prices. I'm sure buyers flush with foreign currency will save our local market soon...then happily lease back to us for those worthless greenbacks.

Nov 8, 2007, 4:43:00 PM  
Blogger Lance said...

beebs said:
"It's not that housing is high. Part of the puzzle is that the dollar is low."

Great observation! Despite all the complaints and high 'nominal' prices, the cost of buying a house today when all is said and done (i.e., factoring in the rediculously low interest rates available) is much much cheaper than it was a generation ago. And there is definitely a correlation between the low dollar and the low interest rates.

Nov 9, 2007, 9:57:00 AM  
Blogger Holland said...

"..the cost of buying a house today when all is said and done (i.e., factoring in the rediculously low interest rates available) is much much cheaper than it was a generation ago."

If it were the case, then we should have not seen pains in people's foreclosures and big write downs by banks. Instead, we should have seen people rushing in and buying houses like crazy!

The pain of the bursting of housing bubble has spread from main streets to Wall Street. It might get uglier because insurance companies and credit card companies are next to tumble. We are witnessing a meltdown not because the housing is cheap but because it has reached such a high price that people had to take out risky loans in order to buy their house.

Nov 9, 2007, 11:24:00 AM  
Blogger bbl said...

great posting

Nov 12, 2007, 12:56:00 AM  
Blogger Eric said...

I don't know what's going on but I just bid on another house, 45K over asking and still did not get it. Someone else bid another 25k over me. It still feels like 2005 in some places.

Nov 13, 2007, 10:12:00 AM  
Blogger Marinmaven said...

I got this in the mail from Wayka Bartolacelli, a realtor who is a Marnwood specialist:
"Oh the market, the market! What to believe and what is real. It is true that the market has changed and it is true that there were some problems with sub-prime loans and some reports about foreclosures and short sales. However, as with most headlines, it is only true to some extent. What is the case in Vallejo and other parts of the Bay Area, for instance, is not the case in Marin. So we need to look at the real picture. From my own experience I can say that the market has made some adjustments, but it is not doom and gloom and it won't last for long. This is a very good time to buy investment property, a second home, or buy that bigger home you've always wanted to afford. Or if you're trying to scale down, maybe you can get into an affordable condo. This is a good time to get that equity loan at a low rate. There are always positive sides to every situation."

One big highball of Kool-Aid, please.

Nov 13, 2007, 3:01:00 PM  
Blogger Holland said...

Eric, I don't know which area you are looking at. From the data I am gathering, most houses on the market of Marin County right now have price reductions, some times multiple reductions. The fews that get sold usually have reductions. Would you point out which area is so special that people have to overbid in this market?

Nov 13, 2007, 3:54:00 PM  
Blogger Eric said...

I'm looking in the San Anselmo area. I've bid over asking on two houses here in the last month but in one case the other party put down all cash and waived their right to inspections. The other case, I got outbid. I thought the credit crunch would lower the demand but again I had a 50% down payment and they both had more.
I've been watching the market here for two years and it does seem like prices are better than they were.
I think that if you are single or a couple without kids, there are a lot of cool houses to choose from and their definitely cheaper than last year. But well built houses on flat lots are still in high demand from my experience.
Depending on what you want, it seems actually pretty affordable. There is property on 1112 SFD for 699k and it includes two houses, one which currently rents for $1400 a month. With a standard mortgage your expenses are under 2k a month. Seems just cheap as renting.

Nov 13, 2007, 10:59:00 PM  

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