Mission Viejo broker/economist Gary Watts, whose home-price insights are widely watching in the local real estate community, conceded Friday that his 2007 housing forecast was wrong, but in his 2008 forecast remains upbeat, predicting that home sales will bounce back.
“The numbers for September and October may be our darkest hour, and then things are going to improve,” Watts said.
Watts didn’t issue a price forecast, saying there’s too much uncertainty. But if they follow historical trends, single-family house prices should go up from 3% to 5% next year while condo prices should drop slightly.
A year ago, Watts forecast a 7% gain in home prices this year. House prices actually were flat through August, and are down 2.2% in the latest weekly figures from DataQuick Information Systems. (Read what he told us in July HERE and then his ‘correction’ HERE)
Watts said he expected inventory to decline this year pus higher summer sales and for the Federal Reserve to lower interest rates earlier in the year. And he hadn’t foreseen the subprime mortgage meltdown.
His published forecast (COPY HERE) notes …
• With the Fed cutting interest rates, Congress passing bills to aid housing, and more money available for home lending, the financial markets will begin calming down. This down cycle will come to an end, just as they have done since 1970, and an excellent buying opportunity may lie ahead.
• The media, knowing that they are losing viewers and subscribers, are well aware that fear helps to keep people tuned in or continuing to read. So they throw the big number of mortgage delinquencies in the headlines, but fail to tell their viewers how few actually go through the entire foreclosure process!
• In the 1990s, real estate values dropped over 19% in Orange County; in this housing downturn it has been minimal. So what makes this cycle different. The truth lies in the fact that today’s homeowners have more income, more equity and more wealth than in previous cycles.
YAWN
“In the 1990s, real estate values dropped over 19% in Orange County; in this housing downturn it has been minimal”.
The 19% drop didn’t occur in one year.
Even in the biggest downturn of all time Watts predicts huge gains.
Salesmen are impossible to learn from unless you just purchased a equity losing home, then they become an immortal profit.
Gary is a true one-note wonder.
At least, he knows where his bread is buttered, accuracy & integrity don’t matter to the bulk of the REIC.
Graphrix has been searching for any 3rd party evidence that he called the 1990s bust. It doesn’t exist in any media archives.
Watt’s has no credibility what so ever!
Most realtors/brokers predicted the future (incorrectly) and that’s why we are in the mess that we are in. They made false promises to home-buyers that prices always go up and therefore you can sell/refinance in a year or two. We all know how that turned out.
He hadn’t foreseen the subprime mortgage meltdown? Are you kidding me?
We’re not even in real estate and we’ve been waiting for the fallout from the too-free-flowing credit for years now.
wow is this Mr watts in a Twilight Zone episode!!!!
This guy should be on the new ONE Flew Over The Cuckoos Nest……lolll
i just cant understand people like him he is just ridiculous!!!!!
What happened next is we saw the slowdown in the real estate market, as home prices started to deteriorate in 2006. However, we’ve never seen a real estate market on a national scale where home prices fell. The investment and underwriting models for which these loans were originated were, in part, based on the increase in home prices.
Roger Herrick
California Mortgage Broker
http://www.contactherrick.com
Couldn’t see this coming and we have been talking about this for years as unavoidable and an obvious outcome. The best thing that could possibly happen is Watts and his ilk come out with a prediction or a forecast and the papers and the media say “Oh” and don’t listen…..then eventually the RA’s etc all learn as well. That however will never (well maybe never) happen around here.
He has no clue, honestlty please stop quoting him or even mentioning him anymore.
I would change his title from Economist to Douchebag. People are more wealthy now????? The savings rate is negative and everyone’s wealth is tied in their home which is now losing money or in the stock market which will soon start losing money.
Gary Watts? Oh yeah! He’s a stand-up comedian from Mission Viejo! He does his bit about how home prices are going to go up! The punch line is that he’s not funny.
“The numbers for September and October may be our darkest hour, and then things are going to improve”…Does this guy have no shame whatsoever? I feel sorry for the fools who actually listen to the “economist”.
The housing slump is ending? When did it start? The prices in the beach cities are as high as ever.
FYI Jimmy:
The beach cities are not the only place that exists in OC. In fact, there are actually other people that dwell in the inland areas. These places also have homes that are bought and sold on the real estate market just like the beach cities. And, as in the beach cities, the prices do fluctuate. At this present time it would be fair to say that a slump has begun in these areas. Maybe your mommy and daddy can help you learn more, they probably own their own home and I’m sure someday you can too.
Using “Median Prices” is useless and does not reflect reality!
Only when house prices are affordable enough for the working class families who earn between $60K and $100K a year will the housing market be back on track. Now that speculators/flippers are gone and lenders are back to common sense there’s no way average wroking class families can afford the current house prices.
Jimmy, Jimmy, Jimmy. Please never go away!!
Gary, as a professional in the RE market, do you not see the tighter lending standards require money down, of which people cannot come up with to support these high prices. All of the investment money is no longer heading towards real estate, its heading overseas. Job loses, high RE prices, high gas prices, low dollar=inflation, no home equity used = no ATM, are just a few drags on the OC economy that will keep people away from OC RE. In 2001 people blamed the media for tech stocks crumbling, people just could not believe the cycle was over. Gary, this RE cycle is over. 30% decline by 2010.
LOL, you gotta love Jimmy, you don’t say property with an actual value is still holding…you mean to tell me that beach front property or property with a boat slip isn’t declining?? Even in those area’s Jimmy we will see problems, but yes the majority of those properties are not going to be beat down like the others.
Jon you should follow up on the project over in HB and see how the wetlands housing project is moving along. Such as how many sold, any price drops, any cancellations?
Jon, good to see you didn’t refer to him as an “economist” as so many realtors do. Watts was also way off the mark in 2006, when he called for a recovery in the second half of that year. The recovery did not materialize, and as we can all bear witness, has only gotten worse. I’ve read his latest report, and his only reason that we’ll see a recovery is because he says that historically, downturns only last 24 months. Eh… Mr. Watts…the LAST downturn lasted > six years, no?
TO OC realtors/brokers:
Why do you listen to this guy? You could get as much information from a Magic 8-Ball. Whenever I hear someone spouting off this guy’s prognostications, I turn the other way in disbelief/disrespect. The sooner the people come to grips with reality, the sooner the market will return to normal.
On Sept 19th, 2007 Robert J. Shiller sure seemed to have a different opinion that Watts! “I am worried that the collapse of home prices might turn out to be the most severe since the Great Depression. It is difficult to predict the depth, duration and all of the consequences of such a decline operating in a much more complex modern economy.”
Larrygg — who earns between $60 and $100k? I would call them poor, not middle class. No offense to anyone earning that kind of money, but my secretary and her plumber husband pull down a combined $130k. Two government employees would earn well over $100k. You’re about 15 years behind the times.
Yea Jimmy you tell em. Laguna beach was only down 44%.
Watts for President!! All you angry renters will be sorry when he proves you all wrong!!
“Its in the BAG”
BAHHAHAHAHAHHAHAHAHA
Jon why do you keep giving Watts “air time” here? Not even the NAR agrees with him, anymore. The guy was saying the same stuff last month, too.
“today’s homeowners have more income, more equity and more wealth than in previous cycles.”
Have salaries risen the same rate as housing? no
Is equity still a gain for houses bought since 2005? maybe - maybe not
Do most AMERICAN consumers continue to get in debt or save money (wealth)? GET IN DEBT.
Did nearly everyone who took a half heartedly look at the re market & money lending see a breakdown in the future? yes… except the few that refuse to beleive the obvious?
how can this person be taken seriously?
Tim would you consider nursing to be a position that people could make decent money? None of the nurses I know make over that figure, and there is a shortage of them now, and you have to have a degree for the position. Can you enter all the places that are making $50 an hour? I know even in the high tech field after 2002 salaries dumped by 30% and those who use to make big bucks are no longer there. Not to mention the H1B visas and other visas coming in working for peanuts, which big biz brought in because there was just “not enough trained Americans” what a crock….should have been “not enough broke desperate fools to work for peanuts, let’s bring over the Indians and the Chinese!”
I do fine and combined we have a good household income, however I would think that I am not the norm.
This guy is crazy…how could anyone NOT see this coming. Prices will not rebound for at least 3 years. I wonder what this guy is smoking? Does he not know how to read. Everything we have heard in the last 3 months is how prices are declining and we all better be ready.
Where is he getting his facts from??
I still dont get the blaim the media mantra. I am sure some are influenced by what they read, but what they are reading is the truth and its the news. You cant say foreclosures are down we they are greater than they have been in years. You cant report that prices are up when they are not. It makes no sense.
Middle class typically represents the majority of the population roughly 40-50%. The income is usually in the 80% to 120% of median income. If the Median household income is 75K in Orange County than the middle class income would be 60 to 90K a year. So the 60K to 100K is pretty accurate with relation to the middle class. I believe the poverty line in Orange County is well under 30K a year.
Thats the problem I see with people in Orange County or anywhere. They dont realize what poor really is, and how the majority of the population are well above the poverty line, but cannot afford the most modest of dwellings. Affordablity is key, that is all there is too it.
Realtors care about volume and care less about prices. As the volume is down big they are in pain.
lee in Irvine
Do you want any ideas that disagree with your gloom and doom scenario censored? Watts and his forecasts are just as relevant as the ones I have seen you quote from the extreme bubble blogs. I sure you would be much happier if this blog turned into an all bear all the time column and as a matter of fact it almost is already.
Where does this guy get the mushrooms he’s putting on his pizza?
Realistic? Watts is relevant?
Ok, move along nothing to see here folks.
Kim
I hate to burst your bubble so to speak, but prices are not going to decrease as much as you are hoping for. You have been a victim of the propoganda from the bubble blogs and it is really sad. I took some time to look at houses that were open in Costa Mesa and Irvine this weekend and the majority of them were holding in price at about the same level as a year ago. I agree that in order for them to sell they will have to negotiate down about 5% to 10 % but that is a far cry from the 40% to 50% that you are desparately hoping for. Unfortunately you are going to get a bif surprise this coming spring and summer when prices start to stabilize and sales start to pick up. My suggestion is to begin with a starter home in Garden Grove or Westminister one that you can afford in the $400,000 range and work your way back up to to what you want in years to come. But don’t assume that you are going to be entitled to buy a luxury home in Anaheim Hills for that kind of price tag. Buy your business work hard earn a good income and get over it.
More ARM reset is coming and more foreclosure from Sept 2007 and beyond. We are far away from bottom. House price continues to decline. Sales is at its slowest. It is going to be a long years ahead in Orange County and California. Save your cash for a rainng days.
This peanut gallery is geeting so old. Let me ask … how often do you expect economist’s, brokers, associations or insiders to be correct when market forecasting? What is an acceptable % error in forecasting?
If I look at Gary’s last 6 years of reporting he was pretty spot on for the first 5 of those years especially when compared to what most would consider his more credible counterparts like Anderson School (UCLA), Adibi (Chapman) and USC. I would be interested to see the Register run a historical comparison of market forecasts as I bet overall Watts would do well in contrast to his counterparts.
Regarding the tightening credit markets, do you all really think we will learn from our mistakes? My guess is that you are not far from hearing the following radio spot “Got bad credit, have a foreclosure on your record, call us at XYZ Lending”. At that point you will shake your head and wonder how this can be as all the sheep come back into the market.
Realistic Homeowner:
WOW! Who said I think home prices would fall 40-50%?? Home prices in Anaheim Hills off Imperial across from Yorba Regional Park have already fallen roughly 10-20%. I do NOT think they will fall 40-50% (it would be nice, but it wont happen). The house I currently live in got appraised in June 2005 for $740,000. It also just got appraised in June of 2007 for $667,000. Looks like its falling…..
The home I am interested in is not a huge home but a started home in AH. It is 3 bed 2 bath 1600 sqft, and no thank you I will not be living in Westminister or Garden grove…. EVER!!! It was listed for $680K 8 months ago, it is now listed for $604K. It all depends where you live. I can hold on to my current situation just fine for awhile and when I feel the time is right I will buy. Like I said before I have a nice down payment and I can afford to buy it, however I want to be comfortable in my lifestyle and pay for my kids college, so I would rather wait so it is more affordable.
Thanks for your suggestion, but I’ll stick with my chosen path.
realistic homeowner is anything but “realistic” dude
your stucco box is vastly over-priced and youre not as
“wealthy” as you thought you were deal with it
Thanks rants!
for all you renter haters…wrecked um boy
$150K annual income (fortune 500 company, not stated), no contingencies, pre-approved, $200k down payment (and growing), close escrow within 15 days.
we don’t need to buy. too bad if you need to sell.
keep calling renters scum but this type of salesmenship will not sell your homes.
the down cycle will continue because creative financing is gone…
Kim
I am amazed at your elitist attitude, do you you think you too good, too special to live in Garden Grove or other parts of central Orange County. That is the problem with many bears on this site they think they are too above starting at the bottem. The fact is there are many affordabable homes in Orange County, just not in the most desireable areas. The bears want champagne on a beer budget. When I bought my first home I bought what I could afford and was grateful. The vast majority of posters on this blog feel they are entitled to living in the best neighborhoods eventhough the can’t afford it. They don’t seem to realize that there are people who can affordi t and will continue buying homes
Oh yes thanks Rants for your partyline gibberish
I sure wish you people who are so quick to criticize who do your research first on the person you are speaking about. Mr watts is very respected in the RE community here in OC and his predictions have been very accurate for many years. He has a wealth of knowledge and when all the other predictors were completely off, he was very accurate. He also has good knowledge of how the media protrays the outlook and how they are soo wrong on most of their data. Nobody expected the mortgage meltdown to be as big as it was, we all knew it was coming but nobody expected it to be this bad and for those that are no in the lending market, you don’t even know the extent of what is going on. I am with Gary on this one, I do believe in many areas of OC we are going to start to see the prices come back around, I have already started to see it in my local south orange county neighborhood.
Realistic Homeowner:
Your really starting to piss me off. Do you have kids?? If you dont, shut up. I will not put my kids in a school in Garden Grove or Westminister. When I was 18 years old with my 2 year old in the back seat, I was at an intersection in Westminster when I had to break hard to avoid hitting the idiot in front of me. Well the guy behind me I guess thought I was trying to get him to hit me, so he decided to pull a gun out and shoot my back windshield. Need I say more…. I will never live in a bad area.
No, I do not feel I am entitled to live in a nice area. I can afford to live in a nice area. I have worked very hard in my 25 years old life to earn a great living to provide the very best for my children, so for you to put me down for thinking I am egotistical, screw you!
I am not on this blog to attack anyone for any decisions that they make in their own lives, so go preach to your own choir. I will live where I choose to live.
Have you ever thought that there are an abundance of homes in bad areas because people dont want to live there. Hello…think about why HB and Newport have 3 million dollar homes.
Get a clue.
Sales don’t suddenly stabilize or pick up in one year - a trend, whether up or down takes years before it flatlines for another few years. The current bubble wasn’t a one year event, it started in 2000 and stopped in 2006. People expect prices to just “correct” in one year? That’s not how the economics of housing works. It takes years for a correction to fully establish itself. Anybody who thinks we’ll be out of the woods in 2008 will be sorely disappointed.
Most likely, we won’t see prices stabilizing until 2009-2010.
Also, wages are still far FAR behind housing prices. Even if the correction is “only” 20%, that means a starter home now costs $440,000 instead of $550,000. $440,000 means downpayment of at least $66,000 and household income of no less than $150,000.
Good luck finding a family with that much financial resources ready to move into a $440,000 1500 sq.ft. starter home in Garden Grove.
Sick of BS:
What is your problem with me anyway?? Why is you post “whats so delightful about..Kim anyway? If you want to know, just ask. Dont be a dick about it.
Realistic Homeowner Says:
“Do you want any ideas that disagree with your gloom and doom scenario censored?”
I enjoy reading opposing views, but when those views are based on stupidity, I don’t think they should be covered by this newspaper.
Example, from Watts forecast:
“This down cycle will come to an end, just as they have done since 1970, and an excellent buying opportunity may lie ahead”
I don’t think we can compare this cycle to the 70s … no way. In the 70s, home buyers were purchasing homes that were 2-4 times their HH incomes, today it’s an unpresidented 8-12 times HH income.
“The media, knowing that they are losing viewers and subscribers, are well aware that fear helps to keep people tuned in or continuing to read.”
Permabulls are always quick to throw the media under the bus wheels when the market turns against them. He wasn’t bit***** about the media when the RE market was at unsustainable levels.
“In the 1990s, real estate values dropped over 19% in Orange County; in this housing downturn it has been minimal.”
It also took 5-6 years to see the loss that carnival barker points out above. We are in the first year of Orange County housing depreciation. We probably have at least another 4 years of evaporating prices.
“So what makes this cycle different. The truth lies in the fact that today’s homeowners have more income”
They also are servicing much more debt when compared to those higher incomes.
Gary “In the bag” Watts conveniently dismisses the big factors (aka fundamentals) with his foolish forecast. He doesn’t talk about the cost to buy a home in Orange County, now takes up a much larger percentage of income, than anytime prior. He doesn’t talk about the cost to rent averaging half the cost to buy. He doesn’t talk about the net-outflow migration that we’re now seeing. He doesn’t talk about our deeply RE dependent economy.
This clown thinks were all going to become rich, buying and selling homes to each other.
We are NOT buying expensive houses because it is simply out of reach and housing is a riskiest investment in Orange County and California. MORTGAGE SLAVERY.
Realistic Homeowner - you’ve been a victim of Gary Watts school of hot air. I advise that you stop listening to Gary Watts and Lawrence Yun and face reality. Unfortunately you are going to get a big surprise this spring when the massive number of foreclosures place even greater downward pressure on values. My suggestion is that you not tell people to buy in at all, especially not in Westminster, Garden Grove, etc. where we are already seeing the largest % of distressed homeowners.
I some what agree with Watts. theres always the possibility for sales to bounce a little.
Don’t be surprised to see the median spike back up. It can go back up to 700k. The low sales volume causes volatility in the median price. When premium communities start to sell at 30 to 50% off and drop below the 1million level, I expect to see some of those homes bought.
Garry Watts:
Predicted 7% Gains in 07.
Actual Decline of 7 % in the OC medium
640,000 is now 580,000 down 7%.
Garry is off = 14%
Predicted drop in inventories
Inventories increased, over 1 year supply.
2 years in Santa Ana & Garden Grove.
Could not for-see the subprime meltdown.
Could not / did not see how the cheep money increased medium.
Could not / did not see that cheep money / easy lending evaporate.
Predicts 5% appreciation in SFH in 2008
Can anyone explain to me why we should listen to the Market pros?
Kim I don’t think it’s delightful when people, especially women ,use foul language to try and act tough and macho. It’s lame and takes away from the points you are trying to make
Here is my prediction.
Medium decrease of another 5%
Actual decrease of 25 to 40% depending on the area.
Beach area losses at 10 to 25%
Inland area losses at 25 to 40%
Bottom of market in December 2008
That is three years from peak in 2005, to bottom of trough.
Recovery in 2010 or 2011
That is 5 to 6 years from the peak in 2005.
Well thank you sick of BS. Considering your name has a bleeped out foul word in it. I truly care what you think of me…really! I do not use foul language to make myself “tough or macho”. If you dont like what I am saying, read on.
I was actually defending myself to the ignorant people on this blog “realistic homeowner” for there lack of knowledge that yes…we all have different viewpoints.
This blog is not personal, but it seems that most take it that way. Get over it! I am who I am and I wont make justifications for it..
Scott-
Dont forget he said that a “15% gain was in the bag for 2006″ - How did that workout? LMAO!!!
Sunset Beach Guy:
What do you think of my predictions?
What is your positon in the market?
Do you own is sunset?
What do you see in your beach neiborhoods?
my rental props are right down the street from you in Belmont
I have seen the beach comps fall at least 10%
Do you agree?
Jimmy:
Same question.
Kim,
You seem confused. We can just let it go at that.
Here is my prediction Scott:
North County older areas -35% to -50% depending on neighborhood
Over all for OC -35%
Beach areas -20%
Market bottom 2011-2013
Beach areas or nicer ares 2010
My best guess on the current data and with the liar loans gone and considering the coming recession, I might be too conservative on this.
Gary says prices dropped 19% in the last downturn - what prices?
I saw 30% + in nice areas, prices only, not factoring the inflation during the 7-9 years it took homes to climb back to their 1989-90 prices.
Gary is not a fool, he’s only trying to salvage his business, which is selling his prognostications to the real estate industry - brokers and agents in particular who are desperate for any bit of hope some “expert” might proffer.
He has survived for years on his reputation for predicting the last turn-around two years early.
In Wall Street wisdom there is the sage observation, “Every market has it’s heroes.” And then there are the bums - who were often the heroes of a past market.
Realisitc homeowner:
I seem confused?? Why dont you read everyone else’s predictions on this blog about their predictions as to where they feel the market is headed, and send me a message that actually has merit.
Patricio:
We are verry close to agreement in these numbers.
The timing of the Recovery is the only gap in agreement.
Historically the bottom of the trough is 3 to 5 years
from the peak of market expansion.
I am not sure about the 2013 figures
as that would be 8 years from peak of expansion
Realistic homeowner & Kim:
If you guys would just stick to the topic,
There would be no need for bickering.
We all are here to benefit from one-another,
Not to make insults!!
Scott, the amount of the funny money created by this is staggering and in turn propped up the local economy, ala 1980’s. However, it was much MUCH worse now and the percentages were much higher on all accounts, not to mention propped up with fraud and exotic loans that were the catalyst for this. Now we have a plummeting local economy from the housing losses and we also have loan programs gone, all we are left with is the stark reality the vast proportion of the county can not afford these houses. That is why I stretched this out, last one was 5-6 years under normal circumstances of a down turn, this one is going to me much harder and pronounced than the 90’s. Not to mention what bubble is going to pull us out like the Dot.com did in the late 90’s with the Internet pushing the economy forward? I suspect the green bubble, hydrogen re-tooling etc? No clue that is my best guess.
nobody knows or can predict when the real estate market will go back up, I MEAN NOBODY.
So if you have the need to buy a home, buy it.
Real estate will go up in the future but who knows exactly when? .
So just sit back and enjoy and go about your daily business and stop trying to predict the market.
Kim
You make my point, almost everyone on this blog sings the same song lol? Unfortunately some people like you actually get caught up in it and believe it. To me its a n amusing distraction but for the most part a total waste of time.
in other news, an oc real estate investor jump out of a high rise building in south oc. luckily he is wearing a parachute. his name is gary watson. last seen heading out to death valley to speculate on the land there.
Kim
An example of my last comment is Patricios posting regarding the ” green bubble and hydrogen re-tooling”concept, have you ever heard more absurd predictions. And you think Gary watts is a whack job. Just look at most people posting here WOW
Realistic Homeowner:
You truly are crazy. I have nothing more to say to you, because I dont think you have common sense.
THE HOUSING MARKET IS CRASHING…….PRICES ARE FALLING!!!!
Jon, You need to take back control of this blog. This has turned into a one-sided bubble blog. The shear anger and rudeness is mind boggling. These angry bears attack anyone with a differing viewpoint. You would think someone insulted their mother! All this because someone dare have an opposing view on Real Estate. Amazing. Why don’t you people form a weekly Real Estate Anonymous support group. You can damn housing and the whole industry to hell in the privacy of your own home.
Realistic Homeowner-Definitely should be unrealistic homeowner
Sick of BS- You are funny.. Jim Bakker with rose colored glasses..
You’ll see!
Mav- Are you familiar with DTI, PTI and Down payments-Get used to it because this is the way it will be. Some people can afford these prices, most can’t unless you create a loan program that facillitates it. No longer available.
Kim- Keep using that language because it means your real..
Gary Watts is obviously a homeowner ego massage therapist! $60 dollar an hour mind rub!
40% or more is coming for Jimmy too. It should pose no problem for you Jimmy, outside of a couple Villa Nova dinners, trip to New Zealand and that new Ferrari..
Disclaimer-I own in BayArea and could care less what happens to the value of my house. I live in it but don’t use it as a bank. 20 years from now when I die, my daughter will havef a home..That’s all I care about..
MY PREDICTIONS for Gary “low wattage” Watts:
2007: 7% gains predicted. I thought he would be: WRONG.
2008: 3-5% gains predicted on SFH I think he will be: WRONG again.
2009: I predict he will predict 2-3% gains on SFH. I predict he will disappear at this time with his head lowered and then pop up somewhere else with some brilliant prediction. This guy is something else. Some kind of BS.
“single-family house prices should go up from 3% to 5% next year”.
Real Homie, I have this sneaking feeling that you are actually ROC.
We, the people of this county, who, as of today, have not bought the real estate always goes up BS, nor will we be handed the bag or drink the kool-aid, or catch the falling knife of the real estate ponzi scheme that greedy blood suckers like you desperately wish we would.
The housing market is recovering………….
The problem is there are no buyers…..so buyers get out there and buy. You can make this recovery happen buyers, go buy a house, now.
Problem Solved.
Kim
Gotcha, you finally went over the edge. See you in the spring
All I wanna know is: Is Garry “Low Wattage” Watts friends with David Lereah? He is another super-expert predictor of RE and former president of NAR (gee, I wonder why?). Check out David’s awesome books. You can find them in the humor and discount section at any book store. “Why the real estate boom will not bust” a Feb 2006 book. Listen to these knuckleheads and you will be busted and flat broke.
scwolf,
Just like someone without $150k in the bank to find it unimaginable that anyone could amass such a fortune. Yes it is true that price to income ratios have increased to unprecedented levels. But it is also true that personal wealth has increased to unprecedented levels. Anyone with a 401(k) has more wealth than they probably could have imagined 5 or 6 years ago. Today over half of U.S. households own stock directly or through mutual funds. The number of households owning stocks is up 42% since 1995 (from 40 million households in 1995 to 56.9 million today). This is conveniently ignored when people compare the affordability of housing to incomes alone. And not only are more people participating in the market, they are participating to a greater extent and they are making money.
TNS Financial Services reported that the number of Orange County household millionaires NOT INCLUDING HOMES was 80,200 in 2003 and 107,028 in 2004 and 113,000 in 2005. It is 3rd nationally behind Los Angeles and Cook County, Illinois in terms of number of millionaires. The TNS report also attributed most wealth to long-term accumulation in 401(k)s and IRAs - not real estate.
Orange County is home to 10% of California’s millionaires, but 8% of the population. (L.A., on the other hand has 23% of the millionaires and 27% of the population).
Here are some stats for you from Money Magazine. Keep in mind these are nationwide. Orange County probably looks more like the top 10% than the median. Also keep in mind that in any free market economy, you are always going to have 25-50% of the population renting.
Age: 20-29
Median Net Worth: $7,900
Top 25%: $36,000
Top 10%: $119,300
Age: 30-39
Median Net Worth: $44,200
Top 25%: $128,100
Top 10%: $317,800
Age: 40-49
Median Net Worth: $117,800
Top 25%: $338,100
Top 10%: $719,800
Age: 50-59
Median Net Worth: $182,300
Top 25%: $563,800
Top 10%: $1,187,600
Age: 60-69
Median Net Worth: $209,200
Top 25%: $647,200
Top 10%: $1,429,500
Affordability stats that just look at income are ignoring half the picture, the big half, and the half that wasn’t there 10, 20, 30, or 40 years ago.
Does anyone happen to know what average Americans have put away towards retirement? Or how about the amount of savings that average Americans have? Savings? How about narrowing it down to OC residents? I think that most people are in heavy debt. They’ll say they own a home and 2 expensive cars, etc. but in reality they don’t own anything. And they’ve taken out a second mortgage to get those new cars! That is typical.
You should all look at Scott’s comments. He is correct. This is not a crash but it will be a deep 4+ year correction. I am in the industry and live it daily.
I looked at some public records for what people’s mortgage balances were in my neighborhood from a realtor a couple of years ago. They were huge as compared to the cost of the home. For example, a 660,000 home with a 570,000 loan - most were like this. Huge loans. I would like to see what the average starting loan balance was in OC over the past 4 years.
Kim is abrasive, rude, fugly tranny
Wow!!!
Kim - I agree that the housing market has fallen and will continue to fall and Gary Watts is well, doing his “job”, so is the Register for posting his article. To make money…OK we got that out of the way…
Also, these other bloggers are pushing your buttons and will continue to do so. The key is to not answer stupid questions, the key is to get them to answer yours…LOL
As for your personal info about why you dislike Westminster? Garden Grove compared to Irvine, Newport, etc…well, that’s personal in your case. If you want to talk about criminals, well, most of the criminals that caused this REAL ESTATE crisis is still working on WALL STREET! and that’s what we are talking about!
Mac,
While it’s true that many more people are investing in stocks than in the past, it’s because many people like myself are saving for retirement. Back in the good old days, people could rely on their pension. Those days are gone.
Hence, people are greatly encouraged to contribute to their 401k’s, Roth IRA, etc. However, just because my 401k has grown a lot through the years doesn’t mean it’s money I’ll choose to use for a nice big house. It’s money for my retirement.
And where do you think I get the money to fund my retirement accounts? My income. So, I don’t believe affordability stats are ignoring as much as you think.
okay “realistic” homeowner, what do you think will happen in spring 2008 and WHY? i hope you have a strong argument.
rickhunter:
The crooks have always been them one’s on Wallstreet and they will continue to be. However they wont be shooting at me…lol
The problem is, people need to be well informed before making any sudden moves, especially in the housing sector. The problem is, most are not! Most are so confused (especially if they read these blogs) because ill informed people dont know what to believe.
Be informed, save your money and trust the numbers.
Jason, don’t feed the bitter over leveraged debtor trolls.
I don’t get the argument bulls that OC is special/different (wealth, sunshine, etc). Please explain this: OC does have some wealth, but this didn’t just happen all of a sudden. So why oh why was a house in the OC worth 1/2 or 1/3 a few years ago before this crazy boom??? There was wealth then… the sun was shining then… land wasn’t being created then… what’s so different between a few years ago and now that lets a house double or triple in such a short amount of time?
The answer is simple, and it’s what has been talked about on this blog for a long time. In the absence of 9/11, artifically low interest rates, etc. etc. etc… this doesn’t happen. So what happens when you take away all those things that made the balloon blow-up (which has happened/is happening now)? Well, if you ask Gary Watts and the NAR, why it keeps going up of course! Common sense says otherwise. A premium will be paid to live in a great area, but that premium is well beyond anything sustainable. I don’t care how much sunshine or wealth is here…. if these factors were the drivers of current value/prices, prices would have increased much more BEFORE the credit bubble came along.
What’s so terrible about our city. Have any of you posting actually spent any time here. We have a very highly rated school system that rivals most in the state. How can people write off our city as undireable, we are part of Orange County.
Mac,
I’m guessing those numbers are not for households; in other words single people and one person in a household. (couples wealth separated)
Dual income couples are buying houses today……
I know plenty of young households in the 150 - 180 K range on income…. some greater than that. The majority of these freinds are renting.
Again, I know there is an affordability issue…. but people on this board need to iron it out to understand it better….. not just look at median income vs. median home price.
I agree, there will always be 25 - 50% renting…. that is market dynamics.
Realistic Homeowner,
You are absolutely right that most people on this blog are anti-housing. Therefore they must all be wrong. I agree with your prediction that housing will bounce back in spring and summer of 2008. Why will it bounce back? Because see, we are 2 people and we will push the market through mental telepathy. Well, we can make it 3 with GW and his amazing forecasting ability. I think every person should buy a starter home in Santa Ana or Stanton and if you are lucky, someday you’ll be an anti-elitist like Realistic Homeowner.
Who cares about a $1 trillion in loans resetting. Who cares about a now defunct credit market. Who cares about people losing their high paying jobs in the housing industry. Who cares about booming inventories and dropping sales. We need to be realistic!
Vote for Housing Power 2008
On every message board, there’s always some old horny guy pretending to be a young female. Old game but works every time.
“I know plenty of young households in the 150 - 180 K range on income…. some greater than that. The majority of these freinds are renting.”
And there you have it, mav. 180k = renter in the OC. And why is that? Because 180K is not enough to afford a mortgage payment on a single family home in the OC. Ask your friends how they feel about swinging a $4000 - $6000 payment a month for house plus property taxes / insurance.
The economics of home ownership in the OC just do not work out.
thomas,
I don’t agree with that….. 150 - 180K puts you in an affordability range around $550K…… give or take 50K
people in this class have at least 20% saved, keep that in mind.
these people may not want to buy a house for lifestyle / location reasons, but they can afford a house in the OC.
Mav,
1) Why do you think they have 20%? $100K plus is very difficut to save. Are you talking retirement money??
2) The $550 range still gets you crap. Either a house in a terrible area, or a smaller condo in a nicer area. Who wants that when you make $180K?
So many on this blog have a sense of entitlement. “Darn it I went to college and make good money so i deserve a nice house without making any sacrifices!! ”
If your not willing to start at the bottom with a starter home and make sacrifices, you don’t deserve to own a home.
Something tells me kim is a single mother. What man could put up with her?
I am still laughing about that guy shooting out kim’s window. That’s hilarious. Way to go bro!
Newport renter,
I’m glad you find humor in the fact that he could have killed my child. You are crossing the line buddy. Watch yourself…
so kim is actually james. i know this work in myspace and facebook as well.
newport renter Says:
October 15th, 2007 at 2:42 pm
Something tells me kim is a single mother. What man could put up with her?
No kidding. Something tells me there was more to her shootout story. Like she probably flipped the guy off. She did reveal that she has a kid. That poor sap of a father has to deal that beast of a woman for the rest of his life.
i know a guy with a first name kim. kim christensen.
Mav,
What I’m trying to figure out is if you are saying use your 401K/retirement for that 20% down?
If not, $110K down is a HUGE deal. Saving that much with the cost of living here is extremely difficult. Assuming a couple, that’s putting $20K a year in the bank after all expenses, a year, for 5.5 years. Double that if you’re single.
If you have equity, then ok, but back to my point–who wants to “move-up” to a peice of crap, or a tiny condo?
If you’re saying use your 401K, then maybe you get the numbers to work, but it’s a terrible financial concept (using your retirement as a housing down payment). If that’s the only solution to getting 20% down, then we’re in trouble b/c that’s not sustainable.
Newport renter:
Is someone a little mad from the comment I left them awhile ago??
Anyway this is a blog where your actually supposed to give your take on a topic. Care to join…or just make ridiculous comments no one cares about?
Any chance you’ll be getting out of your rental status??
Hello.
My name is Antonigelo Mozilo, and I want YOU to know…
I endorse absolutely everything Mr. Gary Watts says.
You people love to hate this prophet of prosperity, this seer of visions, this predicter of profitability…but I say..
You are all wrong.
Countrywide Financial officially endorses The Prophesies of Gary Watts.
Countrywide Can Help.
(Please buy my stock. Please?)
I was born in Westminster, grew up there and played football for Westminster High School. Our family lives in a nice neighborhood in beautiful home with a large yard. I am a little perplexed at the comments some people here have been making about our city.The comments are not based in reality and you will know that if you have ever driven through our city
Patty, Do you know the source of the 10000 REO figure? I don’t trust anything that comes from a bubble blog. The data is way too slanted. Im not saying the 10,000 can’t be true. I would just like to verify.
JJ,
A couple making $150 to $180K a year over 7 years can easily save 20% down payment and invest in their 401K.
Maybe they can’t drive around a Porsche, but they can save money and live in a nice area renting…..
If they are extravagant spenders they can’t……
JJ,
Also, a lot of young couples in that class benefit from nest eggs invested long ago from their parents….. that can put them far above 20%
I am not one of those people……. I earned all my money myself…. but there are plenty in that young couple income bracket that have some “invisble” financing
that is how wealth is trending these days
“When I was 18 years old with my 2 year old in the back seat”
Nuff said, you sound like a real winner Kim. Garden Grove and Westminster is obviously not good enough for you. Please find a place elsewhere to live. Thank you.
JJ,
I think he is getting that idea from a report I read the other day where FBers were using their 401k to try and SAVE their homes - not purchase one. This to me is a retarded and terrible idea, walk away and keep your cash, you want to end up like ROC and be stuck?
“So what makes this cycle different. The truth lies in the fact that today’s homeowners have more income, more equity and more wealth than in previous cycles.”
Today’s homeowner also has a lot more debt this time around. And the “wealth” they supposedly have is really an illusion built on debt.
No, I’m afraid, Mr. Watts, we haven’t seen anything yet. The declines are just beginning.
partricio / JJ,
I completely agree that using your 401K to buy a house is an awful idea. (haha, worse, your your 401K to save your house? yikes)
Also I would suggest someone considering buying a house, who does not currently have a 401K….. should first start investing in their 401K before they invest in a house.
jj,
It is not true that borrowing from your 401(k) to make a down payment is a “terrible financial strategy”. Ask any accountant worth their salt. It is a low-rate loan that you essentially pay to yourself with no tax consequences. To be perfectly honest, I didn’t borrow from my own retirement account to fund my down payment, but I did look into it and consider it. I wouldn’t say it is the right strategy for everyone, but it sure beats paying PMI.
As I won’t deny - because I am not as incredibly biased as most on this blog - lots of people out there consider their house to be part of their retirement strategy, so this is just shifting some capital from one asset class to another. Housing is probably one of the safest stores of value over the long-run. It is safer than equities given the overall U.S. budget deficit, run-away entitlement programs, and foreign competition. Foreign equities? Yeah, go ahead and invest in Chinese equities and then talk to me about bubbles.
I don’t view my own house as part of my retirement plan, because I plan to leave my house to my son, but I also don’t think there is anything wrong with including your house in your retirement plan via a reverse mortgage or downsizing.
It isn’t fair though for people to compare the cost of renting to buying and to ignore that your house does have value one way or the other once you’ve paid off the mortgage. Either you can leave it to your kids or you can fund your retirement. Try doing that with your rental deposit.
Patricio,
You are one jealous bastard.
And a moron to boot.
Actually I hadn’t heard about using your retirement plan to save your house, but again I think depending on the circumstances that could be either incredibly foolish or very wise.
Whether or not you agree with using your 401(k) to fund purchase of a primary residence, it does factor into one’s overall life plan. If you’ve got a sound retirement plan in place, you can spend a little more and save a little less.
Are people in more debt as a % of their incomes? Yes, but that is partly because they are also wealthier, even ignoring the equity in their homes. That is my only point.
mav,
I would like to address your concern for comparing median incomes to median price.
I understand where you are coming from. Not everyone is going to buy a home so why should everyone’s income be used to look at affordability?
I, however, feel that we can use the home price to income ratio to give insights on what is affordable. Why do I think this? We need to use this ratio in relatively, not absolutely. What I mean is that we can look at what home price to income ratios have been historically supported. The current home price to income ratio is still much higher than it has been in the past, hence it can still be argued that homes are much more unaffordable than in the past.
One can argue, as Mac has, that we can’t just use income anymore (since more people are investing than in the past). If this were true, it would make the ratio home price to income + stock assets look much better (i.e. more affordable). However, as I stated in an earlier post, I believe that much of those investments are for retirement and shouldn’t considered part of the general disposable income used for a home purchase.
I know it’s not perfect, but nothing is, and I believe it gives a decent insight on how affordable or un-affordable homes are.
The worldly and astute musings of “Patricio the Great”:
Patricio Says:
October 14th, 2007 at 8:27 pm
“Yeah… because I said that where bitter peak purchaser? Geeez Roc, “don’t put words in my mouth” etc etc etc….then you turn around and do all the things you think others do wagging your proverbial net finger at them.”
You are a total lowlife.
Mac or anyone who knows…
I was under the impression that borrowing from your 401k was a “terrible financial strategy” because you were essentially double taxed.
For example, I fund my 401k pretax dollars. Then I borrow it. Then I repay with after tax dollars. Then when I finally withdraw it, I am taxed once again.
Am I wrong? Please correct me if I am.
nanowest…
read my lips… creative financing is gone and will not come back.
proof of income, 20% down, 3 yrs of bank statements… this is reality.
$150k - $180k can afford a $550k mortgage.
anyone that buys at these prices with a 100% loan deserves the consequences.
we will buy when we get the right price. we don’t need to buy.
realtors need a sale.
mortgage bankers need a sale.
flippers need a sale.
our buying power increases every month we hold out.
2008 oc job growth will be stagnant. get a new profession if you are in the real estate industry.
Patricio Says:
September 11th, 2007 at 8:54 pm
The median means nothing, it is retarded and people that get excited about it just don’t understand it means nothing. I too use to get flustered by looking at the median, now I realize it means little to nothing. I am not sure the median income means all that much either, there are some indicators like inventory, and how long on market that I think are good indicators of downward pressure. Also the loan programs that have gone away, which were the reason for the buying frenzy….not that the houses were undervalued.
Yes Roc, it is my fault you bought at the peak and decided to put hard earned funds into the game to be evaporated. All my fault Roc…wow I am a bad person….get a grip freak.
“proof of income, 20% down, 3 yrs of bank statements… this is reality.
$150k - $180k can afford a $550k mortgage.”
This will support the entry-level product.
People with cash - yes cash - will be the ones buying the more expensive properties.
It is completely stupid to think people don’t have cash.
Half the posters here claim they have plenty - they must think quite highly of themselves that they can achieve what no one else can.
For everyone’s information: using retirement funds for housing has been around forever.
Try worrying about your own affairs before you dole out your sage advice for others.
Lol….I can see you here detective Roc “and here look is a random quote from him that is not relevant to anything see this proves my point about penguins not having knees!” Lmao…peak buying = loss of reality - obviously, geez man go take a nap.
Yes, I attack you talking about your own actions, and I am the worthless human being….freak.
Patricio,
You are a worthless human being.
Lie all you like.
It changes nothing.
You attack me because you fear I will wreck your dream of ripping off some unfortunate soul.
And another thing Patricio,
I wasn’t even part of this thread until you sucker-punched me.
Another person totally obsessed with me.
Get a freaking life.
Renters aren’t losers - just you.
Well, you certainly are taking purchasing in 2006 December very well. Wipe the spit off the monitor and go take a nap Roc, you are losing it or maybe lost it. I am sorry if you are the benchmark for what a person would not want to do with timing and purchasing RE and putting too much skin in the game - that immediately vanishes in 6 months.
But it looks like you are handling it well, definitely the poster child for bubble buyer. If you need to rent a room I might be able to help out later on.
““Yes, I attack you talking about your own actions, and I am the worthless human being….freak.”
You know diddly squat about my finances.
Who the f**k are you to bad-mouth me - someone you don’t know?
Try adding substance instead of trying so desperately to discredit me.
I offer plenty of subtance and you can’t stand it.
You delusional jerk**f.
Are you too stupid to know that builders were already desperate then?
Umm…ok Roc. Sure…good luck with that.
*yikes*
Kim you didn’t answer the question. Are you a single mother?
ROC/Mac/Mav:
Yes, borrowing from retirement to buy has been around for awhile, but no where near to the extent that it has lately as a result of the price spike… and now people are paying dearly as home prices plummet. I am an accountant/finance guy w/ an MBA, so I know what you’re getting at, but the reason it’s a terrible financial strategy is that
1) now, young workers are basically on their own for retirement. Pensions are virtualy gone, and social security is a big ? if it will even be around, let along provide anything worthwhile. Taking from 401K to buy a house leaves you with nothing else, practically speaking.
2) Historical returns for traditional retirement vehichles (stocks & mutual funds) are dramatically superior than real estate ‘returns’ or appreciation. This is further compounded if the $ is used for the purchase of your own residence and not as an investment property. In this case, not only do you not have any ‘returns’, but rather you have large expenses (maintenence, taxes, etc.). Practically speaking, your house isn’t an asset until you sell it. Until then, it’s an expense, and a very large one.
Compare a traditional mutual fund w/ 8-10% return w/ say 1% expense ratio to traditional residential real estate appreciation of what, 3-6% (depends on location) w/ a much higher expense ratio and much higher liquidation costs (~8%). There are many other factors, and leverage is a great RE advantage, but all the components need to be looked at.
Now, I love Real Estate in general, but too many people have been jaded by a completely unrealistic, once in a lifetime bubble as a result of extra-ordinary circumstances. This recent appreciation is not normal or standard, nor will we see it again for a long long time. Getting into a starter home NOW, in today’s cirucmstance, at the sacrifice of one’s retirement, is a pretty terrible financial move.
(older buyers w/ significant equity and savings is a different story and should be looked at on a case by case basis (i.e. less time till retirement, so assuming they have less risky holdings earning smaller returns)).
ROC,
I would sure appreciate if you could gather your thoughts and post them all at once, rather than posting a few sentences at a time.
“Another person totally obsessed with me.”
Believe it or not, I could really care less about your finances, credit score, house in Yorba Linda, blah, blah, blah….
If you want to go postal, do it somewhere else…
Anyone care to talk about real estate?
So many factors are playing into todays perfect storm. I relate this to a almost perfect night out.
50% Less loan programs (Less on the menu)
50% Less employment (Fewer waiters)
2-3 x Sales cycle (Longer time to wait for meal)
Sellers net going lower (Food prices went up after ordering)
Credit Crunch (Credit card declined, only after eating)
Future Prices Could Be Lower (You could have saved even more by waiting)
Thanks JJ,
I agree with you.
I also think that a diversified strategy is best - which generally includes real estate (the ultimate hedge and only vehicle that carries the side benefit of personal enjoyment).
I think this whole presumption of lack of wealth is very telling.
When I go to South Coast Plaza (which has gotten so high-end that I can barely shop outside of Macys and Nordstrom) I don’t look at the people shopping at Dior and Hermes and think they must be using a HELOC.
I rightly presume that they are shrewd business people and foreigners who have accumulated unimaginable wealth.
That doesn’t make me hate, it only makes me want to step-up my own game. I have owned several homes at a time in the past and will in the future as well. I will likely even give away the home I’m in to my kid one day in the not too distant future.
The biggest complainers don’t really understand the concept that others have wealth - even if it is modest. It is a perception problem and a lack of imagination.
I am not saying this to defend pricing here - it is too high without a doubt. But to say that homes can’t cost more than $500,000 is completely ignorant of the outside world.
Liar Loan,
I’d appreciate it if you would mind your own business.
Who the hell are you?
“I’d appreciate it if you would mind your own business.
Who the hell are you?”
ROC,
I’d love to mind my own business, but this is a public comments section, and everybody is subjected to your nonsense. If you’d care to comment on the story or anything remotely RE related, I’d love to hear it, but nobody wants to read your tantrums.
I’m a reader and poster that has been around for awhile. Chances are you’ll be gone soon, and we’ll add you to the Bull hall of shame, along with Troy and Ken.
Liar Loan,
I was minding my own business - working and watching the comments throughout the day until Patricio brought my name up in his usual nasty fashion.
I have every right to address it on the spot with, or without, your permission.
Avert your eyes if you don’t like it.
I suppose you have an open mind and ability to present a reasonable argument given the name you chose for yourself.
I won’t hold my breath for that.
ROC,
You bought at the very tip top of the market. You’re in one of the worst predicaments anyone could be in. You’re a walking financial disaster. After listening to your cussing and animalistic behavior you deserve to lose everything you have and you will. Say goodbye to 40% of your finances. Your way too dense to even make comments in this blog. LOSER.
well it doesnt take sigund freud to read ROC’S persona
dude why do you live on this blog begging for someone
to agree with your arguments? anyone ANYONE who bought a house in 2006 is a financially challenged
moron on that point there is NO DEBATE… NONE
Randy,
I think my kid will disagree with that when his inheritence doubles in the next decade.
I’ve bought and sold more property already than you will acquire in your pitiful lifetime.
Wow,
Unfreakinbelievable.
Renters thinking they are better off than the, what, 65% of people who own property?
I guess if you have no income, you need no tax benefits.
Get some education, that should help with the income problem.
ROC,
The only thing your kid will inherit is a foreclosure, plenty of back taxes and maybe a couple empty bottles of stupid pills.
Randy,
There are plenty of astute posters here.
Too bad that you cannot count yourself among them.
I’ve been praised by both sides here.
I don’t recall anyone saying the same about you - whoever you are.
Randy = Rants. Rants has the nerve to call anyone financially challenged when he sold his primary residence and will buy it back 5 years later for a wopping $40K discount. This is after paying sales commissions on his old place, moving costs and 5 years worth of rent and no tax breaks. yeah, who is the moron?? While he obsesses about the housing market and chases the almighty crash, us homeowners are enjoying our home.
Patricio,
Listen, I apologize for getting vulgar with you.
I am asking you to lay off the trash-talking about me. You don’t see me making comments about others’ personal lives and decisions - unless someone insults me first. What does it really serve? Is this a debate over individuals or the market as a whole? It brings the discussion into the gutter…let’s keep personal attacks out of the discussion if you don’t mind.
Well, Mr. Lansner you certainly seem to have struck a nerve with that post. I must agree with most of the replies here, why on earth would you post anything Gary Watts says. He is about as accurate and reliable as Saddam’s information minister Mohammed Saeed al-Sahaf was. Yes, we are driving the infadels from Iraq and the real estate market in OC will pick up any day now…….
Though I don’t agree with Gary Watts and look down on RA who walk around quoting him, it is good to bring a different perspective to this blog. His viewpoint seems to bring out the worst in the angry bears. Watt’s presence on this blog actually exposes the angry bears for the obssesive lunatics they are. It still amazes me how bent out of shape some get just because others bring up opposing views. They act like their lives depend on being right about the future of RE. You would think someone insulted their mother! get over it angry psychos.
YOUR BLOGGER: A few things …
[1] All viewpoints deserve their day here … To be fair, nobody knows what’s next. Which genius predicted the halt of jumbo lending to PRIME borrowers willing to document everything and put real money down? Nobody. So if you’re crowing that you called it, you’re right for likely the wrong reason!
[2] Folks with opposing viewpoints (no matter their side of the debate) deserve some respect.
Wow,
With such a large number of responses this became quite a forum of attacks. Gary has had a pretty good record. However, being 100% all the time is just not possible. Even for most, ROC. Making 51% correct decisions still puts one ahead. Besides if we had to be 100% correct all the time we would end up being frozen without any decision. This is a most difficult time for many homeowners and the industry.
Gather ye Rose-buds while ye may,
Old Time is still a flying:
And this same flower that smiles to day,
To morrow will be dying.
The glorious Lamp of Heaven, the Sun,
The higher he’s a getting;
The sooner will his Race be run,
And neerer he’s to Setting.
That Age is best, which is the first,
When Youth and Blood are warmer;
But being spent, the worse, and worst
Then be not coy, but use your time;
And while ye may, goe marry:
For having lost but once your prime,
You may for ever tarry.
Robert Herrick
jj,
I too am an ex-CPA, MBA, finance guy and I partly agree with your comments. I’ll just add a couple things. You make the point that historically real estate has trailed equities. This is definitely true, and if you believe the future will be like the past, then by all means, stay in the stock market forever.
But I really believe that the coming fiscal crisis that will result from aging of the population and ballooning entitlement programs, and lack of government spending discipline is inevitable and global. Global stock markets have benefited for decades from a lack of fiscal discipline and responsibility to future generations. The problem in the U.S. got exponentially worse when Congress passed the Medicare Modernization Act which doubled the cost of Medicare and leaves us with something like $70 trillion dollars of unfunded liabilities, a deficit which we couldn’t possibly even come close to funding under the rosiest of projections. I have zero confidence that this will get better rather than worse regardless of whether Democrats or Republicans are in office, but what no one will admit is that the time has already passed when we could even hope of avoiding a total meltdown even with the strictest reforms.
I also believe that as the most permanent and practical tangible asset that exists is real estate, and that real estate will prove to be the safest and best performing asset class over the next 30 years. It is really ironic and short-sighted that it is being portrayed as such a volatile and risky investment, but anything can be made risky when you add an unhealthy dose of leverage and irresponsibility.
sal,
In answer to your question: it is true that you invest pre-tax dollars into a 401(k) and it is true that you then repay your loan with post-tax dollars, but you do not pay any more tax than you would have if you did not take the loan in the first place. You are just moving the money out of stocks and into real estate for 10-20 years. There really are no tax implications. You are going to pay tax on your income either way. You are going to have to pay a loan back to someone with after-tax dollars either way when you buy your house. Your 401(k) is taxed no differently than if you don’t take a loan: there is no tax on the loan proceeds, there is no tax on the interest income paid back to the account.
Maybe he is on to something, with the way prices are dropping, by the end of next year things could get interesting. I think he should give it up for a while, poor guy.
One day he will be right again.
Mac,
Interesting point(s), and one worthy or debate or discussion. I agree to an extent. (Hopefully voters will ask those questions for the election …I mean, who doesn’t want $5K for being born, right Hillary?) I will say this though… I agree that long term RE will have solid returns, perhaps even better than an equities/bonds mix during the “take our medicine” phase of the U.S. economic correction (whenever that is)… BUT, that is ONCE RE CORRECTS from its current ridiculous levels.
It was a perfect cocktail of circumstances that made things rise so quickly. Prices will fall. They have to fall. How much, no one knows, but I advise people who ask me to wait, and then buy/invest in a year to 3 once the major portion of the correction has taken place. I think the facts & figures are showing we’re still in the 3rd or 4th inning.
Also, responding to a point earlier (can’t remember who). I also don’t ‘hate’ when I see spending like crazy, but I do wonder if that’s HELOC money simply because I personally know so many who have/are doing it! Additionally, I have started in the past year to have some candid conversations on the topic with some MBA pals. Everyone says the same thing: “I thought I was the only one not making $400K” to be able to live comfortably here. Everyone thinks that everyone else makes ‘bank’… but the reality is that there just aren’t that many jobs, particularly here in the OC, that pay over $200K. Of course there are some, but very, very small in number compared to the population here.
jj,
I agree with everything you said. There are few traditional MBA finance type jobs here, but the financial services and investment management industries have really grown in the past couple of years and I expect this to continue. This isn’t New York if you are going into finance but after a couple of years here I figured out that the best way to make real money in Orange County is to be an entrepreneur. That is what I have done. I’ve lived lots of other places, and I feel strongly that people here are much more receptive to entrepreneurs, more willing to retain your services, more willing to back you financially, than just about anywhere else. Having an MBA from a good school and a good resume makes it easy to do just about anything.
when all the carnage has run it’s course the median will be $280-300k or so, that is the price point for income fundamentals regardless of what anyone says it is income that dictates how many money is available for PITI+HOA+Maintainence
YOUR BLOGGER: A few things …
[1] All viewpoints deserve their day here … To be fair, nobody knows what’s next. Which genius predicted the halt of jumbo lending to PRIME borrowers willing to document everything and put real money down? Nobody. So if you’re crowing that you called it, you’re right for likely the wrong reason!
[2] Folks with opposing viewpoints (no matter their side of the debate) deserve some respect.
In an effort to curb the dissemination of this bubble nonsense, we at Countrywide Financial have taken it upon ourselves to rewrite Mr. Lansner’s statement. We think this sounds better…
YOUR BLOGGER: A few things …
[1] Only positive viewpoints deserve their day here … To be fair, only Countrywide Financial knows what’s next. Which genius predicted the halt of jumbo lending to PRIME borrowers willing to document everything and put real money down? Nobody did, because it never friggin’ happened, you bozo. So if you’re crowing that you called it, you’re right for likely the wrong reason!
[2] Folks with incorrect viewpoints (especially when on the wrong side of the debate) deserve to wash my underpants for a week. Now go take out a jumbo loan from Countrywide Financial like the good dolt you are and leave me alone!
Countrywide Can Help.
(Professional Document Retouching in Action.)
I was born in Westminster, grew up there and played football for Westminster High School. Our family lives in a nice neighborhood in a beautiful house with a large yard. I am very perplexed at some of the negative comments made about our city by some people on this blog. There are some very good school districts here and we are very racially diverse which gives a lot of energy to our community. I really don’t know why anyone would put us down, there are a lot of responsible families living here
Graphrix and his extreme bubble blogs what a joke
A bunch of pseudo intellectual airheads sittng around all day on their big rear ends predicting gloom and doom. what a waste of time
Realistic Homeowner:
Do you ever have anything nice to say? If you don’t like this blog, get off it. We do not value your level of immaturity anyway.
Real Homeowner: Lighten up. You act like you are the only homeowner whose seeing their home’s value deteriorate. I’m fortunate that I bought in ‘97 so I couldn’t care less if we take a 30% hit - I never include my primary home when calculating my net worth or determining my next investment. You can VISIT OTHER WEB SITES IF THIS TROUBLES YOU.
By the way, graphix has been one of the biggest contributors of loan/finance information on this blog. He’s done way more to provide real data than most. Sorry rants, you do provide a lot as well, but graphix posts results from his own research. Just like ROC and those that choose to provide facts with their conclusions. I do like to see comments from all angles - but especially thos ethat have real data inside ‘em. Of course, an extreme comment may come out - but look, this is emotional for everyone. Keep in mind that the extremes are usually discounted as “noise” in the data.
Graphix, great job - keep up the good work.
Kim
You say “WE” do you have mice in your pockets.
I thought in your last post you said you did not have anything more to say to me. Lucky me I guess you weren’t serious.
Everyone has the right to state their opinions here. Everyone does not have to agree on your view of the status of the housing market. You are hoping for negative things to happen so you can get what you think you are entitled to have. You know what, that poisons your personality. negative toxin drips off every posting you make. You better take a look at your thinking Sweetie if you really want to have anything in this world
Realistic Homeowner has stated some interesting opinions that I’d like to address. With all due respect, he sounds like a real estate agent and here’s why. His reasoning is that houses aren’t too expensive, its just that the rest of us bears aren’t playing the ponzi scheme the way he wants it played. According to him, we should buy houses or condos into socio-economic area below our our status to get into the game. Then as the scheme moves forward, we will have our chance to move up the pyramid and sell to some othe greater fool. So we all just need to pay our dues (to the people higher up the pyramid) so that we might get our chance at making it big without having to work either.
But the rest of us aren’t playing the game, and see the scheme for what it is, a scheme. And we’re waiting, quite comfortably I might add, for the thing to fall apart as all these types of arrangement inevitably always do for our chance to buy into neighborhood of our economic peers at the long term sustainable price. And the really entheusiastic members are waiting for a undershoot as the phsychology turns from “real state only goes up” to “real state is a crappy inventment” sentiment.
Also wanted to comment on the guy with stats on how many millionaires there are in OC. The statistic excludes PRIMARY RESIDENCEs, but not all real estate. And as many know, many people have over allocated into residential real estate in the form of second and third homes with huge leverage. This is where this big run up in “wealth” has come from. Its the mirror image of the number of “millionares” (me included) in the stock bubble that ended 2000 which many of those people no longer “rich” anymore.
No Job. No Document. No Closing Cost. No Verification. No Down Payment. Half a Million Dollar Loan. NO PROBLEM.
Thanks H. Barnes.
I guess Realistic Homeowner needs to get off his/her soapbox and come down to reality. But that will never happen because he/she thinks the world owe’s them something for absolutely nothing.
I’ll just be sitting pretty and content at that!
Kim,
Your ignorance is really showing. I have read some of your other posts and I don’t think you have the slightest idea what you are talking about.. Take a look at your last comment for example “I’ll just be sitting pretty and content at that ! ” What in world does that have to do with anything. Amazing !!
Come on Rants statements like “ANYONE who bought a house in 2006 is a financially challenged moron on that point there is NO DEBATE… NONE” are weak. While I have no doubt that anyone who bought in 05′ & 06′ is upside down why classify someone who is trying to provide family shelter and may have a long term strategy as a “moron”.
I see several constant points of view on this board that go unchallenged and I can’t figure out why. Why does everyone assume that the vast majority of people are trying to keep up with the Jones’s. It seems that everyone sees the BMW’s, SUV’s and Benzes but nobody observes that there is a higher percenatge of our community driving Honda’s and old Jeeps.
Nobody speaks of the home owner who benefitted from zero money down loans and continues to benefit from the access they had to these loans. Of course we will only hear about those who got burned as it is the way of the news world. And no I’m not a loan broker.
Posters often can’t figure out why OC should be thought of differently than anywhere else. Nobody makes the point that one reason OC is unique is its geography. As a county we are framed by Camp Pendleton, National Forest, the ocean and county neighbors with their own high density housing issues. This alone makes OC unique in that unlike other areas there is not an abundance of buildable land. With net in-migration and not a ton of new building happening until the Great Park housing and Rancho Mission Viejo are ready I don’t see where there will be any significant new home developments adding inventory to the market.
I don’t understand why Gary Watts seems so hated? He makes his reports available for free and he puts himself and his opinion out there for everyone to see. While I understand he is a broker I don’t understand why you the poster assume you are more objective than he is. After all everyone who posts owns a position in this arguement whether it is your point of view or your current housing situation. Why would anyone in this position intend to be wrong for their own gain? How long would they be able to position themselves as an authority with flawed logic and motives? This would appear to be self sabotaging behavior and doesn’t seem logical.
What’s interesting is that from a quick review of his stats, Gary Watts has apparently sold only 6 homes so far this year, the last one closing in February of 2007. Could we hear “predictions” from agents who are actually still selling homes?
Get a clue.
This is ridiculous! Seriously, why is Watts (who, from a review of his stats, hasn’t sold a home since February of 2007), still considered enough of an expert to command this type of attention? He didn’t foresee the subprime mortgage meltdown??? Wow!!! Can we read the predictions of an agent or agents who are still actually selling homes and who were warning of this mess months ago?????
been reading this blog for more then a year ,,not surprise to see this huge reaction to mr watts ,no one can take his lies any more
Sorry to say I have to write a bit of tough love for the majority of the posters here.
This column really goes to show how many quasi “Real Estate Day Traders” are out there. You own one piece of property and you think you are a “Real Estate GURU” That type of audacity is truly amazing.
As for the Watt critics here, what does a economic forecaster need to do to have some credibility? Being with in 3% of his forecast every year for the last 17 years holds some creditbility in my book. At least wait till the year is over before you hang him out to dry.
I see soooo many predications from folks that have no idea what is happening in the market. Do any of you have a degree in economics? Have you ever sold real estate? (other than your primary residence?) Have you followed the market for more than 2 years? Most likely the answer is no to ALL of the above is NO. Yet here you are predicting the future like you were the former Fed Chairman….
A quick tip for you. You don’t MAKE or LOSE a dime of equity money on a piece of property till you SELL it. So if you don’t want to lose any money DONT SELL, pretty simple right?. If you can’t afford the mortgage payment on your home then Im not sure what to tell you other than look in the mirror and figure out why you put YOURSELF in that position.
Someone asked when did the market start its down turn? September of 2005 is when it started.
For all of the bears on this list, if you are so convinced that you are correct please go and rent instead of own. We really need you to support us property owners. (Oh BTW you will find that it costs over 5% more to rent this year than last in the OC it is more like 8-10% more this year) Will most likely see you renting 10 years from now as well, God Bless you!
Owning real estate is not for everyone, don’t worry its not your fault it was how you were raised.
Is OC a great place to purchase investment properties? If you have cash to the tune of 25-40% sure! No cash you are better suited to looking in other markets.
Is the OC a great place to own a primary residence? As long as you can afford the mortgage payment ABSOLUTELY. This is one of the best markets to own real estate in. The past 3 decades have had almost double digit returns and this decade will not be any different. If you buy a house and get at least a 10 yr fixed rate, at the end of the 10 years you are almost guaranteed 7-8% equity every year.
Remember owning real estate is not a right, it is a privilege.
If you want to your kids to go to a good school you better plan for it, it is not something that is a God given right. Please don’t blame the market as to why they cant go to xyz school, again i remind you to look in the mirror and take some accountability.
FACT: The average W2 employee in the OC takes a ~$20k loss a year by renting.
FACT: The average W2 employee in the OC takes a 60% loss of their yearly income between rent losses and lack of tax write offs.
Those numbers are based off rental rates of ~1650 a month, and an income of $75k a year.
Tell me again how owning a home is a bad investment…
The following will make the Watts predictions come true for the O.C (not the entire US):
-The above renting scenario
-Continued job strength
-Increasing population (this is not a linear increase it is exponential)
-Interest rates stay at a all time low. (the last time they were under 7% was 1972)
-Gov bailing everyone out (they are doing it right now, Thanks Uncle Sam) This 2008 is an election year, politicians always do the right thing the year prior ;)
What will make the predications untrue:
-We enter a recession (with low interest rates, and a weak dollar this is a big concern)
If we enter a recession then RE losses will be the least of your worries.
-Renters should BUY BUY BUY
-Owners should HOLD HOLD HOLD
-Investors should BUY BUY BUY
-Folks who don’t know anything about RE should ZIPIT ZIPIT ZIPIT
Okay too much name calling. You’re both right. Kim IS sitting pretty, and Realistic Homeowner lives on a permamently high plateu.
Utterly ridiculous. Riverside county has taken 25% hit in 2007. Orange county is just a year behind us. You haven’t seen nothing yet. I bet Orange County will drop at least 15% in 2008 minimum.
Consider this. Jumbo rates are 1% higher than conforming rates which is too much of a difference. When Jumbo rates go down, Orange County buyers can better afford to buy homes, again. A conforming loan is under $417,000 and most homes in the prime areas of Orange County require a jumbo loan for home purchase. There is discussion that confoming loan limits will increase in the near future. Look around and see banks moving to Orange County.
Mr. Lansner:
Why did you let Watts off the hook for his 2006 forecast. The market peaked in mid 2005. Mr Watts’ sold his real estate ‘predictions’ to realtors en masse who then used it to continue the hysteria longer than it should have by passing it out at open houses. This guy single handedly cost many many consumers who relied on his information (and their realtor who proferred it as gospel) and were sold a bill of goods. He must have several lawsuits he’s defending.
Mtg Guy
Yeah Kim. Your pathetic little brain is simply unable to understand that real estate only goes up forever and ever and ever.
Listen to Realistic Homeowner.
If you had only taken out a reverse mortgage on his properties you would have made 45 % gains this year alone.
You have to learn to be smart like us.
ROC,
Haven’t had the pleasure of talking to you in awhile and all I have to say is haha!! Love the sarcasm…
Kim,
That was not me.
To all the folks arguing about the couple making 150-180k a year being able to save 20K a year, I fall into that range and it’s not easy. First of all, even making 180k a year, after taxes, medical deductions, and 401K there is under 100k left (way under, Sure if you don’t contribute to a 401k you will have more). I have about 90k take home, from that comes housing, cars, food, and all the other little expenses life has to offer. I have kids and they take a fair chunk every month. After all is said and done we can bank about 1500 a month living a non-extravigant life style. So 20K per year is possible but not as easy as some think. Also I agree that most of us making this kind of money do not expect to live in a 1000 sq/ft POS tract home in Santa Ana, not do we want a 1200 sq/ft condo in Irvine. At this income level a family should be able to buy a decent SFR in a good area. I could rent a nice home in a nice area for $2500/mo so why on earth would I pay $4500/mo to buy that same home?
Bottom line is prices are way out of whack.
ROC,
I know, thats why I posted it. I knew it wasn’t you from the other blogs. Your not normally sarcastic with me.
A certain CEO at Countrywide had a meeting with his new son-in-law. “I love my daughter, and now I welcome you into the family,” said the CEO. “To show you how much we care for you, I’m making you a 50-50 partner in my business. Yep. Half of my stock options. All you have to do is go to the office every day and learn our business.”
The son-in-law interrupted, “I hate your office. I can’t stand loans. I have a solid and legitimate job.”
“I see,” replied the CEO father in law. “Well, then you’ll work in the office and take charge of some the paperwork.”
“I hate paperwork,” said the son-on-law. “I can’t stand being stuck behind a desk all day. Besides, I am in a safe and non mortgage related industry.”
“Wait a minute,” said the father-in-law. “I just made you half-owner of Countrywide, but you don’t like the office and won’t work in the office. What am I going to do with you?”
“Easy,” said the young man. “Buy me out.”
The CEO handed him five bucks and they parted ways.
Bears can be very ignorant sometimes. Kim especially with her put downs of central OC. Westminster native commented on Westminster, let me add that West Garden Grove is a nice place to live and that Pacifica High (and its feeder schools) are as desirable as most S. OC schools supposedly are. East Orange is another area off the radar of most S. OC wannabees that is actually more interesting than the cliches spouted by someone who does not know the real Orange County. Little Saigon, Little Korea, Little Gaza in Anaheim, Old Town Orange, Downtown Santa Ana; these places are more real with better restaurants then the fake cookie cutter, chain-centric developments of S. OC and the robots who live (or strive to live) there.
But then, I like real people in my life and want my children exposed to as much diversity as possible. Some helicopter moms want their children to grow up in a caucasian wrapped bubble. Each to his own.
Westminster native wrote:
“I was born in Westminster, grew up there and played football for Westminster High School. Our family lives in a nice neighborhood in a beautiful house with a large yard. I am very perplexed at some of the negative comments made about our city by some people on this blog. There are some very good school districts here and we are very racially diverse which gives a lot of energy to our community. I really don’t know why anyone would put us down, there are a lot of responsible families living here”
It is hard to believe that the Register keeps asking this guy for his predictions. Who’s dumber - him or the Register. Even a stopped clock is right twice a day.
Gary Watts is a real estate broker…..period! Not a broker/economist.Sellers and buyers determine the market….not the media, and certainly not sales agents. Gary does not offer any information that is original, nor any insight to economics, or statistics that any average citizen consumer cannot find in daily newspapers. He is a palm reader, not an expert. I’ve been an Orange County homeowner since 1971, and have experienced at least 4 up & down real estate cycles, and no one has correctly predicted the changes with any accuracy. Real Estate agents are no different than stock brokers when it comes to forecasting market swings.
Mtg Guy you are considering the market as an unchanging equation… The item you are not considering is that Orange County alone gained ~500,000 new residents since 1996. Only 100k new homes were built since then. Population grows at an exponential rate not a linear rate. That combined with the attractive climate and everything that the OC has to offer will continue to make it a great place to live and own real estate.
Again simple econ 101 Supply = Demand.
You mention that we are approaching a similar market to the early 90’s… To simulate the early 90’s you will need to have a major cut of jobs (Major I mean to the tune of 750,000 jobs, and excess of new homes) Do you see that happening? The OC is very diversified business wise compared to the 90s where only a few defense contract companies employed a majority of the county. Point being we are much better suited to take a hit to one or two sectors than before when the defense contracts left then entire job market did too.
Yes some people with have little to no equity in their home for the next 6-8 months. Does that mean they lost money? Only if they sell… They continue to have the write offs, and continue to give them selves the opportunity to make money in equity.
As for the golfer who is renting and can not get ahead…
Current Choice:
-Pays $2500 a month in rent. ($30k a year)
-Pays at least 66,600 in taxes a year. (Assuming a 37% tax bracket 180*37% )
-Ok so he/she is throwing 30k + 66.6k out the window every year by not owning. (This is what is suggested as the wise decision.)
Owning Property Choice:
-Pays 4500 a month (as noted by blogger)
-4500 * 12 = 54k (this is 100% tax deductible)
-180k - 54k = 126k is what uncle sam can tax you on now.
-mean you will pay ~46k in taxes (126k*37%, Over 20k less in taxes a year)
Summary:
Renting 180k - 30k - 66.6k = 83.4k left over.
Owning 180k - 54k - 46k = 80k left over.
Now keep in mind renting gives you ZERO % chance at making money on real estate. Owning gives you that change of making money. Both scenarios the golfer can still be saving their extra 20k a year and have 60k to live on! Granted they most likely have $1200+ car payments and a ton of other living expenses. (the OC way!)
Back to MtgGuy the above scenario is another piece of the equation that you are missing! Which is why you are wrong.
Golfer go for the green, don’t lay up! Make a choice to better your life and buy real estate it is really that simple. (be sure to get a fixed rate for at least 10 years)
Stats for the population was pulled from the Cenus Bureau.
Watts critics need to chill out till he is proven wrong for the year… wow you just wont stop…
To Kim. You seem like a disgruntle renter. Too poor for good neighborhood and too good for central OC. Good luck with renting
Landlord: Knock !!! Knock!!!
Kim’s reply: Who’s there?
Landlord: 1st of the month.
Kim’s reply: I will give a you a check but can you cash it next month!!!!
P.S: Have fun. Be humble and start low and moving up to the west side just like the Jeffersons.
2008? When the median falls under 450K the market will shift but not before then.
Your numbers are a little off there “too short to rent”. Your mortgage write off only saves you about 30% of that amount on your taxes. So that $54k savings becomes $18k. Real estate is going down in value right now not up, so you get to lose some more money there. And finally I already own a home so I’m not losing anything on rent. But, if I did not already own I sure as hell would not be buying if I could rent the same place for 50% of the price. I can take that extra $2500 a month and invest it and make a lot more than I can in real estate.
golfpro, sorry bud you are incorrect. Mortgage Interest, Taxes, and PMI are 100% tax deductible if it is your primary residence. You may run into some AMT if you own rental properties due to how much you make. But if it is your primary residence it is 100% tax deductible and those numbers stand.
Not sure who is giving you tax advice but you should consider changing. Those numbers are accurate.
You can do what ever you want with your money that is why we live in this country. At least you have the correct information on RE now, if you dont do anything with it that is your right. Just please don’t blog about something you know nothing about.
Taking that to the next level I think there might be a hand full of RE professional’s blogging here. Most of you are accountants, management, engineers, golf instructors, etc. If you really want to help the community go find a blog related to your industry and contribute. Owning a home doesn’t make you a RE GURU, and give you any right to make predictions.
Moving on to the multiple folks who call Watts the eternal optimist… You really show just how uninformed you really are. Watts nickname in the early 90’s was “Doom and Gloom Gary” or “Scary Gary”. Why you ask, because he was forecasting the RE collapse of the early 90’s and no one believed him. He is giving a forecast based on all of the resources he has. This forecast is only for the OC, not for all of CA or all of the US. Watts track record over the last 17 years gives him some credibility. Does it make his reports doctrine? Of course not! Does it give us some insight on what the market may do I believe so. Would I dump my entire stock portfolio and buy real estate in the OC of course not. If I had an opportunity to get a multi unit property that cash flowed I MIGHT consider moving some money (would have to be a amazing deal). If I was renting would I be out looking for my first house ABOSULUTELY.
They are 100% deductable BUT they only save you about 30% of the cost of them. So you pay $54k to save $18k on your taxes. I did not say they were not 100% deductable. I said they only save you 30% of the cost. It’s like buying a new car when the old one is paid off so you can save money by getting better gas milage. You pay $500/mo to save $100/mo on gas.
“Watts critics need to chill out till he is proven wrong for the year… wow you just wont stop…”
So you want to wait until his prediction is substantially off for the 3rd year in a row before you relegate him irrelevancy? Supply and demand drive prices over the long haul. However when you have asset bubbles that far outstrip the underlying fundamentals because of ‘momentum’ expectations, they actually tend to correct BELOW the long term trend when unwinding. By the way it looks like Bernacke and Paulson are finally starting to see whats happening. I point to the data in todays register. Watts crystal ball doesn’t have a snowball’s chance in hell of being right.
Gary Watts should run for President or Sr. Economist of National Association of Realtors for his insight and housing expertise.
“Mtg. Guy, are you serious? While having attended several economic forecasts I’ve never heard Watts, Adibi or the rest of the gang present information in way where agents should profer them as gospel.”
Don’t insult Adibi. He’s a real economist. And Watts sells his material to realtors to use as a sales tool. Less savvy people don’t do the due diligence, I know I’ve been in the mortgage business for over 20 years. I can’t tell you how many times I have been told “get us what you think is best”.
Whether you agreed with John Lansner, his columns are always full of lively discussions. Mathew Padila, Jeff Collins, and Mary Ann are NOT a good Real Estate Reports. Their stories were confused and seemed to write for housing industry, not unbiased stories.
Now these reporters start to limit readers to post their comments by register. I did and never receive confirmation.
I hardly pay attention to any stories from Mathew Padila, Jeff Collins, and Mary Ann.
golfpro, you are failing to understand the concept. You have to spend the money one way or another. You can give it to uncle sam in taxes, or you can put it towards a house. Those really are your only two choices unless you have another write off. (which 99% of us dont have)
Has any one ever made equity by paying taxes?
They don’t call him Gary “Low Wattage” Watts for nothing! He’s not exactly the brightest bulb in the bunch.
Has anyone found proof that “Scary Gary” really called the last bubble? I’m still looking and all I found was an OCR article that supposedly some Realtor heard him speak. I say he is a fraud until someone gives me proof he said the things he claims. I can find great quotes from a real economist John Burns but nothing, nada, zero, zip, zilch that Gary Watts ever said anything he the 90s.
Short rent. I recently looked at a home in RSM and ran the numbers. I was looking at a $600k loan on a $720k home. Payments and interest would have been about $4000/mo. Tax and insurance would run another $950/mo so total monthly nut of about $5k. Tax savings would have been $1270/mo. So the net cost would be$3680/mo. There was an identical home for rent on the same street for $2600/mo. So even after all the tax savings it was still $1000 a mo less to rent that home. Add in maintenance (that you don’t pay for when renting) and the savings are even more. When I can buy that home for about the same price as it would rent then I will. Until then I will stay in my current home paying my paltry 1200/mo mortgage laughing at all the clowns that paid way too much in the last 5 years.
Currently it makes no sense to buy! BTW who is making equity in today’s market? That argument makes sense in a normal market but certainly not in today’s.
The market has not even begun to slide. You can buy homes from Fannie Mae, Country Wide, Bear Sterns at 35 cents on the current broker’s opinion of value. These companies have marked their REO homes to market and then discounted the prices to blow them out. The value of a comidity, such as a home, is worth nothing if there are no buyers. The guy that just auctioned off 600 homes in southern california paid less than 41 cents on the dollar and sold them for only 68 cents on the dollar http://www.ushomeauction.com the next mortage reset will happen in 2008, then take another three months plus 210 days for the home to be auctioned off and become an REO so the worst is yet ahead not yet here. The market is still at the top, the worst will come in 18 months.
An update to my sense of the next couple of years is that while we haven’t hit bottom, it can come as early as next spring if prices dive quickly enough (meaning a minimum of 20% over the next 6 months) COMBINED with the FED driving rates through the floor trying to bail out the sinking economy. One support for our housing prices will come from the continued fall of the dollar. Foreign investment is already coming in and will increase. The bottom may also be up to 18 months away but I think it will happen in that 12 month window. One thing to note is that once the price stabalizes at the lower level, it will still be stagnant for 12-24 months until the excess inventory is absorbed. Now the timing of this will greatly depend on how far down and how quickly the FED lowers rates. I suspect we’ll be back at 2.0% very soon. A 40 Year mortgage at 4.75% will make housing a whole lot more affordable than it is now. Yes the FED who got you drunk for the past 3 years then cut you off, will be serving up bloody mary’s.
“So the net cost would be$3680/mo. There was an identical home for rent on the same street for $2600/mo. So even after all the tax savings it was still $1000 a mo less to rent that home.”
Thank you golfpro for a reasonable rent versus own scenario.
Even though that home presently costs more to own it is nowhere near “half”.
Everyone I know places a large premium on the intangibles of owing.
When you combine that with locking in historically low rates, it narrows the results dramatically.
A house payment will not rise, rent will.
Yes, prices may go lower, but at a point not far from here it works.
Intheknow,
“You can buy homes from Fannie Mae, Country Wide, Bear Sterns at 35 cents on the current broker’s opinion of value.”
Proof please, and no, not in Garden Grove.
What a bunch of lies.
Housing problems in Orange County and California is like a nasty divorce with a long term painful and costly process. You made your choice. You have to live with consequences. Do not pass around. Deal with it. NO BAIL OUT.
Realistic Homeowner:
I thought from the beginning of the posts that you were just trying to get on Kims’ nerves and having fun with it.
However, after reading your other posts, I have become to realize how stupid you really are.
The problems with 99% of any interviews today is the jackass being interviewed gives conditions on what can be asked.
I don’t know if Gary “15% in the bag” Watts gave conditions before this interview, however, obviously tough questions were not asked.
I have been doing loans since 1989 and can state that all(except for one) the loans we did had a 20% down payment or equity, than there was a ton documentation per loan.
The one we did do had a 10% down payment and with all the all that was requested, we never did another one again.
This time around, the loans that have been done basically required a heart beat.
People who could not rent were able to purchase their home.
People who purchased in the late 80’s and earlyh 90’s LOST homes along with their down payments. Many struggled to make ends meat just so they would not lose their down payments.
Last seven years was a whole new ball game. People have had not had to put any money down.
Worse, they could not qualify for a fixed interest rate even though the Fed. rate was at 1%. That is why we have a subprime mess today.
True, jobs still exist. However, those jobs do not pay enough (yes, even for those who live in Costa Mesa) to cover the purchase (let alone the down payment.)
I have real estate and I will lose value as well. I am waiting to purchase a large house at (yes) 50% discount.
By the way, many lending institutions only stopped lending in late August of 2007.
Those open houses you see with only a 10% value will be much lower in the coming year.
Nuff said.
Please respond with common sense and not emotion.
I have a degree in Quantitative Economics! I dont think it counts for much as far as predictions are concerned. One of the first things I learned was that with Economics you figure out the results you want and work the numbers backwards to prove your result. So anyone that claims to be an economist can do the same.
That being said. For me, buying right now makes no sense in a declining market. I am paying more than 1/2 than I would if I was buying, paying off all my debt and dumping money into my 457.
I am not looking to buy a 4bd 3bath in newport beach. A nice 2 bd condo in North OC will do me just fine, but I cant see paying much more than 300K.
Mtg. Guy, we are on common ground. Why don’t we put them all out to pasture at this point and rely on common sense, interest rates, active to pending ratios, supply & demand principles and the always telling “ear to the ground” methods that have probably helped you in this business for 20 years. There is something to be said for showing up to work everyday and paying attention. So much so that no economist can exercise mind control over professionals who love their craft.
“ROC Says” you are correct as “In the know” apparently is not in the know when it comes to local real estate. There are approximately 20 predominant REO brokers serving Orange, Riverside and S.B. counties of which we are one of them. .35 cents on the brokers BPO price is so ridiculous that you may have been confused and believe you currently live in Michigan.
First of all banks and their representative asset managers very rarely rely on BPO’s alone to set prices as unfortunately they all to commonly rely on what the delinquent property owner owed on their loans. Once listed most banks make modest price adjustments every few weeks until a property sells. Most telling is that most REO managers keep their gigs because they become proficient at pricing on the banks behalf and are adept at moving properties in volume. Selling REO’s is a volume play and there is no benefit to listing properties in this market at what a conventional seller would consider market value. As a broker who represents a fair amount of Countrywide REO’s we have never received a directive to drop prices across the board as it is always a property by property decision.
I’ve read hundreds of postings here chiding Gary for being wrong for the past two years. ( Heck, I was disappointed, also.) BUT, where were you when he was RIGHT for the previous 20 years? Gary DOES have a degree in economics, AND 34 years of experience selling real estate in THIS area, so, he DOES have more than a little credibility, in spite of the misstatements of more than a few bloggers in here.
In the summer of 2002 our main blogger, Jonathon Lansner, wrote an article in this newspaper, stating pretty emphatically that we had reached the top of a cycle and that we were due for some rather DRAMATIC declines in prices.
To any of you who followed THAT advice and sold your houses then, waiting to scoop up bargains a year or two later, you lost out on an additional 50-75% appreciation that came in the ensuing 3 years.
( And are probably relegated to being lifelong tenants.)
Earlier, in 1997 both Gary AND Jonathon accurately predicted that it was definitely a great time to buy real estate in Orange County. Did all you naysayer bloggers buy then? Hopefully, you did – and still own the property.
To quote another successful source, Donald Trump, on Larry King Live, 3 nights ago, said “THIS is an EXCELLENT time to negotiate and to buy real estate”.
Right now is the best buyer’s market I have seen in the last 6 years, and like ALL cycles, it isn’t going to last. In my humble opinion, as a Realtor in South Orange County, who has seen a few cycles in my 31 years in the business, if you’re thinking of buying, this next 3 months will be your best opportunity.
With the offers I’m seeing now, and the visitors at open houses recently, I’m seeing a definite “uptick” of SERIOUS activity, bringing a sense that we have indeed, come to the bottom of this present cycle.
The time to buy a house in South O.C. is NOW. The number of houses to choose from is high, ( although decreasing by at least 5% in MY area, over the past 2 months.) interest rates are great, loans ARE available, and prices are STILL negotiable. You also have plenty of time to make the best buy.
Mark my words, if you wait until March of 2008 or later, I’m predicting you’re going to be pretty disappointed. You will end up spending more, being able to negotiate less, with far fewer choices, AND much less time to make that choice. ( Or, either “stay put” in a less than desirable house, or worse still, continue to be a renter.)
The choice is yours. You can either follow the doomsayer blogger lemmings, ( most of whom have zero or marginal credibility or experience.) or dig a little deeper, looking for meaningful signs in front of you TODAY, rather than rely upon Dataquick statistics that reflect activity that happened two months ago. ( That, is the source the Register uses for most of what you read there.)
I’m sure I’ll catch more than a little flak here, but I’ve heard it all before. At least, like Mr. Lansner and Mr. Watts, I’ve used my real name, and not hidden behind an internet alias, pretending to be an EXPERT with little or no actual experience or credibility. By the way, just like the two of the gentlemen above, I’m not ALWAYS correct - just a majority of the time. Thanks for reading - have a prosperous day!
You all can have OC. I am born and raised in OC and looking forward to moving out of here. Enjoy your rat race.
Isn’t this the guy that wrote “There is No Housing Bubble” just a few years ago? If I click my ruby slippers together really, really fast, maybe all my problems won’t exist and I can live forever in the Emerald City!!!
B Phillips-
Can you say ‘desperation’? Wow.
All the places we have been looking at have dropped asking price by 80-100K…Dont see that changing too soon…glad Im a renter!
Hey Rants: I saw Trump’s interview and he did say that housing is near bottom and should soon be entering into a good time to buy. I have no idea who is right but I can tell you I’m a very experienced long-term investor, and usually (not always) when there is mass negative hysteria (like all of the chatter above) it’s a sign of nearing the bottom. The masses are almost always wrong, just as they were when they got on the real estate bandwagon the last few years buying it up at any price. And your Roger’s story on Bloomberg warns of inflation, which is the reason building materials costs are so high…just the sheer cost of construction and entitlements props up home prices to where they can only fall so far. They might drop another 10%-15%, but you have to remember that the initial 10%-15% drop was off of a value that was never real to begin with due to the buying frenzy. If prices drop a total of 20%-30% it would be a very normal correction, then it would bounce sideways for a couple of years before gradually ratcheting up…all very normal. Meanwhile “smart” money saw this coming and shifted into apartments, commercial, international, oil, etc., and “smart” money will back into residential probably sooner than you think.
Bob: I love your enthusiasm! However. Offers? They are few and far between, and usually WELL under asking price. I know I’m prequalifying for them. The 13% or so drop in price per sq ft doesn’t even come close to correcting the excess, so while I truly hope we bottom soon, I don’t share your 3 month timeframe optimism….unless you know a bunch of sellers getting ready to slash their prices 30%???
I still dont buy it that the bottom is near, as in within the next five months. If the amount of homes on the markey had declined, it isnt due to sales. I would guess it is due to people giving up on the market since they cant get the price they want or sell it for almost anyprice.
I would guess there are some markets that will stay steady and some that may go up as those in So. OC, but last I checked this was the Orange County Register and not just the South Orange County Register.
It is fairly simple to talk about a market like Jimmy does when he mentions CDM.
Tell me how you think the whole county will fair or even Southern California as a whole. That is more representative of how the economy is doing, not just whats happening in a few towns.
Do us one thing Mr. Phillips. Clarify what you mean by the bottom in March and what you are talking about. Make it very clear. Than promise that when you are wrong you will never post a prediction again.
Do not catch a falling knife. Be careful with all the rosy forecasts from National Assocation of Realtors.
You are responsible for your ultimate decision to buy your house. Realtors just want to make 6 percent commission and they will do whatever it takes to convince you to buy a house.
Gary Watts broker and economist? We do have many “Economists” in housing industry from National Association of Realtors to Mission Viejo in Orange County.
Our housing industry is in a big mess. No wonder. Do not catch a falling knife.
I can tell you why Watts makes these comments. He was at a Marshall Reddick seminar earlier this year saying what a great time this was to buy real estate. Paid to be there I’m sure. He knows where his bread is buttered. Reddick is trying to sell homes and Watts is trying to help him so they both make out…never mind the facts. It’s all supply and demand and right now there is more supply do prices will fall. It doesn’t matter what Gary Watts says. When demand exceeds supply only then will prices go up…gee it’s so simple.