Register higher ed reporter Marla Jo Fisher reports that billionaire real estate investor George Argyros and Chapman University President James Doti told a luncheon audience Thursday that it’ll take 10 years for the housing market to recover.
The comments occurred during a luncheon at the Pacific Club in Newport Beach celebrating the addition of Nobel laureate Vernon L. Smith to Chapman’s faculty. Smith, the so-called “father of experimental economics,” was asked during the luncheon how long it will take for the housing market to get back on its feet. Smith said that while he doesn’t follow the housing market specifically, he suspected it will take longer than during the last housing slump because it’s bigger.
“We have to work our way through this big lump,” Smith said.
The slump of the 1990s lasted seven years. Argyros’ and Doti’s view that recovery is 10 years off is longer than other economists have said. Economists speaking at the California Association of Realtors convention in Anaheim last fall, for example, put the recovery at 2 1/2 to three years off. Others expect a long, slow recovery to begin sometime in 2009.
They are right on. if you look back at the previous down turn and long term historical trend it’s 7 to 10 years. Since this was the mother of all bubble, 10 years is the lower bet. if you listen to the realtor of 2 1/2 years, you might as well believe their bs last year when they said that the market would rebound this year. what a bunch of morons.
These people are full of themselves, pretending to know what’s going to happen in 10 years! In ten years, there may not be an OC after the Big Quake!
Ha, all they are stating is the facts that have been shown since the last down turn in better times. They are not going out on a limb, they are not taking a risk, they are just telling people the truth and you know what if you are in the RE industry the truth hurts.
“. . . he suspected it will take longer than during the last housing slump because it’s bigger.”
I would love to hear a reasoned argument against this line of thinking. Last time peak to trough was roughly six or seven years (1989-1995/6).
I don’t think anyone can seriously argue that this boom was not bigger than 1982-1989.
How do you knock this argument down?
The economic Cycle for RE is 10 YEARS!
I HAVE BEEN POSTING THIS FOR THE LAST YEAR!!!
Peak: 2005/ 06
Trough: 2010
Flat: 2015 / 16
Expansion: 2020
Patricio:
Were was my invatation to the meeting of the minds! ahahahahah
Rants:
Check out these morons,
Are they saying anything new?
Roc/Truthi:
What are you doing for $$$ right now?
PDU / Nanowest:
Whats up with the start up?
Hows that benzo treating you?
When are you going to buy?
Note to self:
Quit the day job,
apply for a job with OC Reg as armchair economist . lloll lloll
Ribsplitter
scott,
i am working as an rn for fvrh.
i am looking around for my first home right now.
that is why i am here.
First off, my wife works for Death Valley as well, what department do you work in there Truthi? Secondly, this isn’t the RE shill that was sitting home all day and changing her name and agreeing with her own opinions under other aliases Scott. This Thruti is just someone who plays Devils advocate and answers for the former Roc/Bored/Truthiness….I an not exactly sure why though.
Truthi:
My babys moma works as an RN at western medical.
Good constant living in the face of a recession.
Best of luck to you young lady, or is it young man?
In any event, you should be in good shape buying in the trough,
SEE ARMCHAIR ECONOMIST,
SCOTT THE FORTUNE TELLER ANDERSON’S
GRAPH LISTED ABOVE FOR BEST TIME TO BUY.
Note:
Buy as cheep as you can for the 1st property = condo.
Rent it out when it is inline with market rents & repeat the process
Dont go too big on the first 2,
That way you can continue to aquire.
scott,
90% of rn are female.
you can guess the rest.
The only arguement I can come up with is that information flows and delivery to all involved in the market have improved so much since the last downturn that the cycle may happen qucker just because the truth is so much easier to discern now. This doesn’t mean that the prices won’t fall to the necessary level, it just means that they will fall faster and get into proper range faster thus shortening the cycle.
Remember, the internet didn’t even exist during the last downturn!
….well it looks like the 10 year turn around time frame has now been taken……at least till someother goof ball wants to grab ink, and out estimate them by declaring “turn around is 11-12 years away…..
Headline the day the market turned around last time…”the economy is is mired with no end in sight”
Who cares about 10-years from now currently? If values fall the other 10-20% that most educated experts are predicting, that will help potential 1st time buyers like myself buy their first property and it will help the recovery start. If values don’t fall to affordability, the excess inventory on the market will stay there or continue to grow indefinitely. So obviously prices have nowhere to go but down. This spring, sales will go up, any idiot knows that. But it will be because inventory of homes for sale will double and people will have to lower their price at least another 10% just to sell.
If you really believe it will take 10 years for a recovery, then your strategy should be to keep renting for the next 9 years.
Truthi,
I’m sorry for confusing you with Truthiness, one of the many names our resident troll used to post under. You appeared shortly after and I mistakenly assumed it was her posting in a shortened version.
Scott A,
I only post under one name.
It’s understandable you would think others might use multi IDs since our resident creepy troll set that precedent.
I’ve no need to try to confuse or change my persona - don’t post anything I’m ashamed of ……or anything I have to weasel out of:)
Greg,
I can buy that argument: it’s not the length but the depth that matters. Let’s say -40% is equilibrium. Whether it takes 10 years or 3 years to get there is immaterial, just that we get to that point.
I think the counterargument to that is the ‘ol “housing prices are sticky” — that it just takes time for housing prices to correct.
But maybe more efficient flow of information will impact that.
Sounds reasonable.
PDU:
Ok cool,
Keep it clean people!
Have a great weekend bloggers
The drop in prices appears to be accelerating based on price per square foot (PPSF) for SFHs. The peak price was $444 in June 06. The Dec 07 price was $353. That is a total drop, so far, of 20.5%. That works out to an average monthly drop of 1.14%.
The PPSF in June 07 was $419. So the drop for the last six months is 15.75%. That works out to an average montly drop of 2.6% over the last six month period.
2.6% per month works out to an annual rate of 31.2%. At this rate, I don’t think it will take 10 years to hit bottom.
Of course, I don’t expect prices to continue to drop at the rate of 2.6% per month. However, it seems to indicate some acceleration in the downturn over the last six months.
Greg, I’m with you. The flow of data is MUCH faster now. There was no internet back then. It was mostly fliers on doors and word of mouth. Much different today. A guy can find a house on the net, look at the pics on the net, email the agent, meet there 20 minutes later, and have a contract singed and send an hour later. This just means that decisions are made faster. On both the buyer and seller side. In a declining market, such as the one we are in today, sellers can be exposed to situations where they have to act, and act quickly.
And they will. I think that is the key. Distressed sellers who have equity but just want to take profits and move, have the information to make it happen virtually at the drop of a hat. That is called a liquid market, something the experts said is what made real estate “different”. They said this is the reason prices would never fall off a cliff. Well, I’m hear to tell you all that “they” are falling off a cliff as we speak. On average, according to the markets I have been looking at, the cliff is 25% from peak. Some markets see less and others more. Distressed areas of Santa Ana and Fullerton are seeing 40% from prior purchase prices. The coasts are much less, more like 10-15%, I couldnt find any “fire sale” pricing above 25%. In my area of Mission Viejo, Dana Point, San Juan, and Laguna Niguel, condos are getting hurt much more than SFRs. These markets need another 15-25% decline, which I think might happen all at one in the next 12-18 months, for reasons mentioned above. That will be the bottom. We’ll be stable for many years, before out economy becomes strong enough to support housing fundamentals. So sure, I can see a “recovery” begining in 10 years. But maybe more like 5-7 from now.
Hard to argue with a billionaire, especially with regard to his specialty?! I think clemente or maybe it was Scott A. from above pointed out the last cycle was 7 years? I bought my first home in Laguna Niguel in 1996. Here are the numbers:
1989 Sold new for $189,000 (1,100 sq ft 2/2 condo w/view)
1996 I bought for $131,900
I got lucky and nearly pegged the bottom of the market. But my point is, I’ve already witnessed nice O.C. real estate pull back 30% once before….we’ll see 50% from peak to trough this time around (on this type of property).
Hey OC appraiser.
can you give me info on 90620 and 90621.
Thanks
Not all Realtors are morons, but most are because our fine state allows somebody to take a weekend class, then handle the largest asset most people own. How about complaining to your congressman about licensing requirements for Realtors. Some of us are very educated and very experienced. Talk about Morons, how about the people that publish the drama you all believe, that’s always about 60 to 90 days late. Bottom line is I’m slaying the dragon every day in this business and when you factor interest rate declines and price drops, purchasing power has already increased by about 20 to 25% from the top top of the market and I’d say we have another 15% to go, but that will be achieved from the combination of decreasing prices and lower rates. Information travels at lightening speeds and the market is adjusting much faster than it did in the last downturn. With only 715 single family homes selling out of nearly 10,000, don’t fool yourself and think the Buyers are doing well. If you want to be an investor wait, if your a long-term Buyer and you’re going to live in the house, your situation has greatly improved? Buy a condo as an investment when the market botttoms out, but get your family a home and have a place to call your own in the meantime. If you can only afford a condo as your home, then wait, because for most people condos are temporary and you may get stuck upside down on the loan. If a condo is long-term for you, then buy. Sure renting might pencil out, but it’s still not your house and you live your life in limbo–that’s fun? Living like a transient with the fear of your landlord sucks, grow-up and get your own place if you can afford it. Otherwise, wait another 5 years for the market to dip and come back-up to where it is now (and where will rates be then?). Watch your kid go from 5th grade to high school, while your rent, that’s fun! The time to buy is when nobody else wants to, as Warren Buffet says, “be greedy when the market is fearful, be fearful when the market is greedy” Don’t forget the Social Security System is going bust and the majority of wealth most homeowners have is in their home, if you thing big government is going to let all that equity get flushed away, I wouldn’t bet on it. Preserving that equity and reverse mortgages may be the only thing that will allow many retirees to survive, so my bet would be percentage wise, rates will fall more than prices. Stabilizing prices as quickly as possible is what’s important, so if you think this thing is going to last 10 years, happy waiting, why not just buy a motorhome to live in?
The drop in prices is going to be serious but affect everything else as well. People are using charge cards to prop up their mortgage payments. This will come to a painful end. Bankruptcy laws have changed and the banks can hit you with 32 percent interest if you are late. If you are foreclosed on and along with hundreds of thousands of others the equity evaporates jobs also vanish. Lost jobs+ foreclosures+ high charge card rates+ delinquent cards+ bad debt+ tax rebates = recession + inflation. Ten years to get out of this mess would be optimistic I think. The national debt alone comes to $30,000 for every single taxpayer as opposed to a balanced budget under Clinton. And now we are adding more to the national debt to get out of this? Brilliant.
Let do the math…I recall the peak was in 1991- and the market recovered late 1996 (1997 being the first year of appreciation). My math come out to be 5 years at most…Not 7-10!
By most accounts, it took a minimum 7 years for prices to return to their previous level. 9 years in many situations.
I agree with Ihate…trough was 2-3 years after peak; I wouldn’t want to wait to buy after market has recovered, but take advantage of lower prices.
That being the case, with a market that adjusts much quicker (in theory), even with the “sticky” prices for non-serious sellers, I think the trough might occur as early as Dec 2008 or early 2009.
Then the market should only climb at the rate of inflation after that for a couple of years. That being the case, I don’t know when we get back to our prices today…perhaps like pdu says, 9 years.
Ha! It’s because he’s NOT A REAL ESTATE AGENT that he tells it like it is!
Top 1% - of the past,
You say:
“Stabilizing prices as quickly as possible is what’s important……”
To whom?
Affordability is what is important. Got to be able to pay for it or it’s not yours.
Where has it ever been otherwise? …… Only when the Top1% of realtors, and even the Bottom 1%, were telling everyone that real estate ALWAYS goes up - better buy now or be forever priced out.
Prices exceeded the level most could afford to pay and the money lenders created products (loans) to sell that allowed buyers to acquire property they could never hope to pay for unless price appreciation continued long enough to bail them out.
In any market when prices exceed worth, the market will correct. That’s what’s happening — “bailouts” won’t change the inevitable.
It’s baffling that so many believe California deserves (and has always had) a premium for real estate that includes an amount that makes it unaffordable.
Silliness. I hear it repeated ad nauseam that California real estate has always been unaffordable. Wrong.
The spread grew because enough were convinced that California real estate never goes down.
It does and that will be good in the long run.
Nobody should be in the position of having bought something they could never hope to afford. That’s no way to live, and yet a hell of a lot of the Top1% showed them how they could finagle it — for a short time.
It is the most reasonable housing report so far. We are in 2nd year so far. The worst has yet to come. It will never be the same again.
“pdu Says:
January 26th, 2008 at 11:38 pm
Top 1% - of the past,
You say:
“Stabilizing prices as quickly as possible is what’s important……”
To whom?
Affordability is what is important. Got to be able to pay for it or it’s not yours.
Where has it ever been otherwise? …… Only when the Top1% of realtors, and even the Bottom 1%, were telling everyone that real estate ALWAYS goes up - better buy now or be forever priced out.”
PU, It’s all about affordability for the speculators…errr first-time buyer..right? What do you care anyway. You will be six feet under by the time this all plays out.
Housing has always tracked incomes; but like the stock market, at times it exceeds (leads) incomes, and at times it lags incomes.
Because the investment banks got into the market, they created a whole different buyers scenario, one no longer based upon lending fundamentals. Since the investment banks never intended to hold the paper, but to literally lay it off on some unsuspecting investor, they didn’t care that the deals in the “box” were worthless.
Well when the investors got wind of the problem they refused to keep buying (March 2007). But the investment banks just figured it was an isolated case, so kept doing deals. Then August 2007 comes, and Viola! No one will buy the worthless paper anymore. The investment banks now have paper just like commercial banks…only theirs is truly worthless. At least the commercial banks have some collateral, even if it is modest, behind their loans.
Affordability is simply another word for cashflow. It is always whether one has enough cashflow to pay for the level of debt (loan). It doesn’t matter if the limits are raised. In order to afford a $600K house with nothing down, you have to be able to dedicate approx $5K-$6K a month to cashflow the debt.
That requires about $150K to $180K a year in income. Most entry level families don’t have that kind of cashflow they can dedicate to a loan payment. Hence the “affordability” question.
Most realtors can barely do the math on the front page of a sales agreement, and most can’t even do that without a calculator. I’ve met very few who even know how to determine “affordability”.
shockg,
Your anger makes you ugly. Go away, please.
A normal market without unrealistic price appreciation draws no speculators. I hope to see normalcy return.
Keep waiting for those prices to drop until incomes can afford a house and you’ll be waiting a long time, when is the last time you think that’s ever happen in the Bay area? Welcome to Orange County people, one of the highest demand counties in the Country, It’s quickly becoming a melting pot for some of the wealthiest families from around the world. Sorry, but this isn’t the same OC I lived in during the 70’s and it will never be inexpensive to live her again. Think about the quality of life here, too many people want it. No more champagne taste and beer budget, prices will drop another 15% to 20% max, they’ve already dropped 20% and interest rates are falling as well. Last week you could get an interest only jumbo fixed for ten years at 5.125%, versus 7%. For most people, 10 years of fixed payments is a risk their willing to take to not go with a fully amortized 30 year jumbo at 6.5%, do your realize 40 to 50 percent of people now move within 10 years. Today, 14 of 15 homes are not selling, focus on the ones that are and you’ll see that between the price drops that have already occured, add another 15% to 20% to that with lower rates in the next six months, people will paying 40 to 50% less on a monthly basis than they were at the top of the market! The problem is 92% of the houses that are up for sell are overpriced and are not going to sell and that’s where most people think prices are. Focus on what’s selling, make sure your buying for less than the last guy and don’t try to time the market. Your going to have the next three to five years of a Buyer’s market, but if your waiting for prices to cut in half, your living a pipe dream. They will drop some more, then flatten for a long time. Too much wealth here; the many parents and gradparents willing to help little Johny buy their first place. Too many move-up Buyers with lots of equity positioned to move-up. I worked through the last crash and it was worse, nobody wanted to buy houses, nobody had money and you could hardly find a Buyer. In today’s market, Buyers are everywhere, there’s plenty of people who didn’t buy when things were crazy and they want a home and are not going to wait and try to time the market.
“It’s quickly becoming a melting pot for some of the wealthiest families from around the world”
Snark, snark, snark, that’s MALIBU, not OC.
I think this is one of the funniest arguments going. So Coto is going to save OC? Get real, where do “they” come up with this. Yes, OC is rife with upper middle class, but it’s got a lot more more poor people than rich, and this idea that wealthy families from around the world are moving from Paris, Rome, Madrid to live in Irvine is too funny.