Tracey Seslen is a USC real estate finance professor who’s research has delved deep into housing cycles. Need we need more of a reason here to ring her up? (UPDATED 3/10 to reflect Seslen’s new thoughts on local population growth.)
Us: So how does this up/down cycle compare, nationally and locally, to previous real estate cycles?
Tracey: In the past, housing downturns have often accompanied a more general recessionary environment. In this particular instance, the housing downturn can be pinned to very specific events, and may be a major cause of recession, rather than the other way around. And interestingly, there has been a significant contagion with regard to the impact of the subprime crisis on credit availability in commercial markets. From commercial loan data, there’s nothing to suggest that commercial real estate has come to be at particularly greater risk of default in the last year than anytime in the previous decade, and yet the commercial mortgage-backed securities pipeline has completely dried up.
Us: Does the steepness of the upswing of the boom and the ensuing downswingpop tell us anything about the future?
Tracy: First, one should realize that while the downswing has been relatively steep and has caused hardships for a lot of American families, the housing market still moves very, very slowly relative to traditional financial markets. The steepness of the decline may actually be a good thing from a problem-solving perspective — when bad things happen quickly, the major market players will be quick to recognize the problem and (hopefully) quicker to act on it than if the decline were to happen in dribs and drabs. If they’re unclear as to the severity of the problem, the important players won’t be quick to act, and the long-run damage could be greater. The particular circumstances of the run-up, and subsequent decline, have been a painful learning experience for many capital market players, and hopefully they can use this experience to avoid similar pitfalls in the future. If we do see another run-up and crash in the next decade, chances are it won’t be due to the illusory liquidity and lazy underwriting that caused this one.
Us: Any guess to when we might hit a bottom, nationally or locally?
Tracey: My guess is similar to others’ — mid-2009, or possibly earlier. I think that the change in the conforming loan limits could be the most influential aspect of the Bush stimulus package on account of the fact that it actually provides real (as in non-illusory) liquidity to families in places that need it most — traditional high-home-price states of California, New York, and other parts of the east coast. On a side note, California has an advantage over many parts of the country in that it has very strong population growth. The housing market in SoCal, in the long run, will be buoyed by population growth even if credit remains tight, as all of the new residents will need a place to live. Other parts of the country, such as Cleveland and other parts of the Rust Belt have stagnant or declining populations, and will need a substantial positive economic shock from elsewhere to pick their housing markets up out of the proverbial gutter. Overall, I think that the upper end of the market will hit bottom sooner and bounce back more quickly than the middle and lower ends.
Us: Why do people forget about real estate cycles?
Tracey: I don’t agree that people “forget” about housing cycles. What goes up must eventually come down. I think the more accurate statement is that people don’t know when the tide is going to turn and they think that the good times are going to last just a little bit longer.
Us: How do real estate cycles compare to other assets? There’s been talk that home prices are often “sticky” on the way down, but you couldn’t tell that this time!
Tracey: I did my dissertation on this very topic (“sticky” prices in the housing market, among other things), and I think that I’ve seem some compelling evidence that prices are sticky. When folks get into dire straits and have to bail on a property, either because of a change in life circumstances or because they just can’t afford to hold onto it any more, then we see prices fall. But when the sale of a house is completely voluntary, people appear to be hunkering down, taking the home off the market, and hoping to ride out the downturn. One of the reasons we’ve seen transaction volumes hit record lows isn’t just because people don’t want to buy or can’t get the loan they need – it’s because sellers aren’t willing to sell their properties for what buyers are willing or able to pay.
Us: How do “external” factors, like credit crunches or Fed cuts, factor within real estate cycles?
Tracey: Clearly, these external factors have played a role in the current cycle. As I said before, the run-up this time around was based in part on illusory liquidity – the promise of liquidity that individuals couldn’t actually afford. Fed rate cuts will eventually filter down to Treasury rates and other rates to which loans are indexed, and potentially provide cheaper safe (i.e. 30-year fixed) loans to those looking to buy now. The higher conforming loan limits will make for cheaper borrowing as well. If the cost of funds decreases, more people on the fence about purchasing will take the plunge and get into the market for a home sooner.
14.
HERES SOME REAL LIFE INFO
FIRST GO LONG HOME MOVERS
THEY ARE GOING GANG BUSTERS IN BUSINESS SETTING RECORDS IN MOVING
ONE PERSON I SPOKE TO SAID THEY ARE SO BUSY THEY CANT KEEP UP RECORD BUSINESS EVER
FORECLOSURES ON HOMES IS WHERE THE BUSINESS IS COMING FROM HE SAID
ALSO HE STATED THAT THEY ARE ALMOST ALL MOVING OUT OF STATE
THIS IS REAL ANSWERS TO WHATS REALLY GOING ON IN THE REAL WORLD
INFO
INFO ITS VALUABLE USE IT AND YOU TO CAN PROSPER……..LOL
Tracey says;
“for instance, the population of Orange County is expected to double by 2020″
6.2 million by 2020.
Huh? Our population would need to increase by about 225,000 people per year until 2020. I doubt that.
Jon, is this a typo?
Remember the great exodus from So. Cal in early 90’s? (recession, OC bankruptcy, etc.) Big Northridge earthquake of 1994 was the final straw and people really left after that. But they all dribbled back with better economy and after spending either very hot summers or very cold winters in their new locales. I expect the same to occur again. Tracey says bottom will hit about 2010? We’ll see how many come back next up-cycle.
Hey,
I’m no USC Grad, but I did stay at a Holiday Inn and this kid sounds pretty tapped in. You bunch of snot balls should lay off the young Lady. However, she did gloss over one little bit of info about “Lazy Underwriting” Underwriting got lazy because in 1992 activst groups like ACORN pushed Congress to force Lending Institutions to collect racial data on mortgae applicants. The Data(you guys favorite word)was used by the Boston Fed to do a study that found discrimination was systemic and dictated that Lenders could no longer consider mortgage payment relative to income, savings history, income verification etc. Sorry guys the Fed broke it and the Fed dam well better fix it. And you ACORN seminar bloggers, you guys really shot yourselves in the foot. Now I’m leaving cause I can’t stand the sound of grown men screaming and whinning like a bunch of hysterical little girls.
“The end is near!”
I told you so. And gave you the reasons.
“On a side note, California has an advantage over many parts of the country in that it has very strong population growth — for instance, the population of Orange County is expected to double by 2020, and all of those people will need a place to live.”
I made this point last week and was called a “troll”, lol.
The increase will come from a large percentage of the 30 million Millenians (currently aged 18-28, graduating, having kids, needing homes) and legal immigrants who want to live here near their communities very badly. The housing supply will come from high-rises and a limited number of new homes being built in Rancho Mission Viejo area. Just a 1% increase in population is enough to wipeout all the “wreckage”, so we are very fortunate indeed.
The current situation is an Enron-like event clearly caused by people like Daniel Sadek who were permitted (by licensing bureaus) to each sell as much as $55bn worth of shady loans to Wall Street and by people on Wall Street who breached their fiduciary responsibility by buying the loans and re-selling them as prime quality. This and all of the damage it caused can be wiped off the books faster than the fraud itself simply by having HUD guarantee all of the underwater mortgages written before 2007, along with some economic stimulus for consumers, banks and serious law enforcement to set an example for the next generation of mortgage retailers and resellers.
But like any accident that sits on the 405 too long, if it’s not cleaned up quickly, the whole world will come to an End, even if it was just a fender-bender to start with. Washington DC was slow to respond but they are on it now and the world doesn’t come to an end until May (when something like 3 million mortgages begin to unlock) so bank on them having the HUD thing in place by then and squeezing hard on all the banks to ease lending.
In the mean time, people need to CALL the nasty people at their loan servicer and demand workouts to affordable payments, hire a local lawyer and go legal and be ruthless to hang on. Don’t walk away because you are upside down 500K, behind on a few payments and are worried about the End of the world. With free flowing credit coming back online due to Washington DC’s initiatives in the next few weeks, prices will stabilize faster than the fraud that caused them to de-stabilize (just look at all of the greedy landlord-like b4stards right here on this blog talking prices down and just waiting to pounce). I think with the aforementioned population increase, you know what happens after prices stabilize, so get off your but and declare war on your loan servicer and fight to the death to get a deal that works for you, then relax and enjoy life while the world fixes itself –it ain’t Ending.
2. hwood, you are most likely civilly obligated to not type in all upper case in public forums, per the so-called “netiquette” clause in your contract with your ISP. (”netiquette” prohibits shouting, or all caps.)
OK, this should be fun. An SC professor of real estate and finance gives a reasonable assessment of the current situation. Now we get the privilege of reading 100 rebuttal posts by bears/college students/WoW geeks, some of whom can’t put together two coherent sentences, call her out and say that only THEY know the horrible circumstances and conspiracy that awaits the poor, naive OC populace.
Let the mud fly! See below……..
jake wrote: “Now let the troll come in any of his many voices to cause another unproductive argument ..”
Methinks ye doth protest too much, sir. Lighten up a bit, please.
Well said Tom Turkey!
It is a delight to read such a well thought out treatment as you have place in this Chat Room of Doom. You are of course exactly right about the action needed to resolve the current malady. And you are also right in surmising that what we have is not a Sub-Prime problem but a Wall Street Market Manipulation problem. I am sure your post will cause great wailing and gnashing of teeth amoung the naysayers. If this kind of clear thinking and calm presentation continues it could almost tempt me to consider returning to this den of consternation. Carry on sir, Carry on!
The troll is geared up and posting. Let see out of the previous twelve the same guy posts 5 or is it 6. I’ll give the monkeyier “COCO” the benefit of the doubt.
WHAT DO YOU THINK HWOOD, IS COCO ANOTHER MONKEYIER FOR THE TROLL. WE GOT DADDY , DONS, TOM TURKEY,VOICE OF REASON. THE TROLL HAS GOT CONTROL.
Caps are not the worse thing in life. But the troll tries to get under our skin. He really is quite successful. He creates doubt and distraction and causes the blog to spin and spin. We must pray to be saved by the anti-troll. (999)
Oh there is the Arthur Jensen monkeyier.
Wow troll do you sit in front of the mirror and complement yourself.
nationalbubble,
are you going to cover oil bubble. it is a harder target.
you can be first!
15 minutes of fame.
i am too lazy.
“With free flowing credit coming back online due to Washington DC’s initiatives in the next few weeks, prices will stabilize faster than the fraud that caused them to de-stabilize (just look at all of the greedy landlord-like b4stards right here on this blog talking prices down and just waiting to pounce). ” - Tom Turkey
So I guess that means you only have a few weeks until you are proven wrong. Ok….we’ll give you few months.
You really think things will be better in 1 month? 2? 6? They won’t.
The question is at that time, when they are not, will you rethink your own thought process and admit that you do not understand what is really going on? Nah….you will blame something else, and say…this did not need to happen….I would have been right….but for …….
Jake dear boy,
Yes we are all the same person, you have found us out. We are Professor Moriarty and we have come to persecute you and drive you in to frenzy of paraniod schizophrenia. Soon you will hear our voices wherever you may tarry. At first a mild buzzing in the ear rising ever louder until it becomes a cacophany of unarguable commonsense. Then the synapse will meld and they will find you a sad dribbling fool repeatedly murmuring, “Don’t you hear them?”. I’m afraid Jake that holding to a fixed position such as your is abit like squeezing Jello. sooner or later it will slip through your fingers. Now I am off to enjoy the Day that God has provided.
I loved it when USC Professor Tracey Seslen states - “It’s not that people don’t want to buy or can’t get the loan they need – it’s because sellers aren’t willing to sell their properties for what buyers are willing or able to pay”.
I’m seeing a massive “Mexican Standoff” going on concerning this “Price Gulf”. The “voluntary” sellers seem to list their homes an increment below peak prices, and then when no action occurs for several months, they drop the price $10K-30K, thinking that now they are priced in reality-ville. They won’t sell, unless they get “their price”.
The “Price Gulf” between sellers and buyers is as w-i-de as it’s ever been. This “Price Gulf” inevitably will prolong the downturn beyond the mid-2009 as the good Professor suggests. In those areas where sales have especially slowed (IE - the expensive stuff), new sales comps don’t get recorded and markets don’t necessarily adjust rapidly. Look for downturn-itis to persist in the expensive areas well into 2011-2012+.
If the economy in orange county is able to stay stable somewhat and job growth is there she is right. I would prefer for this to be over next year however I have my doubts.
Although I would have thought that the low end would recover more quickly because that is where I have seen the largest price drops in terms of percent.
“Chat Room of Doom” - great phrase! Mr. Jensen, you are my very favorite contibutor. You have been gone too long.
Unlike the permabulls and the donkeybears, I can actually cite sources when I post. As a result, my post and it’s cites are currently awaiting moderation. Here is the context, cites to come.
The USC professor’s contention that the OC population will double does not pass the ’smell test’.
In 2000, the OC population was 2,846,289.
In 2006, the OC population was 3,002,04x.
But what about before?
In 1990, the OC population was 2,410,556.
In 1980 it was 1,932,709.
So, let me get this right. It took 26 years to increase the OC population 50% (900,000 odd warm bodies) but in her fantasy world it will take 12 years to double the OC population and add 3,000,000 warm bodies?
I realize that her words here are likely out of context, but come on now! The rest of the interview was fairly credible but this part makes me doubt the whole thing.
I was blocked but the troll always get thru.
As Ronald Reagan the first said using his real name
There you go again complementing yourself!
Thoughtful= Arthur Jensen = Troll = only bull left
I would like a comment on the person that does this for a “living”!
Now I know that those of you who watch criminal minds on CBS( the Ciialis Broadcasting Service) will be able to tell us his likely profession , age, background, and what trauma caused his psychotic break. Also could this possiblely be Pat Veling. If so this would be beyond FOX!
this is hilarious - she referred to the 30 yr fixed as the loan vehicle people will navigate to.
I’d bet $$ that the use of ARMs will not fall below 40% in OC even after this next phase in the bailout
Her points have merit. Too bad she forget to take into account one thing: the OC mindset and the fact that 70% or more of the people buying are leveraging themselves to the tune of DTI’s approaching 40% or higher and / or taking on greater risk during low rates for the purpose of keep ing monthly payments low and then hoping for the best or another bailout.
She is looking at some data - just not all of it
Her reasoning is sound, however
Anyone care to comment?
Wow it is true it wont let you say C i a l i s!
Wow what a filter!
not buying it,
This is the only conclusion that is not obvious and is by no means supported. Are people holding out for higher prices? duh?
Fed rate cuts will eventually filter down to Treasury rates and other rates to which loans are indexed, and potentially provide cheaper safe (i.e. 30-year fixed) loans to those looking to buy now. The higher conforming loan limits will make for cheaper borrowing as well. If the cost of funds decreases, more people on the fence about purchasing will take the plunge and get into the market for a home sooner.
I agree about her comments about population growth - did she talk about job growth?
Those particular comments make no sense.
She definitely needs to site her sources for that assumption.
Last I checked, we’re losing more jobs than creating and ths area is not business friendly. Soon - taxes will get worse for CA businesses. So - again - I say she’s limiting her sources of data - but I believe she has sound reasoning skills
Void of data - anyone will be wrong
Jake,
Never let the facts get in the way of a good story, right?
If you think rates are going down I’ve got a bridge I’d like to sell you……
Jake: so let me get this straight. If we see no significant easing on long term rates, and eventually we see an increase over time - what would these people be doing and what would their options be AT THAT TIME? (I am referring to those currently betting on her statements)
We’re not talking about investors here that can leverage other means to manage the debt on an investment property - these are primary home purchasers I am referring to
do we expect the ARM’s and other short term vehicles to decrease as well? Looks like we’ll be in stage 2 of the current cycle if most people stick to ARM’s when the long term rates find their bottom
Also, by the way, isn’t their a limit to how many loans Fanny and Freddie can purchase?
How effective will this change in conforming limits be if these two find much difficulty in being able to stay under their caps?
I think my position as usual was misunderstood.
I think that long rates will go up because of inflation fears and because the banks will see houses as a greater risk.
Jumbo loans margin over non jumbo will go down slightly but all loans may go up.
Sorry for the italics above. The old system automatically turned HTML text formatting off after a carriage return. No longer, I guess.
Also…a case for going back to the capability of viewing one’s post before posting it. How about it, Jon?
jake…
I am no troll.
I always wanted to be Elvis though.
Ah ha hmmm…..yeah.
“Well since my baby left me….”
“The end is near!” Ah ha hmmmm……..
“Got to find a new place to dwell…”
Ah ha hmmmm…..
I checked out Pat Velings Data.
Quite an awesome source of info thanks pat.
could I get the scoop on buena park from you?
Please?
Thanks Pat that was very interesting considering I am think about buying a home in North Orange County.
Where in the world does she get her population growth estimate? no_vas is right, she needs to cite her sources.
The population growth the last two years has been under 1%, and over the last 17 years, it has averaged 1.6%. Taking that number, the population would be under 3.7 million people in 2020. That is if we are lucky.
Sometimes, I like to give the interviewee a hard time about their facts, but this is truly an absurd statement. We will have gone through at least 5 more housing cycles, before we ever see 6million people living here.
“One of the reasons we’ve seen transaction volumes hit record lows isn’t just because people don’t want to buy or can’t get the loan they need – it’s because sellers aren’t willing to sell their properties for what buyers are willing or able to pay.”
That quote is one which nobody mentions on this bearblog. Most sellers wont walk…they will figure out a way. If you happen to live in a highly speculative area, like Ladera, Riverside, or Corona, you will crash pretty mightily. You may already have hit close to bottom. No crystal ball here so I will not be one of those who tries to predict what is going to happen. I look at the long haul, big picture if you will.
SoCal and OC real estate has always been in demand. Once the credit market moves forward with NEEDING to make money again, the pace will pick up again.
Wow sort of like magic, you mention Pat Veling and he appears.
I personally would have a hard time thinking that Pat is the troll. I think he has much better things to do. Not that it would not make sense since he is so annoyed by what he considers unnamed sources that he would want “Realtor Revenge”. He is right that the internet has a problem with unreliable sources. Of course the real world has a problem with unreliable resources. As I have said many times the problems of today are information problems and it is often called “transparency” which is another word to make it nice to question the truthiness of people.
Look theoretically houses could be traded like stocks on the NASDAQ with the only requirement is that one has a reliable appraisal. This would take the profit out of the transaction for the realtors, the brokers,
the bankers , all those guys. Because the only really tough underwriting is the value of the house and credit worthiness of the borrower. The rest a computer can handle quite well. So we are going thru this period where change is occuring and those who have had very nice jobs showing homes and pushing paper are on their way out.
Anyways Pat it is really easy to make a program that will search the blog for the words Pat Veling and then send you a page to your cell phone. Of course we could all end our comments with and peace be with Pat Veling and your cell would be useless. It is a very weird world we are living in. We are at the tipping point, as they say in the lap dance business. So watch out Pat Veling.
Actually my best guess and I will go with this is that the troll is not Pat Veling but that the troll is a friend of Pat Veling. My best guess and of course I could be wrong.
Mr. Bubble:
The dot com bubble and the real estate bubble could be considered to be a result of fed actions or inaction. They helped to create a wealth effect which propped up the economy. The OIL bubble if it is one is a speculative/market manipulation which has an anti wealth effect for most Americans. Of course it makes oil companies , exporters, and speculators in the know wealthy.
But it does not fit the pattern of being a fed plot to keep wealth effect.
More of a plot to stick it to the consumer. One cannot say that Bens interest rate drop pushed up oil from 60 to 105 based on cheapening of the dollar in what 6 to 8 months.
Inflation is high but that does not explain the oil increse. Oil is high that better explains inflation.
Pat,
That is an unbelievable coincidence that you don’t read the blog for a month or more and within an hour of my mentioning your name you appear.
So since I have no Crystall Balls (troll name stolen from me check the record) I will feel free to offer the most likely interpretation.
1) You read this blog all the time (maybe doubt it)
2) You are the troll (really doubt that because I just don’t think you would waste the time- i really really don’t
3)or a friend of yours is a regular reader and alerts you when your name is used in vain.
Now I don’t think the bears are on your “friends im list” so my guess is that it is the troll or another reader. My guess is troll.
So there it is, a real speculation.
Since Mr. Lanser who is no idiot (I speculate) takes no action to control the troll it only leads to all sorts of speculation as to how this blog functions.
Not only that but when Wall Street funds Ninja loans it leads to all sorts of speculation as to how Wall Street functions.
Not only that but when Realtors come on here and say there is no bubble, no bubble , no bubble and then change their tune to know one could see this coming it leads to all sorts of speculation about realtors.
We may have a little data about what is selling and when. But it is very little data. What we need to know is what the financial profile of OC residents is in general. And if we knew that people could make a much better model of how housing will move.
Until then a lot of speculation.
And one could say forget the speculation and just get in it to win it!
But I also am not buying it.
I feel a kind of bad for the poor students of this lady.It seems she has been in her classroom for so long that she really has lost touch with the reality of what has been going on for the past few years.I bet you she has not bought or sold a house for quite a while.
1-what is the source and basis of her projection for such an explosion in the poulation during the next ten years?
2-where is her understanding of speculative buying during the past few years which totally distorted the numbers in home ownership and the actual need for homes ?
3-what is her understanding of the lack of lazy !!! underwriting which probably she meant ( fradulant underwriting ) and the fact that normally it takes at least ten to fifteen years for the players in the mortgage business to be able to pull another fast one ?
4-How does she explain the total lack of any sort of balance between the incomes and the prices of the homes based on the historical norms even in a place such as OC ?
5-It is better that the crash is fast? Does’nt that create a much more visious cycle by adding to the number of foreclosures and distressed inventory and not giving enough time for their absorbtion. Possibly 50% of the explosion in population is going to happen during the next two years !!! and that is going to take care of excessive inventory .
6- Is the raise in the limit of conforming loans going to help the people with average incomes of $70 to $80 thousand dollars who could secure $600 & $700 thousand dollar loans because of lazy !!underwriting and could they really qualify for the same amounts with not such lazy underwriting as existed in the past few years?
7-In that senario what is going to support the bounce back and return of median prices close to $700 thousand range? 8-Would’nt it be easier to acknowledge that there is no easy way out of this situation we are in.We got way ahead of ourselves and it is going to take a while until the incomes go up enough and the prices go down enough to create an actual and sustainable balance. Any fake stimulus or temporary band aid could only delay the inevitable at best.
Mr. Veling,
You are as Moses come down from the Mount. Would that you would continue to post your excellent commentary.
it is a shame when an articulate educator (especially one verbose in the Englsh language) and with sound reasoning skills sells herself short on a potentially accurate assessment and destroys the validity of her arguments with ‘noise” she should have just left out or have done the necessary research before citing it.
We see this often in the engineering world.
You must be precise when making your arguments - all of them - otherwise leave out the noise and those facts that have yet to be validated. Especially in the professional world.
Who was she citing anyway when she stated the population will double in the next decade? Surely it wasn’t a conclusion she generated on her own, yes?
Or is there a large population of rabbit-like humans expected to take off?
I wonder how many properties she bought and/or sold in the last 20 years.
Pat,
Do you actually earn a decent living by taking basic MLS data and making those cheezy bar charts?
What is it that you think is useful about those 6 charts anyway?
Have a great day!
I have been saying all along, this is not a “flyover state.” You want a deal, go buy in Omaha, NE. You want to live in some of the best weather and scenery God has created, you better get your pocketbook ready. There is a reason 44,000,000 people visit the OC every year, and not Tulsa, OK. Yes, pure fundamentals do not apply to some of the most sought after places.
Manhattan or Brooklyn, which would you prefer? Hmmm, that is a toughy.
I wonder if the “blog bears” in NYC whine, moan and complain to the extent they do here, you know, assuming most of them are from there and all, and should not have to rent. They should be entitled to be able to purchase a home there.
You know, Hawaii does mandate affordable housing. You should see what happens after they force sell it to these “lower income” people. They all hold it the minimum amount of time and then flip them for market value. Sign me up for that government sponsored winning lottery ticket as soon as you can.
Those earning over $100,000 annually pay 81% of this country’s taxes.
You want to bring housing down to more affordable levels here? Stop the property tax freeze and reassess annually. Of course it would also be nice to abolish the ridiculous 9.3% state income tax on incomes over $44,815. CA took in over $11 billion in tax revenue last year. Yeah, let’s put some of that back in the consumers’ hands and see what they can do with it. The fiscal system in this state, having lived in several prior to arriving here, are ludicrous at best. You should tax your visitors to help fund your programs, not the residents to the extent that you do.
Law_Student:
You wrote:
“Do you actually earn a decent living by taking basic MLS data and making those cheezy bar charts? What is it that you think is useful about those 6 charts anyway?”
And on February 9th, 2008 at 8:11 pm, you also wrote:
“Pat, You are an idiot, no matter where you are.”
You are one of the people here to whom I made reference when I wrote, above, “Most of you hate my data and methods anyway….”. Yet, you are also one of the 22 people who have used the link to download the file in only about three hours. I cannot imagine you expect an answer given the tone of your “question.”
Let’s you and I agree on at least one thing: my opinion and information have no value to you. But then….you already knew that.
A few people here, and my clients, do appreciate them. But I am certain none of them are as smart as you.
And yes, I WILL have a great day! Thanks for that sign off.
Dang Pat you are making me starting to speculate. For a professional you act with an enormous amount of anger and sarcasm.
That is what makes me specualte that you are the troll.
But I really do think you work most of the time so it makes no sense.
So I speculate the troll is a friend who says
“Arthur Jensen Says:
March 8th, 2008 at 3:17 pm
Mr. Veling,
You are as Moses come down from the Mount. Would that you would continue to post your excellent commentary.”
But at anyrate it does not look that good for a well known figure to go into such a rant. I know it is not fair that these unknown people can rant all day and you have to be pleasant, but that is the life of a public figure.
It is best to have your surrogates do the ranting. That is the way it is done in politics. Have a troll do your dirty work and stay above the fight.
“
Jake:
I took Arthur Jensen’s comments as sarcastic, which is why I have not replied to them. Law_Student and I have mixed it up before, so I felt I needed to respond.
Here is how I interact with this blog:
It is one of my five Internet Explorer home pages, which open when I load the program at the beginning of my work day. I glance at Jon’s posts 2 or 3 times per day, and try to view blogger comments a few times each week. I promised myself a long time ago that I would limit comments or contributions of thought to only one day every 3 or 4 weeks. That’s why I show up, reply to comments (if any) and then disappear again for awhile. I do lurk, however, which I have admitted many times.
The speculation that I am the troll — or specifically ShockG — always makes me laugh. I still do not know if you are “in my camp” because you have not said so. But….at least our discourse is civil. I can’t say that for some others here. For the record, I take more issue with a poster’s “tone” than their opinions. I may disagree, but I try to see the other person’s perspective.
I am now done for today and for the next few weeks, as I am off to a friend’s milestone birthday party.
Pat,
Why are you tracking how many people click onto your marketing ploy?
I guess you really think you can turn the housing market around using this blog as your source for propaganda.
This thinking is very similar to the troll’s tactics of using a heavy volume of posts, agreeing with itself numerous times under different names, trying desperately to persuade folks away from reality.
We all know that you gain financially when you can pump up the real estate market, but at whose cost.
The bottom line is, no matter how many graphs or persuasion tactics you use, you’re not going to be able to match a median buyer’s salary with the price of today’s median home.
Even if a person could qualify legitimately for a vastly overpriced home, it would be a costly financial mistake.
So before you go on your next posting spree with all of your names, stop and think about all the people you’re trying to influence in a negative way, for your own personal gain.
P.S. great ploy to announce your leaving to a birthday party so that when the angry troll enters the blog there would be no way it could possibly be you, since we all know your at a B-Day party.
But of course the troll won’t enter now.
Now after stating the above, the troll has a good possibility of entering.
“Ah ha hmmm, yeah…”
“with suspicious minds….”
Ah ha hmmm………”
Jake, You have posting 15 times so far on this topic and you have the nerve to call someone else a troll. HAHA. If housing prices mean so much to you i bet you are one of the many ‘geniuses” on this blog who gambled their home away. Life must really suck for you.
Bloodinthestreets,
How dare you try to use San Diego as a leading indicator for the OC. The San Diego sun shine and oceans are not as nice. Also we have jack rabbit reproduction here. Moreover realtors are producing test tube babies as we speak to double our population in less time than would normally be feasible with jack rabbit reproduction alone.
Please ignore job loss and wage loss in the OC.
Please ignore the restriction of credit to income multiples and down payments.
Please ignore foreclosures and ARM resets and home price declines in the face of wage and job losses.
Please understand that the OC is different than San Deigo.
I am actually going to start exporting OC sunshine and ocean water to San Diego. We should share our vast natural resources with them.
It’s borderline lame, I know. Honestly, although I live in So. OC, San Diego is closer to me than Fullerton.
It is LATE - This is time change day - Spring Forward all !!
Have a bloody great day!
pat v — you still dont get it? you dont see
whats happening? you are gonna try and
convince your “customers” that the bottom
is here and the market is turning around
with your silly charts and graphs… I’ll
make a prediction one year from today
even gary watts will have to admit he
was wrong you you’ll just disappear
from this blog never to be heard from again
Dear Troll,
How is this day different than any other day?
On this day I have posted more than you by a few. On everyother day
I might post a few and you will post 15 times under five names. That is the difference. But I do admire your technique of taking every possible means to insult and confuse and using it. You really must have read up on Naziz propaganda. You do your “thing” and you do it well. You are very effective. That is rare in our society.
Clearly however you are not very effective at earning money in real estate. If this were the case you would not be spending hours and hours a day blogging. A blogging troll gets no commissions. Maybe you have an iphone?
Anyone want to place bets on how soon the median will fall in to the $400K range and when prices will return to 2003 levels?
The $4- in the front of the median is imminent.
I’d say 2003 prices sometime in 2009.
Dear Mr. Veling,
Please accept my apology. My quip comparing you to Moses come down from the Mount was not meant as sarcasm only as a verbal poke in the eye to those that appearently loathe your very exisitance. Please do continue to post, I found your information very useful. Be assured that there are those of us that post in this continual Dog Fight of Ideas that have your wing and will draw fire from the enemy so that you may lay down a barage of commonsense and useful information.
Your Brother in Arms
Arthur Jensen
I don’t know about the OC population doubling by 2020 as suggested (just seems so farfetched) but it is probably generally accurate to say that population trends favor the OC housing market, in general, over the next 10-15 years. The rust belt by comparison can’t hope for the same dynamic.
How long this credit contraction will last, who knows? Until it moderates, the housing market will have serious, added headwinds.
It’s not far fetched. It’s impossible!
There will never be free money loans again so the prices of RE will drop and never return to their current levels. By free money I mean here is a million dollar loan for 1350 a month, and you want to use it to buy 600sqft, sure go ahead that’s not a problem. It’s only the beginning and anyone who tells you differently is a darn fool.
It’s so funny when people make claims about all the loan programs that no longer exist, but are still widely available (and cheap) today. That always makes me laugh. They are either grossly misinformed, or are pushing an agenda.
“Arthur Jensen Says:
March 9th, 2008 at 7:25 am
Dear Mr. Veling,
Please accept my apology. My quip comparing you to Moses come down from the Mount was not meant as sarcasm only as a verbal poke in the eye to those that appearently loathe your very exisitance. Please do continue to post, I found your information very useful. Be assured that there are those of us that post in this continual Dog Fight of Ideas that have your wing and will draw fire from the enemy so that you may lay down a barage of commonsense and useful information.
Your Brother in Arms
Arthur Jensen”
Perhaps twin brother, identical twin, clone, alter ego?
Speculation, the stuff of the internet!
But we now do know the Arthur Jensen character of the TROLL supports Pat Veling.
We know that Pat by his own words not only lurks but reads the blog multiple times dailey.
But according to him he usually just reads the headlines stories not the comments.
Well if I was to speculate and of course I wont but if I was he is essentially admitting he follows the blog very closely. Now I am just speuclating he does not want to come out and say this because he said he was just lurking. Now this is just speuclation and you might say I should not speculate but rather I should take everyword, I mean the last statement of the witness as being the best account. well you can speculate why I speculate whether the witness is being entirely accurate. You could also speculate that I am in the legal proffession, but from my writing style and what I have said before you could speculate I am not. You could speculate that I am a private internet investigator who looks for Trolls in OC housing blogs. Could be.
Or I could be Rants wife. Probably not. You following me Troll.
But if you get me really angry I will prove my Troll hypothesis with data that might hold up in a court of law. (civil suite)
Finally for those of you who watch numbers (no I am not a Cal Tech consultant) I can apply cluster theory to reveal the identiy of the Troll.
I will be glad to do so for a fee.
And no I am Dick Cheney’s younger brother. Really.
Checking to see if I have been flagged
“Arthur Jensen Says:
March 9th, 2008 at 7:25 am
Dear Mr. Veling,
Please accept my apology. My quip comparing you to Moses come down from the Mount was not meant as sarcasm only as a verbal poke in the eye to those that appearently loathe your very exisitance. Please do continue to post, I found your information very useful. Be assured that there are those of us that post in this continual Dog Fight of Ideas that have your wing and will draw fire from the enemy so that you may lay down a barage of commonsense and useful information.
Your Brother in Arms
Arthur Jensen”
Perhaps twin brother, identical twin, clone, alter ego?
Speculation, the stuff of the internet!
But we now do know the Arthur Jensen character of the TROLL supports Pat Veling.
We know that Pat by his own words not only lurks but reads the blog multiple times dailey.
But according to him he usually just reads the headlines stories not the comments.
Well if I was to speculate and of course I wont but if I was he is essentially admitting he follows the blog very closely. Now I am just speuclating he does not want to come out and say this because he said he was just lurking. Now this is just speuclation and you might say I should not speculate but rather I should take everyword, I mean the last statement of the witness as being the best account. well you can speculate why I speculate whether the witness is being entirely accurate. You could also speculate that I am in the legal proffession, but from my writing style and what I have said before you could speculate I am not. You could speculate that I am a private internet investigator who looks for Trolls in OC housing blogs. Could be.
Or I could be Rants wife. Probably not. You following me Troll.
But if you get me really angry I will prove my Troll hypothesis with data that might hold up in a court of law. (civil suite)
Finally for those of you who watch numbers (no I am not a Cal Tech consultant) I can apply cluster theory to reveal the identiy of the Troll.
I will be glad to do so for a fee.
Well if I was to speculate and of course I wont but if I was he is essentially admitting he follows the blog very closely. Now I am just speuclating he does not want to come out and say this because he said he was just lurking. Now this is just speuclation and you might say I should not speculate but rather I should take everyword, I mean the last statement of the witness as being the best account. well you can speculate why I speculate whether the witness is being entirely accurate. You could also speculate that I am in the legal proffession, but from my writing style and what I have said before you could speculate I am not. You could speculate that I am a private internet investigator who looks for Trolls in OC housing blogs. Could be.
But if you get me really angry I will prove my Troll hypothesis with data that might hold up in a court of law. (civil suite)
Finally for those of you who watch numbers (no I am not a Cal Tech consultant) I can apply cluster theory to reveal the identiy of the Troll.
I will be glad to do so for a fee.
And no I am Mick MCheney’s younger brother. Really.
Rants
Ok sorry for that testing but I had to figure out what the filter was flagging for moderation. It appears that the it looks for “****s” wife.
I guess you are not suppose to insult peoples wives. Not sure about husbands. Ok so I took the time to investigate the filter. Now if Lanser would take the time to investigate the Troll and OC residents balance sheets we all would be better off.
Ok sorry for that testing but I had to figure out what the filter was flagging for moderation. It appears that the it looks for .
I guess you are not suppose to insult peoples wives. Not sure about husbands. Ok so I took the time to investigate the filter. Now if Lanser would take the time to investigate the Troll and OC residents balance sheets we all would be better off.
husband
Ok that confirms what we have known for a long time.
Men think that w i f e is a dirty word
Hey Mav
(Concerning your post 7:04 - also listened to that Jimmy Cliff song on You Tube),
If the median OC price today is $515K , I’m not sure it will plunge fully to $400K. Maybe closer to $425. My prediction for the downturn bottom so far has been between Nov. 2010 and Jan. 2011. I may modify this prediction as more data comes in.
As I mentioned in my posting above at 9:58 (3/8/08). I believe the phenomenon I’ve termed the “Price Gulf” will be a significant factor at prolonging our local RE downturn.
In every buy-sell transaction the sell and buyers have three (3) prices in mind: 1) The price they would happily like to get / pay for; 2) the middle price they think is fair; and, 3) the price they will reluctantly take / pay for.
I define the “Price Gulf” as the monitary difference between the lowest price a seller would reluctantly accept and highest price a buyer would reluctantly pay for, or more importantly qualify for via lenders. I think the “Price Gulf” is at historic highs.
Sellers only lower prices upon experiencing extended periods of personal financial PAIN, and more PAIN. Meanwhile, the buyers uppermost ability to purchase properties will be limited by the new restrictive realities of RESPONSIBLE future lending standards (wonder of wonders) which will require 20%-25% downpayments.
I am seeing a huge no-man’s-land between the Seller’s bottom line and Buyer’s upper reaches (IE - the Price Gulf). As a result, the “Price Gulf” will prolong the downturn. Either the lenders will have to relax their standards (not likely), or the sellers will have to lower prices (ouch). I don’t suppose that the good economics professors factor this mental phenomenon into their computer models when they predict their trend durations.
Also, prices will continue to drop until the first time buyers (the plankton in the food chain) can re-enter the arena of OC home ownership based on long term responsible lending standards.
This means that a 3 brm. fixer upper homes will need to be available in the (less than median) $250K - $325K range.
When prices acheive this, the downturn bottom will be had. If first time buyers can’t financially re-enter the OC home owner’s club (because prices are too high), who will purchase the existing homes when those owners die ?
THE “expert” on real estate in the U.S. is Professor Robert Schiller, at Yale, (the Case-Schiller Index) who correctly forecast the real estate crash in 2001 (and the tech stock crash in 1999). He says real estate will continue to decline, sharply, for the next several years, especially in California. Tracey is a cheer leader, not an economist. BTW, most people who can live wherever they want, consider Southern California to be a cultural backwater.
When I sold my house in 2005 I could have gotten 620 in a month.
At the time that was the price for a median priced home. The price of a median priced home has tracked the price of houses similar to mine very well. Now houses like mine are priced at about median which is about 515. But if I tried to move my house for 515 it would be very unlikely to sell. To get to sell in a month my guess is 450. So apples to apples I would say the median price house which was 620 in august 2005 is now 450 inspite of what the median is. This is again because it does not take into account time to sell. And the momentum is now clearly against housing. We are past talking recession and quickly talking depression. So very quickly my similar house is going to be going for on quick sale 400. From 620 to 400 a 33% dive. And my house was not that different from most of the houses for the middle class. Look most people are not Nicholos Cage. They may have a job as a manager or starting professional and they may live in a 620 house or 1 million house but these people are not rich. So there houses are all gonna act in a similar fashion cause it is a similar kind of person buying. QED.
Peter says: “Tracey is a cheer leader, not an economist. BTW, most people who can live wherever they want, consider Southern California to be a cultural backwater.”
Dear Tracey,
Could you state what scenarios contributed to your ETA of the bottom?
Were the strong possibility of a recession and coupled with high inflation were factored in? Was strong average wage growth (or lack thereof) considered? Population growth (currently feeble) alone will not support current RE prices.
Expending so much effort trying to discredit the place you all want to buy in isn’t very convincing. This area is widely recognized as one of the best places to live in the US, and it’s only going to get bigger and better, but then you knew that.
Thoughtful: “It’s so funny when people make claims about all the loan programs that no longer exist, but are still widely available (and cheap) today”
I agree - I see alot of speculation on the current lending climate. Anyone with real data?
Try this one out and show us how it would work out - the best options need only respond:
Let’s take a proverbial new hire at my firm. Has $100K in the bank - TOTAL (so don’t look stupid and attempt to have them use all of their $$ for a down), have two young kids, married, household income is $140K a year, and they have $1500 a month in non-housing debt (cars, credit cards, educational/sport programs for the kids). They make sure they pay on time and have 720 mid credit scores. They’re a youthful 35 or 36 years old. They are first time buyers. Their risk threshold is defined by the fact they want to raise their family in that home and when they purchase, they want to guarantee themselves that they will always be able to make the payments as long as both are working. That means there must be contingencies in place if you offer an ARM to this family - contingencies that involve a plan if rates rise significantly over the next 5 years and so forth. By the way, like all families they would prefer to be able to take a vacation every year. They expect the usual 3%-5% raise every year (we actually average 6.8% at my firm, but let’s be real here, we all know that’s not the norm).
I am curious as to how the bloggers here would put these folks into a home. How much home and what kind of loan? What do you think they could realistically pay a month?
I’ll even throw in a bit of relief - they have no intention of enlarging the family any further, but they are dedicated to contributing a minimum of 5% gross to retirement.
I know I am not alone in anticipation of the responses.
Hi Thoughtful (hope you’re doing well on this nice Sunday)
Reply to you’re post: I don’t necessarily wish to purchase any OC properties in the future. I’ve kind of had it up to here with the daily freeway gridlock, overly expensive homes, and the rat race aspects of OC / LA. I’d like to depart for greener pastures.
Just about everywhere in Europe blows this place away. I would be living there right now except for the imigration laws which won’t let me stay without first getting a job (yuck), or finding a wife, or going back to college, or starting a business with a large (1/2 million $$) initial investment. Visits only.
Also, in my unsolicited opinion, Midwesterners are a lot nicer than SoCal people, but I don’t feel like purchasing a snow blower just yet. OC isn’t all it’s cracked up to be. Much of it’s reputation was gained in the 50’s and 60’s and is a bit of a myth now.
Not Buying It,
My guess. This family can qualify to purchase a fixer upper home in Santa Ana for $350K with 25% down. How bad is this guess ?
NBI:
I would have them call The Erskine Group out of San Diego. The are lending on my current hotel-condominium project and have 80/20 full docs with a pledge of stock assets instead of a down payment. The reason I use this example is they do not sell to wall st “lumpers,” those traders that package all loans together. That is why this mess is here to begin with…they did not distinguish on wall st as to what they were buying.
Let’s not blame the lenders and realtors folks: if there was not a market for the loans, they would not have been purchased. The home sales process is completely controlled by the marketability of the loans. That is why we have this stalemate. That is why it is the final contingency removed prior to sale. And smart sellers know this. They are waiting for the credit market to return to normal before agreeing to take a hit on their sales price. You don’t sell ice cream on the corner in Green Bay in January.
This family should qualify for about 3x’s their annual income at that level. Just depends upon what they want to do. Nice condo a definite possibility. Entry level home in ok area is possible, but the schools could be in question.
Before you “go long” on real estate in Souhern California, remember Warren Buffett, who is the dean of “long investors” sold his house in California just before the housing bubble burst, because, as he said at the time, real estate in Southern California was irrationally overpriced. If and when Warren Buffett buys another house in Southern California you will know real estate in Southern California has hit bottom.
The increase in population in Souhern California was, primarily, caused BY the housing buble i.e. illegal immigrants who came to work in construction. Even if the rate of population growth that existed during the bubble was to resume anytime soon, there is more than enough vacant housing to accomodate it, with plenty left over.
A barrel of oil is a barrel of oil.
An ounce of gold is an ounce of gold.
A dollar is just a promise by a bunch of lying politicians.
The liars that run the USA are going to try and print their way out of this mess. Inflation will become hyper-inflation at some point. You cannot trust the government to help you. Think for yourself or suffer the same fate as the other paycheck lemmings that surround you. The cliff is coming up fast. See past and through the illusion of democracy we now live in. Follow the white rabbit.
“Let’s not blame the lenders”…..The FBI is investigating LENDERS, not borrowers. That is because the FBI considers the lenders as the perpetrators of this crime, and the borrowers as VICTIMS. Soon LENDERS will be going to prison, based on investigation by the FBI and statements from borrowers.
thoughtful queen of the strawman excuses– yes orange county
is a nice place that doesnt justify the prices for its real estate
period
First of all, the ONLY thing that the bears have had to latch onto with poor Tracey’s interview was that she seriously misstated a population growth in O.C..
SCAG, ( So Cal Assoc. of Govt’s.) the people who helped put together the census’ have come up with these numbers”1950 O.C. population = 216k, 1960 = 704k, 1970 = 1,420k, 1980 = 1,933k, 1990 = 2,411k, 2000 = 2,846k, projection for 2025 = 3,416k.
So, yes Tracey made a significant boo-boo, statistically. Her concept, however, was valid. While many areas of the US are declining in population, O.C. is, and will continue to grow. And yes, where will those people live? Not all in apartments, or in rentals.
Second, the majority of Bear bloggers here are predicting 2 primary things. One, that prices will come down significantly further, and two, that the bottom of prices in O.C. won’t come for AT LEAST a year.
I, personally, have been steadfastly suggesting for about a month now, that the bottom is here - right now. The number of escrows is up - dramatically, and the inventory, which is USUALLY jumping by leaps & bounds at this time of the year, is staying essentially the same.
Here is a blurb from Steven Thomas, of Remax, dated 3/6, which Jon will undoubtedly refer to, in a day or two. ( I’m on Steven’s mailing list, just like Jon.)
“Multiple offers in the lower price ranges? Yes, it is true. Our reports from the streets substantiate the latest development: the lower ranges, especially distressed properties, are receiving multiple offers. It is difficult to gauge the current real estate market by reading the papers or listening to newscasts. The absolute best way to assess what’s going on in is to poll the Realtors® out in the field, writing offers, guiding buyers from home to home, and representing sellers in the marketing and selling of their homes. The reports are in: the lower ranges, below $500,000, are seeing plenty of activity, with multiple offers and buyers losing out on their first choices.
The lower ranges were hit the hardest through the subprime shakeup and they slowed first. Logically, it seems appropriate that this range, the entry level, would be the first to heat up. The below $500,000 range accounts for 45% of the current active inventory and 50% of the most recent demand. One year ago, it accounted for 26% of the active inventory and 28% of demand.
First time buyers are stepping into the fray with their first real opportunity to purchase in years. Bank owned foreclosures are in vogue and are seeing the most activity. Foreclosures only account for 7% of the total active inventory, but 23% of demand. There currently is only a 2.37 month supply of foreclosures, an extremely valid explanation for all of the multiple offers.
When the expected market time is below the 5 month mark, it is a seller’s market. Everybody is looking for a deal, but it seems that the banks are in the driver’s seat. With the new FHA and conventional loan limits coming, the upper ranges will witness a similar boost in demand shortly.
Demand, the number of homes placed into escrow within the prior month, increased modestly by 73 homes in the past two weeks from 1,820 to 1,893 escrows. Demand is at levels not seen since June of last year. And, according to our Realtors® out in the field, what is NOT reflected in the data is that when a buyer and a seller come to an agreement on a short sale, where the seller’s combined loans against the property exceed the purchase price, most homes are not changed in the Multiple Listing Service (MLS) to reflect the agreement. Instead, they remain on the market as active listings until formal lender approval of the short sale.
You see, the buyer and seller may agree on a price, but the seller is really bargaining on behalf of the bank since the bank has to take less than what is owed. They are “subject to lender approval” according to the terms of the contract. So, the standard practice of care out in the field is to keep these homes on the market until lender approval occurs. Also, we are not talking a couple of days for the lenders to respond either. On average, they are taking anywhere from 21 to 90 days to respond. Needless to say, demand is currently understated. This should wash out over the next month as more and more lender approvals hit the market. There are over 4,000 short sales currently on the market, 26% of the current active inventory. Short sales only account for 17% of demand (remember, it is currently understated).
That isn’t the entire report, but should suffice for purposes of THIS thread. Conclusion, just as I have been observing for weeks now, there ARE some good buys out there - the lender repos and the corporate relos, and that ASTUTE buyers should be poring over them to find some excellent buys - UNDER the current market.
When those good buys are picked over, and they are not being replaced nearly as fast as they’re being snapped up, buyers will only have “normal”, non-distressed sellers to deal with, at somewhat higher, and firmer prices - in about 2-4 months.
The bottom is here, now, in South O.C.. I’ll be back in 4 months to say “I told you so!” As for now, I’m off to see some properties.
Scott E,
Aren’t you late for your appointment at some street corner somewhere - preaching to the ignorant masses in need of your unmatched wisdom ?
Sighburrdood,
I was recently at a big foreclosure home auction. I witnessed the exact same thing you are referencing. Each and every home that was sold that day had multiple offers. And amazingly, each offer was higher than the previous offer. You are so right. Those real estate agents really know what they are talking about.
Jeff from Seal Beach:
Look at the monkey, look at the monkey…
Between now and the end of May economic data will come out that will force you to reconsider your predictions of what the “bottom” will look like. You are all focussed on the monkey the government is waving in front of you to distract you from the real problem which is the Internation debt markets, not the stock market or the real eastate market. Remember, you heard it here first.
Peter had this to say: “Before you “go long” on real estate in Souhern California, remember Warren Buffett, who is the dean of “long investors” sold his house in California just before the housing bubble burst, because, as he said at the time, real estate in Southern California was irrationally overpriced.”
UH, WB, the world’s richest man, did NOT make his money on real estate. He ACTUALLY sold his Laguna Beach house WAY too soon. The two guys who bought it from him “flipped” it, in less than a year, for twice as much as they paid, without improving it a bit.
They were locals, and KNEW that WB was “off his proverbial rocker” to sell when he did, for the price he did. Did WB make a profit? Yes he did. Did he sell like someone I should pay attention to, for real estate advice? Not me, thank you. ( actually, he should have held onto it forever, to leave a more valuable asset to his heirs.)
Re: VoiceofReason@ March 8th, 2008 at 8:14 am
I resent your implication about WoW geeks, sir! Many of them are fine students of the laws of supply and demand — who else is going to buy their fine enchanted items in the Auction House?
As to the rest of your comment — yeah, no kidding.
Scott E,
It’s not that I disagree with the points you are trying to make. Your’e just not communicating it in …….. lets just say …. an optimal manner.
For instance … what should an intelligent person think when you say - “follow the white rabbit ” ????? Get my point.
Pat -
I was only joking when I said you were an idiot. If you read the thread in context, you stepped into it. Don’t be so sensitive.
I am certain you are smarter than most of the people on this blog, and probably smarter than most in the real estate business.
I still don’t like your charts, but if some people get something of value out of them, more power to you.
If you can make money out of producing and marketing them, I salute you.
As for the value of your opinion, it has about as much value as the opinions of the other bloggers here.
I don’t see you as an expert, yet you hold yourself up as one.
I would like to know why.
Scott E wrote: “Look at the monkey, look at the monkey…
Between now and the end of May economic data will come out that will force you to reconsider your predictions of what the “bottom” will look like. You are all focussed on the monkey the government is waving in front of you to distract you from the real problem which is the Internation debt markets, not the stock market or the real eastate market. Remember, you heard it here first.”
In Jan. 2007 (not 2008), Lou Barnes wrote the following in his newsletter:
“The housing reality: neither a blowing bubble nor a bottom. Housing and its effects on the whole economy are going to take years to resolve. A jump in long-term rates is a shove from behind that will certainly worsen conditions in the bubble zones, and will also begin to close the escape hatch for ARM-reset procrastinators.
The big shoe whistling down: mortgage credit quality is deteriorating rapidly. The Wizards think that rising loan defaults will be limited to 2006 originations, and they are mistaken about that, too: older paper will soon begin to tank. As it does, credit standards for new loans will begin their inevitable tightening, and diminish the supply of buyers. Nobody knows how that spiral will play out; it’s just beginning.”
I don’t agree with everything Barnes says, but what he and Scott E are saying is that real estate and stock market performance are only secondary indicators of a larger issue that looms not just over the U.S., but also the international economy. Now that’s real gloom and doom, not this penny ante debate about buying a condo in Irvine vs. Garden Grove.
Barnes is a lot smarter than I am, but I hope he is wrong. Let’s see what happens in the next few months. It’s hard for me to see the radical policy decisions being made that Barnes is calling for.
Jeff,
I think most of how bad this gets revolves around the tipping point for the banks. We have not seen a liquidation of bank owned properties and we have seen very limited movement on short sales.
As your post points out the price gulf is huge.
I believe there is currently a support level at 30% off peak. There are people in the market with 20% downpayments and incomes that will support 30% off peak prices.
The real problem will occur when that support level dries up and lending is still tight or potentially tighter. The next support level won’t be pretty.
This could easily coincide with the liquidation of bank owned properties as banks continue to experience liquidity issues. Banks are certainly going to fail in the process, you can count on this. It will mostly be the small banks, but it would not shock me for at least one of the big banks like WaMu to fail.
The bulls are mostly clueless to how deep the problems lie in the financial markets; this is much bigger than OC Real Estate.
can an expert verify for me how dry (non existent) the HELOC market is right now?
“I, personally, have been steadfastly suggesting for about a month now, that the bottom is here - right now.”
I’ll take all the action you’d like to bet (even money) up to $20K that you’re wrong.
How much money do you want to gamble?
Hey No Vaseline,
Not that majority rules when it comes to economic predictions, but at this very moment Lansner is conducting a market survey reflecting the issue of whether the OC real estate market bottom has occurred or not.
At 6:39 pm, 105 readers had placed their votes and only “1″ reader thought the bottom was “here” already. You might wish to reconsider the boldness of your $20K betting offer. The 2008 loan reset season is upon us which might make the odds of you winning problematic. However, if you still feel firm about your convictions, maybe consider investing your expendable $20K in a bottom-priced repo-property when you awake tommorrow.
Interesting scenario, not buying it. It has a definite undertone of entitlement though. Let me get this staight: your couple makes a combined $140,000, and have already had two children. They now want to purchase a single family home (no townhomes please) in one of the most desirable locations on earth. They want to do it, comfortably, on HALF their current income and with only, what, $75,000 down. They still want to save for retirement, raise children, take vacations, etc. with what’s left over. Hmmm. Pardon me for saying so, but this makes me want to puke. I am not responsible for providing for the wife and rugrats of this couple. They have exersized extremely poor judgement. The decision to have kids before you are financially secure is a choice that comes with consequences.
I’m awake now. You wrote that the bottom is here. I quoted it. If you feel the bottom is here - now - I say get your wallet out. I know it’s going lower.
I know the bottom is not here and want to wager with you it is going to go lower.
I can have the $20K in cash for us to escrow by 10am tomorrow. Or, we could bet a smaller ammount you might be able to afford, say, a value meal at McDonalds.
Lets do this. Put your money where your mouth is.
I believe it sounds like we all should run out and buy now — before the massive ARM and OptionARM resets hit.
Greed is good — for those who might profit from convincing others that the shortsales out there now are as good as it’ll get.
The shortsales will be the new standard, the future prices by which sellers and appraisers will have to adjust to.
It took a long time for the public to see the downturn and it’ll take longer for the fear to dissipate; even longer for an upturn in prices.
It’s back to basics — and basics is all about affordability.
Wait - I think I missed something. You also wrote -
“If the median OC price today is $515K , I’m not sure it will plunge fully to $400K. Maybe closer to $425. My prediction for the downturn bottom so far has been between Nov. 2010 and Jan. 2011. I may modify this prediction as more data comes in. ”
So now I’m offically confused. Do you think the bottom is here now or do you think it’s coming between 10/10 and 1/11?
Not buying it,
FIrst, what are they going to buy: House, or attached? It then depends on where they want to buy in OC…North, Central, or South OC. Then, I would steer them either to an agent who specializes in distressed properties OR I would advise them to scope out an auction…should a big REDC event coming up every 2-3 months or so with an increasing amount of inventory…they could get more house at lower prices than they would get buying “at market”. Say, a 4 bedroom at 2,500 sq. feet for $500,000 in Fountain Valley or Mission Viejo.
With that out of the way, they would need to put at LEAST 10% down. This would now get them a conforming or FHA rate on a 30-year fixed…then I would have them BUY DOWN the rate an additional 0.5% by paying a point or a buit more ON TOP of their closing costs. Why? Long term homeowner needs long term LOW rate because the monthly expense is lower, eventual loan payoff is reduced and buying the lower rate can be justified. On a $450,000 loan, that 0.5% is the monthly payment difference of $146.33…that means the point used to buydown the rate ($4,500) takes less than 3 years to regain in monthly savings…over 30 years, you paid $4,500 up front to SAVE $52,678.80 over the life of the loan! Not bad!
So, I’d go FHA, 30-year fixed with their rate at say, 6% total housing payment would be the following: P&I: $2,698, MI: 150, Taxes: $458, Insurance: 75. Total housing payment: $3,381. They still have roughly $40,000 in the bank after paying costs and buying down the rate 1 point and a monthly payment that represents 29% of their monthly debt. With the remainder of their debtload, their total DTI reaches 42%…they need to stop spending on credit but with the tax reduction benefits of two kids and yearly interest, MI, and prop. tax deductions of over $34,000, they will have PLENTY of money since the IRS and state aren’t taking so much of it, to reduce their credit AND save MORE than the 5% you stated while enjoying a yearly vacation paid strictly in CASH! With each years increase in pay, their lives will improve as they save more for the future and enjoy the present. While others’ rents go up, up, up, as they always will and their cash gets burned up in the “landlorosphere”, their fixed payments are actually BUYING something! Even if home prices go down a bit further in the short term, who cares? They are there for the long-term to raise their kids. By the time they are 65, they will have a paid off house which they can choose to use to supplement their generous retirement through a reverse mortgage OR they can sell and move off to their downsized retirement home…or they can choose to rent out their place which with just nominal inflation of 2.5% per year for the next 30-years will net them a rental check of somewhere in the neighborhood of $5,500/month…the Rule of 72 has rents doubling at that rate in about 29 years and I’m being generous in attaching ONLY a $2,750/month rental payment in FV or MV for that sized house even now!
How’s that for you, “not buying it”? Do you think that couple should buy now? At least short sale/foreclosure properties?
Larry P.
By how many post you have tells me you have stirred up interest. I think when the conforming loan / jumbo loans start things will begin to improve as far as homes being sold. I’m just not so sure raising the limits was the thing to do. I feel these area are already over inflated and are we just adding to the problems. I agree by 2009 things will be looking much better. I am glad to see the changes in the lending industry and hope tht the Option ARM will be far and few between and we limit how we use them. I’m not for bailing those out unless it was due to job loss or illness. There are many people qualified to handle a mortgage just don’t have a downpayment. I like to see programs to match the amount people invest for downpayments and lets get these foreclosed homes occupied. I saw a blog where vandels are stripping the homes of copper and what ever they can. So sad we need to occupy these homes and soon.
Not Buying it,
I tried to answer your question last night but apparently the mod didn’t allow my post…I came up with a 10% down 30-year fixed FHA loan on a $500,000 purchase of a distressed/foreclosure prop. approx. 4 bdrm and 2,500 sq. feet in FV or MV with a total monthly payment (everything included) of $3,381/mo. or 29% DTI…42% DTI with so much debt included but easily handled…we’ll see if this one goes through…it should considering all the garbage allowed on here by so many above in this thread!
Hey No Vaseline,
Did you have a stroke ovenight ? I see above that YOU wrote (3/9/08 4:57) -
I, personally, have been steadfastly suggesting for about a month now, that the bottom is here - right now.” I’ll take all the action you’d like to bet (even money) up to $20K that you’re wrong. How much money do you want to gamble?
Those are YOUR words, not mine. In my reply a 5:49 pm, I merely took issue with it. I understand your confusion. An odd reply at 9:07 on 3/10/08. Are you OK ?
Jeff,
You missed vaselines quotes. He was quoting someone else look again. Easy mistake to make.
Jeff and No Vas,
No Vas was quoting Sighburrdood in the original post, and challenging him to a bet. No Vas is saying that the bottom has not yet occurred.
Its not that I don’t trust my favoritest bullUncle dood, but I’m not going to try and buy now (he said that he’d tell his kids to buy now since its the bottom). I’m going to see where things are in 4-6 months like he says and hopefully I’m right and he’s wrong.
But as far as pop growth goes, I would strongly consider taking my chances in another part of the country if things start going up again soon, as many bulls are predicting. And OC would lose another educated young professional.
Thanks to all that responded (just a few). Very interesting to see that all decided this family should stick to 3X annual income.
Meanwhile, they can potentially obligate themselves to the tune of $729K under new limits and standards - yes? No?
I would like to see comments from everyone - those that think their $100K would be better served in the bank or investments and those that think they shoudl buy in the OC. When I get into these finance discussions - which is root cause of many current problems - it ends up being more one-sided. I would like to see comments from everyone.
No emotion, no name calling, etc. I have even been guilty of that myself. No longer. That gets us nowhere in these discussions.
Frankly, I request that we drop this whole troll BS, and get back to basics of informed debates.
If you have something informative to say about current lending standards, characterizing risk threshold, loan products, and the direction of rates in the next year, two, five years, please chime in.
Of if you would like to share your opinion in how this proverbial family should proceed - others would like to see your responses.
Should these people be concerned about using an ARM to be able to buy more home? How would you lay out the priorities in the decision making process for this family? Is being in a home more important than the risk of losing it? How much risk is OK? Is there even risk if they leverage themselves to 5X income using an “affordability product?”
If now is the time to buy - then what should this family do. You can’t state now is the time to buy and not have an opinion.
Again, leave name calling, and the like out of this discussion please.
I formally request that Thoughtful and Sighburdood reply - I value your opinions and care to see how you would advise this family.
10 years from now just living on your OWN in a 1 bed apt will be considered a luxury here in OC.
In fact, I think it already is in most cities.
No Vaseline,
Concerning my 8:25 am post …… Sorry …. my bad. I should have: A) read all the previous posts; and B) known from your past blog writings that you would never in a million years have taken the position I mistakenly thought you took. I’m on your side. Just a mistaken incident of friendly fire.
So, 3 hours into it and not one additional response.
So let me get this straight. Everyone has an opinion as to when is the time to buy but when faced with the real question as to why or why not as it pertains to a perfect example, nobody feels like putting their reasoning skills to the test other than a few people that are currently bearish on OC RE.
Am I not asking the question(s) correctly? Is this a forbidden method of evaluating opinions concerning the market climate?
Everyone has an opinion but when it comes to applying it to a typical use case, we’re all quiet.
Hmmmmm…… I wonder that means.
Sighburdood and Thoughtful probably haven’t read this yet. I always will give the benefit of the doubt before drawing any conclusions. Come on guys and gals - please share your point of view.
Thanks in advance.
Not buying it:
I think everyone is on the other board now.
I will give you my take.
1)The 100K would be better invested outside RE in OC/LA for 2 years.
2)The 100K would be better invested in COMMODITIES / Gold & Silver
3) Rates are going up
4) Prices are going down
5) I will aquire again December 2009 / no sooner
6) Prices may be FLAT till 2011 / 12
I will move next door to you & mom in law in Laguna Nigul or Aliso Viejo
KEN Z :…..4-How does she explain the total lack of any sort of balance between the incomes and the prices of the homes based on the historical norms even in a place such as OC ?…
This says it all. INCOME VS. HOUSING PRICES. This is the one point that all of these people predicting a full-on recovery starting as soon as whenever 2008 conveniently leave out. And this, IMO, is the most important piece of the puzzle!! They talk about interest rates, the Fed, bailouts, loans being sliced and diced and sold, the need to keep prices high, etc. They RARELY talk about the single most impartant factor: AFFORDABLITIY of real estate for the average wage earner.
The delcine will continue until roughly the average income can purchase the average-priced house WITHOUT taking out a crazy loan. And the graph will not be “V” shaped. I expect the the market to be flat for a while.
All-in-all, a major decline in prices will be better for the USA in the long run. What kind of society do we have if the average wage earner cannot afford the average house?? There needs to be pain right now and the idiots we elect should not support any kind of bail out.
The sooner the correction, the better.
BTW, I’m not a bitter renter, I paid off my home in Anaheim 1½ years ago. I was looking to upsize back in 2003/2004, but saw the craziness and decided to concentrate on paying off my mortgage. I’m unconcerned with my equity if it means my children can afford to buy housing.