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Hear why this guy saw home-price crash coming
October 7th, 2009, 2:00 am · 169 Comments · posted by Jon Lansner
Two and a half years ago, money manager Peter Schiff told this blog’s audience that Orange County home prices were about to be cut in half. (Don’t believe we published that? READ HERE) Yah, it created quite a stir around town.
Today, it looks like a pretty good call! (You should read these comments about Peter’s 2007 prediction HERE!)
So, we figured the frequent TV commentator from Euro Pacific Capital — who relocated from Orange County to Connecticut a few years back — would help us understand what went wrong for housing and what we might see next. Schiff, who is also running for the U.S. Senate, tells ocregister.com in a podcast interview assorted government bailouts will only string out the real estate pain — and the rest of the economy may not do much better.
- To hear our full interview, CLICK HERE!
Check out your blogger’s previous podcasts:
- Personal debt woes will linger
- Pain won’t end soon for big landlords
- Housing recovery may be short-lived!
- Credit unions think Calif. housing near bottom
- Why life remains tough for buyers and borrowers
- Rebound in 2010? Listen to why!
- No stabilization in foreclosures yet
- Why apartment rents will continue to stay low
- Self-storage yards do well in downturns
- Chapman U. thinks housing’s recovery will be modest
- Cities, not suburbia, best shot at full housing recovery!
- It will be a renters’ market for some time to come
169 Comments
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Guess not everyone got the word…in Orange County (like Larry below).
Featured in video segment “Castles For Sale” (firesale for biggest homes) on “Good Morning America” on October 7, 2009. (Seen approximately 45+ minutes after the start of the show - east coast feed). Same video segment then posted on abcnews.com as:
Supermansions for Half the Price (length - 2:04 minutes)
(Tough economy forces sellers to bring down the cost of their extravagant homes. 10/07/2009)
http://abcnews.go.com/video/playerIndex?id=8770153
lllooooll…. Ken and DonS, truthiness to tracker….. the time machine of this blog is always good for a laugh….
I couldn’t agree more with Peter more on housing. The ONLY reason why OC prices have not dropped further is all the govt meddling. It would have been much better for us to take our medicine, recalibrate our economy on a sustainable path, and let the TRUE free market work. Now all we’ve done is delay and extend the pain.
I greed with peter as well, I saw that 2 years ago.
I saw it because I went by the old school-rules= It was too good to be true
I have been following Peter commentary closely for the last 2 years. I believed him then, and I believe him now. His ability to turn this complex economy into a common sense perspective has completely rang true.
Go to youtube and type “Peter Schiff Mortgage Brokers.” There is a phenominal presentation he gave to the Mortgage industry in 2006. You can hear the crowd of 2500 brokers including the head ooo-ing and aaah-ing over his comments that were spot on. They took his words as entertainment as they gasped at his predictions. He was 100% correct on everything, in detail. He was thought of as an extemist back then, and even today.
By the way he is not some guy off the street. He is the president of a successful investment firm that is national and international. Yet he presented more detailed facts and figures to the mortgage brokers than they did (see the end of the video)
Peters next big prediction: High inflation or even hyperinflation, a very long recession and very possible depression, the collapse of the US dollr and gold to $5,000 an ounce.
The above sounds extreme, but so did his last predictions that all came true. Listen to why he predicts these things, and it sounds very possible and likely.
Yet the masses instead listen to all the same people that got it all wrong in the first place, from CNBC to the Govt and Ben Bernanke.
lets get rid of obama, his policies are making things worse
I agree Frank that Obama’s policies are making things worse, but who would be a better solution? Big business got smart and bought out both political parties a while ago.The minority party always casts itself as the opposition party, but they are just the same.
As much as I’d like to see it happen (for young buyers), I don’t thinking a 50% drop in prices in nice areas is ever going to happen here.
Shoot, my parents house was $800-$900K at the peak. I don’t ever see it dropping to $400-$450K range. Even in this market, It’ll get gobbled up well before that.
Well, we are already at 36% decline from 2006/2007 on per sq ft basis per DQ/Jeff Collins… And with many predicting another 10% decline next year, that takes you to 46%, so pretty close to a 50% decline in just a year if that happens. UE getting worse, incomes are declining due to less work and underemployment, rents are declining (and per recent OCR story, that pushes housing down more), high end housing in trouble (again, per OCR, will extend the duration of the housing decline and push down on prices more), rates will have to rise (Bennie will have no choice but to raise rates soon), and the credit situation will be the same or worse (1/3 of all applications are rejected as of today).
Many parts of southern CA are already discounted 50% or pretty close.
So “never say never”…. Fools who said “never” just 2-3 yrs ago have lost 100s of thousands of dollars, are in foreclosure or BK, or lost their kids’ college education. Those are pretty serious consequences for beliving in “never.”
His predictions may take into account everything as a whole but my comment was directed more towards nicer areas, namely nicer areas in Fountain Valley. The house I just bought was roughly 20% below peak and it had multiple offers on it.
Fountain Valley nice???
And houses are not twinkies that are gobbled up, especially at that price range - they take months to sell, and after price reductions. That is exactly the mentality that led many home debtors to financial ruin.
Which range? The $800K-$900K range? I can agree with you that it would take quite a while to sell.
But it would never reach the $400-$450K range. It would be “gobbled up” in minutes at a considerably higher price that that. Trust me on that, I’ve seen it with my own eyes.
Greg-you need to understand something. Nothing about this current real estate market is actually free from manipulation.
Interest rates: if the Government stopped buying treasuries and takeover a trillion dollars of bad debt from banks, rates would probably be closer to double than what they are today
inventory: if mark to market was still in place and lenders were not given printed money from the geovernment to fuel credit, the lenders would be forced to throw their inventory on the market as owners default - instead, there are millions of homeowners throughout america that have not paid a dime on their mortgage in over a year and they still have not been foreclosed.
lending standards and credit: the government itself noted that one major reason for the collapse of credit markets can be traced to the high percentage of low or zero down loans during the boom years. Yet - they are now using taxpayer money to insure loans where people only have to put down 3.5% on a homepurchase - talk about being a hypocrit!! And not learning form their mistakes.
Greg,
It will be 400K, it is only a matter of time.
LOL, I’m pretty sure you’re joking.
No he isn’t joking. Take some courses in economics. Don’t listen to your RE salesman.
That’s ok Greg. The “experts” didn’t think our economy was in trouble. Remember all those “the economy is strong and our fundamentals are sound” speeches from Bush? The point being is that anything is possible, given the right time and circumstances. If they find a hidden toxic waste dump next to your parents house, guess what, it’s worth zero. ;-)
What would expect the president to say? We’re in deep doodoo, run for the hills? He has to sugarcoat it and probably always will.
As for the waste dump, God I hope not. I’m going to inherit that house one day! Don’t jinx me!
the only reason it will never hit 50% is inflation. but if you adjust for inflation, then in 2010 we should be seeing right around a 50% decline. it might be 48%, it might be 49%, it might be 52%. but it will be exceedingly close to 50% when all is said and done, in my estimation.
actually I shouldn’t say the only reason. that ignores all the other government meddling, which is the reason we haven’t completely bottomed yet. $8,000 tax credit here, low interest rates there, foreclosure and bank bailouts over here.
“Greg in OC says:
October 7, 2009 at 7 amAs much as I’d like to see it happen (for young buyers), I don’t thinking a 50% drop in prices in nice areas is ever going to happen here.”
Greg so you are saying you don’t prices to drop for the 50+ year old housing speculators? lol
I’m not sure what you said, but I think you said that I don’t want to see prices drop for the 50+ year old speculators. If that’s correct, then yes, I can agree with that.
As a brand new owner, it was quite frustrating to see the investors swoop down and snatch it out from under me!
Greg?
You say:
“Even in this market, It’ll get gobbled up well before that.”
“Gobbled up?”
You sound a lot like Lansner. That is a strange phrase used by Jon here more than once.
It’s hard to deny how right Peter was.
I am reading Crashproof 2.0, Peter Schiff’s new book. He was so right in what he predicted in 2006-2007, that I forget that I am not reading an historical account of the crash, but a prediction before the fact. He has new warnings and insights throughout the new book! Hunker down!!
Orange County: it’s where we keep the stupid people!
By having credit shut-down, Unemployment (Unofficial 16%) and wages flat… Where in the world any family will qualify for a $400/500K’s homes??
The middle-class is fading out, and deep in debts (Because of the “Homeowners-Society years”)
And many here are “Still” hoping that prices will bouce back??
Today’s Gold jump to $1200 oz the world trading is rejecting the dollar.
Yet homes that we really want to live in are down 20%.
Down 20. Stay tuned…..more to come.
The more things change, the more they stay the same.
Closed yesterday:
65 Briar Ln, Irvine
5 bedrooms/2.5 bathrooms/2,900 sf
$775,000
It must suck to see your 12-hour blogging days (day after day, month after month, year after year) are for naught).
267 per sq ft for Irvine - I guess you are right - the same decline continues…, and that is even less per sq ft than the recent per sq ft DQ data, so that is consistent with per sq ft prices continuing to decline relative to the most recent DQ data.
Nope, that is the slum of Irvine aka West Irvine.
Numbers don’t lie.
All in the same neighborhood of the home listed above.
23 Winterfield Rd, Irvine - more info »
$688,000 0 bed 0 bath
”This property is a Pre-Foreclosure.
32 Boulder Creek Way, Irvine - more info »
$619,800 0 bed 0 bath
”This is an REO, meaning this property has been foreclosed on because the owner couldn’t meet their payments.
67 Copper Leaf, Irvine - more info »
$496,000 0 bed 0 bath
”This property is a Pre-Foreclosure.
37 Boulder Creek Way, Irvine - more info »
$675,000 0 bed 0 bath
”This property is a Pre-Foreclosure.
37 Arnold Way, Irvine - more info »
$650,000 0 bed 0 bath
”This property is a Pre-Foreclosure
43 Partisan Pl, Irvine - more info »
$693,000 0 bed 0 bath
”This property is a Pre-Foreclosure.
44 Copper Leaf, Irvine - more info »
$648,000 0 bed 0 bath
”This property is a Pre-Foreclosure.
Your being facious right? You of all people chidding anyone of spending too much time on this blog really takes the cake. Ha!
65 Briar Lane in Irvine sold to it’s previous owner on 3/14/2006 for $850,000. It then transferred via trustee sale to an investment group 5-29-2009 for $628,000. Looks like the investment group recently relisted and sold it for $775,000.
I don’t know why lenders are leaving that much money on the table, especially in a low inventory area like Orange County. Why aren’t they required to try to minimize their loss?
So here we are. Gold is at 1043. It hit a new high yesterday.
He got heat when gold went back to 700. Even I started to doubt him at the time. Silly me.
The 700 gold was a result of the panic. People just started to sell everything indiscriminately. The good thing about gold as opposed to a business is that gold (and other commdities) dont go out of business or bankrupt. They may depreciate, but you will never wake up one morning and find gold at 0 and gone forever. Gold has lasted thousands of years as far as maintaining intrinsic value.
Most of the prices in OC are artificialy kept high, and the question is….for how long they will be able so.
1043 is not 1200 jc. Does not mean it may not make it to that price level, but stating it asif gold is 1200 an oz is incorrect.
It happens in the early hours in the morning, and then went down, but even so…
One of this days you will find that the dollars in your account will be worth it .23 cents.
Peter is a genius, the lemmings will die….
The more things change, the more they stay the same.
Closed yesterday:
33891 Nauticus Isle, Huntington Beach
4 bedrooms/3 bathrooms/2,259 sf
$2,400,000
Wow - one sale, and it is generally accepted that higher end is in trouble.
Maybe you should check the address … it ain’t right, you dope. Please correct it so I can show the blog how many people around it are delinquent.
Sorry, Dana Point.
No one cares about your delinquencies. They are not new. They will be cured or work through the system and be snatched up at going prices….quickly and with multiple offers….just like the past two years.
LoL
We’ll see about that.
I think the people who are delinquent certainly care, as do many other people, like banks…
Ya, there going to be cured and pigs will fly out of my ass.
33891 Nauticus Isle is not located in Huntington Beach, it’s in the guarded entry Niguel Shores area of Dana Point. List price was $2,950,000. Has a pretty nice ocean view.
The more things change, the more they stay the same.
Closed yesterday:
23522 Campestre, Mission Viejo
3 Bedrooms/2 Bathrooms/1,853 sf
$585,000
Yet all these home-debtors are in the same neighborhood …. actually within a couple hundred feet. How is the guberment and the banks going to deal with this?
Via Guadix, Mission Viejo - more info »
$704,923 3 bed 2 bath
“This property is a Notice of Foreclosure Sale.
27412 Via Fineza, Mission Viejo - more info »
$500,000 3 bed 2 bath
“This property is a Pre-Foreclosure.
23311 Via Guadix, Mission Viejo - more info »
$572,000 3 bed 2 bath
“This property is a Pre-Foreclosure.
23405 Via Ronda, Mission Viejo - more info »
$488,000 3 bed 1.5 bath
“This property is a Pre-Foreclosure.
Via Calzada, Mission Viejo - more info »
$478,685 3 bed 2 bath
“This is a Notice of Trustee Sale property and will go through an Auction process.
Via Calzada, Mission Viejo - more info »
$502,792 3 bed 2 bath
“This is a Real Estate owned (REO) property.
Via Guadix, Mission Viejo - more info »
$572,000 3 bed 2 bath
“This property is a Notice of Default.
23752 Barquilla, Mission Viejo - more info »
$505,000 5 bed 2.5 bath
“This property is a Pre-Foreclosure.
Via Calzada, Mission Viejo - more info »
$640,238 3 bed 2 bath
“This property is an REO (Real Estate Owned).
23601 Via El Rocio, Mission Viejo - more info »
$566,000 3 bed 2 bath
“This property is a Pre-Foreclosure.
Yawn.
I always know that when Quacker comes out and yawns that things are going bad.
I’m sure Tracker will let us know the minute they sold. nevermind if these average $75-100k below their list, hey they’re SALES!! get these losers (renters) out of these homes already and let some real buyers take over at market prices.
Yawn. C’mon, everybody yawn.
Who wants to live in Mission Viejo? Yuk!
yawn
yawn
yawn
Tracker– what’s your point of posting these sales?
23522 Campestre sold to it’s previous owner 6/8/2007 for $739,000. If it just resold at $585,000 that means the previous owner only lost $154,000 (21%) in 2 years and 3 months. If you add in selling commissions and closing costs he was down another $41,000 or so. Total so far about $195,000. Don’t forget to add in any fix up costs he paid over the last couple of years.
Tracker doesn’t realize that she is not helping her cause…
Wow - 315 per sq ft. Doesn’t look good.
Been that way for 2 years.
And that’s a good thing because?
So I guess the median jump is artificial - thanks.
Been that way for 2 yrs despite massive govt support, low rates, tax credits….
Again - not good, and this shows the median jump doesn’t mean anything in the midst of continued declines. Any reasonable person would realize that. What happens when that artificial support goes away and there is increased UE?
And, I see you are responding to me again despite your proclamation that you never would, but that’s OK.
inflation
The more things change, the more they stay the same:
19501 Surfset Dr, Huntington Beach
3 Bedrooms/2.5 Bathrooms/2,430 sf
$950,000
This is the second highest price ever paid in this complex. The only higher sale (for $1,080,000) was in December, 2005.
This is supposed to be $540,000 by Schiff math, not $950,000.
All in the same neighborhood as the house listed above.
19358 Surftide Dr, Huntington Beach - more info »
$485,000 0 bed 0 bath
”This property is a Pre-Foreclosure.
19282 Surfwave Dr, Huntington Beach - more info »
$572,800 0 bed 0 bath
”This property is a Pre-Foreclosure.
19371 Ocean Heights Ln, Huntington Beach - more info »
$1,840,000 0 bed 0 bath
”This property is a Pre-Foreclosure.
19572 Grandview Cir, Huntington Beach - more info »
$680,000 3 bed 2.5 bath
”This property is a Pre-Foreclosure.
Elm Ridge Ln, Huntington Beach - more info »
$650,000 2 bed 2 bath
”This property is a Notice of Default.
6181 Fernwood Dr, Huntington Beach - more info »
$637,500 3 bed 2.5 bath
”This property is a Pre-Foreclosure.
Woodlands Ln, Huntington Beach - more info »
$1,806,025 4 bed 3 bath
”This is a Notice of Foreclosure Sale property and will go through an Auction process.
Pacific Coast Hwy, Huntington Beach - more info »
$464,801 1 bed 1 bath
”This is a Notice of Trustee Sale property and will go through an Auction process.
6431 Morningside Dr, Huntington Beach - more info »
$910,000 0 bed 0 bath
”This property is a Pre-Foreclosure.
great view of oil wells too I bet. especially nice with those regular onshore breezes.
SC2, the only thing thats in trouble is your plan.
Really? The places by us are priced at 2003-2004 purchase prices, and on the market for months. If that is “trouble” - I am really, really scared… LOL!!!!!
SC2, The number of times you post everyday has a direct correlation to your frustration level and u seem very FRUSTRATED.
That property on Nauticus fetched an outstanding price. At $2,400,000 it is the highest price ever paid on the street. The second highest (#33901) sold for a mere $1,600,000 in October, 2003. By Schiff math, yesterday’s home should have been a little over $800,000. It went for $2,400,000.
Ouch.
LOL
49 Beach View Ave, Dana Point - more info »
$13,950,000 4 bed 9 bath
“This is an REO, meaning this property has been foreclosed on because the owner couldn’t meet their payments.
Sidney Bay, Dana Point - more info »
$905,428 3 bed 2 bath
“This property is a Notice of Foreclosure Sale.
22 Breakers Isle, Dana Point - more info »
$8,395,000 4 bed 6 bath
“This is an REO, meaning this property has been foreclosed on because the owner couldn’t meet their payments.
23691 Sidney Bay, Dana Point - more info »
$780,000 3 bed 2 bath
“This property is up for Auction.
Ouch!
Funniest thing about those upper crust REOs is the broker pricing them. Only an idiot would drop that cash today for a trophy property. Wait a bit mr gazzillionaire, you will save well into seven figures.
Try living in the present for once, Lee. Sorry you are so unhappy with the reality of the market.
I do live in the present.
When you cherry pick real estate sales, I will quickly post the recent (present) delinquencies in the same neighborhood.
There is no escape … The OC literally has thousands upon thousands of homes that will be going back to the banks/gubermnt within the next 24 months.
Lee, you need to put down the cheetos and get out of you’re parents basement. Seriously!!!
it’s time to buy gold
Real Estate = Gold
I guess you can live in a gold house…
Both are long term hedges against inflation.
Liar Loan is somewhat correct, but why pay 2004 prices for a home when you can wait a few months and pay 2001 prices.
And shiny….
Neither is a hedge against inflation in reality….. just take a look at golds performance 1970-1980 vs. inflation…… and real estate is only a hedge against wage inflation…… not global commodity inflation.
in fact 1970 gold, priced today with inflation would be at over $2000 an ounce…. some hedge….
oh and I will also accept, real estate as a hedge against a credit bubble until it pops……. but a hedge against global commodity inflation, absent of wage inflation it most certainly isn’t….. global commodity inflation combined with wage deflation is an absolute disaster for real estate…. then throw in credit deflation as the kicker…
mav,
What are houses constructed out of… wages or commodiites?
how do you buy a house? with commodities or with everything you have left after you have to pay for your life…… plus available credit….. commodity inflation absent of wage inflation make home ownership more costly…..
Actually gold has surpassed the rate of inflation, as well as the rate of appreciation of other commodities since 1970, so it is due for a crash, but bubbles can last awhile.
I posted this for Bogey earlier:
“Wages Grow for Those With Jobs, New Figures Show”
http://www.nytimes.com/2009/09/16/business/economy/16leonhardt.html?_r=1&scp=1&sq=wage%20growth&st=cse
Gold was priced at $589.50 in 1980 and $270 in 2000, you are calling that a hedge?
If you don’t believe gold is in a bubble, check out the 20 Yr price chart. It strongly resembles the shape of the NASDAQ and housing price charts pre-crash.
http://www.goldprice.org/gold-price-history.html
Once Uncle Ben starts to raise rates watch out.
S&P500 p/e ratio is over 100 now, even greater than at the start of the Great Depression
http://www.ritholtz.com/blog/wp-content/uploads/2009/08/20090821.gif
Mav,
The S&P 500 didn’t exist during the Great Depression. It was created in 1957. Any other lies to spread today?
As for gold, you’re comparing a bubble price in 1980 to a post-crash price in 2000. Compare the 1970 price of $35 to the 2000 price of $270. There’s your inflation hedge.
the comparable in the great depression was the DOW which was what i was comparing…. that is no lie……. the p/e ratio of the S&P500 is higher now
an inflation hedge the requires impeccable timing, is no inflation hedge at all….
Liar Loan, are you ready for the upcoming crash alla 1930?… just curious…
Liar Loan is technically correct, but why pay 2004 prices for a home when you can wait a few months and pay 2001 prices.
WRONG!
Gold is a liquid asset, RE is now illiquid.
How’s that real estate hedge against inflation working for you nowLiar?
You need to study. You need to learn. The only inflation at this time has been commodiites. Assets are deflating, or haven’t you noticed?
RE is up 20% since January, stocks 45%, and bonds are up too. What assets are you referring too?
Should have grabbed it in the upper 800’s in the summer.
mulli, I sold at that price of 800 thinking it won’t go any higher…
now is too high to buy
For all the hoopla about Peter Schiff, his prediction has not come true. To quote him:
“Orange County will plunge into a severe recession, with real estate prices falling by 50 percent or more”
The recession part has come to pass (of course it does every 8 years), however we’ve only seen a 40% peak to trough decline, with the trough occurring about 9 months ago.
Don’t tell me that nobody could have predicted massive government intervention.
Who predicted such massive govt intervention?
Nobody that I know of. It’s the excuse of the month for uber-bears as to why their predictions haven’t come to pass.
We still have tens of thousands of Alt-A mortgages that have yet to recast. And we’ve also seen the number of delinquencies double in the last 100 days. We’re only about 30 months into this debacle … the last real estate decline last 68 months.
It was obvious, the government created this artificial inflation for the last 4 year, or so.
Now they want to keep those prices up.
The ‘intervention’ will have to be permanent to sustain the market at the current level. Are you saying that will be the case?
The government rarely relinquishes power that it has seized during a crisis. I wouldn’t be surprised if we eventually have a permanent $15k tax credit for buying a home.
Why stop there. Why not $150K tax credit! And remind me again why people who rent or who have paid off their home are happy to have their currency debased for the NAR/CAR commissions?
Eat that! says:
“Why stop there. Why not $150K tax credit!”
It may not be a $150K credit, but it will cost $150K per additional home sold (per NAHB): http://www.calculatedriskblog.com/2009/10/housing-tax-credit-nahb-projections-and.html
Shiff probably wanted to buy a home on the cheap in oc. reminds me of the bears telling us how terrible OC and CA are yet they desperately want to own a home here.
Read what you wrote Liar ……Schiller was correct except property is down “only” 40%?
You are a nut.
Two things:
1) It ain’t over.
2) Prices off 40% — takes bigger drops to sell and it is still dropping.
pdu-
Two things:
1) I didn’t say it was over. But his prediction of 50% OR MORE doesn’t look very likely.
2) Prices were off 40%. That was 9 months ago in January. Since then prices have rebounded 5-20% depending on the market. Unless you are one of the many bear millionaires that post here and only look at the 1 million+ market.
Obviously a lot of people are qualified to buy homes in the sub-$500K market otherwise there would not be multiple offers on the homes in this price range (especially the bank-owned homes). To even make an offer these days you have to be qualified. Don’t always believe what the bears say, almost all of them are renters desperate for prices to sink farther so they can afford a home on their insufficient salaries (or hourly pay haha).
Well, we are looking at low 1M, and nothing is moving buy us. I figure the holidays should give those sellers a nice gift - maybe they can reduce their price by six figures. Ouch. And already below 2004 purchas prices.
I will definitely agree that the upper-tier of the market has some dropping to do, the market activity proves it. But in the entry-level SFR market there is movement.
Aren’t we feeling all high and mighty despite the fact that the RE industry is living on government and Fed welfare? ? Yeah, bulls like you just love to pretend to be RE wealthy at the expense of taxpayers.
Hey Chris,
He’s a thought for you — those waiting for prices to drop so that they can buy……………what a novel concept. Isn’t that “the market”?
“Insufficient salaries” = no demand = lowering of prices = demand = market.
This isn’t difficult and it’s not a fantasy world.
prices going back up still fits the schiff model. if there is a little thing called ‘inflation’ then don’t you think the prices will rise??? with all the monetary and fiscal ’stimulus’ there IS going to be inflation.
Only if there is substantial and corresponding wage inflation. Otherwise, RE price inflation is not sustainable as everything else, including basic needs, will eat up more of one’s downpayment.
Agree with PoBT. What is the mechanism for wage inflation? It doesn’t “just happen.”
Housing is done!
Due to globalization and advances in technology, collective peak income was reached in the US in 2007. Six figure white collar jobs are being phased-out in droves because workers/businesses in places like India, Brazil and Asia can provide the same services at half the income expenditures.
It’s too bad it has to be this way but politicians in DC and their Corporate cronies have nurtured this predicament for decades. Along the way, people in the US have lived well above the rest of the World. However, that was not because of market driven fundamental growth but due to massive expansion of credit/debt loads.
Now that peak credit has been reached in the US, in due time, Global income inequity will reach a balance at the expense of US personal income. And, it has only just begun.
I assume you missed this article:
“Wages Grow for Those With Jobs, New Figures Show”
http://www.nytimes.com/2009/09/16/business/economy/16leonhardt.html?_r=1&scp=1&sq=wage%20growth&st=cse
I assume you missed this part from the article:
“according to two different government surveys”
Lol
And he missed the line that said:
“Hourly pay rose a bit, but the increase was canceled out by a shrinking workweek”
Will the RE market recover with a smaller pool of qualified, but albeit richer, buyers?
NO. Not unless the increased richness allows them to buy additional homes to make up for the smaller pool of buyers. The extra $5/Hr will NOT finance an additional home. Nor will an extra $10 or even $20/Hr.
DonS says:
April 7, 2007 at 7 pm
OC real estate is “solid gold”. It always has been and it always will be. The 20% drop in the early 90’s was a “perfect storm” of financial problems that will never happen again.
Thought they were going to interview IHB
You know all the data in the world will not adequately explain price descrepensies. Each property, as well as, buyer are unique within a uniqque time frame coupled ith unque circumstances. That is translated into the price paid for a home. Go get a freakin job. ,and get outside and enjoy what we have, get wih GOD you phreaks.
Hopefully Connecticut puts him in the Senate over the corrupt Dodd. We need more fiscally sound representation in Washington and enough of this “free money for all” crowd.
Cali has a new wave of foreclosures coming that will sink the hole state. Prices will continue to drop to lowest levels in a long time. Another 30% is predicted. The state is broke, high crime, illegales, no economy. You are toast. But the weather is nice, for sun cancer.
TeBone, how do you get up every morning?
shockg, what mechanism do you use to breath whilst your head is buried in the sand? Some kind of straw? Modified scuba gear?
Since you are so far underwater in your mortgage, does the water interfere with hiding your head in the sand?
Thanks for finally doing a piece on Peter Schiff.
http://www.huffingtonpost.com/2009/10/03/will-california-become-am_n_308838.html
Will California become America’s first failed state?
As California goes so does the rest of the nation.
1000 is not too high. It is the new low.
Buy now or be priced out forever!
But, please do not go ALL-IN like our bagholder friends did with RE.
Its not guaranteed money, thats why its called an ‘investment’.
if you want to really hedge yourself - buy gold & the dollar
Why was the CAR propaganda article of 3.3% increase next year on the OCR home page, but the Schiff article was not? Hmmmm, I guess CAR’s money is showing its influence. OCR has no choice but to do what the $ tells it to do, especially since it trying to stay out of BK…..
On behalf of rants……
rants says:
April 9, 2007 at 5 pm
back after a nice long weekend of golf at
pebble beach/ spyglass- compliments of citibank-
as for schiffs call- hes spot on- the day of
reckoning is close at hand- at this point in
time anyone who cant see the handwriting on the wall is oblivious to FACTS– the spoiled children
of orange county are about to get their cummupence- naughty naughty children- living
beyond their means on imaginary home “equity”-
by the way wheres ezbabbler been hiding these days- even that knucklehead can see whats comin-
aint that right babbler
Mav did just as good a job of forecasting as Peter did. “Rising interest rates will result in disaster…”
Where did he predict the international financial collapse? Where did Mav predict it?
You keep wanting to make this into a real estate valuation problem when it is the result of BANKS! COLLAPSING BANKS! And, no, I did not see it coming. But neither did you, or Peter of Mav. I never would have believed 10% unemployment. I still find it amazing that most of you never have recognized the problem and are still blowing your own horns when you were more wrong than we were. At least didn’t make the mistake of blaming a problem that never happened. How can you take credit for “it never happened”?
By the way, the money I raised in 2007 because of the obvious “irrational exuberance” has served me well and most of it is still in the bank awaiting an opportunity. Some of it I lost in the stock market. But nobody warned me!
DonS says:
“You keep wanting to make this into a real estate valuation problem when it is the result of BANKS! COLLAPSING BANKS!”
no, No, NO!! The collapsing banks was the RESULT, not the CAUSE. The banks collapsed because they stopped lending responsibly, allowing prices to become the biggest bubble in history.
Decreased lending standards => increased lending to people who can’t possibly pay their debts back => janitors buying $500K properties => drastically increased competition and access to housing => housing prices FAR outpacing wage growth => eventual mass foreclosures => FAILED PONZI SCHEME.
How could you NOT see this coming? Banks made bad loans and then leveraged those loans by up to 45x with derivatives. What part of people buying homes worth 9-11x their annual income (on average) did you think was sustainable or good for the economy? I don’t get how you could you say that isn’t a real estate valuation problem…
Mav did just as good a job of forecasting as Peter did. “Rising interest rates will result in disaster…”
Where did he predict the international financial collapse? Where did Mav predict it?
You keep wanting to make this into a real estate valuation problem when it is the result of BANKS! COLLAPSING BANKS! And, no, I did not see it coming. But neither did you, or Peter or Mav. I never would have believed 10% unemployment. I still find it amazing that most of you never have recognized the problem and are still blowing your own horns when you were more wrong than we were. At least we didn’t make the mistake of blaming a problem that never happened. How can you take credit for “it never happened”?
By the way, the money I raised in 2007 because of the obvious “irrational exuberance” has served me well and most of it is still in the bank awaiting an opportunity. Some of it I lost in the stock market. But nobody warned me!
who is this knucklehead???
“Send lawyers, guns, and money.” -Warren Zevon
In 2004 I kept telling all my friends that housing was going to crash. They didn’t believe me, they looked at me funny and they thought I was crazy for saying that. It’s good that it crashed because housing is a basic human survival necessity - it is your shelter - and it should not be subject to bubble mania pricing.
Yet you treat housing as an investment. Go figure.
Just once, answer the question: would you pay $60K for a Honda Civic? Explain why you wouldn’t, and how that is different from not wanting to drastically overpay for a house?
I eagerly await your response.
Actually, I see tricked out Civics all the time, so paying $60k (after customization) is probably not far fetched.
You know, I anticipated that someone might answer with something similar. I briefly considered phrasing it as “$60K for a stock Honda Civic from the dealer”, but then I thought to myself “nah, nobody’s gonna pull that distraction tactic crap.”
Hehehe…leave it to LL ;)
So schockg…any response? Or are you going to take the distraction and run with it?
Haha… I get your point. It doesn’t make sense to pay 3x what something is worth. I fully agree with you. However, investors have put the floor in the housing market and first time buyers are frustrated by the lack of supply and being sucked into bidding frenzies. Most sellers AND buyers believe OC housing is worth more than the bears on this blog believe. And really, if you own a house in a safe area of OC, you’re already a “Benz owner”.
Susan - How long have you lived in Fountain Valley?
Not buying it - I understand completely with what you’re saying and happen to agree with you but the government will continue to intervene in order to keep the economy going and money flowing. It has to.
By the dip later - Economics courses have nothing to do with it. I’ve been watching the nice areas of Fountain Valley for YEARS as it took me that long to finally buy something. I never even got with a RE salesman until just recently and let me tell you, everything decent and priced right had multiple offers on them. I was baffled too!
Greg-
I seem to recall that you grew up in Green Valley. Your last name doesn’t happen to start with an ‘S’ and end with a ‘Y’ does it? Just wondering if I went to school with you.
Sure does. Small world.
High school? Middle school?
Both. Don’t really want to reveal my name here. If you look up the first two letters of my last name SE, my senior quote was: “You must live in a constant state of revolution or you are dead” -JM
I’ll check it out.
Congrats on the house in FV. That’s a great place to buy.
Susan doesn’t agree with you….lol
….and I can’t find my stupid yearbooks. Probably packed away in the garage somewhere. I’ll keep looking.
Schiff has said repeatedly that housing may go up in nominal terms but will surely go down in real terms. It’s the real price that is important. The dollar price is irrelevant. The dollar could go to zero. Then what would a foreclosed house cost in dollars?
Schiff is wrong! Look at your source of information, this guy is the worst. period. He ranks right up there with Scary Gary.
Man…I was so right. Read it and weep!
DonS says:
April 7, 2007 at 8 am
Peter ignores the financial resources OC homeowners have built up. They own second homes and investment properties in CA and all over the US. If this prediction should start to take place, those properties, in places like Las Vegas, Phoenix, Austin, etc will be the first to go.
This scenario will push the entire US into depression, which will be fought vigerously by the Fed and US government. Hence a 50% drop is out of the question. It would bankrupt America.
OC has become a premium area to own homes. It is not nearly as expensive as NYC, London, Paris, San Fran, etc. Why will OC be the one to fail?
“A 50% drop is out of the question…..”