Case-Shiller lags anywhere from 3-5 months at the field level., but...
Companies (particurarly banks) pay a lot of money to access subscription services generated by Fiserv and Moody's. Their good reputation is on the line
Fiserv - Moody's Case-Shiller Forecast - SFBA
By SFace Follow Fri, 24 Feb 2012, 11:34am 11,442 views 145 comments
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They should be loaning easy money then,but the fact is there are plenty of all cash transactions despite rock bottom interest rates - Banks know that it is too risky to loan money for the overvalued homes. :)
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http://online.wsj.com/article/SB10001424052970203358704577237211014974658.html?mod=googlenews_wsj
lol
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bubblesitter says
That doesn't make any sense. Banks set their own rates. Why would they offer low rates if they didn't want to loan the money?
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Mountain View, CA
LarryPatrickMaloney's website
I heard a blurb on the radio yesterday, that FHA, or one of the Mac's started raising interest rates, now up to "3.9%"....
Anybody have a link on that?
If rates do start to go up, kiss prices good bye.
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Mountain View, CA
LarryPatrickMaloney's website
Here we go, I think this is what the "news" blurb was referring too..
http://www.cbsnews.com/8301-505145_162-57383618/rising-mortgage-rates-suggest-housing-recovery/
-- A 30-year fixed-rate mortgage (FRM) averaged 3.95 percent, up from last week's average rate of 3.87 percent. At the same time last year, the 30-year FRM averaged 4.95 percent.
-- The 15-year FRM averaged 3.19 percent, up from 3.16 percent. A year ago, a 15-year FRM averaged 4.22 percent.
(Still these are pretty low rates historically)
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bubblesitter says
Separate "all cash" with "delayed financing" first. New rules eliminating the waiting period makes this obvious and delayed financing a good strategy many people utilize, and more than ever. No wait seriously, close one day and finance the next. You'll see more headnotes of "all cash purchase" that are not.
The problem is there is legitiment cash vs. financed risk from a seller's perspective. Once the lenders are confident enough to lend and the seller's realize that the risk is not worth the increment, all cash will be a thing of the past again.
The major implication of the graph. If I was an executive and see prices forecast to be up, I would one up the competition and require lower barrier to gain business. Other banks that require 25% ratio, I can afford 20%. If the trend is true, you will see bank requirement more favorable as well.
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Zillow is predicting a 1.3% gain in Los Angeles housing in 2012... And they aren't being bullish by any means... Los Angeles and Washington are 1 of only 2 markets they are predicting price gains in 2012.
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SFace says
Is that a prediction too?
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Boulder Creek, CA
I wouldn't be putting any money on that prediction.
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Monterey, CA
I'm inclined to side with this prediction...
http://patrick.net/forum/?p=612891
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SFace says
They also subscribe to many other services to formulate their short- long-term plans. Showing only one report from one source to make a "bullish"point is rather disingenuous.
And your point being here on patrick is what ???
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Boulder Creek, CA
He's trying his best to prop up the market so he doesn't lose anymore money?
I own a house free and clear but I don't let it influence my opinion on housing. It's amusing to watch people cheer lead RE when it's obvious they're worried about their own equity stake.
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CrazyMan says
Isn't that a misleading comment? Don't you own a house in Santa Cruz, but live in Campbell and are waiting/hoping for prices to drop there?
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Mountain View, CA
bmwman91's website
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Well, if the forecast is true...fuck this place. I'll take my DINK butt somewhere else. All the fortune seekers can have the place, as much as I will miss the many awesome things to do here & my extended family. I am unwilling to go into an outrageous amount of debt & give up my financial security and disposable income to purchase some wooden box. I practically grew up in a residential construction site, and there really is nothing "special" about the houses here, except the location. And since location is everything, I guess there's no hope.
If rents somehow manage to NOT shoot through the roof, maybe I would stay, but if last year was any indicator, they are going nowhere but up. Getting priced out of your hometown because you would rather live your life than seek a fortune is a shame (or thanks to people from other places with piles of investment money flocking there), but life isn't fair. Oh well, boo-hoo to me I guess!
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Boulder Creek, CA
tiny tina says
Uh which part is misleading?
You realize for every bit housing drops, I lose my own equity right? I gain on one side and lose on the other.
Is that a difficult concept?
It still doesn't change my outlook on housing.
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CrazyMan says
+1
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Boulder Creek, CA
Tina, sounds like you're a RE agent that has something to lose as well.
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joshuatrio says
I agree.
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thomas.wong1986 says
Cheerleading, please, it's pointless.
My only motivation is studying behaviors and how people reacts to behavior. Housing is fascinating in that regard. The social aspect of how people react, respond and choose what they choose and not choose what they choose. I try to add value by adding what I believe is true and correct things that doesn't make sense. Nothing more, take it for what its worth.
Calculators and graphs are useless and explains nothing. Application and how things interwined and reaction is more interesting and useful. Ultimately of course to make money. Ultimately, I also believe house price have bottomed based on the facts as I understand them. The case Shiller in three months may reveal what is going on already.
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I think it's amusing that anyone who has a different opinion than the bears must either be a real estate agent or a homeowner desperate to prop up prices. Nevermind that it is totaly ridiculous to think that posting on pat.net will affect home prices...
I think you guys might want to bone up on "groupthink". Start with the Bay of Pigs.
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San Jose, CA
That graph is ludicrous. The whole point of the Case-Shiller index is to point out that home prices always go back to 100. Overvalued is over 100, undervalued is under 100, but prices will always go back to 100.
Now, if you say it'll go up in nominal terms, that's another matter. Inflation can drive home prices up, but the value must come back down in real terms.
It would be better if these guys claimed that the "new norm" is at the 125 or the 150 mark, and therefore the 100 mark should be moved up accordingly. That would imply that homes are currently undervalued and must go back to "the norm".
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tatupu70 says
1 out of 50 in Calfornia is a real estate agent or directly related to RE business. God knows how many others out of state REA we imported... Vested interest .. there is plenty...
http://www.bizjournals.com/sacramento/stories/2006/05/22/daily20.html?from_rss=1
New record: Nearly a half-million real estate licenses
Nearly 500,000 people hold real estate licenses in California -- the most ever -- the California Department of Real Estate reported Tuesday. That equates to one real estate licensee for every 52 adults.
In 2005, the number of real estate licensees soared to a record of more than 476,000, up 14 percent from the previous year and a 57 percent increase over five years ago.
As of April, the trend continued with the number of licensees climbing to 495,000.
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SFace says
To study and render an objective opinion on hehavior you pretty managed to compromise your independence when you said..
"Ultimately, I also believe house price have bottomed based on the facts as I understand them."
But "studying behaviors" is not your real objective.
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Jeez there you go again, dignifying with argument someone who branded their handle with American Express Black.
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B.A.C.A.H. says
His handle is just and illustration of greed and self interest in a hope of a W-shaped recovery, after the V shaped didnt workout, and we are all back to the good ole days during the boom. .
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thomas.wong1986 says
It seems like BA prices and the forecast of BA are the only beacon of hope for the bulls. LOL.
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Yahoo! Jobs must be back full force. Wow, just a couple of weeks ago I thought I saw an article saying our unemployment rate was over 11% (the real number, not any voodoo or adjusted). Amazing how time flies and the world gets better in a few weeks.
http://www.forbes.com/sites/peterferrara/2012/02/09/dont-be-fooled-the-obama-unemployment-rate-is-11/
No job improvement, then you can bet your grandmother's china that we will not see any housing improvement. The government is out of bullets to shoot. Time will be our witness here. Don't say I didn't warn you.
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SFace says
Their prediction contradicts 400 years of recorded data. There has never been a V-shaped recovery after a bubble collapse. There has never been a housing bubble even close to the proportion of this one we just had. A bubble of this magnitude justifies a crash of an equal magnitude followed by at least 2 decades of flat prices. Forget house buying until 2030 and look for 1975 prices coming back.
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RentingForHalfTheCost says
So Morningstar is biased, but Forbes is OK?
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tatupu70 says
I've been following Peter for years. There are honest individual contributors that don't have to sell their soul to survive. Just good reportable facts do them justice.
http://blogs.forbes.com/peterferrara/
Also, it is about the money trail. Forbes are not paid by anyone to report a particular way about jobs. Most main stream media outlets get a good source of money from the real estate industry. In return they keep quiet on anything negative about the housing market. Just the nature of the beast. If you dumped 10's of thousands to a paper each month running listing and kept seeing that same paper talk badly about the prospects of the housing market, you would most likely complain or move your listings somewhere else. I didn't invent this stuff, it is basic survival 101.
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SFace says
sometimes these forecasts are a self fulfilling prophesy. If the forecast is up banks and businesses position themselves accordingly in terms of lending and business deals and ends up going up. same thing happens on the way down.
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tdeloco says
I don't agree with this.
Wikipedia (I know) says: "The national index is normalized to have a value of 100 in the first quarter of 2000."
But nothing about this representing some "right" value, above which houses are overpriced, and below which houses are underpriced. I don't see why values would have to revert to some norm, especially as population grows (and land doesn't), or some event or transformation happens to make a location more valuable.
I bet Houston prices are higher than they would otherwise be if it weren't for the importance of oil...I bet the completion of the Erie canal was followed by a rise in values in newly connected cities. Statehood for Hawaii probably started a trend of increasing house (land) values.
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tdeloco says
(include Thomas' stupid graph he posted about 100 times about reverting back to the mean)
That may be true if there are no transformative changes (that impact real estate prices) over the past decade. Transformative changes may include:
1) Interest Rates.
2) Supplies and household growth.
3) Income and net wealth
4) Taxes
5) Others such as lending environonment
So with regards to SF over the last decade:
1) Interest rate went from 6-7% - 4%
2) No new SFH homes were added while new households were added. (Of course Condo's balanced that out as a competitive choice somewhat..
3) Income grew but millionaires and wealth grew even faster.
4) MID is more lucrative and property tax rate is the same. Add-on's property tax in SF are non-existent. Combined, taxes have been landlord friendly.
So no, it cannot revert to 100 given the above. Where it should be is of course where everyone likes to know.
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Scottsdale, AZ
robertoaribas's website
Even Dr. Robert Shiller said that rates can effect the long term trend of his index... interest rates are roughly 2/3 of what they were when the 100 level was set, that certainly figures into affordability.
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swebb says
The original Case-Shiller spans 120 years and is normalized at 1890 values. That puts the version you mentioned normalized at approx 125 (eyeballed). What's fascinating is that we've had exponential population growth during the past century, yet the chart remains stable hovering near the 100 index.
Population Growth:
Full Case-Shiller graph:
swebb says
Your argument should've shown changes in the 120-year chart. I only see a 10-point shift for the years 1945-1997, a new norm for the 52-year span. Lots of things happened within this time frame, including steady decline in income taxes. Then, everything seemed out-of-whack after the year 2000. As I've argued, it is better to re-normalize the graph and move the 100-point mark.
SFace says
Income Taxes rates are at their lowest in decades. Interest rates have also been at their lowest. I don't think either rate can move further down, so home prices should stabilize rather than grow exponentially.
That constrains home prices to be a function of income. Just for the sake of example, if home prices stabilize at 5x a person's salary, when the average Joe earns $10k, home prices stabilize at $50k, and when average Joe earns $100k, home prices stabilize at $500k, assuming all other things remain constant.
swebb says
If you look at the people actually living in them, the average should still be some number (say 5x) compared to the person's salary. Do realize that people who buy property in downtown areas tend to be highly paid. Prices are a function of their affordability (assuming all other things remain constant).
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And income is whatever you say it is - or whatever the broker tells you to claim on the application he's helping you fill out with fictions.
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SFace says
I agree. Furthermore, the 100-point mark chosen by Moody's or Wikipedia seems completely arbitrary to me. Why is it 25 points higher with respect to the full graph?
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tatupu70 says
Only because about 99% of the time it turns out to be true.
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thomas.wong1986 says
Holy crap. Make no wonder we are screwed so bad. These clowns are now littering the unemployment lines. We just can't stop them from reaching in our pockets. Dammit.
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dunnross says
+1