Watchhttp://blogs.wsj.com/developments/2013/02/26/shillers-bottom-line-risk-lingers-in-housing/
S&P/Case-Shiller index that bears his name. The Case-Shiller 20-city index was up by more than 8% in November from its February 2012 trough as falling supplies of homes for sale and stronger demand have boosted prices. Developments spoke with Mr. Shiller on Monday about his outlook for U.S. housing markets right now.
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Scottsdale, AZ
robertoaribas's website
"Shiller says risk lingers in Housing" really? you don't feaking say!!!
In other news, Neil DeGrasse Tyson says the US could be hit by an astroid, so don't come out of your basement.
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Seattle, WA
David Losh's website
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Shiller should have stayed doing whatever it was he was doing before he started an Index for Real Estate.
He's just ignorant of the the mechanics of Real Estate.
Of course prices will decline, they have no choice. We are paying way too much for everything since speculators had access to cheap money.
I don't see anyone mentioning that last year we had a return of Real Estate wholesaling where hedge funds were given great terms on "distressed" properties which in turn cleared a lot of inventory off of banks books.
We also saw the return of REITs, not only in commercial property but also rental return residential housing.
Bernanke is promising low interest rates, but there again I don't see where he will get the funding.
We're just seeing banks recovering more cash reserves at the expense of the middle class, and our government played right along.
So it isn't risk, at all, it's simple math. Now is the time to cut your expenses, and save as much as you can. You shouldn't be taking on debt simply because the payments are low.
I really can't believe that any one could say this is a good time to take on debt. It makes no sense.
Home prices are unsustainable. They may bump along at current levels, but they sure as heck won't be going up without sever manipulation. How much more manipulation do you think we have left? What's the next move?
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WSJ: What’s your outlook for home prices?
Mr. Shiller: It’s especially hard to say. We could be looking at a 1-2% increase a year for the next five years. That’s a reasonable scenario—1-2% a year, and it might go up more than that. I don’t know. My main message is that it’s a market with risk in it. We don’t know the future. That’s the most important message to convey.
>>
HE says "I don't know"
Need I say more?
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Victorville, CA
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David Losh says
It just depends on how deep the well of greater fools is, and that depends on facilitation; as long as the means is there to facilitate stupid financial decisions, the public will seize it.
Here's a rather bold flip near your neck of the woods...
http://www.zillow.com/homedetails/1810-N-200th-St-Shoreline-WA-98133/48703312_zpid/
The only way something like that can work is with that bottomless well of endless fools.
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I don't see housing flopping with so many investors buying all cash when interest rates are so low. If prices drop they will probably tap the coffers and reload.
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Scottsdale, AZ
robertoaribas's website
Raw says
yeah he said get out of Phoenix real estate a while back... meanwhile we went up 24% in the past 12 months on his index... His partner, Dr. Case (Case-Shiller index remember?) 8 months ago predicted Phoenix would drop 8% in the upcoming year. we are up 20% since he said that, anyone taking bets we get there in 4 months?
Case's prediction was particularly odd, because at that time, there were 12000 homes for sale in Phoenix, and we were selling 7000 a month; A ludicrously low supply for demand, and it was actually easy to see that prices would go up. that data was available, and yet both Case and Shiller chose to predict woe for the Phoenix market... Thank Buddha I ignored them and bought out my remaining short sale deals, at $76K, $80K and $85K... as today, those three houses can be sold for $120k, $120K, and $140K in a heartbeat.
phoenix prices will go up 1% in the next freaking month, let alone 1% a year as Shiller said above. A home next to one of my purchases just got listed at 130K... and got 21 cash offers up to 155K in 4 days...
So yeah, the market is in real trouble... Inventory has dropped from just under 18000 at the beginning of the month, to just over 17,000... AND, notice of trustee sales may not even break 2000 this month, for the first time in seven years.
maybe someday Phoenix prices retreat, but it is going to be after some very serious price gains from today... If it goes up 25% more from today, then comes down 10% two or three years form now, do you think anybody will really care?
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Madison, WI
Definitely, cash or access to it is way to loose, piled up at banks it might be to plentiful, way to easy, prices will rise, and keep rising, we went through this before, we will do it again. Great investment opportunity, I mean look at the run up in prices, bidding wars again and all, as long as the cash flows are being used to pay loans down RE should actually flourish this time around. We could be getting back into flipping and trading up regular territory. But not for me, where I live and work, I can't afford the prices, or taxes, and that's why we have legions of rental neighborhoods.
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maybe someday Phoenix prices retreat, but it is going to be after some very serious pr from today... If it goes up 25% more from today, then comes down 10% two or three y form now, do you think anybody will really care?
100k today
+ 25% = 125k
- 10% = 112.5k
Then sell to finish the trade would mean seller assist + realtor fees,,,would land the market participant right back where they started. Just neglect all maintenance and pray to the lord nothing breaks, and it'd be a warsh,,,,
Yaaay housing! Weeeeeeeeee!
Would anybody really care? I doubt it. Well, unless you are a baby boomer that depended on perpetual house price appreciation in order to pay for your heloc and have enough scratch left to retire on, but not to worry, the baby boomer retirement model is as healthy as,,,,as,,,well, as healthy as this housing market, fittingly enough seeing as how so many banked on bilking the next generation to fund their expensive lifestyles
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robertoaribas says
and your expectations of 24% appreciation in the future.. how much longer into the future do you expect to get double digit appreciation year over year... for how many years .. as Shiller stated in his study Irrational Exuberance.. not possible! I guess you blame Wall Street when the party end.
https://www.youtube.com/watch?v=ZzE_h33NAhA
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Unemployment payments after job losses will help increase sales & prices & clear the inventory. LOL
http://www.dailyjobcuts.com/
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San Jose, CA
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David Losh says
And you guys have no access to cheap money? Come on. Cheap money is available to almost everyone with a job. It's too easy to blame it on the speculators.
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San Jose, CA
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David Losh says
From the treasury.
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San Jose, CA
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David Losh says
Ok....
David Losh says
Then you say this...
So what's the right way to do it? Save money and put it under the pillow?
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David Losh says
You should believe it. It's not a good time to take on debt. It's a fantastic time to take on debt. You can borrow at a fixed interest rate of 4% or less for 30 years on investment properties. Find anything with a 6%+ cap and load it up with debt.
I think you're looking at all the wrong places. If we can find opportunities here in the Bay Area, there should be even more opportunities in your neck of the woods.
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robertoaribas says
Maybe? Sorry pal. That's for sure. It will definitely retreat.......like in 2020, or maybe 2025..... :)
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Scottsdale, AZ
robertoaribas's website
thomaswong.1986 says
No, since you don't read or think well, I'll type slower for you.
I didn't even expect the past year's 24% appreciation. Simply, I saw supply dropping, I saw my full price offers get rejected, my associates started telling me about multiple offers on their homes.
I REACTED. I put six short sale homes at good prices under contract immediately. And, over time I closed them all. It was tough, I had to scrounge money from everywhere, but As I watched inventory plummet to 1.5 months worth on sales, I knew prices were going up...
Today, I see the following:
17,150 home for sale
6500 sold in the past 30 days.
single family homes under 150K, inside the loops, there is less than 1 month inventory.
Listing prices are rising at 2 to 3% a month
Foreclosures are running at 50% of last year.
Notice of future foreclosures also at 50% of last year.
Based on this data, I'll predict a 10% rise in prices in the next six months... And, a higher rise on the type of starter homes I own.
I'd say the next 15% and maybe 20% up is a far safer bet, than seeing any of these trends reverse. Inventory would have to double to get to any number that historically has stopped price increases here.
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Nampa, ID
Lets think about what this really means considering the whole US economy hangs on this FED move.
12/12/12
In an unprecedented and surprising move, the Federal Reserve announced on Wednesday that it will keep interest rates near zero and will purchase $85 billion in bonds every month until unemployment falls from its present 7.7% to 6.5%.
http://www.breitbart.com/Big-Government/2012/12/12/Fed-Bond-Buying-Bonanza-85-Billion-A-Month-Until-Unemployment-Hits-6-5
This move adds over 1 trllion annually. 1,020,000,000,000 to the fed sheet
Since The fed started this the US Unemployment Rate increased .2-.3%
http://www.forexfactory.com/calendar.php?week=mar3.2013#graph=45643
Over the last 3yrs. Unemployment was reduced .06% mo. avg. (U3)
It is possible due to the housing market recovery/bubble what ever the definition you hold to, mine being simply a market within 8 mo.-yr. we reach 6.5 unemployment.
It is the 85bil per mo. debt monetization and that alone why we will continue to have the low interest rates. Once this monetization is over, however it's demise the top of this market/recovery/bubble will start to take place. More than likely it won't be instantaneously giving an added value of 6-12 mo. 1214?
During that time RE will no doubt reach mean pricing in the areas showing recovery
which is approx. 18% +/- increase for AZ. Some will "actually see" it all coming and then there will be those who "just say" they seen it coming...
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Seattle, WA
David Losh's website
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E-man says
I think I can get this in one comment rather than half a dozen.
Speculators buy oil, cotton, corn, and beef, then sell for quick profit to invest in gold, and Real Estate.
Everything gets pushed up in price while the consumer borrows more to pay those higher prices.
Where is the quick cash return for the consumer?
Simple, there is no cash return, and unless you are leveraging for a cash return you just end up with more debt.
Now, you can explain it to me how the consumer is coming out ahead on this by buying a house. They save on rent but still owe the debt, with interest.
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Nampa, ID
Roberto this is absolutely a reasonable expectation.
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Seattle, WA
David Losh's website
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E-man says
It took a minute for me to get this, but yeah, sure, there are tons of opportunities. You don't really need to borrow in order to make cash, there is tons to do.
We are though talking about the greater fool theory of Real Estate which I don't particularly care for, and find extremely risky.
It's like Roberto and all the sales data to convince people property prices are rising. Well sure, yeah, they are rising because people are in a herd mentality, but there are no economic reasons for people to over pay for property unless there is a quick cash return.
You see, to me this is like a last gasp, last hurrah for Real Estate. 2006 should have shown us how fruitless it is to hold onto Real Estate as a means to anything other than rental income, and that is yet to be determined.
I personally think there is more money in servicing Real Estate than there will be in holding it.
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ttsmyf's website
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Say Hey! Look at the VERY instructive past.
http://www.showrealhist.com/RHandRD.html
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robertoaribas says
http://www.nbcnews.com/business/housing-market-already-shows-signs-new-bubble-1B8246437
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David Losh says
You could be right but these two things are different in working hours. Services, most likely, are full time jobs. Real estate investment can work out on the side for a second income.
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El Cerrito, CA
Shillers comments are ridiculously out of step with Reality. He says there is "risk" in the markey? DUH? Tell me where there is not Risk?Stock market? Multi-level marketing..hedge funds..mutual funds..bonds..How about putting your money in a "guaranteed" no Risk CD at a whopping 1-2% for 2 years! oh yea, then pay taxes on it. I bought a foreclosure 1.5 yers ago for $87k in Richmond calif in an OK but not greata area. The tenant wanted to stay for $1200 per month. I said Ok fine. She has stayed and in 18 motnhs I have collected 22k from the rent and the house currently is valued at app. $160k. So yes, there is Risk in RE but there is also the possiblility of a great upswing
which did occur. I could have left that $87k in the bank and made a whopping $1739. at 2% interest and played it "SAFE" .
The majority of these guys are way behind the 8 ball when it comes to knowledge and application. The worst guy to listen to is Peter Schiff in my opinion. He has been calling for ddooms day for the last 6 years. If you ever listen to his videos for like 10-15 minutes he says the same thing over and over again and at the end you ask your self,"What did he just say"?
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When housing is tanking, there's a risk that it will over correct to the downside. When housing is increasing, there's a risk that it will fall back down.
To Shiller, there's always a risk to the downside. When was the last time he said there is NOT a risk to the downside?
But no, he's not a permabear.
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El Cerrito, CA
When there is a risk to the downside..that is the tme to buy.
BC you never know where the bottom is until AFTR it has bottomed. Now we know we ht the bottom1-2 years ago..If the cost of buying is 50% less than the cost of replacement of the house that should be the time to buy. Easier to predict the future "After" it has hapened!
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Scottsdale, AZ
robertoaribas's website
There is always a risk. North Korea could lob a poorly designed radioactive device into Phoenix, making all housing worth zero...
Housing could crash again, the bears could be right, i could be wrong...
You know what I worry more about? having a stroke or a heart attack. Look up the odd of that for a 48 year old guy... So, I try to eat as healthy as I can, get lots of aerobic and interval exercise... BUt I have years of eating bad and drinking too much, so maybe the damage was already done.
You know what? you play your cards as best you can, and then you go to sleep sound. If i'm wrong and I end up bankrupt, I'll teach english in the third world the rest of my life... or hand out smiley faces at walmart.
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El Cerrito, CA
I like the handing out smiley faces...there is no risk doing that is there?
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San Jose, CA
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mike2 says
Wrong. There's risk with that job too. You don't know when a terrorist would walk in the store and blow you up. How do you know if you will not get shot by drive by shooting while you're handing out smiley faces?
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El Cerrito, CA
True. I never thought of that before. I forgot the terrorists are everywhere. Maybe I should invest in Real estate ..no risk there?
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Victorville, CA
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E-man says
He probably cites risk because there's always a chance that the FED/Fannie won't always be able to serve as the primary (only) supports for keeping RRE prices from over-correcting.
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mike2 says
No. There's still a chance that the meteor might hit your house, or your house will get blown up by the terrorist. I don't think you should invest at all because everywhere I look, I see risks. :)
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JodyChunder says
Of course there's always a chance of..............you fill in the blank.
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El Cerrito, CA
I totally agree plus... I was driving on the freeway today and
there was an accident so I am going to be staying home from now on since I could get killed out there!
Plus there was a Robbery in a home in my meighborhood so I for sure won't buy a house now. Someone could break in and dteal things or hurt me.
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El Cerrito, CA
Beware..you might have something bad happen to you in your life.
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Victorville, CA
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E-man says
Yeah, when the music of chance is harmonic, it lulls one into cocky complacency.
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Seattle, WA
David Losh's website
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Did any one else notice today that we went off the fiscal cliff, and the stock market is headed for new highs?
This is the risk.
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El Cerrito, CA
The fiscal cliff was last month...Now it is the Sequester?
Like U said..the stk mkt went up...Obummer was preaching Big time doom and gloom if it happened..now he is saying it won't be that bad. A cout of $85 billion is like someone making $1000 a week Cutting his pay to $990.00 or $995.00 just 1 less cup of coffee a "FourBucks" I mean StarBucks.
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Nampa, ID
Markets from widgets to digits, stock market to the housing market have a tendency to dislike indecision which plays havoc with "risk management". A well thought out plan needs to be developed with due diligence, risk management and risk/reward hand in hand, and then if the stars all align execute the plan or be left behind. The RE market as an investment instrument is not suitable for everyone, just those prepared with circumstance.
For most the markets I follow what I am seeing is "risk on-risk off" some what neutral (indecision). The very element of indecision is what I believe will drive the trend in what ever direction it is going for instance S&P up and Gold down, at min. some sort of consolidation.
One item that will continue to feed the current condition is the debt ceiling issue coming May19. I haven't really followed that but know it is there. Once that is all sliced and dice games on the end of May-1st of June("risk off").
http://www.bloomberg.com/news/2013-03-01/fitch-reiterates-u-s-downgrade-likely-on-debt-ceiling-crisis.html
As a result of this being behind us S&P flips, USD weakens, gas prices lowered and the bond market comes back to life as will the RE inventory not to mention lower employment rates as a consequence.
I'm sure there are other factors that will have an effect, however for the next 2 RE seasons, RE has the potential of gaining some ground "mean" being a reasonable target for housing prices. Anyway, until the midterm elections 2014 start to take place in full with a large dose of the "Done Nothing" blues.