patrick.net

Oh noes!!! Where is our conoisseur of bottoms when we need one? I hear the 2009 bottom was a very fine, though short-lived vintage - ripe, rich and round, with a pungent top note of delusional hope, accented by a delicious aroma of desperation.

I"ve been seeing housing dropping or stagnant most of 2010... No where did i see home prices rising this summer. So it makes sense that the summer buying season is over that housing would drop.

prices are down this summer concurrent with the expiration of the tax credit which caused sales to slump to record lows. In fact, if you speak to line personnel like agents and lenders, they would tell you that it was an extremely buyer's market in June/July, not so much currently.

If you look at the august pending sales index in the west, it is 101.1 in August 2010. vs. 100.4 in March and 107.9 in April. In other words, the effect of the tax credit expiration is already gone by fall as the August pending will convert into sales by around October. If the pending home sales trend continue into September (which is likely based on mortgage application indicator for purchases which have been rising), we will see the same type of sales in May, June for homes sales this fall, which would not lead to double dip prices. At best it would approach the March 2009 low.

http://www.realtor.org/ro/research/23a8mwa48fasp34aag049grejw4/phs1008.pdf

In my own local area, if a home is on the market long enough, the asking price will eventually be reduced. The degree of the reductions seems to be more significant as of the past month, but its too early to say if it is a trend.

The winter should be interesting. Will fewer active buyers force sellers to capitulate, or will it just be a long drawn stand-off, with neither side blinking?

Unfortunately, I don't see the economy turning around. Things weren't catastrophic over the summer, but the number of vacant buildings and business who are shutting their doors has ticked up again, as it did circa late 2008 to mid 2009, when this whole mess first started to unravel.

Next six to twelve months should be a bumpy ride, with the results highly localized.

Here in the Inland Empire, prices have dropped 5% in the last 2 months. Alot more houses are getting reductions and the reductions are happening quicker also. Plenty of houses still being foreclosed on as well. Prices have stayed flat over the summer, maybe even rising slightly but that raise has been eaten up by the drop already.

This is news?

tatupu70 says

Not great, but not collapse.

Time will tell, but can you recall a two-month period that saw this kind of a drop?

wait wait wait one second .... I know that one of you kept telling me that the homebuyer credit was not making any difference. Whats up with that?

Pricing are collapsing. I never said prices have collapsed. I believe a collapse is technically 10%.

joshuatrio says

Shiller is calling another 20% drop.

that would be gary shilling, not robert shiller.

tatupu70 says

But what history has shown is that prices have very little correlation with interest rates at all. Most likely because both interest rates and prices depend much more on wage inflation. As such, they usually move together. Which means you will see prices rise as interest rates rise…

There is some truth to this. All things being equal, an increase in rates will destroy home prices. But if an increased interest rate following a fight against severe inflation might be accompanied by the inflation-created nominal wage/GDP growth, diminishing the impact of the downward pricing pressure on housing.

But typically, low rates do have a significant upward effect on prices. Downward, less so for the reasons mentioned as well as the inflexibility (price stickiness) in housing values.

mike4518 says

joshuatrio says

Shiller is calling another 20% drop.

that would be gary shilling, not robert shiller.

lol - you are correct. Sorry for the mis-information.

I just wish I could see A FUNDAMENTAL that even supported TODAY'S home prices, let alone a mechanism that would allow them to rise sustainably in the future.

We have:

1. DECREASES in nominal household incomes. Fact.

2. SIGNIFICANT DECREASES in genuine inflation-adjusted (incl. food/energy/insurance/medical insurance/tuition, etc.) household incomes. Fact.

3. DECREASES in jobs. Fact.

4. DECREASE in new household formation. Fact.

5. HUGE INCREASES in supply with new foreclosure records being hit every month or so.

Despite heaps of government gimmicks and giveaways combined with the lowest rates of interest, sales of existing and new homes are SIGNIFICANTLY BELOW EVEN LAST YEAR'S DUMP LEVELS AND HIT MULTI-DECADE LOWS this summer.

Where are all of the billionaires from the UAE? Why aren't they buying up all of our houses? Oh, that's right - their bubble was even bigger than ours, and it completely burst as well. This real estate bubble is worldwide and is the largest speculative bubble ever manifested, all courtesy of sustained record-low interest rates in the developed world as their productive economies no longer exist and depend solely on bubbles to sustain themselves.

This is going to get very, very ugly. Mark my words.

schmitz_kris says

I just wish I could see A FUNDAMENTAL that even supported TODAY’S home prices, let alone a mechanism that would allow them to rise sustainably in the future.

Because people believe that things will improve in the future. Unemployment will decrease, income will increase, housefold formation will increase. If you believe that the economy will double dip, then you shouldn't buy.

We have:

1. "DECREASES in nominal household incomes. Fact."

Fiction currently. That's true for 2008 and 2009 when 13M jobs were shedded. 2010 is an increase in nominal wages. Per the census bureau stats, Average hourly earnings of all employees on private nonfarm payrolls increased by 1 cent to $22.67 in September. Over the past 12 months, average hourly earnings have increased by 1.7 percent.

2. "SIGNIFICANT DECREASES in genuine inflation-adjusted (incl. food/energy/insurance/medical insurance/tuition, etc.) household incomes. Fact."

True, but stocks are up nearly 80% off the March 2009 lows so people with inflation adjusted assets are doing fine so a certain amount of the household is doing fine.

3. "DECREASES in jobs. Fact."

2010 is net additions. Again double check your census data. http://www.bls.gov/news.release/pdf/empsit.pdf

4. "DECREASE in new household formation. Fact."

New household formation is delayed, the significance depends on whether you think this is temp or perm. If temp, it just means that household formation is higher prospectively.

5. "HUGE INCREASES in supply with new foreclosure records being hit every month or so."
Good reason why house prices are not going up but does not explain why it wil dip below March 2009. New homes and apartment are currently built at 1/3 to 1/4 of the levels in 2002-2006.

"Despite heaps of government gimmicks and giveaways combined with the lowest rates of interest, sales of existing and new homes are SIGNIFICANTLY BELOW EVEN LAST YEAR’S DUMP LEVELS AND HIT MULTI-DECADE LOWS this summer."

Last summer/fall was quite a bump up due to the tax credit so 2009 particularly was far from dump levels to comp with.

"Where are all of the billionaires from the UAE? Why aren’t they buying up all of our houses? Oh, that’s right - their bubble was even bigger than ours, and it completely burst as well. This real estate bubble is worldwide and is the largest speculative bubble ever manifested, all courtesy of sustained record-low interest rates in the developed world as their productive economies no longer exist and depend solely on bubbles to sustain themselves."

The effect of foreign buyer's are built over a period of time. In 2010, the % of US real estate under foreign ownership is higher than ever.

klarek says

Oh please. In just a couple of months we’ve nearly wiped out the gains from the tax credit. We’ll soon pass the 2009 bottom, and all of a sudden he will be wrong and others will be right

I'm laughing. You forgot to add "I think" before that sentence. Unless you have a crystal ball in your house that I don't know about...

klarek says

It’s calling someone out for their baseless claims when the data slowly trickles in to show they were wrong

Once again. He's NOT wrong. (yet) Maybe he will be, maybe he won't be. But Jesus Christ. You are the epitome of arrogance to call someone out because you THINK they will be shown wrong in the future.

klarek says

It’s already started double-dipping.

OK Mr. show me the data. Please, show me why you think that the economy is already double dipping.

tatupu70 says

I’m laughing. You forgot to add “I think” before that sentence.

No, I forgot to add "from Clear Capital's housing index which showed a two-month drop of 6%". Whether it happens over 3, 6 or 9 months is irrelevant. What is relevant is that you are intentionally ignoring market trends that many of us have been expecting and are coming true. Price increases when the credit was introduced didn't surprise me one single bit. Nor does this data.

tatupu70 says

Once again. He’s NOT wrong. (yet)

Tell him that then. He admitted above that he was wrong about the tax credit. He's gone from a position of "it had nothing to do with price increases" (in which case then, what did?) to saying that it had some impact, but less than we think. In a few months, he'll be like "okay I was totally wrong". Which is fine, I don't care about people being wrong. I just point out that if their predictions are based on nothing more than an arbitrary guess, their future arbitrary guesses will be rightly derided. Again, the issue is not what he claims, but WHY he makes the claims.

tatupu70 says

Maybe he will be, maybe he won’t be. But Jesus Christ. You are the epitome of arrogance to call someone out because you THINK they will be shown wrong in the future.

No, the data is now backing up the notion that he is wrong, and he admits it. Now stop kissing up to him, he's a few steps closer to reality than you are at this point.

klarek says

No, the data is now backing up the notion that he is wrong, and he admits it. Now stop kissing up to him, he’s a few steps closer to reality than you are at this point.

Scroll half-way up the page. See that big-ass graphic. One, maybe two more months and we will be below 2009's low mark. You think it won't happen? Fine. I do. The fundamentals of the market do not support these prices and there was nothing pre-credit to indicate it was easing on its own. Hence, prices will continue falling.

SF Ace,

Household incomes ARE GOING DOWN. Nominal wages are meaningless - the "gain" for 2010 is microscopic and is a STEP BACK once genuine inflation statistics are used. I never mentioned WAGES - you just brought it up out of nowhere.

Most people still have a LOSS in their 401K from 2007 yet prices of food, tuition, medical insurance, etc. HAVE GONE UP. Assets have GONE DOWN, but costs have GONE UP.

We've lost millions upon millions of jobs since the bust began. 2010's numbers (which are PATHETIC given trillions of dollars of stimulus/debt) are going to be revised significantly DOWNWARD by the BLS. This was in the September BLS report.

New household formation is particularly ugly, especially considering the amount of debt new college graduates are taking on while belonging to a cohort with an extremely high UE rate.

I can't take it anymore
klarek says

I might be arrogant or rude

You are an arrogantly rude uppity chicken little. You are also certainly far from helpful. You also believe that DC is immune because it is something special. You don't have your head in the sand, it is firmly implanted up your ass.

klarek says

I just demand a more sophisticated explanation other than “that was the bottom”, or in your case “since we haven’t crossed it yet, he must be right”.

You have provided some sophisticated analysis as to why it wasn't the bottom? I don't know if it was the bottom or not. There will be a bottom somewhere (if we haven't hit it already), however, and I'm missing your sophisticated analysis as to when it will be. Oh wait a minute, we have had the bottom - only in DC, though. How sophisticated.

klarek says

It’s already started double-dipping.

How do you arrive at this conclusion? Oh, with your sophisticated analysis:

klarek says

I think that upon the credit’s inception, we were nationally about 10-15% overpriced and will very soon be at that same level again. I think this winter will be very brutal, prices will continue to tank, and *maybe* we will see a temporary period in the spring where they level off a little bit, if they’ve fallen enough to feel the spring summer “bump” they normally do.

Where did you get this? Is this not your opinion - given in the same manner which you evidently despise? Where are the facts to back up the "10-15% overpriced" - and are we going to be at the 10-15% overpriced level or back to where we should be? Or is this only in DC? What is your point anyway?

klarek says

The fundamentals of the market do not support these prices and there was nothing pre-credit to indicate it was easing on its own. Hence, prices will continue falling.

What are these fundamentals?

I'm done. I rescind my nomination of PolishKnight as the idiot of the year - I have discovered a new contender.

klarek says

Scroll half-way up the page. See that big-ass graphic. One, maybe two more months and we will be below 2009’s low mark

Oh, is that how it works? If the line points down, it will continue to point down? Didn't know that. So, prices will continue to fall forever then?

klarek says

I just point out that if their predictions are based on nothing more than an arbitrary guess, their future arbitrary guesses will be rightly derided. Again, the issue is not what he claims, but WHY he makes the claims.

His predictions are his best guess, just as yours are. Predictions by their very nature are someone's best guess.

Again--you can disagree with him if you like, but don't call him wrong. Because he's not. It's not a foregone conclusion that prices will continue to drop or that they will establish a new low. They might. They might not.

EightBall says

You also believe that DC is immune because it is something special.

No I did not say it's special. Trust me, I've heard that b.s. around here for the past four years while watching the market tank. I do however know how to look at local GDP trends and compare them to national, and how to extrapolate our pre-bubble market onto what we would have had the bubble never existed. Sorry if that is too complicated, pea-brain, but it does NOT mean this area is special. It means the fundamentals support a certain pricing level, and some areas correct at a different extent than others do.

EightBall says

Where did you get this? Is this not your opinion - given in the same manner which you evidently despise? Where are the facts to back up the “10-15% overpriced” - and are we going to be at the 10-15% overpriced level or back to where we should be? Or is this only in DC? What is your point anyway?

I was referring to the national level. In my area, probably a bit less, though certain pockets around here that have only fallen ~15% so far are destined (by my calculations) to drop another 30%. Due to a lack of foreclosures in those areas, the correction may occur over a very long period of time, scaled out by inflation.

The data is largely from Case-Shiller. Go look it up yourself, I'm not your fucking tutor.

EightBall says

What are these fundamentals?

I have said it many times in other threads: INCOME. Specifically, household GDP. That is the most important. Others would be loan durations, interest rates, govt incentives (tax breaks), supply/demand (which largely respond to the market and don't significantly alter the equilibrium), tiered wage growth, savings rates (and propensity to consume versus save), etc.

Just by asking what these fundamentals are, I can tell you didn't know this. So maybe next time you are actually curious and want me to explain it to you in a way that isn't rude, you don't shoot the question at me like a complete fucking prick yourself. OK?

tatupu70 says

His predictions are his best guess, just as yours are. Predictions by their very nature are someone’s best guess.

No, his predictions are both baseless and ever-changing.

tatupu70 says

Again–you can disagree with him if you like, but don’t call him wrong. Because he’s not. It’s not a foregone conclusion that prices will continue to drop or that they will establish a new low. They might. They might not.

I understand philosophically the argument that because it hasn't happened yet, etc. But the data right now is contradicting him, and he is the one admitting he is wrong. The timing of the price increases with the credit's introduction to the market is no coincidence. Logically, whatever it created (the gain since spring 2009) will not continue to exist. It can't. Just like the housing bubble and all the delusional folks back in 2006-7 insisting that the market had bottomed, things were turning around, etc. There is an inevitability in all of this and unless there is an actual mathematical or statistical basis for someone's arguments, they do not hold equal footing with contrary, numerically-based opinions.

Again, the disagreement is not simply about his position, it's about his methodology (or lack of one). I try to second-guess my opinions all the time, but the numbers simply do not support a significant change of mind on the matter.

klarek says

Just by asking what these fundamentals are, I can tell you didn’t know this. So maybe next time you are actually curious and want me to explain it to you in a way that isn’t rude, you don’t shoot the question at me like a complete fucking prick yourself. OK?

I'm not curious as to what you think. I'm curious as to how you can walk through the front door with such a large head.

If you don't want to be treated like a "complete f'ing prick", stop acting like one.

tatupu70 says

klarek says

Scroll half-way up the page. See that big-ass graphic. One, maybe two more months and we will be below 2009’s low mark

Oh, is that how it works? If the line points down, it will continue to point down? Didn’t know that. So, prices will continue to fall forever then?

Har har, smartass. There was nothing prior to the tax credit that indicated the market was going to rebound.

klarek says

Har har, smartass. There was nothing prior to the tax credit that indicated the market was going to rebound.

SF ace says

If you look at the august pending sales index in the west, it is 101.1 in August 2010. vs. 100.4 in March and 107.9 in April. In other words, the effect of the tax credit expiration is already gone by fall as the August pending will convert into sales by around October. If the pending home sales trend continue into September (which is likely based on mortgage application indicator for purchases which have been rising), we will see the same type of sales in May, June for homes sales this fall, which would not lead to double dip prices. At best it would approach the March 2009 low.

Here's some evidence that seems to contradict your foregone conclusion theory... It's why I'm not convinced we're in for another large drop in prices.

EightBall says

If you don’t want to be treated like a “complete f’ing prick”, stop acting like one.

I had nothing bad to say to you until you approached me like an asshole. My tone to other people isn't always nice, but I get frustrated with bullshitters. If you don't like that, then either ignore it and talk to me like a normal person or don't talk to me at all.

EightBall says

I’m not curious as to what you think.

Oh really?

-You have provided some sophisticated analysis as to why it wasn’t the bottom?
-How do you arrive at this conclusion?
-Where did you get this? Is this not your opinion - given in the same manner which you evidently despise?
-Where are the facts to back up the “10-15% overpriced” - and are we going to be at the 10-15% overpriced level or back to where we should be? Or is this only in DC?
-What is your point anyway?
-What are these fundamentals?

Yes, you were curious. And thankless.

tatupu70 says

Here’s some evidence that seems to contradict your foregone conclusion theory… It’s why I’m not convinced we’re in for another large drop in prices.

And it was a good anecdotal case.... for a particular market. From NAR. I do not ignore points like that, but they aren't exactly overwhelming evidence that the market is near bottom. Give it a few more months of Case Shiller reports without govt interference (and, let's not forget, with rates this low prices SHOULD be increasing on their own), and see what happens. The writing is already on the wall.

klarek says

I had nothing bad to say to you until you approached me like an asshole. My tone to other people isn’t always nice, but I get frustrated with bullshitters. If you don’t like that, then either ignore it and talk to me like a normal person or don’t talk to me at all.

I'm frustrated with bullshitters, too.

klarek says

Yes, you were curious. And thankless.

I'm thankful I remembered the ignore feature. Good bye.

How do fundamentals, past data, theroy, graphs, charts and history help forcast this pozi market built on fraud.

everyone here still speak as if this is a free housing market/ economy that adhears to the natural forces of supply and demand.

How does one plug fraud into a forcast for the future?

EightBall says

I’m thankful I remembered the ignore feature. Good bye.

Door, ass, way out, don't hit, etc.

Katy Perry says

How does one plug fraud into a forcast for the future?

Ignore the fraud. Focus on the moving parts that are real. When there are no more left and it all becomes fraud, buy shotgun and eat soylent green.

klarek says

Give it a few more months of Case Shiller reports without govt interference (and, let’s not forget, with rates this low prices SHOULD be increasing on their own), and see what happens. The writing is already on the wall.

Fair enough. The writing on my wall just says something different I guess.

I never for one second back in 2007 considered the possibility that the government would not intervene. Anyone betting on that assumption was making a big mistake.

Sorry, but nobody anticipated the degree to which the government would intervene, including experts like Meredith Whitney who've admitted as much.

Austinhousingbubble says

Sorry, but nobody anticipated the degree to which the government would intervene, including experts like Meredith Whitney who’ve admitted as much.

Exactly. My assumption was that the free-market (Republicans) in Congress and/or the same in the White House (Bush) would let the free market rule, since that has always been their stated principle (hah).

Instead what we got was the Fed buying multiple triliions - TRILLIONS - worth of crap mortgage bonds at crazy over-valuations and thereby forcing effective mortgage rates down to near unprecedented levels around 4.5%. Plus various incentives, such as the $8k tax break, to get the suckers back into the game.

This massive socialization of the losses stopped the free-fall in the prices, but as we see, there is still downward momentum in the market.

justme says

The Case-Shiller index for July-Aug-Sep should be out later this week. Calculated Risk predicted it would likely show dropping prices again, even though there would be a small tail of the tax-credit-induced transactions in the data. We shall soon see.

Correction: It is the June-July-August data that is out today. Someone will surely start a thread on this topic.

Bap33 says

wait wait wait one second …. I know that one of you kept telling me that the homebuyer credit was not making any difference. Whats up with that?

Dude, when prices go up, it is not because of homebuyer credit. When they fall, though, it is because the homebuyer credit went away. House prices must always go up, the bottom must always be in the past. It is always a great time to buy whatever the nice salesman is selling.

Stop keeping notes and asking so many questions. Sheesh...

I know it's just anecdotal, but I am definitely seeing the higher end homes in my working class area of the Bay Area (those in the 350-450k range) sitting a lot longer, and go pending only to end up active again.

The home we were considering making an offer on I was sure would have an offer right away, it's a nice home on a nice lot and is in move in condition, and is priced at it's 1999 asking price. The first weekend open house had a few lookers there, we went back to look at the house again at last weekends open house and it was empty.

The upper end in my area is now close price wise to the lower end of Lamorinda and the WC/Pleasant Hill prices. There was a serious disconnect for a while between the lower end (which was/is back to pre-2000) and the mid-higher end that was maintaining 2002-2004+ prices. I see that dynamic starting to crack.

Everyone has to live somewhere. The houses will be still occupied either by owners or renters. There will be always homeowners that need to move because of the family circumstances (new job, marriage, divorce, etc.). If they can not move because they can not sell, then the obvious solution is to find someone to trade the house with.

E.g. I found a job in Georgia but can not sell my house in Tennessee: let's find someone who wants to move from Georgia to Tennessee and buy each others houses. It is called permanent house swap. Tell me what is wrong with this type of transaction.

If one googles "permanent house swap" a bunch of sites comes up where creative homeowners happily trade their houses. - thousands of postings!!! The falling prices affect them much less than those just sitting in a house that does not sell trying to get last year's price.