patrick.net

More bearish data: http://advisorperspectives.com/dshort/updates/ECRI-Weekly-Leading-Index.php

If you watch the video, it seems like we are headed for a recession. ECRI measures the economic cycle. I regularly look at the WLI (weekly leading index), as one of my lead economic indicators.

From what I understand, the definition of a recession is when the annual GDP expansion is lower than the population growth (be it 1% or 2%). Fact of the matter is, it has been negative for the past few months. We're not growing, we're contracting.

tdeloco says

From what I understand, the definition of a recession is when the annual GDP expansion is lower than the population growth (be it 1% or 2%).

There are probably several definitions that people like to use, but that is not the generally accepted definition. Most define it as negative GDP

SFace says

Calculators and graphs are useless and explains nothing. Application and how things interwined and reaction is more interesting and useful.

That's pretty funny. Ever since you've been on here you've been proffering some rinky dink prediction of imminent appreciation in housing based upon this that or the other chart. Objective analysis of consumer beahavior is not evident in anything you've conveyed. It's just up up up with you.

SFace says

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.

There isnt anything new form the above points. They been around for decades.. still prices do correct to the long run. Where you born yesterday ? sure sounds like it. From the local economic boom of the 80s to the eventual corrections, it has happened all before.

tatupu70 says

RentingForHalfTheCost says

Data changes my mind. The real kind, not that fake stuff.

There's the rub. Any data I show will be the "fake" kind. Any data you show will be the "real" kind.

Or stated another way--any data that agrees with your viewpoint is real, any that opposes your viewpoint is fake.

Now you are showing that you are suffering from the exact things you are claiming I am suffering from. Instead of making up situations and assuming behavior, show some data! I got more than the 20% in waiting, and if you can show me data that it makes sense to buy in the BA, shit I'll use you for the realtard. ;)

tatupu70 says

There are probably several definitions that people like to use, but that is not the generally accepted definition. Most define it as negative GDP

Ok, so I was wrong.

What I'm trying to say is that there is a need to increase the GDP relative to the growth of the workforce. This shouldn't be the population growth per se, but the difference between the people entering the workforce minus leaving the workforce. If the GDP remains constant despite the increase in workforce, then either real unemployment is growing or everyone's salary is decreasing.

Workforce - 2. (Economics) The total number of people who could be employed

RentingForHalfTheCost says

I got more than the 20% in waiting, and if you can show me data that it makes sense to buy in the BA, shit I'll use you for the realtard. ;)

No--I certainly wouldn't make a recommendation to buy in the BA. When I lived in northern, CA, I rented too.

RentingForHalfTheCost says

Instead of making up situations and assuming behavior, show some data!

The Morningstar article I posted has lots of data.

http://finance.yahoo.com/news/housing-bottom-120000751.html

If you read the article instead of disregarding it, you would have seen the data. Ignore the conclusions if you like, but the numbers don't lie.

tatupu70 says

RentingForHalfTheCost says

Instead of making up situations and assuming behavior, show some data!

The Morningstar article I posted has lots of data.

http://finance.yahoo.com/news/housing-bottom-120000751.html

If you read the article instead of disregarding it, you would have seen the data. Ignore the conclusions if you like, but the numbers don't lie.

I just read and and got a little sick to my stomach in the process.

It is amazing how so much can be said without any reference to data. I kept looking but all I got was fluff. When data did reveal itself it didn't justify the wording. This is a common gimmic by writers because they know people really don't understand the data. They just want someone to say "we are going up", or "we are going down" and not have to think math.

Here are some examples directly from the article. Check out this "no data" writing.
-----
Housing Numbers Continue Climb This Week
This week, there was a lot of housing data, all of it good. Both new- and existing-home sales looked in better shape, as did pricing data from the Federal Housing Finance Administration (lagged and averaged Case Shiller data is due next week). Not only did the January data look great, but also there were massive upward revisions to December's statistics. Last month I was puzzled when some of the originally reported housing data looked incredibly weak, especially given the positive buzz that our homebuilding analysts were hearing from the field.
------

Thinks like "look great", "all of it good", "positive buzz", are all subjective terms and should not be used in reporting on housing.

Here is the teller. After all the hype about the positive conditions and how great the data looks, the writer then shows his true assumption.

"Low Inventories Could Mean Higher Prices". Read it. He is saying "Could" for crying out loud. He can not even say they are, they have, they will. He really isn't saying anything at all, just straight up BS. Here is more from that same BS line. "Low inventories should put a damper on future price declines. Low inventories will also encourage buyers to act more quickly when a desirable house does become available." Lots of cool non-factual assumptions about price direction. This is just bad reporting in my book. To say inventories are short for 2012 when we know the shadow inventory gorilla is walking into the room is crazy. The inventories are going to explode incredibly in 2012, just wait.

Then I did a second read and finally found the data the writer doesn't want the article to focus on. Ready for this? Here it comes and it is buried in the fluff of the article deep in the dungeon.

"Looking at year-over-year, quarterly data, prices declined 2%"

Booyah! Down! This article is so biased I now have to go get a shower to feel clean again. Just sick stuff. Thanks for pulling me in there and justifying my claims. Ugh

RentingForHalfTheCost says

Booyah! Down! This article is so biased I now have to go get a shower to feel clean again. Just sick stuff. Thanks for pulling me in there and justifying my claims. Ugh

Wow. So, I take it you didn't listen to my advice then:

tatupu70 says

Ignore the conclusions if you like, but the numbers don't lie.

The article actually contained a great deal of data. It didn't agree with your thinking, however, so it appears you ignored it. Which is your right.

One other thing that I did a doubletake on--it's bad reporting to conclude that lower inventories might lead to higher prices? But it's good reporting to claim that the shadow inventory gorilla is about to explode?? Really?

tatupu70 says

RentingForHalfTheCost says

Booyah! Down! This article is so biased I now have to go get a shower to feel clean again. Just sick stuff. Thanks for pulling me in there and justifying my claims. Ugh

Wow. So, I take it you didn't listen to my advice then:

tatupu70 says

Ignore the conclusions if you like, but the numbers don't lie.

The article actually contained a great deal of data. It didn't agree with your thinking, however, so it appears you ignored it. Which is your right.

One other thing that I did a doubletake on--it's bad reporting to conclude that lower inventories might lead to higher prices? But it's good reporting to claim that the shadow inventory gorilla is about to explode?? Really?

I didn't conclude that lower inventory leads to lower prices. They were the ones making the conclusions. I posted the actual factual results that prices are still dropping yr-to-yr. If you disagree with that fact, that that is your choice.

About inventory. We are not dropping in inventory Sherlock like the article is trying to say and the basis for all the positive comments. The inventory in California alone is at a 9yr supply. 9 yrs! We are all screwed in my opinion.

http://www.doctorhousingbubble.com/california-has-nearly-9-years-of-housing-supply-58-county-mls-supply-and-foreclosures/

tatupu70 says

The article actually contained a great deal of data. It didn't agree with your thinking, however, so it appears you ignored it. Which is your right.

I wish I had ignored it. It proves to me that people are dishonest. Maybe not solely intentionally, but it still makes it dishonest in my opinion. I have a EE degree, a degree in mathematics with a specialization on statistics. How the general public throws around numbers to make hair brain conclusions is amazing to me. What really pisses me off is that this main stream reporting is what all my friends and relatives use to make their purchase decisions in life. There are a small percentage of people that have enough critical thinking training to see through this stuff easily. However, the vast majority, most of my relatives and friends, don't have that training.

To me it is just like the denial of smokers in the 80's and early 90's. The real hurdle to get over was to actual convince people that smoking was bad for their health. Even after so much evidence that proved without any doubt, they still were bombarded by a few reports from people with a vested interest saying things were not conclusive. They hung onto them reports like it squashed all the good science that was already done. You know what it finally took? For people to have friends and family around them get seriously sick and die, unfortunately. Now, you ask anyone if smoking is good for you and everyone knows. Back then, it was 50/50. I wish everyone knew how to filter the data. It would make us all a little sharper and maybe stop or slow down these boom/bust cycles that almost kill us all.

RentingForHalfTheCost says

I didn't conclude that lower inventory leads to lower prices.

And I never said that you did.

RentingForHalfTheCost says

About inventory. We are not dropping in inventory Sherlock like the article is trying to say and the basis for all the positive comments. The inventory in California alone is at a 9yr supply. 9 yrs! We are all screwed in my opinion.

The article wasn't talking about CA. inventory, so let's try to keep with apples to apples. Do you dispute their inventory numbers?

RentingForHalfTheCost says

I just read and and got a little sick to my stomach in the process.

There is nothing wrong with that article. It is weakly positive, but positive none the less. No need to shun it. Just point to the mountain of data pointing in the other direction, otherwise you're discrediting yourself.

tatupu70 says

If you read the article instead of disregarding it, you would have seen the data. Ignore the conclusions if you like, but the numbers don't lie.

I read it and thought the article itself barely justified the headline. I won't argue with you or anyone about the article any further.

CrazyMan says

Tina, sounds like you're a RE agent that has something to lose as well.

Nope, not an agent. Just someone who agrees with SF Ace. I think he's smart enough to realize that a post on patrick.net is not going to affect the BA market overall.

tatupu70 says

Do you dispute their inventory numbers?

No, not at all. Although, they are ignoring the shadow inventory lurking but that is fine.

What I am disputing is that they are trying to say a bottom is happening. Now, when someone says a bottom, I am thinking in pricing. As a potential home buyer I just need to buy one home for a good price. How many homes are being sold (sales) is nothing to do with a bottom to me. It could infer that we are close to a bottom when you back date the data with historic patterns (never done in this article), or it count infer many other things also. Like for instance that many home owners who would be sellers are trapped and defaulting and living in their homes for years without being foreclosed. Hence, why the shadow inventory is important here. If you are going to grab at lower inventories as a positive then wouldn't it be good to understand why they are lowering? That is just how my brain works. They are not lowering because people are excited to buy. They are lowering because less people can sell (underwater mortgages). That is nothing but a negative. We know this because there is continual downward price pressure (medium values are down, 2.4% just in the last Q).

http://www.bloomberg.com/news/2012-02-23/home-prices-in-u-s-decline-2-4-as-focus-shifts-to-distressed-properties.html?source=patrick.net

The people that can sell are dropping their prices to meet the buyers. That is not the sign of health, exactly the opposite.

So, my dispute is that they are highlighting a rise in sales, lower inventory and then jumping to incorrect conclusion about what to infer out of that data. Their data is actually fine. Good data, just doesn't mean what they think it means.

tdeloco says

RentingForHalfTheCost says

I just read and and got a little sick to my stomach in the process.

There is nothing wrong with that article. It is weakly positive, but positive none the less. No need to shun it. Just point to the mountain of data pointing in the other direction, otherwise you're discrediting yourself.

That is true. I'll refrain from the colorful language and just stick to facts. It is easy to try to add entertainment sometimes.

tdeloco says

tatupu70 says

If you read the article instead of disregarding it, you would have seen the data. Ignore the conclusions if you like, but the numbers don't lie.

I read it and thought the article itself barely justified the headline. I won't argue with you or anyone about the article any further.

I'm glad others see the disconnect. You see barely, and I see no where close. Maybe I'm a bit spoiled because I hold this type of reporting partly responsible for the mess we are in now.

RentingForHalfTheCost says

How many homes are being sold (sales) is nothing to do with a bottom to me.

As someone well versed in statistics, I am surprised you would say that. I can almost guarantee that there is a correlation between home sales and prices (especially prices 3-6 months later).

RentingForHalfTheCost says

If you are going to grab at lower inventories as a positive then wouldn't it be good to understand why they are lowering? That is just how my brain works. They are not lowering because people are excited to buy. They are lowering because less people can sell (underwater mortgages).

Well, that's certainly one opinion. You could be correct, but sales volume is rising. Regardless, supply and demand rules are pretty simple--as supply decreases (with constant demand), prices will rise.

RentingForHalfTheCost says

(medium values are down, 2.4% just in the last Q).

Do you mean median values? As you probably know, that's not a great indicator. Especially with a large number of distressed sales.

RentingForHalfTheCost says

So, my dispute is that they are highlighting a rise in sales, lower inventory and then jumping to incorrect conclusion about what to infer out of that data. Their data is actually fine. Good data, just doesn't mean what they think it means.

OK--you're free to disagree, but don't complain that nobody is showing you any data.

Any way you slice it, paying $500,000 for a crappy house in a bad neighborhood is crazy. I don't care how nice the weather is.

It probably costs less (per day) to vacation in California than it does to live there.

Want nice weather? Move to North Carolina or Virginia. For $500,000 you can have a mansion. Yeah, summers are humid but that's why there's air conditioning. And swimming pools. And at least the summer vegetation is green.

Take the money you save on housing and use it to vacation in California during the winter.

At this point we're all still guessing- and so too are those who write articles about predictions. There are way too many possible wrenches that could get tossed into the spokes. For example, what if gas prices continue to go up? What if interest rates are raised? What if the foreclosures clogging the market continues to be an issue?

Secondly, when they talk about prices rising they're talking about coming off of a median comprised heavily of foreclosures and short sales- which in many ways has masked the true nature of the housing market. Sure- perhaps a bunch of crappy foreclosures were sold but what about actual middle class type property? The median for the Bay Area last check was around $325,000. In other words, DRASTICALLY cheaper than reality for the types of homes you actually find for sale that any of us would want to live in. If the median for the area goes up another 5%, that makes the median around $340,000? Whoopee.

One more thing I'll add which is strictly ancedotal is that at least around where we live, which is your typical East Bay bedroom community- aka- the "Bay Area middle class" meaning they probably have a couple of cute-ish newer cars in the driveway, a couple of gadgets, smart phones, etc etc floating around the house and 2 kids who attend a respectable local school and thus parents paid more for the house to be near it.... so in other words, semi-affluent by national standards- is that there seems to be a recent spike in short sales and foreclosures - again, at least around our immediate area. This is surprising because we're talking about houses being put up as short sales owned by seemingly well-to-do professionals. Perhaps it doesn't mean anything, but if this somehow translates into a surge in foreclosures and short sales in more affluent chunks of the Bay Area then this too could have an impact on future medians.

I'm really glad that I bought last year. I may buy another rental property if I find something that works but there's no real pressure.

RentingForHalfTheCost says

Not really. It is closer to linear since 1960 and now is actually slowing. Many predict that we will be actually stagnant past 2030.

How can anyone with a straight face predict where housing will be in 2030?!... It's 2012.. that is 18 years away...

What was the world like 18 years ago... It was 1994.. practically no one had a cell phone, the internet was in it's infancy and people were just starting to dial up at 14.4 baud rates on AOL. This blog couldn't even really exist yet... except in BBS or newsgroup form.

The only certainty is that the world will be RADICALLY different in 2030... A ground breaking innovation in energy or technology could turn everything on its head in the next few years.

LAO says

How can anyone with a straight face predict where housing will be in 2030?!... It's 2012.. that is 18 years away...

The topic was about population growth and you can make a good prediction based on the drop in the growth rates of developing countries. House prices I agree, you are lucky to forecast out 1 or 2 years at best. Even then, most people get it wrong.

wthrfrk80 says

Want nice weather? Move to North Carolina or Virginia. For $500,000 you can have a mansion. Yeah, summers are humid but that's why there's air conditioning. And

As someone who endured 35 years of humid summers, I feel compelled to comment, lest someone unwittingly move to the subtropical southeast for the weather. I'm sure it varies greatly depending on the individual, but I don't believe anyone escapes the horrendous reality of a 90 degree day with 80%+ relative humidity. Sure, air conditioning helps (it's pretty much a requirement), but it doesn't prevent developing a sweat-soaked shirt walking from your car to to the entrance of the mall. Some will certainly think I'm exaggerating, but anyone who has lived in the region will be nodding their head knowingly. The degree to which the weather affects you will depend on your lifestyle. If you spend most of your time indoors, I guess it wouldn't be terrible. (though living indoors in itself would be)

I have said many times that if I were to return to the region, I would have to make a summer home elsewhere. It's that bad. September trough November is great, though.

Edit: Wow, I just noticed your handle. Weather freak? Indeed.

tatupu70 says

Well, that's certainly one opinion. You could be correct, but sales volume is rising. Regardless, supply and demand rules are pretty simple--as supply decreases (with constant demand), prices will rise.

Here is another take on the same data. Incredible how the same data can say so many different things. Notice how the author doesn't add his own color or emotion. All of that is added by quoting other people. That is good reporting to me. Keep it just facts. Let the reader decide.

http://money.cnn.com/2012/02/28/real_estate/home_prices/index.htm?iid=Lead

RentingForHalfTheCost says

Here is another take on the same data

Did you post the wrong article? I read it and it doesn't mention housing volume data at all. It really doesn't take any position. "We might be on the verge of a recovery, and we might not." Wow-now that's some serious insight.

Here's the latest data I saw today:

http://news.yahoo.com/sales-contracts-us-homes-2-pct-january-150313677.html

tatupu70 says

RentingForHalfTheCost says

Here is another take on the same data

Did you post the wrong article? I read it and it doesn't mention housing volume data at all. It really doesn't take any position. "We might be on the verge of a recovery, and we might not." Wow-now that's some serious insight.

Here's the latest data I saw today:

http://news.yahoo.com/sales-contracts-us-homes-2-pct-january-150313677.html

No, that was the correct article. Recovery seems to mean two different things to people. To me it has only to do with price. If I am selling I am interested in the price rising, if I am buying then dropping. How many people are out shopping obviously influence the price, but if you say recover then I think price. The original article did not say there was a sales recovery, it was using the sales to infer a recover that had yet to happen. The article I posted is using the same year of data and inferring the there is very little to infer, except price data that keeps going down.

tatupu70 says

Here's the latest data I saw today:

http://news.yahoo.com/sales-contracts-us-homes-2-pct-january-150313677.html

It is yet to be seen if the 2% increase in contracts is because prices are getting softer or there were more aggressive buyers. I think it will show the first. Sellers are getting aggressive and dropping their prices. We will know next month when we see the price data.

swebb says

The degree to which the weather affects you will depend on your lifestyle. If you spend most of your time indoors, I guess it wouldn't be terrible. (though living indoors in itself would be)

The human body adapts to weather... I've lived in So Cal for 10 years now.. So I'm much more thin-skinned and a breezy 60 degree evening requires a sweatshirt or jacket... I grew up on the east coast and remember that being shorts and short sleeve weather! :)

But i agree... once you've lived in a dry, low humidity climate.. It's very uncomfortable going back to high humidity areas.

tatupu70 says

OK--you're free to disagree, but don't complain that nobody is showing you any data.

I'm frustrated seeing that you didn't address the points made about the words used to write the article. It matters when someone writes"This week, there was a lot of housing data, all of it good" but doesn't admit that they are not writing about "all of housing data." In fact, that suggestion is not reasonable. How could a writer address all of the housing data for a week? Isn't that the suggestion based on the words the writer used?

This kind of writing suggests either a limited vocabulary or a limited understanding. Either make it really difficult to connect with observations. Observations are the goal of some data, like I want to observe all of the house prices for the last year. Of course, unfortunately, some data becomes disconnected from what it represents, such as during cases of voter fraud and house prices that represent listing prices rather than selling prices, but there are people out there working very hard to keep them connected.

RentingForHalfTheCost says

No, that was the correct article. Recovery seems to mean two different things to people. To me it has only to do with price. If I am selling I am interested in the price rising, if I am buying then dropping. How many people are out shopping obviously influence the price, but if you say recover then I think price. The original article did not say there was a sales recovery, it was using the sales to infer a recover that had yet to happen. The article I posted is using the same year of data and inferring the there is very little to infer, except price data that keeps going down.

I think the disconnect is that the articles were looking at different sets of data. Looking at last years data, it was undoubtedly a bad year. But looking at forward indicating data--Jan sales volume, Jan. inventories, Jan. pending contracts, it appears that 2012 will be better.

RentingForHalfTheCost says

Red hot

I suppose a declining RE(which he calls it flat) is RED HOT.

E-man says

we know that they will do whatever it takes to achieve their GDP growth objective.

Considering the things that they allow into the definition of "GDP", I think that they will achieve precisely the numbers that they are targeting while the American middle class continues to be ceaselessly gutted.

bmwman91 says

Considering the things that they allow into the definition of "GDP",

The Fed is serious about the output gap.

Output gap is the difference between actual GDP and potential GDP, where potential GDP is a long-term trendline growth.

They want to close this output gap, with whatever it takes.
Doesn't matter if its nominal or real :)

E-man says

Don't fight the Fed.

In the United States, aren't the people "the Fed?" So will there be a point where the people get it or will we return fully to rule by the aristocracy?

SFace, I would actually be A-OK with something in the $600-700k range. As of now, the only stuff in that price range in the South Bay is either directly in SJC's primary take-off path, within 50ft of a highway or major throughfare or a unit with serious structural issues. Houses, even if they are still kind of shitty, that are not on a major street or next to a highway are looking to carry an $800k minimum. Honest to god, the only houses that have appealing features and location to us are listed in the $1M to 1.2M range today. Too bad we didn't make a move a year ago when inventories were waaaay higher. Now we get to battle it out with all the other DINKs for the scraps.

We have a couple of relatives that are RE agents. Hopefully they can help us find something that hasn't hit the market yet. I'd be fine with targeting underwater owners in areas that we like to see if they would be interested in a short sale and negotiating that out. Our rental lease lasts until August, although we could just bail early if we found something decent.

And Texas? No thanks. Washington and Colorado are the two places we were looking at. Why? Life in the SFBA is hectic and full of douche bags with nothing better to do than make money and try to flaunt it. Over-the-top liberalism is also not on my list of favorite things, and CA in general looks like a sinking ship. Everything in life is a compromise, and at this point I think that the "people" here are more of a pain in the ass than the harsher winters in Longmont, CO. My wife has already said that she would be 100% fine moving to the Seattle area. Colorado...would be a harder sell lol.

Sorry about my bitching and moaning. It's annoying as hell to watch the already broken housing market become deliberately broken further, and ultimately at my expense.

Oh and SFace, you are probably right about me ending up in a $1MM house in the next 5 years lol. Given that we could put 20% down on one now, and I have a friend that can get me a below-market APR on a 30 year, it might just happen. Find me something on an 8000SF+ lot, 2 car garage (preferably detached), mature trees and a pool in Sunnyvale, Campbell or Mountain View and I'm sold. My friend in the lending industry keeps advising me to wait until after 02/2013 though...need to see how the fiscal cliff, QE4Eva and some other structural lending changes pan out or something. Gotta go visit him & have a beer to find out more lol.

bmwman91 says

Life in the SFBA is hectic and full of douche bags with nothing better to do than make money and try to flaunt it. Over-the-top liberalism is also not on my list of favorite things, and CA in general looks like a sinking ship. Everything in life is a compromise, and at this point I think that the "people" here are more of a pain in the ass than the harsher winters in Longmont, CO. My wife has already said that she would be 100% fine moving to the Seattle area

Yep. A Region of Fools. Welcome to Silicon Valley.

B.A.C.A.H. says

Yep. A Region of Fools. Welcome to Silicon Valley.

It is also called Silly Valley for a reason.

heh. be careful bmwman- I think you might have some of SFace's ass pennies in your pocket (or are you using the Black AmEx these days?)

https://www.youtube.com/watch?v=DO1Q7F23DxM