patrick.net

Now my posting of Lereah’s biography is redundant. Oh well.

Huh? Are you starting with my SQT? :)

I’m getting phone calls from people in California every week. Hell, I’m getting phone calls from people in Idaho and several other states. People who are getting out of overinflated bubble markets and investing where there’s money to be made.

At cursory glance, I see some conflict with one location being a "bubble market" and another "where there's money to be made".

I don't want to lump ScottC in with cheerleading realtors around my locale, but by now any informed buyer should question those who pull a host of buzzwords from their hat to support a continued runup in prices. I live on the SFBay, in one of the priciest, over-hyped economies (and housing markets) around. It's not like we haven't debunked this all before.

SQT, I thought what you meant by "take it out" meant delete it and that was what I expected you to do. If you want, you can delete it....I give you permission. :)

For a bit of unintended humor, check out this woman's approach to seller her home. Apparently, she's part of the deal:

http://tinyurl.com/852bn

Some choice quotes:
"There was only one problem…I had not met that special someone to share this house with"...
"You might be wondering why I have my listing at $600,000.00 plus myself for bid as “priceless”. First, I estimate the value of the house with furnishings at approximately $600,000.00. When I asked my girlfriends their advice on what I (the “bride”) was worth, most responded that I was “priceless”."

Perhaps she's priceless, but "Mr. Right" is required to fully subsidize her overpriced home and decorating expenses? LOL!

People come to this blog and write the most ridiculous things about real estate and hurl the most vicious insults at realtors

ScottC, you insist that we respect who you are, that you are somehow different from the realtors we bemoan, yet you abuse us and possibly our intelligence with such long-winded sermonizing, ad hominem, and pitches that already sound old and worn to my ears:

"Are you missing out on the real estate boom? You are if you’re not investing in the Central Rio Grande Valley.

Most likely you don’t have any money."

Seriously, if you "just gave [us] information [we] won’t find anywhere else," why should other investors, business care about it? This so-called "money nucleus" should be getting large amounts of media attention, shouldn't it? Sorry, I don't buy it.

Kurt says, "Sorry, I don’t buy it."

But he can't be lying; he's a real estate agent. They're required to take ethics exams.

First Agent : Did you pass your ethics exam?
Second Agent: I passed my ethics exam, but I cheated.

Do you want to invest in real estate? Where? I just gave you inside information on one of the hottest markets there is. I just gave you information you won’t find anywhere else. You won’t find out what I just told from the news media. You certainly won’t find it on any real estate blog. You won’t find it on any current report from NAR or BusinessWeek, for that matter. You won’t find it in Tierre Grande, the magazine of the most prestigious real estate school in the state. Because it’s not being reported.

Isn't this a real estate blog?

ScottC, we are not looking to make money in real estate...we are not flippers! We are people who just want to buy a decent house at a normal (real) price using normal financing.....So save the snake oil for the flippers, we aren't buying it!

ScottC

Which Mexican cities have the most factories from which the goods will come?

It seems that El Paso, Laredo and McAllen have good positions as trade gateways. Which one has the best roads leading north? It looks to me like 35 from Laredo through San Antonio is the best route at this time. And that the roads through Monterey are the best routes from inside Mexico. Is that the case? Which city is expected to have the best roads after the upgrades?

For those who haven't seen it, here's an excerpt from the PBS Lereah interview yesterday.

GWEN IFILL: For months, economists and homeowners have been on the hunt for any sign that the nation's robust housing boom may be going bust. This has week has brought mixed news.

The Commerce Department reported today sales of new homes rose a record 13 percent in October, but yesterday, the National Association of Realtors reported sales of previously owned homes fell by nearly 3 percent in the same period. What to make of all of this? For help, we turn to David Lereah, the chief economist for the National Association of Realtors.

We heard bad news this week. Let's run through that. We heard that luxury home forecasts are down. We heard that existing home sales have dropped off. We heard that the inventory of unsold homes has increased. And then we hear this news today. What are we to make of that?

DAVID LEREAH: Well, first, most of the news has been softening in the housing sector. It's beginning to slow down. The boom is -- has peaked and we're starting to see some slowing. The news we heard today were new home sales. They were contracts. It was based on a very small sample that the government conducts. And it's subject to very, very large revisions.

So any economist will tell you that the new home sales release is probably going to be revised downward next month. So I wouldn't put too much stock into that number right now.

GWEN IFILL: Why do we measure new home sales differently from existing home sales?

DAVID LEREAH: New home sales are contracts and existing home sales are the actual closings when you actually sign the papers and move into the house. We do have pending home sales on existing homes which are contracts. It may sound complicated but next week we will come out with those numbers. Those numbers, I suspect, are not going to be great numbers.

They're not going to be 13 percent soaring activity like new homes so I suspect the new home sales numbers will come down. I don't think it's reasonable right now.

------------

The rest can be found here:

http://www.pbs.org/newshour/bb/economy/july-dec05/housing_11-29.html

How much of the trade will originate in Mexican factories located near the border? Of these, how much is near McAllen vs Laredo vs El Paso?

Recent quote:

"Right now, the market is caught up in the psychology of a bubble. You see the fastest increases just before the collapse. If you look at the past, the Nasdaq crossed 4,000 around the new year in 2000, and then two months later, it had already crossed 5,000. Suddenly in mid-March, the Nasdaq plunged 15%, and it was downhill from there." - Dean Baker, co-director of the Center for Economic & Policy Research.

New home sales are based on survey data. The margin for error is high. The data is not reliable in any one month. Next month will probably be lower then usual.

Builders are more likely to be realistic about reducing their prices (or offering more for the same price) than are the sellers of existing homes.
So we could see a market where new home sales volume will hold up better than existing home sales for a while.

Frank, Dean Baker? Get real... You would go broke following his advice. He has been extremely wrong for years.

Was it really skinned, or just a chihuahua?

Frank, Dean Baker? Get real… You would go broke following his advice. He has been extremely wrong for years.

Dean Baker is not wrong.....He can only make guesses as to when the bubble bursts (already has). No one can predict exactly when a bubble will burst, if they could, they'd be the richest SOB in the country!

Market turns are inevitable. When making predictions about market turns it is the timing that matters. A prediction with bad timing is worse than no prediction at all. Dean Baker has been terribly wrong on the timing of the real estate market for several years. It's hard to be that wrong.

Mr. UP, Dean Baker was right there with him. Telling people to get out, right before the strongest up market in history.

If you want to make money read Dean Baker's advice, and then do the opposite.

Here is a good prediction by Dean Baker standards: "It will rain heavily next week."

When it fails to rain... "oh well, my timing is off a little, but it will rain NEXT week."

When it again fails to rain heavily... "Oh this can't go on forever, it will rain heavily next week..."

And so it goes until finally the inevitable does occur. So, eventually it will rain heavily and the prediction is declared accurate! He was just early.

Allah, Guessing is not predicting.

Allah you said: "No one can predict exactly when a bubble will burst, if they could, they’d be the richest SOB in the country!"

I agree. However, while nobody can predict the exact moment accurately and consistently, many people come close on a regular basis.

Remember when all those people were buying into the tech stock bubble... buying at the top? Someone was selling stock to those buyers in equal quantities. For every loser fool there is a smart winner.

It has been said that if you took all the money in the world and distributed it evenly among all the people, before long the same people would have most of the money again.

Mr.UP, I agree with you about sounding right vs. being right. It does me little good to sound right. I make my money by being right. For three decades I have had the good fortune to be either very right or very lucky (or both).

There is always luck. In order to reduce the adverse luck factor I put a lot of effort into knowing as much as possible about the things that affect my investments. That way the luck mostly goes my way.

...and then you must have the discipline to follow a plan, and the guts to act on your beliefs.

I have also started a few businesses -- always for large corporations or investors. I once raised $100 million from VCs (they are bastards) to start a financial services company. While I do not work in real estate, it is more than a hobby. It has been the cornerstone of my investment portfolio for three decades. Although, I have actually invested more money into stocks, and into bonds but ended up with more money in real estate than both combined due to superior returns (on a leveraged basis).

Zephyr,

Ask any economist why his prediction didn't pan out, and he will probably say “trends changed”. This is why an economist’s qualitative predictions can never be precisely on target. Economists work within a framework of assumptions and when many of those assumptions turn out to be wrong, their predictions suffer. Inflationary bubbles are notoriously difficult to predict because bubble psychology causes illogical behavior in market participants. In trying to predict the end of the current housing bubble, assumptions have been incorrectly applied by many a good economist. Baker therefore is in good company. I value Baker (or anyone else for that matter) as an economist not for his predictions, but for his interpretation of available information in light of his assumptions. Looking at a macro economic prediction solely in a right or wrong, black or white manner is for gamblers – not people who desire an understanding of what is really going on.

Mr.UP, Nice chart. When you factor in rents and dividents the gap narrows. I once asked Jeremy Siegel (Economist and author of Stocks for the Long Run) how the total returns compared for stocks vs Real estate and he said roughly one percent over the long run.

I hate to breakup this love-fest between Zephyr, Mr. Up, ScottC & Bull$hitter, but Robert Shiller and Dean Baker have NOT been predicting a real estate market crash for the last 8-9 years.

Shiller's revised edition of Irrational Exuberance just came out this February, while Dean Baker, while admittedly sounding the alarm early (Aug 2002 is the earliest published work of his I could find of his on the subject --see cepr.net/pages/housing_bubble.htm), is not incorrect in calling a bubble a bubble. I'm not familiar with Rosenberg, so can't comment on him.

I don't agree that warning a young family against committing financial suicide by NAAVLP(tm) right now is "zero useful, actionable information". However, I do agree with being right vs. sounding right and having a plan, regardless of where the market goes.

Cheerio...

Frank, Even with great respect for economists I like this quote:

"An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today." -- Dr. Laurence J. Peter, Author of The Peter Principle

HARM, Yes. Baker was about three years too early.

Also worth considering --Mr. Up's very cool graph includes all the recent RE price gains to the peak of the current bubble. As a result, the gap between stocks vs. RE will no doubt grow even larger in years to come.

Mr.Up, Yes. Total return without the use of debt. Stocks beat real estate by an average of one percent per year. These are based national averages.

Zephyr,

Nice quote --maybe I should add that one to the Quotes thread.
I don't live and die by the words of any economist, either --not even my hero, Shiller. ;-)

HARM, It pays to read the thought of many economists.

Ultimately we will all be wrong in our predictions. The trick is to be wrong by as little as possible.

One of my personal favorites

In all recorded history there has not been one economist who has had to worry about where the next meal would come from.
--Peter Drucker

Ultimately we will all be wrong in our predictions. The trick is to be wrong by as little as possible.

The trick is to not be wrong on the one investment that could ruin the rest of your natural life!

Out here in Calif., your game wouldn’t work. People are too smart and too educated.

Actually there are fools everywhere in this country as evidenced by the insane use of IO/NA loans. These people are dumb for using them, and while heading to foreclosure, they are even dumber to allow themselves to get screwed again.

oh great, so we are suppossed to admire two men that bordeline cheat the system? and we should admire that more of our wilderness is being eaten up by encroaching civilization, endangering the survival of many magnificant species, so more people feel enspired to move out and try to bring all the trappings of the modern world with them destroying precious habitats, building huge houses that sit vacant most of the time?

First time I saw Fannies stock go to high risk alert.