patrick.net

Prices in Bay Area will go down 50% (from the top last year) in 2 years.

Who needs a psychic? LAY and Lereah *know* that RE only goes up.

I see a "reset" letter in your mail. I see your eyes bulging and face turning white. I see you grasping your chest and dropping to your knees in great agony. I see you writing suicide note and putting head in oven...

here's a story on significant Oz price crash -- thank god for the herald...

Housing crash puts sellers in debt crisis

"A THREE-BEDROOM brick-veneer house in St Clair sold for just $260,000 at the weekend - down about 42 per cent from its last sale at $450,000 in 2003 in a further sign of the depressed state of the Sydney property market.

Only one person bid on the house in the city's west. The mortgagee sale was forced after the owners could not meet the interest payments on the $405,000 they borrowed to buy the house at the peak of the market.

Auction clearance rates are hovering around 48 per cent since the recent interest rate rise, but plummeting property prices have meant many vendors are confronting negative equity, where they owe more on the property than it is worth.

The Herald checked 16 properties in south-western and western suburbs listed at the weekend and found 60 per cent had prices or had attracted offers at a discount to their last sale price.

Even the inner-suburban areas are showing signs of depressed prices. In Lilyfield a four-bedroom house on 607 square metres last sold at $1,355,000 unrenovated in boom-time 2003. It attracted a $1,179,000 top bid after its recent renovation by its owner-builder."

and another one:

States accused of 'diminishing' home dream

"Prime Minister John Howard has blamed state governments for making home ownership a "diminishing dream" for young Australians.

Mr Howard told the Labor state governments to stop bowing to pressure from environmental groups and make land available for new housing.

He said the cost of land in Sydney had risen 700 per cent between 1973 and 2003 and was the main reason first-home buyers found prices unaffordable, not the recent jump in interest rates."

Note that the selfsame PM a few years ago in a televised radio interview said "none of my constituents are complaining that their house prices have gone up" and shrugged -- completely uninterested. Now he is devastated by the boom and wants to blame the states for not releasing enough land...

Maybe one of us should call one of those 1-900 psychic hotlines and ask them directly about the housing market.

Maybe we should all make a group call to Ms. Cleo to find out.

Glen,

Our guests from LV would largely agree with your overall assesment but would greatly compress your timeline. They say that virtually nothing is moving, prices are falling and projects are being abandoned left and right. There are so many homes on the market already and they fear that spring 2007 will really begin to accelerate the process as the I/O and ARM's begin to have an effect. So much of what drove their market was the "equity locusts" (primarily from SoCal) that have NO commitment or ties to the area other than easy money! They are already starting to see specuvestors simply walk away.

We can reasonably conclude that the chronology may differ from market to market but the events (and the pain) will be pretty universal.

I thought "Ms. Cleo" was doing time?

Our guests from LV would largely agree with your overall assesment but would greatly compress your timeline. They say that virtually nothing is moving, prices are falling and projects are being abandoned left and right.

I may be too conservative in my assumptions. But I am just mentally preparing myself to bubble-sit for the next decade. If I have the opportunity to buy sooner, I probably will. But as they say, the time to buy is when you really don't want to. Fear and insecurity will be peaking, credit will be tight, you won't feel secure in your job, you won't be sure you want to stay in California, etc...

I think the "2007" part of my prediction is already sort of starting to happen in places like Vegas and Sacramento. I see these areas as "less desirable" than, for instance, SF, LA, OC or SD. The more desirable areas will get hit too (and hit hard), but later in the cycle in my opinion.

You just noticed that? It has been primarily asian for about fifteen years. San Marino, Chinese. Hacienda Heights,Industry,Diamond Bar, San Gabriel, and Rosemead Vietnamese.

Been gone about eight month I still keep tabs on the southland. And Like my fellow bloggers waiting for sanity to return to real estate in so cal.

Miss Cleo:

http://www.ebaumsworld.com/mscleo.html

Glen,

I'll have to agree. I'm not sure I would use the term "less desireable" but given their economic bases are more built on state employment in Sac's instance and tourism in Vegas's case you could assert that these areas are "less essential".

Am I mentally prepared to bubble sit for the next 10 years? I know I'd rather not and again I'll add that this is a time when many bloggers here should be building their net worth with each passing month and in our own way each is pursuing exactly that. I will say that I've "bunched" about as much as a self employed person can on to their "Schedule C" and really have to consider going back to "Schedule A" but I still refuse to buy a minute before it makes sense! I can always beef up my SEP contribution and my wife (her 401K) to reduce pre-tax income.

Great for me, I'm self employed! Many here are not and are no less deserving of their rightful place in the sun. I hate to beat this to death but we are mostly at an age where more and more of our income should come from our investments and less and less from 1099/W-2! Until "owning" makes sense we'll be on the sidelines. We're not at an age where we can afford to make a 100/200/500K "mistake". Is there EVER a right age to do that?

DinOR,

The obvious best time to make 500K mistakes is before you turn 11. That way, you can declare bankruptcy and still have a clean slate for college credit cards. :)

My stand point is that bubbleheads should sit out until they get some hint of how the economic macros play out. That's not necessarily the bottom, but it should be when things moved along sufficiently to afford some prospective. Also, given CA's crazy weather pattern, maybe it's best to hold off on paying that BA nice weather premium, just to make sure it's still around in another 10 years.

Actually, I forgot that creditors can't go after minors in most states. So I guess anytime before 18 is fine, if you get a creditor stupid enough not to demand a co-signer.

astrid,

Well that's ONE way to go about it! My point more simply is that if your home isn't really appreciating what sense does it make to pour money into it when you should be funding your retirement, etc?

There was a time when folks actually considered diversifying their investments but as the HB gained momentum there were RE investments and then there were "bad" investments. "Bad" meaning anything that isn't on track to double in 3 years.

If I were to purchase at this point (yes even if one of my or Randy H's lowball offer were to be accepted) I would still be "over paying". Every dime that goes into this over payment means a dime NOT going into my retirement! How do we determine how much we're over paying? Hard to say. I get the sense we'll know more come Spring of 2007. So as it stands we have George's Summer of IT, The Fall of...... What? The Winter of Huh? and The Silent Spring Part II (The Reset Reckoning).

Ever notice how titles to sequels need to "ramp up" the fear factor?

The best one I've ever seen was Scary Movie 4 (Last of the Trilogy)

astrid,

One of the most ridiculous "minors with money" article I'd ever seen was in a mag. called "Wired"?

The title was something like:

Should your minor child be allowed to daytrade his UGMA Account?

Uh, excuse me? Can you say "flagrant violation"? Pffft. Whatever. This article was actually in their March 2000 issue and should have served as the ultimate contrarian indicator!

*UGMA (Uniform Gift to Minors Act)

Skibum - thanks for the link. My favorite Cleoisms "Ya that's the daddy" and "Is he incarcerated?"

SGVPatience-

Hello from Alhambra!

Obviously, I've noticed it too. But I do think the second generation immigrants will all assimiliate. My wife's famiy (Hispanic) has not really assimiliated, my mother-in-law does not speak English and her dad (a US citizen who grew up in Mexico) became fluent in English after serving in the Army but still watches TV exclusively in Spanish, reads the Spanish-language newspaper, etc.

But immigrants' kids all speak English and all assimilate.

Assimilation happens slowly. The first generation often never assimilates, not really, especially if there is a large immigrant community nearby. The only immigrants who really assimilate are those who don't have a support system, i.e. if you grew up in Sweeden and moved to LA you pretty much have assimilate becuase there is no large Sweedish community here.

The second generation assimilates a lot more. But even this takes a little time. People who grow up in an all-Chinese or all-Hispanic neighborhood they feel a little uncomfortable after suddenly being thrust into a more diverse world and tend to hang around with other people with similar backgrounds in college, etc. But as the years go by, people become more comfortable in a more diverse setting and get used to it.

By the third generation, most people have only a pro forma relationship with the old country. You can already see this happening in SoCal's Japanese community. Japanese-Americans are all driving monster trucks in the Inland Empire these days, no one speaks Japanese or has any real ties to Japanese culture any more. My wife grew up in a town (Monterey Park) that used to have a large Japanese-American presence, and we went to the Cherry Blossom Festival a couple of months ago. It was so lame, there was nothing but bad tereayki and funnel cakes, it was no different from any county fair or Oktoberfest, you certainly didn't feel as if you had been transported to Tokyo.

The Asian residents of SoCal will all assimilate eventually, as will the Hispanics.

Funny, I thought we had a "wait til' 300 posts" rule for threads these days. Not only did Peter P kill my C.A.R. thread at 98, but he closed his own "condo" thread at 58.

Funny, I thought we had a “wait til’ 300 posts” rule for threads these days. Not only did Peter P kill my C.A.R. thread at 98, but he closed his own “condo” thread at 58.

Threads are too quiet nowadays to wait for 300 comments. By the time we have 300 comments, the bubble will be long gone and hell will be cool. :)

I used to think Buchanan was a nut, now, with his criticisms of the neocon foreign policy and his criticisms of the Bush administration’s CAFTA ‘open borders’ plans and amnesty programs the guy is sounding rational.

A closed border policy is not necessarily good because it costs too much (to implement, to enforce, to endure). The problem is in the welfare system.

Psychic -

"I'm sensing a lot of negative equity, err, I meant energy"

San Francisco: Prices will slide slightly or hold steady. This is basically because it is a concentration of really rich folks who have no real need to sell.

Actually, many rich people do not like to buy when they think the prices are too high. Remember, they do not NEED to buy. Also, they do not NEED to hold on.

Moreover, much of the housing stock in San Francisco will not appeal to rich folks. And they have better time to do than specuvesting in real estate.

I don't know exactly how "quiet" things have been lately?

We've had some great cameo appearances by some incredibly stupid and determined trolls that remind me of Japanese soldiers still hiding out in the Philippines awaiting the Emperor's Orders (until the 1970's)!

In all fairness to these guys they'd lost radio contact with their superiors probably prior to the re-taking of Manila so with no contact to the outside world we can not only excuse their ignorance but also applaud their dedication (however twisted).

RE perma bulls on the other hand can not lean on this defense. At this point their has been more written, said and broadcast regarding the bubble than the holocaust. So with all of this overwhelming evidence confronting them they are either in deep denial (as in there never really was a holocaust) or just plain stupid. At this point, does it really matter?

We’ve had some great cameo appearances by some incredibly stupid and determined trolls that remind me of Japanese soldiers still hiding out in the Philippines awaiting the Emperor’s Orders (until the 1970’s)!

Were there at least good sushi in Philippines back then?

The Asian residents of SoCal will all assimilate eventually, as will the Hispanics.

The precise ethnic/genetic makeup of greater Los Angeles doesn't particularly concern me. What does concern me is the following:

1. Immigration (mostly illegal) causing rapid population growth (conservatively est. @2%/yr.) which will double the current population (36 million) in 35 years, mostly among the low-paid, low-skilled. Population density/growth is already too high in most parts of SoCal, and is resulting in vast swaths of urban perma-ghettos, significant environmental degradation, as well as accelerating the bifurcation of our economy and gradual erosion of the middle class.

The current situation is not exactly an environment conducive to high quality of life for middle-class wage earners, such as myself. Sorry if this sounds "racist" to some, but I do not regard this as a positive development. If I really wanted to live in Shanghai/Mexico City, I'd already be living there.

2. Free-ridership. Never before have so many gamed the system so completely, while riding on the backs of so few (the remaining taxpaying middle-class citizens who inconveniently happen to be in the way of "Reconquista"). I guess this really wouldn't bother me so much if some bureaucrat would offer ME some free money and food (AFDC), free healthcare, free housing (Section-8), heavily subsidized college education, etc., etc. Sadly, I don't get any of that, but I do get the BILL for it every April 15th.

3. This "assimilation" you speak of is not happening as rapidly or as completely as it has in prior decades, largely due the rise of radical Mexican political movements, such as the Reconquista, MECHa, etc., which seek the repatriation of California and other SW border states to Mexico, which they regard a stolen province known as "Aztlan". Whether or not this will actually occur is debatable, but the movement is very real and very popular among recent immigrants. You see it in efforts to ignore/subvert federal immigration laws, displace English as the default language in our public schools and on the ballots, P.C. revisionist histories, etc.

The fact that the southern border states once really were part of Mexico and this is where the bulk of unassimilated immigrants are coming from --with no great ocean to cross-- makes the current situation considerably different from immigrants who arrived in great numbers in the past. It's not uncommon for these new arrivals to never relinquish Mexican citizenship and fully adopt the U.S. as their home country. Many migrant workers do just that --migrate back and forth over the border, never having to choose to which country they will be loyal.

I recommend reading Victor Davis Hansen's excellent exploration of this very topic, "Mexifornia".

Actually, many rich people do not like to buy when they think the prices are too high. Remember, they do not NEED to buy. Also, they do not NEED to hold on.

Certainly rich people don't like to waste their money; if they did few but the richest would remain rich for long.

However, it's easy to underestimate the financial position of many of these folks. I maintain that in a serious downturn most of them won't sell unless they have overriding qualitative reasons, like moving to another coast/country, etc. However, those who do sell will do so at a significant discount to today's prices.

I would expect to see very low transaction volume, but a healthy drop in prices in rich neighborhoods. But this "healthy drop" will reach resistance because of constrained supply; probably only slightly less of a factor than the healthy decline in rich buyers. So S & D both shift down, probably D a little more than S. In middle to starter neighborhoods I'd expect D to shift down but S to shift up, causing very sharp declines.

**all this assuming a hard landing, of course. I'm still not convinced of such, but it is a distinct possibility.

Seriously.

Troll claims exhibit all the soundness of the "Cargo Cult".

Waiting for the "Great 250/500K tax free cap gains Bird" to reappear!

No longer hunting or gathering, fishing or farming they wait at the islands highest point and spend their days combing the skies for a sign of his much awaited return!

So if the perma bulls are going to recreate a "shrine" to the "Great Bird" what would it look like?

1. Immigration (mostly illegal) causing rapid population growth (conservatively est. @2%/yr.) which will double the current population (36 million) in 35 years, mostly among the low-paid, low-skilled.

HARM, on the bright side, we will be able to aford two maids per household and perhaps most public bathrooms will have attendents. :)

Free-ridership

Again, the problem is in the welfare system.

Whether or not this will actually occur is debatable, but the movement is very real and very popular among recent immigrants.

Repatriation of California? :lol:

You see it in efforts to ignore/subvert federal immigration laws, displace English as the default language in our public schools and on the ballots, P.C. revisionist histories, etc.

The threat is real though.

Peter P,

Now, I can't speak to the availability of good sushi in the P.I post WWII but I will say that it is testament to how bountiful the islands once were. I understand many of these guys survived for years off of fruit and turtle meat (which I hear ain't half bad). Damn, 30+ years surviving in that sweltering jungle. I hope they got their "back pay"!

I just bring this up as an extreme example of the caliber of trolls we've seen of late. True hold-outs, die hards if you will. Armed with only a smattering of anecdotal evidence to face an onslaught of hard numbers. I guess it's not as easy being a perma bull as it once was. Eat up boys!

However, it’s easy to underestimate the financial position of many of these folks.

Perhaps 25M+ properties will not see much activities.

It is also easy to overestimate ...

http://www.socketsite.com/archives/2006/08/1200_indiana_the_final_chapter.html#comments

I see this trend continuing:

San Mateo (all price ranges):
6/8/06 1363
6/12/06 1428
6/19/06 1452
6/26/06 1467
7/10/06 1488
8/21/06 1511

San Jose (all price ranges):
6/8/06 3669
6/12/06 3709
6/19/06 3793
6/26/06 3915
7/10/06 3915
8/21/06 4115

source: mlslistings.com

Kevin Says:

Peninsula: Prices will slide 5-15%. Rich folk and existing long-time owners still dominate the area.

SF and Peninsula prices are already either flat or even slightly (-)ive YoY in many parts. So are you predicting that SF prices will basically remain flat (negative in real terms), or appreciate with inflation from now on?

newsfreak,
Agreed. Just trying to figure out what Kevin is predicting exactly.

>So as workers’ wages in the middle class go down and they put pressure on goods to be cheaper, as do elderly people on fixed incomes

That's overly simplistic. If oil/natural resource prices continue to go up, prices will go up. If China/India continues to be more propserous, prices will go up.

People don't have an entitlement to afford things.

SFWoman,

Thanks for bringing that observation to light. As a planner myself it just doesn't carry the same weight as someone like yourself. What people on the west coast seem to almost always completely overlook is how east coast old money works. Typically the portfolio spins off dividends and interest that are redeployed to purchase HUGE life insurance policies that ensure the next generations place in society! (And so it grows and grows). The trusts the TB's live off of are relatively small when compared to the overall net worth of the family. Trying to explain to most folks on the west coast that wealth means more than a new bimmer (wealth means several generations to come will have new bimmers) is like peeing up a rope. In so many instances here out west if their income dried up (so would their lifestyle). Just an observation.

Kevin,

I can agree in principle but not necessarily in practice. The important distinction being (as SFWoman points out) is that the dream can go on as long as the "appreciation" is there to draw on. Again, if the "income" is there the facade can continue.

It's surprising, but some places are actually hiking their offering prices here in the Pennin:

http://www.burbed.com/2006/08/21/east-palo-alto-price-hike-2239-poplar-ave-now-at-504000/