patrick.net

falling prices create a revers wealth effect. It's bad for everyone including the economy. Some bears are short sighted and dont seem to get this. They only look at the price tag and think lower prices can only be a good thing, right?

toothfairy says

falling prices create a revers wealth effect. It’s bad for everyone including the economy. Some bears are short sighted and dont seem to get this.

What you don't seem to get is that the "wealth effect" of rising asset prices, without economic fundamentals to back up the rising prices are a false boost the economy , and will result in reverse wealth effect as the asset prices revert to what is supported by economic fundamentals, as they eventually must.

It's not that I'm cheering the "reverse wealth effect", and I doubt anybody else is. I just understand it's the inevitable outcome of a false debt fueled "wealth effect".

toothfairy says

Some bears are short sighted and dont seem to get this

I guess that counts every CEO/CFO and other business planners in the Bay Area.
Oh well! you will learn what many of us back in the 80s learned the hard way.

the denial by toothfairy smells distinctly christian/republican.

I don't understand how high prices help the economy, that means the buyer needs more money to allocate per month for mortgage and lesser for everything else (eatouts, concerts, travel, charity, anything else at all).
Bay Are would be full of stingy people soon , who would barely afford to pay their high mortgages in 2 families/per house ghetto neighborhoods.

mike4518 says

the denial by toothfairy smells distinctly christian/republican.

Are you inferring that Christian Republicans are the only people in denial that they were duped into believing the crock of Horse Shit that if they didn't buy in the height of the bubble, they would be priced out for ever?

Our country is so screwed! Greed is destroying this country and both political parties are being used as the proxy.

Liberal Democrats have become the biggest Zealots of all. Their religion is their party.

shrekgrinch says

ptiemann says
40% have been cash buyers off the MLS??
Are they from out-of-state?
I went to some Robert Allen seminar in Foster City a while back. They were trying to get us ‘rich’ Bay Areans to buy ‘cheap’ houses in Indianapolis to fix and flip. So, I’d say that is happening in other areas besides Indiana.

It's interesting that you mention Indiana. I guess this is the new place salespeople are pushing. There is a guy here in SoCal that has a one hour radio show on KABC in Los Angeles. He says that he lives in Orange, which is in Orange County, CA which is the town adjacent to Disneyland. I guess radio profits are down big time, because this 5000 watt station has mostly paid advertising each hour on Saturday and Sunday. They bumped Bob Brinker and the other local talk show hosts a few years ago and started running all infomericals. I wonder what these folks are paying for an hour of air time and the use of their regular phone number to call in and get registered for the seminars that are held at the station as well as an appointment to meet with this fellow or his "associates"? He does the show live by himself, but at the beginning and end of the show KABC says that it's a paid commercial announcement . He says that they only buy houses in Indianapolis, IN because of the low prices and high demand and then fix them up and there is already a tenant in place so there is nothing for the investor to do other than get your monthly check out of the mailbox. They have a management company set up that takes care of the 500 or so that they say have sold so you are "plugged into the system." When I listen to him tout the "15% cash on cash returns" and houses selling for peanuts compared to California prices, I have to wonder how the investor makes much money. By looking at the homes sold on their web site and the returns generated, it's like $200.00 or so a month. Personally, I don't find that worth my time and if a pipe freezes and breaks or a toilet plugs up, or any other problem arises, there goes the $200.00 profit for that month. These profits seem paltry for the risk involved. Also, I would be nervous buying rental property 2,000 miles away. I like my rental property within 10 miles. The web site is www.therealestateinvestinghour.com

Tenouncetrout says

mike4518 says

the denial by toothfairy smells distinctly christian/republican.

Are you inferring that Christian Republicans are the only people in denial that they were duped into believing the crock of Horse Shit that if they didn’t buy in the height of the bubble, they would be priced out for ever?

i did not infer any such thing.

i simply stated toothfairies particular type of denial smells familiar; which it does.

They're in denial about how bad things are, not necessarily the housing market or economy but because they know that the root of all this is the incompetence and corruption in our government, banks, and financial institutions.

If they admit that then they have to admit that at the very least we're pretty much fucked and we're looking at a long slow decline for the whole country over the next 10-20 years. I say very least because that is a realistic "optimistic" view of how things will pan out barring those previously mentioned parties suddenly becoming competent and not corrupt.

They'll probably suddenly stop posting like all the other bubble deniers did back in 08/07 when it became apparent how stupid they looked.

tts says

but because they know that the root of all this is the incompetence and corruption in our government, banks, and financial institutions

The source was at main street, your typical consumer created the bubble. Hype by the public drove prices well beyond any financial common sense. And the NAR, dope pusher!

I will give you an example.. The biggest Anti-Banker, Anti-Wall Street, Michael Moore, who also blams Wall Street and Banks for the bubble, was asked on CNBC a few months ago. 'Since you dont invest in Stocks and Bonds, where do you put savings into "'. Michael Moore's resonse was... 'I vest in my house.' A typical response you would have found in the past several years in many parts of the nation.

OK so Moore sinks in $50,000-100,000 in his new 'investment' the home he lives in middle America... now who in heck is going to be the buyer who will pony up the highly inflated selling price and return on his investment for his house ? Did everyone in his town get a raise to cover the higher prices he demands ? Wages and inflation certainly catch up!

Sounds like a Ponzi scheme to me, found in many typical main street towns!

Mr.Fantastic says

tatupu70 says

Well, GDP has been positive for last 3Qs, wages have been rising for 6 of last 7 months. I’d say we are in the midst of a recovery right now.

LOL
HAHAHAHA

Oh, I forgot. You don't measure recovery in real statistics such as GDP, consumer confidence, durable goods orders, etc... Hell, even the hiring index was at it's highest point in like 20 years. Something like 70% of the companies surveyed indicated they were likely to add workers next year.

But, in MF land, that's not the beginning of a recovery.

tatupu70 says

Housing did, in fact, go down when the housing credit ended. Like everyone expected. I imagine many people who were considering buying hurried to close before the credit ended, pulling forward a lot of demand.

This is exactly what many of us said would happen. Perma-bulls discounted it as having "little effect". I wonder how many consecutive months of declining home prices it will take before you guys get it.

The average salary for technology jobs was $103,850 in 2008, down from $120,064 in 2000, the agency said today.

$100k for a PhD engineer is not that high.

I wonder if it includes the skilled workers or technicians.

klarek says

tatupu70 says

Housing did, in fact, go down when the housing credit ended. Like everyone expected. I imagine many people who were considering buying hurried to close before the credit ended, pulling forward a lot of demand.

This is exactly what many of us said would happen. Perma-bulls discounted it as having “little effect”. I wonder how many consecutive months of declining home prices it will take before you guys get it.

Not exactly. Correct me if I'm wrong, but if I understood your (and others) thinking, it was that the housing credit just put a slight pause on the inevitable fall in prices.

What I see as at least as plausible is the scenario I posted above. Where the end of the housing credit simply caused a short bump followed by a short trough in sales. We'll see...

tatupu70 says

Not exactly. Correct me if I’m wrong, but if I understood your (and others) thinking, it was that the housing credit just put a slight pause on the inevitable fall in prices.

Well it's been almost two years since the credit's inception, so I wouldn't call it a "slight pause". Displacing future demand to the past was enough to reverse downward prices, causing a mini-bubble. But yes, aside from increases in incomes during the past couple of years, you have to be blind to look at the prices falling again and not see the connection.

tatupu70 says

What I see as at least as plausible is the scenario I posted above. Where the end of the housing credit simply caused a short bump followed by a short trough in sales. We’ll see…

Short bump? Again, look at the numbers, prices went up for almost 18 months. If we see 18 months of continuous declines, would you call that short? If not, why would you call the period of increases short? As a would-be buyer, it feels like a fucking lifetime waiting for the idiots to clear out for their bribe while Congress dishes out taxpayer dollars according to the wishes of the assholes at NAR.

Mr.Fantastic says

He is part of the sheeple crowd who buy homes based on double incomes.

Too many people fit that description these days. They buy what they can collectively "afford", to the max, assume their incomes will go up, their house's value will go up, and that they won't both have to keep working full time to afford the mortgage. Of course, that's never the case.

Mr.Fantastic says

klarek says

tatupu70 says

Housing did, in fact, go down when the housing credit ended. Like everyone expected. I imagine many people who were considering buying hurried to close before the credit ended, pulling forward a lot of demand.

This is exactly what many of us said would happen. Perma-bulls discounted it as having “little effect”. I wonder how many consecutive months of declining home prices it will take before you guys get it.

tatupu will never get it. He is part of the sheeple crowd who buy homes based on double incomes.

You're right. I'm part of the sheeple crowd that trusts facts. Actual numbers...

klarek--

I don't think you understand my point. The END of the credit is what produced the slight bump and corresponding slight trough. Or at least that's the theory.

I'm not talking about the last 2 years. Just the last 6 months or so.

OK--good. Back to trolling. I was afraid that you actually were going to engage in a useful discussion of housing...

tatupu70 says

The END of the credit is what produced the slight bump and corresponding slight trough.

Are you talking about inventory or prices? If price, then that bump is merely part of the overall swell in demand pushing prices higher, raising the equilibrium if you will.

Prices were heading in a straight-downward trajectory until the credit. All of the losses that should have happened will still occur, on top of those artificial gains, less a certain amount due to income levels rising (a tiny percent).

What I dislike most about Tatupu and Nomograph is that they instantly attack anything that does not mesh with their hoped-for version of reality. Ask them to provide hard objective facts to support their point of view, and they are empty-handed, every time. It is far easier for them to attack other people's facts than to provide their own. They always come out looking like they know something the rest of us don't know. This appears to be fully intentional.

For them, it's about winning at all costs via manipulative word usage, rather than having a respectful debate based in sourced, objective facts.

These guys need to be kicked off these forums, for this reason. Ban their IP addresses here. They have little to contribute but negativity and personal attacks. They are not interested in respectful debate.

robertoaribas says

mortgage loan applications to PURCHASE have dropped some 20% over the last 3 weeks… Historically, this data corresponds to a drop in buying with a 1 month lag, [r -value = .7, but not steady throughout history. there are periods of higher correlation, and lower correlation]
SO:
1. drop in loan apps to buy…
2. Resumption of foreclosures by BofA etc… as the robosigning scandal fades…[already observable in Phoenix, we have had about 1000 more foreclosures in January than the past couple of months…]
More supply, less demand… and that is on top of documented price drops already occurring…
Just like last time, the evidence is clear to all except the blind!

I haven't seen that data. If true, then I would agree. I was going off the sales and pending home sales which have risen in 5 of the last 6 months.

Increasing foreclosure activity will be a drag on prices, no doubt. I'm still a little skeptical about the size of shadow inventory, but there are lots of foreclosures out there.

klarek says

Prices were heading in a straight-downward trajectory until the credit. All of the losses that should have happened will still occur, on top of those artificial gains, less a certain amount due to income levels rising (a tiny percent).

When you say "all of the losses that should have happened"? That's the question. Who knows what those losses should have been? Was it 1%, 10%, 50%?

tatupu70 says

When you say “all of the losses that should have happened”? That’s the question. Who knows what those losses should have been? Was it 1%, 10%, 50%?

Draw your own conclusions based on inflation-adjusted housing price indexes, or just draw a line on the Case Shiller data for wage inflation and see that there was still nationally about 10% more to drop. Then prices rose, what, 8% from the tax credit? Yeah, so falling from there to fundamentally supported levels.

Have you not ever given this any thought? Or do you really think that the sudden and precipitous increase was somehow supported by market fundamentals. If so, what data are you looking at?

You can pin me on not knowing the exact percent the national market was going to fall at that point, but compared to somebody that hasn't given it any thought at all, I'd like to think I have some modicum of clarity.

shrekgrinch says

They are, however, finding it more and more difficult to ‘defend’ their BS though

The only thing they had before as a defense was that prices were rising. We knew why that was happening, and that they'd inevitably correct. Now they're clinging to "this is a short blip".

klarek says

The only thing they had before as a defense was that prices were rising.

That's about as good of a defense as you can get as to why prices aren't falling, isn't it? :)

shrekgrinch says

robertoaribas says

Just like last time, the evidence is clear to all except the blind!

They are, however, finding it more and more difficult to ‘defend’ their BS though, Roberto.

Ah, good. Now MF and Shrek are both trolling. Double the pleasure, double the fun.

tatupu70 says

Who knows what those losses should have been? Was it 1%, 10%, 50%?

I was trying to explore that with this graph.

The 1990s featured a rising economy, but the general climb-down from the 80s bubble and the Bush/Clinton tax rises reduced inflation and so we saw housing decline in both nominal and real terms, even in the face of positive Fed inducement with the lower interest rates.

What stopped the free-fall in 1Q09 was a combination of factors, foremost was the fact that the 1930-style market meltdown was first contained and then reversed. The system was saved.

Secondly, the government stepped in with further intervention with the $1T Fed take-on of MBS and pushing mortgage interest rates into the 3s for 15-year and 4s for 30-year.

Looking at the above graph, I think the trend is still down in real terms. Whether this translates into the nominal depends on GDP growth.

Interest rate policy is the key here. If we're at the lower bound as far as mortgage rates go, then that tool that they've been using since the 1970s if not earlier is no longer available.

If rates drift up without accompanying a rising GDP, there will be a continued fall in home prices. If they rise in tandem with GDP, that is neutral for home prices.

But the OMB says there's going to be fifteen to twenty trillion of new government debt coming this decade. This smells like Japan, where all the debt issues didn't do much for the housing market for some reason, probably because debt is not growth, it's just more of one's future wealth spent today.

tatupu70 says

Now MF and Shrek are both trolling.

It seems you meet the same criteria:

"In Internet slang, a troll is someone who posts inflammatory, extraneous, or off-topic messages in an online community, such as an online discussion forum, chat room, or blog, with the primary intent of provoking other users into a desired emotional response[1] or of otherwise disrupting normal on-topic discussion.[2]"

http://en.wikipedia.org/wiki/Troll_%28Internet%29

joshuatrio says

tatupu70 says

Now MF and Shrek are both trolling.

It seems you meet the same criteria:
“In Internet slang, a troll is someone who posts inflammatory, extraneous, or off-topic messages in an online community, such as an online discussion forum, chat room, or blog, with the primary intent of provoking other users into a desired emotional response[1] or of otherwise disrupting normal on-topic discussion.[2]”
http://en.wikipedia.org/wiki/Troll_%28Internet%29

Despite what the permabears might think, posting a contrarian opinion is not trolling.

SF ace says

Pending home sales is probably more reliable anyway.
June 75.5

Jul 78.9

Aug 82.4

Sep 80.9

Oct 89.1

Nov 91.9

Dec 93.7
So while you see demand that is trending lower, I see clear improving demand (albeit probably not in Jan). I expect jan pending to be around 93.7 and improving thereafter. So I disagree with AZRob that home sales are on the downtrend when it’s clearly not.

Are pending home sales REALLY that reliable? Sure they are a forward indicator, but consider that many of these records are probably short sales (that can easily fall through) and/or offers dependent on bank financing which may not materialize.

Not to mention that NAR has a huge incentive to skew these and other home sale-related stats to their own self-serving needs:

http://www.calculatedriskblog.com/2011/01/lawler-downward-revisions-coming-to.html

klarek says

Have you not ever given this any thought? Or do you really think that the sudden and precipitous increase was somehow supported by market fundamentals. If so, what data are you looking at?

I've looked at Case Shiller unadjusted for inflation--usually it goes back to 1970. It's a fairly noisy graph so I have a hard time believing that the trend line that is drawn in there is a dead certain fact. In my opinion the slope could be just as easily made more positive so that today's prices are actually right in line with the historic norm. There just isn't enough data there and the noise is too large to draw conclusions in stone.

It's one piece of the puzzle. Just like pending home sales are a piece. Or foreclosures. Or wage inflation.

robertoaribas says

tapabootie:
I purchased 3 home in the last 2 months, hardly counts as “permabear” in my book anyway.
Never the less, I see the market trouble spots, I analyze the data.
lets look at your precious pending trend: Notice that it went UP from June to July to August? Did sales do better in the following month or two? Nope they went to hell…
So, given that your pending home sales data has served as a very poor indicator of sales over the past several months, why would you give it so much weight today? merely because it is one of very few remaining pieces of data that fit your preconceived religious belief, that the housing market will not get much worse?

Actually, you are wrong again.

Here is the existing home sales data from realtor.org:

July 3.8MM
Aug 4.1MM
Sept 4.5MM
Oct 4.4MM
Nov 4.7MM
Dec 5.3MM

Here's a little primer for you on the value of pending home sales:

http://trendingrealestate.typepad.com/trendingrealestate/2008/09/a-historical-review-of-nar-pending-home-sales.html

So, you've been wrong twice now. Care to go for three?

Lovely, how some lost nearly a million ! Wont see this on HGTV

Zappos.com founder Nick Swinmurn sold a five-bedroom, 3.5-bath home in Hillsborough for $2.3 million to equity analyst Paritosh Somani and Nisha Somani on Dec. 3.

Swinmurn is the founder of Zappos.com, an online shoe store that was formed in 1999 and is now a part of Amazon.com. In 2009, the company grossed more than $1 billion. Swinmurn served as CEO of Zappos until 2001, and left in 2006 to pursue other ventures.

tatupu70 says

Here is the existing home sales data from realtor.org:
July 3.8MM

Aug 4.1MM

Sept 4.5MM

Oct 4.4MM

Nov 4.7MM

Dec 5.3MM
Here’s a little primer for you on the value of pending home sales:
http://trendingrealestate.typepad.com/trendingrealestate/2008/09/a-historical-review-of-nar-pending-home-sales.html
So, you’ve been wrong twice now. Care to go for three?

hmm... maybe a good short-term, indicator for NEGATIVE home sale trends 1-2 months in the future according to your cited study. However as a POSITIVE home sale indicator it is probably not so good as it is indeed possible to have LESS future contractual sales than currently pending contracts indicate, for the exact reasons that robertoaribas listed. That is, the only reason it works well for negative trends is that you can't have MORE future contractual sales then currently pending contracts indicate.

robertoaribas says

You sir, as usual pick on the minutae to try to win something. Prices are dropping, anyone reading YOUR old posts on here can judge how smart you have been..

Isn't this the basic strategy for all the bulls on this website? Poo-poo good reasoning, selectively misuse data to support faith-based arguments, bully, dither, dodge and cry when confronted with better evidence/arguments, then go and hide when their crap is demonstrated to be just that.

And I shouldn't just pick on the bulls here... this seems to be a common strategy/life philosophy for most if not all of them.

terriDeaner says

Isn’t this the basic strategy for all the bulls on this website? Poo-poo good reasoning, selectively misuse data to support faith-based arguments, bully, dither, dodge and cry when confronted with better evidence/arguments, then go and hide when their crap is demonstrated to be just that.

Really? Roberto posts completely erroneous statements that he is called on twice. SF Ace posts the actual numbers on pending and I post the actual numbers on existing home sales but yet you think we are misusing data?

How do you figure?

tatupu70 says

terriDeaner says

Isn’t this the basic strategy for all the bulls on this website? Poo-poo good reasoning, selectively misuse data to support faith-based arguments, bully, dither, dodge and cry when confronted with better evidence/arguments, then go and hide when their crap is demonstrated to be just that.

Really? Roberto posts completely erroneous statements that he is called on twice. SF Ace posts the actual numbers on pending and I post the actual numbers on existing home sales but yet you think we are misusing data?
How do you figure?

yawn...

You posted a 'study' on pending home sales that ran from '05 to mid '08 upon which you base your faith/extrapolation/speculation that the same relationship (pending as predictor) will hold for current trends. You also incorrectly assume this data is correct, which it is not:

http://www.calculatedriskblog.com/2011/01/lawler-downward-revisions-coming-to.html

My reasoning for calling your reasoning crap was simple - you do not account for the effects of cancelled contracts on actual sales when using pending sales as a predictor. This holds whether the NAR data is accurate or not.

Further, you and SF are posting garbage from the NAR for current pending/sale data SINCE JULY 2010. Again, NAR is not a reliable data source.

And I don't see how your collective, selective use of these timecourse datasets refutes Roberto's assertion - pending sales are simply not always good predictor of final sales - take another look at the chart he posted over the much longer time period.

So this is how I figure you are misusing data. Don't feel bad, it is easy to make mistakes like this.

terriDeaner says

My reasoning for calling your reasoning crap was simple - you do not account for the effects of cancelled contracts on actual sales when using pending sales as a predictor. This holds whether the NAR data is accurate or not

My lord. I've answered this at least 5 times already. Do you have ANY reason to think cancelled contracts are significantly higher now than 3 months ago? Or 6 months ago? Otherwise it's meaningless. We are looking at the trend.

Further, I posted the actual closed sales numbers and they show the EXACT same trend as the pending sales did. Did you not see that??

tat, my guess is the upper/middle and upper markets start getting hammered next.
Also, all of the crashing commercial stuff has to have an effect on those rich bastards at some point too.

terriDeaner says

Further, you and SF are posting garbage from the NAR for current pending/sale data SINCE JULY 2010. Again, NAR is not a reliable data source.

OK--do you have another data set that shows pending home sales aren't a good prediction then? I'd be happy to see it.