patrick.net

I'll get things started:

I predict the Bay Area will see a growing shift in jobs, but not as bad of job losses as most other areas of the country. We'll suffer a lot of pain due to lost real estate related employment, though a boom in foreclosure-related employment.

But technology will, perhaps ironically, serve as a bit of a safe haven. Tech companies are about as far from the RE meltdown as any sector. Tech revenues come largely from corporate spend, which itself is cyclical and driven by competitive and productivity pressures. And that cycle is on the upswing.

I am careful to also predict that even the best-case tech-haven scenario doesn't spare the Bay Area real estate market. Even while our greatest techs continue to chug along, salaries won't inflate anywhere nearly enough to rescue bubble house prices. So house prices come down, down and down. Probably 70%+ in war-zone areas, 50%+ in bullshit areas with bad schools, and 20%-30% in prime areas. I think the _very least_ the Bay Area gets away with is half of those price reductions.

I also predict:

* No Second Great Depression
* No Hyperinflation
* No US collapse and subsequent wonderful new world of internationalist Kumbaya sing-ins
* No direct relief to FBs even if there is a bailout of their lenders
* At least 1 more Patrick.net author will buy a house in the next 12 months

My prediction is that there's gonna be a backlash against the federal government when the analog TV signals go dead next year.

This backlash will motivatie a small number of normal non-voters to the polls to reject what they perceive as status quo candidates. It will be a relatively small number of voters but if there's a close election it could be enough people to be important.

Randy,

* No direct relief to FBs even if there is a bailout of their lenders

This is an interesting subtopic to me.

President Bush has been quoted as saying in essence that he does not favor *direct* relief to homedebtors. Of course, between the lines, one can see that he probably favors relief for his buddies on Wall St and in the lending/banking industry.

All in all a typical republican approach to economics: Bail out the rich sinners, and to hell with the poor or middle-class victims (although of course the victims are hardly pure nor innocent in this case, just overly greedy).

Definitely no hyperinflation; in fact, I predict the inverse bordering on hyper deflation. As expected credit has all of a sudden become tight and is now rippling. (The clear answer to the nitwits here who start questioning whether bondholders hold enough risk, and whether investors earn too much yada yada ya, this is what happens when they don't).

The steepest part of the downward curve in home prices is now just around the corner as the inflection point has now clearly just passed. Couple that with growing pressure from overseas outsourcing of more and more technical and higher wage executive postitions salaries will freeze, and even decline in some sectors significantly. Add to that technological disruption of traditionally high earning professions (ex the travel agent, realtor, and stockbroker examples) we end up with even greater loss of consumer spending power here, however that also will 'outsource' as international markets which have been doing a lot of our value add gain spening power so exports will continue to rise (see unexpected profits of Ford and GM) as glimpse of this emerging trend.

Precious metals will stabalize and decline as fear of inflation relents. The domestic slowdown will also curb demand for oil however internation demand will pull prices back up. So expect gas to drop to the low $2 mark and then rise to a stable high $2.

Malcolm, if a "high $2" means $2.90, I can agree with that, but I'm not expecting to see the "low $2" ($2.25) ever again.

Just a couple of days ago I received a pretty well written letter in response to our letter writing campaign from Barbara Boxer. To paraphrase there is currently no legislation proposed to help the FBs, however it seems that there are 3 pieces of useless laws being proposed, the same old nonsense, telling lenders to act responsibly which they already learned the hard way. What is disturbing is that she does use the words predators and victims to describe lenders and borrowers. I still don't understand at what point people stopped using their natural consumer instincts to compare different loans when "credit was too easy to obtain."

Well, we'll see, it has been my observation that a small disruption in demand for gas has a pretty harsh impact on pricing on the price curve but time will tell. I wouldn't be surprised if it dipped just below $2 if we have a really sudden slowdown. I think a lot of the experts are way too conservative as far as how quickly things can change. The credit crunch blindsided the market, yet we have often talked about tightening as a result of the meltdown here.

Justme, your post about Bush is interesting to me as well. I've gone on record here stating that the talk of bailouts by BOTH parties is a direct result of the right people facing huge losses. No one seems to care about some black family who really did have their ignorance exploited by a broker somewhere but man as soon as some white collar fund managers start losing their livlihoods the most diehard free market types start talking about the government riding in on a white horse. That Cramer spot on Youtube is hysterical. He wants to cut the rate to stabalize the market yet at the same time blames Greenspan for lowering the rate, WTF?

I made my prediction for Fort Collins, CO on the last thread. Reversion to mean on the 4% trendline, with a significant overcorrection to burn off some of the inventory glut. I will be looking to buy on the overcorrection, at which point there will probably be a -20% to -25% reduction compared to 2003 asking prices. This will correspond to $85-95/fin.sqft, below the present $100-110/sqft + unfinished allowance.

Note: my standard unit of measure is a typical 2000-2500 finished sq.ft. SFH on a 0.2 acre lot, cul de sac location with a good school, within 2 miles of work.

I believe we'll see an extended downturn in financial and real estate interests with a statistical trough showing in the summer of 2009 and public sentiment recognizing the beginning of recovery a few months after. Along the way, there may be a few unpleasant surprises when corporate interests in other sectors are found to have exposed their balance sheets to RE and IB risks not ordinarily associated with their primary lines of business.

I anticipate a xenophobic response here and abroad, a souring of international relations, and a rise in opportunistic extremist activities.

Places like SF with large banking, lending and insurance interests will undoubtedly experience the loss of 'good' jobs in significant numbers, but the area's record of viable R&D and technical enterprise suggest the BA will feel less pain than many other metropolitan areas. I would nevertheless submit that an overall tightening of operations will occur, and that consequently some employment enabled by good times will vanish as viable companies go lean.

I will be surprised if equities do not in the end reflect overall trends, or if the resulting downdraft doesn't carry all before it. There will be no lack of premature bottom calls. By 9/09 I believe the words 'leverage', 'adjustable', 'realtor', 'hedge' and a few obvious others will be inadmissible in polite company and never be spoken in front of the children.