patrick.net

native - if you're house is not being affected by this downturn, then that's great. this article proves that prices are falling in CA as a whole. -3.4% in a month is pretty nasty. With record low rates, what more can people ask for? oh yah, a JOB would be helpful

native94027 says

1. The bottom was in 2009.

2. If the median went down, it doesn’t matter. It only matters when it goes up. Same thing with case-schiller.

3. CA may be going down but [insert-my-location] is different.

4. Rich Asians and Indians by the boatload will come and buy property in [insert-vaguely-specific-geographical-region] and you permarenters will be priced out.

5. It was a dip and if you look at the last two weeks/days/hours on that chart, you will see things are turning upwards sharply.

6. Government programs didn’t affect the market. Except when they ended, which explains the “temporary” softness as the market adjusted back to an upwards trajectory.
There, I think I covered everything. [/sarcasm]

You forgot to mention jobs. I applied at 4 places and all wants my services. They are begging me to work for them and each one if offering more to work for them....LOL.

HousingBoom says

native - if you’re house is not being affected by this downturn, then that’s great. this article proves that prices are falling in CA as a whole. -3.4% in a month is pretty nasty.

You cant loose what you never legiminately had!

Per DQnews.com
Next week they publish more details by zip..
Oct 2010 vs Oct 2009
Med Price Change

Alameda -1.10%
Contra Costa -7.10%
Marin -2.80%
Napa -14.70%
Santa Clara 0.50%
San Francisco -5.60%
San Mateo -3.20%
Solano 5.40%
Sonoma -6.60%
Bay Area -1.80%

native94027 says

1. The bottom was in 2009.

2. If the median went down, it doesn’t matter. It only matters when it goes up. Same thing with case-schiller.

3. CA may be going down but [insert-my-location] is different.

4. Rich Asians and Indians by the boatload will come and buy property in [insert-vaguely-specific-geographical-region] and you permarenters will be priced out.

5. It was a dip and if you look at the last two weeks/days/hours on that chart, you will see things are turning upwards sharply.

6. Government programs didn’t affect the market. Except when they ended, which explains the “temporary” softness as the market adjusted back to an upwards trajectory.
There, I think I covered everything. [/sarcasm]

7. It's just a seasonal variation.

HousingBoom says

native - if you’re house is not being affected by this downturn, then that’s great. this article proves that prices are falling in CA as a whole. -3.4% in a month is pretty nasty. With record low rates, what more can people ask for? oh yah, a JOB would be helpful

Dude, seriously??? You didn't figure that I was being sarcastic???

I am with you man. I was just making sure we got the b.s. ("bull spiel") out of the way asap.

robertoaribas says

wherever IWHACK owns… +20%…
can’t believe you missed the last one!

The Duck is laying low! Hasnt said a quak about recent drop in prices per Dqnews.com ...

The rich are doing OK still:

http://research.stlouisfed.org/fred2/series/CAODIV

but actual wages are back to 2006 levels:

http://research.stlouisfed.org/fred2/series/CAWTOT

There are ~2.4M+ gummint jobs still:

http://research.stlouisfed.org/fred2/series/CAGOVT

but with a $20B+ state deficit and who knows what's going to happen at the Federal level, I can see that falling by 10% easily, 200,000 jobless to add to the already 600,000+ unemployed:

http://research.stlouisfed.org/fred2/series/CACCLAIMS

thomas.wong1986 says

The Duck is laying low! Hasnt said a quak about recent drop in prices per Dqnews.com …

His latest backpedaling gives him another 2 months of reprieve:

http://patrick.net/?p=565053#comment-704936

"A spike in listing prices ALWAYS (read this as never doesn’t happen) precedes higher sales prices on these charts. There are multiple examples. If the pattern continues, the sales numbers are right on the verge of reversing as well and we’ll see higher closings going into December and January."

http://patrick.net/?p=565053#comment-704972

"Low interest rates combined with the recovery will arrest the fall and will be very apparent by December."

http://patrick.net/?p=565053#comment-704934

"I’m not the slightest bit worried about the clear capital numbers. They will start reflecting increases again by December."

gameisrigged says

“Low interest rates combined with the recovery will arrest the fall and will be very apparent by December.”
http://patrick.net/?p=565053#comment-704934
“I’m not the slightest bit worried about the clear capital numbers. They will start reflecting increases again by December.”

sounds like the echos of NARs own David Lereah from a few years ago...

Where is the Duck when you need him??

Was anyone arguing that home prices wouldn't decline in October?

native94027 says

HousingBoom says

native - if you’re house is not being affected by this downturn, then that’s great. this article proves that prices are falling in CA as a whole. -3.4% in a month is pretty nasty. With record low rates, what more can people ask for? oh yah, a JOB would be helpful

Dude, seriously??? You didn’t figure that I was being sarcastic???
I am with you man. I was just making sure we got the b.s. (”bull spiel”) out of the way asap.

lol ok

Here's an article from Fantasy Island that you might enjoy Shrek:

http://www.angrybearblog.com/2005/06/impact-of-interest-rates-on-house.html

An excerpt:

"The answer may shock some people: Historically interest rates have been largely irrelevant to the price of a house"

rentalinvestor says

Nothing beats cheap rental properties.

Except cheapER rental properties. :D

tatupu70 says

“The answer may shock some people: Historically interest rates have been largely irrelevant to the price of a house”

This is true as far as it goes but that's not saying they are uncoupled.

CR's graph in hat article showed that the two recent bubbles were in fact *initially* driven by lower interest rates -- the late 80s and the 2002-2003 period.

CR says as much:

"The surge in homeownership demand from renters contributed to the initial price increase. Then speculators started chasing the appreciating assets leading to even higher prices and more speculation."

Because very few people can afford to pay cash for the typical house, ceteris paribus, lower interest rates simply boost the price of housing. This should not be controversial, as (in general) houses are sold on the auction basis and people in most areas have to bid to the point of pain to win the auction for any given house, since one's home is one's most important possession on this earth.

But this interest rate price mechanism can and does get overwhelmed by willingness to pay the speculative premium to beat future appreciation, and throughout history the Fed has tried to fight speculative price increases by raising rates, most notably the Volcker attack on the economy of 1980.

Going forward from here, I seriously do not expect effective mortgage rates to go upwards from here w/o the household wage inflation / "inflation expectations" that normally prompts the Fed making this move.

But I do not have a clear picture of what the macro interest rate environment will be this decade. Perhaps interest rates will have to rise to combat trade imbalances, or will be prompted by Republican attempts to (further) tank the economy in 2011-2012.

It is a strange world now. You've got to be an optimist to be a pessimist.

shrekgrinch says

tatupu70 says

Was anyone arguing that home prices wouldn’t decline in October?

The Duck?

Well, the Duck has covered his a$$ slightly. He has said on one of the threads that prices will go down very slightly but that's about it.

robertoaribas says

tap a bootie: historically,as has been pointed out to you 1000 times, interest rates have risen when the economy overall was growing very fast. So, if GDP growth goes to say 7% a year, and interest rates go to 7% a year, good on you mate! BUT, in the present climate, if rates begin to climb for any OTHER reason:
1. foreign buyers become weary of buying so much US debt.
2. increasing payouts forces the Social Security trust fund to begin selling more of its huge stash of Treasuries.
3. Other countries raise their rates enough to begin to force US rates up, due to dollar plunge.
4. crash in China property sets off a sudden government change from accumulating US debt, to funding economic stimulus and relief at home…
etc, Well, all bets are off. particularly 4 would mean US rates would rise commensurate with a bad recession, so you’d get all the worst of everything in housing.
Now, I am not predicting ANY of those in the immediate future, but to not recognize the real interest rate risks, and rely on interest rate/housing correlation data from an inflationary growth period of US history is particularly naive, even for you.

And as I've replied 1000 times to you--I know. Shrek has been saying that it's a fact that higher interest rates have historically negatively affected housing prices. I was merely pointing out that he is 100% incorrect.

I have no idea if this trend will continue in the future, and I've consistenly said so. This time it might be different. I wouldn't bet on it, but it's certainly possible.

tatupu70 says

This time it might be different

This time IS different.

http://research.stlouisfed.org/fred2/series/FF

In my local area, I'm seeing a standoff between the lower and upper ends of the housing market.

The lower end is selling and cutting prices regularly, while the middle/upper ends are NOT dropping prices at all - however NONE of the middle/upper priced homes are selling.

This winter will be interesting. I think we are finally entering the long awaited double dip... This will be nice for those who have been saving the past several years and are liquid.

joshuatrio says

In my local area, I’m seeing a standoff between the lower and upper ends of the housing market.
The lower end is selling and cutting prices regularly, while the middle/upper ends are NOT dropping prices at all - however NONE of the middle/upper priced homes are selling.
This winter will be interesting. I think we are finally entering the long awaited double dip… This will be nice for those who have been saving the past several years and are liquid.

You may be right Joshua, but in case you weren't reading the message boards last year, your exact statement about "this winter will be interesting" was said then too.

ch_tah says

joshuatrio says

In my local area, I’m seeing a standoff between the lower and upper ends of the housing market.

The lower end is selling and cutting prices regularly, while the middle/upper ends are NOT dropping prices at all - however NONE of the middle/upper priced homes are selling.

This winter will be interesting. I think we are finally entering the long awaited double dip… This will be nice for those who have been saving the past several years and are liquid.

You may be right Joshua, but in case you weren’t reading the message boards last year, your exact statement about “this winter will be interesting” was said then too.

True - last winter the scenarios were identical. Guess we will see if another $8k tax credit pops up out of thin air.

shrekgrinch says

An article written by a total moron, for total morons.
Of course it matters because the individual can not purchase ‘the same amount’ of the asset for the monthly payment. The author of that article totally ignores (or just plain doesn’t understand) that basic concept

You really don't get it, do you?

shrekgrinch says

No, you are showing your total lack of understanding with economics.

I don't know how else to try to explain it to you. You obviously aren't able to understand the most basic of concepts. Even Roberto gets it. He and Troy think that history may not be a good guide for the current situation--that's a completely reasonable position. You, however, seem to claim that history backs up your viewpoint when it clearly shows exactly the opposite of what you have posted. I don't understand how you can continue to argue this point?

robertoaribas says

ch_tah: interest rates dropped a full percentage point, PLUS the government gave first time buyers $8000 to buy… That stopped the interesting part in terms of price…

We'll see what happens with interest rates.

For the bay area, I don't know if the $8k credit made much of a difference. Houses in decent parts around here start at $600k. Good parts of Cupertino are $1M+. I don't see $8k affecting those prices. I would think the $8k credit may have actually lowered median prices by helping lower income people disproportionately and enabling them to purchase homes on the low end of the spectrum.

shrekgrinch says

Because you refer to a history that doesn’t exist now. That is why.
Are wages going up? No. Will they go up when interest rates go up? No and/or ‘not enough’.
What funded the housing boom prices? Everyone making 20% salary gains year by year? No. For most, it was the debt they could get, nothing more.
Rising interest rates aren’t just about higher monthly payments. It is also about those being ‘priced out’ of the market completely.
In short, you all cling to the apple that was than the oranges that will be (and was predominantly so in the vast majority of the historical past).
It is you who ‘don’t get it’. Really.

Ah, yes. Finally, you are starting to get it. Today is a good day for you Shrek-any day in which you learn something is a good day.

So you now accept that history does not support your argument at all. Excellent. And you have placed yourself firmly in the "this time it's different" camp. Fine. At least you are starting to make some sense now...

http://www.redfin.com/CA/Laguna-Beach/232-Chiquita-St-92651/home/3260552

As the Duck claims, rich people with cash are stepping in to help rich people in trouble.

robertoaribas says

bubble, that thing sold for 1.7 million in 2006… half a million down, half a million to go…
Somebody has to buy on the way down, to set falling comps for the rest of the world!

The reason why I put that up is because it has been on the market since June 2009 -- The Duck's artificial bottom.

shrekgrinch says

Uh, not really. The abnormality was the last thirty years. You seem to think of it as the historical baseline

Oh, so you have some data suggesting there was a strong correlation between interest rates and home prices prior to 1980?

robertoaribas says

it is proven fact that there is a very strong correlation between children’s shoe size, and their vocabulary size. Kids with big feet know many more words that kids with small feet.
Also, it is a proven fact that there is an extremely strong correlation between ice cream sales in Australia, and shark attacks.
Once you have established that two variables are being influenced by a third ‘confounding’ variable, to even continue to discuss their correlation as if it meant something proves nothing but limited ability to think logically.
Stretch your kids feet to help his vocabulary, and ban ice cream to stop shark attacks.

Agreed. However, since there is no correlation I figured it might help him to understand.

shrekgrinch says

tatupu70 says

Oh, so you have some data suggesting there was a strong correlation between interest rates and home prices prior to 1980?

Prove to me the sky is blue and then I’ll provide the historical proof anybody with a pigeon’s brain and access to Google can find.

OK--so what you're saying is that you realized you are wrong but don't want to admit it. I understand. You have a large ego and it's hard to accept it.

tatupu70 says

shrekgrinch says

tatupu70 says

Oh, so you have some data suggesting there was a strong correlation between interest rates and home prices prior to 1980?

Prove to me the sky is blue and then I’ll provide the historical proof anybody with a pigeon’s brain and access to Google can find.

OK–so what you’re saying is that you realized you are wrong but don’t want to admit it. I understand. You have a large ego and it’s hard to accept it.

The Angry Bear article you posted seems somewhat dubious to me. I am always wary of authors who attempt to "reason" out a particular hypothesis without the benefit of any actual data. Why on earth would you attempt to disprove a correlation between home prices and interest rates, by posting charts of home prices vs. HOUSEHOLD INCOME? There doesn't seem to be any data at all on interest rates in the article. This seems odd, considering it is the very crux of what the author is trying to prove. He seems to base his argument chiefly on a flimsy analogy to buying a car. Hmmm...is that really the same thing?

I was able to find an actual chart of home prices vs. interest rates here:

Looking at the graph, interest rates DO seem to be inversely proportional to home prices (1950s-1960s and 1990s-2006), the chief exceptions apparently being that bubbles tend to deflate even if interest rates are falling. Perhaps this can be explained by the possibility that falling interest rates may slow a correction, but that there is no force great enough to actually prevent a correction from happening.

If there is any correlation in that graph, it is very, very small. The interest rate in 1950 was a little over 2% and the home price index was about 105. In 1976, the interest rate was ~7.5% and the home price index was about 106. In 1982 the interest rate was almost 15% and, guess what, the home price index had risen to about 107 or 108. I don't see how you can say there is any correlation there at all.

gameisrigged says

tatupu70 says

shrekgrinch says

tatupu70 says

Oh, so you have some data suggesting there was a strong correlation between interest rates and home prices prior to 1980?

Prove to me the sky is blue and then I’ll provide the historical proof anybody with a pigeon’s brain and access to Google can find.

OK–so what you’re saying is that you realized you are wrong but don’t want to admit it. I understand. You have a large ego and it’s hard to accept it.

The Angry Bear article you posted seems somewhat dubious to me. I am always wary of authors who attempt to “reason” out a particular hypothesis without the benefit of any actual data. Why on earth would you attempt to disprove a correlation between home prices and interest rates, by posting charts of home prices vs. HOUSEHOLD INCOME? There doesn’t seem to be any data at all on interest rates in the article. This seems odd, considering it is the very crux of what the author is trying to prove. He seems to base his argument chiefly on a flimsy analogy to buying a car. Hmmm…is that really the same thing?
I was able to find an actual chart of home prices vs. interest rates here:

Looking at the graph, interest rates DO seem to be inversely proportional to home prices (1950s-1960s and 1990s-2006), the chief exceptions apparently being that bubbles tend to deflate even if interest rates are falling. Perhaps this can be explained by the possibility that falling interest rates may slow a correction, but that there is no force great enough to actually prevent a correction from happening.

According to the chart there is not a correlation between interest rates and prices at all. A huge rise in interest rates does not correlate to a huge drop in the price . Likewise the huge runup in price does not seem to correlate to a huge drop in interest rates. Besides, interest rates are very relative. I remember when 8% was a reasonable norm for a loan and I dont think prices were affected because of it. That does not mean that housing is not overpriced but I am just saying it has little to do with interest rates.

correlation is not black and white - it's not a case of there is or there is no correlation.

the correlation coefficient between two variables(home price index and interest rates in this case) ranges from -1 to +1.
to say there is no correlation implies the correlation coefficient is zero, which would also imply you have calculated that value to determine there is zero correlation.

eyeballing the chart indicates the two variables are negatively correlated.
how strongly they are negatively correlated is determined by calculating the correlation coefficient (which i'm too lazy to do).

APOCALYPSEFUCK says

We’re so fucked, we’re gonna wake up tomorrow with our assholes between our eyes!

what if it's already there? where then shall it be placed?

mike4518 says

correlation is not black and white - it’s not a case of there is or there is no correlation.
the correlation coefficient between two variables(home price index and interest rates in this case) ranges from -1 to +1.

to say there is no correlation implies the correlation coefficient is zero, which would also imply you have calculated that value to determine there is zero correlation.
eyeballing the chart indicates the two variables are negatively correlated.

how strongly they are negatively correlated is determined by calculating the correlation coefficient (which i’m too lazy to do).

If I understand you correctly, I think that's the point I meant to make. Yes, you can cherry-pick 2 points on the graph and thus make it appear, in those limited parameters, as though the two factors are not inversely proportional, as Taintpud70 has done. And that was part of my beef with the Angry Bear article. The jist of the article was that because the 2 things don't correlate perfectly 100% of the time, that there is no correlation at all, and I don't think that follows logically. Sometimes it gets cloudy but does not rain. That doesn't mean there is no correlation between the appearance of clouds and the appearance of rain.

mike4518 says

eyeballing the chart indicates the two variables are negatively correlated.

I think you need your eyeballs checked.

gameisrigged says

Yes, you can cherry-pick 2 points on the graph and thus make it appear, in those limited parameters, as though the two factors are not inversely proportional, as Taintpud70 has done

Cherry pick? Come on. Cherry picking would be looking at 1975 - 1979. Or 1986 - 1989. Or 1989 - 1994. I really fail to see how anyone could reasonably say there is a negative correlation between those two charts.

I'll say again--if there is any correlation at all there, it is VERY weak. It is obviously strongly outweighed by other factors--such as wage inflation.

Finally--I'm assuming that the home price index is inflation adjusted. We should really be using nominal home values--not inflation adjusted.

gameisrigged says

mike4518 says

correlation is not black and white - it’s not a case of there is or there is no correlation.
the correlation coefficient between two variables(home price index and interest rates in this case) ranges from -1 to +1.
to say there is no correlation implies the correlation coefficient is zero, which would also imply you have calculated that value to determine there is zero correlation.
eyeballing the chart indicates the two variables are negatively correlated.
how strongly they are negatively correlated is determined by calculating the correlation coefficient (which i’m too lazy to do).

If I understand you correctly, I think that’s the point I meant to make. Yes, you can cherry-pick 2 points on the graph and thus make it appear, in those limited parameters, as though the two factors are not inversely proportional, as Taintpud70 has done. And that was part of my beef with the Angry Bear article. The jist of the article was that because the 2 things don’t correlate perfectly 100% of the time, that there is no correlation at all, and I don’t think that follows logically. Sometimes it gets cloudy but does not rain. That doesn’t mean there is no correlation between the appearance of clouds and the appearance of rain.

You guys seem to get bogged down in the minutia too often. Looking at the chart, prices (mildly, significantly) go (up, flat, down) when rates go (up, flat, down). Pick one from each parenthetical and it is valid. That tells you that the correlation between the two is very weak. Do your fancy math, and you will see. The point is that anyone arguing that rates going up means prices will go down is using weak logic.

ch_tah says

The point is that anyone arguing that rates going up means prices will go down is using weak logic.

whoah, hold on there tex.

Nobody can deny that, ceteris paribus, rates going up will push home prices down.

There was a very strong correlation in 2002 (with the fall of mortgage rates) a rise in home valuations.

The question is about the ceteris paribus part. I totally agree that we shouldn't expect rates to rise in anything but response to burgeoning wage inflation, since the Fed has historically pushed up rates to cool off the housing market (late 1970s, late 1980s, late 1990s, 2006-2007).

But I do think it's possible for the Fed to lose control of rates and find mortgage rates decoupled from its policy levers. I don't know enough about these levers to say why or how, but discounting this as "impossible" doesn't seem "logical". Everybody to the right of Barney Frank is demonizing the Fed these days, maybe they'll just say 'fine, have fun guys -- we'll be at Vail if & when you change your minds this month'.

tatupu70 says

mike4518 says

eyeballing the chart indicates the two variables are negatively correlated.

I think you need your eyeballs checked.
gameisrigged says

Yes, you can cherry-pick 2 points on the graph and thus make it appear, in those limited parameters, as though the two factors are not inversely proportional, as Taintpud70 has done

Cherry pick? Come on. Cherry picking would be looking at 1975 - 1979. Or 1986 - 1989. Or 1989 - 1994.

Oh, O.K. - You picked 1950, which happens to be a year when prices were lower, even though in 1955 prices fell FOR AN ENTIRE DECADE. Oh, no, there sure isn't any cherry picking going on there, no siree.

I really fail to see how anyone could reasonably say there is a negative correlation between those two charts.

I fail to see how anyone could NOT. Unless they're grasping at straws trying to justify a permabull philosophy.

I’ll say again–if there is any correlation at all there, it is VERY weak. It is obviously strongly outweighed by other factors–such as wage inflation.

I think we already established that it's not a 100% correlation, and I specifically said that it appears to be outweighed by other factors at times. We also established that if two things are not 100% correlated, that does not imply that they are not correlated AT ALL.

Finally–I’m assuming that the home price index is inflation adjusted. We should really be using nominal home values–not inflation adjusted.

Why? I would say precisely the opposite. The unadjusted numbers would always go up over time as the value of currency diminishes, telling us nothing.