How Low Will California Home Prices Go? (Los Angeles, San Francisco: home sales, buying)

[it's all good]

So my bank is WAMU. Do I need to worry about my nest eggs at all?

[sheri257]

Originally Posted by it's all good

So my bank is WAMU. Do I need to worry about my nest eggs at all?

No ... why? Do you think there's going to be a bank run or something?

You're money is insured by the FDIC for up to $100K ...

So unless you have more than $100K in the bank, I wouldn't worry about it.

[it's all good]

Very funny! : ) No, but remember the savings and loan thing in the 90's? And a bunch of people lost their savings because the S & L's made loans that were risky or something like that? That's what I was thinking about. : )

[justsomeguy]

Originally Posted by sheri257

First of all ... we're due for a recession anyway. We have a recession every 7 years or so, and the economy always seems to survive.

Banking and Finance? That will come back as soon as the lending practices get back to basics and the downturn flushes out. It may take 2-5 years but people seem to forget that we've got 36 million people here and up to 90 percent of them have been shut out of the housing market all together in many markets.

As soon as prices get down to more a reasonable level, I have no doubt more people will jump at the chance to buy homes and banks will eventually be making even more money with the increased volume of sales.

Construction? That's pretty much a problem with homes but I seriously doubt that all contractors are going to be out of work. Even in my dinky area of the desert where housing prices are tanking, commercial construction is booming everywhere. I haven't seen much of slow down in the commercial sector. Three new hospitals are being built in my area alone which, I think is a good indicator.

Retail? Yeah ... that's going to hurt for awhile because too much of that spending was based on debt. Retail is always hit pretty hard in a recession but, I don't think it will be a total disaster. Afterall, California has a pretty good history of income growth so, that will take care of itself eventually.

I guess my point is the housing malaise isn't going to *CAUSE* a boom. That's the impression I am getting from you, anyway. Of course the economy will recover later on down the road (hopefully), but it's not going to be because of the disaster going on in the housing and credit markets right now.

[sheri257]

Originally Posted by justsomeguy

I guess my point is the housing malaise isn't going to *CAUSE* a boom.

Yeah, actually ... I think it will eventually.

Think about it. What is California's biggest problem right now? Next to infrastructure ... I'd say affordable housing is a close second. Businesses have to think twice about moving or expanding here because where are their employees going to live if there's no affordable housing?

And if you stop the outward migration due to unaffordable housing (about 100,000 people leaving each year) ... then the economy will do better because of that also.

[justsomeguy]

Originally Posted by sheri257

Yeah, actually ... I think it will eventually.

Think about it. What is California's biggest problem right now? Next to infrastructure ... I'd say affordable housing is a close second. Businesses have to think twice about moving or expanding here because where are their employees going to live if there's no affordable housing?

And if you stop the outward migration due to unaffordable housing (about 100,000 people leaving each year) ... then the economy will do better because of that also.

Housing will still be a lot cheaper in other parts of the country. Oh well, anyways, no sense in arguing further, in essence I think we agree.

[it's all good]

I think you all pretty much agree, I've been wondering when you people would start to notice.... : )

[Humanoid]

And I guess the feds didn't tell the lending market what to do with it, but they could have probably figured that competition would have led to the sharp decrease in lending rates

They wanted the rates to go down, my only point is that the fed does not directly control things like the federal funds rate. The federal funds rate refers to the average rate that banks charge each other to borrow each others funds. When the fed "cuts" rates its really just saying "We are going to try to manipulate the money supply enough to get rates at such and such". But sometimes the markets can be hard to manipulate. Anyhow, the following entry in wikipedia explains it in more detail:

Federal funds rate - Wikipedia, the free encyclopedia

So my bank is WAMU. Do I need to worry about my nest eggs at all?

WAMU isn't doing well, because they got to wrapped up in the current housing bubble. If you look at the ratio of their total assets to loans it isn't pretty.

[it's all good]

Originally Posted by Humanoid

They wanted the rates to go down, my only point is that the fed does not directly control things like the federal funds rate. The federal funds rate refers to the average rate that banks charge each other to borrow each others funds. When the fed "cuts" rates its really just saying "We are going to try to manipulate the money supply enough to get rates at such and such". But sometimes the markets can be hard to manipulate. Anyhow, the following entry in wikipedia explains it in more detail:

Federal funds rate - Wikipedia, the free encyclopedia

Thank you for explaining that, I see what you're saying now. And tomorrow I will look at this link, I promise.

WAMU isn't doing well, because they got to wrapped up in the current housing bubble. If you look at the ratio of their total assets to loans it isn't pretty.

Where can I find that information on their assets to loans? and are the loans the subprime kind we are talking about here or just general loans?

So what does that mean for my CD's and savings? If you saw my earlier question about the savings and loans thing in the 90's, is there any concern that something similar can happen with the banks who invested in funds like this? Thanks very much for explaining these things.

[Sassberto]

Originally Posted by it's all good

So what does that mean for my CD's and savings? If you saw my earlier question about the savings and loans thing in the 90's, is there any concern that something similar can happen with the banks who invested in funds like this? Thanks very much for explaining these things.

It means nothing unless you have more than 100k in cash in your bank account, which is basically insane.

The banks wrote the loans, Wall Streeters repackaged them as MBS and sold them to the Chinese who are flush with cash. This "meltdown" is nothing more than a bunch of bankers crying because they won't be making 900% returns anymore, they'll have to suffer with 200% returns. They could lose money for next 5 years and it still wouldn't erase the massive gains they made over the next five. Unfortunately it all comes off the backs of the poor, the subprime borrower.

Reading through this thread my only addition would be to take what the media reports with a grain of salt - they love to create a "crisis". While the subprime debacle is bad, it's the same old story as the last one - greedy people at the top (banker, lender, wall streeter) lose some money which is a drop in their bucket, while the poor people (subprime borrower) who paid for it all lose everything.

The regular people with the regular house and the regular job will continue to live in their houses and pay their mortgage. The idea that the entire country or state is a flipper using their house to buy Hummers and vacation homes makes for good copy but is ultimately nonsense.

This housing bust is most acute in the new home market, especially condos and tract homes in the exurbs. If you want to see big price declines, look there. Existing home sales are slow and will stay slow, but at least where I live (no new housing since the late 60's), prices are not declining in any meaningful way.