Real Estate Market / Inflation / Recession / Depression (houses, rent, job)

[jazzlover]

Originally Posted by hello-world

yes, thanks; i know what median, mean, mode, and skewness are about. as well as statistical significance. trulia provides for median and mean, though number of sales is only available for some areas, and there is no mention on trulia of where, EXACTLY, they're getting their information from (so, no way of knowing whether there is really much meaning to some areas' means and medians). as for denver, they do provide for number of sales (and one can only assume they're using this value in the denominator of mean, e.g.), but no mention of where, exactly, they're getting their info.

They do mention assessor data at the bottom of one of their charts. Assessors' sales data comes directly from deed data recorded in the county clerk's office. About as close to the "horse's mouth" on sales data as you can get. Of course, all of the non-arm's-length sales as other "noise" must be removed from that data before it can be credibly analyzed.

In the particular data you linked to on Trulia, those median numbers do look somewhat "uglier" as far as showing a significant downward trend. That doesn't surprise me--probably a few very high-priced sales skewing the mean upwards.

A real estate friend of mine sent me this the other day:

Question: "How do you know when the real estate market has tanked?"

Answer: "When your real estate salesman greets you and hands you a cart at Wal-mart, and you address his or her broker as 'waiter'." Ouch.

[hello-world]

jazzlover wrote:

They do mention assessor data at the bottom of one of their charts. Assessors' sales data comes directly from deed data recorded in the county clerk's office.

"and Trulia search traffic" (under "Sources" below chart)

what IS that?

either way, "ugly" is an understatement!

[jazzlover]

The article from the London Financial Times pretty much sums up my view of the economic mess this country is in. Unfortunately, Colorado is a poster child of the very excesses this article speaks to. Here is the link (free registration is required to view the whole article): FT.com / Home UK / UK - America's inflated asset prices must fall


The article talks extensively about speculative "bubbles" in the US economy, especially real-estate and how these have substituted for productive income-based saving and investment. The writer concludes that:

A sharp decline in asset prices is necessary to rebalance the US economy. It is the only realistic hope to shift the mix of saving away from asset appreciation back to that supported by income generation. That could entail as much as a 20-30 per cent decline in overall US housing prices and a related deflating of the bubble of cheap and easy credit.

The concluding last paragraph sums up the writer's view of what's ahead:

It is going to be a very painful process to break the addiction to asset-led behaviour. No one wants recessions, asset deflation and rising unemployment. But this has always been the potential endgame of a bubble-prone US economy. The longer America puts off this reckoning, the steeper the ultimate price of adjustment. Tough as it is, the only sensible way out is to let markets lead the way. That is what the long overdue bursting of America's asset and credit bubbles is all about (emphasis added).

[LBear]

Originally Posted by sberdrow

all I know is I want out of here, Colorado is a nice place for the most part, just not for me. The cold is keeping my home from being looked at here in Loveland, and I have it 30K below market. No one wants to take a look in this freeze I guess.

January (winter) is a bad time to sell, especially anywhere that is cold. Phoenix, Arizona has a decent market in January as people escape the cold to find and buy property where it is warm.

The MOST IMPORTANT thing right now is the ENTIRE real estate market has TANKED. It is REALLY BAD. I an not a gloom and doom person but this is REALLY BAD. I am talking maybe 1970's bad. CLICK HERE I hope not. As the middle-class people will get hurt, really bad. The foreclosure rate is insane. The government is stepping-in to help because if it doesn't, this will be such a disaster that some people are predicting a 1930's type of disaster or even worse, that this will make the 30's disaster seem tame.

I REALLY hope and pray this doesn't happen...


[ MOD EDIT: I'll copy & split this posting. Weather portion stays here, housing part goes to the the thread for that issue. ]

[Bob from down south]

European markets down 4-6% in midday trading. The banking system's crazy financial PONZI leverage pyramid is coming down around our ears now.

Anyone want to take a bet on Dow 11500 tomorrow?

BTW, there's an interesting derivative index called CMBX...it's an indicator of trouble now with commercial real estate backed securities. The top-rated triple-A tranche spreads are shooting up like a Delta-V rocket, indicating severe stress in the commercial real estate sector that's about to land on our heads like Dorothy's little country house.

My guess...housing will accelerate its death-spiral, commercial real estate will start to implode in the next month or two, and consumer credit goes soon thereafter.

And FWIW, last week's Fed H.3 report shows that the banks have chewed through over 99% of their non-borrowed reserves in the last month. The money loaned by the Fed at the new TAF auctions has almost completely replaced non-borrowed reserves in the federal depository system. There's no precedent for that since we came off the gold standard. I can't wait to hear the explanation for that.

FRB: H.3 Release--Aggregate Reserves of Depository Institutions--January 17, 2008

Hold on to your shorts...it's gonna be a week to remember.

Bob

[hello-world]

Originally Posted by Bob from down south

European markets down 4-6% in midday trading. The banking system's crazy financial PONZI leverage pyramid is coming down around our ears now.

Anyone want to take a bet on Dow 11500 tomorrow?

BTW, there's an interesting derivative index called CMBX...it's an indicator of trouble now with commercial real estate backed securities. The top-rated triple-A tranche spreads are shooting up like a Delta-V rocket, indicating severe stress in the commercial real estate sector that's about to land on our heads like Dorothy's little country house.

My guess...housing will accelerate its death-spiral, commercial real estate will start to implode in the next month or two, and consumer credit goes soon thereafter.

And FWIW, last week's Fed H.3 report shows that the banks have chewed through over 99% of their non-borrowed reserves in the last month. The money loaned by the Fed at the new TAF auctions has almost completely replaced non-borrowed reserves in the federal depository system. There's no precedent for that since we came off the gold standard. I can't wait to hear the explanation for that.

FRB: H.3 Release--Aggregate Reserves of Depository Institutions--January 17, 2008

Hold on to your shorts...it's gonna be a week to remember.

Bob

yeah, the indian sensex was down nearly 11% (!!!) at one point today, and almost 8% for the day. apparently, that's one of the biggest plunges ever for that market. other markets around the world slid between 4% and 5% today alone. wow.

it seems the talk regarding the bush/congress "economic stimulus plan" is that $600 or $800 in tax rebates is chump change relative to most americans' debt, so will amount to essentially nothing compared to the debt out there (a bit like a step forward relative to many steps back that gets noone ahead when it has to be put towards a credit card past due payment or a payment to a bank for a troubled mortgage, for example).

regarding the CMBX, "for the rest of us", it basically looks like a risk index on commerical real estate - as defaults begin to roll in, the CMBX starts to rise, with lots of defaults and risks resulting in a spike. i.e., it looks like the commercial real estate market is beginning to look a bit like the residential real estate market. that, along with bad manufacturing news and more layoffs, begins to look like maybe the business world is beginning, at least, to hurt as much as the debt-laden and defaulting "rest of us" world. i.e., more bad news. whether it's pointing to implosion, i don't know. but, it sure is a lot of bad news, and some markets around the world taking nearly their largest one day hits ever also looks like bad news. as does banks' running through all their reserve "worth", as the last link that bob FDS posted appears to suggest.

thanks (???) for the post, bob.

[jazzlover]

I have been mulling of my thoughts of what lies ahead--and wondering what the overseas markets would do when they opened today. I think Americans (who observe it) had better enjoy the holiday today. Tomorrow may be the second "Black Tuesday" in less than a century for the US financial markets. I would be delighted to be wrong about that, but the signs are ominous.

I have (as regular readers of this forum know) been pretty pessimistic about the structurally unsound and unbalanced state of the US economy. I have repeatedly predicted that we are likely in for a good thumping. However, I continued to think that the deflation of the real estate bubble and the associated pain with that would be something like a slow "controlled" crash. I am now increasingly fearful that we may-- instead--experience a rapid, breathtaking high-speed economic crash that leaves virtually every American standing in stunned silence.

Now, the politicians, business leaders, and media will continue to talk about some sort of "soft landing," even as the economy crashes around their heads: they dare not say anything else for fear of inciting panic and for fear of being blamed for whatever disaster follows. So, they will, figuratively, be fiddling away like Emperor Nero while Rome is burning. Even if the politicians, business leaders, etc. did try to take some sort of action, it would likely be either wrong or too late to make any substantial impact. Large scale financial panics usually take on a life of their own, anyway, and once rolling usually pretty much roll over anything in front of them.

So, what would a crash like that likely do to good 'ol Colorado? Plenty.

My predictions:

1. The real estate and construction industries would essentially collapse. Hundreds of thousands of Coloradans working in those industries would find themselves unemployed--probably within months, if not days.

2. Real estate markets would also collapse, as literally hundreds of thousands of Coloradans would be unable to pay their mortgages. Foreclosed properties would flood the real estate markets--with few buyers, prices would collapse to the point that properties would sell for pennies on the dollar--if they sold at all. Financial institutions would face failure right and left, and jobs would hemorrhage from those institutions as they desperately try to remain solvent by cutting expenses.

3. The Colorado recreation industry would go into a coma. For people across the country--struggling to keep a job, make a mortgage payment, put food on the table for their families--would have no disposable income or even time for a vacation. The affluent would not be spared. People who see their net worth decimated in the crashed financial markets are not likely to want to hold on to the dead weight of a non-productive second home or fancy condo in the mountains. They wouldn't be visiting them much, and they would attempt to sell them--again, probably with few buyers. The many service jobs at the resorts would simply evaporate--those workers would beg, borrow, or steal their way back to wherever they came from--being jobless, cold, and hungry in the high country would have little appeal.

4. Colorado's "mailbox economy" would collapse. Tens of thousands (maybe hundreds of thousands) of Coloradans relying on pensions, annuities, investment income, and stock market appreciation would find their cash flows severely reduced, if not non-existent. The value of their homes would plummet in the real estate crash. There would be no jobs for them to supplement their disappearing income. Many would simply abandon their homes to go live with relatives, move to areas with some prospect of employment, or try to make some sort of bare subsistence living to survive.

5. With economic activity pared down to what is necessary for the barest survival, the retail industry would be decimated. Thousands upon thousands of retail stores would close--many thousands of employees would lose their jobs. This would also collapse the commercial real estate market nearly completely.

6. Colorado's energy industry and agriculture would likely be the only two industries in the state to escape near destruction, but they would not be unscathed. The energy industry provides an essential commodity, and demand for domestically available supply could actually increase if the dollar collapse made energy imports either unaffordable or unavailable to the US. However, the collapsing economy and decimated purchasing power of the typical American would bring--by necessity--substantial "demand destruction" of energy demand. Both prices and demand for energy could very possibly decline.

As for agriculture, people do have to eat, and transporting food cross-country may no longer be a very affordable option. Farming and ranching in Colorado could make a comeback, as local producers try to fill local demand. Nobody would be getting rich from it, though, because money will just plain be too scarce.

If you think all of this is not possible, ask somebody who lived through 1929 and the Great Depression. They, too, were told before the crash that such a thing is "impossible"--that the economic leadership and politicians "had it all figured out." That speculative bubble blew up, and took more than decade and a World War to get out of it. The speculative bubble we're in now is not much different--it's just in a different commodity, real estate instead of stocks--but the bursting will probably not be much different. Indeed, things could be worse this time, because the lid has been kept clamped down on this speculative economic pot-boiler for much longer, allowing all kinds of pressures and distortions to build; and because, unlike the 1920's and 1930's, the US is facing the compound problems of an exported manufacturing base of many essential necessities for living and a dwindling domestic natural resource base (neither problem which was present in the last Depression in this country).

As for me, I'm trying to figure out how to get my "ducks in a row" to survive this mess when and if it happens. I figure better safe than sorry--as they say, "Hope for the best, but plan for the worst."

[hello-world]

Originally Posted by jazzlover

I have been mulling of my thoughts of what lies ahead--and wondering ....

as we are seeing that residential real estate is heading downward, though high end real estate is doing fine, i wonder if the especially well off might bolster SOME of this in similar ways...by bargain hunting and so preventing total collapse in, e.g., "the high country". stocks. real estate. goods. i can imagine that there will be a few sectors of each of these that remain intact as wealthier bargain hunters buffer any fall.

that said, i can imagine that the rest of us might still see some of what you predict here. things have gotten out of whack enough via the puppeteers' strings for SOME significant adjustment to become inevitable after awhile (what we're seeing and beginning to see being some of the "adjustment", or some of the "strings" breaking).

i wonder, what do people see as good places to invest, for example, in such times? i can imagine some staple industries that can't go away and others that might benefit from pushes brought on by some of our "addictions" (and weening from them) might be good. or, maybe some "safe havens" where investors tend to go as other investments fall. anyone have any ideas?

[Bob from down south]

DAX (German) and CAC (French) exchanges took 7% hits at close. 7% equates to an 850-point hit in the Dow. Dow futures now pointing to a 514 point (4%) drop at the open in the morning. If that happens, the monoline bond insurers that are already on the brink are looking to go right over the edge, triggering a very unhappy secondary event as the leverage pyramid explosively unwinds and exposes a good number of banks and other financials to the unhedged real risks of several years of misbehavior...compounded...with interest.

A good place to invest? I'm thinking more of a good place to take shelter. Treasuries, even at 1% yields, might be the place for a while. But anyone still in equities now is probably going to take a real punch in the nose in the morning before movement to a safe-haven is even possible. As I said in an earlier post...return of investment is likely to be more important that return on investment for the immediate future if this gets out of hand.

Bob

[hello-world]

Originally Posted by Bob from down south

DAX (German) and CAC (French) exchanges took 7% hits at close. 7% equates to an 850-point hit in the Dow. Dow futures now pointing to a 514 point (4%) drop at the open in the morning. If that happens, the monoline bond insurers that are already on the brink are looking to go right over the edge, triggering a very unhappy secondary event as the leverage pyramid explosively unwinds and exposes a good number of banks and other financials to the unhedged real risks of several years of misbehavior...compounded...with interest.

A good place to invest? I'm thinking more of a good place to take shelter. Treasuries, even at 1% yields, might be the place for a while. But anyone still in equities now is probably going to take a real punch in the nose in the morning before movement to a safe-haven is even possible. As I said in an earlier post...return of investment is likely to be more important that return on investment for the immediate future if this gets out of hand.

Bob

it appears to me that there are some opportunities, here. maybe not a lot, and maybe a little tricky to call, but there are likely some glaringly obvious opportunities (much as there were after 9/11). those are what i am wondering some of you might be seeing... but i guess you're thinking this is truly getting out of hand and a likely loss practically regardless of anything but a safe haven like bonds, treasuries, or maybe CD's or money market (though it seems the bond insurers are coming under the microscope, so maybe mnot even bonds?)...

i.e., maybe a freaking saving's account will be the go to "investment"! (so long's FDIC doesn't go under, too?)