June 2008 Picture of National RE Market (recommendation, insurance, renting, expensive)

[fairmarketvalue]

Originally Posted by Humanoid

Obviously, you didn't get my point. You brush off the loss as if its no big deal, but its a huge deal if you look at its long term effects on your finances. You after all said "But, it shouldn't really matter since I'm not selling anytime soon".


Looking how other bubbles behaved is desperate? I cited that article because I recalled seeing it recently. If you look at other housing bubbles you will find the same thing - sales bottom way before prices bottom.


This is some nice speculation, but do you have real data to indicate this is what people are "realizing"? From what I know a lot of the buying is being done by speculators that are oddly hoping for appreciation. But I only have anecdotal information from real estate agents. EDIT: I see you answered this above.


Are you serious? Who cares? Well anybody interested in the direction of the real estate market. If your typical buyer doesn't care about that...well they can become another knife catcher. Also, many of the people that don't have to sell today, may have to sell shortly. There is another issue, MANY of these are actually going to turn into foreclosures. The typical pattern is that the seller tries to list their house and get out, they don't and about 10-12 months later the house is on the market as a REO. I've seen this countless times in my area, in fact I'm just starting to see massive REOs on the market this month (Things didn't really start getting bad here until about a year ago). The problem is there is a big lag behind the time a house is taken off the market and then finally put on the market by the bank. This is shadow inventory and its significant as you'll soon see.

My goodness, can you ever just shut-up and actually read someone elses opinion without taking the liberty of telling them how wrong they are? So let me see if I understand your "theories". How is it that you know that anyone who buys a house now is a "knife catcher" and that anyone that does not sell will eventually have to "short sell" or go into foreclosure? Since when did the ENTIRE real estate market, including California, become filled with NOTHING but homes that HAVE to sell? Do you actually refuse to believe that there is still a fair amount of "regular real estate transactions" going on in our nation, that many DON'T HAVE to sell, but are just choosing to, so they can buy a bigger home or move to another state/job, buy a vacation home, and finally, buy a smaller home because they are downsizing and the nest is empty? THIS is why we bought and sold(needed bigger home) and I'm quite certain there are 100's of thousand's JUST LIKE US! I know, I know, you DON'T CARE what I or mine do/did and Humboldt, he DOES NOT CARE about CHicago or any other state in our nation, just CA. That's all fine except that you completely continue the "doom and gloom" ranting, leaving an impression that ALL real estate is in the same boat. Then you just seem to be in some sort of denial when it comes to rent/own. Remember that chart put out several weeks ago? You know, the one I put my #'s in and then you shot that down anyway, clainimng you, once again, "didn't care" about our personal realestate decisions or our portfolio and blah, blah, blah. All this and it even showed that buying was "worth it" in 3 short years.

Even if Chuck thinks he lost for now, when he says it doesn't matter since he is not or doesn't have to sell right now, what that means is, if he's in it another 5 years or more, and yet maybe even less, he'll start to see that "loss coming back" and when he does sell, he'll sell it for more than he paid, guarenteed!!!!!!!! You seem absolutely CLUELESS when it comes to this specific arguement, free spirit or not.

Lastly, If you honestly think CA will not bottom out for 4 more years, I am curious to know what you think a $1,000,000 dollar house will be worth then? I'll do it for you. If bought in the "peak", it's already worth only $700,000 now(30% drop), in 09 worth $630,000(the other 10% you predict), in 10 worth $598,500(-5 more %); in 11 $580,545(-3%), and FINALLY in 2012 when you say it'll be done, worth a wopping $568,935. DO you honestly believe this is how the real estate market, IN YOUR STATE, will play out? ANd lets NOT forget this completly unreasonalbe mentality this market has created in buyers and their "low ball offers" that will bring the prices down even lower than the "list prices" I give. I believe you believe it will be down 50% when it's all said and done and I also believe you said possibly more than that. Whew, great depression, here we come, for sure! Glad it's only in your state! But let me close with this. You can BET that even if that $1,000,000 house drops down to the 30% price of $700,000, many will start buying up this "steal of a price" and the market will turn around much sooner than you or even I predict!!!! As I and the rest of us that read you posts know, you don't care about the market in anyplace but CA, We have been trying to tell you that this scenario has already been playing out in our areas and it didn't go all the way down to the 30%+% you have had in CA. More like 10-20 (at the most) from peak and has held steady for nearly all 9 mo. of '08. Chuck, thanks for staying positive and keeping a voice of reason to the "good signs" of real estate. You give wise opinions on your posts, especially when it comes to low/middle/high end housing and the how the #'s are effected. Thank you.

[Humanoid]

but saying that the last bubble lasted X years means that this bubble will last the same X years is naive.

Again, look at more than just the last bubble. You will find that prices bottom years after sales bottom. I cited the article as just an example.

... but it won't be proven until we can see how foreclosure inventory is behaving

I'm already seeing it. I've been watching LA/Ventura market pretty closely for my mom (I got her to sell and rent). I'm seeing two developments. Firstly a lot of low end foreclosures are hitting the market, it oddly increased a lot over the last month. Secondly, in areas that had hardly any defaults are now seeing a handful of foreclosure activity. Of course, it will take a bit to see whether I'm misinterpreting this or not.

The thing is, is that median homes in the IE will still have a fairly stable bottom.

I'm not claiming that the inland empire won't find a bottom, although when the San Andreas lets loose all bets are off. Rather real estate in the IE is going to to be the weakest market for awhile and could take longer to bottom then other areas. The reasons for this are roughly 1.) Its the least desirable area in southern California, 2.) high transportation costs, 3.) high unemployment (9% and increasing!!), 4.) its overbuilt.

but it won't really affect the IE a lot since the majority of homes in the IE aren't high end homes

The housing stock in IE isn't much different than Los Angeles, the real difference is the prices. The problem with defining "high end" etc by price right now is that the prices are so distorted. Although, certainly more expensive houses are better the things that were selling for million bucks in Los Angeles were hardly "high end" houses. They were houses that just 8 years ago your middle class family typical purchased after moving up from their starter home. But I don't disagree with your general claim about low vs high etc, what I disagree with is the amount of declines you are predicting. I think they will be greater (at all levels).

[Humanoid]

he'll start to see that "loss coming back"

No he won't, and although I'm sure he doesn't want to think about it I'm sure he even doesn't think this. You are just looking at the nominal price of the house. You aren't thinking about inflation nor are you thinking about the fact that he could've bought the same house for significantly less if he waited. Lets take someone who purchased a DOW index at the peak of the market. Surely the DOW will return to the 14,000 range again some day, yet the person that purchased it today will do significantly better than the fellow that bought in at 14,000. Luckily, most people slowly buy stocks via their 401(k) etc each year and buy when the market is both high and low (dollar cost averaging) so aren't exposed to this sort of situation. But they are exposed to it in real estate. The loss is real and isn't not reduced by appreciation in the future. After all someone who purchased today would still see the appreciation yet purchased at a much reduced price.

worth a wopping $568,935. DO you honestly believe this is how the real estate market, IN YOUR STATE, will play out?

Yes, houses that sold for around $450k were valued at around $1,000,000 at the peak of the bubble. A return to around $550 in 2012 would be a return to historic norms, in fact in many areas it may go all the way down to $450k again.

[chuck22b]

Originally Posted by Humanoid

I'm already seeing it. I've been watching LA/Ventura market pretty closely for my mom (I got her to sell and rent). I'm seeing two developments. Firstly a lot of low end foreclosures are hitting the market, it oddly increased a lot over the last month. Secondly, in areas that had hardly any defaults are now seeing a handful of foreclosure activity. Of course, it will take a bit to see whether I'm misinterpreting this or not.

So, it probably won't take the mass option arm resets/recasts to occur for the higher end to start falling faster. Interesting observation... likewise, there probably wasn't as many transactions made in those markets as well during the boom era.

I'm not claiming that the inland empire won't find a bottom, although when the San Andreas lets loose all bets are off. Rather real estate in the IE is going to to be the weakest market for awhile and could take longer to bottom then other areas. The reasons for this are roughly 1.) Its the least desirable area in southern California, 2.) high transportation costs, 3.) high unemployment (9% and increasing!!), 4.) its overbuilt.

Not sure why you keep on mentioning earth quakes... the fact that the San Andreas, and the fact that there are many other fault lines, even in the LA basin shouldn't influence this bubble. It's a fact that has always existed in California.

1.) Its the least desirable area in southern California

I think the least desirable area in Southern California may be East LA, followed by the some of the outskirt cities in Ventura (Lancaster?) and the IE (Yucaipa, Palmdale?).

Actually the Western Parts of the IE can beat most of the cities in LA. Most of LA really isn't the greatest place. It can also probably beat a few of the cities in East, North/East Orange County. I'm not as sure about Ventura, but I think Oxnard is very similar to Chino, except that it's a whole lot further from the job centers. Also, Palm Springs area has always been a wealth mecca.

2.) high transportation costs

True for now... if you and I agree that we're in a deflationary environment, then gas prices/transportation costs should wither and be less of an issue

3.) high unemployment (9% and increasing!!)

True for now as well.... the economy will have to further diversify from construction. If more and more investment goes into clean tech/alt. energy, the IE holds to benefit highly. Furthermore, as more retirees move toward Palm Springs and other inland traditional retiree meccas, than nursing and other medical fields should continue to prosper.

4.) its overbuilt.

Also true for now... and also one of the major reasons why prices have dropped as much as it has. The IE will always have an affordability trump over LA/OC and the availability of land is a long-term competitive advantage.

The housing stock in IE isn't much different than Los Angeles, the real difference is the prices. The problem with defining "high end" etc by price right now is that the prices are so distorted. Although, certainly more expensive houses are better the things that were selling for million bucks in Los Angeles were hardly "high end" houses. They were houses that just 8 years ago your middle class family typical purchased after moving up from their starter home. But I don't disagree with your general claim about low vs high etc, what I disagree with is the amount of declines you are predicting. I think they will be greater (at all levels).

I think in general we agree with each other's assessments on how this down turn will affect the different market segments (low/medium/high) and trains of thought (sub-prime, followed by option arms, etc.)...

What we disagree on are the percentages and duration and how the IE will fair in comparison to LA/OC.

-chuck22b

[SoCal Bottom Rider]

FMV

You have NO CLUE as to the tremendous beating OUR area of SoCal is taking. You get you panties all twisted when someone insinuates the rest of the nation is in the same boat but you feel comfortable jumping in and offering your opinions when the discussion is about a specific area. All RE is local remember?If you want to be respected you need to show respect for others. Please.

[SoCal Bottom Rider]

'worth a wopping $568,935. DO you honestly believe this is how the real estate market, IN YOUR STATE, will play out?'

Yes IN OUR AREA OF SOCAL it is entirely possible. just because your areas show appreciation and never experienced a bubble does not mean our areas are in the same boat! All RE is local! how many times do I have to say it!!!! ARGHHHH!!!!

[Humanoid]

Not sure why you keep on mentioning earth quakes... the fact that the San Andreas, and the fact that there are many other fault lines, even in the LA basin shouldn't influence this bubble. It's a fact that has always existed in California.

Because people are not pricing in the earth quake risk. Smart investors will, but most people don't. Anyhow, I mention it because big earth quake on the San Andreas will turn the IE into a ghost town. This isn't a remote possibility, this is something a long term home owner/investor should seriously consider. But, I'm it won't effect the bubble unless we get a reminder of the risk. That recent quake wasn't big enough.

think the least desirable area in Southern California may be East LA, followed by the some of the outskirt cities in Ventura (Lancaster?) and the IE (Yucaipa, Palmdale?).

I'm thinking you don't know Ventura county very well, every time you comment on the area its way off. Lancaster is in Los Angeles county and isn't particularly close to Ventura County, in fact its a good 40 minute drive from Lancaster to the southern border of Ventura/LA county. Anyhow, Ventura county is much nicer than the IE. The weather alone is a million times better (Simi Valley is the hottest, and even that isn't too bad). I really have no idea what "outskirt" cities you are talking about, there is the Piru area but hardly anybody lives up there.

But yeah the Lancastor/Palmdale area may be worse than the IE. But its also cheap compared to other areas.

then gas prices/transportation costs should wither and be less of an issue

Gas is unlikely to get cheap anytime soon. Transportation costs may go down in the future, but its going to require alternate technologies. So transportation costs will hurt the IE for awhile.

If more and more investment goes into clean tech/alt. energy, the IE holds to benefit highly.

How so? Are there any such start ups in the area?

[fairmarketvalue]

Originally Posted by SoCal Bottom Rider

FMV

You have NO CLUE as to the tremendous beating OUR area of SoCal is taking. You get you panties all twisted when someone insinuates the rest of the nation is in the same boat but you feel comfortable jumping in and offering your opinions when the discussion is about a specific area. All RE is local remember?If you want to be respected you need to show respect for others. Please.

SoCalBottomRider,

I'm sorry and do not mean any disrespect and I, more than most seem to, KNOW real estate is local. And as mentioned before, this is NOT a California thread, it's a real estate thread and all the "mess" you guys keep sharing is EXACTLY why much of the rest of the nation is misunderstanding real estate, the conditions of it, whether it's a "good time to buy", and an overall "generlization, period. It clumps it all to the "worst" situtions. I hope you understand what I mean. As for my scenario, I still find it hard to believe. And for your sake in CA, I hope I am actually right. But you have to know that real estate took on a "nation wide" state of paranoia and the media ONLY reported, for a long, long time, #'s that were hugely effected by states like CA.

[Humboldt1]

You and I are not that far off in our predictions nationally for bottom in late 2010. I don't know enough about California to comment but that market has serious challenges.

When would you recommend someone buying real estate? You seem against ownership based on your posts. If I am going to buy a place and live in it for 5-10 years, would you recommend me buying in 2010 or not, nationally? 2012 for California?

If you are still telling me to not buy nationally in 2010 and 2012 in California I would think you are biased against ownership, even for those who don't move all the time.

[Ourdreamhouse]

Whew! I'm a little reluctant to get in on this firefight -- or is it a "passionate" debate? A lot of heat, not much light.... Tells me that losing money makes people pretty cranky.

All real estate is local? Well, yes, of course there are differences between North Carolina or Texas and California or Nevada. But....most mortgage financing is now national, if not global, and financing issues are having a greater and greater impact on purchasing (and pricing) of real estate.
-- When a would-be, marginal buyer can't get a mortgage because lending standards have tightened up dramatically all over the country, that's not local.
-- When a would-be buyer in North Carolina can't complete his purchase because he can't sell his home back in Detroit, that's no longer local.

One thing you guys overlooked: the OP posted data based on MEDIAN prices. Case-Shiller don't use median prices, they use actual prices, which is why their research is more highly respected than other studies, such as the NAR's.

IMHO: best to forget any hope for historical averages in appreciation. We're in a whole new world now. Some areas may appreciate, but we might well see many/most other areas stay flat (or continue to drop) for a long, long time. Instead of historical averages in appreciation, i'd look at historical averages for income to home prices, or rent to purchase ratios. I think those averages will be a more accurate guide to the future. In fact, since lending practices now seem to tightening up to resemble those in the '70s and '80s, even those averages may be too optimistic.

And, as skeptical as i am of the media's ability/willingness to report accurately, i DON'T think that this real estate crash is just a self-filling prophecy by a few doom-and-gloomers. It's real, and it's scary.