[ParkTwain]

Originally Posted by jfkIII

Received my latest issue of Money magazine yesterday. Their prediction for 2008 for housing is gloomy. They pointed out that housing prices tend to run in 10-year cycles, so, as an investment, housing is not a good one for quite awhile. The article did go on to present that if you bought your house prior to 2004, and plan to stay in it for awhile (time not specified) that eventually it will get back to the 2004 levels of equity, and that one would be basically unaffected. It's just that housing between now and then is a very bad investment.

If you take your financial advice from Money magazine, good luck to you. When you read a magazline like that, always consider who benefits from the point of view being expressed, or in whose interests is it that you believe what is being asserted. An awful lots of that magazine consists of puff pieces about a firm who, by being featured in the article, is endeavoring to grow its business via the publicity.

[jfkIII]

Originally Posted by ParkTwain

If you take your financial advice from Money magazine, good luck to you. When you read a magazline like that, always consider who benefits from the point of view being expressed, or in whose interests is it that you believe what is being asserted. An awful lots of that magazine consists of puff pieces about a firm who, by being featured in the article, is endeavoring to grow its business via the publicity.

Good advice, PT. And that article did present itself as only prediction or forecasting...and listed many scenarios that might have an affect on their forecasts to make them swing in another direction. Light reading for sure...but does not change the current outlook on housing, as only one can actually witness.

[SHEPNYC]

See Below:

Foreclosures nearly double from year ago: report - Yahoo! News (broken link)

[ParkTwain]

Re: writedowns of CDOs backed by bad mortgages reaches $45 billion

At some point, the writedowns will overshoot the case. This is another symptom of the fact that the financial system (lenders, CDO investors) doesn't have a handle on the extent to which the individual mortgages were fraudulent or merely predatory. The mortgage origination and capital-providing system had so many holes that it eventually produced a tsunami of crap credit overhanging that marketplace. The truth of the problem will never be known because the data aren't there to be had at an aggregated level. The prosecutions and lawsuits will continue to trickle in for another decade.

[Eric Young]

Originally Posted by Mom2Five

If builder permits are down to 40% and it's not being built unless it's sold, then what about the new construction going on at, for just one example, Inspirada? That has a very long way to go before being completed. I went through it a few times and it seems there are thousands of homes still to be built, and that's not the only new community being developed. Are the builders going to leave empty lots just sitting there? The prices on the new construction are undercutting the prices of existing homes for sale, so I don't see how with all of the new construction as well as existing homes for sale we can see any turnaround for several years. I do like what your saying but I just don't see it.

They're not undercutting the bank-owned properties.

Mom2Five, I've been extremely bearish on this market for over a year and a half (several months ago, quotes of me that were published in InBusinessLV were laughed at on this thread), but I am slowly coming to the opinion that the competition between the builders and the banks will drive our overall median prices lower at a faster rate than in previous housing downturns. This sounds like a bad thing - and for people that own property, it is - but it would lead to a quicker bottoming out than in previous downturns.

In fact, with pending sales ticking upwards the past two months (contrary to previous 4th quarter activity), I think that we could be at the very beginning stages of building the floor that will, over the next six months or so, be looked back upon as the bottom of the market.

For me, this month is the first in an extremely long time in which I am comfortable recommending buying...as long as the buyer is buying either bank-owned or selected new construction. I have no interest in 98.5% of the properties on the market, but approximately 1.5% of available homes are available for significantly below what they will get with the slightest uptick in the market.

In August, a buyer paid $300,000 for a Sun City home that had originally been purchased for $500,000 when it was new in 2004. This was an exceptional deal...even if one presumes that median prices will continue to decline. Two weeks ago, the home that is literally next door to this buyer also got a very good deal: this buyer paid $388,000 for the same house.

I cannot emphasize enough that I expect the median price to continue downward through half or all of 2008. However, as soon as the bottom becomes "visible," the kinds of deals that are available now--1.5% of the market--will evaporate as the hardest-pressed sellers recognize that they a bottom is near and that simply pricing below the median (as opposed to dramatically below the median) is all they must do to attract an offer.

[Mom2Five]

Originally Posted by Eric Young

They're not undercutting the bank-owned properties.

Mom2Five, I've been extremely bearish on this market for over a year and a half (several months ago, quotes of me that were published in InBusinessLV were laughed at on this thread), but I am slowly coming to the opinion that the competition between the builders and the banks will drive our overall median prices lower at a faster rate than in previous housing downturns. This sounds like a bad thing - and for people that own property, it is - but it would lead to a quicker bottoming out than in previous downturns.

In fact, with pending sales ticking upwards the past two months (contrary to previous 4th quarter activity), I think that we could be at the very beginning stages of building the floor that will, over the next six months or so, be looked back upon as the bottom of the market.

For me, this month is the first in an extremely long time in which I am comfortable recommending buying...as long as the buyer is buying either bank-owned or selected new construction. I have no interest in 98.5% of the properties on the market, but approximately 1.5% of available homes are available for significantly below what they will get with the slightest uptick in the market.

In August, a buyer paid $300,000 for a Sun City home that had originally been purchased for $500,000 when it was new in 2004. This was an exceptional deal...even if one presumes that median prices will continue to decline. Two weeks ago, the home that is literally next door to this buyer also got a very good deal: this buyer paid $388,000 for the same house.

I cannot emphasize enough that I expect the median price to continue downward through half or all of 2008. However, as soon as the bottom becomes "visible," the kinds of deals that are available now--1.5% of the market--will evaporate as the hardest-pressed sellers recognize that they a bottom is near and that simply pricing below the median (as opposed to dramatically below the median) is all they must do to attract an offer.

That the builders aren't undercutting bank owned is no comfort to your average homeowner, but you already know that.

If it takes only a year to start recovering, I'll be happy.

[Randy Culture]

House prices will drop for 10 years. Professor Shiller (of book and TV fame) agrees with me. It will be worse than you can believe, and I will love it.

[dude66]

Housing Woes - Fortune Magazine


"Fortune's exclusive calculations show that big declines are needed in markets around the country to bring home prices back to their historical relationship to rents.

Orlando -34.2
Miami -32.2
East Bay, Calif. -31.0
Tampa -28.0
Baltimore -27.8
Fort Lauderdale -27.2
Palm Beach County, Fla. -27.2
Las Vegas -26.4
Sacramento -26.0
Greater Washington, D.C. -25.1
Los Angeles -24.1

[ParkTwain]

Originally Posted by dude66

Fortune's exclusive calculations show that big declines are needed in markets around the country to bring home prices back to their historical relationship to rents.

This is a half-baked premise in a second-home/retirement-driven housing market, as in Vegas and much of Florida. In other words, in such markets local economic conditions for wage-earners aren't sufficient to analyze price elasticity of demand for housing. Furthermore, the boom, and now the bust, in housing is driven by access to lender capital, and by organized mortgage application fraud. The securitization of mortgages will not go away but will become more transparently structured, probably resulting in less capital available to sub-prime applicants.

[Eric Young]

Originally Posted by Randy Culture

House prices will drop for 10 years. Professor Shiller (of book and TV fame) agrees with me. It will be worse than you can believe, and I will love it.

While Shiller has been prescient, so have many, many others.

The key, however, isn't simply in knowing when to get out - which Shiller has been quite good at - it's also knowing when to get back into a market.

Shiller's statements in 1999 about the S&P and NASDAQ being "bubble" markets were well-timed, but did he ever make a statement to get back in? If you were following Shiller, you got out of stocks in 1999 or 2000 and never returned...thus missing the 100% move between 2003 - 2007.

That Shiller has written books and been on TV does not necessarily lead to the conclusion that he has been correct on every market turn or that he will be correct in the future.

In the '80's, Robert Prechter was the guru-du-jour of that decade's boom, pushing his Elliot Wave Principle. He was right, right, right - my own brokerage would pay $160 per minute to talk to him. But he completely disregarded the break below the 200-day MA on the S&P the week before Black Monday in 1987 and remained bullish. An awful lot of people paid an awful lot of money to learn the lesson that eventually every guru will turn out to be wrong, wrong, wrong.

I'm glad to hear that you feel so great about your future, Randy Culture. Please post in ten years so we can see how it all turned out.