Chapman thinks OC prices will be up in 2010

Unfortunately I do not have the data set that they use. However, I do have the chart from the previous economic presentation, and I will see what I can do about getting the updated one as well as possibly getting the data set. Please take note that they mention the ratio will return to 5.6 near the average of 5.7, however the average is distorted by the bubble years, and during more "normal" times the average appears to be below 5.5. I'm surprised they didn't factor in an overshoot from the average, seeing as how that is what happened in the 90s and how insane the ratio got to in this bubble.



http://i43.tinypic.com/6f5lzl.jpg
 
Chapman cannot be serious about this projection.



First, the long term average doesn't mean much because it includes a number of real estate bubbles including the massive one we just experienced. In short, the average means next to nothing.



Second, the price-to-income ratios at the bottom are what matters--somewhat. If interest rates remain at historic lows, there is a slim chance we may bottom at a higher ratio because lower interest rates mean larger amounts are financed with the same income. The best indicator of the bottom is the aggregate DTI. This will get below 30% at the bottom.



If the price-to-income ratio is at 6.3 or 5.2, this suggests we are still 20% to 30% above the bottom, not nearing the bottom as they suggest.
 
[quote author="irvine_home_owner" date=1245938657]I always try to keep in mind who sponsors these economic projections.</blockquote>


Many of the same sponsors of their 2004 forecast, in which they predicted a cooling of the housing market, are the same sponsors of today. If you have ever been to one of their presentations, then you might have thought twice about mentioning their sponsors. Especially when you have been there to hear the boos when the bubble was raging, and the gasps of price drops they forecast when the market started to freeze. If you really want to rip on Chapman, then rip on how their econometric models need to be adjusted for bubble like factors, factors in which Adibi claims (although other economists somehow can adjust) can't be adjusted. But Comerica Bank has been a sponsor forever, even when they heard what they couldn't believe that RE would go down but it continued to go up, and even when they heard that RE will be flat even though they know that it is still headed down.
 
[quote author="irvine_home_owner" date=1245938657]I always try to keep in mind who sponsors these economic projections.</blockquote>


Jim Doti the head of Economic Department who is the author of the chapman forcast has very close tie to developers and developers made very generous philantropy endowment to the Chapman School of Economic and other major Universities like UCI, UCSB, and Berkeley. Doti may also be an advisory board of director for local RE developers.
 
[quote author="IrvineRenter" date=1245922018]Second, the price-to-income ratios at the bottom are what matters--somewhat. If interest rates remain at historic lows, there is a slim chance we may bottom at a higher ratio because lower interest rates mean larger amounts are financed with the same income. The best indicator of the bottom is the aggregate DTI. This will get below 30% at the bottom.</blockquote>


This is key. Most people don't buy by the total purchase price; they buy by the monthly payment. This is the reason that people bought too much house using exotic loans, because they were only looking at the initial monthly payment and not the one they'd pay after it reset and/or recast. But this also applies to fixed rate loans. The same income can afford to buy a lot more house using a thirty year fixed rate loan at 5% than 10% or more. So, comparing price to income ratios from the 1980's, when interest rates were 10-15%, or maybe even higher, to them now at 5-6% is not appropiate.
 
James Doti and Esmael Adibi are good scholars. But even the God doesn't seem to know where this economy is going.

Any forecast is bibidi bobbidi boo to me.
 
[quote author="fennie2578" date=1246001788]James Doti and Esmael Adibi are good scholars. But even the God doesn't seem to know where this economy is going.

Any forecast is bibidi bobbidi boo to me.</blockquote>


The current housing market, IMHO, is fairly easy to predict.



My prediction: Low end (lower than basically any property in Irvine; say, sub-$200k or so) properties are at a bottom or damned near it (but will stay there for quite some time). Everything higher than that has quite a ways to fall and will not hit a true bottom for at least a year, with the most expensive properties taking the longest to hit bottom. This applies to all of southern California and possibly nationwide.
 
[quote author="Geotpf" date=1246004705][quote author="fennie2578" date=1246001788]James Doti and Esmael Adibi are good scholars. But even the God doesn't seem to know where this economy is going.

Any forecast is bibidi bobbidi boo to me.</blockquote>


The current housing market, IMHO, is fairly easy to predict.



My prediction: Low end (lower than basically any property in Irvine; say, sub-$200k or so) properties are at a bottom or damned near it (but will stay there for quite some time). Everything higher than that has quite a ways to fall and will not hit a true bottom for at least a year, with the most expensive properties taking the longest to hit bottom. This applies to all of southern California and possibly nationwide.</blockquote>


There is a real chance that the low end will take another leg down after the high end crashes. Once the high end isn't so high, the demand for low end properties will evaporate.
 
[quote author="IrvineRenter" date=1246005425][quote author="Geotpf" date=1246004705][quote author="fennie2578" date=1246001788]James Doti and Esmael Adibi are good scholars. But even the God doesn't seem to know where this economy is going.

Any forecast is bibidi bobbidi boo to me.</blockquote>


The current housing market, IMHO, is fairly easy to predict.



My prediction: Low end (lower than basically any property in Irvine; say, sub-$200k or so) properties are at a bottom or damned near it (but will stay there for quite some time). Everything higher than that has quite a ways to fall and will not hit a true bottom for at least a year, with the most expensive properties taking the longest to hit bottom. This applies to all of southern California and possibly nationwide.</blockquote>


There is a real chance that the low end will take another leg down after the high end crashes. Once the high end isn't so high, the demand for low end properties will evaporate.</blockquote>


I think a lot of the demand for low end properties is from people who have been permanently priced out until this point-long term renters. They can't afford to move up much. Reports of people making 15 bids or more on low end REOs before they win one are common. Demand is greater than supply on the low end, but there's a definite wall where demand falls off quickly, because much of the demand is from people who can barely afford a house in the first place.



Now, if interest rates go up significantly, some of this demand may go away. Also, if the tax credit isn't renewed, same thing. The tax credit is probably worth much more than an eight grand discount in terms of stimulous of sales on the low end-you get the money (almost) right away, not over thirty years, so it makes buying a house that much easier. On a hundred grand loan, that's basically the first year's worth of payments. Or it's money to repair and furnish the house, which is a more likely scenerio.



That probably also helps the general economy a lot, as that money goes to Home Depot and furniture stores and Sears and Best Buy and to local plumbers, electricians, painters, and carpenters. Heck, it will help domestic manufacturing, since things like furniture, cabinets, large appliances, paint, and lumber are some of the rare things still mostly made in the USA.
 
[quote author="IrvineRenter" date=1246005425][quote author="Geotpf" date=1246004705][quote author="fennie2578" date=1246001788]James Doti and Esmael Adibi are good scholars. But even the God doesn't seem to know where this economy is going.

Any forecast is bibidi bobbidi boo to me.</blockquote>


The current housing market, IMHO, is fairly easy to predict.



My prediction: Low end (lower than basically any property in Irvine; say, sub-$200k or so) properties are at a bottom or damned near it (but will stay there for quite some time). Everything higher than that has quite a ways to fall and will not hit a true bottom for at least a year, with the most expensive properties taking the longest to hit bottom. This applies to all of southern California and possibly nationwide.</blockquote>


There is a real chance that the low end will take another leg down after the high end crashes. Once the high end isn't so high, the demand for low end properties will evaporate.</blockquote>


The low end is has been mostly the market as the 500k and higher has been dead for the past 18 months. There is no move up buyers nor move down as very few have the equity in their homes to make this happen. There is some movement but to rely on the Medium income to judge housing prices and their direction is a real useless stat. The high end is what will be crashing for the next couple of years as all the alt-a and option arms on these properties start to reset. Plus this section will take it really hard as their losses in value is much more pronounced and refinancing and selling is just not option especially if they are wrapped with seconds. All the loan mods that are being done less than 1% are lowering the loan balance so they have been kicking the can down the road for a while and ultimately they are zombie loans waiting to fail. Chapman is always trying to put a positive spin and mostly are pretty honest 90% of the time. I think as long as we see higher job losses and the State in a mess pushing jobs out of California with new taxes we are going to see more losses in value across the board. I think prices may stabilize in 2013 but for price appreciation and high paying jobs to return to this state it may be a lost decade of very slow growth that will be with for a very long time...
 
[quote author="CapitalismWorks" date=1245910797]http://lansner.freedomblogging.com/2009/06/17/chapman-sees-oc-home-prices-up/26481/



Key takeaway from this article was the long term median home price to median income in Orange County is 5.7. I have to see the data series on that.</blockquote>


Is it me or is Lasner turning more of a mouth piece for the NAR and spinning to much green shoots up front. He does still unspin some of his hype articles but it usually the last paragraph and sometimes does not explain fully the other side of the coin. He used to present both sides real equally and from a third party perspective but i just don't get that feel anymore. Any one else feel this?
 
[quote author="OCCOBRA" date=1246107348]Is it me or is Lasner turning more of a mouth piece for the NAR and spinning to much green shoots up front. He does still unspin some of his hype articles but it usually the last paragraph and sometimes does not explain fully the other side of the coin. He used to present both sides real equally and from a third party perspective but i just don't get that feel anymore. Any one else feel this?</blockquote>


I'm gonna be bluntly honest here... Lansner was even somewhat bearish for a time, and now he is a green shooter. Why? Because even he is underwater on his house.



Sorry Jon if you read this, but you know that it is the unfortunate truth.
 
[quote author="OCCOBRA" date=1246107348][quote author="CapitalismWorks" date=1245910797]http://lansner.freedomblogging.com/2009/06/17/chapman-sees-oc-home-prices-up/26481/



Key takeaway from this article was the long term median home price to median income in Orange County is 5.7. I have to see the data series on that.</blockquote>


Is it me or is Lasner turning more of a mouth piece for the NAR and spinning to much green shoots up front. He does still unspin some of his hype articles but it usually the last paragraph and sometimes does not explain fully the other side of the coin. He used to present both sides real equally and from a third party perspective but i just don't get that feel anymore. Any one else feel this?</blockquote>
Yeah, I've also noticed that he's sipping on some kool-aid. Nothing outrageous, but you can sense his shift. If people think that we are in a stable market and on the mend they are only fooling themselves because the market is so jacked up it's not even funny. The majority of listings in Irvine are short sales and the ones that are equity owners have WTF prices due to the fact they know there is a lack of inventory. I'm sure that exists in other cities in Orange County as well. I think it's causing a small frenzy among highly motivated buyers who need to buy (for whatever reasons). There's a reason why they aren't more organic sellers...because if they tried to sell they would also be short sales.
 
[quote author="graphrix" date=1246107844][quote author="OCCOBRA" date=1246107348]Is it me or is Lasner turning more of a mouth piece for the NAR and spinning to much green shoots up front. He does still unspin some of his hype articles but it usually the last paragraph and sometimes does not explain fully the other side of the coin. He used to present both sides real equally and from a third party perspective but i just don't get that feel anymore. Any one else feel this?</blockquote>


I'm gonna be bluntly honest here... Lansner was even somewhat bearish for a time, and now he is a green shooter. Why? Because even he is underwater on his house.



Sorry Jon if you read this, but you know that it is the unfortunate truth.</blockquote>


I felt like the style of writing isn't even Jon's anymore.



Seriously, like everyday is a piece about the dame median rising. Today they highlighted all the higher end neighborhoods with the increases but there was a picture of a "price reduced" sign juxtaposed. Maybe that is Jon's subtle way of saying 'look prices are falling in the high end and thus spurring a few more sales to bring up the median a little.'



Is it the mass marketing campaign BK spoke of to insure the $375 benchmark???
 
I think that everyone needs a refresher on what the "median" price means.



CR (or was it DrHousingbuble?) had a nice pictorial representation. it means what the "middle" house sells for.



so up to now: 3 houses, one sells for $750k (last sold for $850k), one for $325k (last sold $450k), one for $300k (last sold $400k).



<strong>median = $325k (CS=80%)</strong>



but as the low end REOs get exhausted and the upper end starts to move, even at reduced prices:



3 houses, one sells for $650k (last sold $900k), one for $450k (last sold $750k), one for $250k (last sold $400k).



<strong>median = $450k (CS = 65%)</strong>



So the median has gone *UP* (but a repeated sales measure like Case Schiller, has gone down).



<strong>I would much rather be purchasing in the second situation, as you will get a nicer house for the same money.</strong>
 
And keep in mind, that defaults/foreclosures are starting to increase towards the higher end now, while the lower end is pretty much remaining constant. For example, 19 Coral Cay 92657 was taken back to the bank yesterday for $3.3mil, and just six months ago this kind of thing was unheard of. I know that N. Tustin is really starting to crack (WOO HOO!), Irvine has see a significant shift to the higher end, and even Floral Park is starting to see more colorful pins on foreclosure radar. That being said, as these properties either sell as a short sale or come back on the market as REO, the median will probably increase, but as Freedom points out the CS will be a lot lower.



As for Jon's writing on the blog... it started to go downhill about 2 years ago. Before then he would participate in the comments, and do some actual analysis with charts and what not. Now, I think he has given up because the comments from both the bulls and bears are mostly childish bantering. That, and he has never really increased his traffic much over the years, while IHB and others have. I know the blog gets more traffic than he does, and I would bet that even the forums do too. Rumor has it, he is a little pissy about this, and I think he feels a bit entitled as a real journalist and one of the first to start blogging about RE. And, if you have ever met him, you might be surprised that he is kinda grumpy and pretty pessimistic, not what you might assume from his blog posts. Kinda the opposite of me or awgee, people might assume that we the cranky pessimists, but really we are happy, energetic, and optimistic people. Personally, I would rather buy awgee lunch and spend time with him, than I would if Jon were buying me lunch to spend time with him. I would rather walk away with a positive attitude that awgee has, than be around Debbie Downer Lansner. Padilla on the other hand is a great writer, and an inquisitive, intelligent, and positive dude.
 
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