I've been waiting for prices to drop and now they are going back up.

K

Knife Catcher_IHB

New member
10.5 unemployment, decreased income, tight credit, what is it going to take?



With the exception of a few short sales I haven't seen any great deals in the golf communities of OC.
 
[quote author="Knife Catcher" date=1237867290]10.5 unemployment, decreased income, tight credit, what is it going to take?



With the exception of a few short sales I haven't seen any great deals in the golf communities of OC.</blockquote>
The real estate market isn't like the stock market. Be patient grosshopper, the prices shall come to you.
 
prices on houses on the masters drive (end of the santa ana country club, by the 73/airport), admittedly a bad location, dropped 30% for #157, and 36% for #196. in sales last month.
 
25% off peak here in OC is still really high. The areas where many homes are 40-50% off peak are selling relatively fast. I could be wrong here, but it seems to me that the lower end is finding its bottom now and the stubborn higher end is finding that it isn't insulated like it thought it was. But then again, I"m not sure if the higher end is going to supply the same percentage of distressed properties as the lower end.



I've seen the maps with the blue, red and orange pegs in the nicer areas, which seems like a lot until you compare it to the same maps of the lower end areas where the map is just solid color from all the pegs. It seems logical that the high end would fall somewhere near percentage wise as the low end, but maybe not? If it used to cost 3x to live in one area, but that area rose to 3x everything else, the nominal amounts are larger, but the population of haves is growing along with the popultiion of the have nots.



so say it was $100K to buy in SA, but $300K to buy in NPB before the bubble. SA rose to $300K and NPB rose to $900K. Now SA is at $180K, does it follow suit that NPB will eventually fall to $540K? I'm just using numbers that are easy to work with.... Or, are we going to see a greater divide between the have somethings and the have a whole lots? If NPB falls by the same percentage as SA, it's still only 3x more, but the numbers differences aren't as huge as they were during the boom. Anyway, my drivel here is about the question of whether the higher end will fall by the same percentage as the lower end given the lower supply of high end and increasing population that can afford/want the higher end at a current discount of 25%?
 
the fact is nobody knows if this is a bottom or it has more to fall. Those that think it's going down another 25-50% are hoping it will...doesn't make it so. IMO this may be good time to buy the right property, maybe a foreclosure or short sell. I do think the housing market is similar to the stock market. They say buy when there is blood on the streets, and there definitely is blood on the streets now. I can't tell you how many stock message boards have people predicting stock xyz will go to zero, only to see it go up 50%. It's all an unpredictable game. Those that say they know what is going to happen are fooling themselves. Just because housing prices

SHOULD go down another 25% doesn't been they WILL. My wife and I plan to start looking for a property in the next few months.
 
[quote author="socalmd" date=1237888276]the fact is nobody knows if this is a bottom or it has more to fall. Those that think it's going down another 25-50% are hoping it will...doesn't make it so. IMO this may be good time to buy the right property, maybe a foreclosure or short sell. I do think the housing market is similar to the stock market. They say buy when there is blood on the streets, and there definitely is blood on the streets now. I can't tell you how many stock message boards have people predicting stock xyz will go to zero, only to see it go up 50%. It's all an unpredictable game. Those that say they know what is going to happen are fooling themselves. Just because housing prices

SHOULD go down another 25% doesn't been they WILL. My wife and I plan to start looking for a property in the next few months.</blockquote>




What you ignore is fundamental analysis of the economics of the situation.



I'm not going to argue that it is always correct, but if I'm laying out money, it is going to be on that basis.



Housing as an asset class, whether in SA or NPB, is still overpriced at 5x-6x income.



This is not sustainable.



And...income is declining. So not only are prices going to fall to 3x-4x income (if they don't overshoot), but income is a moving (downward) target. Just because people are jumping in now, at what appears to be "low prices" does not mean that they can sustain prices at the current level!
 
[quote author="socalmd" date=1237888276]the fact is nobody knows if this is a bottom or it has more to fall. Those that think it's going down another 25-50% are hoping it will...doesn't make it so. IMO this may be good time to buy the right property, maybe a foreclosure or short sell. I do think the housing market is similar to the stock market. They say buy when there is blood on the streets, and there definitely is blood on the streets now. I can't tell you how many stock message boards have people predicting stock xyz will go to zero, only to see it go up 50%. It's all an unpredictable game. Those that say they know what is going to happen are fooling themselves. Just because housing prices

SHOULD go down another 25% doesn't been they WILL. My wife and I plan to start looking for a property in the next few months.</blockquote>


If you find a property you like, can afford without pressure, and are not worried about being underwater for a period of time, now is not a bad time to buy. Interest rates are very low which is a big help in affordability. As has been pointed out on several occasions there are plenty examples of properties that are selling right around rental equivalence. However, the downward price adjustments have not hit evenly across areas. Ladera Ranch, an area in which you have expressed some interest, has been battered. Meanwhile CDM appears to have fared rather well to this point.



I would dispute the fact that nobody knows if this is the bottom for housing. Only through willful blindness could one ignore the overwhelminG downward pressure on housing. Here is a quick recap:



1. Down payments

2. Income verification

3. Credit requirements

4. Job Losses

5. High inventory

6. low transaction volume

7. Increasing delinquency rates on 2005, 2006, 2007, 2008 vintage mortgage pools

8. Coming Alt-A resets

9. Massive increase in Jumbo defaults

10. Ratio of median price to income ratios continues at unsustainable levels



If you want to see what truly affordable housing markets look click on this link:



http://www.cnbc.com/id/29793370



Now, I don't believe we will get there, but it does underscore just how ludicrous the local housing market became.
 
[quote author="irvine_home_owner" date=1237867844]Where are the prices going back up?



(a Realtor's imagination doesn't count)</blockquote>




According to <a href="http://www.dqnews.com/Charts/Monthly-Charts/LA-Times-Charts/ZIPLAT.aspx">Dataquick</a> these prices in these zipcodes are increasing for sfrs.



Of course if you take a zipcode like 92603 whose median home price for a sfr was $2,045,000 for the month of February, next year at this time you'll probably be looking at a 50% decline from the previous year.





LA 90035 111%

Inglewood 90303 104%

Hillcrest 92103 49%

LACanadaFlntrdg 91011 48%

Blue Jay 92317 47%

Pasadena 91106 46%

LA/Rancho Park 90064 41%

Solana Beach 92075 39%

San Marino 91108 38%

Glendora 91741 36%

Irvine 92602 35%

Wst Hollywd/LA 90048 32%

Santa Barbara 93103 31%

LA 90027 31%

Irvine 92603 31%

Santa Barbara 93109 28%

Santa Ana 92705 26%

North Park 92104 22%

Del Mar 92014 21%

Topanga 90290 17%

LA/Bel-Air 90077 16%

LA 90034 12%

Huntington Beach 92649 11%

San Dimas 91773 10%

Thousand Oaks 91362 10%

Brea 92821 10%

San Gabriel 91775 10%

Carlsbad 92008 9%
 
I have to disagree with the assessment that it's a bad time to buy. The Fed has just promised to print 1 TRILLION dollars to buy mortgage securites (basically) and that really changes thing. This level of printing is totally unprecedented since the Continental, even in the New Deal, WWII, or the 70's. Primarily, it guarantees significant inflation in 1-3 years, and inflation might exceed 20% a year. No doubt the Fed will try to dial things back, but between losses on the securities they're buying and an unemployment rate probably over 9% (maybe a lot over) their options will be limited.



That has two implications for housing. First, the really low interest rates now and in the near future will probably never be matched again. Instead, we can expect a massive increase in the next few years. Try 10% and up. Second, the decreases in the *real* value of houses (inevitable) will be compensated for by inflation. *Nominal* house prices, nationally, will probably bottom this year. So, if you can buy, and if you are *certain* you will stay for 5-10 years, it's now a good time to buy.



Of course details matter and so we can't say whether the particular house you're looking at is a good purchase without more info.
 
The bottom in real vs nominal prices will not be reached until 2012 at the soonest.

The money being printed to buy MBS will have no effect on home prices. The Fed and Treasury can not determine where that money will end up, and it will most likely end up in huge price increases in everyday necessities like food, energy, and health care.
 
Looking at the MBS pools... a trillion is just the beginning. Things continue to get worse in the MBS market. More deals are coming.
 
[quote author="FairEconomist" date=1237898209]I have to disagree with the assessment that it's a bad time to buy. The Fed has just promised to print 1 TRILLION dollars to buy mortgage securites (basically) and that really changes thing. This level of printing is totally unprecedented since the Continental, even in the New Deal, WWII, or the 70's. Primarily, it guarantees significant inflation in 1-3 years, and inflation might exceed 20% a year. No doubt the Fed will try to dial things back, but between losses on the securities they're buying and an unemployment rate probably over 9% (maybe a lot over) their options will be limited.



That has two implications for housing. First, the really low interest rates now and in the near future will probably never be matched again. Instead, we can expect a massive increase in the next few years. Try 10% and up. Second, the decreases in the *real* value of houses (inevitable) will be compensated for by inflation. *Nominal* house prices, nationally, will probably bottom this year. So, if you can buy, and if you are *certain* you will stay for 5-10 years, it's now a good time to buy.



Of course details matter and so we can't say whether the particular house you're looking at is a good purchase without more info.</blockquote>
Low rates are here to stay for the next few years...it will get worse before it gets better (ie high unemployment, more foreclosures, more corp BK filings).
 
[quote author="FairEconomist" date=1237898209]I have to disagree with the assessment that it's a bad time to buy. The Fed has just promised to print 1 TRILLION dollars to buy mortgage securites (basically) and that really changes thing. This level of printing is totally unprecedented since the Continental, even in the New Deal, WWII, or the 70's. Primarily, it guarantees significant inflation in 1-3 years, and inflation might exceed 20% a year. No doubt the Fed will try to dial things back, but between losses on the securities they're buying and an unemployment rate probably over 9% (maybe a lot over) their options will be limited.



That has two implications for housing. First, the really low interest rates now and in the near future will probably never be matched again. Instead, we can expect a massive increase in the next few years. Try 10% and up. Second, the decreases in the *real* value of houses (inevitable) will be compensated for by inflation. *Nominal* house prices, nationally, will probably bottom this year. So, if you can buy, and if you are *certain* you will stay for 5-10 years, it's now a good time to buy.



Of course details matter and so we can't say whether the particular house you're looking at is a good purchase without more info.</blockquote>


Michael Pento

Posted Mar 24, 2009



<em>Helicopter Ben Bernanke has earned the new moniker of Banana Ben. He has earned the new name because of his desire to make the United States resemble a banana republic instead of embracing the policies that made the U.S. the greatest nation on earth. It is now abundantly clear to all that not only the Fed Chairman but also this administration will do everything in their power to create inflation. Their efforts are derived from the mistaken belief that inflation can solve everything.



Listen to two quotes from the administration about their desire to re-inflate the credit bubble that wreaked havoc on our economy earlier this decade. Barack Obama said on March 17th that his $15 billion move to bolster the securitization market will be ?a jolt in the arm for community banks.? With his own exhortation, Treasury Secretary Tim Geithner urged banks ?to go the extra mile? regarding increasing lending and that they have a ?special responsibility? to assist in the recovery. And the administration is actually going to force the 21 largest banks getting bailout money to provide a monthly report on how much they are lending to small businesses.



But the mother of all efforts to return to inflation nation came from the Federal Reserve. Following the FOMC meeting on Wednesday March 18th, Mr. Bernanke gave all investors a final warning to get out of cash with his plan to expand the Fed?s balance sheet to nearly $4 trillion. It did not phase the Fed head that earlier that morning the Consumer Price Index was released and showed inflation growing at a 1.8% annual rate. He remained undaunted by the fact that MZM (money of zero maturity) is up over 12% from last year. He does not care that Total Loans and Leases at Commercial banks are up 2.5% YOY. In fact, he is not worried about inflation at all. He is concerned about deflation even though he does not understand the definition of it. Deflation is a fall in the money supply not collapsing prices in assets that were previously in a bubble.



Despite those facts, the Fed decided to increase its already skyrocketing balance sheet by $1.2 trillion. The most egregious part of the Fed?s announcement that it will purchase up to $300 billion of long term Treasuries. In yet another miscalculation by the Fed, it mistakenly believes that China will be comforted that the price of Treasuries will be supported by the Fed but will be paid off in worth less dollars.



But by far the biggest misstep by the Fed and Administration is the belief that this liquidity can be removed once the economy recovers. Ten year bond yields collapsed the most since 1962 (50bps), to yield just 2.5%. Loan rates are expected to drop to 4.25% for a thirty year fixed mortgage. Millions of loans will be made at this new, artificially-engendered rate. Since bank assets will be collecting income at a much lower rate, the Fed will be hard pressed to move rates higher in the future. Even a relatively small increase in the Fed Funds rate down the road could eliminate bank profits and put extraordinary pressure on their balance sheets.



As of today, total debt is over 360% of GDP. If banks increase lending that number is sure to grow. We also know that the National Debt, which is now over $11 trillion, is increasing at about a $2 trillion annual rate. If raising rates to 5.25% in 2007 sent the economy into a deep recession, how much room does the Fed have to raise rates in the future when the nominal level of debt and the percentage of debt to GDP will be much greater?



The truth is that this stimulus will be impossible to remove without bringing about another collapse in the economy; hence, inflation will be with us for a very long time. However, an inflationary path is seen as the Holy Grail by the Fed. Ben Bernanke, a ?student? of the Great Depression, was apparently absent from class when the part of history that dealt with the hyperinflationary economies of South America and Africa was taught. Banana Ben believes inflation could have saved us from the Depression of the 1930?s. He couldn?t be more wrong. Depressions are caused by debt, not by a decrease in the money supply.



The truth is inflation completely destroys an economy by wiping out savers, crushing those who exist on a fixed income and crippling those at the lowest end of the income scale by raising prices of the most basic goods.



Further, what might surprise the new President - allegedly a champion of the poor - is that an increased supply of money is never evenly distributed throughout the economy; it always finds a home with the nation?s most wealthy citizens who have access to credit first. Skyrocketing prices relegate the middle and lower classes to use all their available funds for the basic necessities of life. Since the demand for discretionary purchases collapses, unemployment rates explode and the economy is left in shambles.



Investors would be wise to continue trading in measurable portions of their cash holdings for gold. It may also be prudent to for some to speculate in the beaten-down bank and home building sectors for a brief period of time, as I believe the entire market will benefit from the initial stages of inflation - the Fed and Administration may be able to provide a truncated period of ersatz prosperity before the terror begins. But because of their decision to monetize away what would have been a deep - and necessary - recession, the economy and country will be far worse off in the long run.</em>



Michael Pento
 
Unlike most people, I do not think price inflation and monetary inflation will have much effect on home prices, because I do not think either will translate into wage inflation. And the psychology of "homes always appreciate" is dead for years.
 
[quote author="awgee" date=1237941341]Unlike most people, I do not think price inflation and monetary inflation will have much effect on home prices, because I do not think either will translate into wage inflation. And the psychology of "homes always appreciate" is dead for years.</blockquote>
Totally agree with you...there will be wage deflation for years to come.
 
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