Welcome to the housing bottom

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Or so they say...



http://finance.yahoo.com/news/Welcome-to-the-bottom-Housing-apf-3190332284.html?x=0&sec=topStories&pos=1&asset;=&ccode;=
 
<a href="http://finance.yahoo.com/news/Welcome-to-the-bottom-Housing-apf-3190332284.html?x=0&sec=topStories&pos=1&asset;=&ccode;= ">Link</a>



Same thing already posted <a href="http://www.irvinehousingblog.com/forums/viewthread/5791/">here</a>. Maybe we should merge threads.
 
<a href="http://www.latimes.com/business/la-fi-bubble-timers17-2009aug17,0,6997492.story?track=rss">Some saw the housing bubble and sold; trick now is spotting the bottom.</a>



A story about some people who have put their money where their mouth is.
 
I think I have read someone calling the bottom every two days since we sold in 2005. And I think they are all the same people who were saying that real estate would coninue to go up in 2005. I am glad we did not trust their judgement then and most assuredly will not trust their judgement now.



The bottom will come after capitulation. This is not the sentiment exhibited at capitulation.
 
[quote author="EvaLSeraphim" date=1250551436]<a href="http://www.latimes.com/business/la-fi-bubble-timers17-2009aug17,0,6997492.story?track=rss">Some saw the housing bubble and sold; trick now is spotting the bottom.</a>



A story about some people who have put their money where their mouth is.</blockquote>


Fun article. And I think the bottom will be fairly obvious to those who open their eyes, which will be a very small minority, as always. There are a number of potential sellers who either took their homes off the market after being dissapointed in the lack of offers and are waiting for "things to turn around" before relisting, and more potential sellers who have not listed their homes even though they want to sell, because they "know what their home is worth", and the market is not currently supporting their knowledge, and they are waiting until it does. When both sets of these potential non-distressed sellers capitulate and give up on waiting because the market keeps going down and down and down, and they get so scared that the market will not come back before they die, and they put their home on the market for whatever they can get, then I will recognize the bottom. The reason very few will recognize the bottom is because the large majority will finally give up on the idea of a bottom, and will decide that a bottom will not come.
 
[quote author="awgee" date=1250552876]I think I have read someone calling the bottom every two days since we sold in 2005. And I think they are all the same people who were saying that real estate would coninue to go up in 2005. I am glad we did not trust their judgement then and most assuredly will not trust their judgement now.



The bottom will come after capitulation. This is not the sentiment exhibited at capitulation.</blockquote>
And we still haven't even sniffed capitulation yet.
 
[quote author="usctrojanman29" date=1250553726][quote author="awgee" date=1250552876]I think I have read someone calling the bottom every two days since we sold in 2005. And I think they are all the same people who were saying that real estate would coninue to go up in 2005. I am glad we did not trust their judgement then and most assuredly will not trust their judgement now.



The bottom will come after capitulation. This is not the sentiment exhibited at capitulation.</blockquote>
And we still haven't even sniffed capitulation yet.</blockquote>


If capitulation smells like blood, then I have to agree. No blood yet.
 
[quote author="EvaLSeraphim" date=1250551436] from Eva's link:



<blockquote>Kiesel, a <span style="color: blue;"><strong>managing director at investment firm Pimco</strong></span>, ...



<span style="color: blue;"><strong>Nobel laureate and Princeton University economist</strong></span> Paul Krugman and <span style="color: blue;"><strong>his economist wife</strong></span>, Robin Wells, ...



Dean Baker, <span style="color: blue;"><strong>a Washington economist</strong></span>, ...



Baker and his wife, Helene Jorgensen -- <span style="color: blue;"><strong>also an economist</strong></span> ...



"I wasn't trying to time the peak," Baker said, because he doesn't think it's possible to perfectly time markets. (After all, he was three to five years off in his crash prediction.)



That's why Baker and Jorgensen bought a house recently in Washington. The bottom isn't here yet, he says, but it's close enough for him. Baker said he's psychologically prepared for his house to fall 10% more in value.



That risk, he said, was offset a bit by the 4.25% mortgage rate he obtained and an $8,000 federal tax credit. He also emphasized that a house isn't just a financial instrument but something one might decide to spend money on for enjoyment.



"I really value having a porch, a yard, other things like that," he said, and he's willing to pay a price for them -- just not any price.



<span style="color: blue;"><strong>UCLA public policy professor</strong></span> Mark Kleiman ...</blockquote></blockquote>


Questions that come to mind when reading this article:



Who is the target audience, or who is it trying to appealing to?

What potential harm is being placed?

Why was it written (motivation)?



-IR2
 
Had any of these writers warned about the peak of the housing bubble in real time, I'd consider what they are saying. More likely than not they discovered the housing bubble a year late which indicates to me based on their past performance we are a year away from the bottom.



Even if this is the bottom, like the Titanic, prices will sit on the ocean floor for a considerable period of time.



My .02c



Soylent Green Is People.
 
[quote author="awgee" date=1250553696] There are a number of potential sellers who either took their homes off the market after being dissapointed in the lack of offers and are waiting for "things to turn around" before relisting, and more potential sellers who have not listed their homes even though they want to sell, because they "know what their home is worth", and the market is not currently supporting their knowledge, and they are waiting until it does. </blockquote>


You just decribed the owners of our rental house. When they finally decide to sell it to us, I will know the bottom is in...and I'll be buying. Thanks, great summary.
 
[quote author="CK" date=1250556848][quote author="awgee" date=1250553696] There are a number of potential sellers who either took their homes off the market after being dissapointed in the lack of offers and are waiting for "things to turn around" before relisting, and more potential sellers who have not listed their homes even though they want to sell, because they "know what their home is worth", and the market is not currently supporting their knowledge, and they are waiting until it does. </blockquote>


You just decribed the owners of our rental house. When they finally decide to sell it to us, I will know the bottom is in...and I'll be buying. Thanks, great summary.</blockquote>


CK, if the owners of your rental home offered you $550,000 for the house. Would you take it at a heart beat? Do you think it is better for the owners to bring it up or the tenants to bring it up? What would happen if you just called up the owners and asked if they are willing to take an offer?
 
[quote author="PANDA" date=1250558154]



CK, if the owners of your rental home offered you $550,000 for the house. Would you take it at a heart beat? Do you think it is better for the owners to bring it up or the tenants to bring it up? What would happen if you just called up the owners and asked if they are willing to take an offer?</blockquote>


Yes, in a heartbeat. But I am not planning on really starting that dialogue until the end of our current 2 year lease (up on Dec 31, 2010).



For now, I doubt there is any huge selling motivation for them, since I am pretty sure our rent fully covers their PITI....so they may up for waiting it out for the long term. On the flip side, since we are happy our buying motivation is very low now as well. Our plan (as long as they are game) is to just stay put until it becomes closer to our rent to buy this house or one equivalent in Irvine or Tustin Ranch. Currently, there is at least a $1 - $1.5k/mo disparity in our rent and what it would be to own something equivalent. I'll get more interested when that is <$500/mo. So we wait.
 
[quote author="CK" date=1250559270][quote author="PANDA" date=1250558154]



CK, if the owners of your rental home offered you $550,000 for the house. Would you take it at a heart beat? Do you think it is better for the owners to bring it up or the tenants to bring it up? What would happen if you just called up the owners and asked if they are willing to take an offer?</blockquote>


Yes, in a heartbeat. But I am not planning on really starting that dialogue until the end of our current 2 year lease (up on Dec 31, 2010).



For now, I doubt there is any huge selling motivation for them, since I am pretty sure our rent fully covers their PITI....so they may up for waiting it out for the long term. On the flip side, since we are happy our buying motivation is very low now as well. Our plan (as long as they are game) is to just stay put until it becomes closer to our rent to buy this house or one equivalent in Irvine or Tustin Ranch. Currently, there is at least a $1 - $1.5k/mo disparity in our rent and what it would be to own something equivalent. I'll get more interested when that is <$500/mo. So we wait.</blockquote>


Thanks CK, what you are saying totally makes sense. If the new 1750 - 1900 square feet SFRs that are being built at Woodbury start selling in the $550s, I am sure that the owners will be coming to you to deal.
 
Krugman, Baker, and Kleiman are all liberals, FWIW, and a quick Google search will reveal their bios, including Baker's new book about the recent stock and housing bubbles. <a href="http://www.samefacts.com/archives/macroeconomic_policy_/2005/05/speculative_selling_in_the_la_housing_market.php">Kleiman wrote in 2005 about the bubble and that he was selling and why</a>. He followed up with several other bubble posts. (Use the search box on his blog, type in "bubble," and start from the bottom up.) As for Kiesel, I don't know his political views, but he apparently isn't willing <a href="http://www.samefacts.com/archives/macroeconomic_policy_/2005/05/speculative_selling_in_the_la_housing_market.php">to follow his boss into the market.</a>



I don't know what the author's motivations are. I thought it was an interesting story. It may very well be that these are people that the writer was aware of who sold their homes in '05 or so. The LAT offers comments, so you could ask directly. :cheese:
 
<a href="http://www.pimco.com/LeftNav/Global+Markets/Global+Credit+Perspectives/2007/U.S.+Credit+Perspectives-+5-2007.htm">Here is Kiesel in May of 2007</a>:



<em>One question my friends and colleagues have asked me repeatedly over the past six months is: Are you still renting? Yes! I sold my house over a year ago and continue to rent. Back in late 2005, I became anxious about my investment in the ?American Dream,? after spending a considerable amount of time and effort researching several factors that I felt would influence housing prices. At the time, I was nervous about housing and ended up selling my house in early 2006 after owning for eight years, and then, upon closing, <a href="http://www.pimco.com/LeftNav/Global+Markets/Global+Credit+Perspectives/2006/Kiesel_For_Sale_06+2005.htm">published For Sale, our U.S. Credit Perspectives, June 2006 publication</a>. A year ago, I suspected housing prices were set to take a sharp turn for the worse and more ?For Sale? signs were coming.</em>



And from the link to his June 2006 publication:



<em>Three weeks ago my wife, Amy, and I sold our house and moved into a rental apartment. I believe the U.S. housing market is set to cool given the current level of prices and fundamental trends. Recent price gains have likely come primarily from rising speculation and ?creative financing? because affordability is declining and inventories are rising. When asset prices diverge from fundamentals, I favor taking the other side of the trade ? even if it involves moving. Amy wasn?t thrilled about moving, but my sense is she will look back on our sale and view it as a good one. In the end, the fundamentals should win out.





The U.S. housing market is turning for the worse and housing price gains are set to moderate. What does housing have to do with corporate bonds? Plenty. Rising home prices have been a key driver of U.S. economic growth, which in turn has played a major role in the tightening of corporate bond spreads. In other words, housing will foreshadow not only the direction of the economy, but also the direction of credit spreads. As the housing market turns, consumers will pull back their spending and the U.S. economy should slow. With a softening housing market, we should expect tighter lending standards, a moderation in the willingness to take risk, a slowdown in the pace of asset price appreciation, less liquid markets, and rising volatility in financial markets. And at that point, ?for sale? will not just be a sign you see in front of your neighbor?s yard ? investors may also put a ?for sale? sign on risk assets as well. Investors in the credit market should therefore remain cautious given the tight overall level of corporate bond spreads and focus on developments in the housing market.</em>



http://www.pimco.com/NR/rdonlyres/41DC8D4D-77B8-4361-A2CC-301FA46CC4A6/2283/Chart2.jpg



http://www.pimco.com/NR/rdonlyres/41DC8D4D-77B8-4361-A2CC-301FA46CC4A6/2285/Chart3.jpg



He called it, much like many of us armchair economists did. I think we have/had prettier charts though.
 
<em>"We could be facing a triple whammy at the end of the year: the expiration of the tax credit, the end of the Fed mortgage-buying program and rising foreclosures.?

</em>

Thomas Lawler, housing economist







<em>"The Fed?s purchases of mortgage-backed debt so far this year have dwarfed net issues of such securities by Fannie Mae, Freddie Mac and government-run mortgage-bond insurer Ginnie Mae, which totaled about $440 billion through the end of August, said Walt Schmidt, a mortgage-bond strategist in Chicago at FTN Financial.



Once the Fed exits the market, the spread between yields on mortgage-backed debt and Treasury securities will have to rise, perhaps by a half percentage point, in order to attract other buyers, he said."</em>



From Calculated Risk: <a href="http://www.calculatedriskblog.com/2009/09/housing-facing-triple-whammy-at-end-of.html">Housing: "Facing a triple whammy" at end of Year</a>
 
[quote author="Geotpf" date=1253571130]My worthless opinion is that we are at bottom now, and we are going to stay here for quite some time.</blockquote>


Maybe your opinion would be worth something if instead of just repeating the same thing over and over with no supporting evidence, you actually showed some reasoning, logic, and evidence for your opinion. do you have some evidence disputing the article quoted and linked? Or maybe you are just comforting yourself with a belief?
 
If you are referring to beliefs as predictions, then some become true, and some become false.

Bringing "evidence" is just comforting oneself.



[quote author="awgee" date=1253571506][quote author="Geotpf" date=1253571130]My worthless opinion is that we are at bottom now, and we are going to stay here for quite some time.</blockquote>


Maybe your opinion would be worth something if instead of just repeating the same thing over and over with no supporting evidence, you actually showed some reasoning, logic, and evidence for your opinion. do you have some evidence disputing the article quoted and linked? Or maybe you are just comforting yourself with a belief?</blockquote>
 
[quote author="rickhunter" date=1253574060]If you are referring to beliefs as predictions, then some become true, and some become false.

Bringing "evidence" is just comforting oneself.



[quote author="awgee" date=1253571506][quote author="Geotpf" date=1253571130]My worthless opinion is that we are at bottom now, and we are going to stay here for quite some time.</blockquote>


Maybe your opinion would be worth something if instead of just repeating the same thing over and over with no supporting evidence, you actually showed some reasoning, logic, and evidence for your opinion. do you have some evidence disputing the article quoted and linked? Or maybe you are just comforting yourself with a belief?</blockquote></blockquote>


How 'bout making pointless and innaccurate statements? Is that comforting oneself as well?
 
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