Housing Rolling Along 2

[crackedback]

Quote from Copernicus:

you must be short your limit on LA housing futures then.

My chuckle comment wasn't a personal dig at you. If you took it as such, i apologize.

I hear more than a few make similar statements on a national level. Even the local realtors are spouting something along those lines. Which, I think as stated before, national just doesn't matter to someone in CA. Real Estate is a wholly local environment.

Nope not short anything and definitely not long real estate. We sold our last place Nov last year. Waiting patiently.

I see this area dropping at least another 20% to get to an area that value is reasonable. Historically, CA has corrected in the 40-50% range in prior run ups. How do I know, I lived through two of them as an owner.

 

[scriabinop23]

Quote from jficquette:

I don't think food is in the core either. It's the dampering of buying power of wages that is similar to a tax increase. If people have a couple hundreds dollars extra a month to spend because energy falls significantly then there will be more money to go into core items.

As far as rents go I would guess that 12 million illegals in this country have something to do with holding those up. If for some reason we stop so many from coming in, rather then a few hundred thousand a year to maybe a few tens of thousands then that will take some pressure off of rents

I think the extra spending will create more jobs and that will put more pressure on the Fed to raise rates.

I initially believed that the Fed was through with propping up bubbles but maybe they are not after all.

John

the fed is about avoiding manias and panics - in other words, propping up bubbles that provide necessary stimulation to the entire economy.

i don't know about illegal immigrants propping up rents. That suggestion comes off a little redneck to tell you the truth. Seriously, I think rents are driven up as house buying demand is lower, and would-be buyers are now would-be renters. Whether it is illegal immigrants (who perhaps offer rent support to lower income areas) or white collar workers who are squeezed out of buying as home prices are too high is immaterial --- rents only increase of course if demand exceeds market supply. I assume it also makes more sense for landlords to sell their inflated properties now than rent them out, and this reduces rent supply as well.

As far as economic growth directly creating a reaction by the fed to slowdown by raising rates, I don't think thats the point. I think the point is price stability. Economic growth, absent raised energy costs, excessive taxes, etc. that provides sufficient margins doesn't necessarily result in inflation and upward price pressure, which is the fed's "offiicial" job to control. "unofficially" their job is to prevent a housing bubble crash and the associated reverberations that come with it - thats at least what the wordings from these FOMC meetings is telling us.

 

[scriabinop23]

Quote from Copernicus:

i dont get that sense looking at the futures 6 months out.

these housing futures appear pretty ineffective... anyone who thinks they offer something comparable to shorting a house in your area will be in for disappointment. they should offer futures 2-5 years out. furthermore, the drop is already priced in - the question is how far will it drop. The farthest out month month is already pricing a nearly 10% drop in one year. I don't see how anyone can make any money on these. ACTUALLY, I bet the longs might make out just as well as the shorts potentially could.

(even though I believe housing will be down 25-35% in 4 years within overheated areas like southern california.)

 

[moo]

Quote from Copernicus:

cut rates, as will happen in 07, it wont stop prices from going down, but will provide a cushion. 50% is just too much, 20-25% drops more reasonable given that we are down 5-10% already

Cutting rates won't be enough. Japan went down 80% (both stocks and real estate) after their bubble burst even though they cut rates to zero.

Will Helicopter-Ben start buying houses for the Fed? Or will he just throw money at anything and everything?

 

[QQQBALL]

Quote from scriabinop23:


i don't know about illegal immigrants propping up rents. That suggestion comes off a little redneck to tell you the truth. Seriously, I think rents are driven up as house buying demand is lower, and would-be buyers are now would-be renters. Whether it is illegal immigrants (who perhaps offer rent support to lower income areas) or white collar workers who are squeezed out of buying as home prices are too high is immaterial --- rents only increase of course if demand exceeds market supply. I assume it also makes more sense for landlords to sell their inflated properties now than rent them out, and this reduces rent supply as well.

take out the "illegal" and the fact remains that immigration, particularly into border areas, = more demand for rental housing and to some extent entry level "for sale" homes. mortgage brokers do not check immigration status.

 

[Midas]

Option Arms recasting:

This will add some fuel to the fire but not right away here is why:

The people who have reached the 5 year point (when the loan recasts) have owned the home through virtually all of the manic appreciation that has occurred (Sept 2001 through 2006)

The amount of appreciation that has occurred in the last 5 years will allow those who would be in trouble with the much higher PI (principle and interest) or IO (interest only) payment to refinance into another Option Arm with negative amortization prolonging the pain for several years to come (minimum payment increases are capped at 7.5% per year for 5 years)

We will see trouble in 3-4 years when the people who financed at the top of the market are unable to refi into another option arm because there is no equity left in there property due to deflating sales comps coupled with negative amortization increasing their loan amount.



This segment home owners is small so I do not see to being a devastating event to the overall market but it could add some fuel to the fire if things are still bad when it occurs.

 

[Copernicus]

Quote from moo:

Cutting rates won't be enough. Japan went down 80% (both stocks and real estate) after their bubble burst even though they cut rates to zero.

Will Helicopter-Ben start buying houses for the Fed? Or will he just throw money at anything and everything?

Japan had other problems which we dont have.

 

[Copernicus]

Quote from crackedback:

My chuckle comment wasn't a personal dig at you. If you took it as such, i apologize.

I hear more than a few make similar statements on a national level. Even the local realtors are spouting something along those lines. Which, I think as stated before, national just doesn't matter to someone in CA. Real Estate is a wholly local environment.

Nope not short anything and definitely not long real estate. We sold our last place Nov last year. Waiting patiently.

I see this area dropping at least another 20% to get to an area that value is reasonable. Historically, CA has corrected in the 40-50% range in prior run ups. How do I know, I lived through two of them as an owner.

i took it as 50% from here, when you say 50% from the top including whatever it went down already, then i agree.

 

[SteveD]

Several points:

Japan has a totally different economic system and structure than US.


Most, if not all, lenders are very reluctant to foreclose on a home...they will work with owner if at all possible to get him to stay...very expensive for lender to foreclose


Also, a lot of "list" prices are set too high to begin with....every seller thinks his house is best on block..."we can always come down"....

The "whacky" situations of three offers ABOVE the asking price got a lot of publicity but actually only occurred in a relatively small number of locations on a national basis...

Memphis, Ok City, Omaha, Nashville, etc etc....I don't think so...

My guess is that the market is putting in a bottom as we speak...will start to rise after first of year....

Always look at actual homeowners....not second homes, speculators, etc etc....people that live in that house and intend to live in that house for the foreseeable future....the others are just "noise" in the market...

But, hey, what do I know. I have only been doing this for 35 years in the toughest real estate market in the country.


SteveD

 

[QQQBALL]

Quote from SteveD:

My guess is that the market is putting in a bottom as we speak...will start to rise after first of year....

Always look at actual homeowners....not second homes, speculators, etc etc....people that live in that house and intend to live in that house for the foreseeable future....the others are just "noise" in the market...

But, hey, what do I know. I have only been doing this for 35 years in the toughest real estate market in the country.
SteveD

markets take longer to correct, all market with the type of parabolic moves take longer to correct. they just dont go straight up, dip for a few months and then a bottom is in... and again, thats NOT just limited to real estate markets.