Yale's Schiller Tells Barron's He Sees 20%-30% Price Declines -Including NYC and SF

[drukes1234]

Quote from poohbear:

His book Irrational Exuberance published in early 2000, right before the market crash. Most people laughed at him at that time. You'd better respect the view of a person with such records.

No one can talk down the market anyway, market rises and falls by itself

I'm not saying I agree/disagree with him, however, what are these records that you speak of? He's only made one major public call and that was the crash in 2000

 

[Copernicus]

Quote from blast19:

Are you still pretending to be a beacon of knowledge? Give it up...you fade into the darkness when challenged. I'm still waiting for those statistics about Miami, not just the blather. Thanks.

FO

 

[Arnie]

He may end up being right, but I don't think the reason prices will correct is due to "cost". RE prices are driven by two things: Supply/demand and affordability.

Supply and demand are pretty inelastic compared with more fungible instruments so these tend to correct more slowly. If people don't get the price they want, some will just take their property off the market, thereby reducing supply. If buyers can't afford the prices, they can rent, reducing demand.

I think that the recent RE boom/bubble is due to affordability. The mindset of the typical buyer is "how much down" and "how much a month". That's one reason ARM's are so popular.....you can buy with nothing down and your payment isn't fully amortized. It's just some minmum payment based on LIBOR or some other index.

 

[blast19]

Quote from Copernicus:

FO

Congratulations! You answer the one guy who calls you on your bullshit being bullshit and ignore guys like BuyLo who actually evoke the idea of rational and intelligent thought. You're a man of one face and you play that card well!

"FO" was a very quirky comeback!

 

[blast19]

Quote from Arnie:

He may end up being right, but I don't think the reason prices will correct is due to "cost". RE prices are driven by two things: Supply/demand and affordability.

Supply and demand are pretty inelastic compared with more fungible instruments so these tend to correct more slowly. If people don't get the price they want, some will just take their property off the market, thereby reducing supply. If buyers can't afford the prices, they can rent, reducing demand.

I think that the recent RE boom/bubble is due to affordability. The mindset of the typical buyer is "how much down" and "how much a month". That's one reason ARM's are so popular.....you can buy with nothing down and your payment isn't fully amortized. It's just some minmum payment based on LIBOR or some other index.

Arnie,

I don't think the market will be dry because those who can't afford the resets, a lot of them, will be foreclosed.

Demand is already slowing and will be even slower when the credit tightening kicks into fully effect.

Those are two reasons why supply and demand will move faster than most times...like a warehouse blowout sale to a town that just had its major factories closed.

I don't know about people just taking their homes off the market. We may see some people fairly panicked if we start seeing foreclosures pile up and you'll see people unloading their houses cheap just to get out of tightly stretched mortgages.

Some people would rather escape with a little equity than have to be cash-strapped paying off a house they were never really able to afford for 5 years waiting for the market to correct.

We'll have to see how it plays out.

cheers

 

[Lights]

I've seen him on tv for years. He was a housing bear 5 years ago too.

Quote from moonstonegirl:

Shiller is a fool with Yale credentials. Thers plenty of them, I should know!

Moon

 

[Pa(b)st Prime]

Quote from blast19:

Are you still pretending to be a beacon of knowledge? Give it up...you fade into the darkness when challenged. I'm still waiting for those statistics about Miami, not just the blather. Thanks.

There was an article today in one of the SoFla papers (can't remember if the Herald or Sun-Sentinel) claiming 15% of Florida buyers are foreign. That's in the whole state. If true one can reasonably extrapolate the figure in Miami as being much higher than the statewide pct.

 

[Pa(b)st Prime]

With a flat to inverted yield curve only those with the cheapest of ARM's will see a dramatic up tick in per month payments.

The U.S. housing market is no more driven by sub prime borrowers than the U.S. stock indicies are driven by 1 lot ES traders.

That's not to say there's zero spillover. Market's after all are musical chairs. But of the many factors effecting RE valuations sub prime is low on the list.

Quote from blast19:

Arnie,

I don't think the market will be dry because those who can't afford the resets, a lot of them, will be foreclosed.

Demand is already slowing and will be even slower when the credit tightening kicks into fully effect.

Those are two reasons why supply and demand will move faster than most times...like a warehouse blowout sale to a town that just had its major factories closed.

I don't know about people just taking their homes off the market. We may see some people fairly panicked if we start seeing foreclosures pile up and you'll see people unloading their houses cheap just to get out of tightly stretched mortgages.

Some people would rather escape with a little equity than have to be cash-strapped paying off a house they were never really able to afford for 5 years waiting for the market to correct.

We'll have to see how it plays out.

cheers

 

[blast19]

Quote from Pa(b)st Prime:

With a flat to inverted yield curve only those with the cheapest of ARM's will see a dramatic up tick in per month payments.

The U.S. housing market is no more driven by sub prime borrowers than the U.S. stock indicies are driven by 1 lot ES traders.

That's not to say there's zero spillover. Market's after all are musical chairs. But of the many factors effecting RE valuations sub prime is low on the list.

RE: FL real estate, until I see a real definitive statistic and forecast by a reliable agency, I have a hard time believing that Miami's apparent overbuilding is going to be absorbed by foreign buyers. It's just not something that makes sense in an overheated market.

When you get Execs from companies like Countrywide admitting that approximately 60% of their Alt-A borrowers(That's half of all their business in 2006) wouldn't qualify if they had applied using the fully indexed rate, I'd say that the "flat yield curve" is not something you can use to gauge problems coming. If you get slight upticks in a person's mortgage that is already stretching and they realize the prices in RE are coming down...you might get more defaults than you think. Not only that, but people who shouldn't have gotten loans probably were handed them like it was candy. About 75% of these Alt-A loans industry-wide went to someone in CA, FL, AZ, VA. That being said...can you remind me where prices are most inflated and the bubble is most overdone?

I agree with you that subprime is a small(ish) issue...but, it does have its implications. Headlines like these:
http://money.cnn.com/2007/03/22/news/companies/countrywide.reut/index.htm?source=yahoo_quote
don't make me feel warm and fuzzy inside...especially when you get the CEO of countrywide "missing" those hearings only to appear on Mad Money later talking about how everything is okay while he sells at a rate not seen since Skilling and Lay....and yes, he is selling at a rate faster than previously. Many have said he's not but, even a Moody's reporter, but if you add up the numbers there's a significant increase.

Whether or not this document was purposefully made public(I'd guess no), it is. Please read it if you're interested in the topic. It's from Credit Suisse and is an incredibly unnerving piece:

http://www.billcara.com/CS Mar 12 2007 Mortgage and Housing.pdf

Cheers.

 

[blast19]

P.S. Want to jump to where it gets really juicy? Go to the section of that document entitled "Now That's Exotic" and you'll see why people might have less stake in holding on to "their" homes than you might think.