You know you're in a bubble when....

[honobob]

Twaddle, is that you?

I just saw the surest sign yet that we're near the top of a real estate bubble. * A *blurb in our local paper announced that a group of little old ladies is forming a new real-estate investment club. * It's deja vu all over again, I tell ya.

Is this your prediction over three ago! The property I closed on in August 2004 is now worth $178,000 more than what I paid. Got a graph for that?

 

[twaddle]

Is this your prediction over three ago! The property I closed on in August 2004 is now worth $178,000 more than what I paid. Got a graph for that?

Why yes, I do!

 

[honobob]

Why yes, I do!

Isn't that upside down..nevermind, that's the stock market not the real estate market

 

[tryan]

My local market (north of Boston) has corrected just about to where it was as of the start of this thread - 8/2004. Spoke to a realtor today (will be listing a SF next month) who seemed pleased/excited about the having pulled some of the excess out of the market.

The zero down buyers (aka speculators) are gone; lots of shady mortgage companies are gone. Buyers have decent credit and are actually putting DEPOSITS into the deal. And low ball offers are acually considered.

The healing has begun.

 

[brewer12345]

My local market (north of Boston) has corrected just about to where it was as of the start of this thread - 8/2004. Spoke to a realtor today (will be listing a SF next month) who seemed pleased/excited about the having pulled some of the excess out of the market.

The zero down buyers (aka speculators) are gone; lots of shady mortgage companies are gone. Buyers have decent credit and are actually putting DEPOSITS into the deal. And low ball offers are acually considered.

The healing has begun.

So would a typical SF property in your market flow cash to an investor, assuming a 30 fixed mortgage and 20 to 25% down? Still a ways to go by me, despite very healthy rents.

 

[audreyh1]

Interesting. Folks felt that we at advanced bubble stage in 2004. But it didn't really reach its peak until 2006, TWO YEARS LATER. That's the problem with bubbles - they last far longer than anyone can imagine.

Audrey

 

[honobob]

Interesting. Folks felt that we at advanced bubble stage in 2004. But it didn't really reach its peak until 2006, TWO YEARS LATER. That's the problem with bubbles - they last far longer than anyone can imagine.

Audrey

Audrey
Try THREE years later in Hono and SF Bay Area and Still NOT a bubble!! Even in Vegas "the Bubble" is mainly confined to new construction. Where and why do you think there was a 2006 peak?

 

[twaddle]

Folks felt that we at advanced bubble stage in 2004. But it didn't really reach its peak until 2006, TWO YEARS LATER.

Well, we did reach a volume peak in 2004. Ed Leamer argues that housing cycles are more of a volume cycle than a price cycle since prices are so sticky on the way down.

What that says to me is that it's actually easier to time a housing bubble than a stock bubble. Once you see the volume peak, wait a year or two and sell your real estate (if you can find a buyer).

 

[laurence]

Audrey
Try THREE years later in Hono and SF Bay Area and Still NOT a bubble!! Even in Vegas "the Bubble" is mainly confined to new construction. Where and why do you think there was a 2006 peak?

Goodness, mercy, captain of industry! I think you should just make, "Real Estate rocks and never has a bubble!" as your signature, you surely post it enough!

Meanwhile, we poor simpletons are seeing our neighbors sell their houses for 10%+ less than what they were selling for a year ago, both in San Diego and in San Fran (friends there). Those stats from the real estate industry about home prices increases are a bit disingenuous considering the median is being buoyed by the fact that a larger % of homes being put on the market are more high end luxury homes, skewing the results.

But hey, you are still making big bucks with your rapier business wit, good on ya mate. Just please don't tell me the overall RE market isn't down, the official reports on wall street and the signs in my neighborhood can't both be wrong.

 

[W2R]

Goodness, mercy, captain of industry! I think you should just make, "Real Estate rocks and never has a bubble!" as your signature, you surely post it enough!

Meanwhile, we poor simpletons are seeing our neighbors sell their houses for 10%+ less than what they were selling for a year ago, both in San Diego and in San Fran (friends there). Those stats from the real estate industry about home prices increases are a bit disingenuous considering the median is being buoyed by the fact that a larger % of homes being put on the market are more high end luxury homes, skewing the results.

But hey, you are still making big bucks with your rapier business wit, good on ya mate. Just please don't tell me the overall RE market isn't down, the official reports on wall street and the signs in my neighborhood can't both be wrong.

The latest quarterly reports show that median prices in New Orleans are down over 7% compared with a year ago, the local real estate association has said that the housing inventory here has grown a whole lot. My neighborhood is sprouting "For Sale" signs right and left. Still, when I mentioned the local housing crunch at work, a co-worker loudly contradicted me and said houses were selling like hotcakes for prices as high as ever. WTF?

Viewpoints do seem to differ on the housing crunch (or lack of same) for reasons that are puzzling to me. Maybe some people are looking at very small regions just within a few blocks of their homes, and not the Big Picture statistics?

 

[REWahoo]

Goodness, mercy, captain of industry! I think you should just make, "Real Estate rocks and never has a bubble!" as your signature, you surely post it enough!

C'mon Laurence, don't be yankin' HB's chain. After all, this time it might be different. Really.

 

[ats5g]

For Home Price stats, check out

S&P/Case-Shiller® Home Price Indices

 

[justin]

The shiller data does say SF and San Diego are down 4% and 7%, respectively, year over year. Laurence, you aren't imagining things.

The only areas that are up YoY in nominal terms are Atlanta, Portland, Dallas, Seattle, and Charlotte. In real terms, knock Dallas and Atlanta off that list.

Nationwide we are down 3.5-4% (plus inflation).

(Shiller data is nominal dollars, right?)

 

[audreyh1]

It seems that in much of the US, prices peaked in 2006.

Audrey

 

[W2R]

It seems that in much of the US, prices peaked in 2006.

That is what I *THINK* I am seeing here. Of course, in New Orleans we have a really complicated situation.

In 2006, there was a huge demand for homes because so many were destroyed and rentals were sky high as well. By now, most of those who couldn't return seem to have found jobs and homes in other cities, and the demand is down.

It is difficult to compare median prices because the availability of so many damaged homes, whether gutted, ungutted, or renovated, are skewing the curve. Theoretically, median home prices are down over 7% here compared with a year ago - - but newly available damaged homes might be causing a lot of that. Or, maybe undamaged homes are dropping in price as well (which from my own observations seems to be the case in my neighborhood).

However, just looking at homes in my immediate neighborhood, I would say that prices skyrocketed in 2006 and homes were selling like hotcakes, but now prices have fallen below 2005 (pre-Katrina) prices and you couldn't sell a home to save your life.

The question to me, is this: how long do we expect for it to take, after a bubble-inspired sales slowdown, for sales to pick up and for the inventory of homes to return to more usual numbers?

I have zero experience in this and have been guessing these things are very transient - - maybe just 2-3 years, but haven't a clue.

 

[honobob]

What that says to me is that it's actually easier to time a housing bubble than a stock bubble. Once you see the volume peak, wait a year or two and sell your real estate (if you can find a buyer).

So EASY!? Didn't you sell in 2003 & 2004? Maybe it was different that time.

 

[honobob]

Meanwhile, we poor simpletons are seeing our neighbors sell their houses for 10%+ less than what they were selling for a year ago, both in San Diego and in San Fran (friends there). Those stats from the real estate industry about home prices increases are a bit disingenuous considering the median is being buoyed by the fact that a larger % of homes being put on the market are more high end luxury homes, skewing the results.

But hey, you are still making big bucks with your rapier business wit, good on ya mate. Just please don't tell me the overall RE market isn't down, the official reports on wall street and the signs in my neighborhood can't both be wrong.

LW
Don't know about SD but would like more details on anybody in SF that is selling for 10% less than last year! I posted some actual resales recently that show continuing appreciation. Are the facts confusing you? I've pointed out the problem of posting median prices before but you don't seem to mention it when W*b or Tw*ddle post his graphs supporting the bursting of the bubble. Seems a little selective. Listen, the overall RE market IS not down!! Wait.. what the hell is the overall RE market. I think I said there is no bubble in SF and Hono in 2004, 2005, 2006, & 2007!! I'll stand by that. Did the official reports on wall street get you out of the market in 2000?

I'm not denying your bubble. Cry and moan about it if it makes you feel better. Just don't tell me something that is wrong and make fun of me when I prove you wrong.

 

[honobob]

The shiller data does say SF and San Diego are down 4% and 7%, respectively, year over year. Laurence, you aren't imagining things.

Justin That data is for the SF metropolitan area that probably includes 9 counties in the Bay Area. Some of these sales would be more that 2 hours from SF. It would also include alot of new home sales. I'm on record that subsequent sales in new developments are often lower than the first sales. I reccomend not buying in new developments.

 

[twaddle]

Honobob, in every region that has already popped, we first saw declining sales and increasing inventory as a leading indicator before prices declined.

Can you tell us what the inventory and sales volume are doing in the regions you say are immune from the bubble?

 

[honobob]

Honobob, in every region that has already popped, we first saw declining sales and increasing inventory as a leading indicator before prices declined.

Can you tell us what the inventory and sales volume are doing in the regions you say are immune from the bubble?

Yes.

 

[twaddle]

Yup, we both know. You got the bubble virus is those markets.

Look, this isn't rocket science. We had a long period of double-digit appreciation. Even you know that's unsustainable and appreciation rates have to adjust. They've been adjusting downward, and even negative in many markets. There's no reason to suspect the current downward trend will reverse until the fundamentals cry CHEAP! and override the expectations of further reduced prices.

 

[laurence]

LW
Don't know about SD but would like more details on anybody in SF that is selling for 10% less than last year! I posted some actual resales recently that show continuing appreciation. Are the facts confusing you? I've pointed out the problem of posting median prices before but you don't seem to mention it when W*b or Tw*ddle post his graphs supporting the bursting of the bubble. Seems a little selective. Listen, the overall RE market IS not down!! Wait.. what the hell is the overall RE market. I think I said there is no bubble in SF and Hono in 2004, 2005, 2006, & 2007!! I'll stand by that. Did the official reports on wall street get you out of the market in 2000?

I'm not denying your bubble. Cry and moan about it if it makes you feel better. Just don't tell me something that is wrong and make fun of me when I prove you wrong.

Actually, I bought my house in 2001 and I'm still living in it. In my hood my house peaked at $580,000 and is not lucky to get $510,000 (that's based on sale prices of comparables).

As far as proving me wrong. Well, every time someone throws up a stat you just say, "that's not the way I want to see it, I'm going to slice the data this way." - Look, I hope you continue to have success in your business, but the aggregate data says the overall trend is down, possibly down hard.

 

[honobob]

Yup, we both know. You got the bubble virus is those markets.

Look, this isn't rocket science. We had a long period of double-digit appreciation. Even you know that's unsustainable and appreciation rates have to adjust.

Well Doc, Not everybody that carries the virus gets sick. Not rocket science but medicine. Maybe not immune but symptoms will be mild like in the past. I've had 21 years of double digit appreciation. The only adjustment has been from 30-50% to 10-11%.

You've got three years invested in this prediction but all you've been spending is Wabinnero's. How about picking a couple of properties in SF give me the bubble burst price % off and the date and I'll buy them from you at a 10% preminum. You'll even save the REALTOR fee. That would be about a 50% return on your money. You'd be stupid not to take that offer unless you're worried that there is no bubble. Didn't I make you a good offer last year?

Bubble virus? Doc Twaddle....waddle?.....Duck........QUACK!

 

[twaddle]

I've had 21 years of double digit appreciation. The only adjustment has been from 30-50% to 10-11%.

Think about that for a nanosecond, honobob. $600K median, and your expectation is for 10%/year going forward?

That would make the median $4M in 20 more years. Who's buying at that price? In fact, very few can afford to buy at today's prices. All-time low affordability has got to tell you something, d00d.

As Shiller mentioned, even a 2% annual premium over other markets would lead to a 100X price difference compared to the average home in the long-term. Trees don't grow to the sky.

 

[honobob]

As far as proving me wrong. Well, every time someone throws up a stat you just say, "that's not the way I want to see it, I'm going to slice the data this way." - Look, I hope you continue to have success in your business, but the aggregate data says the overall trend is down, possibly down hard.

Well if you don't have any actual proof of resales at 10% less in SF why didn't you just say so? I didn't know we were using cocktail talk stats. Sorry! And sorry you lost $70,000 in equity plus the inflation loss and your carrying charges. You should sell and rent and buy in a few years when beach front property is 50% off. Cheers.