Housing Bubble Bursting?

[Brad Ellis]

Randolph,

Everyone kept telling me 30% of a drop for SoCal. I did not look at those figures and will not bother. If it is important to you, then you can use the HPI quarterly index for specific MSAs.

If the Socal drops exceeded your aggregate Pacific region declines then is still means the rest of the region went up. Guess I'll go take a look just for my own curiosity.

Nonetheless, there was no national drop.

Brad

 

[Brad Ellis]

Moh,

I do not see anything missing in the article I copied.

Note that this DJ article is not an "excerpt". Rather it is a summary or synopsis that includes excerpts.

Bottom line: right or wrong the "experts" do not see a serious collapse (and THAT is what I would call a bubble) as being likely.

When they change their minds, let me know. Until then I'll go along with the flow.

Brad

 

[Brad Ellis]

Randolph,

1992 1 -0.98 -0.53 1.82
1992 2 -1 -0.65 1.93
1992 3 -1.55 -0.79 2.72
1992 4 -3.89 -2.22 1.85
1993 1 -5.59 -3.09 1.8
1993 2 -5.92 -3.16 1.87
1993 3 -6.74 -3.72 1.68
1993 4 -6.6 -3.11 2.03
1994 1 -5.7 -2.76 3.05
1994 2 -8.17 -3.83 3.43
1994 3 -8.65 -3.98 2.74
1994 4 -9.59 -4.73 1.74
1995 1 -9.4 -4.17 1.55
1995 2 -4.37 -1.53 1.71


The above list from the OFHEO MSA chart has 3 columns. Left most is the LA MSA; next the San Diego MSA, and finally, the Seattle MSA. I believe these are the quarters you cite.

You said I have no data to support the contention that a 20-25% aggregate drop during those quarters was fueled by Southern California.

Using your basis, it sure looks clear to me like the SoCal MSAs were the ones that brought down the region. I note that Seattle did not decline at all.

Anyway, feel free to analyze that.

Brad

 

[Randolph Kinney]

Brad,

Okay, I will accept your claim that So Cal took down the entire Pacific region for the years 1992 through 1995.

What I conclude from the foregoing data, certain population centers across the U.S. that have had or will have house price declines that can influence the entire data set for the U.S. where it may appear the U.S. as a whole had a major correction. Of course, that is the fallacy of using averages and statistics in general. The average is suppose to represent the region and as you have clearly pointed out, it doesn't.

It is a good thing back then they didn't have the 100% financing using low credit scores like today.

OTOH, how many MSAs would it take where serious declines occur and that produces a serious problem for the lenders and investors, given the 100% financing and low credit scores today?

 

[Randolph Kinney]

Housing starts expected to fall again

Housing starts expected to fall again

http://www.marketwatch.com/news/story/story.aspx?guid=%7BD99C5CF1-B83F-45E9-9D7D-B830FD1806E9%7D

By Rex Nutting, MarketWatch
Last Update: 12:01 AM ET Sep 17, 2006


WASHINGTON (MarketWatch) -- The fragile U.S. housing market probably weakened further in August and early September, economists said, looking ahead to the coming week's economic data.

Home builders have turned very sour on their industry as inventories of unsold houses soar, canceled orders pile up and prices sink.

The week's calendar will offer two views of the home builders: what they do and what they say. In both cases, the story's the same: grim.

"Demand and supply conditions have been deteriorating rapidly," said Jay Feldman, an economist for Credit Suisse. New home sales are off 22% from the peak, while the inventory of unsold new homes is up 22% in the past year. Not surprisingly, prices are flat and probably down significantly considering all the extras builders are throwing in for free to sweeten the deal.

"Speculators, who drove the market for new homes over the past few years, have now fled," Matus said.

A record 1.73 million homes are vacant and awaiting a buyer.

The pace of the decline in starts and permits so far this year is the largest since the recession of 1991.

 

[Randolph Kinney]

San Diego Continues Decline

Prices down 2.2 percent from last August; number of sales also falls

By Emmet Pierce
UNION-TRIBUNE STAFF WRITER September 13, 2006

San Diego County's residential real estate market continued to cool last month, with overall prices down 2.2 percent from August 2005.

It was the third straight month of year-over-year price declines, the research firm DataQuick Information Systems reported yesterday. It also was the slowest August in terms of sales volume since 1997.

The median price for all homes in August was $482,000 for 3,666 sales, compared with a median price of $493,000 and 5,379 sales in August 2005.
August was also the 26th consecutive month in which the total number of homes sold fell on a year-over-year basis. The year-over-year decline in total sales last month was 31.8 percent, the biggest for any month in 11 years.

The county's median price for all types of housing peaked in November 2005 at $518,000. Although the market has been edging downward, DataQuick analyst Andrew LePage said the region's home prices don't appear to be headed for a steep drop in the near future.


http://www.signonsandiego.com/news/business/20060913-9999-1b13housing.html

 

[Brad Ellis]

Randolph,

On your question: "It is a good thing back then they didn't have the 100% financing using low credit scores like today.

OTOH, how many MSAs would it take where serious declines occur and that produces a serious problem for the lenders and investors, given the 100% financing and low credit scores today?"

I cannot remember what loan programs they had back then except I am certain of two things back then: 1) they were doing sub-prime loans and 2) they had adjustable rate loans.

On the number of MSAs, it will take more data than I have. However, that risk is spread out to investors from whole loan portfolio purchases and securitizations along with lender portfolios and insurers. I think all parts of the market are affected in terms of the yields after factoring in losses.

So far, the various market segments are watching with interest but do not appear to be panicking.

Brad

 

[moh malekpour]

Moh,

I do not see anything missing in the article I copied.

Note that this DJ article is not an "excerpt". Rather it is a summary or synopsis that includes excerpts.

Bottom line: right or wrong the "experts" do not see a serious collapse (and THAT is what I would call a bubble) as being likely.

When they change their minds, let me know. Until then I'll go along with the flow.

Brad

Brad,
The market and the public doesn't follow your expert's sentiment. The reason that homebuilder's stock is 35% down is because Mr. Market doesn't believe they have any future no matter how much your pavorite experts try to spin it .

 

[The Bob]

http://www.websitetoolbox.com/tool/post/sdcia/vpost?id=1382618

I am quite new to real estate investing. It would seem that I know 1/10 about RE investing as many of the regular contributors to this board and even less than the "experts."



Sometimes, however, I think that the "experts" should just spend one week in my office observing the financial profiles of our refinance applicants. I believe their outlook would be much different.



Most people simply cannot believe the profiles that we see.



I am the sales manager of a branch office of a top-10 national lender.



My office of 7 loan officers takes +/- 100 loan applications per week, 90% of that coming from cold calls.



Of the last 100, I have taken some simple statistics and have found the following:

68/100 had LTV's over 80% at time of application
16/100 had LTV's over 100% at time of application
78/100 had back end DTI's over 55%
31/100 had back end DTI's over 70%
23/100 had FICO's under 500
81/100 had credit card debt above $10,000
54/100 had credit card debt above $20,000
18/100 had credit card debt above $50,000
66/100 had Pay-option ARMs
27/100 had Pay-option ARMs and mortgage lates
22/100 were either in forbearance or had been in forbearance within the past 12 months

 

[Brad Ellis]

Moh,

I find it interesting how every time you disagree with something it is spin but if you agree with it then it is not spin. Moh- all of this is spin of some sort or another- whether they be the national and government folks I cite or the analysis firm you cite. In the end, only time will tell, of course.

Will the market react in the way these "experts" predict? Again, only time will tell. You may be quite right in that the market will not follow on the expected path. Or you could be wrong and we may find the market following the exact path predicted.

In the meantime, I am seriously considering buying some Hovanian stock. Of the builders, from what I have seen so for, they apear to have the best inventory of undeveloped land, options on land, etc.

If your assumption is correct, then it means the market has over-reacted to the home builders' stocks and they ought to come roaring back once this dip is over.

Brad