patrick.net

egads101 says

10 to 1 odds, I am right an you are wrong.

I'll take that bet every day. You miss the point completely and don't have any grasp of how markets work.

One thing to consider is that it's human nature to view selling at 500K now compared to at the peak when the same house was worth 900K as locking in a 400K loss.

It's quite possible that those that don't need to move are not only waiting out getting right side up on their loans, but thinking now in terms of how much equity they've lost from the peak and hope to see those levels again.
May be a very long time....

egads101 says

If you owe $200K, and list your home for $210K, you can't lower your price. PERIOD. EVER!

That's an idiotic statement, probably from a guy that doesn't have $10K in savings and thinks no one does.

egads101 says

the idiotic statement is from you, a dipshit who knows next to nothing about housing markets, challenging what I say with zero knowledge to his credit.

Everything I read from you so far was either a trivial note on short-term trends, arrogant blathering on irrelevant past monkey-thrown darts, or just plain false.

The latest being your blatantly false negative statements followed by "PERIOD. EVER!".

egads101 says

the above is what you said, on July 2011... Great call dumbfuck! how much did prices go up since you made that gem of a prediction?

The context of that quote was on the question of continuing to rent or believing that that was indeed the time to buy.

For all of the reasons I gave, and with the information we all had back then, there was no reason to believe prices were about to take off. It was the right advice at the time.

What happened since then, ironically, is the topic of this thread: that inventory has rapidly declined at a time when sellers are more enticed to sell. Nobody expected inventory to drop 60+%.

And if inventory hadn't collapsed, prices would not have skyrocketed.

gregpfielding says

It was the right advice at the time.

I never cease to be amazed at the nerve of some of the people here. It was absolutely NOT the right advice at the time. How the hell can you write that it was the right advice??

egads101 says

If you owe $200K, and list your home for $210K, you can't lower your price. PERIOD. EVER! I don't care if there are tons of homes in that predicament, they may not get to sell, but they still can't lower their price.

Yep for that sliver of the market that have so little equity that is true unless they short it. But for everyone else they can still sell and they want to get out at the top or as close to it as they can. Once the market peaks and starts to fall, the 2005 bubble buyers have two choices, sell now (even at a loss) or be willing to stay put for another 5 to 10 years.

egads101 says

I love it when a dumbfuck realtor thinks he can take on a mathematical economist on economics!

Where is the mathematical economist? Or do you mean community college teacher who post online to inflate his ego?

Once again you turn to name calling when you can not win an argument.

Damn oracle, for someone who has a crystal ball crammed sideways up their arse, and is so succesful, you sure don't seem too content with your posting-all-night-and-day-on-patnet life.

What's the matter?

Mo money, mo problems?

egads101 says

Once again you turn to name calling when you can not win an argument.

This argument is already won by me, you are just too fucking stupid to know it.

Hehe, looks like you are proving my point.

Making the all knowing enlightened loose his cool and start cursing at people puts a smile on my face :)

homeowners en masse are simply holding out for the most money. And, then homeowners en masse decide that they had better sell

That would be about now.

And guess what, the longer homeowners wait to sell, as of now, the less they will get.

Reason: Big money investors pumped it 11% and now are dumping. After that...no more buyers.

CDon says

And since 2009, prices in DC have been rising in a continuous, moderate pace.

Price movement is a function of Supply and Demand. Your Supply has been about 1/3 of what it is supposed to be. Combine that with 4% interest rates and of course prices are going to rise.

If inventory had been more normal during that stretch, prices probably wouldn't have risen as much, or maybe even fallen.

Why do think fewer sellers than normal have been deciding to move?

To me this isn't a sign of fundamental strength. There are clearly reasons why potential Sellers are choosing not to sell, and those reasons are temporary. At some point, inventory will correct.

The Fed believes that the reason is simply that potential sellers are all trying to squeeze every dollar out of their homes as they can. Perhaps the ups and downs of the last 20 years has conditioned us to be that way. But if this is true... if there are masses of potential Sellers all waiting until the last minute... then we could see inventory climb very quickly.

CDon says

Granted, while the economy has been better here than elsewhere, these people have been buffeted from OMG CRISIS! to OMG CRISIS! for the past 3 years. Yet as you can see by the tight grouping of inventory levels 2010-2013, for each crisis, the sellers as a group have basically not given the slightest shit whatsoever.

None of the crises you mentioned were a direct threat to home prices.

gregpfielding says

Fact of the matter is, until maybe a month or two before they decide to list the average potential seller doesn't do any more research than pick up the paper and see an occasional generic report on housing (prices up 2% YOY, down 2% MOM) only halfway understand it, and then go about their day without giving the slightest shit whatsoever.

Accordingly, I think is a real mistake to assume any massive, collective, herd movements of any type.

I agree that most potential sellers don't pay as much attention as the should. However SOMETHING is causing inventory in DC and the Bay Area here in CA to be about 1/3 of what it is supposed to be. SOMETHING us causing sellers, collectively, to not list their homes for sale.

As a homeowner in the Bay Area, I'll be curious to see what happens with the RE market. I'd actually welcome a slowdown and a return to a more normal market. That said, the Bay Area is possibly due for a severe upswing in supply mainly because way too many investors bought in a short time. But most of those were in crappy or up-and-coming areas, so the only ones who might suffer the fallout from that might be those same investors. I suspect the more desirable areas less so.

Potential sellers who have skin in the game (large down payments) will not sell for a loss or foreclose unless they absolutely have to. At this point, most of the deadbeat zero-down borrowers have already exited the market (foreclosed) and have replaced with buyers who have skin in the game.

In a downturn, we should not see a massive inventory increase like we had with all of the "strategic defaulters". In fact, we should see an inventory decrease. This will put a floor on prices and prevent a free-fall (unless the banks start loaning to deadbeats with no money down again).

egads101 says

It takes foreclosures to get the slide going.

No. Foreclosures, en masse, happen after home prices fall. Otherwise most people would sell instead.

Unaffordably-high home prices are the disease.
Falling home prices are the cure.
Negative equity, short sales, and foreclosures are all symptoms.

egads101 says

So, worrying today, that A. people will decide to sell. B. all at once. and C. reduce prices in a race to the bottom is ridiculous, when there is zero sign of it at all.

There are signs. Sales have slowed more than normal, and inventory is beginning to tick higher. Maybe it's nothing. Or maybe it's the beginning of a change.

For your discussion, please see my post:

http://www.thefiscaltimes.com/Articles/2013/10/17/Feds-Fisher-Warns-US-Housing-Bubble-Signs?source=Patrick.net

Fisher Warns US housing Bubble...

egads roberto says

plus calling lots of people fucktards and nitwits on here quite cathartic;

Can't really do either during the day gig :-)

there you go!

The Professor says

Tweedle.

History will tell.

History already tells the story. Some folks just choose to ignore it.

coriacci1 says

gregpfielding says

plus calling lots of people fucktards and nitwits on here quite cathartic;

Can't really do either during the day gig :-)

there you go!

That wasn't me saying that...

gregpfielding says

That wasn't me saying that...

sorry, it was meant for egads101 roberto.

The Professor says

You are actually quoting Roberto. He would get fired if he treated his JC students like he does the users here.

my mistake. sorry all. i changed the original comment.

gregpfielding says

Granted, while the economy has been better here than elsewhere, these people
have been buffeted from OMG CRISIS! to OMG CRISIS! for the past 3 years. Yet as
you can see by the tight grouping of inventory levels 2010-2013, for each
crisis, the sellers as a group have basically not given the slightest shit
whatsoever.

None of the crises you mentioned were a direct threat to home prices.

Are you kidding me? For about a month before each of those events (especially the sequester & shutdown) local media would daily tell us about the thousands of federal workers who were going to lose their jobs, or at least take major pay cuts. Don't you think that the nightly reports of DC centric doom would cause some people to get out while the getting is good and list their homes for sale?

Maude: Say Honey, the Wash Post is reporting that 20% of the staff in our department will get laid off - WUSA9 is reporting imminent economic doom. Home prices have been rising here for 3 years... you want to list now and move back to home to Iowa where homes cost 1/4 as much?

Harold: No dear, I say, lets roll the dice and see if we get laid off...I want to squeeze as much profit from this home as possible!!!

Really?

gregpfielding says

However SOMETHING is causing inventory in DC and the Bay Area here in CA to be
about 1/3 of what it is supposed to be. SOMETHING us causing sellers,
collectively, to not list their homes for sale.

While I cant speak to the BA, I dispute the idea that inventory in DC is 1/3 of what its "supposed to be". If you look again at this chart:

http://www.recharts.com/nova/nova.html

the huge inventory numbers (06-08) resulted in -20% declines. Likewise, the very small inventory numbers (05 & earlier) resulted in +20% price increases. What makes you think the 09-13 inventory levels (and the corresponding +3% to +7% annual gains) is abnormally low?

coriacci1 says

While I cant speak to the BA, I dispute the idea that inventory in DC is 1/3 of what its "supposed to be". If you look again at this chart:

Maybe "supposed to be" was the wrong phrase. Your charts go back to 2005 and it looks like 2013 is about 1/3 of the average on those charts. Or no more than half of what it has been.

Even with the uptick on your charts in September, Nova looks to have about 6,000 homes for sale. This is down from roughly 9,000 in 2010 and 2011, 12,000 in 2005, and between 15,000-20,000+ in 2006-2008.

The whole point of the The Fed's paper and my analysis of it is that number of Sellers (inventory) is down (6,000) from 2010-2011 (9,000), even though the price of homes has risen substantially since then.

We would expect MORE sellers to want to sell at higher prices, not fewer.

CDon says

Are you kidding me? For about a month before each of those events (especially the sequester & shutdown) local media would daily tell us about the thousands of federal workers who were going to lose their jobs, or at least take major pay cuts.

I'm not sure what it was like actually living in DC for all of that. Personally I believe that those were all made-up crises, exaggerated by politicians so they could all make their speeches, but there there was never any real threat of anything bad happening. I can't believe anyone in DC would have sold their home thinking that a potential government shutdown would cause their home to plummet in value.

gregpfielding says

The whole point of the The Fed's paper and my analysis of it is that number of Sellers (inventory) is down (6,000) from 2010-2011 (9,000), even though the price of homes has risen substantially since then.

We would expect MORE sellers to want to sell at higher prices, not fewer.

I agree, but I think we need to distinguish "normal" higher prices versus substantially higher, or bubbly prices. After all, in a normal market (say 1982 to 2000) it was normal to see higher prices year after year thanks to inflation. Yet no-one would argue that we should have seen substantially higher inventory all that time as prices rose. If we did, it was only because of new builds, becoming relisted as the exurbs and corresponding population grew - but that is not the sort of dynamic the fed is talking about.

Also, for what its worth, while it doesnt show up on that graph, I believe inventory was extremely low (under 4,000 units) for most of the red-hot 2001-2005 timeframe. Thus, there was at least a 4 year period of 20%+ price gains where inventory didnt increase in the slightest. Basically, inventory didnt really rise until we were at the apex of the bubble prices.

gregpfielding says

I'm not sure what it was like actually living in DC for all of that. Personally I believe that those were all made-up crises, exaggerated by politicians so they could all make their speeches, but there there was never any real threat of anything bad happening. I can't believe anyone in DC would have sold their home thinking that a potential government shutdown would cause their home to plummet in value.

Certainly there was some exaggeration, but this was and is the most serious threat this area faced. For starters, during the shutdown, No-One was paid - that is a fact. And for a long time, they werent sure if they were going to get paid. During the shutdown and sequester, Just about every federal agency was sending round memos planning for reduced schedules. Further, outside contractors actually did fire quite a few folks as that 6.2B federal contract they hired the people for has been delayed or scaled back, or cancelled. If you think I am exaggerating, check my posting record -- I am one of the more level-headed posters here. Yet, I can tell you, unequivocally, this was by far and away the scariest potential crisis this area faced.

And in any event, lets keep some context here. You are arguing that people are all going to "wake up" look around at the rising prices and collectively, "en masse" race for the exits. My counter example is (a) prices in DC have risen continuously for three years, and even if this was a sanguine stable time, at no time during those three years did they "rush" for the edits. Also, in case that isnt enough to persuade you (b) despite the fact that there were so many hyper-specific scary as shit reasons to cause them to "wake up" and list, take their huge profits and go home to Iowa, they just sat there, not moving inventory in the slightest.

So in sum, while I do think you will see some movement in the inventory one way or the other, I think its a big mistake to assume anything equating to a "rush to the exits" or an "en-masse" action will show up on the inventory rolls. This blog attracts some exciteable people who have a tendency to overstate what this or that is going to do to the population of would be sellers who otherwise dont give a shit. I personally think this is just another such occasion.

The Professor says

In spite of the "7.2% unemployment rate" there are millions that are not included because they have exhausted their unemployment benefits. They are not counted but they still want to work but can't find employment.

Hi Professor,
the ue rate is based on people looking for work, whether or not they are getting ue benefits. So someone whose benefits have expired, but is still looking, would be counted. This number is determined through surveys.
There are certainly discouraged workers who are not looking, but not everyone who is off of benefits is counted as discouraged worker.

The Professor says

I did not look very hard to find this. So if 41% of working age adults are not employed and 10 to 20% do not want to work that still leaves us with an unemployment rate of triple the official number. Is my math wrong?

Some percentage of those are in school.

Anyhow, I don't question the point that there are discouraged workers not counted in the official unemployment rate. My point is that this rate has nothing specific to do with the unemployment benefits or lack of same.

The Professor says

did leave out deadbeats. What percentage of the population does not want to
work even without government benefits?

Stay at home Moms?

tatupu70 says

The Professor says

did leave out deadbeats. What percentage of the population does not want to
work even without government benefits?

Stay at home Moms?

That demographic is the true bastion of backwardness, almost the same as muslim women wearing burkas in america, well maybe not quite but still....

The Professor says

Would you agree that the REAL unemployment rate (those that want to work full time but can't find a job or are under-employed) is well over the official rate of 7.2%?

Yes, I agree that there are many discouraged workers and under-employed.

egads101 says

In fact, their prior guess, that many owners are still underwater and hence can't sell at today's prices would be a hell of alot easier to investigate, and they didn't even bother to do that.

Because, if that were the reason, then we would be seeing more sellers as more of them are no longer underwater with rising prices. Instead we are seeing fewer. That may be a part of the reason for some people, but it cannot be the main reason.

egads101 says

Name ANY time in history when real estate markets changed quickly. I was the crash coming from 2005. Inventory built up spectacularly in 2006, but prices kept going up. It took a snails pace three more years to really crash prices.

Inventory began to start building in the Fall of 2005 and prices drifted higher for another 4 months or so, until roughly the Spring/Summer of 2006. Then they began to fall. The more they fell, the more sellers listed and the fall picked up steam.

I'm not sure how you define quickly... some parts of the Bay Area and central valley fall 40% in 2008 alone.

I do agree with you in that, even if this is the beginning of a change, we probably won't see prices really start to drop too much until next June or July, as Spring sellers start to give in and drop prices to compete for buyers.

I'm not predicting this... I am not saying that I have a crystal ball. However, I do believe there is more risk in the market than a lot of others here are giving credit.

egads101 says

NOWHERE in that paper does it even suggest any sudden rush to exit now or in the future. Either you can't read, or you just chose to make that title up yourself.

Further, "waiting, since prices are rising" was given as exactly one speculative guess to describe the situation: rising prices/falling inventory.

It was more than simply "one speculative guess," it was the conclusion they reached as the most likely reason. And, if everyone is simply holding on BECAUSE prices are rising, the implication is that they will no longer hold on when prices are no longer rising.

Clearly you believe that the market has shot up 30% in the last 18 months based on solid fundamentals and a booming economy. Clearly you believe the trend will continue.

I worry that we are nearly back to peak pricing (which most of us would regard as more than people can afford) and we've been buoyed by artificially-low interest rates and housing inventory - both things that are not going to last forever.

I live in Danviile where the inventory of homes for sale has been anywhere from 30-40% of where it should be for the last 18 months or so. Buyers wanting a certain neighborhood have no choice but to complete for the handful of available listings. Prices have skyrocketed.

If inventory would have been normal, I doubt prices would have risen much. When inventory normalizes, I expect that prices will trend to where they otherwise would have been.

I just want to say I think condescending behaviour on this site inhibits communication and the learning process
as well as creating a hostile, uncomfortable, fearful environment.

Mr. Fielding I believe is a Realtor. I personally do not expect him to communicate as a NASA Scientist.
Ok with me. I would think people come to this website in an attempt to make sense of this current,
complex, economic environment. Sure, 2005 was a 'no brainer', anyone with an IQ over 100 had the
thought the market would crash no matter what the media was telling us.

Over the years, I have thanked Patrick many times publicly for my good fortune 10 years ago.
However, at this moment, I will not disrespect myself to be cathartically shit on.
Whatever floats your boat, but for me, absolutely not.

As I have also mentioned publically, had my thinking been a little different, I would have played
this phase of the game differently. I would have saw the opportunity. Didn't happen.
Please see paragraph one and two.

egads101 says

3 years ago, you didn't expect them to rise...In fact, you posted on here that you expected them to go down 100,00s of K further...

I did. I expected the bubbly to fully-deflate and prices here in the Bay Area to return to 1998 levels or lower. I was selling foreclosures for banks and had intimate knowledge of the pipeline.

I did not expect government interference to be so effective. With moratoriums and FASB accounting changes, they essentially shut down the foreclosure pipeline. Then Supply began to fall and prices start to rise again.

I also am not claiming to be an oracle.

gregpfielding says

I did not expect government interference to be so effective. With moratoriums
and FASB accounting changes, they essentially shut down the foreclosure
pipeline. Then Supply began to fall and prices start to rise again.

Except that's not true. The foreclosure pipeline has been very much depleted and in CA isn't that far above norms now.

David9 says

Mr. Fielding I believe is a Realtor. I personally do not expect him to communicate as a NASA Scientist.

Ok with me. I would think people come to this website in an attempt to make sense of this current,

complex, economic environment.

Trying.

David9 says

I just want to say I think condescending behaviour on this site inhibits communication and the learning process

as well as creating a hostile, uncomfortable, fearful environment.

I've been on here for years and Patrick has regularly shared links to articles I've written. I can take the heat.

You are absolutely correct that there are probably dozens of lurkers here who would like to contribute but don't want to deal with potential attacks.

tatupu70 says

Except that's not true. The foreclosure pipeline has been very much depleted and in CA isn't that far above norms now.

Not sure what you mean? I said the foreclosure pipeline was depleted. Do you mean not that far above normal foreclosure numbers?

gregpfielding says

You are absolutely correct that there are probably dozens of lurkers here who
would like to contribute but don't want to deal with potential attacks.

Yes! And that is lost knowledge.

"Information is not knowledge"
Albert Einstein

gregpfielding says

Not sure what you mean? I said the foreclosure pipeline was depleted. Do you
mean not that far above normal foreclosure numbers?

I think I misunderstood you. I was thinking you were implying that there were properties remaining to be foreclosed. Now I think you meant that people refinanced so they won't need to be foreclosed.

Is that correct?

egads101 says

I find giving my excellent advice out for free, plus calling lots of people fucktards and nitwits on here quite cathartic;

Can't really do either during the day gig :-)

Isn't that the archetypical job description of a college instructor?