patrick.net

However, I am against a lot of people in this blog who knows only the extremes, always using words like “CRASH” as the only possible outcome.

...Because it is.....Think of the housing market as a giant rubberband and the more it is stretched, the higher the price. Think of the buyers as hands pulling on the band, but the strongest of the hands (those who use monopoly money) are losing their grip because they are finding it harder to get loans because of tighten of lending standards and higher rates....so they let go...and the weaker of the bunch are left pulling the band, but there is too much tension on it and they cannot hold it...some of them will let go (sell for whatever they can get) while others will try holding on, but as more and more hands let go, the harder it is to hold on. Eventually the band will spring back taking those who are left holding on with it!

As I’ve said before, in order for this housing bubble to collapse, an interconnected sequence of events must occur, converge, and result in massive foreclosures, and there is a huge difference between delinquencies and foreclosures, as the article clearly shows. All roads must lead to massive foreclosures.

Again, reflexivity. One will lead to another. All WILL converge.

The fact of the matter is that the credit market and lending practices for housing in this country have changed, that is obvious, and I believe it will never again be as it was.

Credit market changes according to the prevailing psychology of the market. It is itself a trend-follower and so it reinforces any trend. Be fearful when the trend changes direction!

I am NOT a fan of Soro's political views. But he has been a great speculator and market participants. His theory on reflexivity should be taken seriously.

Current high price/rent ratio is because of high expectation of future appreciation. When this psychology changes (it is changing already), the ratio will tend to mean-revert. Unless something will increase rent sharply, I cannot see how prices can remain high.

Actually, with the THOUSANDS of units being converted from apartments to condos one would likely expect rents to be increasing somewhat dramatically. Why does this NOT appear to be happening?

Because there is an excess supply of housing units.

Even though rates are still very low, many many people are going to face much higher mortgage payments in the near future.

Lower interest rate is making this an especially dangerous game.

Hey Girgl, you seem to think that there is a contradiction in my statements. Just want to let you know that I’m an engineer by trade and writing statements with contradictions is uncommon and goes against the very fabric of my being. You could reconcile the two statements by having the appreciation go flat…:)

The statement "I do not know what will happen in the future and I certainly do not believe that real estate will continue to appreciate non stop." is contradictory by itself.

Engineers tend to overestimate the validity of their logic. :)

@ Mr. Fuck_Up

You are totally correct, but for the wrong reasons, everyone with any money what-so-ever has moved to California, in fact California is now the center of all profitable industries, RE, manufacturing, banking, you name it. Fuck all those fucks that think just because housing is >70% overvalued by traditional measures in the Coastal regions such as Santa Barbara and SLO it will fall. They are just pussys. You greatly deserve the equity you have gained, I say take it out and buy another Hummer, you are clearly a fucking genius and are correct about the confluence very unlikely events that need to happen to cause a "crash". I say take out all your equity (if you haven't already done so :) ) and buy a couple of mid priced, say 600K, condos in SLO.

Well, the certainty of a “belief” and the knowledge of a fact are two separate issues. One deals with a faith on something that one believes to be true, the other deals with the truth.

Then perhaps you have chosen your belief (with "certainty") without adequate knowledge? :)

I was joking. I like you all right.

Belief

Many corporations make lots of money from that fat dude and his sleigh.

You mean there is no santa?

Felcher-X,

And a Merry F*cking Christmas to you, too.

It is getting hard to tell... are you guys all right?

how will your children ever be able to afford a house?

Ahh babies, the other, other, white meat.

Fake P writes:
Hey Girgl, you seem to think that there is a contradiction in my statements. Just want to let you know that I’m an engineer by trade and writing statements with contradictions is uncommon and goes against the very fabric of my being. You could reconcile the two statements by having the appreciation go flat…:)

Oh goody. A permanently high plateau. Then I can continue to save >$2,000 a month by renting, and I won't miss out on all the appreciation. It's a win-win situation.

About the question when rents will finally go up: Rents aren't as flexible as mortgage payments. Remember, it's money down the drain, so you can't fool yourself about "making it up in appreciation". You'll probably check whether you're *actually* able to afford the payment.
Also, as in any market, you need a supply problem for prices to rise. And I just can't see that around here, not even in the next few years, especially with all the folks leaving, and all the small-time RE tycoons getting squeezed.

Good to be back on RE talk after all the event planning traffic. :-)

Mr. Up says:
[For the bubble to burst, ...]All roads must lead to massive foreclosures. If any one of the required events (high interest rates, strangled liquidity, speculators dumping units, massive unemployment) can be averted,

You mean all four events (that happen to be interconnected by positive feedback loops) must happen at the same time for good clean burstage?
Never I say, NEVER.

Um, isn’t this the blog party thread? I thought all the RE talk was the traffic.

Yes, Any serious RE talk would be seriously off topic. :)

SQT says:
Um, isn’t this the blog party thread? I thought all the RE talk was the traffic.

Sorry about the off-topic drivel then :-)
Who can create threads?

DinOR --excellent post!

I have created a new thread from it: "Lagging Vs. Leading Implosion Indicators"

Also, has anyone sent an email to Patrick inviting him to the party?

I thought anyone reading here is invited. Since Patrick is special, perhaps we sould send him an e-mail.

how exactly do we find eachother since most of us don’t know what the other’s look like

Good question...

Massive foreclosures are not a requirement at all. Think of it like a margin call.

Massive foreclosures will first be the effect of the initial crash and then the cause for further collapse. Feedback loop.

SQT, according to weather.com, fog is possible on Saturday in Roseville. So let's wait and see.. I have sent you my cell phone number. (I will be in SF on Saturday morning so I will not be blogging.)

how exactly do we find eachother since most of us don’t know what the other’s look like?

Majita isn't a very big place, and I've met Peter and Jack already. Look for 3 guys discussing real estate?

Btw, what time did we settle on: 1:30...or 2?

Btw, what time did we settle on: 1:30…or 2?

1:30.

But Kurt, it is fine to be a little late. Don't rush. Drive safely.

SQT, you know what I look like...you can look for me, right?

If it's a small place, it shouldn't be too hard to find the other people in a largish group if you arrive late, or of we arrive early it's pretty easy to pick out the other person or people standing around looking confused about who they're supposed to be meeting.

Here is info about parking and directions for the ferry building tomorrow. It includes all the parking options and costs:

http://www.ferrybuildingmarketplace.com/html/visitor_info.html

Is KurtS going to kyack over with his wife? Or just take the ferry? LOL just kidding Kurt!

LOL...I'd love to, but the wind off the bay is freezing now! Ferry is more likely.

Here is info about parking and directions for the ferry building tomorrow. It includes all the parking options and costs

Btw, you may find better parking just a few block into the financial district, as the Ferry Blding/Embarcadero is clogged with holiday shoppers.

"Btw, you may find better parking just a few block into the financial district, as the Ferry Blding/Embarcadero is clogged with holiday shoppers."

Do you know any exact blocks that have parking? Because unless I know exactly where I'm going, I'll just be wandering around confused. I never drive in the city, and I'm parking-impaired.

I'm sorry you won't make it, SQT. :-(

I think I’m going to have to cry mercy and face the fact that I am not going to be able to make the party.

That's okay.

Do you know any exact blocks that have parking? Because unless I know exactly where I’m going, I’ll just be wandering around confused. I never drive in the city, and I’m parking-impaired.

Generally, that's true for me too, but this happens to be where my office is located.
From the Ferry building (Embarcadero rd), drive up Mission, take a left on Spear then a right on Howard. There's several lots on Howard and Main that have weekend rates, and of course--parking meters everywhere (possibly cheaper too).

Thank you, Kurt! I'll try to use one of those lots.

See you all tomorrow!

Saturday Dec 17 13:30 Ferry Building, SF

Use your instinct to find others. Once we have critical mass the group will be easy to spot. :)

I plan on coming. I will be the short guy with the very pregnant wife.

I plan on coming. I will be the short guy with the very pregnant wife.

Welcome, welcome, welcome. :) See you tomorrow... I mean today. :)

Saturday Dec 17 13:30 Ferry Building, SF

Btw, 13:30 means 1:30 pm on your standard Timex.

It was great meeting you all today, Peter P, Jack, Jamie and the lurker who's name I forget (Chris?) as well as Peter's wife. Sorry I could not stay longer, I had to leave just as the conversation got interesting.

Brokeback Mtn was outstanding by the way. They really did a good job of capturing what Wyoming is really like.

Hey SQT, we missed you. It was great meeting live blog people! Thank you to everyone who showed up and made it such a fun afternoon.

And we actually HAD a GOAT at the blog party. No, really! We did. Well...actually, he's a lurker who plans to post by the name billygoat. So now I guess I have to quit with all the goat jokes, eh?

Thanks for the movie recommendation Jimbo. I'll definitely check it out.

It was great meeting live blog people! Thank you to everyone who showed up and made it such a fun afternoon.

Yes--quite a lively discussion! It was almost like a...blog--but with real people!