crewman

Housing Rebound: Why It Could Take 20 Years

There are two Californias....coastal and inland. For inland markets like the Central Valley and many Inland Empire locations, the "decades" prediction is probably correct. For coastal counties, it's more like 3-5 years. In the coastal counties, we are only building one home for every 10 people who'd like to buy one. In other words, as long as 10% of the CA population is doing well and making money - they'll have the means to buy a house. When we get to a point where 50% of the CA population is back doing well and making bonuses and commissions...then you'll have 5 people bidding on that one home that was built for them. When this happens (I think in 3-5 years) you'll get brisk appreciation again. Please don't take me for a RE bull, I'm actually bearish. But in coastal CA, you have to be realistic about the unique supply/demand forces here.

House Prices: Two Views

"Have we forgotten about the crisis so soon"

About the same amount of time it took for people to forget about 9/11....

House Prices: Two Views

The best advice for RE investors is to quit looking at national (and really regional) stats. Asking how much should housing cost is like asking how much should clothes cost. How do you answer that question unless you know the particular house in the particular location. National stats on foreclosures, jobs, or vacant homes in the U.S. will be near irrelevant to how much a home in Martha's Vineyard will be worth. To the extent one needs to generalize, the best advice I can give is that all pricing is gravitating to 2003 levels (when incomes and mortgage products were like they are today). In the lower end, prices have hit this 2003 level and in many instances have gone beyond (to 1999-2001 levels). This is where serious money can be made in the right locations. Be sure to avoid the super tertiary areas like Victorville in California. It will take a decade for this market to recover. You're best bet is locations just outside of the job centers (say less than 30 miles) In the mid-tier market, we're at 2004 pricing. If the economy/jobs picture doesn't improve in the location where you're looking to buy, then you've got another 5-10% downside to go. In many of the the luxury end markets - we're still at 2005 pricing. Again, this is the area where many will lose money thinking they can get an ocean-view home for cheap. It will get cheaper! Why... because the foundations that enabled the luxury market to skyrocket has completely gone away for awhile. There were SO many who really didn't belong in this space but got into it anyway because of easy money. These people still have decent bank accounts and are able to avoid foreclosure (unlike their brethren at the lower end). However, none of these guys thought the downturn would last this long. They're running out of money and will soon turn into distressed sellers. This market will likely continue to correct by 15-20% over the next 2-4 years.

No Housing Recovery Unless Residential Construction Spending Stops Falling

Isn't that like saying oil prices won't return to $140/barrel until we start drilling more oil. From my perspective, if you build more homes you increase supply. Increase supply will drive down pricing.

Options Arm Recasts: Hype or Not?

So would you be a buyer of land in Orange County right now?

What Will Prompt a Housing Recovery?

Phoenix - I agree.

The gov't just can't tell the truth. Not so much because they're devious. It's like a football coach who can't tell his players it's very unlikely they'll win the big game against a superior team. It may be true, but you can't speak the truth, deflate your players and give yourself absolutely NO Chance of winning. In fact, the coach, in an effort to boost his teams' confidence and morale often lies to his players. The coach tells his players that there's nothing to fear, they have a great plan, and if they execute the plan they should win the game.

Obama/government has a tough job in handling the economy. Like a coach, the govt has to be honest with the people to a point but not so honest that you deflate people's confidence and morale. Things are really bad out there and all banks are close to (if not already at) insolvency. For Obama, he has no choice but to hide critical data from us, pump money into the system and prop up asset values on the banks' balance sheets to give the appearance of solvency. I'm a free market guy but this is one case where if you let the free market forces do their thing, we're going to the Great Depression and fast.

Home Prices Up in a Dozen Cities

Bottom line...an increase in the median price does not equal a rise in your individual home's price. I'd like to hear just one example from the Good News Economist of someone who listed their home in 2008 and raised their price in 2009 (or who got more for their house now than what they would have received in 2008).

Home Prices Up in a Dozen Cities

These stats are accurate but highly misleading. The rise in median pricing means that prices are coming down and not up. Here's how...in the first stage of this down market, sellers of higher end homes priced their homes too high, and had the financial means to continue paying their mortgage while their home just sat on the market with no offers. As such, only the lower priced homes sold as those owners were either going through foreclosure or did not have the financial ability to hold on for very long. Now, the sellers in the higher tier markets are selling their homes, thus pushing up the median price of that area. The reason these high end homes are selling is because the owners are running out of money and having their come to Jesus moment...they're lowering their prices (by a lot). Therefore, decreasing prices in the high end is leading to stats showing a rise in median prices.

7 Reasons Why Housing Isn't a Good Investment Yet

Pricing is driven by supply-demand. The problem with the author's analysis is that he doesn't address the supply side of this equation. Most of the comments on this board usually site national statistics to claim we're oversupplied without taking into consideration that most of the oversupply is in outlying areas far from job centers. In core areas the oversupply is much less. Authors trying to give sound real estate advice (whether your bullish or bearish) need to provide facts and analysis (i) on both the supply and demand sides and (ii) on a local (not national) market.

When Will Housing Prices Return to Previous Highs?

It's hard for me not to dismiss your article out of hand because it deals with the macro U.S. housing market as a whole and doesn't focus on the micro market. As such, it has little relevance as to when "my local housing market" will recover. To be sure, we are way over supplied in the aggregate. But, most of the oversupply is in outlying areas where there was lots of land for builders to build on - those areas will take decades to recover their value. However, in core job centers, the over supply (and there is oversupply) is quite a bit less. In these core locations, excess inventory coupled with a lack of buildable land and higher incomes will allow these areas to recover much more quickly. If you're trying to forecast when markets will recover - you have base your analysis on the local picture and not use macro U.S. statistics.

Jumbo Mortgage Activity Increasing

T-bird - I respect your opinion and because you're semi-retired I admit that I'm semi-jealous of you. But from what you wrote, it seems your position is that there will be little to no economic opportunity for most of us for the next 10-15 years.

If we're about 2 years into this down-cycle and we have another 10-15 years to go - that's around 15 years of little to no economic opportunity. You say you're writing from experience (I don't know how old you are) - when was the last time in our history that our nation went for 15 years with little to no economic opportunity for folks. Even during the Great Depression there were many clever businesses that were created and thousands of families who made a fortune during that time. If you're position is that during '03-'06 any idiot could have made lots of money, and now idiots cannot make the same money - I agree. But guys who are sharp, hard working and creative will be able to do well and I don't think they'll have to wait 10-15 years to do so.

I'm a realist and my predictions are not very rosy. However, I am amazed at the level of pessimism on these message boards. My overall philosophy is that during the good times, it's really not as good as it seems; conversely, during the bad times, it's really not as bad as it seems.


On Jun 11 08:22 AM t-bird wrote:

> Crewman:
> You Stated:
>
> T-bird - don't underestimate the crewman's skills...I'm goooooood.
> I stand by my 3-6 year prediction.
>
> I do not hesitate to underestimate your skills and you are probably
> one of the "best". Even though your customer may want to buy from
> you, they may not be able to comply... What I do know is that demand
> for whatever you are selling will not return to levels seen from
> '03-06 for many, many years...I am writing from experience...No brag,
> just fact!!!

Jumbo Mortgage Activity Increasing

T-bird - don't underestimate the crewman's skills...I'm goooooood. I stand by my 3-6 year prediction.


On Jun 10 02:24 PM t-bird wrote:

> Crewman.
> I was a bonus and commission guy until '04 when I hung it up and
> semi-retired. You stated:
>
> "Well (no news flash here), we bonus and commission guys are gone
> for a while leaving only the relatively few high net worth folks
> to bid on all these multi-million dollar homes for sale. We bonus/commission
> guys will be back and God-willing will be making big incomes and
> buying expensive homes again - my guess is that this will take at
> least 3-6 years. So for all those with multi-million dollars homes
> - the big question will be whether all of you can hold onto your
> homes and continue to make the big mortgage payment until such time
> as us bonus guys get our big incomes back. If all of you can, then
> the pricing will hold up well; if many can't hold on, then prices
> will retreat to pre-2003 levels. Having been in the market and knowing
> how vulnerable so many owners are in that market, my guess is the
> later."
>
> I know you must feel the bonus boys will be back in 3-6 years. More
> likely, 10-15 years or longer. Demand for whatever you are hawking
> will not be there in sufficient quantity for many, many years to
> justify the incomes. I do agree with the balance of your reply though...

Jumbo Mortgage Activity Increasing

The jumbo market has been dead for nearly a year...you don't need much activity to get a bump of 32%. Three to five years ago, roughly 80% of the jumbo activity was from guys like me (i) making big bonuses and commissions from the easy money days and (ii) only needing to put down 10-20%. In other words, most of the sales at this level were not super high net worth people so to speak but people having temporarily high yearly incomes in the $500k-$3m range. In turn, this drove up sales and pricing (the avg home in my area was $1.8m in 2002 and now is $4m - there's 50 of these listed in my newport beach neighborhood alone at the $4m range). Well (no news flash here), we bonus and commission guys are gone for a while leaving only the relatively few high net worth folks to bid on all these multi-million dollar homes for sale. We bonus/commission guys will be back and God-willing will be making big incomes and buying expensive homes again - my guess is that this will take at least 3-6 years. So for all those with multi-million dollars homes - the big question will be whether all of you can hold onto your homes and continue to make the big mortgage payment until such time as us bonus guys get our big incomes back. If all of you can, then the pricing will hold up well; if many can't hold on, then prices will retreat to pre-2003 levels. Having been in the market and knowing how vulnerable so many owners are in that market, my guess is the later.

Why I'm Bullish on Homebuilders

Sean - your analysis is too simplistic (i.e. improvements in housing sector = increased home builder stock price). You need to go deeper with your research on public home builders. You'll discover that most shareholder equity is completely gone. With cratering land values, low sales, no bond market (for builders) and no debt market, most public builders have had to strike deals with hedge funds and private equity groups to get them through these tough times. These equity groups often require IRRs of 25% or more. When the housing market returns and home builders are making profit again, per agreements, the lion's share of these profits will go to these private equity groups and not to shareholder equity.

Housing in a Death Spiral, Taking the Mortgage Industry with It

Jeez - you guys need some yellow pills and fast! I'm finding the endless doomsday talk of the housing bears has many similarities with the endless prosperity talk of the housing bulls in 2005/2006. Both disregard the gravitational forces that pull markets back to their historical mean. Here the forces will be (i) medical advances and birth rates will keep population numbers trending up (ii) this population will need somewhere to live, (iii) they don't make any more land, (iv) frankly, they don't make any more homes either (construction starts are at an all time low), (v) if you look carefully, the dramatic supply of homes and foreclosures are mostly located in outlying areas where most prefer not to live - go to core areas and you'll see that the supply of homes/foreclosures is less than the natural average, (vi) sales are up in the core areas because demand/equilibrium is slowly being achieved. These forces will keep us from enduring the doomsday that the author and the commentators are forecasting. Homeownership is not dead, its evolving...and isn't that a good thing. More homes will be smaller and closer to core areas thus reducing our country's greenhouse emissions and dependence on oil.