I'm obsessed. Someone has created an incredible little video of the inflation adjusted price of real estate (from Shiller's book).
http://www.youtube.com/watch?v=kUldGc06S3U
I'm having issues with youtube allowing posting to this blog, so pardon the link.
Hat tip to http://sandiegomarketmonitor.blogspot.com/
I'm afraid pretty much everyone I know will be getting to see this video. My favorite part? The coaster is turning the final corner (2006) and you look back to see the previous trend of real estate... Way down below. It leaves the viewer to question where the market is going in a way that normal graphs just don't drive home as effectively.
One thing I would like to change is to put the ground level at the median income. (e.g., hills and valleys). But I only critique as I'm so excited about this format of showing just how overpriced homes are today. Showing how prices bounce above and below real median income would be a great little additional tidbit.
Got popcorn?
Neil
Saturday, April 07, 2007
Thursday, April 05, 2007
Real estate emotions update
I like to do about a monthly update on my take of real estate emotions. Since foreclosure sales have been reported to be climbing in California, now seems to be a good time to post.
This is my last post on the real estate emotions topic:
http://recomments.blogspot.com/2007/02/record-home-price-slump.html
Let's see how things have changed (or not changed):
A review of investment emotions.
1. Optimism
2. Excitement
3. Thrill
4. Euphoria (market price peak) Peaked in late 2005/early 2006
5. Anxiety (I'm a long term investor, not a speculator.)
****6. Denial Reached in October of 2006 Current state persisting****
7. Fear We're not there yet, but in we'll cross that line within 45 days.
8. Desperation Predicted for July/August 2007
9. Panic
10 Capitulation Could it be summer 2008?
11 Despondency (start of market price bottom)
12 Depression (end of market price bottom) Not before summer 2010
13 Hope (hey, this investment has picked up off its bottom)
14 Relief (Its almost what I paid for it...)
15 Optimism (cycle starts again)
I am making one timeline changes since 2/15/07 post. After reading blogs on real estate time lines it now is obvious to me that the bottom will not hit before mid-2010. OK, I noted that the next step fear will be achieved by mid June. Otherwise, we seem to be right on track.
If you want a pretty bearish analysis of Irvine home prices:
http://www.irvinehousingblog.com/2007/04/02/how-bad-could-bad-get/
However, at those prices my grandmother would be buying three or four homes for her grand kids in OC. So I'm not thinking we'll dive that far or that long. Don't get me wrong, I really like the analysis IrvineRenter performed. I agree with the numbers up to October of 2008. There I disagree. I think late 2008 will be a little worse than IrvineRenter's prediction. But I think the bottom in 2010 will be up at about $330k.
Neat thing... We have 16+ months to discuss and change our minds. There is absolutely no rush. Its just a debate on when the optimal buying window will be.
I still think anyone who buys before Fall of 2008 is throwing away money. Only at that point will there be enough selection for it to be worth picking up a property; only one that is so special its worth leaving $100k+ on the table. (There are those properties.)
Also, because of tax advantages, I'm not going to fret about the last $50k of the drop. :) Remember, I place a higher utilization value on a home than most housing bears, so when the optimal buying window is for you might be different than for me.
That said, every investment bank seems be be predicting a moderate national price drop in 2007 and a bigger one in 2008. Since I have a down payment saved up and do not believe rates will go up much more... I'll wait until enough serial refinancers have handed back the keys to the bank to drive prices down. The tidbit that 75% of foreclosures are older "seasoned" purchases that had 3 to 5 equity withdrawls is.... interesting. Its going to open up a lot more inventory for us that are patient.
Step 10 will have the steepest price drop. Wait for that step to at least be well along.
Got popcorn?
Neil
This is my last post on the real estate emotions topic:
http://recomments.blogspot.com/2007/02/record-home-price-slump.html
Let's see how things have changed (or not changed):
A review of investment emotions.
1. Optimism
2. Excitement
3. Thrill
4. Euphoria (market price peak) Peaked in late 2005/early 2006
5. Anxiety (I'm a long term investor, not a speculator.)
****6. Denial Reached in October of 2006 Current state persisting****
7. Fear We're not there yet, but in we'll cross that line within 45 days.
8. Desperation Predicted for July/August 2007
9. Panic
10 Capitulation Could it be summer 2008?
11 Despondency (start of market price bottom)
12 Depression (end of market price bottom) Not before summer 2010
13 Hope (hey, this investment has picked up off its bottom)
14 Relief (Its almost what I paid for it...)
15 Optimism (cycle starts again)
I am making one timeline changes since 2/15/07 post. After reading blogs on real estate time lines it now is obvious to me that the bottom will not hit before mid-2010. OK, I noted that the next step fear will be achieved by mid June. Otherwise, we seem to be right on track.
If you want a pretty bearish analysis of Irvine home prices:
http://www.irvinehousingblog.com/2007/04/02/how-bad-could-bad-get/
However, at those prices my grandmother would be buying three or four homes for her grand kids in OC. So I'm not thinking we'll dive that far or that long. Don't get me wrong, I really like the analysis IrvineRenter performed. I agree with the numbers up to October of 2008. There I disagree. I think late 2008 will be a little worse than IrvineRenter's prediction. But I think the bottom in 2010 will be up at about $330k.
Neat thing... We have 16+ months to discuss and change our minds. There is absolutely no rush. Its just a debate on when the optimal buying window will be.
I still think anyone who buys before Fall of 2008 is throwing away money. Only at that point will there be enough selection for it to be worth picking up a property; only one that is so special its worth leaving $100k+ on the table. (There are those properties.)
Also, because of tax advantages, I'm not going to fret about the last $50k of the drop. :) Remember, I place a higher utilization value on a home than most housing bears, so when the optimal buying window is for you might be different than for me.
That said, every investment bank seems be be predicting a moderate national price drop in 2007 and a bigger one in 2008. Since I have a down payment saved up and do not believe rates will go up much more... I'll wait until enough serial refinancers have handed back the keys to the bank to drive prices down. The tidbit that 75% of foreclosures are older "seasoned" purchases that had 3 to 5 equity withdrawls is.... interesting. Its going to open up a lot more inventory for us that are patient.
Step 10 will have the steepest price drop. Wait for that step to at least be well along.
Got popcorn?
Neil
Wednesday, April 04, 2007
New Trend?
I'm seeing a new trend amoung those that retire from my company and I thought it was interesting. The trend is to send their kids out of state to where they can afford to buy (ok, not a new trend). But what is new is that families are coordinating their moves in such a way that multigenerational moves are being planned as a package!
Multiple of my coworkers were discussing this today. Its not something I had heard much about. Ok, I've heard of a son or daughter moving out of state and then parents following to see the grandkids a few years later. But this time, its part of a planned muti-household move all within 2007!
The pattern is all the same. The adult kids pick a city where they have good employment prospects; the soon to be grandparents anounce their retirement and buy a large property on the outskirts of that affordable city. In all cases the oldest generation is buying a nice size lot (say 5 acres) near a lake and so far invariably in horse country. Due to the huge California home sale windfalls, the grandparents make out like a bandit (offen $1M+) and are retiring 5 to 10 years earlier than plan. Ponnies are being bought (for grandkids) as well as boats, RV's, and other "toys" for the grandparents to spoil the grandkids with.
As best I can tell, this one of two reasons my company is being hit with a rash of early retirements. (Cashing out). Reason #2 is a pension change that is relatively minor but has freaked out some old timers.
Before, people were retiring where they felt like it and flying the grandkids to them. Again, its the multifamily coordinated moves that I find interesting and new. (Usually both sets of grandparents and siblings too!)
One move is 5 families together. (Two sets of grandparents and three sets of adult children all pursuing a higher standard of living. Its resulting in three homes for sale in California (one sold, one pending, one on the market) and five being purchased in the new location. One additional set of grandparents is on the fence, but will probably move in a year or two (if they can afford to then).
Another move is just two families with a sibling promising to move in the Fall.
Another case has the grandparent finally winning a battle to pressure the adult kids to move out of state (so they can stop subsidizing their adult kids). Both sets of grandparents are preparing their homes for sale to follow. Another sibling might or might not follow.
Are you seeing anything similar? Did I miss this last year? (It is the right season to begin hearing about this for school break moves.)
Got popcorn?
Neil
Multiple of my coworkers were discussing this today. Its not something I had heard much about. Ok, I've heard of a son or daughter moving out of state and then parents following to see the grandkids a few years later. But this time, its part of a planned muti-household move all within 2007!
The pattern is all the same. The adult kids pick a city where they have good employment prospects; the soon to be grandparents anounce their retirement and buy a large property on the outskirts of that affordable city. In all cases the oldest generation is buying a nice size lot (say 5 acres) near a lake and so far invariably in horse country. Due to the huge California home sale windfalls, the grandparents make out like a bandit (offen $1M+) and are retiring 5 to 10 years earlier than plan. Ponnies are being bought (for grandkids) as well as boats, RV's, and other "toys" for the grandparents to spoil the grandkids with.
As best I can tell, this one of two reasons my company is being hit with a rash of early retirements. (Cashing out). Reason #2 is a pension change that is relatively minor but has freaked out some old timers.
Before, people were retiring where they felt like it and flying the grandkids to them. Again, its the multifamily coordinated moves that I find interesting and new. (Usually both sets of grandparents and siblings too!)
One move is 5 families together. (Two sets of grandparents and three sets of adult children all pursuing a higher standard of living. Its resulting in three homes for sale in California (one sold, one pending, one on the market) and five being purchased in the new location. One additional set of grandparents is on the fence, but will probably move in a year or two (if they can afford to then).
Another move is just two families with a sibling promising to move in the Fall.
Another case has the grandparent finally winning a battle to pressure the adult kids to move out of state (so they can stop subsidizing their adult kids). Both sets of grandparents are preparing their homes for sale to follow. Another sibling might or might not follow.
Are you seeing anything similar? Did I miss this last year? (It is the right season to begin hearing about this for school break moves.)
Got popcorn?
Neil
Tuesday, April 03, 2007
U.S. Apartment Rents Increase 1% in quarter
The WSJ has a blurb that in the 1st quarter apartment rents went up 1%.
What caught my eye:
The numbers show apartment owners continue to benefit from weakness in the for-sale housing market, as would-be homebuyers wait out possible further declines in house prices. Sam Chandan, Reis's chief economist, says apartment owners will benefit even more as the tightening of subprime lending closes the door to many first-time homeowners who are currently renters.
Umm... yea. I'll be competing with people with poor credit. You sure people won't wait it out in new areas? Spare bedrooms in Mom and Dad's McMansion?
Also, let's see... that is about 5% inflation YOY assuming wages do well. What assumption do you make on wages? I'm not expecting much of a rent increase in 2008.
The article (requires subscription):
http://online.wsj.com/article/SB117565112287059207.html?mod=todays_us_marketplace
Got popcorn?
Neil
What caught my eye:
The numbers show apartment owners continue to benefit from weakness in the for-sale housing market, as would-be homebuyers wait out possible further declines in house prices. Sam Chandan, Reis's chief economist, says apartment owners will benefit even more as the tightening of subprime lending closes the door to many first-time homeowners who are currently renters.
Umm... yea. I'll be competing with people with poor credit. You sure people won't wait it out in new areas? Spare bedrooms in Mom and Dad's McMansion?
Also, let's see... that is about 5% inflation YOY assuming wages do well. What assumption do you make on wages? I'm not expecting much of a rent increase in 2008.
The article (requires subscription):
http://online.wsj.com/article/SB117565112287059207.html?mod=todays_us_marketplace
Got popcorn?
Neil
Sunday, April 01, 2007
Subprime effective shutdown?
"For all practical purposes, the subprime market is in the process of shutting down."
From:
http://biz.yahoo.com/ap/070402/economic_forecast.html?.v=2
About time! However, I know that like some sad B-flick monster, it will be back some day. :( Hopefully with some sane regulation.
Also from the same article:
However, the article is less bearish than I am. I'm expecting starts to hit a wall this summer. Not stop... But drop to the 1.0 to 1.2 million range.
As to mortgages, sub-prime always leads higher grades in defaults; we haven't seen the big wave of resets... yet. I'm not expecting much to happen with prices until June. But by then... everyone will know RE is correcting.
Got popcorn?
Neil
From:
http://biz.yahoo.com/ap/070402/economic_forecast.html?.v=2
About time! However, I know that like some sad B-flick monster, it will be back some day. :( Hopefully with some sane regulation.
Also from the same article:
Shulman expects housing starts to hit 1.33 million units this year, down from a previous forecast of 1.48 million units.
"For a housing market that has already witnessed housing starts decline by 36 percent, this is not good news," he wrote.
However, the article is less bearish than I am. I'm expecting starts to hit a wall this summer. Not stop... But drop to the 1.0 to 1.2 million range.
As to mortgages, sub-prime always leads higher grades in defaults; we haven't seen the big wave of resets... yet. I'm not expecting much to happen with prices until June. But by then... everyone will know RE is correcting.
Got popcorn?
Neil
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