The forecast is for a longer, deeper home-price slump

CNN Money Tell the World a little of what is happening.

I think its worth blogging when news is getting out to Joe Sixpack. However, this one, while quite bearish, is another one of those "it will turn around soon articles."

In a new survey, Moody's Economy.com says many metro areas will record losses of 20 percent or more during the downturn, with the national median price for single-family homes dropping 13 percent through early 2009. Factoring in discount offers from sellers, the actual price decline would be well over 15 percent.

Eighty of the 381 metro areas covered by the report will record double-digit losses, according to the report. Most of the worst-hit markets are in once high-flying areas, such as California and Florida.

The article goes on to describe how 'buying for investment' is adding to the flood of inventory. But what it doesn't go into is the change in the credit market.

On the housing bubble blog yesterday a poster was noting a radio add for a Jumbo loan on 'old school rules.'
1. 20% down
2. Required proof of 3 years of reserves (effectively another 20% down kept in the bank).

Wow! Its been since the 1970's since we've seen those rules. I was preparing for 30% down and some reserves. 40% (half down, half in reserves) would knock me out of the market for another year. A year where about two dozen people would qualify to buy in the big 'Jumbo Markets.'

I cannot think of anything that would knock down California or DC harder or faster than a return to strict Jumbo lending.

Enjoy your Christmas. January and February provide the best buyer's schadenfreude of the year. So ask that special someone for a popcorn popper! (Or, do it the 'old school' way, like I do, just on the stovetop in a pot.)

Got popcorn?
Neil

Oprah and real estate

No, Oprah hasn't done a show on the housing crisis. But when will she? My thoughts behind this are simple; many of the REIC blame the 'NEWS' for housings' woes. Now... what could up the tempo of the News? I think talk shows could change J6P's mind more than anything else.

Now... maybe I should say 'Joe six Pack' but rather 'Jane six Pack.' For whom really pushes the purchase decision? I believe it is the wife. So if we do start seeing episodes on the talk shoes on the sadness of the housing crisis... expect a big shift. The pressure to buy would... evaporate in but a few episodes.

Personally, I think its only a matter of when, not if, Oprah has a foreclosure show. However, the real impact will be when its time for a week long special on housing on Oprah. (Let's face it, she appeals to a HUGE demographic.) However, I'm bearish enough to expect this 'week long special' to occur quarterly. :(

Any predictions on when this will happen? I think spring of 2009.

Got popcorn?
Neil

U-haul index #3

This is my third U-haul index. We continue to see a trend indicating job flow out of California continues.

The last one:
The first one:

I look at the cost of a 26' truck picked up on a Saturday (12/22/2007).

Redondo Beach to Las Vegas: $397 Return: $186

90277 to Phoenix, Az: $692 Return: $179

90277 to Dallas Texas: $1440 Return: $436

90277 to Austin Texas: $1236 Return: $407 (Cost to Austin is WAY down)

90277 to Spokane, WA: $2996 Return:$498

Basically, the conclusions are the same.
1) We have job flow out of California. Texas seems to have job growth.
2) The u-haul dealers in Austin have their act together (finally). The cost to Austin is so much less than it was 8/15/2007.
3) I still cannot figure out the premium for Spokane. Anyone know what's up?
4) Don't forget, this isn't about population growth. Day laborers, students, and others whom have little to no possessions don't rent a u-haul, they pack up the car.

Heck, I bet more than a few SUV owners are taking everything with that 'toy trailer' and otherwise abandoning the furniture.

Anyone else waiting for United Van lines moving survey?

Here is the 2006 survey.

Will Washington DC still be high inbound? I expect its long record to be broken.
I was surprised to see California "low outbound" last year. Will it remain that way, or go back to being 'high outbound.' Oh well... last survey was 1/8/2007. It will probably be released on the 7th or 8th of 2008. So again, patience.

Got popcorn?
Neil

Predictions for 2008 home sales

Its almost the end of the year!

The NAR is estimating 5.67 million homes to be sold in 2007. What is your prediction for 2008?

Calculated risk had a convincing article that based on historical data, 3.0 Million homes would be a VERY deep recession.

WaMu in their little confession noted that they expect 40% fewer mortgages to be issued in 2008. 60% * 5.67 is 3.4 Million. Hmmmm.... But I'm an optimist... Not to mention it takes a while to really slide into a bad recession. So I'll bracket 3.5 Million to 4.0 Million home sales in 2008. Just for the fun of it, I'll predict two years out: 3.0 to 3.5 Million in 2009.

What's your prediction on price declines in 2008? Where I want to buy has dropped about 5%... Those that predicted where we are predicted a 5% to 10% decline in 2007 and a 8% to 20% decline in 2008. Since I think we're only avoiding the pain on a short term basis... I see a 15% to 20% drop in 2008. For 2009 I predict a 20% to 30% drop in home prices.

I'll add graphs and stuff to this article later. Consider it a 'stub' for now.

Got popcorn?
Neil

Blogger party 2

We had the dinner at the Il Fornaio in Old Town Pasadena last night and I call it a success. Eight fellow bearish bloggers showed up and we had a great night! No photos this time.

Discussions covered a variety of topics. TJ kept things going by bring a library of books to discuss. I was one of several who now have a bit of reading to catch up on.

One topic of the evening is other states and why they are getting hit so much harder than California. Its not that its different here, but rather why certain areas had a far more fragile bubble to pop.

Many of us discussed our buying criteria and when/where we might move to. This led to myself once again talking about aerospace job movements.

The topic of recession or depression once again came up. Basically we concluded that we could survive a depression and that certain parts of life should just go on.

Now it wouldn't have been a bearish dinner without talking about other 'non housing bubble people's' opinion on the current market. We all knew someone buying. We also all know people trying to sell. The consensus was wait. Some were already low balling (but having offers rejected). Others are far on the sidelines.

We all agreed this had years to run. How long? That wasn't agreed upon. But it was educational to discuss. As more than one at the table noted, one reason to have the conversation is to see the various sides to the conversation. :)

It was fun! I'll definitely do more dinners in 2008.

Got popcorn?
Neil