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July 27, 2006

Housing Prices Stronger Than You Think

Toddi Gutner

I find it incredibly refreshing to read Michael Youngblood’s reports on housing prices in the U.S. Why? Because the managing director of asset-backed securities research at Friedman Billings Ramsey & Co. in Arlington, Va. isn’t as pessimistic as everyone else I interview.

Youngblood thinks residential real estate is a lot stronger than most people suspect. He bases his assessment on a new economic model he created that forecasts housing prices in 379 metropolitan areas (MSAs). I interviewed him back in early May when he first introduced his econometric model and he has recently re-estimated that model. The key points of his most recent report are:

• Housing prices will rise in each of the next four quarters, but by progressively slower rates year over year: 7.1% in 2Q 2006; 5.7% in 3Q 2006; 4.4% in 4Q 2006 and 3.5% in 1Q 2007.

• MSAs with fastest year-over-year gains in 1Q 2006 will continue to rise. Those cities include Phoenix, Az (34% expected rise in 1Q 2007) and Naples, Fla. (51% expected rise in 1Q 2007).

• California market will have continued rising house prices with a median year-over-year rate of 24.1% in 1Q 2007.

• Ten of the largest MSAs will continue to rises in housing prices: 17.5% in New York City; 26.7% in Los Angeles, Ca.; 4.9% in Chicago; 3.9% in Houston; and 4.8% in Atlanta, Ga.

• House prices will fall in increasingly numbers of MSAs: four in 2Q 2006; 10 in 3Q 2006; 28 in 4Q 2006 and 24 in 1Q 2007 where they should fall by a median of 1.3% year over year. Of those 24 MSAs, 17 are located in the rust belt, cotton belt and farm belt.

• Only five of the largest 100 MSAs (St Louis, Mo., Pittsburg, Columbia, SC, Little Rock, Charleston, SC) will see a fall in housing prices year over year in 1Q 2007.

• Only Honolulu, Ha. Which is experiencing a house price bubble, will see a fall in prices in 1Q 2007, whereas the other 73 MSAs with bubbles should rise by a median year-over-year rate of 19.6%.

12:27 PM

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Mr. Youngblood's numbers seem insane. +34% for Phoenix?

Posted by: GK at July 27, 2006 02:36 PM

I have run some of my own models based on history, complex mathmatical algorithims, tide and moon phases and processed it through the flux capacitor.

The result is clear, Micheal Youngblood is a crackhead.

Mrs. Gutner, if you find it "refreshing" then you probably got caught with your pants down and now can't dump your overpriced "investments".

No one in thier right mind would consider a continuance of this bubble "refreshing".

Posted by: Parithead at July 27, 2006 04:30 PM

I wonder what methodology he's using to calculate these figures. From everything I've read and seen over the past few months regarding the Southern California market (and based on what I have annecdotally seen for myself of the market here) I have no idea how anyone could predict YOY prices here will be up 27% in Los Angeles by early next year.

The way it's trending I'd be surprised to see any better than YOY prices up somewhere in the low single digits, if not in negative territory by then.

Posted by: mike at July 27, 2006 06:13 PM

Well, his model is already wrong. Only took one month to debunk this junk science of his.

Posted by: doh at July 27, 2006 07:43 PM

> I find it incredibly refreshing to read Michael Youngblood’s reports (...) isn’t as pessimistic as everyone else I interview.

Sure, everybody likes to escape from time to time into something rosier than today.

> Youngblood thinks residential real estate is a lot stronger than most people suspect. (...)

> MSAs with fastest year-over-year gains in 1Q 2006 will continue to rise. Those cities include Phoenix, Az (34% expected rise in 1Q 2007) and Naples, Fla. (51% expected rise in 1Q 2007).

And this with the current increase in inventory? Even the chance for any price increases at all is small - demand and supply, and more supply, and even more supply!

> California market will have continued rising house prices with a median year-over-year rate of 24.1% in 1Q 2007.

He should tell that the CAR economist who recently admitted a slowing in the market.

What I wonder about is the economic interest of Mr. Youngblood to talk house prices higher. What does he want to sell us?

Regards,

Peter

Posted by: Peter at July 28, 2006 03:09 AM

Maybe Toddi should go back to school and learn some basic economics.

Better yet, maybe she should go back to journalism school or learn from recent history. Interviewing the Managing Director of an asset backed securities firm who has a vested interest in the stability of asset backed securities like houses is akin to the dot-com days when analysts were giving rave reviews to stocks they owned. Of course he's bullish on housing. And it's not "refreshing", it's rediculous.

Housing inventory has been building and year over year sales have headed south because housing prices are out of sync with longer term fundamentals. Wages are stagnant, interest rates are going higher, risky home loans are resetting and disposable income is disappearing. Just as the pendulum swings, housing is moving in the reverse direction as evidenced by the 0.9% year over year gain in June.

Anyone who things that housing will meet the kind of gains shown in this article either has a vested interest, is lying to you, or in this case, both.

Housing is in the early stages of a reversal. All I see is positively spun stories on housing on this site. May Businessweek should consider hiring some reporters who can actually think on their own.

Posted by: Bill at July 28, 2006 05:40 AM

I find it hard to believe that Naples will grow 51% first quarter of '07. I'm sure all the specuvestors (flippers) will love this information. Hopefully they can hold out another 9 months for Youngblood's econometric model to play out!

Your article would have more credibility if you had explained Youngblood's "NEW" econometric model. I'd be curious to see how on earth he comes up with these astounding increases. I guess Americans will go deeper into debt to help with these increases. Certainly the only folks who can afford to buy a decent house in a market like that are realtors and mortgage brokers. I guess I better get my realtors license for the upcoming boom. Better to cash in than sit on the sidelines waiting for housing to come down. Thanks for the optimistic news. Think I'll go buy a few houses to flip while I'm at it!

Posted by: lizziebeth at July 28, 2006 10:48 AM

Since there is no info here about the specifics of his model, I can't refute his findings scientifically.

However, I can't help but think that calling for 51% YoY price appreciation in Naples for Q1 2007 is on par with calling for "Dow 32,000" in January 2000. It would be great if he is right, but if I could somehow 'short' this model i'd bet everything I have....

Posted by: Mike at July 28, 2006 03:46 PM

I am as much of a bull as anyone, especially in Orange County,Ca. Having said that, this guys model is just plain wrong. There is no way that RE anywhere is going to perform like he says over the next 4 quarters. I wish it would, but it won't. How does he get paid to come up with this stuff?

Posted by: Ken at July 29, 2006 06:51 PM

First, a general point. I think that this guy is purposefully trying to be contrarian. In the off chance that he ends up being right, he looks like a genius and is anointed the seer of the real estate industry. If he's wrong, then he'll surely have some covenient explanation for where his model when awry. Also, in the latter case, it's unlikely that Business Week will call him to task for his erroneous predictions (hi there Toddi.)

Second, a statistical point. These types of forecasting exercises are extremely difficult. There is a lot of underlying uncertainty as well as sampling error that can make any particular point estimate, or "best guess," extremely imprecise. Sure his model might yield a point forecast of +51% for Naples FL, but if it also generates a huge prediction interval of reasonable values, how much stock does one want to place in that forecast? He will not be exactly correct, there simply is no way, but how incorrect does his model suggest a guess of +51% for Naples might be?

This is actually more of a comment on way in which these forecasts are presented and reported. The analyst and popular press (hi there again, Toddi) tend to focus on the point estimates, that is the single number that the analyst's model generates. Arguably, this is a natural response to a complex situation. We don't like to think about uncertainty, and single values are easier to interpret than ranges. After all, as LBJ once said to an economist who gave him a reasonable range of values for some macro variable, "Ranges are for cattle, I want a number." This bias notwithstanding, I find it difficult to take anything that Youngblood says seriously without some information about the precision of his estimates.

Third, some modeling comments. I must caveat this by noting that it's difficult to know all of the fine details of his model, since they're not available beyond the point estimates. Nevertheless, some apparent features stand out.

First, he's using changes in employment and changes in income to predict changes in house values (presumably a regression in differenced logs.) To generate predictions for changes in house prices, he needs future values for employment and income (to generate the necessary changes in those variables.) Hence, if done correctly, he needs a model to predict his explanatory variables in order to generate a prediction of his final outcome. And the intermediate step of predicting those explanatory variables is not trivial. So we're piling levels of predictions, all of which may be incorrect, on top of one another to generate the final predicted outcome for housing price changes. This is a delicate house of cards.

Second, I assume that he has a panel dataset, i.e. observations of housing prices in multiple MSAs for multiple time periods. In such a data set, there are two sources of variation in the relationships between the variables that he considers: 1) variation in relationships across MSAs (cross-sectional variation); and 2) variation in relationships over time (time series variation.) In such a forecasting application, much of the important information comes from the time dimension. That is, we look at how prices and relationships have behaved over time within an MSA to examine how they may move into the future. If, and I really can't say since, again, I don't have access to his model or data, he is relying heavily on cross-MSA variation or doesn't have a long enough time series, then he's not pinning down the long-run nature of movements in housing prices.

A related point is the fact that, even accounting for the two main explanatory variables that he uses, there is a lot of unexplained noise in series like housing prices. Business cycles and transitory but persistent blips, not to mention bubbles, can occur in ways that are difficult to quantify. To do so, one must carefully model the movement of the unobservable factors. But in the process, it can be very difficult to detect inflection points, i.e. points at which the movement of the series has shifted in some unobservable way. This could be especially problematic in the event of something like a "burst bubble" - identifying and quantifying the implications of such an occurrence is one of the most difficult econometric problems imaginable.

I bring up these points, because reading through the description of his predictions, my suspicion is that he hasn't done a terribly good job accounting for these various issues. Why do I feel this way? Because his point predictions are simply too similar to recent behavior. Pittsburgh will stagnate while Florida and California will continue to rocket upwards? Why do I need his model to tell me this? Instead, I could apparently forecast based on last year's performance. This would seem to indicate that his model isn't sufficiently flexible, and it's not surprising that an inflexible model wouldn't pick up subtle (or not so subtle but difficult to quantify - honestly, what does a bubble look like and how do we know when it arises and bursts?) changes in the real estate landscape.

Admittedly, my own opinions about this bias my evaluation of his research. I cannot envision how anyone can look at recent behavior of housing prices in many markets, or correlations between those prices and various macro- and market-level variables, without concluding that something has gone seriously wacky in real estate. The long-run historical data simply do not support such a run-up. Perhaps I'm old-fashioned with my obsession with historical data. After all, "the world may have changed," as it was claimed to have done during the dotcom boom of the '90s, and passed me by. But historical data are the best information that we have about these types of things to figure out what might happen in the future. And my impression is that Youngblood's research is lacking on this front.

Posted by: Bubba at July 29, 2006 10:38 PM

I think it's more like you just HOPE he's right. All data points to the opposite of what he's claiming. It's a nice fantasy, but that's all it is.

Posted by: Anonymous at July 31, 2006 08:50 AM

We posted today on the actual numbers we're observing for markets in California, Toddi. I would love to hear if the data above is perhaps a typo or misinterpretation. Certainly for California as a whole, we'll see no where near 24% appreciation this year.

www.altosresearch.com/blog

Posted by: mike simonsen at July 31, 2006 05:18 PM

While I agree with him in general with housing increasing modestly, there is no way CA will be increasing 25% year over year in 2007. Who seriously can afford a mortgage on a 700k home? All those consumers who got their homes in ARM teaser rates will be in for a surprise.

Posted by: fl lender at August 1, 2006 01:44 AM

http://money.cnn.com/2006/07/26/real_estate/Florida_fading_markets/index.htm

Naples looks great. This article proves that prices will be up at least 50% in a year...

How could it be otherwise?

Posted by: Sveddy at August 1, 2006 03:05 AM

Home prices went up and home prices are going down. And they will go up again. Period, end of paragraph. That simple.

The only questions are how long and how will real estate fare versus other investments. No matter how diehard a Bubblist you are, at some point when you have the savings, income and precipitating need -- such as a first child on the way, you will think about buying a house.

At this point, you may convince yourself that cash is king and money under the mattress is better than buying a home. But then you will start looking at a home beyond its investment value. And at some point, you will househunt, make an offer and close.

U.S. population is about to hit 300 million and if you think we went from 200 to 300 quickly, just watch the speed with which we get to 400.

There is simply no way that real estate is not going up over the longterm. Smart money knows this. Despite all the Bubblists' wishes the market will plummet endlessly, at a point the sheer numbers of people buying in for non-investment reasons will once again make this a good investment.

Yes, it's perpetual Amway. But that works as long as population keeps rising.

What we are seeing now is a small slowdown in the cycle. The market is taking a breath. Once it catches its breath it will once agin be a happy hiker.

Think of it this way. The train is sitting at the station and not moving. It won't move until it fills up sufficiently with passengers. Right now there's time to go get something to eat, go to the bathroom and make a phonecall before the doors close. You can take your time. But at a point, the doors will close and the train will leave the station. If you have been dawdling, you may find yourself racing back to board only to see the red tail lights pulling out of the station. A most sickening feeling. Even queasier is that some of the most fervent Bubblists will be passengers. Just as their Hippy parents eventually succumbed to SubZero refrigerators, Viking Stoves and BMW's, your Bubblist buddies will sell out too. And if you remain too poor a Bubblist purist, you will be screwed.

Net, net - if not next Spring, the following Spring will be a massive opportunity to board the train.

Posted by: Long Islander at August 1, 2006 11:23 PM

Long Islander,

I do agree that we are in a brief breathing period. Some markets may even see shortlived and moderate decreases.

Your description of the long term outlook is spot on. More people, high land development and construction costs, and increasing scarcity of land in popular areas all point to increasing RE values virtually indefinitely. Complaining about these facts, complaining about immigration, and wishing for the good old days is not going to change a thing. Bottom line is that prices can be expected to increase in the long term.

Posted by: Ken at August 2, 2006 05:19 PM

Mike at altosresearch.com/blog,

Thanks for your comments and querries. In an effort to shorten the blog post, I may have inadvertently left out salient information. The exact wording in Youngblood's report is as follows:

"In the 28 MSAs in California, house prices should rise by a median year-over-year rate of 24.1% in 1Q07, whereas the had risen by a median year-over-year rate of 21.7% in 1Q06. However, house prices should not rise uniformly in the Golden State."

While you may still not agree, perhaps this paragraph can help clarify your confusion.

Posted by: Toddi Gutner at August 3, 2006 05:04 PM

Hey Long Islander,

I agree with you that in the long run, real estate appreciates in value. That is also true for the stock market. But did you have the same attitude in the early 2000's about the stock market? "Sure, in the long run, it'll keep going up." That's definitely true. But then again, as Keynes said "In the long run, we're all dead." How long is long enough to rationalize your thinking? 5 years? 10 years? 20 years? If you're really basing your predictions on "long run" behavior, things are so out of whack relative to the "long run" that a 20% correction wouldn't fix it.

What you're really doing is basing your evaluation of appreciation in real estate on recent behavior. If you look at the REAL long run behavior, real estate hasn't beat t-bills by very much (meaning it has barely outpaced inflation.) The last few years are an anomaly relative to that long run behavior. I wouldn't base my decision to buy real estate on such an anomaly or any anticipation that prices will continue to be so off the long run trend. But then maybe I'm chicken.... (but I also saved a 40% drop in value when I pulled out of the stock market in 1999.)

Posted by: Bubba at August 4, 2006 12:13 AM

complete rubbish. Housing is already crashing. stocks in real estate companies are reflective of this.

Posted by: john at August 4, 2006 09:29 AM

Do any of you live in Southwest Florida, probably not. Residential will go back up here, once the demand drops again. People here tend to panic when a pessimistic report comes and they try and dump as quick as possible so the supply goes crazy in-turn prices drop. People will realize here that once the supply drops again (in season) that it will stabilize and we will have an increase once again. I don't agree with astronomical numbers but 5% to 7% is reasonable. I am not looking to argue, just wait and see.

Posted by: Steve-O at August 4, 2006 11:16 AM

Well, I live in Tucson and an very familiar with both the Tucson and Phoenix markets. Both have seen nearly a 300% increase in inventory since last year (thats 4X what it was last summer), while demand has dropped. Both markets have seen a decrease in prices (about 3.5% in Tucson and about 6% in Phoenix through 2006). Builders are offering 50-100K rebates to buy their homes, and inventory continues to grow by the day. I can't see how that helps prices go up another 34% in 2006 (they still need to make up for the 6% loss through August). I just sold my house last month (thankfully) and according to my realtor, hundreds of listings are expiring each month and people are giving up trying to sell their house because no one will even set foot in it for the price they're asking (sadly, they can't drop any further).

I just don't see any rational reason for prices to go up except that speculators may really think it will and continue to push prices even farther above the fair market value (even if, the prices will still have to come back down at some point).

Posted by: Randy at August 6, 2006 04:51 AM

Steve-O,

southwest floridian here. Problem is steve, the demand will take years to catch up. Too many investors have been ruined by this. The word is out that real estate speculating is not the cash cow people thought it would be. The investors have learned a tough lesson. So, you may be waiting quite a bit longer than you think!

Posted by: lizziebeth at August 6, 2006 10:11 AM

Why does the concept of wages always elude the argument. Like many of you, I've spent 100+ hours of research on past booms to bust (mainly 1950-2006). There are a thousand arguements. However, at the end of the day, the simplist is also the easiest to grasp. When housing costs increase 50%-100%+, and wages only increase 4% per year, then there is a serious diconnect, even considering a 2% decrease in average interest rates (historical). Without the sanctioned pyramid scheme, prices would not have spiraled. Now, the bottom of the pyramid is no longer willing to pay $200k for the same appartment that could be rented for less.

The only way out of this mess is substantial wage inflation (the worst kind). In which no one gets rich since all goods increase. When the train leaves the station, it is easy to get on board since the real value of buying a ticket has decreased.

Frankly, substantial inflation right now would have a much more detrimental impact on the economy since it is the Boomers savings that would impacted the most.

Full Disclosure: I sold my house last Spring 2005, in Las Vegas for 160%. Used the money to buy puts and short on homebuilders and related. Currently rent at $1900 in Seatle, buy price would have generated a $3700 a month mortgage considering 20% down, 30 fixed, or $3300 after tax savings. This does not mention the opportunity cost of keeping $120k+ locked up in an asset that has more down side risk then upside potential.

Posted by: jim at August 7, 2006 08:22 PM

I have a property at pheonix. I wish Michael Youngblood’s idea were true, but I realized it is only a sweet dream or a delicious lie.

Posted by: lucy at August 8, 2006 12:22 AM

I didn't say investing will still be a real wise investment down here, I am saying that it won't take long before we equal out, (still thinking by the 1st quarter of 2007) For all of our sakes, I hope I am right.

We just have to wait and see.

Posted by: Steve-O at August 8, 2006 02:00 PM

I am not saying that it would be a wise decision to start investing in housing market down here. This area will always be hot. If you are looking to get rich it's not going to work anymore but, I don't think the price will continue to go down, eventually start increasing again. my prediction is 1st quarter of 2007. I hope I am right.

We can debate this all year long but, the only thing we can all do is sit and wait.

Posted by: Steve-O at August 8, 2006 03:39 PM

It is funny to watch the baby boomers try and redefine logic, all in the name of hoping the retirement fairy comes and bails them out.

Posted by: doh at August 8, 2006 08:25 PM

My point is that the investors have ruined the market for years to come. They are gone! They drove the housing prices up to the point that the average Joe won't want to or simply can't pay the prices that are being asked.

yes, it's a wonderful place to live, but unless you are a MULTI millionaire, it makes absolutely no sense! Do you read the papers? People are fleeing Southwest Florida! They can't afford to live there! Those that can sell and still make money, are moving out of state. Business owners like the owners of Two Senoritas in Sarasota are having to provide housing for their employees. They won't expand their business because they can't find workers. The young adults that usually work in these fields are either the children of very wealthy people therefore not willing to work or the children of folks who couldn't make it in Florida and have moved on.

It is a mess out there with no end in sight. Yes, maybe the millionaires will keep coming, but when crime goes up because the police force can't hire policemen, they'll half back it too! Lots of nice golf courses, beaches... in GA,SC and NC. As one realtor told me "It's as if someone turned off a switch". Guess why, the investors are GONE! They have left a glut of empty homes that nobody wants! They have ruined Florida!!!!!

Posted by: lizziebeth at August 9, 2006 10:15 AM

I'm sorry I made everyone angry.

Lehigh acres lots going for $20,000 to $50,000. It's still nice there. My wife and I just bought my 2nd piece of property there and plan on building our second house there, we are far from rich. We are self building and can build for way less than these fly by night builders. Anyway, I was just trying to have a good outlook. I wasn't trying to start a fight with anyone, my bad.

Posted by: Steve-O at August 9, 2006 10:40 AM

Lizziebeth, I LOVE Two Senioritas..Totally fab food. That said, it is important to remember Florida has 3% unemployment and one of the highest job creation percentages in the country. Pasco county alone surpassed their population estimates for 2010 by 2006. You have a thousand people moving here a day. Prices will rise again.The switch gonna be turned on shortly.

Posted by: pamela at August 9, 2006 01:17 PM

I have a good friend in Real Estate who explained to me the different ways Real Estate sales numbers are misleading.

He told me to simplify the analysis:

"Inventory levels will determine market direction. Building inventories = lower future prices."

One more thing, stop picking on Toddi. She might know nothing about finance, but look at that smile!

Posted by: Lama at August 11, 2006 12:14 PM

I have to agree with Steve-O, that the market will bounce back in 2007, at the end of July we have 3995 RESIDENTIAL listings in the Manatee MLS, this is fact!!!!!!! We have 9.2 months of inventory, which means if nothing else is listed it will take that long to sell your home, this is a FACT. Yes, it is indeed a lot of inventory, but in the past 3 weeks, 11 homes have gone under contract in and around my neighborhood, the buyers know the buys are out there now. An article in our paper last Wednesday, stated that the buyers are going to realize that they waited to long to buy, just like the sellers waited to long to list, and yes the investors have made a mess out of Florida. But, as far as people fleeing SW Florida and abandoning their homes and moving out, is a total lie. Come up with the facts, not just mouthing. I have never heard anyone doing that. Some of these posts prove that people have vivid imaginations, they act like Florida is going into the Gulf. Just wait until the northern States, get their heating bills this winter, they will be taking a SUPER JET, to Florida. All the people complaing about the market, they are the ones that usually can't qualify for a home, I have run across renters in the 13 years we have been here, and there answer is "we are renting, until we find someting, some people just have the RENTER MENTALITY. They will never own anything. JUST WAIT UNTIL 2007, THE BUYERS WILL BE HERE IN DROVES.

Posted by: Tricia at August 14, 2006 09:49 AM

The Florida Association of Realtors:

"Sales of existing single-family homes were down about 20% in February when compared to the same month a year ago -- and they were off as much as 47% in Naples."

From the Wall Street Journal:

"Homes that just last year were selling so rapidly that they stayed on the market for just days or even hours -- condominiums on the Florida coastline, desert haciendas in California and Arizona, town houses in Washington, D.C. -- are now languishing without buyers or even prospects. Many once-booming markets are seeing double-digit declines in sales."

Tricia, I love your enthusiasm, but you have to read the tea leaves. With mortgage rates likely to resume rising and the 2004 3/1 ARMs initial teaser rates expiring, I can't see a rosy 2007.

Posted by: Lama at August 14, 2006 07:39 PM

"JUST WAIT UNTIL 2007, THE BUYERS WILL BE HERE IN DROVES."

Hahaha. You don't really believe that, do you? They may return, but it will be around 2012.

Posted by: Anonymous at August 16, 2006 04:29 PM

As a bean counter, I am perplexed by the market's resiliency to date. With an increase from 5.70% to 6.76% for 30 year mortgage rates July 2005 to 2006, this means any payment will afford a house at 11% less for the latter period. If prices have held, that indicates an effective 11% price increase over last year.

If there is no repercussions from the 99% increase in 3/1 ARMs from 2002 to 2004, all should be fine on that front. That is to further assume, that most everyone who took out a 3/1 ARM is able to afford the continued increases, such as the 62% increase in 3/1 ARM rates from July 2003 (3.8%) to July 2006 (6.16%).

Also, can anyone explain how the GDP declining from 5.6% in Q1 to 2.5% in Q2 factors into Mr. Youngblood's secret formula? I'd be interested to know how this tanslates into continued growth in wages.

Posted by: Lama at August 21, 2006 03:46 PM

Can you call this guy and ask him about the last to existing home sales reports from the NAR. He needs to recheck his model, I think he forgot to carry a one or something.

Posted by: Cal at August 24, 2006 02:52 AM

"No matter how diehard a Bubblist you are, at some point when you have the savings, income and precipitating need -- such as a first child on the way, you will think about buying a house."

Well of course you will.

You'll also think about it if you don't have the savings, income and precipitating need. Any numbers available on what percentage of homes sold in the past few years were purchased by existing homeowners? ie: Down payment was funded by a very large profit?

This market is akin to a pyramid scheme.

Come up with all the terms, such as 'Bubblist' you'd like. Listen to the 'Experts' all you'd like. But truth be told, the party is over.

Hint: New Condo development in my Town with 120 units have sold ZERO units after 3 months on market.

Posted by: Gary at August 28, 2006 01:06 PM

"No matter how diehard a Bubblist you are, at some point when you have the savings, income and precipitating need -- such as a first child on the way, you will think about buying a house."

Well of course you will.

You'll also think about it if you don't have the savings, income and precipitating need. Any numbers available on what percentage of homes sold in the past few years were purchased by existing homeowners? ie: Down payment was funded by a very large profit?

This market is akin to a pyramid scheme.

Come up with all the terms, such as 'Bubblist' you'd like. Listen to the 'Experts' all you'd like. But truth be told, the party is over.

(Hint: New Condo development in my Town with 120 units have sold ZERO units after 3 months on market)

Posted by: Gary at August 28, 2006 01:13 PM

I went looking at homes in Reno yesterday. Sellers are getting more realistic, but still holding out for nice gains. I'm going to hurl in some offers next week reflective of where I see the bottom (i.e. 15-20% below today's value) and see if they bite. If not, I'm content to sit out for a couple more years. I studied California's last housing crash (1989-1996). It would have taken about 8-10 years to break even and cover your closing costs if you'd bought the year after the last big increase. Yes, housing will go up in the long run, but emphaisis is on the word looooong.

Posted by: Jason at October 7, 2006 02:36 PM

Funny how San Francisco and San Diego are mentioned regarding a bubble. Are people not realizing that Los Angeles will get hit hard?

Posted by: Grand Mesa at October 17, 2006 02:56 PM


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