I live in Seattle, and I can't count the number of stories in the local paper, and the number of times I've heard personally from people that, "it won't happen here." We're the last major metro area to continue to see appreciation, leading to further pronouncements that "it won't happen here."

I'm going to laugh at everyone who buys at the top of the market here in Seattle because they had ample example from other areas on what is going to happen to them.

arbogast: you are probably way off topic, but I can't resist to complete your post with the observation that China would be smart to "loan" Iran some nukes for self defense, and let that word filter out. That would stop any attack on Iran cold. US would screech and scream, but what could it do? Nothing.

"I can't tell you how many times I've heard "It won't happen here."

Just ask Sebastian and you'll hear that again:-)

All wars are inflationary if you want someone to blame for inflation look to our government spending and not the FED. Monetary policies are always a slave to fiscal policies.

James,

Second request.

GO AWAY! You add nothing here.

Not nice to laugh Kingrat, there will be a path of devastation. Youth simply has to learn from their own mistakes, and I suspect it will be youth that pays the biggest price.

I am not sure how you reach young people. For more than a year I was saying to my niece and and her husband that if they must buy a home to look for the top in the housing market and then wait 4 to 7 years after they see prices coming down to buy a place and to save their money in the meantime. I heard they bought a place this month. Do I congratulate them? I had sent them one of the best written documents on asset bubbles and credit risks and they are both university educated.

Salaries, pensions and benefits for Los Angeles city workers have soared in the past seven years, outstripping revenue growth and pushing the city toward a serious budget crisis, according to a Daily News study.

Since 2000, Los Angeles workers' costs have surged 53 percent - to $4 billion a year - rising an average 7.5 percent every year.

General fund revenues also grew strongly but only at an average 5.7 percent a year.

The result is a swing of almost $1 billion, pushing the city from a surplus to an anticipated shortfall of $300 million next year.

"It's almost like we're working for them; they aren't there to serve us. The situation has gotten badly out of whack," said Jack Kyser, chief economist for the nonprofit Los Angeles County Economic Development Corp.

City worker costs up 7.5% a year, but revenue up just 5.7% - LA Daily News

"It's almost like we're working for them"

Get use to it.

Yal,

You are a fairly typical spokesperson for Zionism.

It would be hard to match you aggression and anger.

It's a good thing Israel doesn't have nuclear weapons.

DataQuick says -15%? drhousingbubble says -40%.

I'm not sure I would call a 15% price decrease off of insane highs a price bust. Naturally the credit bubble popping will affect all markets but the IE (which includes San Bernardino County by the way) is still growing jobs and seems to have a lot more potential for growth than other neighboring counties like Orange and San Diego.

I think Husing knows the IE pretty well and I would agree with his view over any amateur economists.

How long was Dr. Husing in the opium den before he made his statement?

The lie is a systemic problem in American economy and it begins with economists who care more for popularity, or being liked, and business, e.g., keeping the job, than the truth.

I don't know if it begins with economists, but it certainly pays them well for "responsible" opinions. And, it will pay many others to "spin" "responsible" perspectives as well - from politicians to generals, from accountants to lawyers, from product design to marketing departments.

We could use another rating agency to assess most of what we are expected to buy into: you could call it the National Integrity Index. Though I imagine we would refer to it colloquially as the Truthiness indicator...

"My only point was that it is easier to comb Donald Trump's hair than to convince the average San Franciscan that RE can actually fall "in the city".

Why spend time trying to convince the average SF that RE may fall? You have no crysal ball, one cannot make financial decisions for other people, it is up to each person to find out what is their financial path.
Deborah, I agree with Tom Stone, My son in law, 27 years old, in April purchased a 700K townhouse in the Bay area, while I thought it was a stupid decision I keep my opinion to myself and sent along a nice house warming gift. As a little follow up he recently told me he wished he waited only because they have started to realize that it will be dificult to move to another area of the country quickly if they wanted to pull up stakes.

E-Trade: Everything is just fine. No need to panic.

Yahoo! 404 - Page Not Found

Mortgage fraud cases yield tough sentences
Man received 40 years in prison for his role in skimming scheme

"A lot of people got caught up in ongoing businesses that were improper," Barner said. "But bottom line: These high sentences in Harris County for white-collar crimes are outrageous."

404 Error, No such article | Chron.com - Houston Chronicle

It only white collar crime, you mean I gotta do time.

CR - thanks for all of the great analysis. Somehow, after 8 months of reading this blog daily, I have become the person all of my friend ask about housing questions here in Victoria, B.C. There is no question in my mind that we are in a bubble - housing up to 550K for the average price, around 500K for the median, with MSM predicting 600K in a year.

To me, this means that housing is running around 8 times family income and around 20 to 25 times rent for the same house. Of course the line is that everyone wants to move here, that it is a retirement destination, and that prices will never go down - ignoring the affordability issue.

So, my question for the group: is Victoria really different or will the bubble burst here (and elsewhere in Western Canada)? Personally I'm holding out and renting, even with a sizable downpayment ready.

If CR and Tanta wish to hold a 'Calculated Risk' gathering, Victoria would be a great place to meet!

Best to All,

So much depends on the veracity of that unemployment number...apparently. Apparently even for economists like Husing who don't distinguish between manufacturing jobs and whatever that BDM is replacing those lost jobs with. Possibly a rusty economist...possibly a bought economist (provoking responses like this) [which do you prefer --clunkerheads or Badheads?]
Interesting to note the "destination" cities and their insulation (so far) from price declines...the disparity of wealth pervades everything about this economy, yes?
And the appearance of political sentiments tells me that even here (in Neutral Land), the insulation is wearing thin.

Conjure Bag is welcome here, but we prefer the Sooke Harbour House to the Empress!

I can't tell you how many times I've heard "It won't happen here."

Whoo hoo ! You tell 'em CR. After more than 2 years of taking their abuse it's time for some payback. Rake the bodies over the coals. Hang, draw, and quarter 'em. Vengence hath ours !

There is a blog for every bubble. Try
Sorry. Page not found.

"Should I just bite the bullet and buy?'

Is your job totally secure? Your spouse's?
Is there any possibility you might move for a job opportunity in the forseeable future?
Do you have children? What age?

If you and/or your spouse's job is highly secure, you're locked into living in a particular area for good and you have kids that you want to secure a "good" school system, neighborhood enviroment then buying something now might not be the worst decision in the world.

I've lived in the same home for 20 years. My college kids recently remarked that they are the ONLY kids who have never moved. Speaking only statistically, chances are you'll move for one reason or another.

You also may move for unforseeable, uncontrollable, reasons. I had a couple of neighbors next to my first house who were nightmares. You never know what neighbors may be like or who might move in and disrupt your neighborhood or NEGATIVELY influence your kids, no?

The point is; unless you have a compelling reason to buy now or an incredibly comfortable, predictible and secure business future ahead of you, buying a FIRST house now makes little financial sense.

Someone mentioned above taking time to study the markets where you'd like to buy. I totally agree. You might even make extremely low ball offers ONLY on houses you really, really, like. A friend, back in 1990, got a great house after the owner came back to them THREE TIMES. The seller rejected his first offer, then called later to accept it....friend said the first offer was dead, new offer was 15% less. Seller rejected 2nd offer. Time passed. Seller called to accept 2nd offer....no deal...3rd offer was, again,15% less than 2nd offer. 3rd offer was soon accepted.

His patience was rewarded. His self-control was rewarded. Find places you really, really like. Bid way too low on them. Wait. The game is now musical chairs where you are one of only a few "chairs" available to quite a few more sellers. Think about what it must be like for a seller to have NO OFFERS AT ALL. Some sellers may be able to handle that pressure. I suggest that, as time passes, more and more won't be able to handle it.

Your job is simply to put a line out for those who are willing to discount their property enough to minimize YOUR future risk. Maybe you won't be as "lucky" as my friend (a CPA and successful CFO). Worst case; you'll learn a lot about negotiating while the market continues to decline.

True or False, be careful! Are there a lot of empty homes in your area? Would your house payment be somewhere in the ballpark of your rent payment? Do you have an Aunt Deborah?

"THOSE COMMENTS ABOVE ARE NOT MINE!!"

Banker

I believe that most people already realized that.

I am not ashamed to say that I would not buy a house right now if I received a direct dial from the Crab Nebula in my silver helmet.

Don't buy.

Of course, that's the kind of thing that feeds on itself, which is what the problem is going to be going forward. So if you don't hate America, only yourself, then buy.

“I would guess the #1 area of "it's different here" is San Francisco.”

I think SF is second to New York City for real estate hubris. My NYC friends think that the coop committees prevent speculators from causing a bubble. They think housing will continue to appreciate and it’s always better to buy than to rent. Never mind that the NY condo building boom, and the expansion of high priced properties into Harlem. But both places have plenty of company. How about “This is wine country, everybody wants to live here, and property values can’t go down.” Just Friday I heard that property values won’t drop in Alamo CA, and “Tracy CA is only off a few percent.” Then I hear from the Key West people that “this is the only tropical place in continental America, and property will continue to increase.” In short we live in a bubble of mass psychosis about real estate that seems to span America from sea to shining sea.

"Husing's econometric model is decades out of date. The IE (which includes only parts of San Bernardino)"

It includes all of San Bernardino my dear. Your comment further reinforces the lack of understanding about what's really going on in the IE. Sure there is going to be depreciation, lots of it it, but its mostly froth. The IE is losing contruction jobs like everywhere else, but it's the only county I'm aware of that is producing real job numbers otherwise. Manufacturing and service business are still coming in droves, especially in Ontario and Rancho Cucamonga.

By the way, I'm sorry if I used someone elses moniker... I wil call myself REBanker from now on...

In August 2007, the CA Employment
Development Department estimated that
the Inland Empire was up 51,300 jobs or 4.0%
from August 2006 (Exhibit 3). That represented
34.1% of the jobs created in California
(150,300). The data appear unusually strong
given the residential construction slowdown.
The region’s 6.1% unemployment rate was up
from 5.2% in August 2006. The area’s job
growth was almost five times the 10,500 added
in San Diego (8,800) and Orange (1,700)
counties

For those who think their markets safe due to the amount of appreciation don't discount the amount inventory.

Virginia Postrel: A tale of two townhouses |
News for Dallas, Texas | Dallas Morning News
| Opinion: Points

Note this was reprinted in the Atlantic as well

You're all caught up in the wrong quote. The key BS quote is this:

The underlying strength of our economy is too great.

Sound familiar? That's everyone's justification for why we won't have a recession.

p.s.: mp, the zero equity thing is what ultimately convinced me of the coming depression. It will happen.

"Husing's econometric model is decades out of date. The IE (which includes only parts of San Bernardino)"

It includes all of San Bernardino my dear. Your comment further reinforces the lack of understanding about what's really going on in the IE.

Condescending and inflammatory "my dear" notwithstanding it is you that needs a geography and geoeconomics refresher.

Here's almost an admission of what I'm talking about from the county itself:
County of San Bernardino > Maps
Even at that the residents of Wrightwood and Arrowhead and Big Bear would bristle at the prospect being called part of the Inland Empire.

As to my "understanding." I had sold the last of my non-personal use San Bernardino real estate by April 2006. How does that look in retrospect?

You note in support: The data appear unusually strong given the residential construction slowdown. The region’s 6.1% unemployment rate was up from 5.2% in August 2006. The area’s job growth was almost five times the 10,500 added in San Diego (8,800) and Orange (1,700) counties

CR has done an excellent job tracking this puzzling issue. If a robust economy as you describe it can result in one of the greatest median sales price reductions in modern history then as I originally stated; "Hussing's model is broken."

"CR has done an excellent job tracking this puzzling issue. If a robust economy as you describe it can result in one of the greatest median sales price reductions in modern history then as I originally stated; "Hussing's model is broken.""

Yes, because it has been preceded by the highest median increases in modern history.

Losing 10 to 25% of paper profit is not going to affect the economy when homeowners most still have 50 to 150% more equity than when they started. It will hurt individual persons who cashed out their equity for anything but an investment grade asset and cannot afford their payments.

I do not agree that a quarterly decrease in median price is automatically a "price bust". And it certainly does not change the fact that the area is still growing jobs and importing families and business.

REBanker: Losing 10 to 25% of paper profit is not going to affect the economy when homeowners most still have 50 to 150% more equity than when they started.

Most have 50-150% more equity? Wow, that's one sneaky statistic. Some have infinitely more having put nothing down. Leverage works wonders on the way up. What is important is that housing is priced on the margins. Your MoVal mid 80s vintage 3br/2.5ba doesn't have to sell for a new high or low for you not to follow that metric. With some hints of rationality returning to the lending markets the last 20% is no longer accessible for borrowing. Not that it matters, borrowing against equity is a zero sum game for our purpose here. Prices don't care about one's CLTV.

Without appreciation AND the expectation of forever rising prices the economy of the IE just doesn't work very well. The homebuilding boom had tremendous local multipliers that few other industries can match. You cannot expect all those auto dealerships to survive when they don't have 22yo with a recent paystub buying pickup trucks for work.