I notice how we keep seeing downward revisions to past readings in many of the reports that keep coming out. I wonder how much these current statistics will be revised lower in the coming months? It's sad that the media just focusses on the headline number and there is never much nashing of teeth as to how innacurate past readings were.
The NAR is my favorite group of clowns. They always put a smile on my face with their crazy antics. Kind of like that skit where one clown is carrying a 2x4 and turning around to hit the other one in the head. LOL!!!! HARDY NAR NAR!!!
Sniglet:
Do you ever read the Cunning Realist? He used to mock Nereah(I think that was his name. The guy used to be head economist at NAR. Nereah was like Kevin Bacon at the end of Animal House.
Vikram:
Haven't you noticed a trend by now? What kind of model could they have if it doesn't come anywhere close to reality. I am convinced the just sprinkle some magical pony dust and go from there.
CR, I've only followed the forecasts for the last year or so. How have their forecasts been before that - during periods of increasing sales, during the period of the "subprime years" ? Were they anywhere close to real rates ?
Anti-Hispanic Americans should consider the possibility that Puerto Rico will determine the next President of the U.S.
Puerto Rico will hold the last primary, on June 7. They have 63 delegates. Unlike all other Democratic states, their process usually throws them all behind one candidate or the other.
If Hillary and Obama are close, Puerto Rico's 63 delegates could make the difference. Viva PR!
"Existing-Home Sales to Hold in Narrow Range, then Begin Upward Trend"... hahaha. I wonder if The Onion hacked their web site? Actually I suspect that it was The Onion behind this. If the NAR really wrote that press release, it would say something about the weather influencing the poor sales.
It's time for a challenge. The NAR wants credibility? Fine let them put their money where their mouth is. Let them pledge $1 for every house under their 5.35 million estimate for 2008 to Habitat for Humanity. Not good enough? Then maybe we can all pool our resources and make it a bet where we pledge $1 for every house over $5.35m and shame them into participating.
Clueless just like their Realtor members in the communities across America. They just can't understand why people would not buy at todays interest rates and low prices.
I told one new house Realtor that homes had another 30% to fall and her answer was the HB couldn't go that low. I told her the HB may not be able to but the banks can.
"I told one new house Realtor that homes had another 30% to fall and her answer was the HB couldn't go that low. I told her the HB may not be able to but the banks can."
I told my Realtor the same thing. She didn't like it very much. She is now starting to understand why I only want to look at foreclosures, etc. Private owners just can't get low enough to make it worth my time, even if its a short sale. We need another 30% haircut in the Sacramento area to bring prices and rents in line.
Darth,
My remote distance read on the Sacto market is that you need a 50% decrease in prices to bring renting in line with owning. Pretty much everyplace in California is renting at half the cost of owning.
You figure it's NAR that can get away with these forecasts or the negligence of the editors not to include their previous forcasts...so that there is some accountability?
Times a million with political commentary.
Recently overheard in a cafe in a large eastern Mass. university town: A frustrated realtor telling a colleague that a property listed at $2.7 million got a $2.1 million offer and the owners refused. They ended-up taking $1.9 mil. -- a year later. The realtor used this example to support his argument that his colleague needed to convince stubborn clients to be more realistic about the value of their property. The NAR may be sanguine, but there is growing unrest in their rank-and-file.
I notice that the NAR forecasts have been about as accurate as the forecast by those in the business of buying stocks (usually with other people's money).
How much do you need to pay a realtor for a house you don't buy? About the same amount you pay a broker/advisor for investments you don't make.
The only people saying cash is King are those not in the business to profit from those who purchase equities.
I think that MSM should put up the accuracy percentage of previous NAR calls, similar to a batting average for BB players. At least they should be able to be sued. There should be some financial incentive to be accurate..there certainly is one to be innaccurate.
So here are some choice quotes from Yun: "...when the full impact of higher loan limits for conventional mortgages begins to impact the market there is likely to be a notable rise in home sales and prices."
Translation: "lower interest will juice sales."
Were seeing a pattern that is consistent with skimming along the bottom of the cycle, and sales could ease modestly.
Translation: "We've bottomed!, but it's not the bottom, bottom, just an almost bottom. I hesitate to call the bottom a little bit because, well, I know I'm going to have to do it again next month."
"...in most areas with improving affordability conditions, well generally see moderately higher home prices,
Translation: "No really, in all those places where wages are rising, housing prices will rise, I don't want to talk about the other way affordability improves because that makes my employer sad.
One last thing, I hate to ask CR, but would it be possible to chart the NAR prediction against reality this year?
I realize the seasonal adjustment would be a bit of a complication, but the call is for 446K (NSA) sales per month. I don't think we hit that number in 9 of the 12 months, and considering how bad some data points are, if you exclude the foreclosures that are counted as sales, it might not happen all year.
Sacto area renter here. I'm in that weird grey area now of having to make a decision in the next few months about purchase timing. Do I jump in in the next six months or wait for a possible second-leg down? If there is a second-leg down, that will be where the significant haircut is discounted. I figure tracking inventory numbers and macro-economoy recovery leading indicators may be the best bet. Thoughts?
"My remote distance read on the Sacto market is that you need a 50% decrease in prices to bring renting in line with owning. Pretty much everyplace in California is renting at half the cost of owning."
Absolutely. We still have a bifurcated market, with cash buyers at the high end who don't give a crap about price for the right property. (One ocean-front property in my town, bought in 05 for $1.9 mill, just sold for about $3 mill).
But the vast majority of us, and the vast majority of properties, don't fall into those categories. Prices in Santa Cruz have to fall at least 50 percent to be economically viable. Sacramento and the Central Valley are leading the way on repricing, but I can't see why the coastal areas won't follow eventually. Although eventually may be a while, and would probably follow an economic slowdown that hits high tech, the valley, and e-commerce.
DamonDidIt,
Thoughts only, not advice. I wouldn't even poke my head out of the bunker until Q3. at that time you can look around and decide if the bottom is in sight. I just don't see how you'd miss anything good in the next 6-8 months. You can't call the absolute bottom but Darth & I were talking about the rent v own disparity. That you can call.
Now for advice, just not the financial kind. You have a great opportunity to test drive neighborhoods. For the last few years there just weren't any renting opportunities in some neighborhoods. Take advantage.
The NAR may be sanguine, but there is growing unrest in their rank-and-file.
Even NAR Clowns have to eat once in a while...
BTW if I was one of those 'clueless' sellers and I didn't have to sell & liked where I was (say I was just 'fishing')... I wouldn't cut either. What is the rush?
The single most important thing a realtor needs to do in this market is determine the urgency of the seller - if it isn't there then don't sign the dude no matter how nice the listing - isn't worth the effort. It is a complete opposite from the boom where the challenge was to determine how insanely desperate the BUYER was.
Selling of this type is 99% psychology and 1% offering.
I think the NAR is actually too bearish on sales projections.
Lenders have been stubborn about cutting asking prices. They will at some point later this year get religion on pricing their REOs to SELL and that should move the needle materially, and Y/Y comparison points are weak, so bears should expect pretty big moves higher in sales, probably in the second half. That should fuel a false HB rally, since their problem is REOs will pull from new home sales figures.
damondidit asked: "Sacto area renter here. I'm in that weird grey area now of having to make a decision in the next few months about purchase timing. Do I jump in in the next six months or wait for a possible second-leg down?..."
You might want to look at affordability numbers here:
"And jobless claims are up more than expected. Recession here, no doubt."
While no doubt we are in recession and heading into the mother of all depressions it is somewhat odd that on a day when the dollar is very strong (odd in and of itself), copper is breaking out to 3 month highs. Perhaps people are just taking delivery of 25,000 lb lots from the comex and putting it in the basement for safe keeping because gold has gotten so expensive.
energyecon, I haven't compiled the cancellation rates from the various companies yet. The rates vary significantly by company mostly because they have different downpayment policies - so I average across several companies. For the companies I've looked at so for, cancellation rates are about the same as last quarter (near record highs), but not rising.
Their reasoning is that if they convince the buying public that prices won't go down anymore, people will buy now instead of waiting for prices to drop more. They don't realize that the problem isn't that they don't want to buy; The problem is they can't afford to buy.
The smarter move would be to make it look like prices are going to drop a lot and keep dropping so sellers will quickly lower their prices. Once the prices become affordable, people will buy.
david_in_ct posted: "And jobless claims are up more than expected. Recession here, no doubt."
Job creation always slows down when the economy is at full employment (because the economy is at full employment), so this may or may not be a bearish development.
No doubt this point is too subtle and will be wasted, but you don't give up just because the fight is hard.
Mr. Wright Model B -
The yield curve started telling us trouble was coming in 2006.
In the past 80 years we've only had a few years in which the yield curve inverted:
1927-1930 (depression began in 1929)
1959 (recession began in 1960)
1966-1970 (recession began in 1969)
1973-1974 (recession began in 1973)
1979-1981 (recessions began in 1980 and 1981)
2000 (recession began in 2001)
2006-2007
Data looks pretty compelling to me.
On average an inverted yield curve gives us about 15 months advance notice that a recession is coming. That would imply a recession in Q1 2008. Based upon what I've seen in our businesses I think it started in December 2007.
Also, in the past 80 years we've never had the yield curve invert and a recession not follow within less than 3 years.
I dont know what you do for a living, but I can tell you that I'm involved across a variety of businesses. Most saw things slow pretty significantly in December - a trend which has continued in January - and ALL are planning cutbacks on hiring/headcount and capital expenditures. Not one has mentioned Wright Model B....
I've seen some data long ago (perhaps it was here or on Mish's site) when the yield curve first inverted.
Some of the wise posters at the time correlated the recessions NOT to the initial inversion, but to when the curve re-steepened. (such as what has recently started happening).
it's just a distant recollection, perhaps CR has more insight?
We still have people saying that we're not in the midst of a recession. By the accepted definition of "recession", that's probably true (if you trust the numbers, and if you do, you shouldn't). OTOH, we're in something, and it is at least as bad as, if not worse than, a recession.
Do we need a new name for the malaise we find ourselves in?
My nomination: We are in a period of economic regression.
When you've been living in a feel-good fantasy world, reality is a bummer.
"Job creation always slows down when the economy is at full employment..."
Full employment? Only if you include all the 20-hour-a-week job with no benes. I remember full employment from periods in the '80s and the '90s. It didn't feel like this.
We just had an opening for an admin. assistant. job in my university office; crappy pay, but good benes. We got 100 strong applicants.
Something to note: jobs at the university are in demand because you can qualify for medical for the family in a half-time job, of which there are plenty even here. A lot of people take these crappy-pay half-time jobs so their non-insured or self-employed spouses can get it. We have a lot of employees who are the spouses of contractors, self-employed programmers, self-employed tradesment, and so on.
In other words, our uni is a de facto health care provider for uninsured professionals. The "new economy" has played out in very interesting ways, hasn't it?
So I guess a 10 step program wasn't enought for S&P --- "S&P ANNOUNCES NEW ACTIONS TO ENHANCE INDEPENDENCE, STRENGTHEN
THE RATINGS PROCESS, AND INCREASE TRANSPARENCY TO BETTER SERVE
GLOBAL MARKETS
damondidit, I'm with Rob Dawg on this. I've started the process of looking around only, but I'm still basically in the bunker. I've floated out a couple of extreme low-ball offers on foreclosures and have been countered high by the banks so I let the deals drop. I wanted to see if banks are at capitulation point yet, and they basically aren't from what I can tell. I will repeat this test every once in a while to determine banking attitudes. Also, there is a hell of a lot of shadow inventory out there that has a NOD or is in some kind of a pre-foreclosure state that isn't on the MLS, much more than is actually on the MLS if you can believe that!
You really have to do as Rob said and perform a rent/mortgage evaluation using a 30 year fixed standard mortgage with 20% down. That should be roughly the same price as rents. If not, the price is still too high.
The problem with using the above metric is if the recession really starts kicking in, then rents will go lower too! Then you've literally got a moving target where the fundamental value of RE keeps dropping along with prices. This makes it very difficult to call the bottom.
The NAR is like any other organization; those who are hired for the top-echelon jobs are always relentlessly and aggresively positive and optimistic, regardless of circumstance or the issue at hand. This applies to internal organization matters and external tasks. All companies say they want to hire independent thinkers who can form their own opinions based on facts, and that's one of the biggest lies in the books. The vast, vast majority of organizations want sunny sycophants and smiling asskissers as employees; anyone who dares to offer a contrarian view, however well supported by facts, will eventually be let go. David Yun knows this; his unwritten job description is to always spin the news in as positive a light as possible. If he presented an interpretation of the situation that was more in line with CR, say, or Mish, he'd be out of a job in 24 hours.
And I think there's no chance that the NAR will ever encourage dropping prices, either. With RE agents' income determined by sale price, most will fight reducing prices until the alternative is starvation.
"In other words, our uni is a de facto health care provider for uninsured professionals. The "new economy" has played out in very interesting ways, hasn't it?"
It is unusual in the circumstance but it makes complete economic sense. Given that good family coverage in my neck of the woods is around 18k a year, thats a lot of tax free income to as a bonus to your workers. If we had a real free market in medicine a lot of this stuff would not exist. It is likely we would have more individual 'horror' stories but in the aggregate care would be better and cheaper. c'est la vie.
And I think there's no chance that the NAR will ever encourage dropping prices, either. With RE agents' income determined by sale price, most will fight reducing prices until the alternative is starvation.
I'm not sure about this.
the RE agents need SALES. keeping prices high but with low volume is no good for the run of the mill RE agent. It means they have to put a lot of time and $$ into their listings.
better to bring prices down and increase volume.
the trick: they need to talk sellers down from their initial asking prices, without scaring prospective buyers out of buying.
the other trick: there is obviously a massive over-capacity in RE right now. Depending on region, there are probably 20-50% too many realtors...
many will lose their jobs. Not sure if they will get counted in the "unemployed" numbers or not...
I just can't decide whether to believe Sebastian and the Wright Model B, or the "recipient of the 2006 Lawrence R. Klein Award for Blue Chip Forecasting Accuracy".
The Wright Model B is parked in a small hanger at a General Aviation Airport in Springboro Ohio (might be Miamisburg, its on the border of the two towns). The Model A is at the Smithsonian in Washington DC.
Dirk, I had no idea of how well-traveled and worldly you were...anyone who shows their chops about the birthplace/cradle of aviation (ridiculous north carolina license plate logos notwithstanding) probably spends a lot of time on planes...
Clyde,
I lived in Springboro for about 10 years and my kids still do (Go Panthers). Travel back and forth to there from Chicago every other weekend, own a cheap house in Dayton as my base there (and Dayton is one market where the increase in conforming limits will not make a difference, got the place in 04 for $68k, 3/4 bed 2.5 bath classic old house).
Show me a 30 year fixed @ 3.75 or 4% and i will do my part for the economy...otherwise I am all set.
I notice how we keep seeing downward revisions to past readings in many of the reports that keep coming out. I wonder how much these current statistics will be revised lower in the coming months? It's sad that the media just focusses on the headline number and there is never much nashing of teeth as to how innacurate past readings were.
How does NAR come up with forecasts ? They must have some model or reasoning by which they present numbers - or is that assumption not true ?
Well, one day the NAR will be right. Just like us bears.
The NAR is my favorite group of clowns. They always put a smile on my face with their crazy antics. Kind of like that skit where one clown is carrying a 2x4 and turning around to hit the other one in the head. LOL!!!! HARDY NAR NAR!!!
Shorter NAR: New homes and ponies for everyone!
Sniglet:
Do you ever read the Cunning Realist? He used to mock Nereah(I think that was his name. The guy used to be head economist at NAR. Nereah was like Kevin Bacon at the end of Animal House.
Vikram, I don't know. It seems like they just take the current sales rate and always forecast higher sales in the future.
Best Wishes.
Vikram:
Haven't you noticed a trend by now? What kind of model could they have if it doesn't come anywhere close to reality. I am convinced the just sprinkle some magical pony dust and go from there.
Like the Simpson's take on Huell Howser: "I give this year my lowest rating ever! An eight out of ten!"
It should read:
I am convinced they sprinkle
Until they stop saying that the recovery is just around the corner, the recovery won't be just around the corner.
I think they use a Wright Model "B".
Good one Gary.
Does Sebastian work for the NAR?
The aggregate existing-home price should decline 1.2 percent in 2008
Is this like the second revision for the year?
CR, I've only followed the forecasts for the last year or so. How have their forecasts been before that - during periods of increasing sales, during the period of the "subprime years" ? Were they anywhere close to real rates ?
Regards,
I wonder if Lawrence Yun is actually Bagdad Bob?
OT
Anti-Hispanic Americans should consider the possibility that Puerto Rico will determine the next President of the U.S.
Puerto Rico will hold the last primary, on June 7. They have 63 delegates. Unlike all other Democratic states, their process usually throws them all behind one candidate or the other.
If Hillary and Obama are close, Puerto Rico's 63 delegates could make the difference. Viva PR!
awgee:
I don't. In hindsight, Baghdad Bob told the truth.
"Existing-Home Sales to Hold in Narrow Range, then Begin Upward Trend"... hahaha. I wonder if The Onion hacked their web site? Actually I suspect that it was The Onion behind this. If the NAR really wrote that press release, it would say something about the weather influencing the poor sales.
Subprime executive gives up mortgages for yacht sales. (btw, my money's on "zeroes"):
Got yacht? Mortgage magnate dips into new venture | hsieh, says, lendingtree - Life - The Orange County Register
It's time for a challenge. The NAR wants credibility? Fine let them put their money where their mouth is. Let them pledge $1 for every house under their 5.35 million estimate for 2008 to Habitat for Humanity. Not good enough? Then maybe we can all pool our resources and make it a bet where we pledge $1 for every house over $5.35m and shame them into participating.
Magical Pony Dust $1,000,000,000
Item Not Found
Clueless just like their Realtor members in the communities across America. They just can't understand why people would not buy at todays interest rates and low prices.
I told one new house Realtor that homes had another 30% to fall and her answer was the HB couldn't go that low. I told her the HB may not be able to but the banks can.
"I told one new house Realtor that homes had another 30% to fall and her answer was the HB couldn't go that low. I told her the HB may not be able to but the banks can."
I told my Realtor the same thing. She didn't like it very much. She is now starting to understand why I only want to look at foreclosures, etc. Private owners just can't get low enough to make it worth my time, even if its a short sale. We need another 30% haircut in the Sacramento area to bring prices and rents in line.
Darth,
My remote distance read on the Sacto market is that you need a 50% decrease in prices to bring renting in line with owning. Pretty much everyplace in California is renting at half the cost of owning.
The recovery is always just around the corner!
CR
Just like the Vista rally(that became the 2nd half Vista rally) that was always supposed to save tech.
You figure it's NAR that can get away with these forecasts or the negligence of the editors not to include their previous forcasts...so that there is some accountability?
Times a million with political commentary.
And jobless claims are up more than expected. Recession here, no doubt.
Recently overheard in a cafe in a large eastern Mass. university town: A frustrated realtor telling a colleague that a property listed at $2.7 million got a $2.1 million offer and the owners refused. They ended-up taking $1.9 mil. -- a year later. The realtor used this example to support his argument that his colleague needed to convince stubborn clients to be more realistic about the value of their property. The NAR may be sanguine, but there is growing unrest in their rank-and-file.
mp - are you and conjure still in NYC? I hear conjure's cash is 'sound as a pound' now in the big apple.
I notice that the NAR forecasts have been about as accurate as the forecast by those in the business of buying stocks (usually with other people's money).
How much do you need to pay a realtor for a house you don't buy? About the same amount you pay a broker/advisor for investments you don't make.
The only people saying cash is King are those not in the business to profit from those who purchase equities.
I think that MSM should put up the accuracy percentage of previous NAR calls, similar to a batting average for BB players. At least they should be able to be sued. There should be some financial incentive to be accurate..there certainly is one to be innaccurate.
CR,
Any projections on what cancellation rates are like these days?
So here are some choice quotes from Yun:
"...when the full impact of higher loan limits for conventional mortgages begins to impact the market there is likely to be a notable rise in home sales and prices."
Translation: "lower interest will juice sales."
Were seeing a pattern that is consistent with skimming along the bottom of the cycle, and sales could ease modestly.
Translation: "We've bottomed!, but it's not the bottom, bottom, just an almost bottom. I hesitate to call the bottom a little bit because, well, I know I'm going to have to do it again next month."
"...in most areas with improving affordability conditions, well generally see moderately higher home prices,
Translation: "No really, in all those places where wages are rising, housing prices will rise, I don't want to talk about the other way affordability improves because that makes my employer sad.
One last thing, I hate to ask CR, but would it be possible to chart the NAR prediction against reality this year?
I realize the seasonal adjustment would be a bit of a complication, but the call is for 446K (NSA) sales per month. I don't think we hit that number in 9 of the 12 months, and considering how bad some data points are, if you exclude the foreclosures that are counted as sales, it might not happen all year.
Oh, I like the batting average idea. Baseball cards for finance, that could be big.
Anonymous said: "Good one Gary.
Does Sebastian work for the NAR?"
Yeah, pretty clever, you two.
Except that the yield-curve doesn't forecast housing.
Meanwhile, what it does (or doesn't, in this case) forecast is recession--which we still don't have.
S.
Rob Dawg and Darth,
Sacto area renter here. I'm in that weird grey area now of having to make a decision in the next few months about purchase timing. Do I jump in in the next six months or wait for a possible second-leg down? If there is a second-leg down, that will be where the significant haircut is discounted. I figure tracking inventory numbers and macro-economoy recovery leading indicators may be the best bet. Thoughts?
"My remote distance read on the Sacto market is that you need a 50% decrease in prices to bring renting in line with owning. Pretty much everyplace in California is renting at half the cost of owning."
Absolutely. We still have a bifurcated market, with cash buyers at the high end who don't give a crap about price for the right property. (One ocean-front property in my town, bought in 05 for $1.9 mill, just sold for about $3 mill).
But the vast majority of us, and the vast majority of properties, don't fall into those categories. Prices in Santa Cruz have to fall at least 50 percent to be economically viable. Sacramento and the Central Valley are leading the way on repricing, but I can't see why the coastal areas won't follow eventually. Although eventually may be a while, and would probably follow an economic slowdown that hits high tech, the valley, and e-commerce.
DamonDidIt,
Thoughts only, not advice. I wouldn't even poke my head out of the bunker until Q3. at that time you can look around and decide if the bottom is in sight. I just don't see how you'd miss anything good in the next 6-8 months. You can't call the absolute bottom but Darth & I were talking about the rent v own disparity. That you can call.
Now for advice, just not the financial kind. You have a great opportunity to test drive neighborhoods. For the last few years there just weren't any renting opportunities in some neighborhoods. Take advantage.
The NAR may be sanguine, but there is growing unrest in their rank-and-file.
Even NAR Clowns have to eat once in a while...
BTW if I was one of those 'clueless' sellers and I didn't have to sell & liked where I was (say I was just 'fishing')... I wouldn't cut either. What is the rush?
The single most important thing a realtor needs to do in this market is determine the urgency of the seller - if it isn't there then don't sign the dude no matter how nice the listing - isn't worth the effort. It is a complete opposite from the boom where the challenge was to determine how insanely desperate the BUYER was.
Selling of this type is 99% psychology and 1% offering.
I think the NAR is actually too bearish on sales projections.
Lenders have been stubborn about cutting asking prices. They will at some point later this year get religion on pricing their REOs to SELL and that should move the needle materially, and Y/Y comparison points are weak, so bears should expect pretty big moves higher in sales, probably in the second half. That should fuel a false HB rally, since their problem is REOs will pull from new home sales figures.
damondidit asked: "Sacto area renter here. I'm in that weird grey area now of having to make a decision in the next few months about purchase timing. Do I jump in in the next six months or wait for a possible second-leg down?..."
You might want to look at affordability numbers here:
Housing Tracker
By one measure, "mortgage/rent", Sacramento is actually better than Charlotte, which is one of the strongest housing markets in the nation.
Housing in other CA cities (LA, San Diego, San Francisco) is significantly more pricey than Sacramento.
S.
"And jobless claims are up more than expected. Recession here, no doubt."
While no doubt we are in recession and heading into the mother of all depressions it is somewhat odd that on a day when the dollar is very strong (odd in and of itself), copper is breaking out to 3 month highs. Perhaps people are just taking delivery of 25,000 lb lots from the comex and putting it in the basement for safe keeping because gold has gotten so expensive.
Ya gotta love those realtors. They're such an optomistic bunch.
If you're gonna last 80 years, you might as well be upbeat along the way.
energyecon, I haven't compiled the cancellation rates from the various companies yet. The rates vary significantly by company mostly because they have different downpayment policies - so I average across several companies. For the companies I've looked at so for, cancellation rates are about the same as last quarter (near record highs), but not rising.
Best Wishes.
The NAR is shooting themselves in the foot.
Their reasoning is that if they convince the buying public that prices won't go down anymore, people will buy now instead of waiting for prices to drop more. They don't realize that the problem isn't that they don't want to buy; The problem is they can't afford to buy.
The smarter move would be to make it look like prices are going to drop a lot and keep dropping so sellers will quickly lower their prices. Once the prices become affordable, people will buy.
CR,
Thanks - that suggests to me that future revisions of the current release will be about the same as the revision of the previously released number...
david_in_ct posted: "And jobless claims are up more than expected. Recession here, no doubt."
Job creation always slows down when the economy is at full employment (because the economy is at full employment), so this may or may not be a bearish development.
No doubt this point is too subtle and will be wasted, but you don't give up just because the fight is hard.
S.
Fisher seems to be making the bond market cry a little.
Mr. Wright Model B -
The yield curve started telling us trouble was coming in 2006.
In the past 80 years we've only had a few years in which the yield curve inverted:
1927-1930 (depression began in 1929)
1959 (recession began in 1960)
1966-1970 (recession began in 1969)
1973-1974 (recession began in 1973)
1979-1981 (recessions began in 1980 and 1981)
2000 (recession began in 2001)
2006-2007
Data looks pretty compelling to me.
On average an inverted yield curve gives us about 15 months advance notice that a recession is coming. That would imply a recession in Q1 2008. Based upon what I've seen in our businesses I think it started in December 2007.
Also, in the past 80 years we've never had the yield curve invert and a recession not follow within less than 3 years.
I dont know what you do for a living, but I can tell you that I'm involved across a variety of businesses. Most saw things slow pretty significantly in December - a trend which has continued in January - and ALL are planning cutbacks on hiring/headcount and capital expenditures. Not one has mentioned Wright Model B....
OT: Romney dropping out.
back to topic:
does anybody know:
was "the market" expecting this drop or not?
in other words: was this drop a surprise to anybody?
in the trenches:
I've seen some data long ago (perhaps it was here or on Mish's site) when the yield curve first inverted.
Some of the wise posters at the time correlated the recessions NOT to the initial inversion, but to when the curve re-steepened. (such as what has recently started happening).
it's just a distant recollection, perhaps CR has more insight?
YMMV
We still have people saying that we're not in the midst of a recession. By the accepted definition of "recession", that's probably true (if you trust the numbers, and if you do, you shouldn't). OTOH, we're in something, and it is at least as bad as, if not worse than, a recession.
Do we need a new name for the malaise we find ourselves in?
My nomination: We are in a period of economic regression.
When you've been living in a feel-good fantasy world, reality is a bummer.
Yearning -
I believe that is exactly correct. Thanks.
OT re Romney: he will endorse Huckabee and things will get really acrimonious really fast in the GOP race. Look for SC-2000-style sniping at McCain.
"Job creation always slows down when the economy is at full employment..."
Full employment? Only if you include all the 20-hour-a-week job with no benes. I remember full employment from periods in the '80s and the '90s. It didn't feel like this.
We just had an opening for an admin. assistant. job in my university office; crappy pay, but good benes. We got 100 strong applicants.
Something to note: jobs at the university are in demand because you can qualify for medical for the family in a half-time job, of which there are plenty even here. A lot of people take these crappy-pay half-time jobs so their non-insured or self-employed spouses can get it. We have a lot of employees who are the spouses of contractors, self-employed programmers, self-employed tradesment, and so on.
In other words, our uni is a de facto health care provider for uninsured professionals. The "new economy" has played out in very interesting ways, hasn't it?
So I guess a 10 step program wasn't enought for S&P --- "S&P ANNOUNCES NEW ACTIONS TO ENHANCE INDEPENDENCE, STRENGTHEN
THE RATINGS PROCESS, AND INCREASE TRANSPARENCY TO BETTER SERVE
GLOBAL MARKETS
http://www2.standardandpoors.com/spf/pdf/media/Leadership_Actions_Press_Release.pdf
damondidit, I'm with Rob Dawg on this. I've started the process of looking around only, but I'm still basically in the bunker. I've floated out a couple of extreme low-ball offers on foreclosures and have been countered high by the banks so I let the deals drop. I wanted to see if banks are at capitulation point yet, and they basically aren't from what I can tell. I will repeat this test every once in a while to determine banking attitudes. Also, there is a hell of a lot of shadow inventory out there that has a NOD or is in some kind of a pre-foreclosure state that isn't on the MLS, much more than is actually on the MLS if you can believe that!
You really have to do as Rob said and perform a rent/mortgage evaluation using a 30 year fixed standard mortgage with 20% down. That should be roughly the same price as rents. If not, the price is still too high.
The problem with using the above metric is if the recession really starts kicking in, then rents will go lower too! Then you've literally got a moving target where the fundamental value of RE keeps dropping along with prices. This makes it very difficult to call the bottom.
The NAR is like any other organization; those who are hired for the top-echelon jobs are always relentlessly and aggresively positive and optimistic, regardless of circumstance or the issue at hand. This applies to internal organization matters and external tasks. All companies say they want to hire independent thinkers who can form their own opinions based on facts, and that's one of the biggest lies in the books. The vast, vast majority of organizations want sunny sycophants and smiling asskissers as employees; anyone who dares to offer a contrarian view, however well supported by facts, will eventually be let go. David Yun knows this; his unwritten job description is to always spin the news in as positive a light as possible. If he presented an interpretation of the situation that was more in line with CR, say, or Mish, he'd be out of a job in 24 hours.
And I think there's no chance that the NAR will ever encourage dropping prices, either. With RE agents' income determined by sale price, most will fight reducing prices until the alternative is starvation.
"In other words, our uni is a de facto health care provider for uninsured professionals. The "new economy" has played out in very interesting ways, hasn't it?"
It is unusual in the circumstance but it makes complete economic sense. Given that good family coverage in my neck of the woods is around 18k a year, thats a lot of tax free income to as a bonus to your workers. If we had a real free market in medicine a lot of this stuff would not exist. It is likely we would have more individual 'horror' stories but in the aggregate care would be better and cheaper. c'est la vie.
And I think there's no chance that the NAR will ever encourage dropping prices, either. With RE agents' income determined by sale price, most will fight reducing prices until the alternative is starvation.
I'm not sure about this.
the RE agents need SALES. keeping prices high but with low volume is no good for the run of the mill RE agent. It means they have to put a lot of time and $$ into their listings.
better to bring prices down and increase volume.
the trick: they need to talk sellers down from their initial asking prices, without scaring prospective buyers out of buying.
the other trick: there is obviously a massive over-capacity in RE right now. Depending on region, there are probably 20-50% too many realtors...
many will lose their jobs. Not sure if they will get counted in the "unemployed" numbers or not...
OT -
Kasriel at Northern Trust: Recession Now Putting Our Forecast Where Our Mouth Has Been
I just can't decide whether to believe Sebastian and the Wright Model B, or the "recipient of the 2006 Lawrence R. Klein Award for Blue Chip Forecasting Accuracy".
It's a quandary.
The Wright Model B is parked in a small hanger at a General Aviation Airport in Springboro Ohio (might be Miamisburg, its on the border of the two towns). The Model A is at the Smithsonian in Washington DC.
There must be a "shame" gene. And the NAR must test prospective members for a lack of that gene.
Dirk, I had no idea of how well-traveled and worldly you were...anyone who shows their chops about the birthplace/cradle of aviation (ridiculous north carolina license plate logos notwithstanding) probably spends a lot of time on planes...
Clyde,
I lived in Springboro for about 10 years and my kids still do (Go Panthers). Travel back and forth to there from Chicago every other weekend, own a cheap house in Dayton as my base there (and Dayton is one market where the increase in conforming limits will not make a difference, got the place in 04 for $68k, 3/4 bed 2.5 bath classic old house).