Wells Fargo forecasts 6.5% 2006 SoCal House Appreciation

Submitted by
CalculatedRisk on Fri, 01/06/2006 - 1:43pm (12 comments)
BabsBush wrote on Fri, 1/6/2006 - 5:30 pm

Quite right. A bare minimum of research reveals that timing has not been “a bitch” for the Wells boys. They’ve been up to the task.

CalculatedRisk wrote on Fri, 1/6/2006 - 6:16 pm

BabsBush, since this is an internal Wells Fargo forecast (and I don't have the previous ones), I can't judge if they are better than the Anderson Forecast. Of the public forecasts, the UCLA Anderson Forecast is one of the best and has received numerous awards.

If you have the previous internal Wells Fargo forecasts, maybe you can share them.

Best Wishes.

Mtnrunner2 wrote on Fri, 1/6/2006 - 8:47 pm

The CA Building Industry Ass'tn said (also on UCLA post mentioned above):
California's 12-year run of home building gains will likely end in 2006, as developers pause to clear out excess inventory during the early part of the year, according to a trade group's annual housing forecast.

Now, how can excess inventory lead to any price increase. Furthermore, median listing price is DOWN 10% in San Diego in the last 4 months!!!
HousingTracker.net | Median Home Asking Price & Inventory Data for San Diego, California
For example, the median price in the 75th percentile was $798K on 9/1/05, and $ 725K on 1/1/06.

The Wells Fargo economist is lying. He's one of the group of real estate industry economists who are making forecasts based on wishful thinking, not on facts.

I'd love to ask this guy on what basis he predicts a positive appreciation. What factors lead him to believe an increase is even possible, in light of the fact that prices have headed down already!!

It is unethical to make such "economic" statements.

BabsBush wrote on Fri, 1/6/2006 - 9:46 pm

CR, I'm not privy to internal Wells documents, and don't need to be. Their website is currently showing a '06 CA forecast of 6.0% median price increase, and available archives show their past forecasts have been within a point or two within actual, usually erring on the conservative side. Been pegging it right in there close, they have.

Those Anderson boys? Well, they've been struggling mightily with this whole real estate thing for two years or so, havn't they? Their projections have clearly been "out of whack with reality", wouldn't you say?

Mtnrunner2 wrote on Sat, 1/7/2006 - 10:43 am

The UCLA Anderson Forecast was predicting the end of the bubble, but bubbles have a tendency to go on longer than one thinks. But the problem is this: the higher you go, the harder and longer you fall.

The SD MLS median listing price has dropped 10% over the past 4 months.

If there is a price increase, it would be limited to cheaper areas where cash-flush CAs are buying and raising prices.

The bubble cities are headed for a major correction. SD's correction has already started. Proof: check the MLS. Check the data.

FoolsMate wrote on Sat, 1/7/2006 - 11:13 am

Two very different views, but not necessarily mutually exclusive. I don't see why housing prices can't go up 6% in 2006 while new home construction slows.

Of course, the two are related, but so are apples and oranges.

Spectator wrote on Sat, 1/7/2006 - 4:23 pm

While BabsBush may not work in RE, he sure sounds like one of those stock cheerleaders in early 2000. He'd be singing the praises of Jim Cramer's forecasting record probably.

Trends change, and forecasters quickly go from genius to goat. Particularly if they had a vested interest in cheerleading.

dryfly wrote on Sat, 1/7/2006 - 4:51 pm

Its a good think it has been hard to short the RE indistry the last few years... Its on thing to be wrong, a whole other thing to be wrong with your money.

I think this bubble will pop but have no idea when or how severe or what the consequences... I think it was Lord Keynes who said 'markets can remain irrational longet than you can reamin solvent'... sure works for me right now.

bailey wrote on Sun, 1/8/2006 - 7:39 am

HUH? BEFORE taking any forecast seriously it would do readers well to consider the forecaster's axe & premises. Has ANYONE seen a SoCal est. for '05 median existing home price this low?
My guess is, Wells has a HUGE r.e. mtg. portfolio, & that they were NOT pleased by Thornberg's call.

dilbert dogbert wrote on Sun, 1/8/2006 - 8:08 am

Just another poorly informed data point for ya'all, my builder friend told me last night that people are still knocking his door down to build their houses here in SF mid pen. This is high end stuff for sure, but.....
Time will tell.

dryfly wrote on Sun, 1/8/2006 - 9:30 am

dogbert - high end of the demographic curve is doing great... have been for years. Tax cuts & global opportunity is their oyster. I met a guy in the Twin Cities who told me the samething... the phone is ringing off the hook for them and has been since mid90s.

But he is a small independent & doesn't get involved in the large developments or me too commodity offerings. He isn't even a data point on the forecast and really never has been. He was building million dollar homes when they were still worth a million dollars...

I doubt we can look at them and expect Centex to follow suit... might & might not... but these types are poor comparison either way (up or down).

Kurt Story wrote on Tue, 1/10/2006 - 10:59 am

My guess is, Wells has a HUGE r.e. mtg. portfolio

Purely anecdotal, but in the recent conversation with a WF banker, he basically said the same. When I voiced my concern over their risk exposure, his response was decidedly upbeat. Needless to say, I don't share his optimism.

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