This isn't just in the U.S. either. Here in Canada, the major markets are set to get hit by a major "contraction". A few people I know have been talking about this bubble for some time now - we saw it coming. At the time, there were too many nay-sayers braying the "not this time" mantra. Welcome to the bursting, friends.
This is just so much looking in the rear view mirror. Given the concessions out there, prices are clearly falling already. Granted, the trend is grim, but posting this as a "prices are still rising" headline is totally misleading. I pity the poor fool who buys something at these prices, and I dont care what the long term trend is. Even if you want to live there 30 years, it might take you half that long for the price to get back to the point at which you bought. Then at reasonable appreciation rates, it's hard to see how that will be a good investment.
For example...if prices in a bubble market fall 25% peak (now) to trough in 2012, and then grow 3% a year (the LT average) youd be back to break even in nominal terms in 2023. Youd probably be dead by the time you break even after inflation.
Slightly offtopic, but relevant for the future consumer prices: The Finnish newspaper "Helsingin Sanomat" and some other European newspapers got an interview from Chinese prime minister Wen Jiabao. Some tidbits, translated into English:
The might of the current economy of China is clearly apparent by the fact that it has the world's greatest currency reserves; currently USD $954.5 billion. The big currency reserve and the worry about overheating economy have increased the speculations on China willing to let the yuan strengthen, which would have a considerable effect on Finnish companies. Wen says that China is willing to slowly give yuan more room to move. However, he says that there will be no sudden changes like the revaluation in the July of last year. "There will be no more surprises", Wen said in Zhongnanhai, Peking.
So, does that really mean there will be no revaluation for yuan? That could be bad news for the balance in the world economy.
OFHEO--"rear mirror" indeed. They simply don't see what's happening in the front lines now. Case in point: just north of SF in the communities of Marin I'm seeing over 40% of listings reduced from last fall. Average is down 8-10%, with some as much as 30%. One nearby home was reduced from $3.5M to 2.4.
From the article, it looks like the really exaggerated prices were in appraisals for refinancings. Guess why!
Although the trend is the same, without the appraisal data for refinancings, the appreciation has not been so marked the past two years.
China has such massive reserves due in large part to the US consumer paying for cheap goods in US$. No matter what anyone says, China won't decouple from the US when US housing rolls over and consumers tighten their belts.
Sellers might be cutting asking prices but wait until someone really gets hit and has to slash their price materially. It will cause others to reset their offering price or pull their listing. My guess is that many people have already pulled their houses off the market which means "shadow" supply is much higher than what is being reported. Not good
Off Topic.
Did anyone see the NY Times article on entry level workers?
Quote from NY Times
"The nations personal savings sank below zero last year for the first time since the Depression, meaning Americans spent more than they earned. But for households under 35, the saving rate has plunged to minus 16 percent, which means they are spending 16 percent more than they are earning."
Most young people I know have no idea how to save. They spend more than they make buying every big ticket item with as little money down as possible. I think the economic future of America and maybe the world is in for some trouble if the job market turns.
Heck....why save when your house keeps going up in value every year. It's much better than some silly 401K. Ooops, oh wait.
I went into a Best Buy this weekend and the place was packed. No interest for 36 months on TVs priced above $1,000. The consumer is holding on for a lot longer than I ever expected.
went into a Best Buy this weekend and the place was packed. No interest for 36 months on TVs priced above $1,000. The consumer is holding on for a lot longer than I ever expected.
Hey enjoy the ride. Look around & soak it in - you are watching history being made. We are living like a nation of Gatsby's.
How does rampant flipping play into these indexes? With flip sales happening in very short time frames it would seem to add quite a upward bias to the numbers for areas with lots of flipping going on.
How, exactly, does a country like China maintain a fixed exchange rate for their currency?
I think I get it but am not sure - I wish somebody who really gets it would do a flow chart... a sort of 'follow the money'... and post it. It would be a blogland & maybe even MSM hit I'm sure.
Hey CR - you handy with Visio? How about tanta?
Anyway I think the key is that all the dollars coming into China businesses are converted to yuan at their regional banks. Those regional banks then convert the dollars they hold into yuan at the PBoC... which then uses them to buy US treasuries or more recently GSE agency debt... sending the dollars back to us in the US to become more mortgages & CC debt... and maintaining the dollar-yuan balance.
Now that SHOULD increase inflation in on the street in China... all that fresh yuan created from dollar conversion floating about... except the PBoC then sells 'special bonds' to the regional banks who then resell them or something similar to the general public to soak them all up again.
Those bonds then are collateralized by the US agency & treasury debt they hold.
Minimal inflation & dollar-yuan recirculation... works great as long as we continue to buy and go in hock & the Chinese peasants & workers continue to work and save.
There's your 'savings glut' in a nutshell Bennie complained to congress about a year or two ago.
That's my nickel tour - not sure its 100% correct but I can't find a concise explanation that's better.
If somebody has one that is better PLEASE post it.
right dc1000....why pay all that money up front, when you get an automatic five percent discount every year you make payments, by putting the cash into an online savings acct, and paying interest only as long as they will let you. 0% finance shows you that the sellers are becoming desparate.
"went into a Best Buy this weekend and the place was packed. No interest for 36 months on TVs priced above $1,000. The consumer is holding on for a lot longer than I ever expected."
You might have seen me. I bought 2 countem' 2 Panasonic 50" Plasmas. $2,800 apiece. Coulda paid cash, but why would I when they are offering 36 months 0% same as cash? Toss in another $900 apiece for Klipsch surround sound and now your livin' - YEAH BABY!
One important fact to note is the type of sales that OFHEO uses to calculate the HPI.. From OFHEO:
6. What transactions are covered in the HPI?
The House Price Index is based on transactions involving conforming, conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac. Only mortgage transactions on single-family properties are included. Conforming refers to a mortgage that both meets the underwriting guidelines of Fannie Mae or Freddie Mac and that does not exceed the conforming loan limit, a figure linked to an index published by the Federal Housing Finance Board. The conforming mortgage loan limit for single-family homes in 2006 is $417,000. Conventional means that the mortgages are neither insured nor guaranteed by the FHA, VA, or other federal government entities. Mortgages on properties financed by government-insured loans, such as FHA or VA mortgages, are excluded from the HPI, as are properties with mortgages whose principal amount exceeds the conforming loan limit. Mortgage transactions on condominiums, cooperatives, multi-unit properties, and planned unit developments are also excluded.
So grim,
What you're saying is that the data from this report DOES NOT include houses selling for over 417k? That would remove almost all meaningful price movements from the data in the hot markets. What was the median price in SD last year? Wasn't it over 500k?
I smell a skunk.
Hey kirk, I assume by 'SD' you mean 'San Diego' not 'South Dakota'... in the SD near me you need about 500 acres to go with the home to reach a median of $500K.
dryfly,
Ya, lol, I meant San Diego. I'm from L.A. .....emphasis on "from". Why anyone would want to pay those prices for the house I grew up in simply floors me....and don't even try to ask me how they are affording it.
BTW, South Dakota is a nice place. I love the area. I still don't know how I got suckered back into the rat race on the west coast.
kirk
Lets see kid buys $2,000 TV plus $1000 in other stuuf, has good job and apt.
Kids loses job, Has great TV and stuff in his parent's place to pass the time with.
Downside?
Friend of mine had wife with a CC account. The balance got to $35, but the CC hit her with a $35 late charge, he got pissed off and refused to pay. They called with threats and otherwise violated fair debt collection for a year. Account went to $300 with late charges. Friend sent $50 to CC with note to either settle or return it so he could pay other debtors. They settled.
So what is lessons. One is that a lot of CC profit may not really exist. Two is that it costs like crazy to collect in this case 6 calls a week costing say $2 a call or $12/week x 52 or $624 to collect $50.
The bottom line is that, for the present, one can 'steal' through credit without much downside. Literally this means that there is little incentive about preserving credit, you seemly can always get more credit.
What is rational behavor in this enviornment?
I don't know, but folks are learning to game the system.
Geoff, the OFHEO numbers have their limitations, but I wouldnt call them useless. Kirk, remember that the conforming limit is the loan limit, not the price limit. If you have an 80% LTV mortgage at the maximum mortgage amount of $417M, you get a maximum price of $521M. Since theres no (theoretical) minimum LTV, the data can include much larger prices than that. (The minimum LTV is in practice around 25%. Under that, the prepayment speed is so high that lenders lose interest in the deal.)
I spend half my time dealing with people who are having a fit about Fannie and Freddies safety and soundness because people think theyre loading up on high-LTV loans in the bubble markets. (They arenttheir loan limits keep the LTVs down.) This is a case of the good news being the bad news, because the GSEs limited exposure in jumbo markets means that any index based on GSE data is weighted toward cheaper markets. However, theres just no source of reliable comparable data in the jumbo market. The GSEs can also provide the critical info here about repeat transactions on the same property. Thats why you include refisan existing home just doesnt change hands often enough for repeat transactions to include only repeat purchases. And, obviously, including refis means a certain amount of distortion because of the appraisal issue, but Im not sure thats any worse than trying to apply hedonic adjustments to new home sales. (Frequently it turns into the same argument: should the appraiser up the value for the refi because the borrower took out the formica countertops and put in granite since the original purchase? Is this outweighed by the fact that the dog has spent the last year chewing up the baseboards in the family room? You get the idea.) You can, however, always bet that when cash-out refis are up, inflated appraised values are up.
As far as condos go, Fannie and Freddies condo business is mostly spot loans in existing or very nearly complete projects. Condo guidelines have eased over the years at the agenciesFannie guidelines were updated and eased significantly in 2003but I suspect that trying to do a repeat transaction analysis over a significant historical period with GSE condo loans would give you pretty warped data. Historically, the GSEs were always pretty strict about loans in projects that werent complete or werent primarily owner-occupied; the condo-speculator unfinished-project underfunded-HOA loans went to the private investor market (and lets hope theyre happy with them now, huh?).
"The second quarter increase followed an even larger 9 percent surge in labor costs in the first three months of the year, which was the biggest quarterly increase in nearly six years."
My sources report essentially the same picture on San Diego as noted by Robert Campbell earlier on this thread - lots of listings, very few people even looking and practically no offers. The situation in San Diego is not unique, and some places are in much worse shape.
There are many limitations to the OFHEO Housing Price Index. Geographic and price band limitations are significant, but there is also a methodology issue that severly limits the applicability of the index for short-term price movement.
If you want to know what the long term average annual price change was over the last few years as a whole then the OFHEO data is good. If you want to know what the average price change was during the most recent 12 months only you will not find that in the OFHEO data.
This is becuase OFHEO uses same house data for determining their index - using the recent transaction compared to its prior transaction years ago. Apples to apples but measuring long term averages - not recent movement.
A home bought five years ago and sold recently will show a positive average annual gain - even though it has declined during the latest period.
The OFHEO HPI is essentially a rolling average of many years of price movement.
Looked up rental, as seemed a good idea to sell my house and buy back a couple hundred grand lower, but the rental for a comparable place here in coastal orange county is 150 to 200% per month greater (which is a total loss) than my 5.5% mortgage. Decided I'm not that good at timing.
I'll ride out any possible paper loss in favor of a steady equity build-up.
Inflation,stagflation,recession, Dollar drop...who knows? If I get any strong feel, I'll trade on the new housing price commodity futures to hedge. If mortgage rates drop due to recessions, I'll refinance, and new buyers may come in to shore up values at new cheap rates.
The point is no-one buys my house if I lose $. I'll simply live in it. I suspect all but the ARM's people echo this view.
outsider, sounds as if you bought well. Good for you! That's the second benefit of home-ownership. You get to use your investment for shelter.
Back in 1999, I concluded my tech stocks had run as far as they could. I sold them all and got into cash and staple stocks. Three years later I felt like a genius. The problem is, during all of 2000, I felt like I had ruined my life as the stocks I sold on average went up another 50%. I think trying to sell now and wait out a price decline might take a toll on someone that outweighs the possible financial benefit, especially when you are dealing with your shelter, not just paper as I was.
"My sources report essentially the same picture on San Diego as noted by Robert Campbell earlier on this thread - lots of listings, very few people even looking and practically no offers."
True if "practically no offers" = 3,370 closings in July alone. Otherwise "practically no offers" = an absurd statement.
contraction will soon set in. you can't have a move upward without some like move downward without a change in fundamentals.
This isn't just in the U.S. either. Here in Canada, the major markets are set to get hit by a major "contraction". A few people I know have been talking about this bubble for some time now - we saw it coming. At the time, there were too many nay-sayers braying the "not this time" mantra. Welcome to the bursting, friends.
This is just so much looking in the rear view mirror. Given the concessions out there, prices are clearly falling already. Granted, the trend is grim, but posting this as a "prices are still rising" headline is totally misleading. I pity the poor fool who buys something at these prices, and I dont care what the long term trend is. Even if you want to live there 30 years, it might take you half that long for the price to get back to the point at which you bought. Then at reasonable appreciation rates, it's hard to see how that will be a good investment.
For example...if prices in a bubble market fall 25% peak (now) to trough in 2012, and then grow 3% a year (the LT average) youd be back to break even in nominal terms in 2023. Youd probably be dead by the time you break even after inflation.
Slightly offtopic, but relevant for the future consumer prices: The Finnish newspaper "Helsingin Sanomat" and some other European newspapers got an interview from Chinese prime minister Wen Jiabao. Some tidbits, translated into English:
The might of the current economy of China is clearly apparent by the fact that it has the world's greatest currency reserves; currently USD $954.5 billion. The big currency reserve and the worry about overheating economy have increased the speculations on China willing to let the yuan strengthen, which would have a considerable effect on Finnish companies. Wen says that China is willing to slowly give yuan more room to move. However, he says that there will be no sudden changes like the revaluation in the July of last year. "There will be no more surprises", Wen said in Zhongnanhai, Peking.
So, does that really mean there will be no revaluation for yuan? That could be bad news for the balance in the world economy.
OFHEO--"rear mirror" indeed. They simply don't see what's happening in the front lines now. Case in point: just north of SF in the communities of Marin I'm seeing over 40% of listings reduced from last fall. Average is down 8-10%, with some as much as 30%. One nearby home was reduced from $3.5M to 2.4.
From the article, it looks like the really exaggerated prices were in appraisals for refinancings. Guess why!
Although the trend is the same, without the appraisal data for refinancings, the appreciation has not been so marked the past two years.
China has such massive reserves due in large part to the US consumer paying for cheap goods in US$. No matter what anyone says, China won't decouple from the US when US housing rolls over and consumers tighten their belts.
Sellers might be cutting asking prices but wait until someone really gets hit and has to slash their price materially. It will cause others to reset their offering price or pull their listing. My guess is that many people have already pulled their houses off the market which means "shadow" supply is much higher than what is being reported. Not good
lloyd, I would add that the high supply numbers reflect the fact that a surprising number of people have no other choice but to sell.
Off Topic.
Did anyone see the NY Times article on entry level workers?
Quote from NY Times
"The nations personal savings sank below zero last year for the first time since the Depression, meaning Americans spent more than they earned. But for households under 35, the saving rate has plunged to minus 16 percent, which means they are spending 16 percent more than they are earning."
Many Entry-Level Workers Feel Pinch of Rough Market - NY Times
Most young people I know have no idea how to save. They spend more than they make buying every big ticket item with as little money down as possible. I think the economic future of America and maybe the world is in for some trouble if the job market turns.
Dma
Heck....why save when your house keeps going up in value every year. It's much better than some silly 401K. Ooops, oh wait.
I went into a Best Buy this weekend and the place was packed. No interest for 36 months on TVs priced above $1,000. The consumer is holding on for a lot longer than I ever expected.
how could they not when financing is basically discounted cash instead of charging a premium??
it'd be economically irrational not to take the zero interest financing rather than pay or save up to get there.
off-off topic question...
How, exactly, does a country like China maintain a fixed exchange rate for their currency?
I understand they want the yuan to trade "within a certain range" on the world "markets."
Isn't that like being a little pregnant?
went into a Best Buy this weekend and the place was packed. No interest for 36 months on TVs priced above $1,000. The consumer is holding on for a lot longer than I ever expected.
Hey enjoy the ride. Look around & soak it in - you are watching history being made. We are living like a nation of Gatsby's.
How does rampant flipping play into these indexes? With flip sales happening in very short time frames it would seem to add quite a upward bias to the numbers for areas with lots of flipping going on.
How, exactly, does a country like China maintain a fixed exchange rate for their currency?
I think I get it but am not sure - I wish somebody who really gets it would do a flow chart... a sort of 'follow the money'... and post it. It would be a blogland & maybe even MSM hit I'm sure.
Hey CR - you handy with Visio? How about tanta?
Anyway I think the key is that all the dollars coming into China businesses are converted to yuan at their regional banks. Those regional banks then convert the dollars they hold into yuan at the PBoC... which then uses them to buy US treasuries or more recently GSE agency debt... sending the dollars back to us in the US to become more mortgages & CC debt... and maintaining the dollar-yuan balance.
Now that SHOULD increase inflation in on the street in China... all that fresh yuan created from dollar conversion floating about... except the PBoC then sells 'special bonds' to the regional banks who then resell them or something similar to the general public to soak them all up again.
Those bonds then are collateralized by the US agency & treasury debt they hold.
Minimal inflation & dollar-yuan recirculation... works great as long as we continue to buy and go in hock & the Chinese peasants & workers continue to work and save.
There's your 'savings glut' in a nutshell Bennie complained to congress about a year or two ago.
That's my nickel tour - not sure its 100% correct but I can't find a concise explanation that's better.
If somebody has one that is better PLEASE post it.
right dc1000....why pay all that money up front, when you get an automatic five percent discount every year you make payments, by putting the cash into an online savings acct, and paying interest only as long as they will let you. 0% finance shows you that the sellers are becoming desparate.
The problem is, the consumer isn't holding on. They are falling in deeper and deeper. Time for market forces to begin its culling.
"went into a Best Buy this weekend and the place was packed. No interest for 36 months on TVs priced above $1,000. The consumer is holding on for a lot longer than I ever expected."
You might have seen me. I bought 2 countem' 2 Panasonic 50" Plasmas. $2,800 apiece. Coulda paid cash, but why would I when they are offering 36 months 0% same as cash? Toss in another $900 apiece for Klipsch surround sound and now your livin' - YEAH BABY!
CR-Seen the latest edition of Barron's? Check the Electronic Investor column. You get a prominent name (weblog) check.
One important fact to note is the type of sales that OFHEO uses to calculate the HPI.. From OFHEO:
6. What transactions are covered in the HPI?
The House Price Index is based on transactions involving conforming, conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac. Only mortgage transactions on single-family properties are included. Conforming refers to a mortgage that both meets the underwriting guidelines of Fannie Mae or Freddie Mac and that does not exceed the conforming loan limit, a figure linked to an index published by the Federal Housing Finance Board. The conforming mortgage loan limit for single-family homes in 2006 is $417,000. Conventional means that the mortgages are neither insured nor guaranteed by the FHA, VA, or other federal government entities. Mortgages on properties financed by government-insured loans, such as FHA or VA mortgages, are excluded from the HPI, as are properties with mortgages whose principal amount exceeds the conforming loan limit. Mortgage transactions on condominiums, cooperatives, multi-unit properties, and planned unit developments are also excluded.
so no condos, and pretty much no california, no new york, half of jersey, etc etc. This price gauge is useless...
So grim,
What you're saying is that the data from this report DOES NOT include houses selling for over 417k? That would remove almost all meaningful price movements from the data in the hot markets. What was the median price in SD last year? Wasn't it over 500k?
I smell a skunk.
Hey kirk, I assume by 'SD' you mean 'San Diego' not 'South Dakota'... in the SD near me you need about 500 acres to go with the home to reach a median of $500K.
dryfly,
Ya, lol, I meant San Diego. I'm from L.A. .....emphasis on "from". Why anyone would want to pay those prices for the house I grew up in simply floors me....and don't even try to ask me how they are affording it.
BTW, South Dakota is a nice place. I love the area. I still don't know how I got suckered back into the rat race on the west coast.
kirk
Here's the real story about San Diego housing prices ...
Prices have dropped 10 to 15% from the peak valuations.
The source of this data is a Realtor friend of mine who sells about 150 San Diego homes per year. (a real listing and selling machine).
We talked last week ...
He said he had 110 listings, and only 5 offers on those 110 listings.
In other words, not much demand.
He said maybe 1 of those 5 offers would result in a closed escrow.
Why?
Because the difference between the buyer's "bid" and the seller's "ask" are typically a mile apart.
Typical deal ...
Peak value for the seller's house was $850K in 2005. Seller is now asking $790K.
Buyer offers $710K. Seller counters at $760K, and seller says "no" and walks away.
End of negotiating.
Just a guess, but my Realtor friend thinks San Diego home prices will fall by another 15 to 20% in 2007 when the bulk of the ARMs get repriced.
Robert Campbell
Lets see kid buys $2,000 TV plus $1000 in other stuuf, has good job and apt.
Kids loses job, Has great TV and stuff in his parent's place to pass the time with.
Downside?
Friend of mine had wife with a CC account. The balance got to $35, but the CC hit her with a $35 late charge, he got pissed off and refused to pay. They called with threats and otherwise violated fair debt collection for a year. Account went to $300 with late charges. Friend sent $50 to CC with note to either settle or return it so he could pay other debtors. They settled.
So what is lessons. One is that a lot of CC profit may not really exist. Two is that it costs like crazy to collect in this case 6 calls a week costing say $2 a call or $12/week x 52 or $624 to collect $50.
The bottom line is that, for the present, one can 'steal' through credit without much downside. Literally this means that there is little incentive about preserving credit, you seemly can always get more credit.
What is rational behavor in this enviornment?
I don't know, but folks are learning to game the system.
I'm not saying it, OFHEO is..
The page cannot be displayed
Also, don't forget that it isn't adjusted for inflation. You can do that yourself using the CPI less shelter.
grim
Geoff, the OFHEO numbers have their limitations, but I wouldnt call them useless. Kirk, remember that the conforming limit is the loan limit, not the price limit. If you have an 80% LTV mortgage at the maximum mortgage amount of $417M, you get a maximum price of $521M. Since theres no (theoretical) minimum LTV, the data can include much larger prices than that. (The minimum LTV is in practice around 25%. Under that, the prepayment speed is so high that lenders lose interest in the deal.)
I spend half my time dealing with people who are having a fit about Fannie and Freddies safety and soundness because people think theyre loading up on high-LTV loans in the bubble markets. (They arenttheir loan limits keep the LTVs down.) This is a case of the good news being the bad news, because the GSEs limited exposure in jumbo markets means that any index based on GSE data is weighted toward cheaper markets. However, theres just no source of reliable comparable data in the jumbo market. The GSEs can also provide the critical info here about repeat transactions on the same property. Thats why you include refisan existing home just doesnt change hands often enough for repeat transactions to include only repeat purchases. And, obviously, including refis means a certain amount of distortion because of the appraisal issue, but Im not sure thats any worse than trying to apply hedonic adjustments to new home sales. (Frequently it turns into the same argument: should the appraiser up the value for the refi because the borrower took out the formica countertops and put in granite since the original purchase? Is this outweighed by the fact that the dog has spent the last year chewing up the baseboards in the family room? You get the idea.) You can, however, always bet that when cash-out refis are up, inflated appraised values are up.
As far as condos go, Fannie and Freddies condo business is mostly spot loans in existing or very nearly complete projects. Condo guidelines have eased over the years at the agenciesFannie guidelines were updated and eased significantly in 2003but I suspect that trying to do a repeat transaction analysis over a significant historical period with GSE condo loans would give you pretty warped data. Historically, the GSEs were always pretty strict about loans in projects that werent complete or werent primarily owner-occupied; the condo-speculator unfinished-project underfunded-HOA loans went to the private investor market (and lets hope theyre happy with them now, huh?).
"The second quarter increase followed an even larger 9 percent surge in labor costs in the first three months of the year, which was the biggest quarterly increase in nearly six years."
um, is this good or bad?
My sources report essentially the same picture on San Diego as noted by Robert Campbell earlier on this thread - lots of listings, very few people even looking and practically no offers. The situation in San Diego is not unique, and some places are in much worse shape.
There are many limitations to the OFHEO Housing Price Index. Geographic and price band limitations are significant, but there is also a methodology issue that severly limits the applicability of the index for short-term price movement.
If you want to know what the long term average annual price change was over the last few years as a whole then the OFHEO data is good. If you want to know what the average price change was during the most recent 12 months only you will not find that in the OFHEO data.
This is becuase OFHEO uses same house data for determining their index - using the recent transaction compared to its prior transaction years ago. Apples to apples but measuring long term averages - not recent movement.
A home bought five years ago and sold recently will show a positive average annual gain - even though it has declined during the latest period.
The OFHEO HPI is essentially a rolling average of many years of price movement.
Looked up rental, as seemed a good idea to sell my house and buy back a couple hundred grand lower, but the rental for a comparable place here in coastal orange county is 150 to 200% per month greater (which is a total loss) than my 5.5% mortgage. Decided I'm not that good at timing.
I'll ride out any possible paper loss in favor of a steady equity build-up.
Inflation,stagflation,recession, Dollar drop...who knows? If I get any strong feel, I'll trade on the new housing price commodity futures to hedge. If mortgage rates drop due to recessions, I'll refinance, and new buyers may come in to shore up values at new cheap rates.
The point is no-one buys my house if I lose $. I'll simply live in it. I suspect all but the ARM's people echo this view.
outsider, sounds as if you bought well. Good for you! That's the second benefit of home-ownership. You get to use your investment for shelter.
Back in 1999, I concluded my tech stocks had run as far as they could. I sold them all and got into cash and staple stocks. Three years later I felt like a genius. The problem is, during all of 2000, I felt like I had ruined my life as the stocks I sold on average went up another 50%. I think trying to sell now and wait out a price decline might take a toll on someone that outweighs the possible financial benefit, especially when you are dealing with your shelter, not just paper as I was.
"My sources report essentially the same picture on San Diego as noted by Robert Campbell earlier on this thread - lots of listings, very few people even looking and practically no offers."
True if "practically no offers" = 3,370 closings in July alone. Otherwise "practically no offers" = an absurd statement.
PeePee,
What's the source of your data?
DataQuick reports only 2,531 total sales (SFR + condos) for July 2006.
Lama, Thanks.
Bernard Baruch, when asked what the secret of his stock market success was replied; "I always sold too soon.".
You're in good company.
Robert,
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