"Housing bubbles do not pop on the price side, unless there is a substantial loss of employment in the local economythe kind of employment losses typically associated with a wider recession."
YAWN
Welcome to reality, mate.
Page me when interest rates or unemployment spike.
"Appreciation will slow to a mere 6% (nominal) by the end of this year and will be flat in 2007."
He obviously didn't speak with any realtors. Just keep looking at the data, Thornberg and close your eyes to interviewing realtors. Median price is going up because the distribution of sales is skewed to the higher end. See Bob Casagrand's report on Realty Times. The price of each individual house is off 5-10% vs. last summer. I have this info from several realtors, and experiened this myself. In December 2005, my house had offers for 5-10% below summer prices. I had a friend in Poway whose house didn't sell last summer despite several reductions. How can he say prices are going up 6% this year? Clueless....
The reason prices fall when people loose jobs is they can either no longer afford the payments, they need to move for a job, or a combination of the 2 force them to sell.
If ARMs readjust higher, then many will be in the 'can't afford payments' realm and be forced to sell, so prices should adjust downward. Not to mention the loss of housing related jobs.
the data is not comparable to other historical periods. What was the debt to income ratio during other historical drops in prices vs. today? What types of mortgages were used during those periods vs. today? What was the average down payment then vs. today?
Needless to say we can have I think we can have significant price drops without losses of jobs.
since 2003 there has been little reason to believe the price increases we have seen are legitimate
Ah, but prices don't adjust instantaneously. Some of that rise afterwards was due to earlier changes. Appraisals lag on the upside as well as down. Even though they are overvalued now, this won't show in the data for some time.
I have noticed that recently housing bubble proponents seem to have shifted their definition of a popping bubble from crashing prices, 30% to 50% reductions was the battle cry, to sales volume reductions, as young Chris has done in the linked report.
The first bubble death-watch region in the US was San Diego, the so-called "canary in a coal mine", etc. Since then, SD has had negative YoY sales volume every single month for the last two years - yet prices have continued to rise in a classic "soft landing" pattern. Consequently, bubbleheads are now hoping for anything but what has transpired in SD for the rest of the hot real estate markets, yet what they are hoping for is something that has never happened - a low unemployment and interest rate environment housing price crash.
The Home Builders index fell to 45 in May from 51 in April. That is the lowest reading since June of 1995. That is so far a smaller fall than in the mid 1990s or in the early 1990s.
Thank you for pointing out this report. I downloaded and read the whole piece.
It is one of the most complete and realistic I've read on the potential effects of a slowing housing market.
What the author does not take into consideration is that the overall drop in US demand which could be caused by the housing sector slowing, could in turn precipitate a global recession.
This would cause many more jobs to be lost in sectors outside of housing, than they are estimating....and that would really prick the bubble.
"Housing bubbles do not pop on the price side, unless there is a substantial loss of employment in the local economythe kind of employment losses typically associated with a wider recession."
YAWN
Welcome to reality, mate.
Page me when interest rates or unemployment spike.
"Appreciation will slow to a mere 6% (nominal) by the end of this year and will be flat in 2007."
He obviously didn't speak with any realtors. Just keep looking at the data, Thornberg and close your eyes to interviewing realtors. Median price is going up because the distribution of sales is skewed to the higher end. See Bob Casagrand's report on Realty Times. The price of each individual house is off 5-10% vs. last summer. I have this info from several realtors, and experiened this myself. In December 2005, my house had offers for 5-10% below summer prices. I had a friend in Poway whose house didn't sell last summer despite several reductions. How can he say prices are going up 6% this year? Clueless....
A "shock to the economy" could BE the high cost of energy. Voila!
PowaySeller,
That's why my insiders (Realtors who give me the straight scoop) tell me too. Condo prices have even fallen more in many SoCal markets.
Robert Campbell
The reason prices fall when people loose jobs is they can either no longer afford the payments, they need to move for a job, or a combination of the 2 force them to sell.
If ARMs readjust higher, then many will be in the 'can't afford payments' realm and be forced to sell, so prices should adjust downward. Not to mention the loss of housing related jobs.
Umm, I can't say I disagree.
the data is not comparable to other historical periods. What was the debt to income ratio during other historical drops in prices vs. today? What types of mortgages were used during those periods vs. today? What was the average down payment then vs. today?
Needless to say we can have I think we can have significant price drops without losses of jobs.
since 2003 there has been little reason to believe the price increases we have seen are legitimate
Ah, but prices don't adjust instantaneously. Some of that rise afterwards was due to earlier changes. Appraisals lag on the upside as well as down. Even though they are overvalued now, this won't show in the data for some time.
I have noticed that recently housing bubble proponents seem to have shifted their definition of a popping bubble from crashing prices, 30% to 50% reductions was the battle cry, to sales volume reductions, as young Chris has done in the linked report.
The first bubble death-watch region in the US was San Diego, the so-called "canary in a coal mine", etc. Since then, SD has had negative YoY sales volume every single month for the last two years - yet prices have continued to rise in a classic "soft landing" pattern. Consequently, bubbleheads are now hoping for anything but what has transpired in SD for the rest of the hot real estate markets, yet what they are hoping for is something that has never happened - a low unemployment and interest rate environment housing price crash.
The Home Builders index fell to 45 in May from 51 in April. That is the lowest reading since June of 1995. That is so far a smaller fall than in the mid 1990s or in the early 1990s.
Thank you for pointing out this report. I downloaded and read the whole piece.
It is one of the most complete and realistic I've read on the potential effects of a slowing housing market.
What the author does not take into consideration is that the overall drop in US demand which could be caused by the housing sector slowing, could in turn precipitate a global recession.
This would cause many more jobs to be lost in sectors outside of housing, than they are estimating....and that would really prick the bubble.