A classic from 2005 from San Diego's head real estate clerk (he he he he):
Bursting the housing bubble's bubble
San Diego County has experienced unprecedented increases in real estate values in recent years, with homes appreciating as much as 20 percent to 30 percent a year.Such appreciation has given rise to the notion that there is a "housing bubble" ---- that is, an unsustainable gain in home prices that, in effect, creates a price bubble that will suddenly "pop," resulting in a loss of equity by homeowners.
The housing bubble is an economic myth, particularly in North San Diego County, where demand for housing has long outstripped supply ---- even in today's cooling market. A cooler housing market in which price increases are more in line with other economic growth factors does not signal the bursting of any so-called housing bubble ---- or the end of a vigorous housing market. Housing price increases can level off significantly and still provide good investment opportunities for buyers and sellers alike.
While the home price-to-income ratio is currently above the historical norm in the San Diego region, the more relevant measure of a homeowner's mortgage-serving cost compared with household income is still at a very manageable level. It implies no widespread financial overstretching to purchase a home in our region.
The only threat we face is loss of confidence on the part of those who want to buy or sell homes and other real estate. The plain fact is there is a lot of misleading and jaded information out there.
In the end, it is the marketplace ---- not panicky doomsayers ----- that will determine the future of our region's housing market. Continuing confidence in the viability of San Diego County and the fact that more people want and need to live here is the best evidence there is to disprove any housing bubble.
Kevin Forrester is president of the North San Diego County Association of Realtors.
January 29, 2007
Won't it be a blast in a few years to go back and read "there is no bubble" articles like these...
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32 comments:
In the long run, the marketplace, not the real estate hucksters, will determine the price of homes
"The only threat we face is loss of confidence"!
How about lower home values,foreclosures, fewer jobs, people moving out of the city, more stressed out homeowners who had planned to retire with the equity in there home etc...
This is huge news:
Quoting:
"he Census Bureau just released the data for fourth quarter of 2006. This showed the vacancy rate for owner occupied housing hitting 2.7 percent. This is up 50 percent from the 1.8 percent rate of two years ago.
This is big news. The vacancy rate for ownership units has hovered near 1.5 percent for 50 years. It had never previously crossed 2.0 percent."
Read that last sentence again. This is not going to end well...at all.
Anyone have a link to those photographs of a condo selling party in San Diego? The ones with the male and female models posing as your potential neighbors, and the RealtWhores (I know its clerks now but for those photos this applies) dressing skimpy. Be fun to revisit.
Oops! Forgot to include the link
Many of humanities major gaffes over time have been caused by shortsightedness and a lack of the overall picture. Why should anything change now?
somebody should email that article to that loser every day for the next year.
I'm one of those who bought in the north county market. I sold my San Jose stucco box, got the tax benifit and shifted my real estate taxes from Santa clara to San Diego.
I wound up totally debt free, in a larger house on a larger lot in a better neighborhood (and change in my pocket.
Some of that is going on in California. People shifting about from absurd housing prices to the merely ridiculious, and if over 55 can shift their real estate tax burden.
The only place I blew it on was that the difference between the cost of the new versus the tax evaluation of the old property can be applied to home improvements for the next two years WITHOUT increasing your real estate taxes.
I'll post the san diego condo party pics from March 2006 tomorrow. Oh, man, that's a hoot looking back on it.
Maybe he meant
"The only threat we face is loss of continence..."
Mike
"While the home price-to-income ratio is currently above the historical norm in the San Diego region, the more relevant measure of a homeowner's mortgage-serving cost compared with household income is still at a very manageable level. It implies no widespread financial overstretching to purchase a home in our region."
This is code for, as long as you were a pre-bubble owner and you lateralled you're yuppie housing coupon over to a new place and did not squander it then your mortgage to income ratio is ok.
There are two flaws of willful blindness here:
1-Someone has to come in and buy the entry level home to faciliate redemption of the yuppie housing coupon. Doing that the old fashion way w/ 20% down Fixed is impossible, hence toxic mortgages.
2-Many people re-fied, heloced & squandered their yuppie housing coupons on other things and when you add that to their mortgage debt they are in as big a bind as the entry level over extended households with toxic mortgages.
He is 100% correct in that market forces will decide and not doomsayers. Likewise NAR spin doctors have no influence on the market. The forces of liquidity & loose lending fed the mania on the way up and now the forces of tight liquidity and tightened lending practices will drive them back down.
While the home price-to-income ratio is currently above the historical norm in the San Diego region, the more relevant measure of a homeowner's mortgage-serving cost compared with household income is still at a very manageable level. It implies no widespread financial overstretching to purchase a home in our region.
--
What a nice spin, he focused on the mortgage-servicing cost as being key but makes no mention of how, for many many people, that cost may be unrealistically low due to teaser rates etc.
To mix things up, what's the best case scenario you folks see for what going to happen with RE and its effect on the overall economy?
I hear plenty of the worst case, but what effects would you say are basically a sure thing at this point?
For my part, I would say that, soft landing or not, the amount of consumer spending from home equity withdrawal is going to shrink dramatically and that all by itself will be huge. And I don't see that turning around any time soon, even if this is "the bottom".
I'll take being a panicky doomsayer over being a soon-to-be-disintermediated shill who failed to invest in any useful skills except luring FBs to their financial destruction. Fortunately for him there's plenty of ways for bloodslurping parasites to make a living in this country, but he'd best hustle his ass into law or politics soon if he doesn't want to be eating dog food in five years.
Considering the San Diego Union Tribute had a big story yesterday about the county LOOSING population because "high housing costs" and lost 6000 "real estate and construction jobs in 2006". . .I would say North County as well as all of SD county is "f$cked!". . .remember people - real estate agents are SALESPEOPLE . . .just like used car salesmen/women. . .
Saw MLS resale condo inventories in my area take a sharp drop and put earnest money for a contract to purchase. I am not sure where the curve will go from here, but 20 years from now people might wish they bought a home in 2007.
Bush lied, thousands died. The Feds gave us hundreds of billions of dollars of new debts; spending at arms sales trade shows. Damned if he failed to wisely estimate the cost of his terrible war.
· Does Kevin Forrester sound a little nervous.
· Is he involved in the Real Estate business
· What would be beneficial to Kevin
a) lots of high commission RE transactions
b) even higher commission RE transactions
c) I’m going live forever and RE will never come down
d) All of the above
If you were in his shoes would you let this party end
'Kevin Forrester is president of the North San Diego County Association of Realtors.'
is he like the commander-in-chief of the North San Diego County
i think he's got a side job
Kevin Forrester, president of the North San Diego County Ass. of Realtors sez: "The housing bubble is an economic myth, particularly in North San Diego County, where demand for housing has long outstripped supply..."
How is the housing bubble an economic myth? Bubble markets have existed throughout history and the results are always the same. It's never different this time. In a housing bubble -- or any other bubble market -- prices go up because the prices are going up. It's the reverse with the bubble bursts.
Interest rates go down and people can afford more expensive houses. House prices go up until they reach the threshold of becoming unaffordable. With prices going up, lenders feel that they can become more casual with their lending standards and require little or no income verification. Prices go up even more. Then, the gimmicky financing comes into play -- no money down, interest only and minimum payment loans flourish. Speculators wreak havoc with prices and fraud becomes rampant as prices go even higher.
Finally, even with creative financing, very few can afford to buy at the peak of the bubble. The speculators exit, leaving many "homeowners" upside-down, with funny money time bomb mortgages about to reset. Sellers are in a panic to unload their overpriced debt bombs as prices fall and buyers are afraid to buy these rapidly depreciating assets.
We are at this stage of the game now. It couldn't be more obvious. How Kevin Forrester can claim that "the housing bubble is an economic myth" leaves me bewildered.
Oh, wait a minute. Just like David Lereah, Mr. Forrester is paid to lie.
I live here in North County SD. I can tell you that there are many homes on the market and they arent moving. Even with prices being lowered, they arent moving.
I know 3 families that waited just a couple months too long to see and now they are stuck and scared. They had grand plans with all of their profits in another city, but daily their plans are on hold and money is flying out the window.
I'm waiting for the day I see an article from the mainstream media talking about how incompetent the mainstream media was in covering the RE bubble. It would be so easy for a noob reporter to make a name for himself or herself tearing apart the job the MSM has done. Of course they'd probably need a noob editor too, because the editors have been complicit at least by ignorance.
It's here:
Senator Christopher Dodd, D-Conn is working on a foreclosure bailout bill using our tax dollars to bail out flippers and FB's. They also want to raise the GSE loan limits to prop up housing prices. It looks like the REIC has found a better friend than the Republicans.
http://www.nationalmortgagenews.com/fraud/
good old Kevin was replaced by Chuck Smiar, who proudly proclaimed "...it's sort of a false drop..." and "If anyone is going to buy, they better buy now, because things are going to turn around. We're going to start seeing a slow increase in prices."
Though I can't say it's always true, it seems it's the unexpected that gets you.
Have you ever boiled water in a microwave oven? One time I did so in a cup. Nothing appeared to be happening so I opened the open, and poured the water into my French press to make coffee. The water exploded out of the container, luckily it was pointing away from me. That was an example of "superheating". The liquid was heated to beyond its boiling point, but there was no "nucleation point", no starting point of the boil until the cup was distrubed.
http://en.wikipedia.org/wiki/Superheating
Are you getting the analogy yet?
The housing market may already be internally ready to collapse, but the trigger, the catalyst has not occurred.
Anyone care to guess what might be that trigger? Something that hasn't already happened?
check out the comments to his 2006 article here!
http://www.nctimes.com/articles/2005/10/28/opinion/commentary/20_17_0310_27_05.txt
Fallout Boy wrote on October 28, 2005 12:57 PM:"The party is over. Most people have very little job security and little common sense when it comes to carrying debt. The fallout from the realestate bubble will be far reaching and cause massive job losses in many sectors. People will default on loans in record numbers because they will find themselves upside down on their home. Interest rates will rise and lending standards will tighten again. Everything runs in a cycle and it is foolish to believe that "This time it will be different.""
VegasMan wrote on October 28, 2005 1:09 PM:"The real estate shill said, "Unlike stocks, real estate, especially at the national level, rarely decreases in value." One's house is not in any sense national, it's location is as local as one can get. I sold my house for a double and am now renting until after the collapse. Also, unlike stocks, real estate is not very liquid, and many will watch its value go down without being able to bail. "
amoney wrote on October 28, 2005 6:21 PM:"This is the just the shrill of a shill. He knows the tripling of inventory in the past 18 months and the 10 rate hikes have killed off the golden goose - the no doc, bogus loans given to idiots that have driven prices up the past 3 years. Now many people are gonna find they could never REALLY afford that house at the absurd price they bought it for, and will have to leave the keys in the mailbox. Whoops, now they have to pay the IRS for that "gift"! And filing for bankruptcy is now much, much harder. All the idiots who bought in the past 3 years are gonna be out of this state inside of 2-3 years, trying to duck their creditors, and for the most part, good riddance!"
mike wrote on October 28, 2005 7:46 PM:"I've lived in San Diego since 1974, and guess what. The weather and beaches have always been nice! What changed in the last 5 years that caused houses to triple? Did our population increase their paychecks by 300 percent in the last few years? Did we have a population explosion that I missed? I bought my current townhome in 1997 for $82000 and yes it was a repo, the prior owner paid $120000, thats a loss of over 30 percent. Now my home is worth almost 400 grand! And your telling us this aint a bubble?"
"bozonian said...
The housing market may already be internally ready to collapse, but the trigger, the catalyst has not occurred"
Thanks for the update on the care and feeding of microwaves. I had that happen to me on occasion and wondered why it happened? I'll be more careful in the future.Thanks.
That being said, does anyone have any ideas on a good catalyst.
This bust is unfolding far faster than I imagined, and I'm not even in a bubble area, but not as fast as I hoped. I'm thinking anything major going down in the middle east
to shove gas back up over 3-4-5 dollars, or perhaps another terriost attack on the U.S. to give GW an excuse to start something major in the middle east. Something that the REIC and its spin meisters and political puppets cannot control.
Waiting for all those toxic loans to reset is like watching glue dry.
When all else fails, call names. Never mind the fact that most people with half a brain cell would NEVER buy a house more than 2-3 times their salary.
I like to visit open houses in San Diego and defecate in the closets.
I was already to watch from the sidelines as real estate reckoning day came to pass. Now you are telling me that we're going to be bailing out these bozos???
Many of humanities major gaffes over time
I so do love when illiterate renters try to seem well read.
Renter, it is humanity's not humanities. Do you jokers really think anyone takes you seriously when your grammar is worse than a 5th grader's?
I like to visit open houses in San Diego and defecate in the closets.
Ladies and gentlemen I present to you the typical renter. Rude, crass, classless.
Catalyst: word of mouth played a role in the flipping phenomenon. Could that work in reverse? See the book The Tipping Point - "mavens" and well-connected people are important to any trend.
When people say you can make money "even in a down market", what are they talking about? Ditching previous purchases? Casey Serin wrap-arounds and short sales? Falling knife buy and hold strategy? Sounds bogus.
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