Case-Shiller: Anemic Spring Bounce in April

Let’s make our regularly scheduled monthly check on the Case-Shiller Home Price Index. According to March data,

Up 0.2% March to April.
Down 16.8% YOY.
Down 22.3% from the July 2007 peak

Last year prices rose 0.7% from March to April and year-over-year prices were down 4.9%.

Here’s the usual graph, with L.A. & San Diego offset from Seattle & Portland by 17 months. Portland continued to turn in a slightly smaller YOY loss than Seattle. Meanwhile, down in SoCal, the losses continue to get smaller. If Seattle and Portland keep following the trend set by San Diego and Los Angeles, we will see the most extreme YOY drops next March.

Case-Shiller HPI: West Coast

Note: This graph is not intended to be predictive. It is for entertainment purposes only.

Here’s the graph of all twenty Case-Shiller-tracked cities:

Case-Shiller HPI: All Cities

In April, eight of the twenty Case-Shiller-tracked cities experienced smaller year-over-year drops than Seattle (the same number as the previous four months). Denver at -4.9%, Dallas at -5.0%, Boston at -7.7%, Charlotte at -10.0%, Cleveland at -10.5%, New York at -12.2%, Atlanta at -15.2%, and Portland at -16.0%. As usual, Phoenix had the largest year-over-year drop, with prices falling 35% in a single year.

Here’s an update to the peak-decline graph, inspired by a graph created by reader CrystalBall. This chart takes the twelve cities whose peak index was greater than 175, and tracks how far they have fallen so far from their peak. The horizontal axis shows the total number of months since each individual city peaked.

Case-Shiller HPI: Decline From Peak

In the twenty months since the price peak in Seattle prices have declined 22.3%. April’s uptick brought us further from the trendlines of Phoenix and Tampa, and closer to San Francisco. April saw similar upticks in Seattle, Portland, San Francisco, DC, and Boston.

Here’s the “rewind” chart. The horizontal range is selected to go back just far enough to find the last time that Seattle’s HPI was as low as it is now. This gives us a clean visual of just how far back prices have retreated in terms of months.

Case-Shiller HPI: Seattle Price Reversion

Seattle’s Case-Shiller value for April 2009 of 149.38 came in just above its May 2005 value of 148.97. Prices have now “rewound” a full four years (longer than this site has been in existence).

Finally, the following chart takes the post-bubble years of 2007, 2008, and 2009 and indexes each January’s Case-Shiller HPI to 100 so we can get a picture of how this year’s declines compare to last year:

Post-Bubble Seattle Case-Shiller HPI by Year

We got the uptick we were expecting for April, but compared to last year’s bump, I’d have to call it somewhat… anemic. If price declines only manage to match last year, Seattle’s index will be just over 29% off peak by December. If we continue to turn in stronger price drops than 2008, we’ll be closer to 32% off peak by December.

Check back tomorrow for a post on the Case-Shiller data for Seattle’s price tiers.

(Home Price Indices, Standard & Poor’s, 06.30.2009)


About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

116 comments:

  1. 1
    Jeremy says:

    Does anyone have any information on the ‘Notice Of Trustee Sales’ that did not get sold at the King County
    Auction?

    I have read in a few places that there is a huge shadow inventory of homes that the banks are sitting on – refusing to foreclose on and letting the “owners” live there.

    How do we find out what is going on with a particular house?

  2. 2
    Kary L. Krismer says:

    Usually I like less detail in graphs, but in the case of the last graph I’d actually like more detail. The problem with the last graph is you start with a year where the market was over-heating with huge increases on a month to month basis, and then it’s followed up with two years where the market was in trouble. There’s no normal year to compare to.

    BTW, for all the debate over whether C-S is better than mean or median, I’d point out that right now it’s almost exactly in between the mean and median when it comes to percent from the peak in July 2007.

  3. 3
    patient says:

    It looks like last year we had to wait until July’s c/s (released in September) until we got a reading lower than the March value. Personally I thought the increase in foreclosure would have killed the spring bounce effect this year but it looks like it’s still there though to a lesser extentn than last year. Btw congrats Kary to a good guess, didn’t you guess 0.2% or was that -0.2%, still pretty good.

  4. 4
    Kary L. Krismer says:

    RE: patient @ 3 – I was close on the percentage change, but off on the direction. So that’s off.

  5. 5
    The Tim says:

    RE: Kary L. Krismer @ 2 – Here you go, two more charts of the same style data from pre-bubble periods of moderate home price gains.

    And here’s the month-to-month comparison chart I’ve posted the last few months, with every April highlighted since 2000:

  6. 6
    Kary L. Krismer says:

    Thanks! I’m surprised 2007 doesn’t show stronger in the last graph.

  7. 7
    Ray Pepper says:

    My analysis of some of the markets I track in Reno, Carson, Sacramento, Gilbert, and other outlying areas of Phoenix is the cost to own is quickly approaching that of renting. I find the auction prices of the homes becoming quite compelling.

    The GEMS are becoming more apparent beginning 800 miles south of here.

  8. 8
    S-Crow says:

    RE: Jeremy @ 1 – Jeremy,

    drop me an e-mail and I’ll see what I can find. I’ll need either the address, parcel # or Deed of Trust recording number. Be specific as to what type of information you are after.

    tim@legacyescrow.net

  9. 9
    Kary L. Krismer says:

    RE: Jeremy @ 1 – It’s normal that most houses don’t get foreclosed on at the sale date. The owner will bring the property current, file bankruptcy, have some legitimate dispute with the lender, the lender may agree to delay the sale, etc.

  10. 10
    Bob Goates says:

    http://www.usa-foreclosure.com

    This is a good website that shows the outcome of what happened at trustee sales.

    King County

    http://www.usa-foreclosure.com/propertySearchResults.aspx?c=King&s=WA&sN=Washington

  11. 11
    Bennydtown says:

    New York times has this very cool interactive case shiller graph:
    http://www.nytimes.com/interactive/2009/04/29/business/2009-wide-housing-graphic.html

    The graph at this point really enforces one of The Tim’s main themes over the history of this blog: As far as the housing market is concerned, for the past five years or so, Seattle has behaved as a very average American city offset by a year or so (late) from the mean.

  12. 12
    DrShort says:

    June has seen a huge spike in Notice Of Trustee Sales for King County. 1,600+ filings. That’s about 500 more than we’ve ever seen in a single month recently. Not sure why the sudden spike.

  13. 13
    Scotsman says:

    CNBC and others are calling a bottom. Rally on! Go buy a house!

    Just be sure to use OPM.

  14. 14
    patient says:

    RE: DrShort @ 12 – If I recall correctly isn’t there a large bump in Alt-a loans up for reset/recast about now and Seattle has a large percentage of such loans? Anyone who has the graph of this?

  15. 15
    Hector says:

    By Jeremy @ 1:

    Does anyone have any information on the ‘Notice Of Trustee Sales’ that did not get sold at the King County
    Auction?

    I have read in a few places that there is a huge shadow inventory of homes that the banks are sitting on – refusing to foreclose on and letting the “owners” live there.

    How do we find out what is going on with a particular house?

    I know of one house that just received it’s 3rd notice of trustee sale. It’s in great shape, good neighborhood, newer, etc, but the bank refuses to repossess it. I tried to contact the owners to work out a deal, but they are no where to be found.

  16. 16
    Magnolia44 says:

    “Jingle keys ingle keys.. Jingle all the way”

    Its all a joke to me, not so much housing but the markets. It is so propped up by the govt its a joke. Who knows what tmw brings, RIP Billy Mays and MJ

    Live for today whether that beans renting or buying. All future projects in my household are on hold at the moment, we will look them over in 2010 (late).

  17. 17
    Kary L. Krismer says:

    Someone is going to have to explain the Jingle Mail term to me. Ignoring the issue of whether you should walk away, I don’t understand how someone could think that they would mail the keys in to the bank. Why would anyone do that?

    The bank doesn’t need the keys to get in, they’ll change the locks, and they probably have no way to get the keys to the property even assuming they weren’t sent to a lock box address.

  18. 18
    Big Worm says:

    So is all this pointing to a ~40% decline from peak before we hit bottom, assuming the pattern continues to hold?

  19. 19
    Kary L. Krismer says:

    RE: Big Worm @ 18 – Assuming the pattern is going to hold, in 10 years people will pay you $400,000 to take the median home in Seattle.

    Stated differently, you can’t tell squat from patterns.

  20. 20
    John says:

    I read that Hong Kong mortgage rates have dropped to 2%. I wonder if the rates will drop that far here. That will certainly make things a lot more affordable.

  21. 21
    deejayoh says:

    By patient @ 14:

    RE: DrShort @ 12 – If I recall correctly isn’t there a large bump in Alt-a loans up for reset/recast about now and Seattle has a large percentage of such loans? Anyone who has the graph of this?

    you can get data here: http://www.newyorkfed.org/mortgagemaps/

  22. 22
    Magnolia44 says:

    Jingle mail is ust a term. The real process would be squat as long as possible and save your money every month before you are thrown out.

    This is all of course a worst case scenario

  23. 23
    Groundhogday says:

    Let’s see:

    $8k tax credit (treasury intervention)
    4.5-5% mortgage loans (thanks to Fed intervention)
    FHA and GSE’s loosing billions in subsidizing home loans
    Moratorium on foreclosures, just starting to thaw
    Federal money to encourage workouts

    All that intervention, we get the slightest hint of an uptick during the peak season… and someone thinks this is a sign we’ve hit bottom?

  24. 24
    mr.finviz says:

    RE: The Tim @ 5 – I always wondered why we don’t use the seasonally adjusted index for MoM comparisons?? It’s a better indicator for MoM movements. And if you look at the seasonally adjusted index the prices actually declined a little over March from 150.78 to 149.85. Could you also post a MoM % change graph for seasonally adjusted index?

  25. 25
    mr.finviz says:

    Also to add to the request in my last post, it will be a good idea to have a graph which actually compares the % gain to the peak vs the % decline from the peak. The biggest bubbles and the biggest bust. Specially when we compare areas where the %gain was close to what we had in Seattle.

  26. 26
    Scott Weitz says:

    Good call GroundHogday…

    This party is just getting started…especially in the Seattle area.

  27. 27
    Flying Ape says:

    RE: John @ 20
    We can only wish. Hong Kong pegs its currency to the US dollar so it lowers interest rates almost in step with the Fed. Even though market conditions probably wouldn’t warrant historic low lending rates, they follow the Feds credit easing policy. Fierce competition would also help.

  28. 28
    deejayoh says:

    By mr.finviz @ 25:

    Also to add to the request in my last post, it will be a good idea to have a graph which actually compares the % gain to the peak vs the % decline from the peak. The biggest bubbles and the biggest bust. Specially when we compare areas where the %gain was close to what we had in Seattle.

    I have done a couple posts on this in the past. I’d be happy to update if there is interest

    http://seattlebubble.com/blog/2008/07/31/comparing-boom-and-bust-cycles-across-markets/
    http://seattlebubble.com/blog/2008/11/20/update-boom-and-bust-cycles-across-markets/

  29. 29
    Kary L. Krismer says:

    RE: mr.finviz @ 24 – I think C-S has seasonally adjusted numbers, but I’ve never really looked at them.

  30. 30
    The Tim says:

    By mr.finviz @ 24:

    RE: The Tim @ 5 – I always wondered why we don’t use the seasonally adjusted index for MoM comparisons?? It’s a better indicator for MoM movements. And if you look at the seasonally adjusted index the prices actually declined a little over March from 150.78 to 149.85. Could you also post a MoM % change graph for seasonally adjusted index?

    Here you go:

    Seattle's Case-Shiller HPI: Month-to-Month Change (Seasonally Adjusted Data)

  31. 31
    sasha055 says:

    I’ve been reading comments here for almost 6 month now..
    I’m a first time homebuyer that is looking for a house.. and this site gives me a lot of usefull info

    I have a question though.. I’m looking at all these numbers, price decrease month to month and Year to Year.. but when looking at the market around MSFT it looks different. Here are few examples (I’m closely following Redmond/Bellevue/Sammamish area)

    Back in March there were a lot of cute houses around 400K in this areas (by cute I mean not split level and in decent condition ) now all that is under 400K are either small or has no backyard.. or distressed badly
    It seems to me that around this areas prices actually rised a bit.. and inventory is really low…

    Is there a report based on area?
    Maybe around Seattle prices did drop and all.. but I feel that around MSFT market is still going strong.. am I missing something?

    Thanks
    Sasha

  32. 32
    per_se says:

    RE: mr.finviz @ 25 – you’d have to normalize the percentage though. 10% on the way down is more than a 10% rise because you are starting from a higher value. It would also be interesting to see it tracked against inflation in real terms and the boom bust compared to interest rates.

  33. 33
    mr.finviz says:

    By Kary L. Krismer @ 29:

    RE: mr.finviz @ 24 – I think C-S has seasonally adjusted numbers, but I’ve never really looked at them.

    Why not?

  34. 34
    mr.finviz says:

    RE: The Tim @ 30 – Now *that* shows the summer effect.. :-)

  35. 35
    mr.finviz says:

    RE: deejayoh @ 28 – Yes please, when you get some time.

  36. 36
    Eastside Westside its all Good says:

    I’ve been looking in the South Bellevue area for over a year, and the downward trend is apparent, particularly when looking at comparable property over time.

    In the summer of 2007, 1970’s built split-levels were running from the low 600’s to the low 700’s in the nieghborhoods I’ve tracked. In these particular areas, the homes are pretty homogenous (sq ft, lot size, etc).

    Last summer – 2008 – those same houses fell into the 500’s to 600’s range, with homes above 650k just flat out sitting.

    It is now going on July 1st and none of these houses in this area have sold for 600k+. In fact, only two homes have sold in the 500’s since February. In the last two weeks there was a run on homes with most of the inventory getting picked up (last chance for people to move in time to register children for the start of school). In all cases, the homes were listed in the upper 400’s to low 500’s. Listings remain, most in the mid/upper 400’s.

    When these most recent homes close in July and August, the comps in this South Bellevue area will be rolled back to late 2004/early 2005.

    Forget that April bit. The trend remains down. The seeds for July and August prices have already been sown and the numbers are not stabilizing.

  37. 37
    Scotsman says:

    RE: sasha055 @ 31

    “It seems to me that around this areas prices actually rised a bit.. and inventory is really low…”

    Buy now, or be priced out forever!

  38. 38
    MSoftie says:

    RE: sasha055 @ 31

    Here is the problem. Most of the properties around MSFT aren’t really priced to sell. Anything that is listed below 20% off the July peak gets sold and there are very few of them. This does not mean that we have hit bottom. It only means that it is a bad time to buy a home because there are very few decently priced homes. It simply is not a good time to buy. The reasonably priced options are too few.

    Why am I saying this is not the bottom? Take a look at http://www.elementredmond.com/. They have new townhomes at just over 300K$. Sounds like a steal at 5% interest mortgage. Now go visit craigslist http://seattle.craigslist.org/est/apa/. Look for townhome rentals. Compare the mortgage interest payments at 5% (for 0 down) and HOA dues and property maintenance and taxes v/s renting a townhome at a great price. You are still better off renting. This means that the prices here are so high that the idea of buying a home next to a job center and renting it out will not earn you any money. This should be an outright signal that RE is quite overpriced and prices have further to fall, especially with falling rents.

  39. 39
    Kary L. Krismer says:

    By MSoftie @ 38:

    RE: sasha055 @ 31

    Here is the problem. Most of the properties around MSFT aren’t really priced to sell. .

    You deal with that by looking at stuff that does sell.

  40. 40
    Softwarengineer says:

    THE HUD HOME NEXT DOOR TO ME JUST SOLD

    Sure, they had to lower the price from 2006 about 30-40%…LOL

    It still took 6 months to unload at the low price tag.

    They just painted it and perhaps soon I’ll get some new neighbors. Its been empty for about 2 years.

  41. 41
    hzg says:

    The commenter above suggesting the use of the seasonally adjusted CS index has the right idea. If the seasonally adjusted index existed from day one it would be the only CS index of interest. But it was first published only recently. Unfortunately, human nature resists change even when change is so obviously for the better.

    Furthermore, the way month to month calculations are virtually always performed on the CS index are wrong and/or misleading because the value for a month is actually an average of 3 months of data. So if a months value was an average of months A, B and C then the next value will be the average of months B, C and D. Now the first reading is A/3+B/3+C/3 and the next month is B/3+C/3+D/3. Consequently the difference in the 2 values (so called month to month change) is (B/3+C/3+D/3) – (A/3+B/3+C/3) = D/3 – A/3 Thus the so called month to month change is actually one third of the difference between the current months data and the data of 3 months ago!

    (not to mention that the whole thing is ridiculously old data to begin with)

  42. 42
    what goes up must come down says:

    Greg calling Greg how is that prediciton going concerning June sales wasn’t it +2000?

  43. 43
    shawn says:

    RE: Kary L. Krismer @ 19 – “you can’t tell squat from patterns. “, I suggest some reading on Patterns, maybe you could start with Pattern theory :)

  44. 44
    Kary L. Krismer says:

    RE: shawn @ 43 – In the past I’ve said you can use charting for stocks, but that housing is too slow moving and too illiquid for charts to be of any real use.

  45. 45
    alex says:

    RE: Eastside Westside its all Good @ 36

    What this guy is doing is really cool! If we all track some neighborhood ultra-closely like this and combine our findings on a regular basis, we stand a good chance of spotting the bottom some 1-2 months before everyone else.

  46. 46

    TIM, YOU NEED TO UPDATE YOUR CHART PROJECTIONS DOWNWARD

    The recent news predicts an even more accelerated downfall for your future charts due to our horrifying chronic unemployment and subsequent tanked consumer confidence:

    See some CNBC data that just came in from Dr. Roubini’s bloggers:

    “…So consumer confidence tanked yesterday, today its a Mortgage Applications Collapse- the common thread being NO JOBS!
    Can’t apply for a mortgage when you dont have a job, plus who would actully buy as home values continue to plummet?
    Wheres the GREENSHOOTS? which is sort of like the old commercial “WHERES the BEEF”…
    Seems also that there are a lot of opinions, bloggers, commentors, even some POLS hot on the heals of Goldman Sachs..
    Goldman is corrput and needs to GO AWAY.

    Mortgage Applications Collapse

    Another sign that the housing market isn’t in recovery mode, or anywhere close yet…

    The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending June 26, 2009. The Market Composite Index, a measure of mortgage loan application volume, was 444.8, a decrease of 18.9 percent on a seasonally adjusted basis from 548.2 one week earlier. On an unadjusted basis, the Index decreased 18.5 percent compared with the previous week and decreased 7.4 percent compared with the same week one year earlier.

    The Refinance Index decreased 30.0 percent to 1482.2 from 2116.3 the previous week and the seasonally adjusted Purchase Index decreased 4.5 percent to 267.7 from 280.3 one week earlier. The Refinance Index is at its lowest level since November 2008.

    The four week moving average for the seasonally adjusted Market Index is down 9.2 percent. The four week moving average is unchanged for the seasonally adjusted Purchase Index, while this average is down 15.2 percent for the Refinance Index.

    As CNBC notes, new weekly mortgage applications are at a seven-month low, and of course they quote someone who thinks this needs to be “fixed” ASAP

    Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley, said mortgage rates are just one factor driving potential borrowers.

    “Rising unemployment, concerns about job security, potential buyers’ inability to sell their existing homes and problems with appraisals coming in too low are all weighing on demand,” he said.

    “The government needs to take more aggressive action to bring mortgage rates back down to below 5 percent as that seems to be a key level for the market,” he said.
    http://www.businessinsider.com/mortgage-applications-collapse-2009-7

    Hide reply Reply to this comment By MM CA on 2009-07-01 08:51:10…”

    The rest of the URL:

    http://www.rgemonitor.com/roubini-monitor/257169/the_chinese_proposal_for_a_new_global_super_currency#readcomments

    YEAH RIGHT

    I saw Cramer and the FDIC chief on a CNN townhall meeting talking about home
    value collapses a couple monts ago, and Cramer [you know, the guy who bats 100 on
    stock picks] piped up, the way to solve the housing crisis is 3.5% fixed mortgage
    interest. The FDIC chief nodded her head yes and the audience [canned/paid?] all
    applauded vigorously like trained seals.

    Why in God’s name would we want to attempt to re-inflate the same bubble that destroyed
    our economy in the first place? What am I missing? Besides, with 3.5% fixed mortgages, what’s
    are savings accounts going to get? -1%?

  47. 47
    Kary L. Krismer says:

    RE: alex @ 45 – I don’t think you’re likely to know when the bottom occurred until at least one year after the fact. Just look at what was happening with the King County SFR median last year at this time:

    470,000 June 2007
    481,000
    477,345
    450,000
    443,950
    435,000
    435,000
    435,000 Jan 2008
    429,900
    439,900
    448,500
    440,000
    449,700 June 2008

    The median for June 2009 will most likely be under $400,000.

  48. 48
    Kary L. Krismer says:

    RE: softwarengineer @ 46 – Why would the FDIC chief appear with Cramer?

  49. 49
    Gerald says:

    RE: Kary L. Krismer @ 48 – Kary, it’s almost as if you are willfully misunderstanding what the data is telling you. I think it’s clear people are telling you that the data is showing a TREND that is indisputable. Prices are going down and the only moderation that has occurred is in the RATE at which the prices are declining. You keep saying that PATTERNS can’t be seen in the data, as if we need to see an exact replica of a past event in order to see what is plain before our eyes. The data you posted does not prove your point. Try plotting it out and see if you can see the TREND that is clearly there.

  50. 50
    George says:

    RE: sasha055 @ 31 – You are right the East Bellevue area in general has seen a decrease in lower priced inventory overall due to the good local job base and a reduction of bank owned inventory. The amount of “distressed” inventory is what puts downward pressure on pricing. As an example in Zip Code 98008 at present there is only six bank owned homes of which four are listed. This compares to over 20 homes in January of this year. It was at his time the market had seen it biggest downward spike in pricing. There are still a number of homes having their “notice of trustee sale issued” (25) in the 98008 zip copde but the interesting fact is that a number of those homes appear to be getting sold prior to foreclosure.

  51. 51
    Kary L. Krismer says:

    RE: Gerald @ 49 – Give me a break. Clearly I’m talking about trying to predict the future based on the past trends. Any idiot can read a graph, so I and everyone else here are well qualified to know the past trends.

  52. 52
    Gerald says:

    RE: Kary L. Krismer @ 51 – Aren’t you the one that said the RE market is not like the stock market? In the stock market, it’s not uncommon for there to be “V” type bottoms where the trend suddenly changes direction. Sometimes because of “news”, but sometimes for no clear reason whatsoever. The RE market has never done this in the past. It’s a smooth trending market that changes direction in a pretty obvious fashion when you look back at the past. Are you aware of any examples where the trend changed suddenly? If not, why do you think it’s unreasonable for people to look at the charts of past price history and extrapolate out that the current trend is so clearly not approaching a bottoming formation that the future price must continue going down? I don’t see how you can constantly straddle the fence and say it might go down, it might go up. What gives you any indication whatsoever that the future might be up (and I’m not talking long-term future)?

  53. 53
    Scotsman says:

    RE: Gerald @ 52

    Kary sells real estate. Admitting to himself that there is going to be a long downward trend in real estate prices, and that he is selling his clients a declining asset and locking them into a losing position would make it hard to keep selling. And he needs to sell to eat. Keep in mind, he also bought at the peak. So cognitive dissonance takes over, and Kary is either incapable of seeing the reality before him, or unwilling to acknowledge its existence. It’s a survival technique.

    He does know quite a bit about the law though, especially real estate and contracts.

  54. 54
    Gerald says:

    RE: Scotsman @ 53 – I actually greatly appreciate what I’ve learned from Kary by reading his comments. He is clearly a smart guy and is willing to share his knowledge with people here. I think realtors can take part in transactions in a declining market in good conscience by simply being honest with their clients about what is happening. There is no need to talk up the market because there are always buyers out there who will still buy even knowing that they will probably lose money (those are the monthly payment buyers).

  55. 55
    Greg Perry says:

    By what goes up must come down @ 42:

    Greg calling Greg how is that prediciton going concerning June sales wasn’t it +2000?</blockquote

    I see 2000, but in July, not June. I revised early last month (here in several comments). Jan, Feb and early March were too anemic for +2000 June closings. There will be + 1500 in June. We'll see!

  56. 56
    Kary L. Krismer says:

    RE: Gerald @ 52 – Markets go up and down, and real estate is no exception.

    http://mysite.verizon.net/vodkajim/housingbubble/sacramento.html

    Seattle was a bit unusual, having been up only for such a long time.

    As to when it will go up here again, I’m not trying to predict that. I’m just saying you won’t really know that until at least a year after it happened.

  57. 57
    Kary L. Krismer says:

    RE: Scotsman @ 53 – Wow, it’s amazing how wrong you guess when you guess.

    First, I don’t only represent buyers. I represent both buyers and sellers. And as I’ve noted in the past, I don’t try to predict and tell people when to buy or sell.

    Second, I bought after the peak, knowing there was potentially trouble in the market. And I bought deciding to sell my existing property. The last time I looked, the old property declined in value more than the new property did, so ignoring the back I moved into a better house in a better neighborhood, it was also a good move financially. Yes I could have just sold and rented, but I wouldn’t want to be a renter. Some people are fine renting, but personally I think it sucks. I’m too much of a control freak, for one thing.

    Third, as I just said a couple of days ago, agents are more affected by volume than price.

  58. 58
    Greg Perry says:

    By what goes up must come down @ 42:

    Greg calling Greg how is that prediciton going concerning June sales wasn’t it +2000?

    I amended the +2000 in June (in several posts here) early last month to July. Jan/Feb/early March pending volume was way down. The market started moving in the 4th week of March. June will be +1500. I think we’ll see +2000 in July. We’ll see.

  59. 59
    Kary L. Krismer says:

    I wonder what the volume would be, hypothetically, if the banks approved every short sale tomorrow. My guess is there are probably a lot of people that have accepted offers on multiple short sales, and that probably over 50% of them would drop out if that somehow happened.

  60. 60
    patient says:

    RE: Kary L. Krismer @ 58 – I think you have strong opposition from Greg Perry for that theory. When I brought up the topic a while ago he strongly rejected the notion that there were buyers with more than one pending in the system due to the firm contractual status between buyers and sellers for pendings. I’m still leaning more to your guess Kary.

  61. 61
    The Tim says:

    By Kary L. Krismer @ 58:

    My guess is there are probably a lot of people that have accepted offers on multiple short sales, and that probably over 50% of them would drop out if that somehow happened.

    Granted, this is a blog post from an agent in Florida, and I don’t know if the rules here prohibit this sort of thing, but check this out: My Buyer only wants one house. Why make 14 offers?

  62. 62
    Kary L. Krismer says:

    RE: The Tim @ 60 – That carries it a bit far. Making offers on properties you haven’t even looked at is absurd.

  63. 63
    Greg Perry says:

    RE: Kary L. Krismer @ 58RE: The Tim @ 60RE: patient @ 59 – When a buyer signs a purchase and sale, he/she signs over this: “Buyer represents that Buyer has sufficient funds to close this sale in accordance with this agreement and is not relying on any contingent source of funds, including funds from loans, the sale of other property, gifts, retirement, or future earnings, except to the extent otherwise specified this Agreement.”

    If a Buyer enters into a 2 or more contracts, and doesn’t have the means to close on multiple contracts, the Buyer is (and agent who represents with knowledge) at the least is not dealing in good faith or possibly committing fraud. (Note I am not an attorney). If an agent has knowledge that buyer doesn’t have sufficient funds to close a contract, the agent may be violating license law. (Agent must represent the truth and deal with all parties in good faith).

    I believe the Buyer CAN DISCLOSE to all parties that they are entering into multiple contracts. Wording could be crafted that would say the buyer is entering into several contracts and will accept the first short sale that comes back approved by the bank, and will terminate the remaining contracts. This of course would give the seller the decision whether or not to enter into an agreement like this.

    I haven’t seen this scenario….. maybe it’s happening. This could result in one buyer tying up several pended properties. If a buyer does not give proper disclosures, it would be tricky waters to navigate in.

    A Seller may elect on the NWMLS short sale addendum to accept offers from more than one buyer. This scenario would only result in ONE pending (with several buyers tied up).

    In Tim’s article in comment 60, I would think a buyer and agent can make as many offers as they want at the same time. There is a difference between making many offers and entering many contracts. This is a tricky strategy, because two contracts could be accepted by sellers at the same time. This scenario should also have disclosure wording, I would think, to ensure dealing in good faith.

  64. 64
    Gerald says:

    RE: Greg Perry @ 62 – Isn’t the deposit the material representation of “good faith”? A lawyer’s opinion would certainly be more valuable, but I don’t see how the clause you quoted is in direct conflict with being in multiple contracts. It seems to me that those buyers with multiple contracts won’t be in violation of that clause until they close at least one of them before having cancelled the others. At that point, they may not have necessary source of funds to close the second deal.

  65. 65
    Gerald says:

    By the way, not that I endorse this tactic. I personally think it’s stupid.

  66. 66
    Greg Perry says:

    RE: Gerald @ 63
    When a buyer enters into an agreement, the buyer is stating they have”funds to close” with no contingencies, except as noted.

    A deposit is just a portion of the “funds to close”. If they need a loan, it must be disclosed, usually in a financing addendum. Other disclosures can be made. Everything should be above the table and in good faith.

    If buyer is in contract with seller one for $200,000, and in contract with seller two for $200,000, he should have $400,000 available OR some kind of disclosure.

    In other words, if multiple contracts are done on the sly, it’s not in “good faith”.

    Technically it is possible for one buyer to have 2 or more pending sales locked up. However, I do not see this as a widespread problem.

    I’d love to see a contract attorney chime in.

  67. 67
    Mikal says:

    RE: Scotsman @ 53 – We all know what Scotsman knows as we quickly scroll past his posts.

  68. 68
    Scotsman says:

    RE: Kary L. Krismer @ 56

    “First, I don’t only represent buyers. I represent both buyers and sellers.”

    Like I said, you sell real estate. How does your statement above refute that?

    Whether you acknowledge it or not, your profession is at odds with many of the current issues
    in the economy, and thus presents a conflict of interest. While it’s true that volume is of greater
    importance than price, it’s harder to generate sales volume when prices are falling. I’m not saying that you aren’t honest, or smart. or capable. I’m saying the current reality is a bit uncomfortable, so you opt for a slightly myopic vision of the future. It’s not really a criticism, just an observation. As someone who looks at a lot of data, the first question is always “where does it come from, and what is their interest?” Getting comprehensive, accurate, timely, and unbiased data is the core of what I do. It’s business, don’t take it personally.

  69. 69
    Scotsman says:

    RE: Mikal @ 66

    You should ask Tim to add an “ignore” function. Then you would never even see my posts, and we would both be happier. You’d be happy because in your world, I wouldn’t exist. And I’d be happy, because you’d be happy. It’s a beautiful day- kick back, have a beer, and enjoy! ;-)

  70. 70
    Racket says:

    By Scotsman @ 68:

    RE: Mikal @ 66

    You should ask Tim to add an “ignore” function. Then you would never even see my posts, and we would both be happier. You’d be happy because in your world, I wouldn’t exist. And I’d be happy, because you’d be happy. It’s a beautiful day- kick back, have a beer, and enjoy! ;-)

    RE: Scotsman @ 68

    I’d like to see a thumbs up or down button next to comments as well.

  71. 71

    RE: Scotsman @ 67
    Like Kary, I too sell real estate. But I don’t feel any conflicts of interest in doing my job. I never tell people that it’s ” a great time to buy” nor do I pressure clients into making offers. I’ve been known to have talked a few people out of making offers. Why? Because I’m in it for the long haul, and they can get the usual realtor BS from other agents.. I recognize that there are various reasons why people want to buy houses, and if someone wants to buy a house, I don’t feel as though I’m aiding and abetting a major crime by assisting in their endeavor. In the last couple of years, there hasn’t been a time when I did not express the reality to clients that prices have been dropping, that I expected prices to continue dropping, and if they wanted to buy a house they needed to know that this was a very real risk.
    I don’t see the conflict, at least for me. If I’m working for a buyer, I want to make sure they get the best house for the least amount of money possible. And yes, I realize it’s an industry rife with charlatans, swindlers, and friendly, smiling backstabbers .

  72. 72
    Scotsman says:

    RE: Ira Sacharoff @ 70

    ” In the last couple of years, there hasn’t been a time when I did not express the reality to clients that prices have been dropping, that I expected prices to continue dropping, and if they wanted to buy a house they needed to know that this was a very real risk.”

    Commendably, that’s what sets you apart, Ira. It’s a very different approach from feigning “no one knows what the future will bring.”

    No one who reads this site and can understand even the most basic data can claim ignorance of the fact that prices are not only still headed down, but headed down at a rate commensurate with what we’ve seen for the past year. If someone just has to buy a house, fine, but don’t go crying to the government or other taxing entity in a year or so when you’re upside down with no equity. And most of all, don’t pretend no one saw it coming.

  73. 73
    Kary L. Krismer says:

    By Scotsman @ 53:

    RE: Gerald @ 52 – Kary sells real estate. Admitting to himself that there is going to be a long downward trend in real estate prices, and that he is selling his clients a declining asset and locking them into a losing position would make it hard to keep selling.

    Apparently I need to respond to this clearer. I represent both buyers and sellers. When I do so, and to do so, I don’t need to represent to either that things are likely to go up or down. So I don’t really need to admit anything. And most people, actually almost all people, don’t want to buy or sell mainly because they think values will go up or down in the future. It’s only people on this board that have that fascination to such a degree.

    You need to admit that you don’t know the future. While there are many reasons prices may continue to decline, things may not work out the way you think. If I’m incorrect on that, I’ll assume you have $100,000,000 in profits from trading stocks over the past 5 years.

  74. 74
    Kary L. Krismer says:

    By Scotsman @ 68:

    RE: Kary L. Krismer @ 56 – Whether you acknowledge it or not, your profession is at odds with many of the current issues in the economy, and thus presents a conflict of interest. While it’s true that volume is of greater
    importance than price, it’s harder to generate sales volume when prices are falling. I’m not saying that you aren’t honest, or smart. or capable. I’m saying the current reality is a bit uncomfortable, so you opt for a slightly myopic vision of the future. It’s not really a criticism, just an observation. As someone who looks at a lot of data, the first question is always “where does it come from, and what is their interest?” Getting comprehensive, accurate, timely, and unbiased data is the core of what I do. It’s business, don’t take it personally.

    I’m not terribly worried about my ability to function in any market, although I’d prefer a market where I didn’t have to deal with banks at all. That’s just a result of having dealt with them so much as an attorney. Banks suck.

    I don’t see how you can say I’m myopic when I don’t really take a position on where things are going, and I think fairly report where they are today.

  75. 75
    Kary L. Krismer says:

    RE: Scotsman @ 72 – Where’s that $100,000,00 you made knowing the future. If anyone is feigning anything, it’s you regarding knowing what’s going on.

    Just as an example, you mentioned my buying a house near the peak (which was actually after the peak, but whatever). You don’t really have a clue, and that shows. That investment is earning me over 4% per annum, tax free in rental value, which is much better than what I probably could have done elsewhere over the same period of time. And as I mentioned, it saved me possibly greater losses on the old house. And it’s a hedge against inflation, meaning I’m relatively balanced for inflation/deflation. But you see it as having been a bad move because you’re so focused on price trends. Who’s myopic?

  76. 76
    Kary L. Krismer says:

    RE: Ira Sacharoff @ 71 – Actually this market is sort of nice, because you don’t have people buying focused so much on where things are headed. People buying planning on selling in three years never made a lot of sense to me (absent sweat equity or some such thing), so it’s nice that there are a lot fewer of such people.

  77. 77
    Scotsman says:

    RE: Kary L. Krismer @ 74

    “I don’t see how you can say I’m myopic when I don’t really take a position on where things are going, and I think fairly report where they are today. ”

    That’s disingenuous- you do take a position, and your “position” is to disavow any knowledge or even awareness about what may happen in the future, thus removing yourself from the consequences of your actions. It’s less than honest because you spend a healthy portion of your day reading/posting on a site that has a decidedly negative outlook on the future of real estate and the economy in general. Additionally, that perspective is well presented, clearly documented, well reasoned, essentially peer reviewed, and wide open to critique. And what does it show? It shows that aside from a very weak seasonal bounce up in a what remains a clear downward trend there is NO positive news out there. There is NOTHING that is honest and verifiable to suggest that housing and the economy have significantly slowed in their decent, let alone plateaued. The concept of “:green shoots” is openly mocked on sites all across the Internet, both domestically and abroad. Yet you can somehow completely ignore this environment (that you’ve willingly put yourself in), and continually proclaim that no one can predict the future. That is the very definition of willful myopia.

    Has my personal situation improved over the last few years because of my efforts? Yes, significantly. Is that in any way relevant to this discussion? Nope. Am I the exception? Nope- the vast majority of folks who read this site could come up with a pretty good prediction of what happens over the next few years. By denying the obvious one loses credibility when he could be building good will toward the future. Good luck.

  78. 78
    EconE says:

    RE: Scotsman @ 77

    Realtors HAVE to play dumb.

    If they didn’t…what would they say to their 2006 and 2007 clients?

    “Ooops…my bad…I guess that option-ARM my mortgage-broker-buddy set you up with wasn’t such a good idea and perhaps it wasn’t such a “great time to buy”. Sorry. Thanks for the commission however.”

    I’m still waiting for the pitchforks and torches.

  79. 79
    shawn says:

    Kary, we might start predicting what you will say next due the pattern of your statements. We might even graph them.

  80. 80
    shawn says:

    RE: EconE @ 78 – I am shocked that there has not been a real backlash against the RE folks that led so many to be swindled so badly.

  81. 81
    Kary L. Krismer says:

    By Scotsman @ 77:

    RE: Kary L. Krismer @ 74

    “I donâ��t see how you can say Iâ��m myopic when I donâ��t really take a position on where things are going, and I think fairly report where they are today. ”

    That’s disingenuous- you do take a position, and your “position” is to disavow any knowledge or even awareness about what may happen in the future, thus removing yourself from the consequences of your actions. .

    I take the position that there should be an ethical rule to prevent real estate agents from trying to predict the future. They’re not trained, and as a practical matter no one can. Also, there’s no financial liability at all for being wrong, so I purposefully don’t take a position precisely because there are no “consequences” to my actions. I think it’s ethically wrong to try to convince someone to make a financial decision based on a guess about the future.

    Real estate is unfortunately affected by a herd mentality. People are irrational. They want to buy in large numbers when things are going up out of control, and avoid buying when prices are falling. Trying to predict where the herd is going to run next is pointless.

  82. 82
    Kary L. Krismer says:

    RE: EconE @ 78 – I’d say the same thing I told them then. No one knows where the market is headed.

    I’ve told this before, but once I had to say that three times to someone. They were just convinced that the market would head up again and they were really looking for affirmation of their own opinion more than my opinion.

  83. 83
    Kary L. Krismer says:

    By shawn @ 80:

    RE: EconE @ 78 – I am shocked that there has not been a real backlash against the RE folks that led so many to be swindled so badly.

    – Me too. Americans like to blame others for their own mistakes. ;-)

  84. 84
    Gerald says:

    RE: Kary L. Krismer @ 81 – You said: “They want to buy in large numbers when things are going up out of control, and avoid buying when prices are falling. Trying to predict where the herd is going to run next is pointless.”

    If you believe this to be true, why can’t you take this knowledge and use it to make decisions about the future? What you seem to be saying is that you can see the herd running north but dang it, they might just all stop and turn around heading south any second now. Is the bystander who sees the same herd and thinks that heck, those folks camping up ahead of them best be moving on because I bet that thar herd is about to squish ’em is making a ridiculous prediction?

  85. 85
    Kary L. Krismer says:

    RE: Gerald @ 84 – How do you predict irrational behavior? Especially when the relevant time frame is measured in years, not days or weeks. There is no CNBC for real estate to let us know what the masses are being taught to think, and even in the case of CNBC, it’s effect on stocks is very short-lived.

  86. 86
    Racket says:

    Wow You guys are completely irrational. You attack a guy that says “I don’t know”.

  87. 87
    Kary L. Krismer says:

    By Racket @ 86:

    Wow You guys are completely irrational. You attack a guy that says “I don’t know”.

    That’s what their psychic told them to do. ;-)

    Seriously, how many of them were praising Ardell for making her bottom call? I think the real thing they’re upset with is not that I won’t make a prediction, it’s that I don’t share their opinion.

  88. 88
    Gerald says:

    RE: Kary L. Krismer @ 85 – How do you know the behavior is irrational? A stock chart is a reflection of buy/sell decision being made by humans that covers every possible reason for them making the decision. Some of those decisions are made based on research, analysis, computer programs, or the “art” or “science” of trading. Others are based purely on emotions. It doesn’t matter. The chart reflects all of it. Much of the time, these charts are choppy and making a decision is very difficult. Other times, the trend is so strong that the risk associated with making the decision is lower and it is possible to use the information to your benefit. This is not that common, though, and for the most part predicting stock prices by reading charts is very difficult. As you’ve already said, though, housing trends are not like stock trends. Housing tends to move in slower cycles. This slowing, though, makes the trends easier to see. I think many of us are saying the same thing. The stinking trend is so obviously down in Seattle, how could you not see it? The economic fundamentals continue to be weak and serve to reinforce the belief that the trend is intact. If we were talking San Diego or LA, maybe you might have some takers that the charts seem to indicate a slowing of the rate of decline. The downtrend still looks intact, but you could argue that the downside risk is greatly reduced. If we were talking DC, you might argue that the growth in government presents opportunities because the local economy is artificially stronger. In Seattle, though, where is the belief in a turnaround coming from other than hope?

  89. 89
    David Losh says:

    RE: Kary L. Krismer @ 85RE: Kary L. Krismer @ 81

    Real Estate is a rational market. Real Estate prices may go up and down according to herd mentality, but the core value is as a housing unit. Some housing units are unique by location, or archetypal detail, as examples, but the core value is the dirt and housing unit.

    There is no top or bottom. You own the housing unit, the dirt, or control it.

    There is the freeway off ramp factor. Knowing where the next improvement to the value of the dirt is going to be. Job Centers are a good indicator of future housing unit value. There are rules to Real Estate.

    So yes, Real Estate is a rational market. It can be predicted. That is what an agent gets paid for. An agent gets paid to know the market place.

  90. 90
    Kary L. Krismer says:

    By Gerald @ 88:

    RE: Kary L. Krismer @ 85 – The stinking trend is so obviously down in Seattle, how could you not see it?

    Well obviously I know what the past numbers have been, but that doesn’t mean I know what the next numbers will be.

    If Tim is listening, perhaps we should have a poll where people here predict the June 2009 median for King County SFR. $10,000 increments, starting at say $345,000 and ending at $415,000 (May was $375,000, roughly halfway in between). The number will be announced June 6. I have a pretty good idea what that number will be because of my access to the system, but let’s see how you all do given your access to the past data.

  91. 91
    Kary L. Krismer says:

    By David Losh @ 89:

    RE: Kary L. Krismer @ 85RE: Kary L. Krismer @ 81 – So yes, Real Estate is a rational market. It can be predicted. That is what an agent gets paid for. An agent gets paid to know the market place.

    I’d agree we get paid to know the current market price, not the future price.

  92. 92
    Gerald says:

    RE: Kary L. Krismer @ 90 – Now you’re moving the goal posts. I haven’t said that you can predict what the price will be at some time in the future. I’m saying that the trend is still going down, so a buyer would be wise to wait until the trend either stops going down or that the slope flattens sufficiently that you have reduced the risk of downside. If this were a stock chart, you’d be even wiser to wait until the trend turns up before you buy. It isn’t necessary to get the absolute bottom or top to make a good buy, you just need to avoid the really bad drops. Missing the bottom by 5-10% is trivial compared to avoiding losses in this downtrend.

    If your argument is that nobody can predict the correct price at a specified time in the future, then I agree with you. Unfortunately, I think you’re just trying to shift the argument because I’m not saying that.

    If you ignore the absolute numbers, can you predict whether we will be lower or higher 6 months from now based on what you already know? I know you are capable of predicting, because you’ve played the “how many closed sales” game here. If you can make that prediction based on past history, why can’t you predict where the current trend takes us?

  93. 93
    shawn says:

    RE: Kary L. Krismer @ 83 – Truthfulness in statements and advertising; and non-interference in exclusive relationships that other REALTORS® have with their clients.

    If Realtors and the NAR had followed that and clearly stated that in their opinion that real estate has gone freaking nuts and if things go back to normal, then you as a buyer are destroyed, then I would agree with you. But Realtors pretended to have ethics and be advisers to the buyers, so Realtors are more than complicit.

    But I could be wrong. Maybe it is just that Realtors simply facilitated buyers in making the worst mistake of their lives. Sort of like a person wants to kill themselves and another aids them, not the assistant’s fault.

  94. 94
    Civil Servant says:

    Hi Tim — Enthusiastically seconding Mikal’s wish, above @ 67, for an Ignore function. I would probably even pay for this, as the benefit to me would be both intellectual and psychiatric.

  95. 95
    Kary L. Krismer says:

    RE: Gerald @ 92 – In my poll suggestion in the other thread, I was suggesting that people here predict the past (June).

  96. 96
    Kary L. Krismer says:

    RE: shawn @ 93 – I think people came to agents wanting to buy a lot more than agents found people and made them buy.

  97. 97
    shawn says:

    RE: Kary L. Krismer @ 85 – Kary you are missing the point that regardless of peoples thoughts being rational or not, it is the ability to act on that irrationality. If the cattle think “hey lets just stampede forward forever and ever” and reach a cliff, guess what? Their irrational thinking continues, but the stampede is over. And there I am on a hill top where I can see everything, standing next to you, and I say “if they do not take a turn they are dead.” And to that you reply “Hard to predict that.” And I say “So if they do keep going straight then they do not die?” And you say “It is impossible to predict.”

  98. 98
    shawn says:

    RE: Kary L. Krismer @ 87 – Kary I don’t mind that you don’t make a prediction, what I find odd is that you say a prediction cannot be made. There is a science to predicting future outcomes based on past and current events, and influencing factors. Add to that, the fact that others did correctly predict this whole real estate scenario that has occurred. Taking that into consideration, when you say that no one can make a prediction, it just comes off as either naive or disingenuous.

  99. 99
    Kary L. Krismer says:

    RE: shawn @ 97 – I can see that, but irrationality is only part of what affects things. Going back to stocks, you could think that say Boeing’s stock price was being driven up by irrationality, and be right, but at some point reality will sink in. Predicting when that will occur is tough, because you’d have to have predicted a delay in say the 787 program (relatively easy) or a loss of a tanker project (more difficult)..

    Let’s just say buyers in Seattle were getting irrational in the spring/summer of 2007. But for what happened earlier in CA, AZ, and FL, that irrationality probably would have continued for many months or even years.

    Now they are inter-related. If we have a third financial crisis in the fall of 2009, that will undoubtedly affect the opinions of the masses and their behavior. But what’s going on right now in the Seattle real estate market won’t predict that. If I had to predict, that hypothetical third crisis would be related to something like commercial lending or some massive bank’s (banks’?) failure.

  100. 100
    Kary L. Krismer says:

    RE: shawn @ 98 – Well predictions can be made, but most of those will be wrong, and most of the ones that are right will merely be lucky. But enough about Cramer. ;-)

  101. 101
    EconE says:

    If predictions couldn’t be made, bubble blogs wouldn’t have surfaced around 2005 dumba$$.

    And we were right…..so [naughty naughty trying to avoid the word filter] you.

  102. 102
    Kary L. Krismer says:

    RE: EconE @ 101 – You were lucky. And not that lucky–you had a 50/50 chance [ignoring the world where prices are flat for 5 years].

    Eleua was right, or close enough.

  103. 103
    Kary L. Krismer says:

    RE: EconE @ 101 – I take that back. May 2005 the King County median was 370500. May 2009 was 375000. Since you all seem to think real estate should be bought and sold like a day trader trading stock, you’ve not only lost a lot of profit, but you’re still underwater.

    But in reality, the bubble mentality goes back to at least 2002. Those people are really underwater. The median back then was under $333,000. The market went 44% higher than that. Not even close to being right. And a lot of potentially tax free profits lost.

    It really isn’t that special to predict prices will drop. Again, 50/50 chance of being right.

  104. 104
    David Losh says:

    RE: Kary L. Krismer @ 99

    Uh Oh,

    You seem to be greatly confused about Real Estate. Maybe it’s the sales person mentality that seems to permeate the Real Estate business these days. Those sales people have always been a minority. Today maybe that dynamic has changed.

    People in the Real Estate business do study trends. I know one guy who watches Safeway building permits. He buys properties close to those sites as the permit is applied for. Some times the permit gets quashed, or there is a back lash, but most times he makes money.

    Other people buy cash flow. I know a guy who buys around Universities. He has a concentric circle formula. The closer in to the campus the higher the price he will pay. he looks for the ability to add on for increased rental income.

    Another guy who I mention a lot in blogs buys only around Green Lake. It’s his thing and be buys and sells well, even in today’s market.

    I could go on with examples of land use changes, job center creations, development trends, and community development, but the point is always the same, Real Estate is a rational market.

    I sold pre 2007. I bought 2001, 2002, 2003, 2006. My purchases were to be long term holds. The market dictated to sell. I sold, 2005, 2006, 2007. It made sense.

    This is why Real Estate is a hedge against inflation. Real Estate is a stable, or was, investment tied to the CPI. The variations of market timing and buying strategies are predictions based on sound research.

  105. 105
    Gerald says:

    By Kary L. Krismer @ 103:

    Since you all seem to think real estate should be bought and sold like a day trader trading stock, you’ve not only lost a lot of profit, but you’re still underwater

    Can you refresh my memory on when one person, let alone all of us, said that real estate should be bought and sold like real estate. Forgive me for not taking your word for it.

  106. 106
    shawn says:

    RE: Kary L. Krismer @ 99 – Kary, you are close to understanding my point, which is that people can think irrationally forever, but there will always be a point where they will no longer be able to act on it. Even if the market has priced them out, that does not mean that they have, as a result, gained reason. I do admire your lack of rigidity though.

  107. 107
    shawn says:

    RE: Kary L. Krismer @ 100 – Kary, here is where a pattern comes in, if someone does regularly predict future events, then we might think that they are more than lucky, as with Shiller predicting the dot com bust and the RE bubble. I gotta give it to you that you venture into shark infested waters and hold your own.

  108. 108
    Kary L. Krismer says:

    By Gerald @ 105:

    By Kary L. Krismer @ 103:

    Since you all seem to think real estate should be bought and sold like a day trader trading stock, you’ve not only lost a lot of profit, but you’re still underwater

    Can you refresh my memory on when one person, let alone all of us, said that real estate should be bought and sold like real estate. Forgive me for not taking your word for it.

    I was referring to this whole talk of just walking away because you happen to be underwater at the moment.

    Really it is like a stock. The daily variations don’t mean much until you sell. It’s the same with houses. What your house is worth doesn’t really mean much if you don’t plan on selling any time soon.

  109. 109
    Kary L. Krismer says:

    RE: shawn @ 107 – I’m not familiar with Case-Shiller predicting the dot-com bust, but they were hardly alone. People predict the demise of just about any stock with a high multiple on a daily basis, at least as long as there are such stocks. People become famous for that largely as a result of luck if one of their predictions becomes timely. I don’t recall the name, but there was one female stock analyst not even in the field of real estate that happened to make a timely negative statement about real estate and became famous for that. If Case-Shiller has two predictions, that makes them one better than most of those famous for making a prediction.

    And I’m perhaps not familiar with everything Case-Shiller said about housing–in fact I’m sure I’m not. But of all the people who were negative that I did read, Eleua stands out the most as clearly connecting it as being related to banking, and how it was related to banking, not just simply price movements or price relationships. If there is something Case-Shiller put out on that topic in say 2006-2007, I’d love to see it.

  110. 110
    David Losh says:

    RE: Kary L. Krismer @ 109

    I sold my stocks when the monopoly action against Microsoft took shape in 1999. It’s a no brainer. You can not fight city hall.

    My houses I sold when the Real Estate market kept spiraling out of control in 2005, 2006, and again in 2007. It’s a no brainer appreciation was 14% and 17%. That is unsubstantiated appreciation by any standard.

    What I never saw was the banking issues and financial markets as a whole. My thinking was that on a global scale the economy could expand far beyond where we are today. The paper profit, and collapse of the credit markets never, ever, came into my thinking.

    Now that I see it, and according to what I read, we are going back wards from this point forward to those times of at least 1998. I originally figured in an appreciation rate of 4% per year to date, but have since given up that thought.

    Rather than us having had inflation all of these years I think that credit has actually boosted the price of goods.

    If we do go to a cash economy or shadow economy prices will fall. Housing is just a blip on the screen at this point. If people stop buying with credit, in the case of housing, mortgages, the price of the financing leaves the economy.

    If people are really stupid enough to give a bank or lender 20% as a down payment why not have five people combine to pay 100% cash for a house. For cash you can make better deals than going through the mortgage mill. You can buy at auction, buy distressed, buy big, and pay a return on other people’s contributions.

    Using Japan as an example they have the regular economy and the shadow cash economy. People combine money all the time and invest as a group. They become the group mentality rather than follow the group.

    So in terms of predictions they happen every day. There is logic and reasoning to those predictions.

    Can Paul Volker stand up in Congress and say something stupid that will change the face of the economy? Sure. Can Congress file a law suit against Microsoft? Sure. The trick is knowing, waiting. watching, then guessing the out come. In my opinion that defines a prediction.

  111. 111
    Kary L. Krismer says:

    By David Losh @ 110:

    RE: Kary L. Krismer @ 109 – My houses I sold when the Real Estate market kept spiraling out of control in 2005, 2006, and again in 2007. It’s a no brainer appreciation was 14% and 17%. That is unsubstantiated appreciation by any standard. .

    When you tack on for a few years in a row, I’d agree entirely. If you look at some of the bubble cities, such as Phoenix, their prices almost doubled in less than 3 years, and that was with a ton of construction occurring. That’s just nuts.

    That’s why I’ve suggested that the limit a bank (FHA, Freddie, etc.) should loan should be not only a percentage of today’s value, but a lower percentage of maybe 2 years prior. That would limit the upward appreciation in an area by limiting the financing when prices start going out of control due to herd mentality taking over.

  112. 112

    RE: Kary L. Krismer @ 111

    Makes perfect sense, Kary. It’s actually a great idea.
    But it’s just not the American way to prevent people from borrowing way more than they can afford to.

  113. 113
    Gerald says:

    By David Losh @ 110:

    If we do go to a cash economy or shadow economy prices will fall. Housing is just a blip on the screen at this point. If people stop buying with credit, in the case of housing, mortgages, the price of the financing leaves the economy.

    That’s not the way people buy things though, so it will not happen regardless of whether or not it is a good idea. The use of credit is ingrained in society, only a subculture will work in a cash economy.

  114. 114
    Gerald says:

    By Kary L. Krismer @ 108:

    Really it is like a stock. The daily variations don’t mean much until you sell. It’s the same with houses. What your house is worth doesn’t really mean much if you don’t plan on selling any time soon.

    That’s not how an asset is valued. What you paid for something only tells you what it is worth on the purchase date (maybe). If a stock drops 50% the day after you bought it, your purchase price is irrelevant. Your asset is now worth 1/2 of what it was whether you hold or sell. Take GE stock as an example. If you bought in August of last year, you might have paid as much as $30/share. Today, it is worth $12/share. Does the fact that you paid $30/share mean anything to anyone else in the world other than you? The capital tied up in holding the stock is fungible. The question is whether there is a better use of that capital elsewhere. Holding the stock at $12 is no different than making a decision to buy GE at $12 today. If buying it today is not a good decision, then holding it is no better. But choosing to hold it just because you bought it at $30 is irrational.

  115. 115
    Kary L. Krismer says:

    By Gerald @ 114:

    By But choosing to hold it just because you bought it at $30 is irrational.

    As is selling it because you bought it at $30.

  116. 116

    […] This kind of shift will obviously push the median price higher, as it’s essentially just a larger-scale version of the second hypothetical scenario I described above. It goes a long way toward explaining why the median price jumped 4.4% from March to April, but the Case-Shiller index (which uses same-house sale pairs) rose just 0.2%. […]

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