Bottom-Calling: Dollars per Square Foot Linear Forecast

For our next forecast, let’s refer to a dataset that we’ve only gone to once before on Seattle Bubble: Radar Logic’s Residential Property Index.

Radar Logic analyzes home sales and produces a running index of sale prices in the Seattle metro area in terms of dollars per square foot.

Here are our basic assumptions for the Dollars per Square Foot Linear forecast:

  • The 2000 to early 2004 trendline for Seattle home prices represents a reasonable baseline.
  • Prices on a $/sqft basis will continue falling at present rate.
  • The bottom will be 10% below the historical trend line.

Given these assumptions, here’s a rough picture of what Seattle’s Radar Logic Residential Property Index would look like through late 2009:

Bottom-Calling Method 2: Dollars per Square Foot Linear Forecast

Using the Dollars per Square Foot Linear forecast model, Seattle-area home prices (as measured by Radar Logic) will hit bottom late this year to early next year.

This method seems to give us a fairly reasonable prediction. The historical trend (red dashed line in the chart above) represents home price growth of approximately 5% per year in the years just prior to the housing bubble. Of course, it is certainly open for debate whether 5% annual growth is truly sustainable in the long-term, and whether 10% below that trendline is a reasonable bottom. If you believe, as some do, that unsustainable price growth has been taking place since the late ’90s, the bottom would obviously be much later and lower than shown above.

Also note that this forecast method and the three that remain in Bottom-Calling Week do not forecast any further into the future than the bottom month. Once the bottom is reached, the forecast is halted.

Method 2: Dollars per Square Foot Linear Forecast (Summary)
Bottom Month: December 2009
Bottom Value: 30.7% off peak
Likelihood*: 20%

* Likelihood is a totally subjective value assigned according to The Tim’s gut feeling. Treat it accordingly.

Bottom-Calling Week on Seattle Bubble

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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. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

54 comments:

  1. 1
    tim says:

    Does anyone have any thoughts on the North Admiral district in West Seattle? I’m watching that area closely and I’m not seeing many price reductions. I’m mainly looking at houses in the $400-$600k range, so somewhat closer to the bottom of the market in that area. Any resident experts think this region will holdup better than others?

  2. 2
    Kary L. Krismer says:

    This would be better if it were done in nominal dollars, to remove the effects of inflation. Also, it totally ignores supply (new construction) affecting prices, and I don’t think there’s any way you can correct for that.

  3. 3
    David Losh says:

    New construction has been selling at a steep price per square foot. As foreclosures continue, the resale on new construction may reflect a lower price per square foot.

    I agree with this graph and look at it as reflecting inflated dollars. $150 per square foot used to be an indicator to me of a good deal pre 2000. So the number seems right to me.

    However, Jillyanne asked me in another post how I expected housing to be purchased if banks were to stop lending. We can call bottom all day long, but banks are in a catch 22. If they start only making loans on a new value of Real Estate it means the old values they have on the books are wrong.

    If banks start buying into a new value, a new bottom, then they have a lot of over priced assets on the books. In my opinion, no matter what we say and do the banks will try to hold the line as long as they can. Once they start recognizing an adjusted value the whole thing starts to feed on itself again.

  4. 4
    obelus says:

    At last a subject I have been asking what others here think! I used to think $150 sq/ft would be a deal. Now I think it will go lower. Especially when I see by the chart that it was lower in the early bubble years of 2000-01 (yes the bubble started earlier than that even).

    A big welcome to Kary! Glad to have your opinion here.

  5. 5
    Ray Pepper says:

    Tim, I love North Admiral. In fact I used to live on Walker. Keep tracking that area and find your GEM. They will most certainly come down. Many homes will be hitting the market in the Spring. Monitor the public notices as well. Many are buried in those homes from Refi’s and untimely purchases. They will walk.

  6. 6
    Kary L. Krismer says:

    RE: David Losh @ 3 – What I’ve said on new construction elsewhere is that agents pricing resale property can no longer ignore new construction. I think the banks are pressuring the builders to sell, and that’s causing their prices to decline, which puts them in competition with recent comps on resales. Before you could almost assume that wasn’t the case.

    As to the “new value” and banks comment, I’ve said before that I think part of what the government is doing is trying to bypass TARP through interest rate induced refinances. I’m starting to come to the conclusion it isn’t working, because the new standards are not all that much different than the old standards. I saw a bankruptcy filing last night (from a couple of weeks ago) where the person bought a $350,000 or so house in September, and they’re already in bankruptcy (but not foreclosure). What kind of lending standards would allow a loan to be made to someone so close to the tipping point?

    BTW, related to that comment, most the bankruptcies I’m seeing are not the type of people that the bubble bloggers like to complain about–they’re people with relatively modest houses–$250,000 to $350,000 assessed values. But a large percentage of the people filing bankruptcy are homeowners, but only maybe 20% of those are in foreclosure.

  7. 7
    Sniglet says:

    If banks start buying into a new value, a new bottom, then they have a lot of over priced assets on the books.

    Precisely. This is exactly why financial institutions are in such trouble (i.e. because assets on their books are worth less than the current valuations they are being given). Unfortunately, all the denial in the world won’t prevent the fact that asset values keep falling, and that the whole attempt to prop up valuations is a lost cause. In most cases, the true values won’t be acknowledged until the existing asset owners go bust.

    This is the same phenomena we see with individual home-owners. A given home-owner just isn’t able to sell if their mortgage is for more than the actual market price. We just have to wait for these under-water home-owners to eventually lose their properties in foreclosure before a realistic valuation is finally used on the property. Likewise, many existing lenders will NEVER acknowledge the actual value of the loans on their books, and it will only be after their are siezed by the FDIC that the real rot will become apparent.

    I suspect that this process of recognizing losses will just have to be a long drawn out affair, spanning many years, since people will have to be dragged kicking and screaming (or deceased more often than not) to new valuations.

  8. 8
    Kary L. Krismer says:

    Sniglet, there’s a bill proposed by the governor that arguably requires banks to be more responsive to short sale requests in order to go the non-judicial foreclosure route. I’t’s HB 1942, which I wrote about over in P-I land.

    I don’t think the effect will be immediate if it passes, but the option of being forced to judicially foreclose should get the banks off their collective butts. Not only does it take longer, but a resident owner gets to stay in the property rent free for a year with judicial, unless the bank waives the deficiency, in which case it’s eight months (from memory).

  9. 9
    softwarengineer says:

    FAT GOVERNMENT AND STARVING SKELETON PRIVATE SECTOR TAX BASE

    Its clearly arguable that today’s stimulus bill won’t create any jobs at all in Seattle; albeit it does apparently fund maintaining government jobs at 100% fatness, simultaneously, the private sector job base is a hopeless starving skeleton at 80-85% of what it was in 1998, with almost no help from the stimulus bill. Where’s the stimulus bill at producing domestic private sector industrial base [manufacturing] jobs?

    Will keeping existing teachers, police and government administrators, etc. working during this economic crisis help the local RE collapse from getting worse? Their incomes aren’t that high and the high % of single income households in Seattle just makes it far worse. Couple that with its just a 2009 fry pan stimulus, with another trillion needed for 2010….this endless debt cycle to maintain uncontrolled population growth government at its present levels is impossible, especially with baby boomers hitting the 60/70 YO age range with a plethora of medical and diability needs a-coming [I’d mention retirement, but I don’t see that happenning for almost all of them, they can’t afford it anymore, uncontrolled RE growth stole their retirement 401K investment interest rates].

  10. 10
    Sniglet says:

    the option of being forced to judicially foreclose should get the banks off their collective butts.

    Unfortunately, I suspect that many banks don’t really have a choice. They either avoid recognizing losses on their books or go into FDIC conservatorship. If this new law encouraging short sales really does work, then it may result in tipping more financial institutions over the edge at a faster rate.

    It’s all one giant game of chicken. If governments push too hard on the lenders, the lenders will just go bust forcing the governments to then come up with funds to pick up the pieces.

  11. 11
    AMS says:

    The Tim-

    Do you have any scientific basis to suggest that homes appreciate on a linear per square foot basis? Or is the suggestion just based on a pretty graph? Why not geometric?

  12. 12
    The Tim says:

    RE: AMS @ 11 – I think you’re reading too much into this. I have stated my assumptions all up front. The purpose of this series isn’t to come to a rigorous scientific conclusion, because as you have pointed out, that is going to be impossible.

    The point is just to look at a handful of price measures and project where they might be headed in the next few years based on some simple inputs.

  13. 13
    Ray Pepper says:

    The Seattle Home Show was DEAD yesterday and my Agent reports its a Morgue there today. Parking is FREE. Everyone go down there and buy a window or something.

    You can eat an Al’s sausage outside on Occidental, and return to the show running like I did yesterday, just in time to make it to the restroom.

  14. 14

    “You can eat an Al’s sausage outside on Occidental, and return to the show running like I did yesterday, just in time to make it to the restroom. ”

    That’s a great recommendation, Ray. I’m sure they’ll use that testimonial in their ads.

  15. 15
    Vicki says:

    I’m not a fan of radar logic’s indicator. It would be fine if the average size of a house stayed the same – but it doesn’t. So a comparison overtime doesn’t make sense. McMansions are going out of style and even without that – as homes get bigger the price / area should go down because the value of the land gets spread out among more square feet.

  16. 16

    I’ve never put a whole lot of stock in price per square footage data either. Maybe it works if you’re comparing two nearly identical homes in the same neighborhood of the same size, etc, but changes in price per square foot could simply indicate that the average size of the home has changed. I’ve seen some of the biggest price drops in large homes, both in dollar amount and percentage wise.
    So if you’ve got an 1100 square foot home built in 1920 and in Greenlake, Wallingford, or Queen Anne, I’m sure that has seen a dramatically smaller price per square foot home decline as compared to a 2200 square foot home built in 1975 and in Lynnwood.
    For me, price per square foot is only a minor indicator. Astrology would probably be a better predictor.

  17. 17
    tim says:

    RE: Ray Pepper @ 5

    Yeah, that part of West Seattle is fantastic. I lived on Alki for a year and loved it (though traffic was insane during the hot Fri/Sat evenings). Definitely developed an affinity for the North Admiral district and would love to ultimately buy a home in that neighborhood.

    Can you elaborate on how to monitor the public notices? I’m mainly just using Redfin to watch what comes on the market and is reduced in price.

    Thanks a lot.

  18. 18

    RE: tim @ 1

    Yeah, I’d say that North Admiral will hold up pretty well, maybe not quite as well as North Capitol Hill or the top of Queen Anne , but it’s thought of as a desirable location, and has houses with character and a lot of attributes of what a good neighborhood should be, walkability, shopping, good restaurants, quick buses to downtown, etc.

  19. 19
    JJL says:

    Tim,

    I found an interesting chart regarding ALT A loans & Option loans & reset timelines you might find of interest.

    http://optionarmageddon.ml-implode.com/wp-content/uploads/2009/02/1-mortgage-rate-resets1.png

  20. 20
    Scotsman says:

    A major problem with this analysis is that it ignores the Case-Shiller index which shows that inflation adjusted prices for homes have been essentially flat from 1890 UNTIL 2000 when they started to ramp up. The only exception is the two decades of the great depression from 1925 to the start of WWII when they fell to 25% below the average. Using 2000-2004 as a baseline gives a false sense of how low the bottom really is. First, it uses the initial part of the bubble ramp-up as the base, and second, it ignors the greater economic environment in which the current market operates. Assuming we’re entering a second great depression, we should use the numbers from say 1980-2000, adjusted for inflation, then subtract 25%. That is where we’re headed if you have any faith in long term trends and statistics. It’s also known as 80% off peak. Math’s a b*tch when all you want to do is to play with your pink pony…

  21. 21
    Fran Tarkenton says:

    RE: Scotsman @ 20

    Re: 80%-off-peak*. Here’s the C-S index from 1890 until mid-2006:

    http://www.investingintelligently.com/wp-content/uploads/2006/08/a_history_of_home_values.png

    It stops before the 2007 peak, so lets give it another 10% on top of that 200, saying it peaked at 220. 80% off that peak is 44. The lowest anywhere on that graph is 66, or a full 50% above 44. And that’s even giving you the benefit of the doubt that you mean “80% off in real terms” since inflation is working strongly against you in nominal terms.

    How then do you use that data to justify 80% off peak?

    *If you truly believe that prices will fall this far, you’d be well-served to spend all your money on canned food and shotgun shells, because society as we know it will collapse.

  22. 22
    Sniglet says:

    If you truly believe that prices will fall this far, you’d be well-served to spend all your money on canned food and shotgun shells, because society as we know it will collapse.

    There have been many cases where asset prices fell by 50% or more yet the underlying societies never “collapsed”. Japan has seen an 80% drop in stocks, and 50% to 90% drop in real estate (depending on region), yet their society hasn’t fallen apart, life still goes on.

    The ’30s depression saw something like 80% of all urban US homes go into foreclosure (at some point over an 8 year time-frame) as well as a greater than 90% decline in stocks, yet that didn’t lead to the end of American civilization either.

    Yes, I believe we are in for MAJOR asset price declines (on order of 80% or better for everything from stocks, to commodities and real-estate), yet I don’t believe in some form of societal break-down and Mad-Max like existence.

  23. 23
    Scotsman says:

    Factoring in inflation, it puts us at about $90-100/square foot. Looking at Tim’s chart at the top of this post, starting at the 2000 number and subtracting 25% puts you in the same range, somewhere just under $100. I personally feel the over-correction that inevitably accompanies such re-adjustments will be significant this time around given the more global nature of the depression. But you’re right, when mixing nominal and inflation adjusted numbers, as well as the indexed numbers on shiller’s chart verses prices on Tim’s chart, I should be more careful and specific. My apologies.

    And while I have guns, etc. I don’t think we will see the end of civilization as we know it. we will see a very different set of governmental prioities though as hard choices have to be made.

  24. 24
    Interloper says:

    RE: Fran Tarkenton @ 21
    FYI, the Shiller long term price chart has been updated here: http://www.econ.yale.edu/~shiller/data/Fig2-1.xls

    At the time of that Shiller update, National fall from peak was 28% , and appears destined to fall another 17% from peak, to an inflation-adjusted baseline of index = 110.

    Since Seattle peaked a year late, it should have further to fall, and if it declines similarly (to inflation-adjusted index = 110), average prices would end up between $200K and $250K.

    PS used to love Fran Tarkenton growing up. Too bad his passing records got eclipsed in an era of 16-game seasons and passing offenses. Funny how eras change.

  25. 25
    Fran Tarkenton says:

    This is Fran again. I’m not sure why I’m marked anonymous.

    RE: Sniglet @ 22

    I offer you a running bet of one box of shotgun shells and one case of yellow cling peaches (halves, in light syrup) that if the C-S index sinks to 80% off peak that there will be mass public rioting (let’s define this as reasonable-person-subjectively more severe than Detroit 1967) in at least five U.S. cities within 1 year of that date. If C-S is net-positive for any 24-month period without sinking to 80% off peak, we will consider the decline to have ended, and I will be declared the winner.

  26. 26
    Interloper says:

    RE: Scotsman @ 20

    “Using 2000-2004 as a baseline gives a false sense of how low the bottom really is.”

    I agree. The run-up began in 1997.

    Best way to predict the bottom is a return to historical prices + inflation, and better not to project the “overshooting” of the bottom. I see little evidence in this 120-year chart that US prices overshoot the bottom, rather each for the four bottoms from the previous four decades (before 1997) returned to a small range of index = 105-107.

  27. 27
    Peckhammer says:

    RE: Sniglet @ 22

    I’ve got some property in Temecula. Houses were going for $500K+ a couple of years ago. For entertainment value, I looked up the current value of some of them (that are currently listed). Many have seen a 50% drop, some a lot more.

    I’ve checked North County Times and there are no reports of Armageddon-like societal breakdown.

  28. 28
    Scotsman says:

    Interloper- your approach is spot-on during “normal” times, but ignores the impending economic turmoil. While the drop in prices from 1920+ through 1945 isn’t technically an “overshoot”, it’s a pretty significant dip. I think we need to expect something similar this time around as well.

    There are really several issues here- the collapse of the housing bubble, the collapse of state/local governments, and the collapse of the world economies. While somewhat interrelated, they have different economic factors and limits working to resolve them. We need to look at the consequences of all when seeking a bottom for housing.

    There will be riots, but not because of collapsing housing prices. They will be caused by bankrupt states suspending welfare payments and other entitlements. When I read that Los Angles has over half a million welfare recipients within the city limits, and that the state was already insolvent the light went on. That’s the future.

  29. 29
    Sniglet says:

    So how far will the price of your home on the range fall? Citing historical data and trends, Talbott concludes that real prices should return to their average 1997 levels, adjusted for inflation. Why 1997? A 120-year historical graph shows that real home prices in the U.S. stayed relatively flat for 100 years, then began rising in 1981 and surged from 1997 to 2006.

    A return to 1997 prices “would get us out of the heady, crazy days from 1997 to 2006 in which banks were lending large amounts of money under poor supervision and aggressive terms.”

    http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a8mdg7z0u7Dw

    John Talbott is looking at a variety of metrics, largely based around relationships with salaries, on which to determine what the “true” value of real-estate is. He feels that we still have quite a ways to go to bring real-estate prices in line with income.

  30. 30
    98115_Renter says:

    RE: Scotsman @ 28

    Your sensational claims about welfare recipients rioting and CA being insolvent are a fun fantasy for you, maybe you can go out and buy more guns for the coming anarchy. Go listen to Rush some more.

  31. 31
    David Losh says:

    RE: Sniglet @ 29

    Exactly. Housing is only one sector in a larger economic picture.

    There are jobs that are no longer viable, such as in finance. Good paying jobs that we all counted on for stability, such as doctors and lawyers are going to also have a tough time in the years to come. There will be plenty of work but the economic base that paid them in the past is shrinking.

    Doctors especially come to mind with the amount of lay offs. We built a health care system on employer paid benefits. Those benefits will be on the chopping block for employees and retirees.

    Lawyers will have plenty to do, but who’s going to pay them? Where’s the money going to come from for those law suits concerning high finance?

    As you go down the line you can see more people turning to the government. With loss of revenue or people just not being able to afford to pay taxes there is a brick wall there also.

    There is a bright and shiney light in all of this. The very wealthy, who I refer to many times in my comments, are feeling the pain. I mentioned doctors and lawyers, but people with large portfolios are losing money even more quickly.

    I talk with people who are losing 30% to 50% values in an over all portfolio. There are no safe investments. You can put your money in, but you can not count on it being there when the time comes to take it out.

    The article mentions gold which is another sucker’s bet. You need to have a buyer for gold. You can not eat gold.

    The future is in agriculture and renewable resources. Population will be the ultimate cause of a change in priorities.

    Once the system began effecting the people who hold, or are hoarding, today’s wealth they will be the first to rush into new investment opportunities.

    It will all work out for the best, and yes, I thnk you will see the price of housing come to a price you can pay for with cash.

  32. 32
    Scotsman says:

    98115-Renter: Do you read, or just listen to Kieth Olberman? California is facing a current budget deficit of $41.2 billion dollars out of a total budget of about $105 billion. (Numbers are changing as we speak- the budget dropping, the revenue dropping just as fast.)

    If it costs you $1,000 a month to live, and your income is only $580, what do you cut? That is the situation California is in. There’s a good chance some entitlements might have to be cut, including welfare. Those who lose those benefits might not be happy. If only one out of ten went into the streets and rioted, that’s 50,000 people in LA alone. I don’t think it’s a fantasy, I think it’s a concern. But hey, it’s not our problem, and the government will fix it, right?

  33. 33
    Interloper says:

    RE: Scotsman @ 28

    I don’t share as dire an outlook on the future, but even if I did, I don’t know why I’d have to assume an “overshoot” of the bottom.

    The 120-year data includes two world wars, a depression, periods of 10%+ unemployment (even 20%+), boom and bust cycles, multiple stock market crashes and still the relationship between national home prices and inflation is normally a constant. When home prices gets too high or low, they seem to correct to the constant. (the primary exception was a circa 1920 plunge in building costs which dragged down home prices for a time)

    As Solomon wrote in only slight exaggeration, “there is nothing new under the sun.”

    Certainly our price decline has accelerated, which may mean we merely get to the bottom faster. I kinda hope so.

  34. 34
    98115_Renter says:

    RE: Scotsman @ 32

    This happened in CA in 1992 and there were no riots. Welfare as we know it has not existed since Clinton abolished it. From what I read :

    “The payments to be frozen include nearly $2 billion in tax refunds; $300 million in cash grants for needy families and the elderly, blind and disabled; and $13 million in grants for college students.”

    http://www.latimes.com/news/local/la-me-budget17-2009jan17,0,4472460.story?page=1

    OK, $300 million out of all of that is for social programs. What makes you assume that people who receive entitlements (Blind? Elderly? Disabled?) will riot in the streets? Won’t the people not receiving the $2billion in tax refunds riot too? What about all of the state employees getting laid off, where’s their riot?

    Your assumption that the poor are somehow social misfits who will create mass disturbance is a stunning vision into your personal character, and shows the depth to which the right is willing to demonize those that are easily scapegoated. It’s like we’re reliving the Southern Strategy right here on this board.

    PS, I don’t have cable TV so do not watch CNN/MSNBC/FOX or any other cable “news” channel. I read newspapers and online versions thereof.

  35. 35
    Scotsman says:

    1. They don’t have a signed budget yet, so your numbers about what may be cut mean nothing. Also, as receipts continue to decline,any signed budget becomes meaningless as it is immediately rendered void in the face of zero reserves. They haven’t even gotten through February yet, let alone this coming November.

    2. Your ignorance about me, and what you perceive as the “right” and it’s values reveal a bias and hate of great depth. Why do you resort to name calling and personal attacks so quickly?

    3. LA has a long history of rioting for a wide variety of reasons- that’s a fact, not my opinion. You’re welcome to your opinion, I try to keep to the facts. I offered welfare recipients as one example of those who will be unhappy. I’m sure there will be many others to join them.

  36. 36
    David Losh says:

    RE: Scotsman @ 35

    Here’s a fact: there are two kinds of people in the world who have power: the very wealthy and the very poor. The wealthy protect what they have and the poor have nothing to lose.

    The poor will adapt, they always will. They are used to the struggle for day to day survival.

    It’s the responsible people who will panic. Those people with families, jobs, security, and hope for a better future for their children will be the ones who will get angry.

    They have more of a propensity to talk about solutions rather than take action.

  37. 37
    newbie says:

    I feel funny talking about bottom now. I’ve been reading SB for more than a year and watched prices decline on the CS index. Problem is, many houses are still being listed at 2007 prices. Where’s the price drop? I can’t see it.

    One unit at the condo where I rent was just listed recently, priced at 15% above the last sale of a different unit. The last sale was a short sale last early 2007. I couldn’t help but laugh when I first saw the asking price but who can blame him? Seems like many sellers are still asking for top prices, as though price decline never happen here in Seattle.

    There’ll be no bottom until reality hits and sellers start asking reasonable prices. Since that is almost never going happen, we’ll just have to wait for foreclosures to help push prices down.

    I was looking to buy a house last year but have since changed my mind. Not even going to consider until 2010 at least. I’ll rather move than to pay “California prices” to live in Seattle.

  38. 38
    Fazu says:

    Thanks all for the excellent discussion on Seattle RE. I’m relatively new to the site, though have been watching the market in Seattle for 2 years.

    This is an interesting conversation – specifically, the idea that the banks can’t mark down loans or appraise properties for new mortgages at declining values. I’m currently looking at buying a property and the bank came back with an “electronic” appraisal. I thought this sounded insane. However, this discussion shed some light on the issue for me. So, my question to the group: can anyone recommend an independent appraiser that knows what they are doing? Its well worth the extra $ to get an opinion on this property while I still have the option of walking away from my money/or re-negotiating the purchase price.

    Would be very appreciative of any suggestions.

    Fazu

  39. 39
    george says:

    RE: Scotsman @ 20

    Inflation adjusted prices for homes have been essentially flat from 1890 UNTIL 2000 when they started to ramp up.

    Nationally, but that would not be accurate for a market like Manhattan.

  40. 40
    Mikal says:

    RE: Scotsman @ 35 – You ask for it. If you don’t realize that there is no help for you. If you aren’t expecting some of these responses you are in a George Bush bubble. I expect some responses that disagree with me. The world has passed you by. Guess what, people don’t make black jokes anymore.

  41. 41
    Mikal says:

    RE: george @ 39 – Much of Manhatten was built on finance money. With all the people losing there jobs from that it will be interesting to see what happens.

  42. 42
    Sniglet says:

    Charles Hugh Smith has posted a pretty good piece explaining that housing prices stand to drop anywhere from 65% to 80% from peak.

    If we consider this the chart of a financial bubble, then we can deduce that prices of whatever asset this chart tracks will retrace to approximately 1998 levels, or $200,000, down from $570,000 at the peak.

    This would be a 65% decline, not a 35% drop. Thus the buyer of a home which topped out at $340,000 might think $220,000 is a bargain, but if the price is set to fall all the way back to its pre-bubble value of $120,000 (a 65% decline), then there is another $100,000 to go.

    http://www.oftwominds.com/blogfeb09/capital-trapRE02-09.html

  43. 43
    Mikal says:

    RE: Scotsman @ 35 – We could throw out all the illegals. It would save California. ALL THOSE CLEANING JOBS. The government there wouldn’t have to cut expenses. They could put all those underutilized state employees into the cleaning fields. Problem solved.

  44. 44
    Ray Pepper says:

    There is absolutely NO BETTER ANALYST then Howard Davidowitz. If it wasn’t so depressing it would be even funnier!

    http://www.cnbc.com/id/15840232?video=1037869511&play=1

  45. 45
    EconE says:

    RE Los Angeles.

    They’ve been ramping up security in my ‘hood over the last couple years. Freakin’ helicopters. I wish they would find a car chase or something that they could put on the news rather than buzzing overhead back and forth all night long.

    People are still just in the “fear” (of the unknown) stage.

    When the “unknown” becomes “known”…what if that “known” isn’t good? It’s nice to hope for the best, but then there is the reality of the situation and it’s not looking very good going forward.

  46. 46
    DaveyDave says:

    RE: Ray Pepper @ 44
    Are you out of ABK or still holding on, Ray?

  47. 47
    Scotsman says:

    RE: Mikal @ 40

    What? Both of you are projecting way too much. Have a drink, and kick back.

  48. 48
    Scotsman says:

    Mikal- your government at work!

    http://www.tickerforum.org/cgi-ticker/akcs-www?post=80513

    http://wnd.com/index.php?fa=PAGE.view&pageId=87757

    Hey, isn’t the bill’s sponsor black? What’s your take on that?!? Sheesh.

  49. 49
    Ray Pepper says:

    Im still holding ABK. Down .12 today. Back near entry price. I may add more prior to CC.

  50. 50
    Sniglet says:

    Ambak? You’ve got to be kidding… That company is nothing more than a walking corpse that hasn’t realized it is dead yet. I suppose there might be some money to be made from short-term volatility, but that puppy is NEVER going to get up again and become a viable business. The liabilities are huge and it’s reputation is completely shot, which is the only thing insurance companies have going for them in the first place.

  51. 51
    Ray Pepper says:

    Snig just in for some gaps. Remember last time it hit a 1.00. 8 months ago it went right back to 10. ..It can double in a blink. …Also watching SAY…I continue to swing trade BAC and C. Incredible volatility daily. Just love it.

  52. 52

    RE: Fazu @ 38

    Fazu,
    A couple of great local appraisers who are highly competent and independent are Richard Hagar, of American Home Appriasals and Peter Coulton of the Coulton Company.

  53. 53
    Mikal says:

    RE: Scotsman @ 47 – I was way beyond one drink at that point. Sorry.

  54. 54
    mrfinviz says:

    Guess what, the chart here forms a classic head and shoulders pattern. If you follow Technical analysis you will know this is a major topping pattern. I have posted the analysis on my blog.

    http://tradomatic.blogspot.com/2009/03/technical-analysis-applied-to-seattle.html

    Again take this with a bag of salt not just a pinch!! :-)

    BTW Great blog Tim!!

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