I always said we are in 1990

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Submitted by waiting hawk on August 24, 2006 - 3:27pm

Submitted by lindismith on August 24, 2006 - 3:42pm.

Great find!

It's as if it were written this week! There's even a reference to a Middle East crisis. Some things don't change.

Submitted by Daniel on August 24, 2006 - 3:56pm.

Wow! It's unreal! Hawk, I hereby nominate your finding for "Best Piggington Post of the Year" award.

Submitted by powayseller on August 24, 2006 - 4:01pm.

A replay of today, with two notable exceptions:

1) lack of creative financing, so there was not a noticeable rise in foreclosures even one year after the boom ended
"Few sellers are actually losing money. Except for those who bought at the peak last year and must sell now, most homeowners are still far ahead on paper after the double-digit price increases of previous years. As a result, banks and savings and loan associations in California report no upswing in foreclosures on residences, and most analysts say the state's financial institutions will weather the slump without any significant damage. "

2) Housing affordability was 18%, about 6 x higher than today. With such low affordability, we have so far to fall to get back to fundamentals.

Item #1 is the most concerning. The last cycle after one year had no upswing in NODs, but this time, we have a lot. 69% increases in NODs is a very big deal. Although the numbers of NODs remain small, all you need is a few more quarters of 69% increases for those numbers to start looking big, real fast. The Fed kept the rates too low, for too long. They didn't rein in Fannie Mae or lending guidelines.

On a related note, the sheer fear of a systemic crisis kept the government from slapping any penalties on Fannie Mae. What other reason is there to allow a public traded company to violate SEC regulations that would get any other company delisted from the stock exchange? The government is scared to death of what can go wrong with Fannie, but it is too late to do anything about it. The crisis is already baked into the cake. You can't remove it, too late.

Submitted by waiting hawk on August 24, 2006 - 4:21pm.

I like this part:

"In the view of many real estate agents here, the slump is nothing more than a temporary cooling. Californians continue to recite a litany of factors they think will keep the housing market from going into a steep dive, including the state's diversified economy, widespread restrictions on building that have limited the supply of housing and its strong population growth. Early census figures show that the state's population has topped 29 million, for an explosive 23.7 percent rise in a decade." I lmao when I hear the term "cooling".

My website tracking Temecula and South Riverside County

Submitted by waiting hawk on August 24, 2006 - 4:38pm.

But in Q1 of 1991 I think we had a recession so in Q1 of 2007 if we have a recession then I will bring this thread back up in caps stating we are now in 1991 and most will believe it.

My website tracking Temecula and South Riverside County

Submitted by LA_Renter on August 24, 2006 - 4:42pm.

Waiting Hawk,

Thank you for that post. It's amost eerie.

Submitted by FormerSanDiegan on August 24, 2006 - 5:40pm.

Awesome.

I bet this will prevent George Bush from getting elected again.

Submitted by yooklid on August 24, 2006 - 5:41pm.

I wonder if we'll have another Clinton in the white house again then!

Submitted by Diego Mamani on August 24, 2006 - 6:04pm.

Richard A. Snyder, a broker in San Diego who is chairman of the California Association of Realtors' long-term planning committee, said: ''We are [1990] in an adjustment period. My personal view is that we are going into a cyclical downturn that could last one-and-a-half to two years.''

Prices started falling in 1990 and didn't stop shrinking until 1996, at least! Even though there were severe job losses when the aerospace employers shut down, and then a mild recession in 1991-92, house prices were still very sticky on the way down: the "correction" continued as far out as 1996.

This has implications for today's down side of the cycle: don't expect all or most of the correction to take place only in a year or two like realtor Snyder said back in 1990. It'll be a looooooooong and painful adjustment process.

Submitted by Bugs on August 24, 2006 - 6:19pm.

I've been saying the same thing all along. The only difference is that things seem to be moving much more quickly this time.

Submitted by Chris Johnston on August 24, 2006 - 6:53pm.

Chris Johnston
iamafuturestrader.com

Bugs, I am glad to hear you say that. I was just thinking that this seems to be happening up here in OC almost overnight. The deterioration in the last 30 to 60 days in terms of sales volume has been very surprising.

Submitted by waiting hawk on August 24, 2006 - 7:03pm.

Does anyone think that the run up in prices and activity was so much greater than 90's that it had to move down faster to keep pace with the cycle? Also is technology playing a part in getting news out faster?

My website tracking Temecula and South Riverside County

Submitted by powayseller on August 24, 2006 - 8:26pm.

Why do you say it's happening quickly? The downturn started in the summer of 2004, so it has been in process for 2 years. Inventory doubled from 3,000 in March 2004 to 6,000 in June 2004, and then doubled again to 12,000 in September 2004.

The inventory doubled because buyers were squeezed out. Prices were getting too high for first time buyers.

Lenders are even more lax than ever, and the Fed funds rate does not affect the exotic loans. So I don't buy the story that the Fed's raising of interest rates started the slowdown. I think, and I don't really know, that prices were simply too high and people couldn't afford to buy.

The ripple effect of longer times on market started at the low end, and
took over one year to get to the mid end.

From preliminary data, isn't August holding up fairly well? Sales are the same as July, so they are not decreasing further.

I have some ideas for why it appears to be happening faster this time. Exotic loans are leading to foreclosures among new and older homeowners, putting more motivated sellers and REOs on the market. More speculators this time created a greater frenzy and perhaps more building, creating a further glut of condos and homes. This cycle is national in scope, so the impact of cooling housing is having a stronger effect. Internet via blogs like this and realty web sites are speeding the flow of information; consider how many potential buyers chose to rent thanks to piggington. I can think of a couple people who cancelled their escrow due to getting data about housing from this website.

Last, and MOST important: with prices so much higher this time, we have 50,000 people per year leaving San Diego, shrinking the pool of buyers. Did people leave San Diego before the layoffs in the last cycle? No, they left due to the layoffs. Likewise, when construction workers and lenders lose their jobs, they may leave too. But notice that in this cycle, people are leaving BEFORE the recession, simply due to the high prices. We can't attract people to come here. "Hardly anyone wants to live in San Diego" is more like it, as few are willing to pay 50% of their income on shelter. At today's prices, fewer and fewer people are coming here, and more are leaving. I think the exodus of middle wage earners has the greatest negative impact on housing prices, but it is not discussed in the media at all.

The high prices were the cause of the bubble popping, as 1) people couldn't afford the loans anymore, and 2)people started moving away selling their homes to cash out or plain refusing to pay so much to a mortgage. It was just too expensive to live here, so buyers started moving away. If the media ever covers this, it will make my day!

On a related note, we need some accurate forecasters, because our government officials have got to be educated on the dire situation facing us so they can act with a proper plan. If we could get a meeting with the County officials, we could perhaps persuade them to provide incentives for companies to come here. We can solve the housing issue with our knowledge that prices will drop a lot in the next few years, thus attracting workers who would be willing to rent for a couple years. It is critical to bring in recession proof businesses as soon as possible, so we can minimize the impact of the recession. Esp. biotech.. gov't officials have to be prepared for less revenue in sales tax, property tax, and human suffering that goes along with foreclosures and bankruptcies (homelessness, suicide, bankruptcy counseling, social services). They must realize the population exodus, but I am afraid they do not. If they pay Alan Gin for forecasting, they still
believe this is all temporary. This is a huge disservice to our population. Does anyone want to get together with me to schedule a meeting with city or county officials?

Schahrzad Berkland

Submitted by waiting hawk on August 24, 2006 - 8:33pm.

With respect to prices and inventory I think the peak was still summer of 2005 though.

My website tracking Temecula and South Riverside County

Submitted by PerryChase on August 24, 2006 - 8:36pm.

City or County officials in San Diego all work for development interests. They know exactly what's going-on. What they do about it is something else.

San Diego is a big city with a small town atmosphere. The good-old-boys' club is very much alive and running things here.

Submitted by barnaby33 on August 24, 2006 - 8:51pm.

Plus and this is strictly me speaking for me. I don't want San Diego to grow. People leaving is not a bad thing to me. I may not be able to stop SD from growing, but growth is not an endless mantra. Its time at least for now seems over.

On a higher pardigmatic level, there isn't anything the city/county could do. The forces that shaped this bubble are global, and we are mostly powerless at this point to do anything but take a front seat and watch.

Josh

Submitted by powayseller on August 25, 2006 - 8:08am.

waiting hawk, the peak prices for condos was the spring of 04. SFH peaked a year later. Just goes to show: real estate is a slow moving ship. It took over one year for the downturn to move from condos to SFH.

Submitted by VCJIM on August 25, 2006 - 1:31pm.

There was one other factor that contributed to the early-mid 90s decline in So Cal real estate that I have not seen mentioned here: the 1994 Northridge earthquake. At that time, I lived about 20 miles due East of it and remember clearly. Many of my friends and co-workers were displaced, not only in the valley but in Hollywood, West LA and Santa Monica. Some people left purely out of fear. Houses in Northridge and Chatsworth and most other parts of the valley to lesser degree could be had for a song for the follwing 1-2 years.

I do not know if there was a direct effect on SD real estate, but I imagine it had ancillary effects.

Submitted by bob007 on August 25, 2006 - 2:18pm.

i do not expect an immediate collapse in real estate prices.

i prefer a long slow painful decline. i hate to see the economy tank and affect other people not involved in this boom.

Submitted by The-Shoveler on August 25, 2006 - 2:57pm.

Nor_LA-Temcu-SD-Guy

http://www.thestreet.com/_yahoo/markets/...

The street.com got another article about how the housing bubble popping is leading to economic melt-down.

It’s getting very loud this storm is

Submitted by Bugs on August 25, 2006 - 5:25pm.

The media coverage is going to exacerbate the declines, just as it did for the increases.

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