Question for all of the Nostradamus's on here

User Forum Topic
Submitted by Alex_angel on August 15, 2007 - 6:27am

Over the last few weeks I have seen a lot of Nostradamus's pop up. What makes me laugh are people that say, wait until 2012 for the bottom, or homes will be 30% cheaper next year. Where are you guys getting your predictions from? Did any of you predict the house increase from 2001-2005? Why all of a sudden are some of you pulling these dates out of thin air?

Most if not anyone on this site can predict what next month will bring. Sure we all know housing is going to go down. But to where? How fast? How long?

For those of you so certain that you know that 2012 is the bottom of the boom can you do me a favor and email me next weeks winning Lotto numbers and maybe the winner of the Pacific Classic?

thanks
(but you probably already knew I was going to say this)

Submitted by TheBreeze on August 15, 2007 - 6:52am.

These predictions aren't being pulled out of thin air. Piggingtonians are using the available data to make predictions -- number of ARM resets, income levels, current interest rate and what have you. Is anyone going to be able to predict the exact bottom? Probably not many, but it looks like a good bet that the market is going to be lower next year than it is this year.

All one can really do is use the data to make estimates based on probabilities. If you think the time to buy is now and that prices will soon shoot up again then go for it. You can come back in laugh in all our faces next year after your house has doubled in value.

Submitted by lindismith on August 15, 2007 - 6:54am.

Most of us on this forum (for the last few years I might add) have been asking your same questions.

We are all agreed the market has turned, and is headed down. The questions now are, for long, and how low. Lots of very smart people on here have answered many related questions, using very good data. This is called forecasting. It's used all the time in business. Each week new data comes out that helps us revise these answers.

To answer your question about the run-up: yes, most of us did know the market would go up during that time period. What we didn't know was for how long, and how high. I think it exceeded everyone's imaginations.

I think you are just badgering us when asking for winning lotto numbers, no? In any case, here they are: 20, 12, 87, 92, 41, 43.

Submitted by The-Shoveler on August 15, 2007 - 7:25am.

Nor_LA-Temcu-SD-Guy

I see CountryWide going BK,

Submitted by Alex_angel on August 15, 2007 - 7:35am.

CountryWide plus those banks like Wells and BofA will start rasing fees for ATMs, checking etc... to make back the money they have lost.

Submitted by Ex-SD on August 15, 2007 - 7:31am.

It's no skin off my butt whether you believe us or not...........but it can cost you a lot of money. Yes, I did predict the run-up that occurred. I went through the run-up in prices between 1988-1992 and the subsequent drop that happened after that. When things starting warming up in early 1998, I predicted that we were in for another run-up and by 2001, I told my friends that due to the rate that it was ramping up, it would probably have to blow up by 2005 or 2006 because nobody would be able to continue paying for the crazy mortgages that they were getting. We sold our house in early 2005, cashed out and left CA. I'm waiting for the mess to bottom out and then we'll move back. If you look at all the facts and figures, it's not hard to predict these things, especially if you've been through one before.

Submitted by ocrenter on August 15, 2007 - 7:37am.

I think it exceeded everyone's imaginations.

normal predictability of rise and fall of market went out the window with the price run-up this time around.

afterall, yes you can predict the price increase.

and yes you can predict the extension of the price run-up when the interest rate dropped and lending standards loosened.

but how many could actually predict wide-spread fraud and inflated appraisals and 6 figure cash backs?

and how many could predict that in '06 the subprime lenders aggressively dropped ALL standards to keep the numbers up.

I think a lot of bears may have been able to predict the run-up to 2004. But the continued strength in '05 and early '06 was completely artificial manufactured by the interested parties to keep the party alive a couple of years longer. and that was completely unpredictable.

Submitted by Alex_angel on August 15, 2007 - 7:38am.

Ex-SD. Did you also predict 9-11 and what it did to the economy by forcing the feds to lower rates to almost nothing that ignited this huge buying frenzy?

If 9-11 never happened this whole house boom would have never happened. Interest rates tanking right after was the main catalyst for this. It changed the way Americans lived forever.

Submitted by Alex_angel on August 15, 2007 - 7:40am.

September 18, 2001 6.00
October 3, 2001 5.50
November 7, 2001 5.00
December 12, 2001 4.75
November 7, 2002 4.25
June 27, 2003 4.00
July 1, 2004 4.25
August 11, 2004 4.50
September 21, 2004 4.75
November 11, 2004 5.00
December 15, 2004 5.25
February 3, 2005 5.50
March 22, 2005 5.75
May 3, 2005 6.00
June 30, 2005 6.25
August 9, 2005 6.50
September 20, 2005 6.75
November 1, 2005 7.00
December 13, 2005 7.25
January 31, 2006 7.50
March 28, 2006 7.75
May 11, 2006 8.00
June 29, 2006 8.25

Submitted by Ex-SD on August 15, 2007 - 7:42am.

Alex, it appears that you simply want to argue........not learn from someone who predicted this mess with a pretty good degree of accuracy, then cashed out for a big profit. You can be a smart ass all you like and you can go out and buy some property in SoCal right now if you wish............neither will help you in the long run.

Submitted by Alex_angel on August 15, 2007 - 7:47am.

People will always look back in hindsight and claim they knew something was going to happen. I'm pretty sure if I predict the housing market will crash, stay flat or gain in the next month that I will be right. 1 out of 3 ain't so bad right?

Submitted by Alex_angel on August 15, 2007 - 8:02am.

Ex-SD. I am not here to argue. I am here to see why people are throwing dates around like they are so certain. When I see wait until 2012 for the bottom written it irritates more than anything. It is irresponsible to throw dates like this around. When people call others dumb for buying now is also dumb. When people were buying in 2004-2005 did people call them dumb at the time? No. Looking back you can. What is someone with the money and large family going to do? Rent for 5 years until 2012? Hell no. people need to live life today and not wait for something they have no idea will ever happen. If you're looking to flip then a home is not the right purchase. But if you're looking to live here for work and raise a family then by all means buy. As long as you can make the payments then who really cares what happens to the market. When you live in an area where everyone bought close the the millions and you got in for $750k today then what do you have to worry about? The rest of the area should worry but you don't if you have a 30 year that you can afford.
Most people on here talk like people don't get paid. I'm sorry to say it but there are a lot of people that make great incomes and owning a home here is no big deal. How they hell have people been able to afford SF and OC homes over the last 10 years? How do people afford to live in NY? They make money and can afford it. I'd rather live in a nice house and drive a camry than rent and drive a Mercedes 500 or a Porsche 911 live most people do where I currently live. It is a joke. They'd rather drive a piece of shit high prices car around than own a home. I want to take care of my kids and raising them in a small apartment or renting a house and paying someone elses mortgage is not my idea of being 'Smart' as most of you think it is. It is always easy to be pissed at others that have what you don't. That is the sentiment that I get here. Lots of envious people that hope bad things happens to others so they can benefit.

Submitted by lindismith on August 15, 2007 - 8:20am.

Alex,
Why are you on this board?

Just askin'.

Submitted by Ex-SD on August 15, 2007 - 8:28am.

Alex, I'm not one of those people that you mentioned. I'm just watching the SoCal & NoCal housing markets from South Carolina after leaving my home(s) in SD of 30 years. Whether you want to believe me or not, I was able to predict this mess with good accuracy and timed it just right when I sold my home and cashed out. My purpose in being on this particular forum is that I would hate to see anybody (other than my sworn enemies who wish me harm) lose their hard earned money by either holding on to a home that they already own and that they absolutely will have to sell within the next 10 years or someone who is thinking of buying a home getting stuck with a super high mortgage payment for 30 years when all they have to do is rent and wait a few years and they'll be able to buy the same type of home in the same area for 30-50% less. I have a son who still lives in SD and he is renting and saving his money until this whole thing bottoms out. BTW: I'm probably going to move back to SD if I've figured this correctly. Can anyone absolutely predict that it will bottom out in 2012? NO! But, my guess is late 2011 or 2012 will either be the bottom or darned close to it. But, even then, prices will not spring back overnight. Buyers who wait for the bottom will have their choice of plenty of properties for sale. Even the richest investors will not buy a property in SD at the present prices because they won't get a decent net return on their money. The majority of markets in the USA have nice single family housing for $175-$250k. Houses above that level are usually luxury homes. CA wages are not that much higher than those in other markets that offer these homes so now that the brokers won't be selling mortgages for $600k houses to window cleaners and berry pickers and down payments are going to be a normal requirement again, if you factor in all of the foreclosures that have already happened, look at the high number that are expected when loans reset for borrowers who have adjustable ARM mortgages and look at the interest rate on a jumbo loan which is presently required to purchase just about every SFR in CA..............you don't have to be a rocket scientist to figure out that this rocket had to crash.
I sincerely hope that you can find what you want within a reasonable timetable but if you're presently renting and going to stay in CA, I would strongly advise you to continue doing so for a minimum of two more years. If things haven't gone down as much as the majority of people on this forum (and others) are saying at the end of two years, then you can look at buying but with all of the factors that I mentioned above coming into play, I think you'll be a very happy camper that you waited.
Good luck to you whatever you decide.

Submitted by lendingbubbleco... on August 15, 2007 - 8:30am.

I predict that the plural of the name Nostradamus will be Nostradamii;)

Submitted by Bugs on August 15, 2007 - 8:44am.

It's true that people want to benefit, but I think most people would prefer not to benefit at someone else's expense. Just remember, the people who are overextended now are not being screwed by the people who now want the market to correct; they were screwed by the people who sold them their albatross. If you want to blame someone for the suffering of the FBs, Piggs are absolutely the last group of the someones who you should be looking at.

Your comment about how people were able to get themselves into this mess is practically a gimme. You imply the region was economically capable of supporting all those prices without artificial assistance. The problem with that suggestion is that current events are proving it to be completely unfounded.

Based on the number of ARMs that were used and the subsequent trends for default it has become obvious that a significant percentage of buyers who bought in 2004 and 2005 do NOT have such great jobs or earn the incomes necessary to sustain their purchases.

I don't know when this trend will end and I've made no predictions beyond saying it isn't going to happen in the next 2 years. The only reason I even go that far is because I have already seen a RE recession up close once before and I've seen what happens when there are a significant number of foreclosures in the market.

Price is a function of supply and demand. Use any measure you want - right now we have a lot more supply than the effective demand can absorb. Remember, "effective demand" goes beyond the number of people who simply want, and includes only those buyers who have both the desire and the financial means to achieve those desires. The normalization of the credit markets only serves to further reduce the number of would-be buyers who comprise that effective demand.

Before pricing can stablize the market has to achieve some level of equilibrium between the number of typically motivated listings vs. the rate of sales. That can't happen when there are a lot of foreclosures available in the market, and all indications are that the stream of resale listings resulting from foreclosures will not recede below their current level until at least 2011.

The market has to absorb both the must-sell inventory and clear out all the excess wanna-sells before the number of available properties approaches the rate of sales. Once that happens and there are enough buyers to go around we'll see price stabilization. It basically can't happen before then.

That's why I think that 2011 is the EARLIEST this trend can stabilize and we can go back into growth mode. The aggregate losses will be largely a function of the length of time multiplied by the current rate of decline that we've already seen. If the rate of decline speeds up the losses will be greater, if it slows down they'll end up being less.

I was too optimistic in the early 1990s and called the end of that downtrend a couple years prior to when it actually occurred. I am a reasonably optimistic person by nature (I'm just not irrational about it), so it's very possible that my opinion about 2011 being the earliest the market can turn may also turn out to be optimistic.

About the only way I can envision this decline being cut shorter than 2011 is if by artificial means. The most commonly touted artificial life preserver being bandied about right now if the taxpayers are compelled to bail out these investors and subsidize these foolish FBs. Aliens from outer space might come to Earth to give us the secret to clean power for free. The Rapture or it's equivalent might happen and man may learn to live in peace without war or conflict.

But barring some unforseeable event changing the history of man, I'm just not seeing any shortcuts.

Submitted by lindismith on August 15, 2007 - 8:47am.

Bugs Rocks!

Submitted by lendingbubbleco... on August 15, 2007 - 8:50am.

Bugs-

Nostradamus would be proud!

Submitted by sdrealtor on August 15, 2007 - 8:54am.

Did someone say Nostradumbass?

Submitted by PerryChase on August 15, 2007 - 9:00am.

Alex, you seem to have a split personality. Sometimes you are reasonable, and other times, you come off as an FB in trouble.

1) I've been calling people dumb for buying since 2002. When prices revert to those levels or below, they'll see how dumb they were. Slaving all those years to pay for an overpriced house is not what anyone would call smart.

2) You can indefinitely rent a nice home in a nice neighborhood where you want to raise your kids. Kids don't care how the house is financed (rent the house, or rent the money).

3) Life is about opportunity costs and making wise choice. Even if you can "afford" an overpriced house, you can also buy other things with that money -- vacations, travel, saving for retirement, education, etc... People have been giving up a lot to own those mc mansions. Living prisoner of a cookie cutter house is no way to broaden one's horizons and learn about the "real" life.

4) The majority of professional jobs in SD is based on venture money. When that easy money is gone, there's be retrenchment and layoffs. What are the laid-off workers going to do?

5) Recessions are sure things. They always hit at the most inopportune moments. The best time to buy is when others are selling. Smart families save during the good times because the hard times do come around. Jobs are not forever and companies do come and go. I'm afraid that many professional families will be in for a nasty surprise.

6) Regardless of when the bottom will be, it's dumb to buy when all signs indicate that the bottom is nowhere on the horizon. The alternative it to rent.

Submitted by lendingbubbleco... on August 15, 2007 - 9:02am.

sdrealtor-

that just gave me a good laugh!!

Submitted by Nostradamuses on August 15, 2007 - 9:13am.

I couldn't put an apostrophe in my username and I am wishing I had chosen Nostradumbass instead, but I predict that alex_angel will be wishing for a long time that he hadn't coined the word "Nostradamus's".

Submitted by gn on August 15, 2007 - 9:35am.

Alex, you seem to have a split personality

Alex reminds me of a guy in Temecula by the name of 1234VC (I dont remember his exact name). He always argued that prices cannot go down much. From his posts, it was obvious that he knew very little about real estate.

He finally pulled the trigger & bought. As soon as he bought, someone else got a much better deal in the same neighborhood :-)

Now, compared to this guy, Alex seems to be more afraid of the downside potentials. But Alex is equally naive about the real estate market :-)

Submitted by FormerSanDiegan on August 15, 2007 - 9:45am.

Some of us do quantitative analysis with estimates based on historical growth rates to do our projections or we also estimate changes in rent and apply rent vs own scenarios to come up with our estimates.

Below is an example of the first approach.

Basic growth rate plot

Submitted by seattle-relo on August 15, 2007 - 10:18am.

The consequences of foreclosure...

With all the potential foreclosures happening in the next couple years, I am wondering how these people will be seen in terms of getting into another loan when prices finally hit bottom.(A loan that they could actually afford) Does anyone have any prediction for these people? Will the banks be even more fearful of these people and not lend to them or due to such a high amount of families forclosing, could the banks extend a bad credit "forgiveness" due to the nationwide trend? I am not saying that there should be any "bad credit forgiveness", but I am wondering if that could happen. Any thoughts?

On a side note, you have talked about 1st mortgages being a non-recourse loan if there hasn't been any refinacing. For those who purchased with a 1st and piggybacked with a second, but did not refinance, is that 2nd also a non-recourse loan?

Submitted by seattle-relo on August 15, 2007 - 10:19am.

Oops, I meant to put that in a new thread, sorry...

Submitted by cr on August 15, 2007 - 10:35am.

AA,

People have been making estimates, or "predictions" as you claim, since this site started. They are based on data, historical trends, and economic conditions.

If you'd actually read the info on here you would see it's not thin air. Don't sarcastically criticize people for interpreting the data and then ask them for answers that you don't want to hear.

I find it ironic that those most negatively affected by the housing correction point the finger at "nostradamus's's's's'" who've been saying all along it wasn't a smart choice.

Submitted by Nostradamuses on August 15, 2007 - 10:48am.

wish these ex-mortgage brokers (I suspect) had better things to do than try and ridicule a very small group of people who are being proven more and more correct with each passing day.

Nostradumbass

Submitted by Critter on August 15, 2007 - 11:11am.

Is it possible that certain posters are trollstradamus's, to mimic a certain style of pluralizing words?

Submitted by falcon_eyes on August 15, 2007 - 11:42am.

The tide in the housing market has turned its direction from bullish in the past 5-6 years to bearish, Alex_angel. That's just how the market economy works, it can't go on forever going up or going down. Look at our recent history in the Internet dot-com bubble during 2000-2001 timeframe. You might say yeah, but it's different this time since home involves more US people to participate compare to the stock market plus there is the 911 terrorist attack. Remember the old saying that if something is too good to be true, then it probably is.

Submitted by Stu949 on August 15, 2007 - 11:44am.

To Alex_angel:

I get this a lot, "Lots of envious people that hope bad things happens to others so they can benefit." During many conversations with people from all walks of life, I declared in 2004 (before I was on Piggington) that the financing ponzi scheme was not sustainable in the long term.

I never hope that bad things happen to people, I just try to recognize trends and projections for what they are... Hoping things will happen will not get you far in life. People always say that I hope home prices will come down. That is the furthest thing from the truth. My analysis and research has led me believe that home prices will decline. When I first started my research, I had no emotion about housing. I didn't make much money and buying a house wasn't even a thought at the time. During the last three years, things have changed - I can now afford to buy a SFR, but prices are still too high. Things are what they are...hoping is for uneducated, ignorant, amateurs.

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