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 eyePod on August 15, 2007 - 5:04pm.

Alex does indeed seem to have a split personality. Both in his attitude toward housing prices and in how he treats people. For instance, he can't stand people making predictions and yet he seems to be argumentative about whether prices can go down very much or not. That to me seems to be an obstinate way to make a prediction. Or maybe he just wants to argue. Or maybe he is just cynical.

Submitted by Diego Mamani on August 15, 2007 - 5:45pm.

In think that Alex makes a good point regarding predictions: It is really silly to say that the market will bottom in 2012 - why not 2011? Or 2014? No one really knows. And the same is true for the % drop in inflation-adjusted prices from peak to trough: will it be 20% or 60%? How fast will prices drop over this period? Most of it up front in 2007-08? Or evenly over the long downturn period?

We know where the market is headed, but we just don't know the details regarding years or exact % price drops.

That said, however, I think that Alex's true colors come through when he made this fallacious argument that we often hear from RE industry shills:

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.

Once I read that, I stopped taking him seriously.

Submitted by JWM in SD on August 15, 2007 - 5:50pm.

"When people were buying in 2004-2005 did people call them dumb at the time?"

I did...but I'm just that kind of guy...as you well know by now..looks like I was right.

Submitted by JWM in SD on August 15, 2007 - 5:52pm.

Not if they go bankrupt first AA. LMFAO...ATM fees going to save CFC from their REO portfolio..bwhahahaha....

Submitted by rocket science on August 15, 2007 - 6:12pm.

After seeing Alex's Graph I couldn't resist.
BTW, love the log scale to minimize the effect.

First let me admit that I do not know the pedigree of the housing data in the graph but believe it to be accurate as it came from a spreadsheet that I downloaded a while back in May of 2007 from a link from a previous thread.(as best I can remember). THe 'Alex" data is a few points eyeballed off of his graph and approximated in between but gets the basic shape.

That said, just put together a quick picture of the data and some curves assuming 6.2% (that appears to be what Alex used) and even a generous 5% growth in value and then a 4% growth rate. The anchor point for the 'growth' data is the first available point I picked off of the 'Alex' data.

Some observations, not to be taken as fact:
Although I think 5% is generous it is curious that it basically intersects the bottom of the last correction in the mid 90s.

So if one were to ASSUME the 5% growth rate is what houses should expect to appreciate over a long period of time, the prices should decrease approximately the following amounts for the “bottom” to occur in the following years.

2008 48%
2009 45%
2010 43%
2011 40%
2012 37%
2013 34%

And if the “growth” is at ~5.5% it matches the 2017 prediction in one of his “A Bubble Primer” post on when per capita income divided by the median-priced home meets the historical average based on prices remaining constant and income increases at an annual rate of 4.6%

Again, just observations but it looks like the fall may be with us a while.
rs

Submitted by rocket science on August 15, 2007 - 6:14pm.

Had trouble with the graph.
Housing Data: Had trouble with the graph
rs

Submitted by falcon_eyes on August 15, 2007 - 6:15pm.

I agree with Diego Mamani analysis ... it doesn't make sense that the true happiness of living a life to its fullest can ONLY be accomplished by having a home and raised a family. Well, if my family is having a wealthy fortune, then i have no issue with my financial problems. I don't even care with average middle income families since I have my own butler.

First of all, people has to live within their means .... don't stretch their lifestyle by buying into homes at outrageous prices. If you can not afford to buy the home, then don't buy ... wait on the sideline as a renter for now while saving the money when you're ready.

My vote: Alex_angel is a real estate spy, he's listening to these forums trying to gauge the BEARISH home market barometer. Flash news to you, the BEAR has beaten down the BULL in this housing market ... not done yet but it's getting close to declare our BEAR VICTORY. My suggestion to Alex_angel, you should switch your current job to become a foreclosure real estate agent. That's where the current activity now if you still want to stick around in the property market.

Submitted by Nancy_s soothsayer on August 15, 2007 - 6:23pm.

Very nice, rocket science. Based on Alex Data alone, Alex will also stay young and live forever. He will never ever pass away. San Diego will turn to Nirvana for his perpetual lifespan. (Sarcasm off)

Submitted by PerryChase on August 15, 2007 - 6:27pm.

Diego, people make predictions all the time -- housing will rise 4%, Iraq will pay for itself, population will grow 2% etc...

When the preditions are not optimistic, you get all kinds of people coming out saying "don't make predictions because you don't know."

I think human nature is such that we want to reject the bad news. Here's an example:

Iraq will pay for itself = patriotic and All-American.
Thousands will get killed = defeatist and weak on terrorists.

Submitted by Reality on August 15, 2007 - 7:29pm.

"When people were buying in 2004-2005 did people call them dumb at the time?"

I did. They were.

People buying today, same thing.

Submitted by SD Realtor on August 15, 2007 - 7:43pm.

Alex what do you want from the board? It is a website blog with alot of differing opinions. Nobody is going to hold back. My own analysis may be dead wrong but I don't see a quick bottom for a ton of reasons. Nobody is holding you hostage so buy a home if you want to buy a home. It is very likely that I myself will end up buying long before I want to buy but that is the way life goes. It still will not change a rationale study of how long it takes real estate cycles to occur. Why is it hard to fathom we are in uncharted waters? We have never had this much overextension from recent homeowners so it seems prudent to err on the side for a longer unwinding then the previous 6 year cycles.

Wouldn't you think that to be the case?

I cannot wait until 2012 either. However that will not make me change the way I look at the problem. I cannot formulate a solution to fit my personal life. I think it is peculiar that you hammer the board because it doesn't fit yours.

SD Realtor

Submitted by Nancy_s soothsayer on August 15, 2007 - 7:50pm.

"When people were buying in 2004-2005 did people call them dumb at the time?"

I did, too. Yes, sir, indeeedee. They were dumb.

Like Ex-SD, we sold in 2005.
Like Ex-SD, we moved away from San Diego.
Like EX-SD, we have a son in San Diego.

We bought a huge brand new house in green, rain-soaked Central Texas. At $70 per-sqft. Cash.

Hey Ex-SD, are we long lost twins? Dopelgangers (sp)?

Submitted by lendingbubbleco... on August 15, 2007 - 8:21pm.

I predict that Alex_angel won't be back until at least 8/16/07.

Nostradumbass

Submitted by garysears on August 15, 2007 - 9:19pm.

Ah yes, the old "life is better when you are a homedebtor" argument.

Believe it or not I actually recently wondered if I might "miss" this correction for lack of down payment cash. How stupid does that sound?

Now that I think about it, the complete lack of savings and down payment required for real loans virtually guarantees a prolonged decline. People who want to own are going to have to get frugal again and save. No way around it. I'm pretty sure I can outfrugal the masses so I don't have anything to worry about.

I'm guessing there aren't enough responsible buyers on the sidelines to make a big difference to the upside for many years to come, especially staring down the barrel of double digit interest rates. People are going to get real demotivated about real estate.

Rent now before you're wiped out forever!

Submitted by Ricechex on August 15, 2007 - 9:44pm.

Alex, it doesn't take a brain surgeon (and I can guarantee you I am not one!) to figure out that the housing market is dropping and continues to do so. I am not nearly as financially savvy as the rest of these posters, and I suspect my income is quite meager compared to the rest of these guys.

However, I started to watch the market, and check housing prices constantly beginning in 1996. Because I have difficulty making decisions and taking risks with money, it was not until 2001 that I finally bought a small house in the hood, cause that is all I could afford with a 30 year fixed mortgage. It was obvious that there was a frenzy going down. I bought the house so I would have a place for myself and my dog, and I saw rents skyrocketings and people getting booted for condo conversions. This was happenning at an unprecedented pace.

So, all these years, I continue to watch the market. Just search the MLS listings on sdlookup.com, and you will see....many of these homes were bought in 2004-2005 and the listing price is considerably less than the sales price of those years. Furthermore, I see PLENTY of short sales, and prior to these last 6 months, I was unfamiliar with the term. (Now I know what it means)

That suggests that there is trouble in paradise. I see houses in my neighborhood taking months to a year to sell, and that was not what I have been seeing in the last 5 years.

And, yes I thought people were totally stupid buying on those crazy "creative" mortgages these last couple of years. What were they thinking? Didn't they want to know the terms? How could they think they would be able to pay when their ARMs reset? Were they expecting to inherit a windfall of cash or win the lottery? Didn't their parents teach them common sense? Not the sharpest tools in the shed.

If I recall correctly, I remember first hearing about the interest only mortgages in 2003-2004, which makes sense now, as it is 3 years in, and the ARMs are re-setting, and guess what, they cannot pay. Thus, the short sales, foreclosures. Since those ARMs continued into late 2006, that brings us to 2009 for the rest of them to go under.

Have some lunch downtown. See all the empty condos. See the for rent signs. Something is awry. The news is mostly bogus, I pay little attention to it....just LOOK AROUND. The market is crashing.

If it walks like a duck and talks like a duck, then it is a duck.

Submitted by FormerSanDiegan on August 16, 2007 - 9:43am.

Rocket science - I think you were referring to my graph. Not Alex's. Pleeze don't confuse me with him.

I pulled the chart from a discussion we had a couple months ago. In that discussion I plotted both on linear and logarithmic scales. (linear plot below).

In that discussion someone asked what "normal" growth rates are. Well, that's anyone's guess. FOr these plots I tried to put a growth rate that intersected the bottom of the market in 1996-1997.

I made a half-assed projection based on the same percentage decline as the last housing bust, then extending it for several years further at the peak rate of decline.

I came up with an optimistic correction of a nominal 20% decline through 2012. Adding about 3% inflation that is a 41% real decline. This is the optimistic range of what I expect. When take more conservative growth rates (e.g. 5% from a "fair value" price in 1998) it's a bit worse as you indicate in the 40-50% range, depending on how quickly it happens.

Sorry I didn't have the entire explanation. I was too lazy to look up the entire thread. Just wanted to show Alex that some of our guesses on the market are based on analysis rather than being pulled completely out of thin air.

As a rocket scientist you should appreciate the log scale. A constant growth (or decline) rate shows up as a line on a log scale. Some people have a problem seeing the linear scale go exponential.

another half-a$$ed projection

Submitted by lendingbubbleco... on August 16, 2007 - 9:58am.

"I predict that Alex_angel won't be back until at least 8/16/07.

Nostradumbass"

It seems I was right...Alex_angel has reappeared in the "contrarian view of CFC" topic. Today's date: 8/16/07.

Could this be an accurate foretelling of the future or merely a coincidence? I will never tell.

Nostradumbass's's's's's's's'

Submitted by Alex_angel on August 16, 2007 - 12:24pm.

Can you feel the love tonighhhhht. Where is the love. Ha. I love how you are calling each other NostraDumbasses. I didn't go that low. I just called you guys NostraDomus's. I'm glad the juvenile crowd took it upon themselves to insult the piggington members that post here. For shame. Tsk Tsk.

Here is my prediction.

None of you are happy. Your life sucks so you hope the same on others. You pray for the crash to affect people so that you can laugh at their lost and beleive that is makes your worthless existence mean something. Pathetic people!

Submitted by gn on August 16, 2007 - 12:58pm.

Here is my prediction:

As a consequence of Alex's lack of real estate knowledge/understanding, he will become increasingly baffled by the housing market.

Alex will become increasingly confused and exhibit a split personality, bordering on schizophrenia.

Eventually, he will give up & pull the trigger (buy a house). He will end up being a "knife catcher" & got cut badly :-)

Submitted by SD Realtor on August 16, 2007 - 12:59pm.

Alex, some of us replied to your post in a rational manner with no name calling. I agree with you that name calling is not appropriate.

Would you care to address my response to your post?

SD Realtor

Submitted by waiting hawk on August 16, 2007 - 1:48pm.

"You pray for the crash to affect people so that you can laugh at their lost and beleive that is makes your worthless existence mean something."

You got it! I am big on saying, "I told you so" to idiots :)

Submitted by FormerSanDiegan on August 16, 2007 - 1:50pm.

Alex, some of us replied to your post in a rational manner with no name calling. I agree with you that name calling is not appropriate.

Alex, I too showed a plot with a range of long-term rates that supports my price opinion that is not pulled out of thin air.

If you cannot contribute to the data-driven civil discourse that has been the hallmark of this site, then go ahead and waste your time spewing random thoughts and ill-conceived rants.

It's a free country.
On that note: I don't agree with what you say, but I believe you have a right to say it. In addition I will exercise my right in calling it horse shit.

Submitted by Bugs on August 16, 2007 - 3:35pm.

Well, at least one Pigg has demonstrated a knack for predicting the future.

LendingBubble, please stand up and take a bow.

Submitted by Diego Mamani on August 16, 2007 - 5:11pm.

Perry, it's true that people make predictions all the time. I worked as an economist and a statistician in different lives, so I can easily smell a rat when people start throwing around exact dates or numbers. I guess it's just human nature to attach a number to our beliefs, so that we sound as if we know what we're talking about. But someone with data experience will just roll his eyes and laugh later.

Your comment about rejecting bad news has more to do with political issues. I'm not saying that the RE debacle doesn't have political implications!

Submitted by lendingbubbleco... on August 16, 2007 - 5:28pm.

Hi Bugs.

Thanks, but....I didn't fare too well predicting where the DJIA would close today.

Some things are easier to predict than others I suppose;)

Submitted by Dukehorn on August 16, 2007 - 11:12pm.

I admit I'm dumb. I'm a lawyer that worked did transactions in the dot.com world. I jumped out of tech stocks in 99 because I saw it was unsustainable. Well I missed the crash by two years. I did the same thing in real estate in 2002 and missed it by 4 years.

I think the problem is that by working closely with people in the industry I become "frightened" by the overexuberance and I bail out early. Is that dumb? I don't know and I may have lost quite a bit of capital gains, but frankly I'm pretty happy with a cheap old whitewater kayak, a nice mountain bike and a very good road bike. I drive a brand new car under 22k and my old kayak carrying truck is over 12 years old. SoCal is full of folks that keep on asking me why I haven't bought a BMWer. Easy, I'm not a materialistic fool and that's what a see in a lot of Californians.

Am I happy that the market is resetting? If it cuts down on the number of Hummers I see out here, I'm pretty satisfied.

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