The Tipping Point Is Here

User Forum Topic
Submitted by Enorah on July 25, 2007 - 12:00pm

It's happened. I can feel it. The downward trend has begun to accelerate.

Submitted by capeman on July 25, 2007 - 12:13pm.

Looks like the markets may actually be starting to see it too.

Submitted by Enorah on July 25, 2007 - 12:16pm.

Right before I began my morning ritual of reading all of the housing blogs today, I just knew. Something has dramatically shifted.

Submitted by JWM in SD on July 25, 2007 - 1:09pm.

Yes, thank you Bear Stearns and Angelo.

Submitted by SD Realtor on July 25, 2007 - 3:24pm.

So I take it based on this analysis we will see sales/prices drop drastically in all the zip codes here in SD? Is that for this month? next month?

Okay I will track the data and see what happens.

SD Realtor

Submitted by lostkitty on July 25, 2007 - 3:33pm.

I was feeling it too (tipping point)... until I came here to CA for a visit.
Everyone I know out here is so absolutely CERTAIN that it wont crash much. If they own, they are sure their properties will not go down at all. If they dont own, they are saying things like, "we really missed the boat." These are people with good incomes and jobs (and brains - although I am starting to question that a bit).

Since I am only here once a year - the only real "change " I've noticed is that there are so many moms driving around with 'PEACE' and 'COEXIST' stickers on their cars. Big difference from last summer.

I do not understand why Rich's graphs are not front and center in the paper. People need to understand how out of whack the market is. They need education - and I used to think that was what the "news"paper was supposed to do... inform the people.

Submitted by GoUSC on July 25, 2007 - 3:37pm.

I don't know if we have reached the "tipping" point. I have noticed a lot less blinged out Hummers and Escalades on the roads. I know the ski boat, RV dealers, and auto dealers are dying out there right now. I know that homes in my neighborhood are all sitting on the market. Etc. etc. I know a correction in happening but I think it will continue very slowly. Home prices are very sticky on the way down. We will need to see some really negative job numbers for things to accelerate faster. Not discounting that though, because I think we are going to.

Submitted by sdrealtor on July 25, 2007 - 4:09pm.

I think the idea that there is ever a tipping point for anything is absolute nonsense. While it has sex appeal and sells books, it a bunch of silliness.

Consumers exist in their own little worlds and act individually. The thought of herding cats comes to mind. Changes occurs over time gradually in the world of consumers.

Several years ago I was involved in the acquisition of a very large retail entity (over 5000 units) by one of the strongest brands in the world. They believed that with rebranding and their marketing muscle they could increase throughput by factors of "X". My constant harping on them that change would be incremental and take many years fell upon deaf ears. From what I have heard after several years they still havent achieved their first year projections.

Perhaps the author of this thread is consuming something illicit with their morning coffee which led them to feel a palpable change?

Submitted by SD Realtor on July 25, 2007 - 4:17pm.

I was not trying to be flippant in my post... though that is most likely how it came out. I just think that statements are made with so much emotion... Once more I will point out posts made by people who do want to buy... Once more there are pretty decent active/pending ratios in several zip codes. I completely agree with sdr, I don't feel there is some point frozen in time where all of the sudden the market stops or plummets altogether. I am not saying the market will not drop as I totally agree it will do that... However these posts where people say, I can just feel it... Oh man... Then that gets everyone all frothed up... to me that makes the board here seem a bit less...well you can choose your own adjective.

Of course there are rampant defaults, and lots of signs that indicate the market should do this or that... yet that is not how it works, nor has it ever worked that way.

Why is it so hard to accept that the market will move at given pace?

SD Realtor

Submitted by Bugs on July 25, 2007 - 4:36pm.

I gotta go with the "slow-and-incremental" rate of change. The RE markets are relatively illiquid and they don't respond rapidly. I think the current trend for unwinding these pricing structures will take years, not months. It'll take significantly longer to "correct" than it did to "distort".

Submitted by Enorah on July 25, 2007 - 4:46pm.

I'm going to be a bit clearer about what I mean. I have only followed the housing drama for the last year or so. We moved out to CA about three years ago, and I was amazed at what people were willing to pay to live. I still am. I am sometimes amazed at what I am willing to pay, but then again I remember that this reality is all made up anyways. It is all a game. All a virtual construct of our emotions and thoughts taking form.

But I digress. Two and a half years ago, six months after we moved to this state, I was talking with a neighbor about the cost of housing, the insanity that was pushing prices higher and higher (we were in Sonoma county at the time), and I looked at him and said, "It's all going to come crashing down". To which he replied, "No it won't, 'cause there will always be another idiot willing to pay."

I walked away from that conversation without responding to his last statement because I have learned that it is pointless to argue with someone when I express a thought based on an emotion as strong as that one was. I have no way of substantiating my claims because my process is intuitive and emotional.

About a year later I was lead to Patrick's housing crash website and saw there, on line, in words, exactly the thoughts that were in my head the day I had conversed with my neighbor. I have spent the last year, reading, every day, many housing blogs. I have spent the last year wondering when it was I was going to feel what it is I felt today.

In my opinion, intuitive and emotionally based as it may be, something big just shifted.

Submitted by SD Realtor on July 25, 2007 - 4:53pm.

Point well taken Enorah... We will see if the big shift yields tangible results in a month or two, or over the next few years.

SD Realtor

Submitted by GoUSC on July 25, 2007 - 4:58pm.

While there isn't a tipping point per se there is definately a point where the general increase trend stops increasing or bouncing along steady state and starts a long trend downwards. We might be there...but it is going to take a long time to unwind.

I still emphatically believe that prices have to unravel to more reasonable numbers inline with the economics of today. If not I give up and will just rent and be smarter for the rest of my life :)

Submitted by Enorah on July 25, 2007 - 5:04pm.

I agree, we will see. I mean that in all sincerity. Interpreting intuitive information is a complicated process. :)

edited to add: I was replying to SD Realtor there

Submitted by drunkle on July 25, 2007 - 5:08pm.

i think it has to do with the media spin. before, it was "there's no problem", then "it's contained" and now "we're dooooOOOOOOMMMMEEEEEDDDD---D!!!!!" /bender.

Submitted by PerryChase on July 25, 2007 - 5:31pm.

I think that there is such a thing as herd mentalilty.
We do what our social contacts do and talk about.

I believe that people have finally stopped talking about real estate at dinner parties and backyard BBQs. Do people still brag about and try to convince their friends and relatives to buy real estate?

Here's a study about how people subconsciously imitate their peers. Not surprising at all. Monkey see, monkey do.
http://www.signonsandiego.com/news/healt...

Submitted by rb_engineer on July 25, 2007 - 5:33pm.

I believe that the turning point was the winter of 2005. Before then, sellers were winning and getting the prices that they wanted. Since then, its been a buyer's market.

Submitted by lendingbubbleco... on July 25, 2007 - 6:38pm.

Reading DQ's latest price/sqft data for SoCal, I seem to recall that COMPTON is still above $330 per square foot.

This is completely normal folks...nothing to see here...everyone wants to live in Compton, you know.

Seriously, though, the turning point is here, I agree, but some areas have a looooooooooooong way to go (i.e. Compton back below $100 per sqft. for starters)

rb_e: still not a buyer's market until nobody (I mean NOBODY) believes in real estate as a good investment anymore....again, we have a long way to go....don't believe me? ask a few of your friends and neighbors how bad they think things are going to get around here....I'll bet most of them will still say the worst is over and to expect flat to minor downside over the next couple years before things go back up again....sentiment has to be in the gutter before we will see a "buyer's market"

Keep an eye out for the TIME magazine cover article proclaiming "Real Estate is Dead"...that'll be the time to buy.

Submitted by Arraya on July 25, 2007 - 7:01pm.

Funny, I mentioned the RE market problems to a freinds father and he laughed at me and thought that it was completely ridiculous.

A very well to do lawyer, so you would think he would have a little business savy.

We have a long way to go before it enters the "average joe's" psyche...

Submitted by drunkle on July 25, 2007 - 7:04pm.

your friend's father may not have been one of the gold rushers of the mid 00's. he may have bought long ago so to him, RE is doing great. he may not be aware of the situation because the situation is hardly being covered.

Submitted by rb_engineer on July 25, 2007 - 7:06pm.

lendingbubbleco,

Well, I think you are wrong. The sentiment among regular people (people around me at least) pretty much reflects this blog and many blogs that are out there. Majority are super bear, some do think that things are not going to be as bad as everyone says. But no one I know is bullish and recklessly buying now.

Not sure why we even need to wait for TIME to put it on the cover. Almost all articles that deals with economy nowdays mention US housing recession to a degree. Even a farmer living in a village in China knows about US housing problems.

It could get worse, obviously. But its definitely not good right now.

Submitted by NotCranky on July 25, 2007 - 7:09pm.

Enorah, Regarding the turning point.I think most of us confirmed that we had the same intuition or outright opinion or some combination of the two a long time ago. That's why we got rid of overleveraged properties or cashed in lottery tickets and/or became avid housing bubble bloggers and are in one form or another anticipating a better opportunity to buy in the future. The collective analysis here in favor and the hollow ring or obvious ulterior motives to the posts to the contrary is enough confirmation. Plain facts(no need to rehash them) show that the turning point has been reached we can speculate now and observe the seriousness of the ramifications and for the most part that is what most of us have been doing for months and some of us for years.

Submitted by lendingbubbleco... on July 25, 2007 - 7:40pm.

rb_e:

Which is it? COULD it get worse or WILL it get worse?

If even you, fortunate enough to have found this blog, are wavering on this question, obviously my point is crystallizing.

Sentiment has to change dramatically from here. I respectfully disagree that "regular people" have any negative sentiment whatsoever.

I venture that the percentage of people who are truly bearish on the real estate market is statistically insignificant (near 0%) when you really consider all the dolts in this country.

OK, somewhat off topic but I don't buy the old adage used by realtors either that "time will tell"...

The last realtor who used that line with me lost her flipping house (McMansion in North County) to foreclosure, very recently. Time has spoken bee-yotch!!!!! Loud and clear!!!

Submitted by drunkle on July 25, 2007 - 7:23pm.

just because the housing market gets mentioned, doesnt mean that it's getting full treatment. the sound bytes are all "sub prime" or "stalled market" but little to no in depth information. if you watched the last kpbs interview with rich, he spells things out, but it's kpbs and it was all fact. too dry, too boring, too intellectual. when 60 minutes spells it out in 4 letter words or less and with pretty/ugly pictures then it might have an impact.

hell, do the home owners who took out sub prime loans even know that they're talking about them?

Submitted by Risk Adverse on July 25, 2007 - 7:34pm.

The perfect alignment of the real estate planets has past. Consider all the factors that have recently driven up real esate prices: low interest rates, low unemployment, a robust economy, easy credit qualification, 100% financing, money fleeing the financial markets (especially in 2000-2002), no doc approvals on loans (i.e. "liar-liar loans"), and of course red hot speculation. Which of these factors are going to IMPROVE in the forseeable future? I can't name a single one. Congress is busy passing legislation for tighter requirements on new loan applications (MN already requires full docs), and interest rates have bounced up from 45 year lows. Throw in an unprecedented volume of ARMS that are hitting reset, and no more cheap money to save the day. The planets are moving further from alignment and we may be in for a multi-year cycle for re-alignment.

Submitted by rb_engineer on July 25, 2007 - 7:41pm.

lendingbubbleco,

Now you are saying I'm average. I would disagree with that. I probably can't answer that question because I just don't know. I hope it goes down a lot, 50-75% (to pre 2000 levels).

I don't know why you think that you are "special" because you think SD housing is overpriced. Its blatantly clear that it is!

Maybe because most colleagues of mine are well informed. When one of them buys a house now (a contrarian investor, I would say), most of us roll our eyes expressing our disbelief. We say "hey, why didn't you wait for the ARMs to reset!"

Submitted by lendingbubbleco... on July 25, 2007 - 7:53pm.

I am special. My mommy told me so.

OK...When Would Jesus Buy a House? That's the real question here.

Submitted by Enorah on July 25, 2007 - 8:10pm.

Hey! Play nicely on my psychic thread

Submitted by cr on July 25, 2007 - 9:39pm.

What you're feeling is the fact that mainstream media is finally accepting that a soft landing is not gonna happen.

Foreclosures and inventories are up, sales and prices are down. People are out of money, equity, and strapped by debt.

It ultimately doesn't matter what anyone thinks, wants, or feels. The wrecklessness has been sewn, and now the fallout is being reaped.

We've just known it for longer than everyone else, so it's validating when other people see the light.

Submitted by covered_10 on July 25, 2007 - 10:18pm.

Kevin DePew at minyanville.com has been and is staying all over the financial media propaganda concerning the debt orgy and subsequent asset bubbles it created. Scroll down to his item #3, "Jai Guru Containment" for a black humor look at how the spin meisters are hard at work (photo of great T-shirt) and the "Mr. T Gold Price Indicator is a hoot, too:

http://www.minyanville.com/articles/JPM-...
Minyanville - NEWS & VIEWS-Article

Submitted by sdrealtor on July 25, 2007 - 10:39pm.

Just to clarify my comments on the presence of a tipping point. There is no question that the market has definitely turned. Personally, I felt the beginning of the change around June of 2004 which I think pretty much everyone would agree is far earlier than most of us here. However, the change happens at different times and under different circumstances for everyone. The idea that there is some mystical tipping point out there is utter hogwash IMO.

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