Timing the Bottom

User Forum Topic
Submitted by RemingtonRd on December 5, 2007 - 11:21pm

How do you know when the bottom has hit? Most likely when realtors are out looking for different jobs.

Same as when we all knew the top was near, unprecedented numbers of new realtors!

So, from some of the stories I've heard recently, we are getting closer to a bottom.

All you renters out there, start getting your pre-qual letters.

Submitted by NotCranky on December 5, 2007 - 11:25pm.

The bottom has hit when there are three or four "for rent" signs per block...on each side of the street..especially near educational complexes such as universities.
Sincerely,
delightful and entertaining.

Submitted by drunkle on December 5, 2007 - 11:26pm.

instead of going out and asking everybody "are you a failed realtor?", i think it'd be easier (and less obnoxious) to just keep watching prices fall.

btw, from what i hear, we all get closer to death every day, but we're still far from dead.

Submitted by temeculaguy on December 5, 2007 - 11:41pm.

Since you bout that remington road place in August for 475k, I think the bottom will be next August when the next guy buys it at auction for 375k. While August of 2008 is purely a guess, I am quite sure that August of 07 wasn't it.

Submitted by patientrenter on December 5, 2007 - 11:50pm.

I'm pretty tolerant, but this guy's a real troll. All you guys responding are falling for a troll's bait. Advice: Let this thread die quickly, and don't respond to any more posts from this guy (under whatever name he uses in the future).

Patient renter in OC

Submitted by drunkle on December 6, 2007 - 12:15am.

what are you, the hall monitor? eff off!

Submitted by neto on December 6, 2007 - 1:58am.

A friend once told me "The time to buy is when everyone hates real estate, this is when it has hit bottom". So just look around, be patient and wait. Your patience will be rewarded.

Submitted by RemingtonRd on December 6, 2007 - 6:49am.

Sounds like many of the people on this forum hate real estate. "when everyone doesn't want to buy and is waiting for the bottom, the bottom has likely already passed".

Patient renter, when did you SELL your place to become a renter? Or have you been renting since 1991 waiting for that bottom?

Submitted by blackbox on December 6, 2007 - 7:29am.

The current bailout will stretch out the process of bottoming. Another bailout after the election by the dems will make it even worst. The bad news is that affortability will take longer to hit.

Submitted by YokohamaCt on December 6, 2007 - 7:50am.

"Stretch out the process of bottoming" - is that to say the prices are near bottoms, but just may stay at these levels for a few months/years? Or are you saying that the decline in prices will take longer and now rather than hitting a bottom in early-mid 2008 (for example), it may not happen until 2009 or 2010?

Would it be better to buy near the bottom, or miss the bottom and end up having to buy a bit higher?

Submitted by LA_Renter on December 6, 2007 - 8:30am.

Here is a quote about the last downturn from Chapman I found on Lansners blog in the OC Register.

"The previous downturn in the housing market in the early 90’s was not short-lived. In Orange County, home prices declined for 54 months from the peak to the trough, decreasing 17.7 percent. It took another 51 months for the median price to reach back to its previous peak. A similar pattern occurred in many other regions of the state. Although there were significant job losses in the 90’s that sharply reduced demand for housing, in the current cycle, there is a different problem: a lack of housing affordability. Not only that, the job market is beginning to weaken considerably. The combination of these factors suggests that the county is facing a multi-year downward spiral in home prices."

These things take a long time and they don't bounce off the bottom like a stock. Regardless of any bailout I anticipate that 2008 will be toast, you will see falling prices all year with a possible exception this Spring where it may just go flat. The final shoe to drop in this housing bust is If we enter into, OR what degree of a Recession we encounter as a result of this mess. Pay attention to local job numbers. Here is my prediction of what the bottom will look like, it will be when RE becomes the most boring asset class in the world to watch and will be the furtherest thing from people's minds.

Submitted by YokohamaCt on December 6, 2007 - 8:47am.

Actually when it is the furthest thing from people's minds that doesn't correlate to the bottom. More often it is when everyone is saying how much further it will go down, how scared they are, etc etc.

But, perhaps this is the most interesting fact of them all.

Maybe the sign of the bottom is when our own humble and NASD-muted Professor Piggington's OWN LANDLORD has defaulted on his loan! Yes, it's true (as long as Piggington still lives in the same address as the NASD has on file).

In fact, one of Piggington's neighbors tried to sell his place for 698,000-714,000 (5/2006), and it is currently active for $369,000, after buying it for $390,000 in 2004 (it previously sold for $199,000 in 2001). If this property is even comparable to Piggington's, then the $670,000 mortgage on the place will be a short sale or REO very soon!

Oh, and lastly, the owner is also an Agent. Yes, the bottom is very near!

Submitted by FormerSanDiegan on December 6, 2007 - 9:23am.

Would it be better to buy near the bottom, or miss the bottom and end up having to buy a bit higher?

Answer: It is clearly the latter

Taking into account the time value of money, it's better to buy after the initial stages of the upswing, than to try to buy when things are still going down. Your probability of experiencing further declines is much higher when prices are still declining. Once prices have made the turn positive, history shows that there is plenty of time to catch more upside.

Submitted by FormerSanDiegan on December 6, 2007 - 9:26am.

One other thing:

Mr./Ms. IamNamedAfteraStreetonWhichIamMarketingProperty

There are plenty of homeowners, including owners of rental property (myself included) that post regularly on this board.

Submitted by SHILOH on December 6, 2007 - 9:35am.

How will the 'rate freeze' affect the bottom? Won't it drag it out further than 2011? Especially w/ boomers retiring? The current plan applies to owner occupied homes and would apply to borrowers with loans made at the start of 2005 through July 30 of this year with rates that are scheduled to rise between Jan. 1, 2008, and July 31, 2010. When the loans begin resetting beyond 2010, will the homes have gained enough equity for home owners to afford them, even if their income had had not climbed much in five years?
Also, does anyone know what % of the resets are owner occupied? And will this rate affect new loans?

Submitted by North15 on December 6, 2007 - 9:53am.

This chart identifies the mental state at the bottom:

http://www.idorfman.com/Charts/sentiment...

Submitted by NotCranky on December 6, 2007 - 9:53am.

Slumlord,

We are gentle crowd. It is blog policy not to e-ball even trolls. Consider yourself fortunate. If you do not respect this kindness you win automatic entry into the special olympics. You must show and compete. Instead of a number bib, you will wear your "for rent" signs so that everyone will understand your condition and the appropriate sympathies can be awarded.

Sincerely,
Poster formerly known as delightful and entertaining.

Submitted by Rich Toscano on December 6, 2007 - 9:56am.

Dude, you have got way too much free time.

Yes, it's true that my prior landlord defaulted on his mortgage. He also defaulted on about 7 other mortgages, all serially refinanced at 100% LTV (and often more) with the proceeds used to buy more rental properties until the game came to an end.

As for my specific property, he has been holding up the foreclosure process through legal tactics. But given the amount he owes vs. what the home is worth (including the amount in arrears he owes almost double what zillow says the home is worth) there is no way he is getting the home back.

It is a sure REO, yet along with many other of his and others' sure REOs it hasn't even hit the market yet. So I ask you: how exactly is this a sign of the bottom?

There is just no data to justify that this is the bottom. Instead of snooping about my personal information, maybe you can research this: how is this the bottom with homes still overpriced, 13 months of inventory on the market, and huge amount of REOs in the pipeline?

Submitted by RatherOpinionated on December 6, 2007 - 10:15am.

Rich,

the same way you know that buying CFC or FNM or FRE or C for any of your clients is one of the smartest things you'll do all year. Markets go to extremes and get extremely oversold or overbought well before the bottom is ever identified. By the time you "know" you've hit bottom, it is already too late.

For example, Countrywide stock with rumors of bankruptcy etc. hit a low of 8.21 recently. Well, it's trading at 11.49 right now - that's a 40% bounce. Had you waited for "confirmation" of a bottom or that all their bad news was behind them - you would still be waiting and made nothing. I also recognize you can't be the one to buy at 8.21, but if you bought anywhere under $10/share, based on knowing there is too much BAD news out there for the thing to be priced correctly, you would still be sitting on a great return.

I'd take this same philosophy to REO's and the Real Estate market. Everyone KNOWS there are months of inventory and the pipelines are growing, they KNOW there are a bunch of REO's that haven't even hit the market yet - and simply because EVERYONE ALREADY KNOWS, the current prices are reflecting that already. "Efficient Market" - I'm sure you remember that from your Series 7 exam last year.

Oh, and what isn't "priced in" yet is all the ways our nifty government will come to the rescue of lenders and borrowers. This should help support the market as well.

This is fun....

Submitted by FormerSanDiegan on December 6, 2007 - 10:16am.

RatherOpinionated -

Are you the same person as "YokohamaCt" ?
I ask because Rich directed a quesiton at Yokohama Ct and you responded under the moniker RatherOpinionated.

What's the matter ?

Is work slow right now ?

Taking out your angst on the blogsters ?

Submitted by North15 on December 6, 2007 - 10:21am.

RatherOpinionated:

Connecting the dots between a heavily shorted stock with the resulting dead-cat bounce and the bottoming in housing is foolish.

Submitted by RatherOpinionated on December 6, 2007 - 10:24am.

Everytime we get an intelligent conversation going, someone needs to chime in about how much they can't stand Mr/Mrs NamedAfterAProperty. Explain how my recent reply did not fit within the criteria of this blog's purpose? Discussing the bottom and identifying methodology perfectly fits the title of this string, "Timing the Bottom". If you don't value this discussion, let it die out, and perhaps you should respond to the string about "price collapse in Chula Vista" - that looks like an engaging discussion.

Back to the discussion at hand.

Submitted by Rich Toscano on December 6, 2007 - 10:25am.

Sorry, not buying it. None of these things are "priced in" to the housing market because as recent history has made extremely clear, price is the most lagging indicator when it comes to housing. The "technicals" (months of supply, NODs, volume, etc) have continued to get worse, and the prices have continued to follow the technicals down months later.

Also, homes are still quite overpriced based on their historical valuations and income earning potential, so trying to make it sound like they are some sort of screaming bargain doesn't hold up.

Finally, your posting via multiple logins is a transparent attempt to make it seem like your ideas, such as they are, have widespread support. If the ideas are so great why do you need to resort to such tactics?

Sorry to feed the trolls, everyone, but I just can't believe these guy/gal went through the trouble to snoop on me instead of researching the most rudimentary facts about the market itself. I couldn't help myself!

Rich

Submitted by RatherOpinionated on December 6, 2007 - 10:33am.

You are all so smart, but this is my final moniker and I no longer need to resort to marketing properties or rentals. Now I can fit in with the rest of the lemurs and make only appropriate comments that fit within the scope of the discussions. Love me or hate me, at least the discussions may get a bit more heated (which is good, right)?

Sincerely,

The Troll of Piggingtonville

Submitted by sdduuuude on December 6, 2007 - 10:33am.

Maybe you should publish his IP address - heh, heh.

Submitted by patientlywaiting on December 6, 2007 - 10:36am.

I would say that all the NODs and foreclures are not evidence of a bottom. On the contrary, they point to a still depreciating market.

All the hidden inventory out there are only signs of worse to come.

Submitted by RatherOpinionated on December 6, 2007 - 10:48am.

Okay, so where would everyone put themselves on this chart?

Sentiment Cycles

I can already tell a lot of you are already well past DENIAL (since you feel so confidently that the up market has ended, which of couse it has), there are also many people already in DESPERATION and PANIC, and for those about to face foreclosure, CAPITULATION (ie. Piggington's neighbor). DESPONDENCY can't be far!

Submitted by sdrealtor on December 6, 2007 - 10:51am.

We are still somewhere between denial and fear.

Submitted by FormerSanDiegan on December 6, 2007 - 10:56am.

RatherOpinionated -

I welcome discussion and think you actually made some reasonable points to which I wish to counter.
However, I wanted to be clear to whom I am conversing with before starting a discussion. Using multiple monikers is simply rude, since it confuses the dialog and is often used as a smokescreen by disingenuous posters.

Now, to your point ...
One interesting difference about real estate timing versus stocks is the pace at which things happen. When the market holds 13 months of inventory, it usually takes a long time of increasing sales pace to sufficiently draw down the inventory to the point where market reaches equilibrium and starts rising again. In stocks these turns can happen on a time scale of hours, days, weeks. In real estate the time scale is months/years.

If you have indications of increasing sales necessary to burn off the excess inventory I would love to see it.

Submitted by FormerSanDiegan on December 6, 2007 - 11:01am.

Nice cycle chart.

I think we are clearly well past the denial stage.
I'd say we are squarely between the fear/desperation stage.

Some time in 2008 ... Capitulation.

Submitted by RatherOpinionated on December 6, 2007 - 11:03am.

FormerSanDiegan you are absolutely correct and I am not trying to prove otherwise. It may have come across that way, but I concur with you - however I also feel that perhaps we may see a more protracted period of flat real estate prices from here, rather than a continued steep decline. Time value of money or otherwise, "we're closer to a bottom in prices than we are to the top"

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.