Friday, January 13, 2006

Chief Economist of the California Association of Realtors is Wrong

Leslie Appleton-Young, who is the California Association of Realtors Chief Economist, delivered her forecast for the 2006 housing market at the Trump National Golf Course in Rancho Palos Verdes. As reported by the Press-Telegram:

The forecast confirmed what she and other housing prognosticators have been saying for the past year: The market is on course for a soft-landing, with slowing housing appreciation and falling home sales, and that there is not a housing bubble waiting to burst.

"There is a bubble a bubble in the number of articles about the housing bubble," Appleton-Young said of the "hype."

She added, "The median price of a U.S. home has never declined."

Hold on. The National Association of Realtors has this too say:

Home price declines are very rare to begin with. In fact, the national median home price has not declined since the Great Depression.

The two bold statements are in direct contradiction. Who is right? The National Association of Realtors is indeed correct that the "national median home price has not declined since the Great Depression." Leslie Appleton-Young, who is the California Association of Realtors Chief Economist is wrong. She is either lying or does not know her facts. The housing cheerleading clowns who are running the California Association of Realtors are pathetic.

43 comments:

  1. I am saving these articles in a database. Let's see who is right and who is wrong a year from now. Are all the RE people too young to remember the crash in 1990?

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  2. I think that the real problem with this article is the use of the "national median home price" as a measure. This number may not infact change when the bubble markets burst.

    If the national median price is about $206,000, if San Fran readjusts closer to this number to say $300,000 from $847,000 this will NOT affect the median price nationally. If would affect the MEAN price but not the MEDIAN. Only if the bubble markets adjust BELOW the current national median will the overall national median be affected. The article is just using a very misleading metric.

    numbers for example from:
    http://www.kiplinger.com/personalfinance/tools/houseprices/index.php?db=housing2005&sortby=median&orderby=normal&action=Submit

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  3. cathy,

    Great point. I fully concur that median price is a misleading metric.

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  4. Xsparta

    I was an investor in the 90's. If you know what you are doing and are long-term, then these cycles are irrelevant. If you are buying a home that you can afford, then these cycles are irrelevant.

    How is the stock market any less risky? There is a base-line value to housing. One needs shelter. It will never drop like some of the absolutely worthless dot-coms. Land and bricks & mortar have a value that is real.

    Even with the crash of the RE market in the 90's and the stock market in 2001; the economy did not implode. No 1929. No tulipmania.

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  5. "If you are buying a home that you can afford, then these cycles are irrelevant."

    Thats the problem. No one can buy a house they can afford anymore. So the cycles are very relevant now. Also, don't forget the time value of money. Just because you might be able to sell your house in 2016 for the same price you paid in 2006 doesn't mean you haven't had a huge loss due to inflation and lost interest.

    "How is the stock market any less risky?"

    Stop loss. Stocks are much easier and faster to sell and limit your downside risk. Also, with stocks you can make money on the way up and on the way down. You can also diversify much better with stocks.

    "Land and bricks & mortar have a value that is real."

    Thats right, the question is what is that value. I would say about half of what it is now in the DC area.

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  6. Other Anon...

    If I had your insight into the stock market - that is where I would be too. I don't have a crystal ball. I do know, however, that over the long-term real estate has always matched or beat inflation.

    I also know what almost 25yrs of experience has taught me. It is not "all or none" , people should be diversified in different asset types. Yes, it took ten yrs to get even if you bought in 1988 or 1989 ( which I did - 8 properties) but we just buckled the seat belt and hung on. When we wanted to move-up in 1994, we rented our home out rather than give it away. Got a terrific deal on the new place.

    Just sold the old place after 16 years of ownership and 1031'd into our dream retirement home.

    Point is - think long-term. Now is an opportune time to find that cosmetic fixer-uper that 95% of the market fails to see that a coat of paint and some sweat will completely turn around. These are the type of properties I love.

    Again, if you can time the market - go for it. But buying at the peak (unknowingly - as NO ONE KNOWS) does not spell financial ruin.

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  7. "over the long-term real estate has always matched or beat inflation"

    I am glad you mentioned that. Do you know how far above the inflation rate housing has been over the past 5 years or so? Take a look and you will see just how far it has to come down to get back the the long term trend of inflation + 1.3 or so. In my area thats about 50% adjusting for inflation. It doesn't take 25 years of experience to figure that out. Just look at the historical data on www.census.gov.

    "I don't have a crystal ball"

    So why do you think housing will deviate from what is has done over the past 60+ years, and not return to the normal inflation + 1.3%. Please provide something other than what you say you did in the past. What has changed to deviate this so much? What economic factors support this?

    "If I had your insight into the stock market- that is where I would be too."

    Your suggesting that you don't have your money in stocks. Are you really that foolish to have all your money in real estate?

    Also you don't need insight into the stock market, get a financial book and read it, or let the professional financial adviser help you. And above all don't base your financial decisions on what you read from a blog.

    "Now is an opportune time to find that cosmetic fixer-uper that 95% of the market fails to see that a coat of paint and some sweat will completely turn around. These are the type of properties I love."

    Straight from the Realtor handbook. I challenge you to show me one such property in the DC metro area, because I sure can't find one that even comes close to getting the numbers to work.

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  8. Some idiot says: "If you are buying a home that you can afford, then these cycles are irrelevant."

    Ha! You really think it is not relevant whether you bought a house 5 years ago for 200K or the same house today for 400K? I'd say it's pretty relevant.

    "How is the stock market any less risky?"

    It's less risky because when you buy a house you are typically more than 80% leveraged!

    Do the math....

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  9. Anon and Anon....

    I am the idiot that said if you are buying a home that you can afford cycles are irrelevant. I only have 25 years experience, 60 or 70 transactions and millions to show for it. Of course, I will defer to you guys as the experts. How stupid of me.

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  10. "I am the idiot that said if you are buying a home that you can afford cycles are irrelevant. I only have 25 years experience, 60 or 70 transactions and millions to show for it. Of course, I will defer to you guys as the experts. How stupid of me. "

    This is your response? Where are your facts and figures on future apprication and such?

    And exactly why should we believe you actually have any experience, and are not just a bored Realtor who can't move your properties because your clients keep getting information from housing bubble blogs like this one.

    How much experience do I have? How many transactions have I performed? You don't know do you, maybe cause its a anonymous blog on the web, duh. I can also say I have made millions and millions, but it would just be a bunch of hot air like it is when you say it.

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  11. Mike...

    I can only hope or expect that my writing will give you some insight to my experience. I try not to bragg but, as I said, I love real estate. I believe that anyone on this site has a serious interest in real estate.

    I am not out to prove anything to anyone - just offer my heartfelt advice on this path of financial success. Would it help you to know that we bought our first house in Cinncinati in 1981 at an assumption of 12.5%. How about being transferred here to Wash. 6 months later and not being able to afford a one bedroom condo that wasn't in a slum. How about 3 years of law school at night while working full time. How about 3 properties by the time I was out of school?

    Ask me any question that you can come up with concerning real eastate. I am not some poser. Just trying to say that if real estate is your goal, it is not only realistic but can be a profession. P.S. -was Ivy League (including athletic Hall of Fame )and Law Review. These are my cards - what are yours?

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  12. just offer my heartfelt advice

    my heartfelt..QUIT TROLLING

    this blog is about
    * inventory up 300%
    * As reported in the Washington Post last week 50,000 new condos hitting the area in the next 36 months
    * renting cost less than half of owning right now

    We all want to buy, generally RE is a good investment, it's a matter of WHEN to buy

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  13. Anon...

    No trolling here. No hidden agenda. Just hoping to offer something useful. It is a shame that so many are so suspicious of others' motives these days.

    P.S. If you or I knew exactly when to buy or sell, I suspect we would both be on a yatcht in the carribean.

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  14. So you say these are your cards, but only you can see them. Yet you continue to brag. You say you have nothing to prove to any one, but rather than providing some facts pertaining to the future of real estate, you try to empress me
    with

    "P.S. -was Ivy League (including athletic Hall of Fame )and Law Review".
    Please, big deal. Even if it was true, who cares. Let your argument speak for its self.

    Lets hear some facts, not some fairy tails.

    "Ask me any question that you can come up with concerning real estate."

    You don't seem to want to answer the questions directed to you but lets try again:

    I challenge you to show me one such property in the DC metro area, because I sure can't find one that even comes close to getting the numbers to work.

    So why do you think housing will deviate from what is has done over the past 60+ years, and not return to the normal inflation + 1.3%. Please provide something other than what you say you did in the past. What has changed to deviate this so much? What economic factors support this?

    I honestly would like to hear a good bull argument other than: I made $$$ before so I will continue to do so listen to me I am so smart.

    Even I could make some decent points for the bulls, but lets hear yours first.

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  15. "P.S. If you or I knew exactly when to buy or sell, I suspect we would both be on a yacht in the Caribbean. "

    Thought you already had a few with your millions, or did you forget about that?

    Ok, sorry for feeding the trolls. But it is a slow day today.

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  16. Mike...

    I do have millions from real estate but also have a 16 year old so I am not yet able to sail the carribean. Not that I would really want to - not long term, anyway.

    Look, I can't predict the future of real estate prices. I never have claimed to. I can only say that I survived the 90's and with alot on the table.

    I have not bought anything locally since 2002 when I bought my current residence at a foreclosure auction at the Courthouse. Two years ago I bought an estate sale in Naples, Fl. for 465K. I sold a loser duplex that I had owned in Falls Church for 15 yrs.for 540K to 1031 into the Naples property. Put approx. 120K into Naples and it is now worth 1.5 million.

    You see; I never PAY market value but I sell for it. Also, last year (May 2005) sold a house in Vienna for 850K. I had bought it at the peak in the fall of 1988. I 1031'd into a 92 Acre waterfront farm outside Fredericksburg for 875K. Turned down 3 million a few months ago. It took a lot of looking and quick action to get that deal. I can't explain years of experience and intuition to you. Believe it or not - I don't care. If anyone wants to talk, I am happy to share what I have learned. When I was a lawyer, I used to give seminars to agents. Think the worst of me if you want, but I know alot and like to help people.

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  17. Are you kidding? You didn't answer one of my questions. All you did is do exactly what I said multiple times not to, tell me about real estate dealings in the past. You have provided absolutely nothing. It is very easy to predict what has already happened.

    "I can't explain years of experience and intuition to you."

    So that wonderfully "Ivy League" education, and intuition is all you can come up with? Thanks alot, so everyone go out and buy some properties because this anonymous poster intuition. Brilliant!

    Again why not at least try to answer some question?

    By the way, it is a lot easier to keep track of what you have said when you speak the truth.

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  18. Why would someone with millions of dollars in the bank be trolling a housing bubble blog?

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  19. Mike....

    What precisely do you want to know? Tell us about your experience. Are you always this hostile and distrustful?

    Have you encountered so many liars that you can't distinguish the truth when you see it? I have no fight with you - so what's up?

    What question have you asked that I have dodged? And, further, wy do I have to prove my bonifides when no one else is asked to? Are we to accept your proections and conclusions not having any basis therefore (i.e. your bonifides)?

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  20. Not saying that this poster is but, you see, sometimes a Realtors clients will run across a blog such as this. So you see they get nervous about buying and he needs to convince that buyer to buy so he can collect the 3% commission. That is why you will hear the familiar I have made $$$ in real, estate it always goes up in the long run, my last transaction I made so much, you too can be a millionaire, its easy no one has to work anymore.

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  21. Anon....

    I am trolling the blogs because I am Bored. I haven't worked in 15 yrs. except my real estate deals. I am not interested right now in buying or selling. I don't have to work. When I feel like it I will Look at some property.

    I find it interesting and curious to read these blogs. So many opinions and so little experience.

    Again - why the hostility? Is there no room for rational discourse or must we mud-sling?

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  22. Anonymous...

    I am not your agent or anyone else's. In fact, I just bailed a few months ago on a new condo. Got my deposit back due to my legal background.

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  23. Question: "What precisely do you want to know?"

    Answer: I have asked multiple question multiple times and you still don't answer. How many times do you need me to ask the same questions? Can you not scroll up and read them?

    Answer2: Why do you think housing will deviate from what is has done over the past 60+ years, and not return to the normal inflation + 1.3%.

    Q: "Are you always this hostile and distrustful?"

    A: Hostile, it is not hostile to ask you a question. This is a discussion board. An anonymous one, no hostility here.

    Q: "Have you encountered so many liars that you can't distinguish the truth when you see it?"

    A: I can't exactly verify what you say about your past real estate dealing is true, there for they really don't help any. Should I not question some one that has contridicted what he has said?

    Q: "And, further, wy do I have to prove my bonifides when no one else is asked to?"

    A: If someone on this blog says something that my own research doesn't agree with then I will ask them how they arrived at there conclusion. You have. So I asked for clarification so I could be better informed.


    Q: "Are we to accept your proections and conclusions not having any basis therefore (i.e. your bonifides)?"

    Currently not, I would appreciate any input from you or any other poster has regarding my postings. This is how I learn. If we don't question each other we will never learn any thing.

    I thought I answered and responded to your answers in a clear fashion in prior posts. I have labeled them in this one, feel free to use the same format with your response.

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  24. mike...

    I Believe in a prior post that I posited that real estate is the only asset that has kept pace with or exceeded inflation. What more can I say. As you may have discerned, I do not pay amrket value for any real estate. For me, it is a business. That said, I see nothing wrong for Joe Homebuyer or my brother to pay market value = especially at these interest rates.

    I told you that I don't have a crystal ball. One can only look at history to predict the future. I told you that i don't really care if prices go up or down short term (for me 10 years).

    What more do you want? What is your experience? What are your predictions? Don't demand answers of others that you are unwilling to give.

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  25. You haven't answed anything. I cited your "real estate is the only asset that has kept pace with or exceeded inflation" in a prior post. It is exactly that fact that leads me to belive that real estate will come back down to the inflation rate plus about 1.3%. Around here that would put the house prices to about half of what they are now.

    q: What more do you want?
    A: just answer any of the questions. If you have no answer than fine don't respond.

    q: "What more do you want? What is your experience? What are your predictions? Don't demand answers of others that you are unwilling to give."

    What experience are you asking about, my profesional experence? Would you like to here about my past real estate dealing? How exactly would you verfiy what I whould tell you is true. Are you try to say that because you post that you have made money in the past that what you say should be taken for fact and not questioned. How about you give me the address of your past dealings and I will verify them online. Oh wait, don't want every one to know who you are do, me either.

    You see any one can make up some fake backgroud and try to pass for some kind of expert. Not saying that this is what you did, but you could have so could I. This is why stating on an anonymous blog about past experence of great real estate dealing, or My education is of no value to any one. Only the facts. I will tell you if you are just curious, but by no means should it give any more or less relavece to what I post.

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  26. Mike.....

    For about the third time --What are your predictions and what are they based on? Are you saying a 50% correction is coming? When Mikey?

    Can't you simply verify past dates and interest rates? Maybe you weren't born yet.. I could not care less if you don't want opinions from a seasoned, intelligent and highly successful investor. Your loss.

    See you on the beach - but then again, probably not. Go back and read the posts and see who took the discussion down this snarky road.

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  27. "What are your predictions and what are they based on? Are you saying a 50% correction is coming?"
    Man, even for a realtor you are really stupid. Like I said many times before they are based on a fact that you posted. Housing historicaly appricates about 1.3% above the inflation rate. The data is here www.census.gov The past 5 years or so it has devated so far from the norm that they would need to come down 50% come back in line with the historical trend. Don't trust me, go to the data and caculate it your self. Have your broker friends help you with the big numbers.

    " I could not care less if you don't want opinions from a seasoned, intelligent and highly successful investor."

    Prove it, your just a realtor pretending. You can't even debate a simple topic with out contradicting your self, and repeating the same lame stuff why should we think you are intelligent. Better save thoses commissions because that made up education and fake portfolio won't help you any where but online. Its time to go, had fun playing with you realtors trolls today, have a good weekend all.

    P.S. the correction has started stupid, No. Va is down 10% and falling.

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  28. Mike...

    You are quite obviously a renter with little or no real estate or financial accumen. I would almost feel sorry for you if you were not also a complete jerk. I'll just sit here and count my millions.

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  29. Have fun counting your monopoly money.

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  30. David,
    You have a good blog. You might want to considering requiring posters to log in. This should help increase the quality of the conversation.

    Personally I'm interested in experiences and numbers that are relevant to the housing bubble right now.

    In general, during more sane times homeownership is the best option. No one is arguing that because that is not the topic of this blog.

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  31. Mike....

    I am not to proud to ask.

    "The past 5 years or so it has devated so far from the norm that they would need to come down 50% come back in line with the historical trend. Don't trust me, go to the data and caculate it your self. Have your broker friends help you with the big numbers."

    How did you calculate that? I went to the census website. Lots of data and hard to navigate. Where are you getting your data specifically?

    Drew

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  32. Mike and others...

    If you want me off the site just say so. If the the majority here think I am a liar and a shill, I will not post again. Why waste my time?

    I moved here in 1981. Interest rates went from 14 to 17% while we tried to buy a home. Very depressing. Never thought we would be able to afford something decent. I have alot of experience to share - if anyone is interested. Mike is not.

    If you want me to go away - I will. Just post you opinions. You might want to go to Wall Street Journal Housing Blog for a more balanced discussion. I post under "Virginia investor".

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  33. http://www.census.gov/hhes/www/housing/census/historic/values.html

    has housing data from 1940 to 2000 in inflation adjusted $.

    1940 $30,600
    2000 $119,600

    an increase of $89,000 or about 74.41% increase in 60 years or 1.24% per year. So this is 1.24% above the inflation rate because the data has been adjusted to account for inflation.

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  34. If you want me to go away - I will. Just post you opinions. You might want to go to Wall Street Journal Housing Blog for a more balanced discussion. I post under "Virginia investor".

    Anonymous,
    Yes I want you to go away. This blog at the top says 'A blog dedicated to the premise that there is a Housing Bubble in many locales in the USA'. It doesn't 'a discussion on the merits of home ownership'.

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  35. Arlingtonva...

    I guess a "premise" means no debate?

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  36. i know about some when he says "WS journal blog" is a balanced one , ha! ha!

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  37. I am living in the San Francisco and watching the real estate market here. I am interested in perhaps buying a larger house if the market returns more to normal. In 1994 I purchased a condominium in Pacific Heights at about $200 per square foot. The last DataQuick information I saw had my neighborhood selling at $1056 per square foot. I don't see how anything other than speculation and an artificially loose money supply could account for a five fold increase in price in 11.5 years, particularly when we have lost population the last 5 years or so.
    In California a lot of people have become trapped in their homes. Because you must pay capital gains taxes on appreciation over $500,000, the increase in property taxes that are held very low due to Prop. 13, and the 6% fee that goes to the realtor upon sale makes moving either up or down a very expensive proposal.
    Perhaps the US having to raise interest rates, if only to keep the Asian countries buying our bonds to finance our deficieits, will bring the prices back in line to where they have been in long term historical trends.

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  38. I was just clicking around on these BLOGs and read that another anonymous guy (I have never got around setting up an acct.) wrote:
    "I am living in the San Francisco and watching the real estate market here. I am interested in perhaps buying a larger house if the market returns more to normal. In 1994 I purchased a condominium in Pacific Heights at about $200 per square foot. The last DataQuick information I saw had my neighborhood selling at $1056 per square foot."

    I live down the hill from you in Cow Hollow. I've been renting since I sold my Burlingame home in 2000. I lost about $250K when I sold my home in San Diego (bought in 1989) to move to N. Cal in 1994. When my Burlingame home went from $320K to 700K in seven years I sold it (along with a bunch of tech stocks) thinking we were at the top of the market. I was close with the stocks, but have no idea how prices of Peninsula homes have gone over $1,000 sf and some nice (view) Pacific Heights condos are selling for over $1,500 ft. A friend recently bought a condo (not as nice as the apartment I'm renting) and his property taxes and HOA fees are more than my rent (he also has a $4,800/month I/O mortgage).
    Waiting for the crash in SF

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  39. Anonymous... You don't think the WSJ blog is balanced? Where were you last summer when the Journal came out with article after artcle screaming headlines about the Bubble. Sadly, you show your (lack of) intelligence.

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  40. Can you give a website for the WSJ Housing blog? I'm interested in seeing what folks are saying over there.

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  41. anon..wall street ournal site:

    http://discussions.realestatejournal.com

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  42. Thanks for starting a economic depression Realtors!

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