Sunday, July 23, 2006

Chief Economist of the California Association of Realtors Changes Tune

In 2005, Leslie Young Appleton, the chief economist for the California Association of Realtors (CAR), was busy publishing power point presentations mocking the housing bubble theory.



PowerPoint presentation by the California Association of Realtors, in 2005.

Now, Leslie Appleton-Young is "at a loss for words" to describe the declining housing market. Here are excerpts from the LA Times:
Leslie Appleton-Young is at a loss for words.

The chief economist of the California Assn. of Realtors has stopped using the term "soft landing" to describe the state's real estate market, saying she no longer feels comfortable with that mild label.

"Maybe we need something new. That's all I'm prepared to say," Appleton-Young said Thursday.

The shift in language comes as debate over the real estate market is intensifying. The long-awaited drop-off is happening, but there's little agreement about how brutal the landing will be.

For real estate optimists, the phrase "soft landing" conveyed the soothing notion that the run-up in values over the last few years would be permanent. It wasn't a bubble, it was a new plateau.

The Realtors association last month lowered its 2006 sales prediction from a 2% slip to a 16.8% drop. That was when Appleton-Young first told the San Diego Union-Tribune that she didn't feel comfortable any longer using "soft landing."

"I'm sorry I ever made that comment," she said Thursday. "When I get my new term, I'll let you know."

Appleton-Young had no qualms about predicting a hard landing here: "We're expecting a fairly significant shakeout."
You know its bad when the chief economist for the California Association of Realtors is apologizing for using the term 'soft landing.' She also said "Maybe we need something new" to describe the housing market. Patrick.net has a discussion for new terms. Here are some of my suggestions:
  • Painful Landing
  • Tough Landing
  • Rough Landing
  • Hard Landing
  • Crash Landing
Ms. Young Appleton has recognized the very signifcant decline that is occuring in the housing market. So when will David Lereah, the chief economist for the National Association of Realtors stop using the term 'soft landing?'

31 comments:

  1. DL already reprimanded her for accepting the housing bubble fact. So she has again changed here tune "after more and more looking at data, I think that we are going to be back to normal housing market". These NAR folks should be sued for deceiving people.

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  2. It was on http://thehousingbubbleblog.com/ this evening. The site is down as of now.

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  3. "Some accident which excites expectations of rising prices sets speculators at work. In certain states of the public mind, such examples of rapid increase of fortune call forth numerous imitators, and speculation not only goes much beyond what is justified by the original grounds for expecting a rise of price, but extends itself to articles in which there never was any such ground; these, however, rise like the rest as soon as speculation sets in. At periods of this kind, a great extension of credit takes place."

    Sound familiar?

    No, this is not a quote from Lance who suddenly woke up smart one day (granted the quote is as long-winded as he is).

    It's John Stuart Mill, in his "Principles of Economics" - published in 1848. [quote courtesy of the economic history "Devil Take The Hindmost"]

    Plus ca change, plus c'est la meme chose.

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  4. here it is.
    http://www.dailybreeze.com/business/articles/3404231.html?showAll=y&c=y

    "
    It's certainly not the soft landing that we envisioned nine months ago," Appleton-Young said. "As I look at the statistics of inventory and year-over-year price appreciation, I think it would be accurate to call it a return to normal."
    "

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  5. Hard landings are a return to normal? Lying Lereah must be intimidating her. Moron that he is. I am sorry, but he is duping millions to buy houses that they cannot afford to buy, with loans that they should not be taking out. The man is a crum, a worm, a slug, a snail, and worse.

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  6. The CAR and NAR should be sued as defendants in any lawsuit where the buyer has bought in this market and loses money. They can't hide behind the defense it was "just an opinion." It isn't "normal" to lose your life savings buying a home. Any description of the "landing" other than a "crash" is an outright lie. They shouldn't still be suckering people in this bubble market.

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  7. True that David Lereah should be called every 4-letter word, but at this point, even an uneducated homebuyer should be getting a clue. There is enough available information floating around there that potential buyers can get up to speed on the facts. The Internet is at their fingertips too --- it's not like the pre-Internet days where people had to rely solely on the media and their stupid friends for information.

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  8. How much soft landing is oon the Richter scale?

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  9. Here is one of my offers in south NJ.

    Subject : Re: $389000 - Immaculate 3 Year young Colonial Style SFH - 2500 sqft

    Yes it is a serious offer and no I do not know you but I am sorry if you did not like it. It is nothing personal It is just a business transaction in which parties either accept or reject the offered price. My offer price is in line with what is going to happen in next 12 to 24 months, the prices are going to drop by 30 to 40% and I do not want to overpay now and remain underwater for next 4 or 5 years.
    Thanks

    Seller responds
    Subject: Re: $389000 - Immaculate 3 Year young Colonial Style SFH - 2500 sqft

    Was this a serious offer??????? Or do I know you and you are pulling my leg????

    My offer
    Subject : Re: $389000 - Immaculate 3 Year young Colonial Style SFH - 2500 sqft
    I can offer 230K for this property and this is a serious offer. Let me know
    if you are interested.
    thanks

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  10. An interesting revelation, we should start to see a lot more of these revalations coming out in the near future.
    Nice find
    regards
    Consa
    Just for info: my forum was attacked last night with an xss type attack, all OK due to the security etc. but just a warning to other sites and blogs
    http://forum.globalhousepricecrash.com

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  11. interesting article about some fickle dame, but since all real estate markets are local, it's hardly relevent for us. should we look in Zimbabwe next to try to prove a bubble in DC?

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  12. anon advertized:
    "My offer price is in line with what is going to happen in next 12 to 24 months"

    LOL ... how funny! now we have people out there thinking they have a right to ludicrously low prices just 'cause some guy with a blog told them that prices are gonna drop! they should be buying from other bubbleheads, since it is the bubbleheads who are apparently willing to sell at such ludricrous level ... if only they owned something to sell!

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  13. gary a. said:
    "I am sorry, but he is duping millions to buy houses that they cannot afford to buy, with loans that they should not be taking out."

    what hootspa you have! who on earth made you God and gave YOU the right to decide what others can or cannot afford? Please just speak for yourself ... If you're a loser and can't afford a loan at today's affordable rates, then it is YOUR problem and YOUR problem alone. please quit trying to make judgements for others. you are not God ... or even close and I find your hootspa greatly offensive.

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  14. Lance said...

    "LOL ... how funny! now we have people out there thinking they have a right to ludicrously low prices just 'cause some guy with a blog told them that prices are gonna drop"

    People have the RIGHT to offer what ever they wish to offer. The seller does not have to accept. If the low-ballers are off the mark, it should be little skin off their noses (or the sellers for that matter). However, if the doomsayers are correct, the lowballer will be happy that he/she hedged against depreciating markets. Since the overall trends in many of the once hot markets are not looking too good for the bulls, it seems prudent to make offers allowing for future dips in prices.

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  15. anon:
    "Since the overall trends in many of the once hot markets are not looking too good for the bulls, it seems prudent to make offers allowing for future dips in prices."

    ok ... put yourself in the seller's shoes for one instant. would you even consider an offer that is substantially lower than what properties are selling for today on the possibility (as put forth by people with a vested interest) that prices could drop substantially ih the future ... and you may as well beat the market to the punch and just take that price now! Imagine how stupid you sound saying such a thing! Ok, I want to buy your 1 yr old car for $2 'cause some guy with a blog told me that because of high gas prices it will be selling for that in a few years ... LOL Please bubbleheads, allow yourselves some dignity at least! What you are saying is nothing short of rediculous!

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  16. Lance,
    It costs me nothing to sound ridicules to someone who is selling a house at what I believe to be an inflated price. Calling me stupid and/or illogical will not cause me to raise an offer, nor will it change the fact that I am not the one trying to make a sale. The seller needs me, not the other way around.

    Also, your example of the $2 car offer is a bit extreme. But since you bring it up, I’ve been seeing quite a few for sale adds for cars with poor gas mileage for discounted prices. If I were interested in buying one of those, I would be sure to capitalize on the high gas prices with a lower offer - I could probably manage to put more than %2 on the table though :)

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  17. Have to agree with Lance on this one. That offer of $230K seems way off and the buyer is rationalizing the offer with predictions on the future housing market.

    I ask the buyer, why BUY NOW? If your prediction of the housing market is so glum, why not just wait 2 years when all inventory will be 30-40% lower as you are predicting? Makes no sense when trying to go into the mind of this buyer.

    The market is very slow right now, and depending on the urgency of the seller, will buyers have good deals to chase after. I just feel awful for all those clueless sellers our there that put their trust into their hired real estate agent who promised a sky high price just to get that signed exclusive listing contract! The sellers are the victims of their own stupidity and the longer they stay in denial about their homes true market value, the longer they will suffer through an agonizing sales process which will utlimately get them an even lower price as the market continues to slow.

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  18. "controlled flight into terrain" is the term of art for when pilot takes a plane that is working fine and mintakenly crashes it into the side of a mountain.

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  19. Fellas,
    My point is that it can't hurt to offer. If you want to buy a house now within a particular price range and believe that that price will eventually materialize in the market, why not place offers within that range all the live-long-day. Lightning might strike and you would be in your house years ahead of schedule. If it doesn’t, no big deal. I know for some, they will not violate a certain debt threshold no matter what the market predictions are... i.e. "priced out forever" is irrelevant, they won't borrow 500K today for fear of needing to borrow 550K tomorrow simply because they feel 500K of debt is too much to bare for the right to put holes in your living room wall. For those folks, offering the maximum they will allow themselves to pay for a particular property is a reasonable thing to do.

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  20. I am not sure why people would be offended by low offers? In my experience anyone who "is offended" by ANYTHING is being defensive about something. Usually some cognitive dissonance that they are unable to address yet.

    If they do not believe that the low price offered is realistic based on the future projections of the asset group as described by the buyer then they should counter with some other logic. Why should the buyer NOT look at the future prior to exchanging his liquid asset. I buy stocks and that is exactly what I look at. Future earnings and growth. Of course past performance is an indicator but the future performance is what is important. It's not like the seller is under any pressure to decline offers. Or is he? ;)

    Reality is what is still there even when you don't believe it. I am still waiting for some rational explenations for why prices will continue to go up other than "no more land". There is plenty of time to borrow at lower interests rates as well. Worse case scenario is they go double digits and that would still take years. All data shows no real tightening in lending practices either yet. Interests rates might even go down in another year or two. Everyone knows real estate is a longer cycle. Now that the downtrend is on there is no chance in hell of it going back up for years at least. Rock bottem is going to be next year, 2 years, 3 years or even 4,5,6 years from now. It certainly is now or behind us.

    Suck it up, get smart and deal with it. If you are not already sold, preparing to sell with a large price slash, or ready to ride out prices for another 5 years min and stay in the place you are in now (hopefully its fixed cost(other than inflation and insurance) and you love it).

    There will be some great deals for those looking for along term home in the next few years. Some great deals for long term investors too.

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  21. Regarding my offer of 230K.
    First the asking price of 389K itself is not realistic. This house was around 190K 3 years back. I did not get offended by seeing asking, so the seller should not get offended by my offer. It is business transaction. Take it or leave it.
    Regarding putting myself into sellers shoe's as Lance said. I am not selling so I can not do that but if I was a seller, I would certianly try to get as much as possible. And that is why I did not tell seller that his asking is unrealistic. I would have done the same thing if I was selling but it is the buyer(s) who decides what a house is worth. I have been lowballing since last 6 months and the reason I do it to do my share of work as an individual to make sellers realize that market has changed/changing. It will not happen overnight and it will take time. During last 6 months asking in the community has dropped by 10% (30K). My taget is 30 to 40% and I reduce my offers as and when interest rates go up. 30K drop (for 300K houses) for every 1% increase in interest rate.Inventory in this community has increased by 500% times in 1 year and mostly are flippers. I will be waiting (because I can afford to wait) to see how long these flippers are able to hold.

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  22. It is a simple math as per flippers during last 2 or 3 years
    "why house prices are increasing" Answer from flippers :- Interest rates have become very low so the same monthly payment can buy at higher price.
    So now payback time "Now same monthly payment can buy the same house at lower price, so lower your price" and add very high inventory and no one is left to buy (I mean substantially less GFs left in market), so drop prices even more to sell.

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  23. anon 9:09 am: Interest rates hit their nadir in summer '03. IMHO appreciation SINCE then has simply been speculation driven "market momentum." So we've seen 2 years of overshoot from the fundamentals and the market is only now starting to backslide. I believe that this will be a long, slow collapse.

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  24. Lance bought his house '$200K under market' simply by making an offer, yet is livid when others want to do the same? Please explain...

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  25. Anonymous said...
    "Lance bought his house '$200K under market' simply by making an offer, yet is livid when others want to do the same? Please explain..."

    The poster made an offer that was 40% below the asking price which the seller had set. I paid the full asking price for my home. Should I have insisted on paying more when the seller offered it to me for what I estimate was some 15% less than what other comparable homes were selling for at the time? Of course he didn't have to pay a commission since it was a private sale, and he got to get a nice return on his money since he finance the purchase for me ... and generally made out pretty well having owned the house for over 40 years and getting 25% down in cash from me. I can say we were both happy and he is now a friend. I doubt very much the poster offering 40% less than asking price will ever be friends with the seller he offended with his rediculous offer.

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  26. Anonymous said...
    "Lance bought his house '$200K under market' simply by making an offer, yet is livid when others want to do the same? Please explain..."

    The poster made an offer that was 40% below the asking price which the seller had set. I paid the full asking price for my home. Should I have insisted on paying more when the seller offered it to me for what I estimate was some 15% less than what other comparable homes were selling for at the time? Of course he didn't have to pay a commission since it was a private sale, and he got to get a nice return on his money since he finance the purchase for me ... and generally made out pretty well having owned the house for over 40 years and getting 25% down in cash from me. I can say we were both happy and he is now a friend. I doubt very much the poster offering 40% less than asking price will ever be friends with the seller he offended with his rediculous offer.

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  27. Lance said...
    “….I can say we were both happy and he is now a friend. I doubt very much the poster offering 40% less than asking price will ever be friends with the seller he offended with his rediculous offer….”

    Aw how nice, best buds. Here’s $400K, can we be friends now? Now that is a nice business tactic.

    I say make the lowball. I have no idea where or how this idea of “lest we offend thine seller” mentality is springing from. Since when does a seller set the market? Oh yea, I forgot, THIS home is different (wow! granite counter tops!). Different from the other thousand homes on the market.

    How’s this for speculation. I’m 99% sure that a buyer will not loose sleep over a lowball offer. The seller? I’m pretty sure “offended” is the wrong term. Frustrated is more like it.

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  28. Robert said:
    "I say make the lowball."

    When you are making an offer that 40% less than what is being asked, you are not making any offer ... not even a lowball ... you are making it clear to the sender that you are either not a qualified buyer or, worse yet, playing games by trying to send a message. Either way, it is not an offer ... not even a lowball offer. Don't believe me? Ask current and former homeowners on here whether they would have ever entertained an offer 40% below the actual current value of their property ... i.e., not the value some bubblehead thinks the property is going to fall to in some imagined doom and gloom scenario, but the value it has now.

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  29. Lance said...
    “Don't believe me? Ask current and former homeowners on here whether they would have ever entertained an offer 40% below the actual current value of their property ...”

    No need to ask. I’ve thrown a few lowballs out there and the sellers have always been “entertained” with a few counter offers back and forth. A few of those started out %50 below asking.

    What’s with all the touchy feely with the sellers? First it’s that we’re ”offending” them, now we must also “entertain”?

    Anywho, wasn’t it you Lance who so adamantly were trying to educate us in the difference between “asking price” and “selling price”? The seller can “ask” for any number he wants. The buyer can “offer” anything he wants. The market will determine the selling price. After 6, 7, 8, 9, months on the market, I sure that for some sellers, any offer for the month would make them feel better than no offers for the month.

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