The [thing] that strikes me is the positively bewildered expressions on the faces of the chief economists of both associations. These poor guys are tasked with telling everyone when it's all going to get better, and the fact of the matter is they just don't know. Don't get me wrong, these are supersmart guys, number crunchers with decades in the business, but as NAHB's David Seiders said, the risk in housing right now is just so high that it makes forecasting extremely difficult.Don't worry, the recovery is right around the corner, just like they predicted in 2005, 2006, 2007, 2008...
The chief economist at Fannie Mae, Doug Duncan, spoke to the builders conference today and reminded folks here that forecasts are based on trends in history i.e., how did similar circumstances result in the past? But, as he astutely points out, there is no historical data, no past trend, no previous parameters by which to judge today's scenario. Never before were there so many borrowers who put down no equity, so many who declined to state income, so many with negative amortization loans.
Friday, October 24, 2008
The woe of housing economists
Diana Olick listens to the forecasts of housing economists:
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Well the RE agents did get one thing right. "It's different this time." Yes it was different on the false spike up in prices and now it's going to be different on the adjustment and correction to long term fundamentals on the way down.
ReplyDeleteMost people are just getting this message now -- so we will soon go from Denial to anger I believe -- will make for an interesting spring. What will sellers currently in Denial due when the move to anger? Will it cause the upper price areas to collapse like the lower end?
It's definitely a scary time. The reports I am reading about when the market will come back are all over the place. Some are saying 3 years, some 6 years. You're right, NOBODY KNOWS! If you have the money, great time to buy, but for most of us, its good to sit it out.
ReplyDeleteSean Murphy, Rofo - San Francisco Office Space
Yes it is differnt this time.
ReplyDeleteNobody alive has seen anything like it. The only hope for the throngs of hopefulls out there is a big government intrusion to socialize housing in America. I wonder how the six percenters will make out with that. This uncharted territory is sure going to be frightening, whether you are buying, selling or holding.
We're definitely going to have to ultimately pay for this economic mess, the bailouts, and the liquidity being pumped.
ReplyDeleteWith the countless liquidity measures that have been taken and still to be taken (good, bad, or indifferent) some of this money will eventually make it to the streets.
Per legislation in CA, we're starting to see banks making an attempt to renegotiate loan terms before simply filing a notice. A number of reports of loan terms being modified significantly.
Prices have been coming down for over three years in some areas and pricing has dropped remarkably quick in many areas over the past year and quite substantially since peak pricing.
Housing starts and building permit numbers were down significantly in the latest report. Inventory levels appear to be leveling in many markets or at least subsiding from the vigorous pace in which it had been on the rise. In some of the most overheated markets, even though prices are still falling, sales numbers have found a better footing in 2008.
It's tough to determine when these changes will impact the market but the changes are in process and they will ultimately have a positive impact on inventory levels, ultimately helping to stabilize many markets.
Housing couldn't go up for ever and it's certainly not going to drop forever.
Property quest, I totally agree with you on that one. You know the real estate market is possibly near bottom when you read blog comments like Cara on the Northern Virginia Real Estate Bubble blog below:
ReplyDeletehttp://novabubblefallout.blogspot.com/
Cara says that she wants to buy a house outright by saving her $50,000 a year income for five years. She says that housing is feasible but she won't buy unless it is attractive. I guarantee you that rents will increase because landlords know they can get away with it.
Perhaps just like we saw emotion rule during the run-up, we'll see emotion rule during the run-down when everybody's expectation is that an average blue collar couple should be able to buy a detached single family home in the heart of San Francisco.
I am a victim of the subprime crisis and in a lighter moment, I put it into a song. It is pretty good (at least that is the feedback I get) but it hasn't gotten much exposure. One professor I know used it in a recent classroom to quickly describe what the subprime problem is all about. Please let me know what you think as I tell the whole story of one unfortunate borrower in prose.
ReplyDeletehttp://www.youtube.com/watch?v=N3G1PdipmtI
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"Perhaps just like we saw emotion rule during the run-up, we'll see emotion rule during the run-down when everybody's expectation is that an average blue collar couple should be able to buy a detached single family home in the heart of San Francisco."
ReplyDeleteWhy you going anony, tony? BTW, most plumbers probably make more than you do. You know how much a plumber makes?
Joe the plumber is str8 ballin
ReplyDelete