Sunday, May 28, 2006

Google Video: "The California Economy: Housing Boom or Bubble?"

Google Video has this wonderful 58 minute video about the housing market by David Thornburg who is a senior economist with the UCLA Anderson Forecast. The speech was given on February 16, 2006.

In one segment, David Thornburg is talking about all these subprimes which are headquartered in US 405 in Orange County, CA. He asks "Is Orange County different? Yes they are going to get hammered."

During minute 38 of the video, Mr. Thornburg attacks Greenspan and the National Association of Realtors. Another great line is "Boomers have been terrible savers"

During minute 45 he asks "When will this end?" I highly recommend this outstanding video.


  1. The best no BS explination of the housing bubble i've seen.

  2. old stale stuff..moving on...
    david, your blog is losing it, bud,

  3. Thornberg has excellent insight into the current economy and its problems, and then blows it by jumping to a completely irrational conclusion.

    I watched the video. Did you notice he left out these words/phrases: mortgage equity withdrawal, 100% financing, option ARM, adjustable rate mortgages, stated income loan, 40% of purchases by speculators, rising inventory, foreclosure?

    Yup, he is predicting the future of housing prices without even considering that some people might have to sell because their mortgage adjusts. He didn't mention rising inventory, and that this puts downward pressure on prices.

    He only said: prices cannot go down, because historically they only go down in a recession. We are not going to have a recession, so prices cannot go down.

    Further, how can prices stay flat until 2011 when they are already down 5-10%???? This makes no sense.

    He estimated the # of construction jobs lost in his SD speech on May 3, 2006, but did not give that for realtors, mortgage officers, title officers, retailers, restaurant personnel. How can you leave that out?

  4. Thornberg has made many, many bold prediction about the housing market over the last 4 years, none of which have turned out to be even remotely accurate.

  5. I think it was a pretty good presentation, and brought out some very good points
    and statistics

    What I did'nt understand was this.
    He said that job losses caused home prices to fall in Texas
    after the oil bust, and in Southern California after the Aerospace
    collapse. He earlier in the presentation pointed out how important
    and how many of Housing related jobs were there in the California
    economy. He also said these jobs were going away.

    Why these job losses wont have the same effect, is beyond me.

    Calling a bubble is not the same as calling a pop in the bubbble
    Bubbles usually expand a lot more before busting.
    They called the Nasdaq a bubble in 1998. It more than doubled before
    busting in 2000.

    Also he did not provide any basis for why prices will rise very slowly
    until 2010-2011.

  6. "Calling a bubble is not the same as calling a pop in the bubbble"

    Obviously, just as being wrong is not the same as being right.

    Unfortunatly for Thornberg and us bubbleheads, we've simply been wrong for years while salving our wounds with thin, tortured, pithy phrases about NASDQ, "the fundamentals are easy, timing is tough" (my personal favorite), reversion to the mean, etc. ad nauseum.

    Somebody please just kill me now.

  7. surfer-x:
    Yes, it is not. 2006 is the year when the
    bubble pops. That still means Housing was
    a Bubble from 2001 thru 2006.

    DJIA and S&P 500 are in a bubble. They too
    should pop within a year of housing bust.
    Home values doubled nationwide on an average
    in the last five years. DJIA tripled in the five
    year period from 1994 to 1999.

    Actually, the bubbleheads are gonna make a lot
    of money by taking short positions on Home Builders
    and lenders.

    Home Builder puts are already up, a good 35% since
    Is your home up 35% since February?
    I think it might be actually down, depending where you

    "Somebody please just kill me now".
    No Thanks. You are doing it yourself.

  8. Don't mess with Surfer-X! He's got guts, which many other bubbleheads lack.

  9. "bubbleheads are gonna make a lot
    of money by taking short positions on Home Builders
    and lenders."

    I dare say that many (not all) bubbleheads are relatively unsophisticated people who have an entitlement sensibility and are bitter.

    I doubt that most bubbleheads even know what a "short position" is, or could even name a publicly traded builder without looking one up.

  10. Guts? What about Brains? If yes he would
    be encashing his Housing Gains of the
    last five years. And use it to take
    short positions on Home Builders.

    For those who want to make money
    from this bust read this book.
    ( I own a copy )

    Book Link

  11. And yes, the insiders have already sold their Builder stocks and are out.

  12. I just had an idea and wondered what you all might think.

    I have the ability to do resumes searches on the two largest resume database engines.

    Would it be interesting to see how many people on the sites that had the words "mortgage broker" and ("real estate" + license) would have their resume posted on a daily or weekly basis?

    I'm assuming the number would go up.

  13. "Is your home up 35% since February?
    I think it might be actually down, depending where you

    You mean my landlords home? Nope, it's up 12% YoY in April, but that aint the half of it. I coulda bought back in '01 but refused to pay 200k for a 1,100 sf bungalow (bunghole I called it) built in the '50's that was maybe 200 feet from low tide. Those go for 750k now - if you can findem, which you can't. What "mean" are those gonna "revert" to? 650?

    Jesus wept.

    I'll tell you another thing that's changed - my rent. It's been jacked up to the point where I could be making a payment on a 500k house.

  14. I think you should shop around for another rental.
    What you see as your "home", your landlord is seeing it as a "cash cow".

    Builders will be trading in the single digits by the end of next year.
    Jan 2008 puts is the easiest money you
    will ever make.

  15. I've been in three different rentals here in the last 2 years, so I know the market backwards and forward. Don't get me wrong, I'm renting a house that would sell for at least a mil for what amounts to a mortgage on half that. I have no interest whatsoever in buying puts, that kinda bs bores me rigid.

    I'm pushing 41 and will prolly end up writing code, renting and eating cat food 'till the neighbors notice an overflowing mail box and a bad smell, kick the door down and find my pissed off cats have half eaten my bloated corpse.

  16. >bloated corpse

    why not learn about investing in something else other than real estate?

    Why not live below your means and save/invest the rest?

    Do you really need to rent a $1m house?

  17. Chicks dig surfer-X.

    Chicks do not dig guys who do January '07 puts of builder equities.

  18. I said Jan '08 puts.

    Jan '07 puts will be less profitable
    and will be short term gains, will be taxed more.

  19. Chicks dig guys with money - either the appearance (surfer-X's rental) or actual ('08 PUT guy).


    My $0.02.

  20. You guys are all junior economists. Why are you refusing to acknowledge the fundamentals. Supply and demand. Sure the amount of new housing has surpassed the present demand in San Diego, Las Vegas and Florida, at the moment. Not one of you has addressed the growth in demand in the 70's, 80's, 90's and in this decade.

    How large is the Boomer component of the market, how about the x's and y's? What wealth are these kids are getting from their parents? Now days your parents homes are worth !!!! more than they were in the 50', 60's !!!!.
    What else can you invest in that gives you an after tax cash on cash return of over 70% each year for the past 10 years? Not Oracle, Microsoft or even General Motors. (Google or ??)

    Bottom line, this real estate inflation has not begun, check out the GNP in China, India, and the Eastern Bloc. Try and buyer a house there.

    Watch the housing market this summer when over 1,500 new condo's are offered for sale on Rincon Hill.
    The 55 story 1 Rincon Hill with over 600 condo's averaging $1 million, is predicted to sell out (take hard deposits) within 6 months.

  21. frederick,
    you are representing the same psychology
    of those who have bought into the real estate

    At least you do agree that new housing has
    surpassed demand in some areas. Then what happens
    next ?

    This same thing happenned in Texas during
    the Oil boom and the following bust.

    Texas got into this mania, it was way overbuilt
    in the boom. And you know what is the state of housing
    market in Texas today.

    Check this one out:

    Is the US Over Built?