Shared Top Border
sdcia_head3.jpg (14795 bytes)
SDCIA Message Board
Register Latest Topics
 
 
 


Reply
  Author   Comment  
HiddenMarket

Avatar / Picture

Senior Member
Registered:
Posts: 311
Reply with quote  #1 

What FORTUNE Magazine has to say...

http://money.cnn.com/2006/08/24/real_estate/pluggedin_tully.fortune/


__________________
Richard "Forrest" Greenwood & Marti Scott
"Serving YOU at YOUR level of need"
http://TemeculaRealty.net
BRE #01900852
sdlocal619

Senior Member
Registered:
Posts: 520
Reply with quote  #2 
Great article
steveM

Senior Member
Registered:
Posts: 257
Reply with quote  #3 

From the article above:

 

 

"High prices are sewing the seeds of their own demise"

 

That's got to be in the running for Bubble Quote of the year!

RobertCampbell

Senior Member
Registered:
Posts: 6,812
Reply with quote  #4 

 

That's a great line, Steve M.

 

And on a positive note ... low prices will plant the seeds for the rebirth of the next upcycle.

 

Welcome to the real estate rollercoaster ride.  For those of you who didn't get rich during the last real estate boom, don't despair.  That opportunity will come around again - so be ready.

 

Robert Campbell

 

PS:  There are other myths that were not mentioned.  How about the myth that housing prices can't go down because "everyone needs a place to live"?

 

 

Boombust

Junior Member
Registered:
Posts: 19
Reply with quote  #5 

Yes, the cure for high prices is HIGH PRICES.

rog56

Senior Member
Registered:
Posts: 117
Reply with quote  #6 

This article includes the important point that builders can be expected to continue to build and sell properties while they see sufficient margin over their costs to do so.

In areas like Tucson and Phoenix, some people think that continued population growth will ensure an early end to price declines in real estate. I do not see that happening, because builders will keep on building enough for new inward migrants until prices are so low that it is no longer profitable for them to sell more houses. (In fact, that point will probably not be reached, even if prices plunge to way below current levels. Builders will go on building enough new houses.)

Every RE investor in such expanding cities who wants to sell must face the fact that they are in competition with builders who care only about their margin over costs: I think that things are going to be very bleak for existing home owners wanting to sell during the next several years. Many will be trying to get out early now instead of endure the pain of steadily sliding market conditions, and there is the prospect of interesting times ahead.

Myth #2: The builders learned their lesson in the last downturn. They won't swamp the market with new houses when the market turns

You might call this the OPEC theory of homebuilders. The idea was that the builders wouldn't take a chance by building lots of unsold, "spec" units that could clog the market in a downturn. They had supposedly absorbed hard-won discipline from their excessive building in past downturns.

Well, it hasn't turned out that way. Builders are still pouring out near-record numbers of new homes as sales decline, assuring a further fall in prices. "Buyers" are walking away from deposits on houses that were supposedly pre-sold, forcing developers to throw them back on the market at a discount.

The problem is that even now, margins on new homes are still pretty good, though well below the levels of a year ago. As a result, builders will just keep building until those big margins evaporate. High prices are sewing [sic] the seeds of their own demise. They always do.

(I put in a 'sic', because of course the writer means that "High prices are sowing the seeds of their own demise.")
LindaTx

Avatar / Picture

Junior Member
Registered:
Posts: 28
Reply with quote  #7 

Your right again Robert! After 26 years I have seen markets come, go and come again..but now is still a great time to be buying Real Estate, and making money! Just know your facts..its not hard.

 

LindaTx


__________________
"Straight Talk -
Solid Personal Service"Ā 
Linda Scott,RealtorĀ®
rog56

Senior Member
Registered:
Posts: 117
Reply with quote  #8 
Your [sic] right again Robert! After 26 years I have seen markets come, go and come again..but now is still a great time to be buying Real Estate, and making money! Just know your facts..its not hard.

Hi, Linda. LOL! How many times do realtors say "This is a great time to be buying Real Estate" in a single day? Do they say it to themselves in front of the mirror 20 times each morning??? LOL!!

You may have seen markets come and go. If so, why are you claiming that "this is still a great time to be buying Real Estate"?  (Simply, because, and only because, you're a realtor, touting here for business?)

The "low prices" aren't here yet, Linda. Try again in a few years' time.


samzell

Senior Member
Registered:
Posts: 688
Reply with quote  #9 

I think I'm going to barf if I read one more bubble article.  Read a billion of them since 2001.  All the same beating the dead horse, interest-only loans, 100% financing, incomes out of whack w/ prices, yada, yada, yada.  We all know this stuff.

 

SHOW ME big price declines in CA sfr's, and foreclosures numbers going well beyond historical averages.  Show me.  All I care about is hard proof.  Not more bubble babble.  Hard proof is official data: Dataquick numbers, OFHEO numbers, foreclosure numbers.

 

If the prices never have a big fall, what good is all the "data" that we've all had beaten into out brains the last 4 yrs?

 

I know, I know...  "next year" is when the big collapse is coming.  It's been "next year" since 2001.

 

Not saying this means anything, but I find it interesting that practically no one was sounding the warning bell in 1999 about the stock market.  Yet I think the RE bubble talk has been the biggest media blitz in the history of the earth about a "coming" asset crash.  You can't turn on CNBC or read a newspaper article for seemingly the last 3 or 4 years without bubble talk.

 

 

 

 

 

taddyangle

Avatar / Picture

Senior Member
Registered:
Posts: 2,044
Reply with quote  #10 

Samzell,

 

Does actual sales from properties count with you?  I know you want to see the global numbers, and I can appreciate that, but also note when those numbers were going up, ie San Diego's median price is up x% even though we may have seen y% for our specific property.  Those number did not always match.

 

My point is this.  I monitor the properties I have sold and compare them to the current comps to see the gain/loss.  I mainly do this because I am  evaluating the 1031 process for our specific situation.  The very obvious trend for us is that the properties we sold have seen very little appreciation, and when I compare it to the appreciation gains we captured, it was a no brainer to sell/exchange.  I posted numbers in other posts.

 

Yes I agree most have been talking bubble for that last three or so years, but the reality is we are finally starting to see it.  There are a number of blogs that show the home prices that were recently purchased and they also include the current selling price (or recent sale price) and the trend is clearly down.  Does this mean there is a bubble?  I think we can continue to expect a decline, and I guess we will see next year what happens, but in the mean time, I am very happy I sold 4 properties and very bummed that I waited to sell two as they are sitting on the market with little to no interest. 


__________________
------
sdlocal619

Senior Member
Registered:
Posts: 520
Reply with quote  #11 

Exactly, I do the same.  Just looking at SFD & a condo I sold a couple years back, the ones listed are at the same price I sold for or a little less, & have been sitting forever.  7++ months.  92119 & 92115

steveM

Senior Member
Registered:
Posts: 257
Reply with quote  #12 
Quote:
Originally Posted by samzell

I think I'm going to barf if I read one more bubble article.  Read a billion of them since 2001.  All the same beating the dead horse, interest-only loans, 100% financing, incomes out of whack w/ prices, yada, yada, yada.  We all know this stuff.

 

SHOW ME big price declines in CA sfr's, and foreclosures numbers going well beyond historical averages.  Show me.  All I care about is hard proof.  Not more bubble babble.  Hard proof is official data: Dataquick numbers, OFHEO numbers, foreclosure numbers.

 

If the prices never have a big fall, what good is all the "data" that we've all had beaten into out brains the last 4 yrs?

 

I know, I know...  "next year" is when the big collapse is coming.  It's been "next year" since 2001.

 

Not saying this means anything, but I find it interesting that practically no one was sounding the warning bell in 1999 about the stock market.  Yet I think the RE bubble talk has been the biggest media blitz in the history of the earth about a "coming" asset crash.  You can't turn on CNBC or read a newspaper article for seemingly the last 3 or 4 years without bubble talk.

 

 

 

 

 

 

IMHO the bubble talk from the major media outlets (MMO) has just begun.   Articles a year ago from MMO were basically "Is there a bubble?   Two years ago everything was "Bubble talk is crazy, there's no bubble". Now its all about how fast its crumbling and "How far will it will fall".

 

Us avid bubble watchers have been agog at how long this has gone on, although we all know timing bubbles is next to impossible. 

 

S. Californians have a unique insight on RE bubbles as CA has seen 2 boom/bust cycles (prior to this one) in one lifetime.   Vegas for instance is seeing its 1st, real bubble activity.   So, we who remember have seen prices in certain areas of SoCal fall 50% from bubble levels.  

 

We are excited because we are finally, not crazy, and we feel pretty confident we know what is coming.

 

I can't get enough of bubble articles!!!!

Subcranium

Senior Member
Registered:
Posts: 718
Reply with quote  #13 
>>Not saying this means anything, but I find it interesting that practically no one was sounding the warning bell in 1999 about the stock market.

Shiller did. Just like he's sounding the warning bell about RE now.

I don't see where the controversy is. What happens before prices fall, every time? Inventories build. Check. We have record inventories. Builder concessions. Check.

If we don't have a hard landing, we'll have a long period where prices don't go up. That's just as bad--it's losing to inflation.
RobertCampbell

Senior Member
Registered:
Posts: 6,812
Reply with quote  #14 

 

Re:  Asset bubbles that deflate.

 

My approach to predicting future market events ...

 

First, it's all about probabilities.  So you develop a model that - based on past history - is right more than it is wrong.  Just like counting cards in blackjack - same principle.  The greater the probability of being right, the more confidence you can have in your model.

 

Second, it's about predicting the distance of the price movement.  In other words, to calculate how far prices are likely to rise or fall when a trend reverses. One way - also a good way - to do this is with the principle of mean reversion.  Mean reversion is also based on history, namely historical correlations between key fundamental data. 

 

The reason I'm bringing these facts to some people's attention is that they seem to believe that predicting future events is pure guesswork.  This is not true.  Based on historic relationships that have occured time and time again in the past, the future occurance of some market events is more likely than others.  Again, it's all about probabilities.

 

This is what probability theory is all about, and this is why I'm convinced this massive credit-driven real estate bubble is going to crash and burn.

 

Based on my calculations, I could be wrong but I doubt it.

 

Robert Campbell

 

PS:  Thoughtful investors should be prepared for all future events - both good and bad.  Dodging the assasin's bullet is the first rule to being a good investor.

 

 

 Mainstream_media

 

wayne

Senior Member
Registered:
Posts: 135
Reply with quote  #15 
Quote:
Originally Posted by RobertCampbell

 

Re:  Asset bubbles that deflate.

 

My approach to predicting future market events ...

 

First, it's all about probabilities.  So you develop a model that - based on past history - is right more than it is wrong.  Just like counting cards in blackjack - same principle.  The greater the probability of being right, the more confidence you can have in your model.

 

Second, it's about predicting the distance of the price movement.  In other words, to calculate how far prices are likely to rise or fall when a trend reverses. One way - also a good way - to do this is with the principle of mean reversion.  Mean reversion is also based on history, namely historical correlations between key fundamental data. 

 

The reason I'm bringing these facts to some people's attention is that they seem to believe that predicting future events is pure guesswork.  This is not true.  Based on historic relationships that have occured time and time again in the past, the future occurance of some market events is more likely than others.  Again, it's all about probabilities.

 

This is what probability theory is all about, and this is why I'm convinced this massive credit-driven real estate bubble is going to crash and burn.

 

Based on my calculations, I could be wrong but I doubt it.

 

Robert Campbell

 

PS:  Thoughtful investors should be prepared for all future events - both good and bad.  Dodging the assasin's bullet is the first rule to being a good investor.

 

 

 Mainstream_media

 

it sound like mathematics. From what I learn in school and from what I get from reading your comments, future housing event is derived from probability theory. That's all very good, however, there is a huge disconnect in your theory. To calculate a future event, in this case the probability, you need to develop probability density function. You then integrate your pdf and obtain your result. What is your pdf? Let's not mention those elementary statistic stuff like the mean, median, the standard deviation, etc. There all irrevant here. Those terms probabibly does not mean much here (due to the complexity of housing market).

 

Another thing is that you try to predict an event from past events. If you do it, you are contradicting yourself mathetically here. Here you are not really calculating the probability using the probability theory. You are in effect trying to come up with linear function that does recursive computing. Before you can do that, you must show the current is somehow related to the past events (again, here I don't think you have done that either).

 

you method of prediction is very confusing to me.

RobertCampbell

Senior Member
Registered:
Posts: 6,812
Reply with quote  #16 

Wayne,

 

Yes, it is about mathematics.  If you don't like - or are confused by - my statistical methodologies, so be it. 

 

Not all women like me, either.  But some of them do. 

 

Best wishes,

 

Robert Campbell

dansimo

Avatar / Picture

Senior Member
Registered:
Posts: 623
Reply with quote  #17 
Robert,

nice retort!

But for all of us non-Stat heads, Wayne's seemingly sophisticated critique of your methodologies is intriguing.
It seems to reach to the core of your argument.

I assume a more detailed specific retort may take more time than you're willing to give to this board, (not to mention most of us wouldn't understand much of it anyway, in all "probability"!) ...but it would be very interesting to hear how you would respond.


__________________

"The harder I work, the luckier I get"
Gekko

Avatar / Picture

Senior Member
Registered:
Posts: 776
Reply with quote  #18 

 

-

 

I'm very skeptical of anyone's claims of unique predictive powers.  Even Nobel Prize winners.

 

 

Long-Term Capital Management (LTCM) was a hedge fund founded in 1994 by John Meriwether (the former vice-chairman and head of Bond trading at Salomon Brothers). On its board of directors were Myron Scholes and Robert Carhart Merton, who shared the 1997 Nobel Memorial Prize in Economics. Initially amazingly successful, it folded in 1998, losing $4.6 Billion in less than four months.

 

 

Gekko

Avatar / Picture

Senior Member
Registered:
Posts: 776
Reply with quote  #19 

-

 

Simple math may help you find an entry point during the downturn:

 

http://www.files.bz/files/11251/RealEstateValuationMethods.xls

 

At minimum, it gives you a metric of what you are paying for when you offer $X.

 

 

 

 

sdlocal619

Senior Member
Registered:
Posts: 520
Reply with quote  #20 

Everybody,  it's not that hard to see whats going on.  Whether its Roberts calculations, which are great, & that one poster just overanalyzed it.  Its simple, if you see whats going on out on the "street", & then add market psychology, you get a fairly reasonable answer to todays market.  Its not rocket science, although some seem to try to turn it into it.

RobertCampbell

Senior Member
Registered:
Posts: 6,812
Reply with quote  #21 

 

HI Danismo,

 

Frankly, I don't know what Wayne is talking about.  You should ask him, not me, for a thorough explanation of what he considers to be valid statistical methodogies.

 

I personally use simple and practical statistical methodologies that have a high probability of success.  The assumption I use - which is the base assumption that all or most trend-followers/forecasters use - is that the future trends will resemble past trends. 

 

Based on 24 years of data, my clearly-defined model has a success rate of over 80% for correctly predicting the direction of the SoCal real estate market.  You can argue all you want about probability theory, you can't predict anything about the future (which is BS, by the way), or about a trend-following system and the metrics used, but in the end it all comes down to the track record of the system.  

 

The bottom line is whether the system is right more than it was wrong.  If so, it can be a valuable tool for decision-making. 

 

Robert Campbell

 

 

 

 

 

 

Gekko

Avatar / Picture

Senior Member
Registered:
Posts: 776
Reply with quote  #22 

>Based on 24 years of data, my clearly-defined model has a success rate of over 80% for correctly predicting the direction of the SoCal real estate market.  You can argue all you want about probability theory or about a trend-following system and the metrics used, but in the end it all comes down to the track record of the system. 

 

this is called data-mining and back-testing.  a formula that happens to fit the data of the past won't necessarily have any predictive value.

 

the only track record that matters is your actual, personal track record - not a data-mined, back-tested theoretical one.  didn't you lose your a$$ not that long ago in the last downturn?

 

we all need to be smart enough to know that we're not that smart.

 

 

RobertCampbell

Senior Member
Registered:
Posts: 6,812
Reply with quote  #23 

 

Gekko,

 

this is called data-mining and back-testing.  a formula that happens to fit the data of the past won't necessarily have any predictive value.

 

LOL.  What a broadly based and generally ignorant statement. 

 

Robert Campbell

Gekko

Avatar / Picture

Senior Member
Registered:
Posts: 776
Reply with quote  #24 

 

-

 

Your November 2002 "Sell" call speaks for itself.

 

 

http://www.sandiegorealestatereport.com/

rog56

Senior Member
Registered:
Posts: 117
Reply with quote  #25 

This is what probability theory is all about, and this is why I'm convinced this massive credit-driven real estate bubble is going to crash and burn.

 

Based on my calculations, I could be wrong but I doubt it.


No calculations or probability theory required. Just look at current levels of inventory. Then apply a bit of simple economic analysis: markets tend towards equilibrium; over-supply means that prices must continue falling, to equate demand and supply.


Then sit back and watch it happen.

RobertCampbell

Senior Member
Registered:
Posts: 6,812
Reply with quote  #26 

Gekko,

 

Yawn.  Do you have a learning disability or something?  I told you in the past that you're confused - and you're still confused.

 

Now you go one step further and make ignorant statements.  End of discussion.  You bore me.

 

Robert Campbell

 

 

Previous Topic | Next Topic
Print
Reply

Quick Navigation:

Easily create a Forum Website with Website Toolbox.

Policy