L.A. Times: UCLA Group Predicts Flat Home Prices - personally I don't think Anderson gets it
There are accolades for the UCLA Anderson school for calling the bubble in this September 28, 2006 L.A. Times story by Lisa Girion, but now Anderson is talking in a mealy-mouthed two-sided fashion about how it doesn't rule out a recession but doesn't expect one.
While Anderson does say it expects the state and national economies to slow, it reasons that homeowners would rather hold on to their homes in a sinking market than sell into a sinking market. For some reason their decision to do that hinges on whether there is a recession or not.
Really? Anderson clarifies this by stating that job loss could force a homeowner to sell. People would rather stay put because they still have dreams about being able to sell their house for what the neighbor got for his house back at the peak in 2005. (OK, well Anderson didn't exactly say it that way, I said it that way.) But when the dream is let go, and panic sets in, what then? The Anderson school of business is probably not exactly brimming with psychologists who specialize in crowd psychology.
And this is the quote we should remember: "Expect home prices five years from now to be about the same as they are today, though lower in real [inflation-adjusted] terms by 15-20%." And, "We are not going to see anything like the '90's again." "It won't be anywhere near as bad as the stagflation of the 1970's." "What we had in the 1970's, you could call pneumonia. You could call this a low-grade cold."
Anderson hedges its hedge by stating that if the trend accelerates, their forecast is "too optimistic." Well duh.
Blog readers, I submit to you this link about Nightmare Mortgages. On this page is an "online extra" called Map of Misery. This is a map showing the percentage of new and refinanced mortgages that went into the creative loans that are ticking time bombs. Take a look at how the state of California is colored compared to even the Housing Bubble Ground Zero spots like Arizona and Florida. And then take a look at the percentages for new loans in Orange County, San Diego, and Los Angeles-Long Beach. I think Southern California is at risk.
It continues to astound me that forecasters do not want to even consider and discuss the possibility of drastic price declines, on the order of 40%, 50% and more. They won't talk about them until they've already happened, which isn't going to help you if you are thinking about selling a house. I sincerely hope that there isn't anybody out there who is basing their real estate selling decisions on what these "experts" are forecasting. Forecasters like to herd along with everyone else, and they will only say the things that are safe to say.
posted by bearmaster at 7:23 AM
4 Comments:
I should add, it has never made sense to me to talk about a recession in a binary fashion (i.e., either we have one or we don't). Rather, it is a matter of degree. Soft spot or soft patch, softening, slump, slowdown, recession, and depression can all have different shades of meaning, the same way that sprig, twiglet, twig, withe, branchlet, branch, stem, limb, and stalk can have different shades of meaning.
A slight slowdown in an otherwise good economy with relatively low levels of credit leverage, like what we experienced in the 1950's and early 1960's, is not a huge deal. But because we are so hyper-leveraged today, a slight slowdown can propagate into something much much worse.
By the way, if you are a word lover, you might enjoy this page.
Anderson looks like a gutless wonder to me but I suppose I should cut them some slack. "Whose bread I eat is the song I sing." They aren't the only economists out there that are bearish on real estate. But without a clear statement of the potentially dire consequences of that bubble, I doubt their forecasts are doing the torn homeseller much good. Like so many others they strongly imply that there will be little or no pain involved in the aftermath.
Does anybody know of a financial bubble in history that ended in a "soft landing"? I would like to hear about the consequentless bubble if there was one.
Tulipmania caused pain; the South Sea Bubble caused pain, as did the railroad mania of the late 19th century.
i know what you mean. it's so amazing that most of those who are supposed to be the experts on this won't even assign a small probability to the possibility of prices down here taking a major hit. the prices are so much further from fundamentals than they were in the previous two downturns that it would not be too far-fetched to at least consider the possibility that it could be as bad or even worse as it has been before.
just the fact that nearly every time they talk about the market they reassure everyone that this time it's different suggests that the spectre of large price declines is on everyone's minds.
Great San Diego Housing Flip site
http://thisoldhouseflip.blogspot.com
Post a Comment
<< Home