housingpanic, one of the real estate bubble blogs, disagrees with me, “Idiot Phoenix realtor says housing was not a bubble because it’ll only drop 10%.”
See his comments on this post of mine.
I’ve copied by response comment below. =================================
housingpanic, thanks for the comment.
Oh dear god anyone who buys today in Phoenix and sells within five years will be bankrupted by your “Buy” sgnal.
Prices may indeed go lower. My recommendation if you listen to it was that if you have been planning to buy in the last few months but were worried about prices, or you were planning to buy in the next 6 months, then the next month or two would be a good time to consider buying.
That is, if you were planning to buy next spring , for example, I would suggest you seriously consider buying right now instead.
Tell you what, if you’re such a bull, tell us what properties you’re out buying today with your own money.
The vast majority of buyers today are owner-occupants and that’s who I’m talking to. I didn’t say, “Hey, you should invest in a rental property in Phoenix even if you weren’t planning on it.” Maybe next autumn I would make that recommendation if the data looks good but it’s more likely it would be years from now.
But don’t forget that there are many people who have already decided to move to Phoenix and they would like an educated guess on likely pricing trends during the next several months.
Phoenix will fall ANOTHER 20% to 40%. The burst is just getting started there, and the downfall will be ugly to wash away the excess of ‘04 and ‘05.
That just ain’t gonna happen. The median home price in Greater Phoenix has only fallen 3.7%. The high was $267,000 in June 2006 and October was $257,000. Source
Obviously, it can’t fall “ANOTHER 20% to 40%” when it’s only fallen 3.7%.
Now, that doesn’t mean that the price hasn’t declined 20% in some outlying areas that are competing big time with homebuilders.
But overall, the median price for Great Phoenix has only gone down 3.7%… so far.
With the inventory flattening out, that will remove one factor putting pressure on prices. It’s not only the level of inventory that puts downward pressure on prices but the increase in the inventory.
Sure, there are significant downside price risks for the Arizona residential resale home market if the economy tanks.
But right now the outlook for 2007 is good. Gas prices down, interest rates likely stable or declining a bit, the stock market is up and it’s often a leading indicator for the economy.
It was a classic Ponzi Scheme, period.
That’s just silly.
Sure, some investors made ungodly amounts of money during the skyrocketing prices, but you lose that envy and jealously when you talk to investors who didn’t get out in time and their personal real estate bubble is bursting big time.
They didn’t Ponzi themselves. It’s not a Ponzi scheme.
Speculative real estate investing just has some huge risks.
8 responses so far ↓
1 Ken // Nov 24, 2006 at 7:33 pm
-Anywhere between 30-50% of all new loans are ARM’s with 0 down.-
Can anymore provide a link which verifies the above? Or is speculation based on antidotal evidence?
Thanks
2 mrd // Nov 24, 2006 at 10:34 pm
I don’t think you should have dignified the housingpanic blog with a response.
The comments regarding your site are a bunch of nasty hot air.
Here are some signs of a blow hard: 1) Calling someone an idiot. 2) Saying with supreme confidence that any market will fall between 20 and 40%.
Note: I did not agree with your buy signal. However, while I do not agree with you on this point, I do not think you should have been called an idiot.
The net is full of nasty people who think that they alone know everything. It is best to ignore these types.
3 Kelly // Nov 25, 2006 at 6:50 am
You should reread your freshman year economics text before opening your mouth again.
“Those who have been riding the upward wave decide now is the time to get out. Those who thought the increase would be forever find their illusion destroyed abruptly, and they, also respond to the newly revealed reality buy selling or trying to sell. Thus the collapse. And thus the rule, supported by the experience of centuries: the speculative episode always ends not with a whimper but with a crash.” Galbraith
4 John L. Wake // Nov 25, 2006 at 12:52 pm
mrd,
You’re probably right but what the heck, I didn’t have any meeting scheduled yesterday.
5 John L. Wake // Nov 25, 2006 at 12:57 pm
Kelly,
I never liked Galbraith anyway.
Economically, I like the “Austrians.”
6 Sixpercenter // Nov 25, 2006 at 3:38 pm
Neither Hayek, Friedman, Keynes, or any highschool kid with C or better in math would be foolish enough to buy now.
Sixpercenter (for now)
7 John L. Wake // Nov 25, 2006 at 5:56 pm
If you were planning to buy within the next six months or were putting it off because you were worried about price declines, you would be foolish not to consider buying now.
8 mrd // Nov 26, 2006 at 1:01 am
Kelly,
You give a quote and that is supposed to mean that all is figured out?
The problem with the quote is the “rule”:
“And thus the rule, supported by the experience of centuries: the speculative episode always ends not with a whimper but with a crash”
The market that we are discussing is the real estate market. This market is not like the stock or commodities market. There is a very real possibility that the real estate market will simply flatten out. Over time, a flat market will lose value. For example, if the cost of any particular home remained constant for five years, yet there was 3% inflation during this time, the inflation adjusted price of the home would have diminished by ~16%. This scenario is just not that exciting.
I would prefer to see a crash of 20 to 40%. This would mean that I could afford to buy a nice little town house in Tempe. While my desire is for a crash, I realize that it is more probable that there might be some decreases and then a flattening out. Since the real estate market is intimately tied to long term interest rates and growth in GDP, my guess is simply that.
Confidence in predicting the future is something to be wary of. No amount of quotes should give a person too much confidence in what the future will bring. Otherwise, one would only need read Bartlett’s book of familiar quotations to have nostradamus like powers.
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