Wednesday, August 30, 2006

A Soft Landing After This?



Anonymous said...

This is a nice chart, but just because he was right in the past.....

Has he studied the cause of the run up. I read his comments, he cites general excitement about real estate, similar to the tech bubble.

Its possible that a contributing cause is the intricate and costly planning cycles required to build communities now that were not in the mix 10 years ago.

In California where it takes a decade to develop property, prices have skyrocketed. In Nevada, not so much.

Happy Renter said...

The runup makes sense because we are running out of land. :)

Anonymous said...

If you take the growth rate between 1997 and 2006 on that chart and compare it to the growth rate of the NASDAQ between 1990 and 2000 they are nearly identical.

And everyone knows what happened to the NASQAQ after 2000.... POOF!

Jeff said...

Anonymouse 5:24:04,

"in Nevada, not so much"?!

You might want to check out the fact behind that statement before making it. Reno and Las Vegas are two of the biggest bubble areas in the country.

rocklin renter said...

anonymous -

Why are you trying to justify it?

That chart shows what we know already - there is a clear problem with the overvaluation of homes today.

Anyhow, just imagine where the top right of that graph would be if they focused on just the Sacramento area market. 200? 300? 500?

Anonymous said...

A straight up market graph, like this one, without correction, is as vunerable as any stock or equity market with same pattern. A 50% correction that holds would be a confirmation the market still has legs and could power forward. A break below 50% would constitute a market tending even lower. The "what goes up" addage should ring true here. Let's remember that Shiller is academia and they tend to be more wrong than right over time. There's no soft landing coming as there are too many variables like hybrid loans, lack of speculation, and buyers that aren't going to pull the trigger when the market is falling. All this of course imho.

Lander said...

Anyhow, just imagine where the top right of that graph would be if they focused on just the Sacramento area market. 200? 300? 500?

I was thinking about that same thing. Clearly, Sacramento appreciated at a more rapid rate than the nation as a whole:

United States: 58%
Sacramento Region: 122%

Anonymous said...

As quoted by Paul Ashworth, chief U.S. economist at Capital Economics in the Guardian this week,

"House prices have been rising at unprecedented double-digit rates in recent years, giving homeowners massive windfalls and supporting a wave of investment in new construction. However, the number of unsold new homes is now at a 10-year high."

Ashworth reckons that "30 percent of all the jobs created since the end of the last recession in 2001 - 1.4 million - have been in sectors related to the housing market boom, from construction to DIY stores. As the boom runs out of steam, he calculates that 73,000 jobs a month will be lost."

Also in the Guardian, Stephen Roach warns, "for a wealth-dependent U.S. economy, the bursting of another major asset bubble is likely to be a
very big deal."

He notes, "With U.S. fiscal and trade imbalances now larger than five years ago, the fallout for the rest of the world could be more devastating than the aftermath of the dotcom boom."

Anonymous said...

Very interesting - thanks for posting this information. I always wondered how the 1970s boom compared to the current boom. And as others have mentioned, it would be nice to see CA-only or Sac-only data.

marin_explorer said...

Not to get dramatic, but I find Shiller's graph downright scary--like watching the sea recede back a mile and a wall of water build on the horizon.

doug_rwc said...

Anonymous' comment about the planning cycle is apt - it might cushion the fall as the supply of homes is artificially limited. I am involved in the process of obtaining approvals for a development. To date, it has been 5 years since we have submitted our application. We are unfortunately probably looking at another two to three years before we'll be allowed to break ground.

In most other states, the process would take less than a year.

PS. The future's market for housing in San Diego is predicting a fall of 7-8% over the next 9-12 months. (There is no future's market for Sacramento).

Ali, in Cali said...

This graph pretty much says it all. Anyone that can't see it is blind to the plain and simple truth.

The spike IS definitely scary... I mean, as a potential first-time bubble-sittin' buyer, I should be seeing this as a sign of hope. Too bad I am too afraid of the economic impact of this crash on the nation as a whole to really be enjoying the show and gloating. So many people could be financially crippled when this is all said and done we may need to invent a new career: fiscal therapist.

And marin_explorer,
Niiiiiice metaphor!! And since I AM a high school English/Language Arts teacher, feel free to take that as a HIGH compliment.