Friday, April 06, 2007

UOP Predicts Market Bottom in 2007

From CBS 5:

Dr. Chuck Williams, the Dean of the University of Pacific School of Business believes 2007 will mark rock bottom for the housing market.

"We don't see a bubble bursting," William said. "Prices have dropped 5 to 10 percent compared to two years ago. Interest rates are low; there's a tremendous amount of inventory from which to choose. And if you're a buyer those are the three conditions that you want."

15 comments:

Patient Renter said...

Good lord, someone mark those words. I'm not sure if even David Lereah is willing to call another bottom in 2007. What are they thinking?

I'm pretty tired of the ridiculous reports coming out of UOP. I hope someone takes them to task for this ridiculous prediction when it doesn't come true.

Patient Renter said...

"Experts believe Northern California home prices will start to rise again over the next 18 months. Waiting for rock bottom, however, could be risky. "

Did the NAR write this? It's the exact same crap as "buy now or be priced out forever"... trying to instill fear. I can't believe this kind of BS is even published.

rocklin renter said...

Thanks to Snaith, UOP carries exactly 0.00% of credibility with me.

I am sure the NAR and CAR will gobble this up and regurgitate it to their members as quickly as possible, though.

Can't wait to hear a "realtor" tell me "but according to UOP....". I will be laughing but I don't think they will understand why.

Waiting for the popping sound said...

I am affiliated with UOP and I hate to see the whole university labelled this way. I, for one, am waiting this out as a renter with the full expectation that I will find a good bargain in the future. And I know that I'm not the only one among my colleagues who are doing so.

The forecast/prediction you see is coming from Snaith. The forecasts are not paid for by the real estate industry in any way. The real problem, in my humble opinion, is that economic forecasters don't know how to deal with the psychological aspects of bubbles. Shiller is still a rare exception among economists. Also, even if the forecast turns out to be true I don't believe it will hold for all of NorCal. Clearly some places will be hit harder than others.

anon1137 said...

. . . there's a tremendous amount of inventory from which to choose. And if you're a buyer those are the three conditions that you want.

I've looked at the MLS and I think what he's trying to say is that there's a tremendous amount of overpriced crap out there.

Patient Renter said...

"The real problem, in my humble opinion, is that economic forecasters don't know how to deal with the psychological aspects of bubbles. "

Psychology aside, I think that the facts point to there not being a bottom for a very long time. The graph from Credit Suisse showing ARM resets extending out over the next few years is proof enough that we won't be hitting a bottom for a few years. The only way for an "economist" to not know this is if they don't want to know it.

Waiting for the popping sound said...

Patient renter-
I agree with you that the forecasting models are off, and have failed to take into account adjustable rate re-set schedules we've all seen. As I said I'm personally renting right now and am betting on that fact.
But the UOP forecast (and all the other university-based forecasts we're seeing) are not purposely manipulating things. The models they're using worked to explain the world from 2001-2005 and so they're slow to see the new reality and to take into account new variables. Its not because they're trying to dupe anyone. What interest would the UOP or UCLA or any of these other university forecasters have in purposely duping you. Their funding comes from sources that have nothing to do with the real estate industry.

Patient Renter said...

"The models they're using worked to explain the world from 2001-2005 and so they're slow to see the new reality and to take into account new variables. Its not because they're trying to dupe anyone. What interest would the UOP or UCLA or any of these other university forecasters have in purposely duping you."

That's all fair enough. The fact is though, that potential homebuyers rely on reports such as this (for better or worse). Therefore for a bunch of "economists" to come out with a strong position that is so clearly incorrect is completely irresponsible.

They shouldn't be making predictions unless they're pretty damn sure that their models are comprehensive and correct.

Diggin Deeper said...

Choose your economists wisely. For every one on this side there's one on the other. Best to do a gut check and ask yourself:

1. Does this market indicate in any way that its levelling off and about to rise?

2. Are inventory figures dropping toward their historical mean?

3. Is the "psychology" of this market favoring buyers or sellers at this time?

The authors' make the assumption that money will stay cheap for the forseeable future. It might.

They don't see a 12,000% increase in the March Bay area inventory as a problem. Maybe not.

And they do assume that the 550,000 people coming to this state every year will all be well documented and have enough money to pay for the dream. Could be.

Lot's of assumptions from those whose income depends upon growth added to one UOP economist's opinion. Not very convincing.

sunny said...

In bay area, some good area, RE is back. Lots of multiple offers. It all starts again

Perfect Storm said...

Sunny what are you talking about.

Gwynster said...

UCLA's anderson center does receive money from business such as Wachovia Corporation and it's Quarterly forecast is sponsored by CA enterprises.

"The Forecast Seminar, a quarterly forum sponsored by major corporations, state agencies, and local governments, gives members access to new developments in forecasting technology and software development. Seminar members include Western Financial Bank, Wellpoint Health Networks, Southern California Edison, State of California entities such as the Department of Finance, California Technology, Trade & Commerce Agency, and the State Controller’s office."

I work with gifts and grants of all flavors and am very familiar with conflict of interest in these areas. I remember looking at UOP's gifts and sponsors list a while back (2004) and there were plenty of corporate names. Nobody is clean here.

Jeff said...

I wonder if Dean Chuck is buying RE this year, I'd like to see if he's putting his money where his predictions are. I believe both DRHorton's Chair as well as Toll Bros. Chair said "2007 will suck." Why would the Dean of UOP know anything different, does he sit in on the boards of homebuilders?

anon1137 said...
This comment has been removed by the author.
anon1137 said...

PS - this may be what Sunny is talking about (from sfgate.com)

San Francisco, San Mateo and Marin counties are experiencing rapid home sales and agents complain that the biggest problem in those areas is that there simply aren't enough homes to sell.