Sunday, June 17, 2007

Sean Snaith "Was Wrong"

From CBS 13 (also video):

In a neighborhood of well kept houses and neatly manicured lawns, a home in foreclosure stands out. "They were supposed to put the fence back together and fill the holes back in," said Paul Ramos, neighbor of home being foreclosed. Ramos says the previous owners just abandoned [it]. The grass hasn't been cut in weeks, the property is littered with clothing and garbage, and Paul's drainage system was left in disrepair by a swimming pool construction.

"What they did is the payments got way too high, well over $3000, and they went ahead and bought another house in Lathrop and they let this one go into foreclosure," said Ramos.

Foreclosure stories like this dominate the Central Valley. In fact, Stockton has the highest foreclosure rate in the nation....
From the Stockton Record:
When the lines on the graph are headed upward, everyone looks like a genius even when you've acted like a dummy by, say, buying more house than you really can afford.

No more. Now, homeowners are actually losing their homes. Lenders aren't just filing notices of foreclosure, they are foreclosing. Keys, please (and sometimes they don't even say please).
In the last year there has been a 49 percent increase in foreclosure activity in San Joaquin County. In two years filings in the county are up by a factor of 18, from 120 to 2,157. Foreclosure notices have been filed on one of every 88 household properties in Stockton. Our foreclosure activity rate is now 7.5 times the national average.
When Sean Snaith headed the UOP's Business Forecasting Center [based in Stockton] he liked to predict the housing market here - at a time when the bubble was about as big as it seemed possible to get - would not burst. In fact, he likened the housing market to a soufflé that would slowly sink as it cooled.

He was wrong (though hardly alone in that category). The market didn't just cool. It turned cold even as the weather turned hot. Early spring optimism about the market spooling back up could charitably be described as, well, optimistic.

Housing inventories continue to climb and home prices, while stubbornly sticky, certainly are not climbing the 20 percent or 25 percent per year we saw during the boom.
According to TrendGraphix, the median home price in San Joaquin County was down 10.8% from last May and down 12.9% since peak. Price per square foot was down 12% from a year ago and down 14% from peak. Such numbers put the Stockton housing market into UOP's "worst case scenario" [pdf]:
"Housing prices will continue to decline until the excess inventory can be worked down. Current worst case scenarios for some areas put declines in the range of 10-20%. A bubble bursting? Hardly. If NASDAQ had fallen 10-20% in 2001 from its high point, would we still refer to it as the dot-com bubble?"
How far will prices have to fall to convince Sean Snaith/UOP that they were sitting on top of one of the most over-inflated housing markets in the county? A drop of 30%? 40%? 50%?


Diggin Deeper said...

If Snaith continues to predict the unpredictable, he ought to find another job... maybe a weatherman on the local news.

"If NASDAQ had fallen 10-20% in 2001 from its high point, would we still refer to it as the dot-com bubble?"

Hindsight is perfect vision and this one's far from over. Wouldn't be surprized if this one dwarfs the bubble

RMB said...

Snaith was and continues to be a moron. I am starting to wonder what e"con"O"missed" really do. It appears that part of the job description is cheerleader, because there sure isn't anything in there about critical analysis.
Snaith pumped up stockton into a frenzy so they would spend 100's of millions on a failed downtown, then he bails and heads for flordia.

The scary part is that this guy is looked on by the establishment as one of the better e"con"O"missed". Just goes to show you what the establishment is really made of.

Patient Renter said...

Agreed, snaith is a moron (I think I may have said so several months ago when the last UOP report came out)

"In two years filings in the county are up by a factor of 18, from 120 to 2,157."

David said...

I'm not an economist by profession, but I did get a 3.97 GPA in getting my MA in economics, and I certainly never bought into this nonsense about the housing market being somehow fundamentally different than pre-2002 or so.

Any beginning economics student has heard the story of the "tulip craze" and should have been asking the key questions about this market and what are long-term price determinants. Few did so.

But it doesn't surprise. So many engage in wishful thinking and become shills in the process. I don't even get how it's "wishful thinking" though, since it's clearly unsustainable, and it's a one-shot deal as far as "wealth"-generation is concerned.

Personally, I hope the homebuilders construct a few million more units. All the better for long-term housing availability and affordability.

Ann said...

Let's talk about Snaith's own home in Stockton, which he sold September 2006.

It was on the market over 6 months, initial asking price was $487,000. It was reduced several times for a final price of $399,000. Mr. Snaith purchased the home in May 2004 for $342,000, so he still profited. But he had to drop the asking price nearly 18% to get a sale in 2006.

I guess his Stockton "pumping frenzy" generated some personal rewards for him.

2007 sellers in Stockton have it quite a bit tougher. But he's in Florida...