I’m loving it! Please keep buying. The more buyers that lock themselves in their new happy home for 5-10 years, the less competition i’ll need to deal with when I buy my own (a nicer home in a better locale for the same price) YAY!
I think this is the first Socketsite embedded video (but I may be mistaken).
Slippery slope, putting cramu on 🙂
[Editor’s Note: It’s not the first video, but mentioning Cramer was a first (and likely last).]
Well then! I currently rent, have about $180k in cash, and reasonable income to support a mortgage up to say $1.2M. What should I buy folks? I currently live in a loft in Hayes Valley, and don’t really like living outside of the real SF.
Given Cramer’s speech patterns and body language, how does anyone take what he says as anything other than BS? His voice constantly rises (“yeeeAAAUUH. It’s HERE.“), he is almost always looking downward and/or at his hands, the shifting in his seat, the fidgeting. He looks about as comfortable and truthful as a little boy holding a bat trying to explain/deny ownership of the baseball that came through a window and into your living room.
Really makes me almost respect the other pundits who believe their own lies and can look straight-faced into the camera. Almost.
Let’s be real, if you can lock in a good rate for a 30 year fixed in So Cal or a Miami condo with ocean views where prices have fallen 50-80% from the peak, it probably is a good time to buy.
Do the hedge funds fax broadcasting instructions to Cramer and CNBC?
I’d rather trust Tommy the Fuzzy Wuzzy bear pulling random levers for my equity advice than Jim Cramer.
eh, too calm in this video. he’s no fun to watch when he’s not throwing a fit or throwing stuff across the room.
does the lady address him as “Tim” in the beginning and the end of the video, or am i losing my hearing senses.
Tall Guy if you have an income that can support a 1.2MM mortgage then you should be able to increase your downpayment savings by $10K/month fairly easily. Save up another 120K and buy in a year. Better yet, save up for 2 years and buy a condo all cash.
Cramer starts off by saying that the $8000 housing credit makes up for a .75% rise in mortgage interest rates. A $150K mortgage at 4.75 fixed/30 yr. = $131,689 in total interest. Same mortgage at 5.25% = $1148,190. In SF, the loan amount would be more like $471K (80% of avg. SF Co. median of $589,500), for a difference of about $30K in total interest between the a 4.75 and 5.25 mortgage.
This is the same guy that was touting Lenny Dykstra as a financial genius.
if a fake cablecar hauling a bachelorette party hasn’t come down your street in the past six months, does that mean you don’t live in “real” san francisco?
of the table-pounding call to buy Bear Stearns
actually he was saying money in BSC brokerage accounts was safe [which it was], not the equity issue itself.
If you have cash then buying in an entrenched high interest rate environment is better than a historical low one.
But I am the biggest real estate bear and still think 5% fixed for life is a pretty good deal for a depressed market that is expecting population growth in the future.
So in SF if you can lock in ownership in an area that will should not significantly increase in density or otherwise decrease in quality in the 30 years then catching the knife now might pay off.
Interest rates were 8% in 1999-2000 so we’re not going to see 1999-2000 pricing in the conforming sector until interest rates rise way above the current 5-6% and stay there to kneecap buying power.
bearish-ness persists on this blog. i totally bought into the bearishness for a long time, but at this point, i don’t know if we can say whether it will go down further or bottom out… but there is a good probability that it is bottoming out. further, at some point, unless you have all cash, even if the market is going down further, the rising interest rates should scare you… and make your purchasing power less. i’m tempted to buy now and lock in a good rate, hoping for bottom, rather than, in a worse situation, try to buy something in the upswing, with high interest rates. again, though, who knows.
btw, why has noone commented on the following wsj article: http://online.wsj.com/article/SB124353047811163187.html
Tall Guy — been speaking with re agents in SF and been told if you are looking for a loan in excess of the 729k limit, expect to be required to put 30% down — so you will need more than 180k cash for the 1.2 million home even if your income can support it.
This tidbit if true (that banks now want 30% or more down) is enough by itself to tank the above 800k market in SF, regardless of what Cramer says.
But I also agree that if you want a home in Florida or in the markets in CA that have seen prices drop 50% from the peak, it is likely the bottom. If you are looking at the coasts, NYC or other more desirable areas (aka any home above 600k say) the bottom is at least a year away.
It depends what you define as “the bottom”. Is it when house prices stop depreciating? Is it when inventory has stopped growing? There are a lot of metrics.
The numbers are all skewed because banks are not letting go of their foreclosure inventory.
Bottom line: there is still a lot of inventory out there (hidden or not), there are still more job losses coming.
anon, we may not have talked about that exact WSJ article but many of the bears here have been predicting that median prices will go up while upper end home values are still falling. Most of the recent sale action has been at the low end. As upper tier sellers drop prices to get their homes to move, the median home price goes up.
Anon, the median just tells you what is selling. That article said the median in CA rose. It always rises in the spring, and trust me, it’s going to keep rising because the sub prime problem is winding down and the loans that went to higher priced properties are just starting to go into short sales.
You’ll see foreclosures of higher priced properties ramping up by the end of the year, driving the medians higher. Watch only Case-Shiller and the apples shown on SS. The median is worthless.
As interest rates rise, if salaries stay the same, and at 10% unemployment, it’s hard to imagine wages rising, home prices will fall.
Although you may pay a higher interest rate, you’ll pay a lower price for the home. The net payment will be about the same, BUT the potential loss will be less. Here’s an example:
You buy a home for 700K at low interest rates. At higher rates, the same home is $500K because the payments will be about the same. Total payments are about the same, maybe a little higher.
Now you go to sell. If the price of the home has fallen to $450K, you only lose $50K if you bought when interest rates were high. If you bought when they were low, you lose $250K! The person who buys when rates are high makes out better.
Better to buy when interest rates are high, BUT before wages rise. When unemployment drops into the 6-7% range, you may see wages start to rise, but it’s unlikely before. You’ve got plenty of time, and you will want to hope for HIGHER rates, not lower ones. Those go into the pocket of the seller, NOT you.
Second tipster’s comments. In addition, with prop 13 you get a permanent property tax break with the lower purchase price, regardless of the monthly payment. Lower principal and a higher interest rate is generally going to be a better deal overall than the converse with less risk, unless interest rates were to really skyrocket (but that would just accelerate the pricing declines).
A home price is what should really matter. The smaller the price, the easier it will be to refi/resell/pay off. Buying a monthly payment is very short sighted (how well did that work in 04-07 with I/O, Neg-Am and such?).
Affordable are cheap homes, not low-mortgage homes.
I remember when I sold off my places the City of Paris was giving away 0% interest loans for the purpose of a downpayment for the “priced out” masses. The net result: homes went up in price by the same amount and more crazies went into buying at insane prices they couldn’t afford after the interest reset on their primary mortgage. 2 years later these geniuses at City Hall scratched their eggheads at the ever increasing housing and decided to… double the incentive!!!
I liked it as a seller, that’s for sure, but when I go back to think about the poor souls that bid on my places I feel a pinch of guilt… I will never thank them enough for making that selfless sacrifice 😉
We’re about in the same position as Tall Guy, but renting in PacHeights (we perfectly timed the sale of our house in summer of 2007).
We’ve been keeping an eye on the market in our area, but still current prices are nothing to get excited about. It seems that many sellers are very willing to wait 12 months or more to find a buyer at top dollar, and will rather pull the listing than drop the price to market. Or maybe that’s just me wishing they would drop the price to what I would pay 😉
Anyways, as far as market timing goes, what is the consensus on District 7B? I’m guessing prices will not fall as much, and will hit bottom later.
We are in the same position as Tall Guy and ktdw and so are many other in the city .. I have the feeling that some will blink this summer … see SFH that go relatively fast if decently priced over condos.
Think there are quite a few people ready for trading up without having to sell the property they live in.
Lots of these people also believe their Realtor story “best time ever to buy” … sooo … think this will keep the middle of the market ($850K – $1.2M) float in the short term …
can’t remember who mentioned the term “falling knives catchers” ..
You buy a home for 700K at low interest rates. At higher rates, the same home is $500K because the payments will be about the same. Total payments are about the same, maybe a little higher.
The only problem here is that low/high are relative. 6% is low for ‘today’. 9% may be high ‘tomorrow’. Problem is that there is no guarantee that we may not get back to 12-13% (or higher) interest rates.
Anyone that thinks this bubble has unwound in 18 months is crazy. Yes there are some macro-economic factors that could make home buying a sound investment, but no one has presented a coherent argument explaining why it makes more sense to buy a house today versus 12-18 months from today on a pure ‘home value’ basis. Cramer is certainly anything but coherent.
eddy,
Wait until Obama’s plan to phase out the mortgage interest deduction for high earners (over $250K – about what you need to qualify for ANY jumbo loan) hits the upper tier of properties in about a year. That will keep prices dropping too.
let’s just say, how are you sure the house will be $500K at higher rates? seems a little aggressive. there are too many macro-factors to determine house prices. basically there are unknowns.. and there is a price premium for risk. sometimes locking in now is better than taking risk that it gets to be a worse market later. maybe you get burned slightly, but you will not get burned like those at the peak in 2007/2008. and maybe you have to stay in your house 5 years instead of 2, but that’s all fine as long as it is a long term bet.
just by walking around, the inventory is getting a lot better. no longer is it that the seller has to sell in every situation.. some sellers are choosing to sell to take advantage of the low prices, and buy a nicer place. also, if you look at inventory of banks in SF specifically, you don’t see a lot. you see it in the east bay. (that’s where case shiller is misleading.. it groups everything into SF)
maybe more people will get laid off, maybe more people will lose their jobs. but i think the worst is over. cars are selling again, retail is doing reasonable again… just doesn’t seem like it anymore.
i’ve seen the apples, i’ve seen case shiller. i get it. but that doesn’t mean this is not the bottom. it only means right now we’re in a good spot relative to 2007/2008. further, in noe, condo prices per square foot are starting to tick up again. take a look at recent sales vs. sales a month or two months ago. do your comps, make the comps apples to apples in terms of property sophistication.
finally, don’t put all your trust in case shiller. remember it is a lagging indicator, not a leading indicator. it only tells you about the past. even more so, it includes east bay and everywhere else, not just prime neighborhoods in SF. noone can predict the future, not even cramer, not even socket site, not even you or me.
that’s why i’m taking my depreciated price now and running with it.. locking in the real estate market loss to date.
Another 20-30% down on most properties that SS’ers would consider desirable is my call. Just sit back and watch it happen. It might take another 2-4 years for it all to unfold, but I bet the bulk of the nominal declines are in by end 2010.
I expect housing prices in SF to be lower than they are right now (in nominal dollars) even as long as 10 years from now.
Let’s keep checking back – so far the unwind is going according to schedule, and most who bought after 2002 in SF are now “trapped” in the sense that if they want to sell (or are forced to sell by life circumstance), they will realize the loss that they have already absorbed on their balance sheets.
When people are not bothered by, and stop fighting, the idea that prices won’t rise for 10 years, it will be a great time to buy! Still way too much hope and speculation in the market to speak of a “bottom”, and fundamental metrics remain terrible, albeit slightly better than in 2005-07.
Anon, please “lock in” that loss to date by buying a foreclosure or short sale. We need people like you to absorb the losses from further declines so that the banks (i.e. taxpayers) don’t have to do so. Oh, and make a big down payment.
anon,
It’s normal for house prices to be inversely related to mortgage interest rates. But, I think today’s prices are super-sensitive to interest rates thanks to all the wacky adjustable rate loans. Every percentage point increase results in more people unable to pay their new payment due to reduced wages or partial employment in these hard times, which results in more foreclosures, which results in more fear and panic in the market. So, yes, I do think it’s possible for that $700K house to go to $500K.
In many markets, the MONTHLY mortgage PAYMENTS might have hit bottom and are due to begin increasing soon, but housing PRICES in expensive markets have yet to do so. Even if prices hit bottom now, which is a decent possibility, they will be there for a long long time. Here’s why.
1) Inflation will hurt housing prices not help it
2) The government has yet to stop the emergency actions and regulate wall st
3) supply vs demand has not hit a free market equilibrium
4) the government still has yet to face the music for its huge deficits
5) Employment is far from healthy
6) Interest rates have yet to revert to sustainable levels
7) The financial sector has yet to realize all of its losses
All of these strongly suggest that there is a sustained difficult road for many many years to come. These will keep housing at the bottom for some time.
You guys are just scapegoating Cramer. Watch this video from 9/07 in which he says that you should NOT be buying a house: http://www.cnbc.com/id/15840232?video=533257614&play=1
Let’s be objective with this guy. He makes bad calls, and he makes some good calls. His bank account suggests that he makes good calls more frequently than bad calls… though I think his personality is the reason he got a gig on TV.
There are markets that have absolutely bottomed from a national standpoint.
There are segments of San Francisco that are at bottom (sub-million homes in established parts of the city).
There are segments of San Francisco that are still in trouble (Soma and other high-inventory areas, as well as $2mil+ homes).
We all know these things.
“bearish-ness persists on this blog. i totally bought into the bearishness for a long time, but at this point, i don’t know if we can say whether it will go down further or bottom out… but there is a good probability that it is bottoming out. further, at some point, unless you have all cash, even if the market is going down further, the rising interest rates should scare you… and make your purchasing power less. i’m tempted to buy now and lock in a good rate, hoping for bottom, rather than, in a worse situation, try to buy something in the upswing, with high interest rates. again, though, who knows.”
You make a good point, but generally speaking, the economy stinks, bad!
If people can only afford 3500/month in mortgage, then houses have to come in line with incomes. Ponzi schemes and a fanstastic economy aren’t going to save the day like they did in 2005. Houses will hover around 800k for 3500/month at 4.5%, but when interest spikes to 7%, houses WILL come down to 620k to match the increased borrowing costs.
You have two choices
1) expensive house cheap credit
2) cheap house expensive credit
There is no longer the threat of
3) expensive house expensive credit
Expensive credit will crush housing in this sustained lackluster economy.
I welcome expensive credit and cheaper prices.
You are right though. Things have bottomed, but they will be at the bottom for a LOOOOONG time.
“let’s just say, how are you sure the house will be $500K at higher rates? seems a little aggressive. ”
Anon, historically speaking, houses have not reacted proportionally to interest rates, however ever since 2001, they have.
Exotic lending, poor mid-term economic outlook, out of whack balance sheets, imbalanced housing supply vs demand, ultra high housing costs + more stringent qualification has effectively coupled housing prices and interest rates.
Housing was doomed at 6.5% in oct 2008 and didn’t show signs of a recovery until rates hit 4.5%. In 2007 the housing ponzi scheme was going full steam until the Fed changed the rates and sellers and buyers were at a odds.
The housing industry has been transformed since 2001 and it will remain transformed for a long long time. One of the transformations was that housing prices are pegged to interest rates like never before.
Why else do you think the fed promised 1.3 TRILLION JUST to push down mortgage rates? Why else do you think everyone is freaked out about higher interest rates? Its because interest rates and prices are tightly coupled.
If interest rates go up, and prices stay fixed, there will be another stalemate and another ripple effect throughout the economy. Maybe you think people struggling to buy 700k homes at 5% interest will magically be able to buy 750k homes at 7.5% in 2011? I guess you think the economy will not only rebound, but skyrocket next year.
@Anon at 1:17 PM
“Locking in” low rates at a higher housing price only pays off if you’re confident that you won’t move for 20 or 30 years. Otherwise, you’re much better off paying higher rates at a lower housing price. The key is that the benefit of the low rate accumulates over the entire life of the loan, and you can’t “take the loan with you” if you move. Unless you live in that home for the full 30 years, you only get a fraction of the benefit.
In fact, as tipster points out, buying in the low rate/high price environment exposes you to the risk of capital losses if you choose to move in the next 5 to 10 years.
In both the stock and real estate markets people so badly want things to turn that they’re deceiving themselves. I wish you’d post a link to the 60 Minutes story on the next wave of defaults coming. Its sobering, and its still on the way.
I watched Crammer a little bit but was rather disappointed with his advice few weeks ago regarding financial sector. Had stop watching him since.
Prices in SF have not come down that much. I wish Case Schiller would only include District 1-9 to show the real price action of SF. A true indication of SF real estate price correction to me would be condos in SOMA selling for $350-$400/ square feet max. Houses in Noe Valley selling generally for $800k-$1M max. Until then, I say SF real estate’s bubble has not burst.
Crammer may have it right for places like Fremont, but the bubbles in SF or LA (with exception of downtown lofts, places like Silverlake has yet to come down to a realistic prices) have yet to burst.
Even if the prices have bottomed, there is no need to rush to buy a house because real estate prices do not shot right back up like stocks. It’ll flat line for a few years before it goes back up again so people have plenty of time to buy if they want to buy. Frankly unless you can find a place in SF that the mortgage+insurance+taxes = say your current rent + 10% or maybe 20%, I don’t see why you want to buy. You are better off taking the difference and by stocks now. The trick with buying stocks is buy it when the market crashes. If you bought during the dot come boom, and never sell out, you lost money. But if you bought right after the bust, you probably still made some money even after the big crash we had. Same with housing. The difference between people who made money from real estate and people who loss money is “WHEN” they made the purchase.
When there is a consensus here or anywhere that prices have bottomed, it will be well after they’ve bottomed and buyers will have to fight the multiple offer wars. Cramer’s prediction of a bottom in June was made 6 months ago and he will be close if not spot on. What is holding things back somewhat in the Bay Area is simply the difficulty of getting jumbo mortgages.
Also let me say that Cramer’s much-maligned stock picks are as good as anyone’s. Beating the averages by a few percentage points is considered good in investing and Cramer often does. His famous rant last summer at the Fed turned out to be right on too. As was his “get out now” call at Dow 11,000 and his “get back in” call in early March. Of course his each and every pick is not correct–no one’s is.
As a San Francisco homeowner for nearly 30 years and an investor for 40 years, I think most outspoken Cramer critics are just inexperienced whiners. There are legions of people who do just what Cramer does, some doing it better and many doing it worse. There’s no reason to pick on him.
I don’t agree. Because our government have the habit of messing with things thus make the housing bottom a very difficult thing to predict. If our government leaves everything alone, then I would say the bottom should be around 2012. But since our government likes to meddle with things, I say maybe closer to 2010/11.
Buyers will not be fighting multiple offer wars for awhile. This whole housing crash has changed the way people see houses. It’s no longer a home but an investment. Multiple offers will only happen to places that are truly under-priced on purpose.
Of course not all of Crammer’s picks are going to be spot on. Otherwise all his readers will be filthy rich and the whole America will be tuning in on CNBC daily pronto when he comes on (and quit their day job). As you indicated that he’s a good trend reader. That’s the most important thing. A person doesn’t have to be a good stock picker because that’s difficult. But if a person can read trend, then just buy the market leader in whatever the sector that one wants to invest in and he/she should make pretty good money.
My gripe about him is that he cannot read short term trends (and he likes to make misleading comments about them). Fast Money and Options Action is probably a much better short term gauge show than Mad Money. Since we are in a trader market right now, FM and OA is a better show to watch for now than MM.
Cramer said to buy Bear Stearns stock. His subsequent claims, that he meant money in Bear Stearns accounts was safe, are lies. Don’t let him get away with that.
Cramer reminds us that no-one can predict the future. But for housing, remember that we are measuring in dollars, and you can predict that paper currencies will lose value, because they always have. There are no exceptions. Obama is running those printing presses like Robert Mugabe.
Oh sure.. we are at the bottom!!! We are ONLY losing 500k jobs a month… and two of our largest automakers just went BK… the State of California is going broke… the City of SF is cutting workers and budget … a bottom? What a JOKE!
I agree with the earlier post on here that the people in the stock market and real estate markets WANT things to bottom so bad they are deceiving themselves.
By the way, commercial real estate has just started it’s freefall… another massive wave of Alt-A and Option ARMs foreclosures are about to hit … and we are at a BOTTOM??
What the hell are these idiots smoking???
We have just lived through the biggest debt bubble in history … and now it is going to take a LONG time to deflate … just like Japan’s “lost decade”! We have at least another 2 or 3 years of real depreciation in real estate prices here in SF.
Don’t listen to the RE brokers BS about “a good time to buy”. If you wait a few more years and still have a job… you can buy one of these SOMA condos for CASH!
Jim Makes some really great calls:
BUY, BUY, BUY @DOW 14K.
“accept that things are over valued, but they’re going to keep going up”
Is that Cramer, or a real estate agent? http://www.youtube.com/watch?v=vtrke0NfbcQ
have posted it here before, but for whatever its worth – ceos that we’re meeting with are planning for a 3-5 years of slog. (meaning zero to very limited growth)
then the HOPE is that will return to a more muted version of the growth that was experienced before.
I agree with the major bears on here. There is a fundamental shift in consumer behavior required to unwind this leverage. 60% of US consumer debt held by top 10% of households, who now have some very difficult lifestyle change decisions to make.
Those consumers leverage drove the prices up for the entire market. Their unwind has a long way to go to drive them down. Many others have said it – but these are the PRIME borrowers, not the subprime.
hold onto your butts.
Dating from when? There’s a recurring theme on here. “Just wait.” “The upcoming three years …” “instert future period here.”
We’re in it, folks. We’ve been in it. I read somewhere this morning that some are attributing the recession’s beginning back to December 2007. Another three years, from then?
Dating from now. Corporate strategic planning is being done for no significant growth through 2011, and then minor growth for the medium term.
like mud better.
Why not dating from the last time you made that same post, several months ago? 😉
You’re speaking about local business outlooks, and I respect that. I’m more getting at what’s always the same refrain on here. “Wait till the San Francisco market shifts.”
Um. Hello?
made the original 3-5 year statement a couple of months. planning cycles are still ongoing. 3-5 yrs still relevant.
and for what its worth, these are not just local businesses. national employers, some of whom are based here – all of whom have employees here. 10,000s to 100,000s of employees globally.
Anyway – beating a dead horse, but consumer credit hasn’t significantly unwound yet (see above about top 10% of households holding majority of debt). When it does (and it has to) – it represents a ‘new normal’. Big article in WSJ 2 days ago about auto industry wondering if they’ll see 17MM new units again. Same applies to most retail (grocery usually excluded). To consumer electronics. to content and subscription services.
and, yes, even to housing.
“Oh sure.. we are at the bottom!!! We are ONLY losing 500k jobs a month… and two of our largest automakers just went BK… the State of California is going broke… the City of SF is cutting workers and budget … a bottom? What a JOKE!”
We are near the bottom, but the bottom is not a very great place to be! We are just now beginning to survey the damage and it’s not pretty. We won’t be off of the bottom for years. There are too many fundamental weaknesses in the economy for things to turn around 2-3 years from now. When borrowing costs and taxes go up, and the endless supply of shadow inventory gets released over time, there will be constant downward pressure counteracting sustained growth in housing prices.
Mud’s got it right.
Six or so months ago, many in strategic planning in corporate America were belatedly trying to figure out if this was “an 8 month thing, or a 3 year thing.”
If you think it’s closer to the former timeframe, you may not have been paying attention.
No significant growth through 2011 seems a reasonable expectation.
Shadow inventory is a tough thing to parse. It is made up of those who would or will perhaps sell. One has to consider that some of those who put properties on the market, to no avail, and saw them withdrawn, will not put their propertes back on the market any time soon. People are people. Trying to sell real estate endlessly can be incredibly annoying. But “endless,” in San Francisco, it’s not.
I don’t know if Jimmy C is correct or not at this time. but I used to watch his show religiously (I thought it was funny) for the first 1.5 years or so.
He has good analysis and makes some good bets. but also some horrendous bets. His biggest weakness IMO is that he is definitely part of “the establishment”.
for years he has cheered “rightsizing” when it’s the little guys. But when his beloved financial sector is about to get hit then he starts screaming “they know NOTHING. NOTHING.”.
there was a website for a while that charted all of his recommendations. it didn’t look pretty for him. I didn’t follow the website closely enough to check the veracity of their data. But many people have made big bucks doing the opposite of what he has done.
this financial crisis has really crippled him. He did well during boom times, but he has made several major gaffes in predictions, especially related to financial stocks. If you had followed his recommendations since bear stearns collapsed you would have lost substantially IMO.
Lastly please remember: he is a TRADER not an investor. So he may say “jump in to housing!” today, but then “sell sell sell!” in 1 month.
====
as for whether or not we’re at the bottom yet? too hard to know, but it really doesn’t matter anyway.
the RE market is dominated by government. Thus completely hostage to political decisions. If the govt were to reverse recent FHA/Fannie/Freddie actions all of the RE markets would all tank in one second. If they are able to expand the products (given the squawking from the foreign creditors, unlikely), then RE could do well.
what is sure:
there is no reason that someone needs to “lock in” anything at this point. simply watch and wait for RE to appreciate on a yoy basis for 12 consecutive months. once it does that the risk of RE collapse is lower than it is now.
currently, any buyers take a huge risk of future home price depreciation. there is little to no financial analytical reason why RE will make substantial gains in the next year, and renting is cheaper than owning in most areas, so why rush?
if interest rates go up, housing prices will fall so that the monthly payment is comparable. no biggie.
and it is almost always better to buy in a high interest rate low cost environment than a low interest rate high cost environment.
you can always refinance a high interest rate. You can almost never refinance a high mortgage balance.
Mortgage interest is deductible. principal payments are not.
no hurry.
as for timing anonn: many of us have been quite clear that we foresee negative housing pressure ahead for years. in my case, Dec 2011. I’ve been consistent on that for well over 2 years now. so only 2.5 years to go.
“Shadow inventory is a tough thing to parse. It is made up of those who would or will perhaps sell. One has to consider that some of those who put properties on the market, to no avail, and saw them withdrawn, will not put their propertes back on the market any time soon. People are people. Trying to sell real estate endlessly can be incredibly annoying. But “endless,” in San Francisco, it’s not.”
Not endless, but there is excess supply compared to demand over the MIDTERM in SF given the current housing prices and economic situation. Shadow inventory is hard to quantify, but qualitatively, over the next several years, there will be upward pressures on supply. Sure, thousands of shadow properties won’t be unleashed all at once in the next year creating 30% price drops, but, two hundred here and two hundred there will pop up over several years and put pressure on prices to stay put or drop modestly.
In 2005, there was tons of demand for 1 million dollar houses, and that demand outstripped supply in SF. In 2009, and even in till 2013, I don’t see demand for 1 million dollar houses being higher than the supply. Even in SF. Thus as credit becomes more expensive, and the economy doesn’t come roaring back, the price point will have to shift to put supply and demand back into balance.
Is there infinite supply? Of course not. I am not saying there will be a catastrophic drop in the next year. I am saying that there a more forces keeping houses on the bottom over the midterm than pushing it up, so I expect the bottom to stay for a long long time until we fix a lot of macro and micro economic issues.
Other ideas about shadow inventory:
– Everyone will agree that the worst situation in a bear market is when someone HAS TO sell. These have always been there and always will be. As most people restrain from selling if they don’t have to, some of the sales will come from people selling at any price.
– Prop 13 helped make sure boomers clinged to their undertaxed property as long as they could. Come sale time, they will be making a huge profit whatever the sale price. Of course a seller always wants the best possible price, but between the family with a 1.5M mortgage trying to sell when prices are at 1.3M, and the old-timer who bought at 80K in 1970, who do you think will accept the 1.3M more easily? Boomers are retiring en masse in the next decade. I know a few that plan to hand over their houses to their kids, but some sales are going to happen.
“Dating from when? There’s a recurring theme on here. “Just wait.” “The upcoming three years …” “instert future period here.”
We’re in it, folks. We’ve been in it. I read somewhere this morning that some are attributing the recession’s beginning back to December 2007. Another three years, from then?”
I assume this is “Fluj” or whatever you used to go by right? Interesting to see you saying we are in it after reading countless posts from you over the last few years telling everyone how it wasn’t/wouldn’t happen here.
I assume this is “Fluj” or whatever you used to go by right? Interesting to see you saying we are in it after reading countless posts from you over the last few years telling everyone how it wasn’t/wouldn’t happen here.
I repeatedly said that a correction was likely to occur at some point. Don’t forget the context. I was arguing with people whose standpoint was that the sea change had already happened. It was a whole lot of derisive swipes at micro markets, way ahead of schedule. They were arguing individual properties, trying to apply MSA median hits and the like to houses in Noe Valley or elsewhere. I wasn’t having it. But yeah, I did also say “nope. not happening” from time to time.
Well, now, clearly September 2008 happened. About a year or two later than a lot of these guys argued. But even now it isn’t good enough. Now it’s like, “It still hasn’t happened yet.”
I don’t argue from future times. I argue from now. You know? Calamity for SF would not see 2.4M Potrero Hill SFRs, or a 2.85M green build in the flats of Noe, or a Glen Park house well under 3000 feet going pending inside of two weeks. Those type of pricepoints would be north of California only. So, all “gotcha” moments aside, let’s look at what’s actually being said at the time it is said.
“I don’t argue from future times.”
– Posted by: anonn/fluj at June 4, 2009 3:08 PM
“San Francisco never really took a price hit and it won’t, either.”
– Posted by: fluj/anonn at June 23, 2008 9:57 AM
You’re sounding a lot like Jim ‘I didn’t say to buy Bear Stearns right before it collapsed even though you have it on tape’ Cramer fluj.
You could also do a search and find fluj saying a correction is likely but that it hadn’t happened yet if you wanted to. Again, the context was arguing with people who were dead wrong at the time. So go ahead and bold old quotes out of context till the cows come home. It’s all good.
Hi Anonn,
I would say that once Iranian businessmen start fleeing the country and allowing their 7 figure gold coast mansions to fall into foreclosure that the correction has started in the real SF.
What a long strange trip it’s been.
Looks like Cramer fell asleep in the sun. All real estate is local. I doubt Jim is fired up to buy some properties in the bay area right now.
yeah, find the video(s) of the table-pounding call to buy Bear Stearns.
next.
I’m loving it! Please keep buying. The more buyers that lock themselves in their new happy home for 5-10 years, the less competition i’ll need to deal with when I buy my own (a nicer home in a better locale for the same price) YAY!
I think this is the first Socketsite embedded video (but I may be mistaken).
Slippery slope, putting cramu on 🙂
[Editor’s Note: It’s not the first video, but mentioning Cramer was a first (and likely last).]
Well then! I currently rent, have about $180k in cash, and reasonable income to support a mortgage up to say $1.2M. What should I buy folks? I currently live in a loft in Hayes Valley, and don’t really like living outside of the real SF.
Cramer would be the perfect replacement for Lawrence Yun.
He’s right!
Given Cramer’s speech patterns and body language, how does anyone take what he says as anything other than BS? His voice constantly rises (“yeeeAAAUUH. It’s HERE.“), he is almost always looking downward and/or at his hands, the shifting in his seat, the fidgeting. He looks about as comfortable and truthful as a little boy holding a bat trying to explain/deny ownership of the baseball that came through a window and into your living room.
Really makes me almost respect the other pundits who believe their own lies and can look straight-faced into the camera. Almost.
Let’s be real, if you can lock in a good rate for a 30 year fixed in So Cal or a Miami condo with ocean views where prices have fallen 50-80% from the peak, it probably is a good time to buy.
Here you go. Jon Stewart/Jim Cramer video on Bear Stearns……hilarious!
http://www.thedailyshow.com/video/index.jhtml?videoId=220288&title=In-Cramer-We-Trust
Do the hedge funds fax broadcasting instructions to Cramer and CNBC?
I’d rather trust Tommy the Fuzzy Wuzzy bear pulling random levers for my equity advice than Jim Cramer.
eh, too calm in this video. he’s no fun to watch when he’s not throwing a fit or throwing stuff across the room.
does the lady address him as “Tim” in the beginning and the end of the video, or am i losing my hearing senses.
On a nationwide basis, he might be right. Maybe a year early.
SF still has a ways to go though.
Tall Guy if you have an income that can support a 1.2MM mortgage then you should be able to increase your downpayment savings by $10K/month fairly easily. Save up another 120K and buy in a year. Better yet, save up for 2 years and buy a condo all cash.
Never buy a Rolex from a man out of breath.
Never play poker with a guy named Sly.
And never, ever take financial advice from a man who yells!
satchelfan, that video is hillarious. The fun on that video starts at the 2 minute mark and continues all the way through.
Cramer starts off by saying that the $8000 housing credit makes up for a .75% rise in mortgage interest rates. A $150K mortgage at 4.75 fixed/30 yr. = $131,689 in total interest. Same mortgage at 5.25% = $1148,190. In SF, the loan amount would be more like $471K (80% of avg. SF Co. median of $589,500), for a difference of about $30K in total interest between the a 4.75 and 5.25 mortgage.
This is the same guy that was touting Lenny Dykstra as a financial genius.
I liked him better on Arrested Development. Dont buy Bluth!
Sorry, $148,190, not 1148,190.
if a fake cablecar hauling a bachelorette party hasn’t come down your street in the past six months, does that mean you don’t live in “real” san francisco?
He’s bought and paid for, how can you expect unbiased commentary from Cramer?
of the table-pounding call to buy Bear Stearns
actually he was saying money in BSC brokerage accounts was safe [which it was], not the equity issue itself.
If you have cash then buying in an entrenched high interest rate environment is better than a historical low one.
But I am the biggest real estate bear and still think 5% fixed for life is a pretty good deal for a depressed market that is expecting population growth in the future.
So in SF if you can lock in ownership in an area that will should not significantly increase in density or otherwise decrease in quality in the 30 years then catching the knife now might pay off.
Interest rates were 8% in 1999-2000 so we’re not going to see 1999-2000 pricing in the conforming sector until interest rates rise way above the current 5-6% and stay there to kneecap buying power.
bearish-ness persists on this blog. i totally bought into the bearishness for a long time, but at this point, i don’t know if we can say whether it will go down further or bottom out… but there is a good probability that it is bottoming out. further, at some point, unless you have all cash, even if the market is going down further, the rising interest rates should scare you… and make your purchasing power less. i’m tempted to buy now and lock in a good rate, hoping for bottom, rather than, in a worse situation, try to buy something in the upswing, with high interest rates. again, though, who knows.
btw, why has noone commented on the following wsj article:
http://online.wsj.com/article/SB124353047811163187.html
Tall Guy — been speaking with re agents in SF and been told if you are looking for a loan in excess of the 729k limit, expect to be required to put 30% down — so you will need more than 180k cash for the 1.2 million home even if your income can support it.
This tidbit if true (that banks now want 30% or more down) is enough by itself to tank the above 800k market in SF, regardless of what Cramer says.
But I also agree that if you want a home in Florida or in the markets in CA that have seen prices drop 50% from the peak, it is likely the bottom. If you are looking at the coasts, NYC or other more desirable areas (aka any home above 600k say) the bottom is at least a year away.
Video is not displaying on Safari (for me anyway).
[Editor’s Note: Unfortunately that’s a player (not SocketSite) issue. Try http://link.brightcove.com/services/player/bcpid1079049304?bctid=25028858001.]
It depends what you define as “the bottom”. Is it when house prices stop depreciating? Is it when inventory has stopped growing? There are a lot of metrics.
The numbers are all skewed because banks are not letting go of their foreclosure inventory.
Bottom line: there is still a lot of inventory out there (hidden or not), there are still more job losses coming.
btw, you should all be more humble b/f calling cramer out… others have in the past, and see below:
http://www.npr.org/blogs/money/2009/05/cramer_not_so_mad.html
(i’m not a cramer fan, i find him to be too risky typically)
This guy must have amnesia.
Anon…aren’t you forgetting the time value of money?
anon, we may not have talked about that exact WSJ article but many of the bears here have been predicting that median prices will go up while upper end home values are still falling. Most of the recent sale action has been at the low end. As upper tier sellers drop prices to get their homes to move, the median home price goes up.
Anon, the median just tells you what is selling. That article said the median in CA rose. It always rises in the spring, and trust me, it’s going to keep rising because the sub prime problem is winding down and the loans that went to higher priced properties are just starting to go into short sales.
You’ll see foreclosures of higher priced properties ramping up by the end of the year, driving the medians higher. Watch only Case-Shiller and the apples shown on SS. The median is worthless.
As interest rates rise, if salaries stay the same, and at 10% unemployment, it’s hard to imagine wages rising, home prices will fall.
Although you may pay a higher interest rate, you’ll pay a lower price for the home. The net payment will be about the same, BUT the potential loss will be less. Here’s an example:
You buy a home for 700K at low interest rates. At higher rates, the same home is $500K because the payments will be about the same. Total payments are about the same, maybe a little higher.
Now you go to sell. If the price of the home has fallen to $450K, you only lose $50K if you bought when interest rates were high. If you bought when they were low, you lose $250K! The person who buys when rates are high makes out better.
Better to buy when interest rates are high, BUT before wages rise. When unemployment drops into the 6-7% range, you may see wages start to rise, but it’s unlikely before. You’ve got plenty of time, and you will want to hope for HIGHER rates, not lower ones. Those go into the pocket of the seller, NOT you.
Didn’t this guy learn his lesson from getting his ass handed to him on The Daily Show, how is he even still on television?
Second tipster’s comments. In addition, with prop 13 you get a permanent property tax break with the lower purchase price, regardless of the monthly payment. Lower principal and a higher interest rate is generally going to be a better deal overall than the converse with less risk, unless interest rates were to really skyrocket (but that would just accelerate the pricing declines).
Cramer is just an egotistical fool…who takes this guy seriously? The Street has become such a farce…
A home price is what should really matter. The smaller the price, the easier it will be to refi/resell/pay off. Buying a monthly payment is very short sighted (how well did that work in 04-07 with I/O, Neg-Am and such?).
Affordable are cheap homes, not low-mortgage homes.
I remember when I sold off my places the City of Paris was giving away 0% interest loans for the purpose of a downpayment for the “priced out” masses. The net result: homes went up in price by the same amount and more crazies went into buying at insane prices they couldn’t afford after the interest reset on their primary mortgage. 2 years later these geniuses at City Hall scratched their eggheads at the ever increasing housing and decided to… double the incentive!!!
I liked it as a seller, that’s for sure, but when I go back to think about the poor souls that bid on my places I feel a pinch of guilt… I will never thank them enough for making that selfless sacrifice 😉
We’re about in the same position as Tall Guy, but renting in PacHeights (we perfectly timed the sale of our house in summer of 2007).
We’ve been keeping an eye on the market in our area, but still current prices are nothing to get excited about. It seems that many sellers are very willing to wait 12 months or more to find a buyer at top dollar, and will rather pull the listing than drop the price to market. Or maybe that’s just me wishing they would drop the price to what I would pay 😉
Anyways, as far as market timing goes, what is the consensus on District 7B? I’m guessing prices will not fall as much, and will hit bottom later.
We are in the same position as Tall Guy and ktdw and so are many other in the city .. I have the feeling that some will blink this summer … see SFH that go relatively fast if decently priced over condos.
Think there are quite a few people ready for trading up without having to sell the property they live in.
Lots of these people also believe their Realtor story “best time ever to buy” … sooo … think this will keep the middle of the market ($850K – $1.2M) float in the short term …
can’t remember who mentioned the term “falling knives catchers” ..
You buy a home for 700K at low interest rates. At higher rates, the same home is $500K because the payments will be about the same. Total payments are about the same, maybe a little higher.
The only problem here is that low/high are relative. 6% is low for ‘today’. 9% may be high ‘tomorrow’. Problem is that there is no guarantee that we may not get back to 12-13% (or higher) interest rates.
Anyone that thinks this bubble has unwound in 18 months is crazy. Yes there are some macro-economic factors that could make home buying a sound investment, but no one has presented a coherent argument explaining why it makes more sense to buy a house today versus 12-18 months from today on a pure ‘home value’ basis. Cramer is certainly anything but coherent.
eddy,
Wait until Obama’s plan to phase out the mortgage interest deduction for high earners (over $250K – about what you need to qualify for ANY jumbo loan) hits the upper tier of properties in about a year. That will keep prices dropping too.
let’s just say, how are you sure the house will be $500K at higher rates? seems a little aggressive. there are too many macro-factors to determine house prices. basically there are unknowns.. and there is a price premium for risk. sometimes locking in now is better than taking risk that it gets to be a worse market later. maybe you get burned slightly, but you will not get burned like those at the peak in 2007/2008. and maybe you have to stay in your house 5 years instead of 2, but that’s all fine as long as it is a long term bet.
just by walking around, the inventory is getting a lot better. no longer is it that the seller has to sell in every situation.. some sellers are choosing to sell to take advantage of the low prices, and buy a nicer place. also, if you look at inventory of banks in SF specifically, you don’t see a lot. you see it in the east bay. (that’s where case shiller is misleading.. it groups everything into SF)
maybe more people will get laid off, maybe more people will lose their jobs. but i think the worst is over. cars are selling again, retail is doing reasonable again… just doesn’t seem like it anymore.
i’ve seen the apples, i’ve seen case shiller. i get it. but that doesn’t mean this is not the bottom. it only means right now we’re in a good spot relative to 2007/2008. further, in noe, condo prices per square foot are starting to tick up again. take a look at recent sales vs. sales a month or two months ago. do your comps, make the comps apples to apples in terms of property sophistication.
finally, don’t put all your trust in case shiller. remember it is a lagging indicator, not a leading indicator. it only tells you about the past. even more so, it includes east bay and everywhere else, not just prime neighborhoods in SF. noone can predict the future, not even cramer, not even socket site, not even you or me.
that’s why i’m taking my depreciated price now and running with it.. locking in the real estate market loss to date.
Another 20-30% down on most properties that SS’ers would consider desirable is my call. Just sit back and watch it happen. It might take another 2-4 years for it all to unfold, but I bet the bulk of the nominal declines are in by end 2010.
I expect housing prices in SF to be lower than they are right now (in nominal dollars) even as long as 10 years from now.
Let’s keep checking back – so far the unwind is going according to schedule, and most who bought after 2002 in SF are now “trapped” in the sense that if they want to sell (or are forced to sell by life circumstance), they will realize the loss that they have already absorbed on their balance sheets.
When people are not bothered by, and stop fighting, the idea that prices won’t rise for 10 years, it will be a great time to buy! Still way too much hope and speculation in the market to speak of a “bottom”, and fundamental metrics remain terrible, albeit slightly better than in 2005-07.
Anon, please “lock in” that loss to date by buying a foreclosure or short sale. We need people like you to absorb the losses from further declines so that the banks (i.e. taxpayers) don’t have to do so. Oh, and make a big down payment.
anon,
It’s normal for house prices to be inversely related to mortgage interest rates. But, I think today’s prices are super-sensitive to interest rates thanks to all the wacky adjustable rate loans. Every percentage point increase results in more people unable to pay their new payment due to reduced wages or partial employment in these hard times, which results in more foreclosures, which results in more fear and panic in the market. So, yes, I do think it’s possible for that $700K house to go to $500K.
In many markets, the MONTHLY mortgage PAYMENTS might have hit bottom and are due to begin increasing soon, but housing PRICES in expensive markets have yet to do so. Even if prices hit bottom now, which is a decent possibility, they will be there for a long long time. Here’s why.
1) Inflation will hurt housing prices not help it
2) The government has yet to stop the emergency actions and regulate wall st
3) supply vs demand has not hit a free market equilibrium
4) the government still has yet to face the music for its huge deficits
5) Employment is far from healthy
6) Interest rates have yet to revert to sustainable levels
7) The financial sector has yet to realize all of its losses
All of these strongly suggest that there is a sustained difficult road for many many years to come. These will keep housing at the bottom for some time.
You guys are just scapegoating Cramer. Watch this video from 9/07 in which he says that you should NOT be buying a house:
http://www.cnbc.com/id/15840232?video=533257614&play=1
Let’s be objective with this guy. He makes bad calls, and he makes some good calls. His bank account suggests that he makes good calls more frequently than bad calls… though I think his personality is the reason he got a gig on TV.
There are markets that have absolutely bottomed from a national standpoint.
There are segments of San Francisco that are at bottom (sub-million homes in established parts of the city).
There are segments of San Francisco that are still in trouble (Soma and other high-inventory areas, as well as $2mil+ homes).
We all know these things.
“bearish-ness persists on this blog. i totally bought into the bearishness for a long time, but at this point, i don’t know if we can say whether it will go down further or bottom out… but there is a good probability that it is bottoming out. further, at some point, unless you have all cash, even if the market is going down further, the rising interest rates should scare you… and make your purchasing power less. i’m tempted to buy now and lock in a good rate, hoping for bottom, rather than, in a worse situation, try to buy something in the upswing, with high interest rates. again, though, who knows.”
You make a good point, but generally speaking, the economy stinks, bad!
If people can only afford 3500/month in mortgage, then houses have to come in line with incomes. Ponzi schemes and a fanstastic economy aren’t going to save the day like they did in 2005. Houses will hover around 800k for 3500/month at 4.5%, but when interest spikes to 7%, houses WILL come down to 620k to match the increased borrowing costs.
You have two choices
1) expensive house cheap credit
2) cheap house expensive credit
There is no longer the threat of
3) expensive house expensive credit
Expensive credit will crush housing in this sustained lackluster economy.
I welcome expensive credit and cheaper prices.
You are right though. Things have bottomed, but they will be at the bottom for a LOOOOONG time.
“let’s just say, how are you sure the house will be $500K at higher rates? seems a little aggressive. ”
Anon, historically speaking, houses have not reacted proportionally to interest rates, however ever since 2001, they have.
Exotic lending, poor mid-term economic outlook, out of whack balance sheets, imbalanced housing supply vs demand, ultra high housing costs + more stringent qualification has effectively coupled housing prices and interest rates.
Housing was doomed at 6.5% in oct 2008 and didn’t show signs of a recovery until rates hit 4.5%. In 2007 the housing ponzi scheme was going full steam until the Fed changed the rates and sellers and buyers were at a odds.
The housing industry has been transformed since 2001 and it will remain transformed for a long long time. One of the transformations was that housing prices are pegged to interest rates like never before.
Why else do you think the fed promised 1.3 TRILLION JUST to push down mortgage rates? Why else do you think everyone is freaked out about higher interest rates? Its because interest rates and prices are tightly coupled.
If interest rates go up, and prices stay fixed, there will be another stalemate and another ripple effect throughout the economy. Maybe you think people struggling to buy 700k homes at 5% interest will magically be able to buy 750k homes at 7.5% in 2011? I guess you think the economy will not only rebound, but skyrocket next year.
@Anon at 1:17 PM
“Locking in” low rates at a higher housing price only pays off if you’re confident that you won’t move for 20 or 30 years. Otherwise, you’re much better off paying higher rates at a lower housing price. The key is that the benefit of the low rate accumulates over the entire life of the loan, and you can’t “take the loan with you” if you move. Unless you live in that home for the full 30 years, you only get a fraction of the benefit.
In fact, as tipster points out, buying in the low rate/high price environment exposes you to the risk of capital losses if you choose to move in the next 5 to 10 years.
Didn’t Cramer mention in late ’07 that he had sold his house, but in late ’08 he had bought a new one?
In both the stock and real estate markets people so badly want things to turn that they’re deceiving themselves. I wish you’d post a link to the 60 Minutes story on the next wave of defaults coming. Its sobering, and its still on the way.
I watched Crammer a little bit but was rather disappointed with his advice few weeks ago regarding financial sector. Had stop watching him since.
Prices in SF have not come down that much. I wish Case Schiller would only include District 1-9 to show the real price action of SF. A true indication of SF real estate price correction to me would be condos in SOMA selling for $350-$400/ square feet max. Houses in Noe Valley selling generally for $800k-$1M max. Until then, I say SF real estate’s bubble has not burst.
Crammer may have it right for places like Fremont, but the bubbles in SF or LA (with exception of downtown lofts, places like Silverlake has yet to come down to a realistic prices) have yet to burst.
Even if the prices have bottomed, there is no need to rush to buy a house because real estate prices do not shot right back up like stocks. It’ll flat line for a few years before it goes back up again so people have plenty of time to buy if they want to buy. Frankly unless you can find a place in SF that the mortgage+insurance+taxes = say your current rent + 10% or maybe 20%, I don’t see why you want to buy. You are better off taking the difference and by stocks now. The trick with buying stocks is buy it when the market crashes. If you bought during the dot come boom, and never sell out, you lost money. But if you bought right after the bust, you probably still made some money even after the big crash we had. Same with housing. The difference between people who made money from real estate and people who loss money is “WHEN” they made the purchase.
When there is a consensus here or anywhere that prices have bottomed, it will be well after they’ve bottomed and buyers will have to fight the multiple offer wars. Cramer’s prediction of a bottom in June was made 6 months ago and he will be close if not spot on. What is holding things back somewhat in the Bay Area is simply the difficulty of getting jumbo mortgages.
Also let me say that Cramer’s much-maligned stock picks are as good as anyone’s. Beating the averages by a few percentage points is considered good in investing and Cramer often does. His famous rant last summer at the Fed turned out to be right on too. As was his “get out now” call at Dow 11,000 and his “get back in” call in early March. Of course his each and every pick is not correct–no one’s is.
As a San Francisco homeowner for nearly 30 years and an investor for 40 years, I think most outspoken Cramer critics are just inexperienced whiners. There are legions of people who do just what Cramer does, some doing it better and many doing it worse. There’s no reason to pick on him.
I don’t agree. Because our government have the habit of messing with things thus make the housing bottom a very difficult thing to predict. If our government leaves everything alone, then I would say the bottom should be around 2012. But since our government likes to meddle with things, I say maybe closer to 2010/11.
Buyers will not be fighting multiple offer wars for awhile. This whole housing crash has changed the way people see houses. It’s no longer a home but an investment. Multiple offers will only happen to places that are truly under-priced on purpose.
Of course not all of Crammer’s picks are going to be spot on. Otherwise all his readers will be filthy rich and the whole America will be tuning in on CNBC daily pronto when he comes on (and quit their day job). As you indicated that he’s a good trend reader. That’s the most important thing. A person doesn’t have to be a good stock picker because that’s difficult. But if a person can read trend, then just buy the market leader in whatever the sector that one wants to invest in and he/she should make pretty good money.
My gripe about him is that he cannot read short term trends (and he likes to make misleading comments about them). Fast Money and Options Action is probably a much better short term gauge show than Mad Money. Since we are in a trader market right now, FM and OA is a better show to watch for now than MM.
Cramer said to buy Bear Stearns stock. His subsequent claims, that he meant money in Bear Stearns accounts was safe, are lies. Don’t let him get away with that.
Cramer reminds us that no-one can predict the future. But for housing, remember that we are measuring in dollars, and you can predict that paper currencies will lose value, because they always have. There are no exceptions. Obama is running those printing presses like Robert Mugabe.
Oh sure.. we are at the bottom!!! We are ONLY losing 500k jobs a month… and two of our largest automakers just went BK… the State of California is going broke… the City of SF is cutting workers and budget … a bottom? What a JOKE!
I agree with the earlier post on here that the people in the stock market and real estate markets WANT things to bottom so bad they are deceiving themselves.
By the way, commercial real estate has just started it’s freefall… another massive wave of Alt-A and Option ARMs foreclosures are about to hit … and we are at a BOTTOM??
What the hell are these idiots smoking???
We have just lived through the biggest debt bubble in history … and now it is going to take a LONG time to deflate … just like Japan’s “lost decade”! We have at least another 2 or 3 years of real depreciation in real estate prices here in SF.
Don’t listen to the RE brokers BS about “a good time to buy”. If you wait a few more years and still have a job… you can buy one of these SOMA condos for CASH!
Jim Makes some really great calls:
BUY, BUY, BUY @DOW 14K.
“accept that things are over valued, but they’re going to keep going up”
Is that Cramer, or a real estate agent?
http://www.youtube.com/watch?v=vtrke0NfbcQ
Mavo,
When did the deflation process begin, in your estimation? You say two or three more years. When did it start?
have posted it here before, but for whatever its worth – ceos that we’re meeting with are planning for a 3-5 years of slog. (meaning zero to very limited growth)
then the HOPE is that will return to a more muted version of the growth that was experienced before.
I agree with the major bears on here. There is a fundamental shift in consumer behavior required to unwind this leverage. 60% of US consumer debt held by top 10% of households, who now have some very difficult lifestyle change decisions to make.
Those consumers leverage drove the prices up for the entire market. Their unwind has a long way to go to drive them down. Many others have said it – but these are the PRIME borrowers, not the subprime.
hold onto your butts.
Dating from when? There’s a recurring theme on here. “Just wait.” “The upcoming three years …” “instert future period here.”
We’re in it, folks. We’ve been in it. I read somewhere this morning that some are attributing the recession’s beginning back to December 2007. Another three years, from then?
Dating from now. Corporate strategic planning is being done for no significant growth through 2011, and then minor growth for the medium term.
like mud better.
Why not dating from the last time you made that same post, several months ago? 😉
You’re speaking about local business outlooks, and I respect that. I’m more getting at what’s always the same refrain on here. “Wait till the San Francisco market shifts.”
Um. Hello?
made the original 3-5 year statement a couple of months. planning cycles are still ongoing. 3-5 yrs still relevant.
and for what its worth, these are not just local businesses. national employers, some of whom are based here – all of whom have employees here. 10,000s to 100,000s of employees globally.
Anyway – beating a dead horse, but consumer credit hasn’t significantly unwound yet (see above about top 10% of households holding majority of debt). When it does (and it has to) – it represents a ‘new normal’. Big article in WSJ 2 days ago about auto industry wondering if they’ll see 17MM new units again. Same applies to most retail (grocery usually excluded). To consumer electronics. to content and subscription services.
and, yes, even to housing.
“Oh sure.. we are at the bottom!!! We are ONLY losing 500k jobs a month… and two of our largest automakers just went BK… the State of California is going broke… the City of SF is cutting workers and budget … a bottom? What a JOKE!”
We are near the bottom, but the bottom is not a very great place to be! We are just now beginning to survey the damage and it’s not pretty. We won’t be off of the bottom for years. There are too many fundamental weaknesses in the economy for things to turn around 2-3 years from now. When borrowing costs and taxes go up, and the endless supply of shadow inventory gets released over time, there will be constant downward pressure counteracting sustained growth in housing prices.
Mud’s got it right.
Six or so months ago, many in strategic planning in corporate America were belatedly trying to figure out if this was “an 8 month thing, or a 3 year thing.”
If you think it’s closer to the former timeframe, you may not have been paying attention.
No significant growth through 2011 seems a reasonable expectation.
Shadow inventory is a tough thing to parse. It is made up of those who would or will perhaps sell. One has to consider that some of those who put properties on the market, to no avail, and saw them withdrawn, will not put their propertes back on the market any time soon. People are people. Trying to sell real estate endlessly can be incredibly annoying. But “endless,” in San Francisco, it’s not.
I don’t know if Jimmy C is correct or not at this time. but I used to watch his show religiously (I thought it was funny) for the first 1.5 years or so.
He has good analysis and makes some good bets. but also some horrendous bets. His biggest weakness IMO is that he is definitely part of “the establishment”.
for years he has cheered “rightsizing” when it’s the little guys. But when his beloved financial sector is about to get hit then he starts screaming “they know NOTHING. NOTHING.”.
there was a website for a while that charted all of his recommendations. it didn’t look pretty for him. I didn’t follow the website closely enough to check the veracity of their data. But many people have made big bucks doing the opposite of what he has done.
this financial crisis has really crippled him. He did well during boom times, but he has made several major gaffes in predictions, especially related to financial stocks. If you had followed his recommendations since bear stearns collapsed you would have lost substantially IMO.
Lastly please remember: he is a TRADER not an investor. So he may say “jump in to housing!” today, but then “sell sell sell!” in 1 month.
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as for whether or not we’re at the bottom yet? too hard to know, but it really doesn’t matter anyway.
the RE market is dominated by government. Thus completely hostage to political decisions. If the govt were to reverse recent FHA/Fannie/Freddie actions all of the RE markets would all tank in one second. If they are able to expand the products (given the squawking from the foreign creditors, unlikely), then RE could do well.
what is sure:
there is no reason that someone needs to “lock in” anything at this point. simply watch and wait for RE to appreciate on a yoy basis for 12 consecutive months. once it does that the risk of RE collapse is lower than it is now.
currently, any buyers take a huge risk of future home price depreciation. there is little to no financial analytical reason why RE will make substantial gains in the next year, and renting is cheaper than owning in most areas, so why rush?
if interest rates go up, housing prices will fall so that the monthly payment is comparable. no biggie.
and it is almost always better to buy in a high interest rate low cost environment than a low interest rate high cost environment.
you can always refinance a high interest rate. You can almost never refinance a high mortgage balance.
Mortgage interest is deductible. principal payments are not.
no hurry.
as for timing anonn: many of us have been quite clear that we foresee negative housing pressure ahead for years. in my case, Dec 2011. I’ve been consistent on that for well over 2 years now. so only 2.5 years to go.
“Shadow inventory is a tough thing to parse. It is made up of those who would or will perhaps sell. One has to consider that some of those who put properties on the market, to no avail, and saw them withdrawn, will not put their propertes back on the market any time soon. People are people. Trying to sell real estate endlessly can be incredibly annoying. But “endless,” in San Francisco, it’s not.”
Not endless, but there is excess supply compared to demand over the MIDTERM in SF given the current housing prices and economic situation. Shadow inventory is hard to quantify, but qualitatively, over the next several years, there will be upward pressures on supply. Sure, thousands of shadow properties won’t be unleashed all at once in the next year creating 30% price drops, but, two hundred here and two hundred there will pop up over several years and put pressure on prices to stay put or drop modestly.
In 2005, there was tons of demand for 1 million dollar houses, and that demand outstripped supply in SF. In 2009, and even in till 2013, I don’t see demand for 1 million dollar houses being higher than the supply. Even in SF. Thus as credit becomes more expensive, and the economy doesn’t come roaring back, the price point will have to shift to put supply and demand back into balance.
Is there infinite supply? Of course not. I am not saying there will be a catastrophic drop in the next year. I am saying that there a more forces keeping houses on the bottom over the midterm than pushing it up, so I expect the bottom to stay for a long long time until we fix a lot of macro and micro economic issues.
Other ideas about shadow inventory:
– Everyone will agree that the worst situation in a bear market is when someone HAS TO sell. These have always been there and always will be. As most people restrain from selling if they don’t have to, some of the sales will come from people selling at any price.
– Prop 13 helped make sure boomers clinged to their undertaxed property as long as they could. Come sale time, they will be making a huge profit whatever the sale price. Of course a seller always wants the best possible price, but between the family with a 1.5M mortgage trying to sell when prices are at 1.3M, and the old-timer who bought at 80K in 1970, who do you think will accept the 1.3M more easily? Boomers are retiring en masse in the next decade. I know a few that plan to hand over their houses to their kids, but some sales are going to happen.
“Dating from when? There’s a recurring theme on here. “Just wait.” “The upcoming three years …” “instert future period here.”
We’re in it, folks. We’ve been in it. I read somewhere this morning that some are attributing the recession’s beginning back to December 2007. Another three years, from then?”
I assume this is “Fluj” or whatever you used to go by right? Interesting to see you saying we are in it after reading countless posts from you over the last few years telling everyone how it wasn’t/wouldn’t happen here.
I assume this is “Fluj” or whatever you used to go by right? Interesting to see you saying we are in it after reading countless posts from you over the last few years telling everyone how it wasn’t/wouldn’t happen here.
I repeatedly said that a correction was likely to occur at some point. Don’t forget the context. I was arguing with people whose standpoint was that the sea change had already happened. It was a whole lot of derisive swipes at micro markets, way ahead of schedule. They were arguing individual properties, trying to apply MSA median hits and the like to houses in Noe Valley or elsewhere. I wasn’t having it. But yeah, I did also say “nope. not happening” from time to time.
Well, now, clearly September 2008 happened. About a year or two later than a lot of these guys argued. But even now it isn’t good enough. Now it’s like, “It still hasn’t happened yet.”
I don’t argue from future times. I argue from now. You know? Calamity for SF would not see 2.4M Potrero Hill SFRs, or a 2.85M green build in the flats of Noe, or a Glen Park house well under 3000 feet going pending inside of two weeks. Those type of pricepoints would be north of California only. So, all “gotcha” moments aside, let’s look at what’s actually being said at the time it is said.
“I don’t argue from future times.”
– Posted by: anonn/fluj at June 4, 2009 3:08 PM
“San Francisco never really took a price hit and it won’t, either.”
– Posted by: fluj/anonn at June 23, 2008 9:57 AM
You’re sounding a lot like Jim ‘I didn’t say to buy Bear Stearns right before it collapsed even though you have it on tape’ Cramer fluj.
You could also do a search and find fluj saying a correction is likely but that it hadn’t happened yet if you wanted to. Again, the context was arguing with people who were dead wrong at the time. So go ahead and bold old quotes out of context till the cows come home. It’s all good.
Hi Anonn,
I would say that once Iranian businessmen start fleeing the country and allowing their 7 figure gold coast mansions to fall into foreclosure that the correction has started in the real SF.
What a long strange trip it’s been.
The Lazy Iranian Businessman Indicator (TM), eh diemos? I’m with it. Let’s see if it catches on.