Real Estate News Summary, Part 5
Gordon Hamachi
Bad News for Real Estate Owners, Part 4:
39. The US economy is in recession and the risks are high that it could be
the most severe downturn since World War II, two leading experts told
Congress's Joint Economic Committee. Even if the recession causes only
moderate damage, the economy will remain unusually weak for years, they
said. "The prospect is that the 1990s will be the slowest growth decade
since the 1930s," said Donald H. Straszheim, chief economist for Merrill
Lynch. [San Jose Mercury News]
40. Japanese real estate investment in this country is slowing as U.S.
property markets sour and changes in the Japanese economy put new
pressures on the investors. Key are the rise in Japanese interest rates,
the Tokyo stock market's 37% fall since January, and the softening of
stratospheric land prices in Japan itself. [Washington Post]
41. In some areas where housing prices have fallen sharply, bankruptcy judges
are cutting debtors' mortgage obligations down to the actual market value
of the house. In some places such as Denver, where housing prices have
plummetted as much as 40%, these so-called cramdowns have substantially
reduced the amount the debtor owed. So far, cramdowns aren't that
prevalent in California, but the trend is changing. [SF Chronicle]
42. The median single family house sold in the Bay Area in Q3 dropped 3.1%
to $261,610 from the year-earlier price of $269,970, the California
Association of Realtors reported. The number of sales fell 21.5% from
Q3 1989. [SF Chronicle]
43. Sales of existing homes from July to September nationwide slipped 2.5%
from their level a year earlier and will remain slow in the first half of
1991 because of the weakening economy, a real estate trade group said.
California's home sales dropoff was one of the sharpest in the nation,
18.9%. [SJ Mercury News]
44. Residential rents rose 4.2% in the first half; but after inflation, "real"
rents slid 0.6%, the National Apartment Association says. A weak economy
plus an apartment glut in some areas prompt incentives like a free month's
rent or rebates in parts of Los Angeles and Chicago. Some landlords
actually trim rents for existing tenants. [Wall Street Journal]
45. The California housing market, which accounts for roughly 15% of new and
existing home sales nationwide, is in a deep swoon. If the decline keeps
up, it could be a harbinger of a widespread and severe national recession.
Latest figures from the California Association of Realtors show that sales
of existing single-family homes plummetted 27% in September. "It is a
bust," says Timothy R. Eller, president and chief operating officer of
Centex Real Estate Corp. that builds in California. "I think the shakeout
is just starting." [Wall Street Journal]
46. An investor in Maine bought a townhouse at auction for $116,000. That was
1/3 of the listed $350,000 price at the peak of the boom in house prices
in the mid-1980's. [New York Times]
47. In Southern Santa Clara County, 85 home sellers are offering cars to
anyone who signs a contract this weekend. But the buyer has to agree to
the seller's asking price. Even some of the real estate developers and
brokers who are sponsoring the event admit they don't expect to sell many
homes this weekend. There are more than 700 homes for sale with the
San Jose Real Estate Board in the area from Morgan Hill to Gilroy; in
October, there were 68 sales. [San Jose Mercury News].
48. Lower interst rates and a slump in prices combined to make Bay Area
housing slightly more affordable in Q3 1990. [SF Chronicle].
---------------------------------------------------------------------
The headline was "COUNTY HOME PRICES PLUNGE" the day they so cleverly :-)
challenged me to put my money where my mouth is.
Scott TCB Turner
happened to the loyal opposition? I was hoping to see another posting
or three claiming that all of the sources quoted in Gordon's 50+
articles are ignorant of the real situation.
-- Scott Turner
Les Earnest
Looks like Gordon is trying to rationalize his decision not to invest
in real estate. Those who are buying now will be smiling quietly a
year from now, while Gordon continues to pay rent.
--
Les Earnest Phone: 415 941-3984
Internet: L...@Go4.Stanford.edu USMail: 12769 Dianne Dr.
UUCP: . . . decwrl!Go4.Stanford.edu!Les Los Altos Hills, CA 94022
Eduardo Krell
>Looks like Gordon is winning this argument pretty convincingly.
I don't understand what this argument is all about. Yes, real estate
prices have come down in some parts of the country, and yes, they're
going up in other parts. So what? That doesn't seem to prove anything.
Eduardo Krell AT&T Bell Laboratories, Murray Hill, NJ
UUCP: {att,decvax,ucbvax}!ulysses!ekrell Internet: ekr...@ulysses.att.com
Bill Reid
> Looks like Gordon is winning this argument pretty convincingly. What
> happened to the loyal opposition?
of the woman who got arrested recently here in Santa Clara county for
buying 18 houses on false credit information. I just saw something about it
on TV...woman was a poor immigrant, had no job, no net worth, no income,
but bought 18 houses in the area, including an 800K job she was living in
herself, all on falsified credit information. Sounds like she attended a
few too many Tom Vu seminars. Please post the details, Gordon!
Dan Hepner
>Looks like Gordon is winning this argument pretty convincingly. What
>happened to the loyal opposition? I was hoping to see another posting
>or three claiming that all of the sources quoted in Gordon's 50+
>articles are ignorant of the real situation.
> -- Scott Turner
There isn't any way to win an argument such as has been going on
except for waiting for time to show the winner. Even thousands
of "experts" joining in making a prediction does not a priori make
that prediction the winner.
Further, it hasn't been clear just what the argument is. Gordon's
point, that Silicon Valley RE (and CA in general) has been a poor investment
over the past year, is undisputed. Gordon's detractors' point, that Silicon
Valley RE has been a wonderful investment over the past five years, is
similarly undisputed. Gordon's predictions for the future seem to be
limited to "_now_ is a bad time to buy RE". Should SV RE be in the doldrums
for the next two years, followed by a 100% gain in the following two years, no
doubt Gordon, along with all his detractors, will claim absolute
vindication. 1991 will have been simultaneously an excellent time to
buy and a dismal time to buy.
_My_ prediction: in 15 years, Silicon Valley single family home prices
will be similarly related to today's prices as today's prices are related
to those of 15 years ago. Next year? Any particular year? Who knows.
Dan Hepner
Scott TCB Turner
>Looks like Gordon is trying to rationalize his decision not to invest
>in real estate. Those who are buying now will be smiling quietly a
>year from now, while Gordon continues to pay rent.
How about the ones who were buying when this argument started? If you
bought in the West L.A. market at the time this discussion started,
you would already have lost more money than Gordon will pay in rent
for the next year.
Several months ago, Gordon considered buying a house. He decided not
to because he thought the market was on the way down. He was right.
Those of you who claimed otherwise were wrong. Period.
Now, whether the market has reached bottom is another (interesting)
question.
-- Scott Turner
phd...@gsbacd.uchicago.edu
(Dan Hepner) writes...
>_My_ prediction: in 15 years, Silicon Valley single family home prices
>will be similarly related to today's prices as today's prices are related
>to those of 15 years ago. Next year? Any particular year? Who knows.
>Dan Hepner
My understand of SV housing is that is has risen dramatically over the
last 15 years. From what I gather, the cost of housing has risen
far beyond the ability of "regular middle class folks" to afford it,
locking out a significant portion of possible purchasers. Fortunately,
there seem to be enough young lawyers, MBAs, and mid-level electrical
engineers to support the price.
My question: If it shoots similarly in the next fifteen years, where
will you find enough vice-presidents, directors of research, and general
partners to buy up the property that comes on the market?
Keith
mca...@cdp.uucp
Speaking about future values in SV real estate, Keith sez:
[stuff deleted]
|engineers to support the price.
|My question: If it shoots similarly in the next fifteen years, where
|will you find enough vice-presidents, directors of research, and general
|partners to buy up the property that comes on the market?
My answer: You are overlooking wage inflation which presumably will
keep pace with RE price inflation over the next 15 years as it did,
more or less, in the past. By the same token, rents should increase
in the same measure. Nothing is certain, of course. Another Great
Depression might see prices in 15 years below what they are now. IMHO,
it's more likely, if present-day political structures remain, that we'll
still be teetering on the brink of a vastly greater budget deficit, with
politicians still proclaiming prosperity.
|mcaldon, Econet -- one of them there environmental extremists!|
Bill Reid
> In article <103...@hpcuhc.cup.hp.com>, dhe...@hpcuhc.cup.hp.com
> (Dan Hepner) writes...
> >_My_ prediction: in 15 years, Silicon Valley single family home prices
> >will be similarly related to today's prices as today's prices are related
> >to those of 15 years ago. Next year? Any particular year? Who knows.
> will you find enough vice-presidents, directors of research, and general
> partners to buy up the property that comes on the market?
major urban area in America since the industrial revolution. You can still
buy a 4br house in NY city for 45K. Where? In the South Bronx. Silly valley
RE is already showing that kind of Balkanization, with prices on the East
side 30% lower than the West side of San Jose. You know that burned out
building in the South Bronx? The people who built it and invested in it did
so with the idea that prices would continue to go up indefinitely for all
RE in the NY city area...after all, it is the center of commerce for
America. Nobody ever plans to build or invest in a slum, but unfortunately
there is a finite market for high-end housing. If there is another
demographic shift in Silly valley due to Pac Rim economics in the next
15 years, expect large areas of slums to develop, and large amounts of
money to be lost by "investors" in the areas which don't share the wealth.
Michael Zimmers
>Looks like Gordon is winning this argument pretty convincingly. What
>happened to the loyal opposition?
Well, some of the opposition grew tired of trying to conduct a
constructive conversation with someone who: refused to take a stand,
claimed "I didn't say that" when others attempted to summarize his
position, refused to answer why he wouldn't back up his words with
action, refused to suggest better investment alternatives for the '90s,
and did his best to sensationalize news items that he construed to
support his position.
In general, despite his mountain of accumulated "evidence", Gordon was
and is detracting from the effort to clarify the current situation, and
has sucked up tremendous bandwidth with his ever-so-valuable statistics.
Other posters, like me, have stated their positions to the point of
tedium, and have decided, for the time, to let Gordon get his rocks
off by having the last word.
-------------
BTW, for those of you who are fond of such data: recently the Japan
Real Estate Appraisement Association (JREAA) surveyed average prices
of one square meter (the size unit they used should be a tipoff as to
how much they value the stuff) of land in major cities. Figures are
in January, 1988 US dollars.
Tokyo 8059
Paris 3650
Taipei 1954
Osaka 1694
Seoul 454
* London 268
Frankfort 242
Honolulu 205
Vancouver 204
Sydney 155
San Francisco 146
* Los Angeles 81
The asterisks are mine and intended as evidence against any arguments
that RP prices only reflect future expectations of economic growth for
an area.
In short, the argument that prices can't go any higher because people
can't afford the stuff is full of holes. To the global buyer, our
prices are anything but expensive.--
Michael Zimmers | please note:
| my email name is mikez not mike.
phd...@gsbacd.uchicago.edu
prices would continue to appreciate for the next fifteen years
at a rate similar to that of the previous 15, to which I queried...
>|My question: If it shoots similarly in the next fifteen years, where
>|will you find enough vice-presidents, directors of research, and general
>|partners to buy up the property that comes on the market?
mca...@cdp.UUCP then responds
>My answer: You are overlooking wage inflation which presumably will
>keep pace with RE price inflation over the next 15 years as it did,
>more or less, in the past.
Overlooking wage inflation? No. I simply do not share your view
that wages kept up with real estate inflation in SV from '75-90. I have
read the the Bay area in general has the highest "median house price/
median income" ratio in the country, approximately 5 or 6 (compared with
approximately 2 to 3 in cities such as Denver or Houston). I do not
believe that the ratio was 6 in 1975.
Will prices rise with wages over the next decade? Almost certainly,
though perhaps after a couple of years of stagnation. But
housing costs in SV have increased far more rapidly than wages, and
I do not believe that they can continue to do for the next 15 years.
Keith
Inna Lauris
My opinion on the real estate prices is that they are going to come back.
Now is a good time to buy. While it is possible that the prices may come
down in the next couple of months , on the long run they will come back.
I remember how my parents were buying their house in 1981, right at the
time when the real estate market was dead. After booming in 1979 - mid 1980,
the market started to slow down. The interest rates were 18% (!!!), my parents
got a mortgage at 15 % , and that was considered a good deal at the time.
Actually, we bought a house 2 years after we came to USA as refugees.
I think we got approved, because the market was slow and the builder was
desperate to sell. Anyway, the house tripled in value since then, my
parents are paying $800 for it, just about the same price that a decent
2 bedroom apartment is renting for nowdays.
I think one of the posters was right when s/he said that the time will show
who is right. The land supply is not unlimited, therefore real estate will
never lose its value unless we'll start colonilizing other planets :)
Also besides financial considerations, there are some sentimental ones.
When you own home, it is yours. You can re-decorate/remodel/rebuild it.
When you rent it is a different story.
Inna
Guido Marx
I think that we're still here. What I believe, is that there is no
fundamental disagreement about the data. The disagreement is over how
to interpret it. Gordon seems to think that R.E. is headed for a
crash. People like myself think that we are looking at a correction in
prices that reflects three years of huge increases, and an economy that
is entering a recession. I can envision a scenario in which R.E. prices
plunge, but it would require a depression. At any rate, I feel the
LIKELY scenario is that we will continue to see a decline in R.E. prices
for the forseeable future (ie: next six months). I still think that in
the long run, California R.E. is one of the best investments that you
can make. Clearly, others in this group disagree, that is what makes
life interesting.
Guido
mca...@cdp.uucp
mikez sez:
|BTW, for those of you who are fond of such data: recently the Japan
|Real Estate Appraisement Association (JREAA) surveyed average prices
|of one square meter (the size unit they used should be a tipoff as to
|how much they value the stuff) of land in major cities. Figures are
|in January, 1988 US dollars.
|Tokyo 8059
| [other cities deleted]
|* Los Angeles 81
If my figures are correct, which would be unusual, this works out to
about $322,000/acre in LA. I'm no appraiser but this is below 1/10th
the price of good commercial land here, I think. |mcaldon, Eco
Gordon Hamachi
>Well, some of the opposition grew tired of trying to conduct a
>constructive conversation with someone who: refused to take a stand,
>claimed "I didn't say that" when others attempted to summarize his
>position, refused to answer why he wouldn't back up his words with
>action, refused to suggest better investment alternatives for the '90s,
>and did his best to sensationalize news items that he construed to
>support his position.
>
>In general, despite his mountain of accumulated "evidence", Gordon was
>and is detracting from the effort to clarify the current situation, and
>has sucked up tremendous bandwidth with his ever-so-valuable statistics.
I fail to understand your argument. Do you deny that virtually all of the
printed news about real estate is very bad? If so, where's your mountain
of evidence saying that the real estate market is booming? If you agree
that the real estate news is bad, how does my posting a news summary
sensationalize the news?
I've been showing you my evidence. In your own terms, Mr. Zimmers, I'd say
it is time for you to "put up or shut up." A more polite person might ask
you to please explain your vicious personal attack. How do my real estate
news summaries detract from the effort to clarify the current situation in
the residential real estate market?
My sources for real estate news summaries are the newspapers and major
business publications. In addition, I talk to realtors, listen to the radio,
and watch the local TV news. From these sources, there is total agreement
that the local real estate market is bad. Here's a partial list of these
sources:
Wall Street Journal
Investor's Daily
Forbes
Fortune
Business Week
Baron's
New York Times
San Francisco Examiner
San Jose Mercury News
San Francisco Chronicle
Peninsula Times Tribune
Los Angeles Times
Los Altos Town Crier
To attack the credibility of my news summaries, you have to attack the
credibility of the sources. They can't all be lying, can they?
---------------------------------------------------------------------
The headline was "COUNTY HOME PRICES PLUNGE" they day Michael Zimmers
Eduardo Krell
>Do you deny that virtually all of the
>printed news about real estate is very bad?
This might be true where you live, but there are areas of the USA
where the real estate market is not soft at all. There was a report
on one of the business TV programs I watch (could have been The Wall
Street Journal Report) which analyzed the real estate market in several
regions (northeast, west coast, midwest, south, etc.). and the conclusion
was that some areas were in trouble while others were not, and they
showed figures to prove it...
Michael Zimmers
> >Well, some of the opposition grew tired of trying to conduct a
> >constructive conversation with someone who: refused to take a stand,
> >claimed "I didn't say that" when others attempted to summarize his
> >position, refused to answer why he wouldn't back up his words with
> >action, refused to suggest better investment alternatives for the '90s,
> >and did his best to sensationalize news items that he construed to
> >support his position.
> >
> >In general, despite his mountain of accumulated "evidence", Gordon was
> >and is detracting from the effort to clarify the current situation, and
> >has sucked up tremendous bandwidth with his ever-so-valuable statistics.
>
>I fail to understand your argument. Do you deny that virtually all of the
>printed news about real estate is very bad?
Funny question coming from a guy who recently pointed out that it's
impossible to apply good/bad descriptors without a common perspective.
>I've been showing you my evidence.
Ah yes, your scientific analysis of the news clippings that frequently
relate third hand hearsay. I was especially fond of your extrapolation
from an advertisement that boasted a large price cut (from a developer no
less) to support your own claims of overall price erosion. Gee, just
yesterday, I saw a "50% off" sign in a Macy's ad -- I guess the retail
business output for the country has been cut in half! Nasty business,
that recession.
>In your own terms, Mr. Zimmers, I'd say
>it is time for you to "put up or shut up." A more polite person might ask
>you to please explain your vicious personal attack.
My statements were neither personal attacks nor vicious; they were
manifestations of frustration from trying to engage in an analytical
discussion with a trivia freak. And if you've got a dispute with anything
I've specifically said, let's hear it; otherwise I will stand by its
veracity.
>How do my real estate
>news summaries detract from the effort to clarify the current situation in
>the residential real estate market?
To begin with, your "summaries" are actually unrepresentative selections
of quotes and events that support your view. Perhaps you are so
pathologically biased that you can't understand this, but I imagine that
you've probably come across at least some weakly bullish news on the
subject in the past six months. (I do remember a SJMN column in which
local realtors were all forecasting RP prices in the '90s and the
predictions were *all* over the map.) Strangely, however, your summaries
fail to reflect same. But, hey, we've all got our personal axes to grind,
so I won't beat that to death.
The real problem with your data is that it is just that: data. You've
done a marvelous job scooping up all kinds of items, with a complete
range of credibility, that you feel somehow backs up your prediction of
a pending RP market crash. What you haven't done at all is to try to
analyze said data to turn it into meaningful information. To make matters
worse, when other people (like me) attempt to do so, you typically ignore
such attempts and continue to spew the latest quotations you've picked up.
This IMHO is much poorer netiquette than any of my "vicious attacks".
>My sources for real estate news summaries are the newspapers and major
>business publications. In addition, I talk to realtors, listen to the radio,
>and watch the local TV news. From these sources, there is total agreement
>that the local real estate market is bad.
Then you've been pretty selective about with whom you communicate.
Neither in the press or within the industry has there been "total agreement"
about the market being "bad" (by which I assume you mean bearish; please
correct as appropriate).
You also read this newsgroup -- has there been total agreement that the
local market is bad here? (Hint: this is a rhetorical question.)
>To attack the credibility of my news summaries, you have to attack the
>credibility of the sources.
No I don't; you've attacked some of them yourself. Or are only the
optimistic realtors the slimeballs, while the gloom-and-doom variety
are quoteworthy for your "summaries"?
>They can't all be lying, can they?
They could be, but they aren't. Neither are you, but by the same
token, your objectivity and credibility leave a lot to be desired.
>The headline was "COUNTY HOME PRICES PLUNGE" they day Michael Zimmers
>so cleverly :-) challenged me to put my money where my mouth is.
This is not only getting tiresome, but is also incorrect. I was not the
one who issued the challenge; I merely suggested that you take it. The
fact that you didn't reinforced my feelings about your hypocricy.
You also come off as pretty smug for someone who, when given an no-load
opportunity to capitalize on the coming crash he predicted, not only
shrank from the challenge, but wouldn't even give a reason why. Were I
interested in making a personal attack, as you seem to think I am, this
would be one heck of a target-rich environment.
Bill Reid
> My sources for real estate news summaries are the newspapers and major
> Investor's Daily
> Los Angeles Times
> Los Altos Town Crier
Apparently so...you have to remember these are not professional real estate
publications. The latest issue of "California Homes" contains an article
titled "The Real Estate Crash Myth", which states unequivocally that real
estate is actually going up in value, and if it isn't, it will do so again,
pretty soon, just give it some time, it always has before, this is just a
normal downward cycle, of no suprise or consequence to the professional
realtor, so don't worry, buy happy. Those other publications just dote on
doom and gloom...most of them are also spreading rumors about the federal
debt, S&L failures, war in the mideast, and recession. Phooey on them!
Bill Reid
> There was a report
> on one of the business TV programs I watch (could have been The Wall
> Street Journal Report) which analyzed the real estate market in several
> regions (northeast, west coast, midwest, south, etc.). and the conclusion
> was that some areas were in trouble while others were not, and they
> showed figures to prove it..
they performed this exercise, and followed a young man in the midwest who
was buying his first home, in an area where real estate prices rose 8-10%
last year. The young man's income was about 25K a year, and he bought a
three bedroom house for himself at the whopping price of 62K. In the Bay
Area or in New Jersey, 62K is about twice what homeowners lost in "equity"
over the last year or so...
George Tucker
>|[Value in Japan of 1 meter^2] of land in major cities. Figures are
>|in January, 1988 US dollars.
>|Tokyo 8059
>| [other cities deleted]
>|* Los Angeles 81
>If my figures are correct, which would be unusual, this works out to
>about $322,000/acre in LA. I'm no appraiser but this is below 1/10th
>the price of good commercial land here, I think. |mcaldon
real numbers. I'm no calculator, but I used to live on a farm and
I know there are more than 40 meter^2 per acre. More like 4840,
which works out to 39 megabux per acre.
Good residential land here fetches 4 megabux per acre, so I
assume good commercial land is around 10 megabux (January, 1990).
Some beachfront residential property might get that much too.
"Average" or "median" land would probably be <2 megabux.
Tokyo land is probably proportionally higher now, especially in
US dollars.
Gordon Hamachi
>I think that we're still here. What I believe, is that there is no
>fundamental disagreement about the data. The disagreement is over how
>to interpret it. Gordon seems to think that R.E. is headed for a
>crash.
I could write a book "How to Lose Friends and Influence People" based on
my experiences discussing real estate. I now prefer to provide data, in
the form of news summaries, and let everyone draw their own conclusions
on the future of real estate.
I summarize and post just about every article I see relevant to real estate.
The news is overwhelmingly negative, but that's all the newspapers and major
major financial publications are writing at the moment.
If you get the impression I think that R.E. is headed for a crash, you should
examine your own deeply-ingrained belief that real estate only goes up. You
aren't reading my opinions; you're reading the real estate news, and the
opinions of the financial experts who write on the subject.
----------------------------------------------------------------------
The headline was "U.N. EXPECTED TO OK FORCE" the day I so cleverly :-)
challenged them to show me their evidence.
George Tucker
>> credibility of the sources. They can't all be lying, can they?
>Apparently so...you have to remember these are not professional real estate
>publications. The latest issue of "California Homes" contains an article
>titled "The Real Estate Crash Myth", which states unequivocally that real
>estate is actually going up in value, and if it isn't, it will do so again,
I have no idea how well real estate will do, but this was too funny to pass.
Can this guy be serious? I mean, when did any "professional" real estate
rag say real estate was a bad investment anywhere? Did "California Homes"
help buyers avoid past downturns? Here is my article on the subject:
The Professional Real Estate Rag Accuracy Myth
I will state unequivocally that real estate publications always state
unequivocally that:
1. Real estate is going up in value,
2. If it isn't, it will do so again Real Soon Now, and/or
3. If it went down, this is The Time to Buy.
Jeff Keasler
>>Looks like Gordon is winning this argument pretty convincingly. What
>>happened to the loyal opposition? I was hoping to see another posting
>>or three claiming that all of the sources quoted in Gordon's 50+
>>articles are ignorant of the real situation.
>>
>> -- Scott Turner
>
>I think that we're still here. What I believe, is that there is no
>fundamental disagreement about the data. The disagreement is over how
>to interpret it. Gordon seems to think that R.E. is headed for a
>crash. People like myself think that we are looking at a correction in
>
Let's look at this as a hypothetical situation.
1) Let's assume that I live in silicon valley. Let us also assume
that alot of the people I know are buying cars and houses on
credit (By cars, I mean BMW or Mercedes which are more
common than fleas on a dog in silicon valley. By houses, I
mean one residential property and one or more investment
properties). Let's assume that the price(s) of the house(s)
is(are) low for silicon valley, say $200,000. Let us also assume
that these people have alot of credit card debt.
2) Let's assume that technology sales start to flatten out, and
perhaps decline. This causes some people to get laid off.
These people start living on their credit cards for a while,
and finally their credit cards run out of money and they
file for bankruptcy. Since filing for bankruptcy is almost
as easy as having a glass of water in this country, let's say
they succeed.
3) The banks take back any property that they can from the people.
The banks must try and sell that property to get the money
back that they have loaned to these people. The car will
be worth less money than the bank loaned out because it is used.
The house will be worth less money because a) we are in a soft
RE market, and b) The market will be flooded with houses that
these banks are trying to get rid of. Let's be optimistic and
say that the bank can sell out hypothetical $200,000 house for
$160,000 given a market with the above conditions. This will
only be a $40,000 dollar loss per house. As far as the
credit cards go... well, those creditors will be SOL.
4) Maybe at this point, banks will start failing....
I could go on, but you get the picture. Personally, I plan to
get out of the country while I'm still allowed to leave, and the
tax rate(35%, considering everything they take out of my paycheck,)
is still at a reasonable level.
- Jeff Keasler
Beware the Ides of March!
Steve Kelley
--titled "The Real Estate Crash Myth", which states unequivocally that real
--estate is actually going up in value, and if it isn't, it will do so again,
-
Now, this is an interesting use of the word 'unequivocally'.
There must be a potential newsletter in here somewhere.
Steve Cynic
Michael Zimmers
>>mcaldon sez: |mikez sez:
>>|[Value in Japan of 1 meter^2] of land in major cities. Figures are
>>|in January, 1988 US dollars.
>>|Tokyo 8059
>>| [other cities deleted]
>>|* Los Angeles 81
>>If my figures are correct, which would be unusual, this works out to
>>about $322,000/acre in LA. I'm no appraiser but this is below 1/10th
>>the price of good commercial land here, I think. |mcaldon
$3.2M/acre sounds like the high rent district, even for LA. I don't have
the specifics on the study, but I'd guess that it would include the crummy
areas as well as the good ones, and not limit itself to strictly
commercial property, which tends to be the most expensive variety.
I normally don't put too much stock in such studies, but the part that I
found really interesting was the inertia in RP prices. Look at a city
like London. If memory serves (ha!), the British economy has been between
mediocre and terrible pretty much since the end of the Empire. LA, on the
other hand, for all of its faults, has been quite prosperous over the same
period. Yet the cost of land in London is much, MUCH higher than in LA, and
I don't think it can be attributed to future expectations (although one
reader did point out to me that London is expected to be the financial hub
of the new European economy).
Yet more evidence that RP cannot be superficially compared with other
investment mediums, as British stocks and bonds took a long, hard beating
in the subject period of time. Those expecting a RP crash in this area
had better find reasons other than the impending "recession" (which hasn
not started yet), because even if anyone thought our local economy was
heading for the same problems that England experienced in the 1970s, it
hasn't clobbered their RP market prices in the long run.
Gordon Hamachi
-------------------------------------------------------------------------------
In article <33...@athertn.Atherton.COM> mi...@Atherton.COM
(Michael Zimmers) writes:
>My statements were neither personal attacks nor vicious; they were
>manifestations of frustration from trying to engage in an analytical
>discussion with a trivia freak. And if you've got a dispute with anything
>I've specifically said, let's hear it; otherwise I will stand by its
>veracity.
#1. You claim you're not attacking me personally, but you just called
me a freak. Later in the same article you suggest that I am
pathalogically biased.
-------------------------------------------------------------------------------
>Ah yes, your scientific analysis of the news clippings that frequently
>relate third hand hearsay.
#2. Actually, I don't include any of my own analysis, scientific or otherwise,
in my real estate news summaries. Any analysis comes from the original
writer, or the sources the original writer quotes. You would know that
if you read any of the same publications I read. I edit only for brevity.
-------------------------------------------------------------------------------
>I was especially fond of your extrapolation
>from an advertisement that boasted a large price cut (from a developer no
>less) to support your own claims of overall price erosion.
#3. I assume you mean this item, from my Real Estate News Summary, Part 6:
52. Auctioneers advertise exclusive estates in Menlo Park, with minimum
bids 40% off the current bank appraised value. Custom homesites
reflect discounts 47% off the current bank appraised value.
[Wall Street Journal]
This is essentially the advertiser's own words. Any extrapolation was a
product of your own imagination. But since you raised the subject, let
me add that I did go over to Menlo Park to tour the homes and speak with
an auction company representative. She assured me that the builder was
in fact ready to sell the homes and lots if the minimum bid price was met.
To date, only 2 homes in the development had been sold. The remaining
completed homes will be auctioned in December. The builder isn't going
to finish the project, so there are a number of empty lots to sell. In
addition, the builder is giving up on his plan to demolish a bordering
senior citizens' residence to build more of these houses.
You do the extrapolation.
-------------------------------------------------------------------------------
>To begin with, your "summaries" are actually unrepresentative selections
>of quotes and events that support your view. Perhaps you are so
>pathologically biased that you can't understand this, but I imagine that
>you've probably come across at least some weakly bullish news on the
>subject in the past six months. (I do remember a SJMN column in which
#4. I say again, Mr. Zimmers, where is your mountain of evidence that real
estate is booming? So far I've posted summaries of 70 articles, while
you've mumbled something about the existence of just 1 article with a
"mixed" outlook for real estate. Let's see your quotes, uncolored by your
own scientific analysis or extrapolation.
-------------------------------------------------------------------------------
In article <33...@athertn.Atherton.COM> mi...@Atherton.COM
(Michael Zimmers) writes:
>The real problem with your data is that it is just that: data. You've
>done a marvelous job scooping up all kinds of items, with a complete
>range of credibility, that you feel somehow backs up your prediction of
>a pending RP market crash. What you haven't done at all is to try to
>analyze said data to turn it into meaningful information.
#5. I used to attempt to interpret the data. This brought about many
unpleasant attacks upon my personal character, mental competence, and
worthiness to be a member of the human race. One of them came from my
best friend, who reads misc.invest and bought a house at the peak of the
market and no longer speaks to me. Some other attacks came from you,
Mr. Zimmers, even though many of my ideas were in agreement with, and
supported by, articles in the major newspapers and business publications
such as:
Wall Street Journal
Barron's Weekly
Business Week
New York Times
San Jose Mercury News
San Francisco Chronicle
These articles cited bankers, financial analysts, real estate industry
groups, and real estate professionals such as:
John McMahan, president of Mellon/McMahan Real Estate Advisors
Leanne Lachman, managing director of Schroder Real Estate Associates
Harley Rouda, president, National Association of Realtors
Leslie Appleton-Young, vice-president of research and economics,
Calif Association of Realtors
Dan Feshbach, head of the Mortgage Information Corp.
US Chamber of Commerce
University of Michigan
Rutgers University
Lawrence J. Horan, of Prudential-Bache Securities.
Kenneth Rosen, chairman of the Center for Real Estate and Urban
Economics at U.C. Berkeley
Martin Perlman, president of the National Association of Home Builders
I now think it is better for me, personally, to report what credible
sources are saying, so others can draw their own conclusions. Too bad,
I get attacked even for this.
-------------------------------------------------------------------------------
>Then you've been pretty selective about with whom you communicate.
>Neither in the press or within the industry has there been "total agreement"
>about the market being "bad" (by which I assume you mean bearish; please
>correct as appropriate).
#6. I say once again, Mr. Zimmers, where is your mountain of evidence that
is contrary to the message in the 70 published articles I've summarized,
from major newspapers and financial publications?
-------------------------------------------------------------------------------
When I wrote
>>The headline was "COUNTY HOME PRICES PLUNGE" they day Michael Zimmers
>>so cleverly :-) challenged me to put my money where my mouth is.
In article <33...@athertn.Atherton.COM> mi...@Atherton.COM
(Michael Zimmers) replied:
>This is not only getting tiresome, but is also incorrect. I was not the
>one who issued the challenge; I merely suggested that you take it. The
>fact that you didn't reinforced my feelings about your hypocricy.
#7. True, Mr. Zimmers, you did not initially issue the challenge, but you
certainly taunted me again and again to take the challenge. Below are
just a few of the quotes from your past postings; do you still claim
that you never challenged me?
> This is quite fair. I'm sure that many people have tired of the debate
> and would like to see which side is truly committed to their views.
> Gordon, do you believe in what you've you've been saying for the past
> two months? And if you do, do you have the guts to back it up?
> What? Childish posturing? My dear Gordon, we're asking you to back up
> your claims. In the real world, people are expected to do this or shut up.
> And now someone who is tired of listening to you is challenging you to
> put up or shut up. Unfortunately, you're doing neither; you're trying to
> cop out. And I for one won't let you get off the hook.
> So, what's it going to be, Gordon? Will you back off of the "collapse"
> blather and recognize this correction for the short-term phenomena
> that it is? Or will you take Bill up on his offer?
-------------------------------------------------------------------------------
>You also come off as pretty smug for someone who, when given an no-load
>opportunity to capitalize on the coming crash he predicted, not only
>shrank from the challenge, but wouldn't even give a reason why.
#8. Let's see. Tuthill and Zimmers challenged me on 4 Sept 90. The median
price for August in Santa Clara County was $222,000. The October median
price was $216,000. Why don't you send me a cashier's check for $6,000?
Then maybe you can rest easy about my not taking you up on your challenge.
I'll let you slide on the seller concessions that hide additional sales
price declines. :-) :-) :-)
-------------------------------------------------------------------------------
The headline was "U.N. Expected to OK Force" the day I so cleverly :-)
Dave Mc Mahan
In a previous article, je...@everexn.UUCP (Jeff Keasler) writes:
>In article <22...@island.uu.net> gu...@island.uu.net (Guido Marx) writes:
>>In article <91...@aerospace.AERO.ORG> s...@aerospace.aero.org (Scott "TCB" Turner) writes:
>>>Looks like Gordon is winning this argument pretty convincingly.
>>
>>I think that we're still here. What I believe, is that there is no
>>fundamental disagreement about the data. The disagreement is over how
>>to interpret it. Gordon seems to think that R.E. is headed for a
>>crash. People like myself think that we are looking at a correction in
>>
>>Guido
>
> Let's look at this as a hypothetical situation.
>
> 1) Let's assume that I live in silicon valley. Let us also assume
> credit. By houses, I mean one residential property and one or
> more investment properties). Let's assume that the price(s) of
> the house(s) is(are) low for silicon valley, say $200,000. Let
> us also assume that these people have alot of credit card debt.
Lots of assumptions here, but I think I understand what you are driving at.
> 2) Let's assume that technology sales start to flatten out, and
> perhaps decline. This causes some people to get laid off.
> These people start living on their credit cards for a while,
> and finally their credit cards run out of money and they
> file for bankruptcy.
>
> 3) The banks take back any property that they can from the people.
> The banks must try and sell that property to get the money
> back that they have loaned to these people. The car will
> be worth less money than the bank loaned out because it is used.
> The house will be worth less money because a) we are in a soft
> RE market, and b) The market will be flooded with houses that
> these banks are trying to get rid of. Let's be optimistic and
> say that the bank can sell out hypothetical $200,000 house for
> $160,000 given a market with the above conditions. This will
> only be a $40,000 dollar loss per house. As far as the
> credit cards go... well, those creditors will be SOL.
You forget a fact that I hope most banks won't. There is a downpayment that
banks get to keep when they repo a house or a car. Now, assuming that you
have met at least a few of the payments to date on your house before defaulting,
the banks are cushioned by the down payment and can afford to take a loss in
dumping the property. Not all banks are smart enough to do this right, and
have required very little down when they need to make more loans to appease
the investors and the quarterly bottom line. These banks will go down like
flies when times get tough. Personally, I expect that there will be a few
bank failures in the next 3-4 years around the Valley, some will be quite
spectacular. Their assets will get consolidated and sold off to healthier
institutions. Hopefully, there won't be a large burden placed on the FSLIC
or other insuring groups for those banks that do fail. You are quite correct
in assuming such actions will have a drastic negative aspect on the price of
housing around here. Many people that are over-extended will go down in
financial flames. Oh well. It can happen (and I think it will, I just don't
know how bad it will be) and those that survive will be a bit smarter and, if
they play their cards right, a bit better off due to the bargains to be had.
I fell that the Valley is going to be around for quite some time and the price
of land will continue to rise, especially in the areas that are completely
built up and have no more room for expansion. Companies still want to be
located in Sunnyvale, Santa Clara, or Northern San Jose. They don't want to
be in Gilroy, Morgan Hill, South San Jose, or Felton. Eventually, I think
this will change over time, but for now it seems to me that this is the
way things are.
> 4) Maybe at this point, banks will start failing....
I think you can count on at least one or two big failures/mergers, and several
smaller ones.
> I could go on, but you get the picture. Personally, I plan to
> get out of the country while I'm still allowed to leave, and the
> tax rate(35%, considering everything they take out of my paycheck,)
> is still at a reasonable level.
So long, pal. Don't let the gate hit your behind on the way out. We will have
our problems here in the USA, but don't think that you can run away from the
problems. This is going to be another down side in the cycle of society. It
may last a while, but that's the way it goes. Even the all-mighty Japan is
having economic troubles that are just starting to emerge in force. What do
you think will happen to that country if they suffer a real-estate price
collapse? After spending a couple of months over there working, I'm still
convinced that I live in the best country around.
> - Jeff Keasler
-dave
--
Dave McMahan mcm...@netcom.uucp
{apple,amdahl,claris}!netcom!mcmahan
Dennis Allen
buyers perspective.
(1) Dont try to predict the bottom; It is too difficult. Those who say the
market will come back are right. Of course this may be useless input
since the real question is when. No-one wants to see their equity
drop down 20% while hoping for this "enevitable" turnaround.
(20 Simply wait for the trend to change. You can use any number of trend
following systems developed for the stock market. I believe that
at the fundamental level, all markets are the same whether they are
houses, pork bellies, stocks, bonds, you name it.
(3) When the trend turns up for more than a 6 month period, consider buying.
The small amount you lose when the prices rise off the bottom is a
small amount to pay for the priveledge of not seeing your equity
shrink if you buy too early and it keeps dropping.
"The Trader"
Dennis Allen
I appreciate your taking a stand for those of us who refused to jump off
the cliff like lemmings in 88,89 into the real-esate market and all the
while suffer years of abuse from relentless real-estate bulls who thought
that house prices can only go up.
Michael Zimmers
>Let's take Michael Zimmers' points one at a time.
Let's do.
> (Michael Zimmers) writes:
> >My statements were neither personal attacks nor vicious; they were
> >manifestations of frustration from trying to engage in an analytical
> >discussion with a trivia freak. And if you've got a dispute with anything
> You claim you're not attacking me personally, but you just called
> me a freak. Later in the same article you suggest that I am
> pathalogically biased.
I refuse to believe that you're incapable of distinguishing what I said
with calling you a freak in the more common sense of the word. If I
referred to someone in slang as a gold bug, would you think that I called
them an insect? (Yes, I know insects aren't bugs, and all that...)
Mediocre try.
> >Ah yes, your scientific analysis of the news clippings that frequently
> >relate third hand hearsay.
>
> Actually, I don't include any of my own analysis, scientific or otherwise,
> in my real estate news summaries.
Breakthrough!! I see that my sarcasm was lost on you, but all is not lost.
Now for the $64 question: what will it take to get you to do something
with your mountain of newsclippings besides regurgitate them to the net?
You may think you're providing a valuable service; I for one happen to find
the true value of this and other newsgroups comes from people's opinions and
analyses of the data that is already available to most of us.
Why will you not do this? Do you doubt your own skills, or are you afraid
that a non-face value assessment of your data will mitigate the horror show
you're trying to play for the rest of us?
> >I was especially fond of your extrapolation
> >from an advertisement that boasted a large price cut (from a developer no
> >less) to support your own claims of overall price erosion.
>
> I assume you mean this item, from my Real Estate News Summary, Part 6:
> 52. Auctioneers advertise exclusive estates in Menlo Park, with minimum
> bids 40% off the current bank appraised value. Custom homesites
> reflect discounts 47% off the current bank appraised value.
Close enough. Actually, the one I had in mind had a fixed price cut, not
a percentage, but this one is fine.
>
> This is essentially the advertiser's own words. Any extrapolation was a
> product of your own imagination. But since you raised the subject, let
> me add that I did go over to Menlo Park to tour the homes and speak with
> an auction company representative. She assured me that the builder was
> in fact ready to sell the homes and lots if the minimum bid price was met.
I never, ever disputed that, nor do I doubt the correctness of the ad's terms.
If *you* had examined *my* posting with a bit more care, though, I think that
you'd find that my objection focused more on the lack of representative comp-
arison between the games that developers play with prices (and believe me,
they do), and what is really going on the the (much larger and therefore
more typical) resale market. That was the point of my Macy's non-analogy.
> You do the extrapolation.
I beg your pardon, but you've already done it, by using this item as evidence,
no matter how slight, of price erosions in this area.
> >To begin with, your "summaries" are actually unrepresentative selections
> >of quotes and events that support your view. Perhaps you are so
> >pathologically biased that you can't understand this, but I imagine that
> >you've probably come across at least some weakly bullish news on the
> >subject in the past six months. (I do remember a SJMN column in which
>
> I say again, Mr. Zimmers, where is your mountain of evidence that real
> estate is booming?
And I say again, where have I claimed that the RP market is booming? How
plain must it be put for you to understand that the problem we have here is
your mindless rehash of news items that you can construe to support what you
want to believe. Note: "mindless rehash" is not intended as an insult;
you said yourself that you're postings are verbatim quotes except for
brevity.
>So far I've posted summaries of 70 articles, while
> you've mumbled something about the existence of just 1 article with a
> "mixed" outlook for real estate. Let's see your quotes, uncolored by your
> own scientific analysis or extrapolation.
If I were so universally proud of "my own scientific analysis or extrapolation"
I wouldn't be bothering with you. I never claimed that my thoughts were the
end all on the subject, but at least I'm willing to take a stand and try to
do more with the news than just practice my typing with it.
>
> I used to attempt to interpret the data. This brought about many
> unpleasant attacks upon my personal character, mental competence, and
> worthiness to be a member of the human race. One of them came from my
> best friend, who reads misc.invest and bought a house at the peak of the
> market and no longer speaks to me. Some other attacks came from you,
> Mr. Zimmers, even though many of my ideas were in agreement with, and
> supported by, articles in the major newspapers and business publications
> such as:
[a long list of Gordon's heroes]
> I now think it is better for me, personally, to report what credible
> sources are saying, so others can draw their own conclusions. Too bad,
> I get attacked even for this.
Since you're fixated on the word "attack", I'll own up to "attacking" you on
two fronts: originally for dodging my responses to your posts and continuing
your own private threads as though my responses didn't exist, and more lately
for flooding the group with recounts that used little of your gray matter.
Unless I don't understand the purpose of the net or its etiquette, I think
my "attacks" were founded. I don't recall ever "attacking" your analyses,
but if I did, then I was out of line, and I would apologize.
> >Then you've been pretty selective about with whom you communicate.
> >Neither in the press or within the industry has there been "total agreement"
> >about the market being "bad" (by which I assume you mean bearish; please
> >correct as appropriate).
>
> I say once again, Mr. Zimmers, where is your mountain of evidence that
> is contrary to the message in the 70 published articles I've summarized,
> from major newspapers and financial publications?
I don't need a mountain; you've already got one and that's more than
enough for one newsgroup. Let me ask you a question: can you in good
conscience say that you have yet to see even a teeny little line somewhere
in your voluminous readings that maybe suggested the current situation isn't
quite as dire as some make it out to be? Not a word? Not a syllable?
(Although I can't refute it, as I don't know what or how you read, it would
be tough to believe, as I'm pretty sure that a few months ago, you did
borrow from a SJMN column that talked to several local people in the industry.
Their remarks ranged from neutral to bearish, but only the bearish found their
way into your summary. Sorry if this constitutes mumbling; I'm typing as
loudly as I can.) If you truly, on scout's honor, haven't seen anything,
fine. But if you have, and didn't report it, then your summary and you are
biased. And if you're unaware of it, it's pathological as I understand it.
> True, Mr. Zimmers, you did not initially issue the challenge, but you
> certainly taunted me again and again to take the challenge. Below are
> just a few of the quotes from your past postings; do you still claim
> that you never challenged me?
[a bunch of quotes...]
I'm not interested in quibbling about what you consider a challenge. I never
laid down the gauntlet to you, but I would be very interested in hearing why
you didn't accept it from Bill.
> Let's see. Tuthill and Zimmers challenged me on 4 Sept 90. The median
> price for August in Santa Clara County was $222,000. The October median
> price was $216,000. Why don't you send me a cashier's check for $6,000?
Apart from the fact that the challenge had nothing to do with median sales
prices, which even you should know can be misleading about overall price
trends, and ignoring that the challenge was to cover a bit more time than
three months, and forgiving you for a couple of other inconsistencies,
you have been asked several times (you probably know the exact number) why
you didn't and won't take the challenge. Will you ever come up with a
straight answer?
Why is it that the author of Poor Gordon's Almanac is *so* eager to share
with us his prize collection of bearish news on the RP market, but so
unwilling to cash in on the imminent crash? And even more interestingly,
why is it that he won't answer the first question?? Bonus question: why
do realtors who are on record with bearish comments experts in Gordon's
eyes, while realtors who aren't so down on the market are simply typical
sales slime? Who killed Laura Palmer?
Lemuel Davis
that Mr. Hamachi (sp?) should be thanked for doing a useful service for
the net community. When making an investment as large as required for real
estate, one wants to be as sure as possible that it will not be a money losing
proposition. What better way is there to do this than to read as many articles
as possible on what the current trends are? The Real Estate News Summaries
save me, and I would assume others, some of the time of doing of the prudent
research required before making such a large investment.
So, thanks Gordon, please keep it up.
Michael Zimmers
>Here is my opinion on how to handle the current real-estate market from a
>buyers perspective.
> (3) When the trend turns up for more than a 6 month period, consider buying.
> The small amount you lose when the prices rise off the bottom is a
> small amount to pay for the priveledge of not seeing your equity
> shrink if you buy too early and it keeps dropping.
Assuming that the primary purpose of a purchase is for investment, let me
ask you a question or two.
Do you see a parallel between the current phenomenon in the RP market,
and the behavior of technical analysts of the stock market? That is, unlike
in the past, aren't many and perhaps most would-be buyers not buying strictly
because they've been eyeing the recent price downturns and are hoping for
more? It sure seems like it to me, because it's 1) smart to do so, and 2)
consistent with what many people have posted recently.
And if your answer is "yes",
Doesn't this imply that the current bear market will be (possibly has
been) prolonged by such behavior? And doesn't this also imply that when
the correction does occur, it will be stronger and more forceful than it
would have if buyers didn't practice such technical analysis? If the
connection isn't apparent, I can elaborate.
It seems possible that the slump itself might be contributing to the speed
of the recovery. Iff this is true, it would be wise for all prospective
buyers to remain fairly liquid, so that when the correction begins, they
can act quickly and truly catch the market at or very near bottom. Six
months might be too long.
Eduardo Krell
New York Times? It's called "With Sales Strong, a Greenwich Builder
Raises Prices".
That's Greenwich, Connecticut.
Guido Marx
>In article <22...@island.uu.net> gu...@island.uu.net (Guido Marx) writes:
> >I think that we're still here. What I believe, is that there is no
> >fundamental disagreement about the data. The disagreement is over how
> >to interpret it. Gordon seems to think that R.E. is headed for a
> >crash.
>
>I could write a book "How to Lose Friends and Influence People" based on
>my experiences discussing real estate. I now prefer to provide data, in
>the form of news summaries, and let everyone draw their own conclusions
>on the future of real estate.
>If you get the impression I think that R.E. is headed for a crash, you should
>examine your own deeply-ingrained belief that real estate only goes up. You
>aren't reading my opinions; you're reading the real estate news, and the
>opinions of the financial experts who write on the subject.
First off, I don't think that you should lose friends over a discussion
of this type. Honest, smart people can and frequently do disagree. If
we all agreed on everything, I would quit reading News because it would
be boring. I already know what I think, I read News to find out what
other people think.
I also want to emphasize the fact that I do NOT think that R.E. only
goes up. Such an opinion is truly silly, since it flies in the face
of recent, and historical experience. But, there is a big difference
between thinking that there is going to be a crash in R.E. and my own
opinion that we are in for a period of a year, perhaps two, of stagnant
and/or declining prices. The last time that there was a crash in
R.E. in California was during the Great Depression. It is my opinion
that another Depression will be required to cause that kind of crash
again. I don't see that happening. When the economy recovers, and I
think that it will, then so will the R.E. market.
As for the 'experts', I think that their opinions can be helpful, but
you need to analyze what they are saying. These 'experts' frequently
disagree, and they can certainly be wrong. I wouldn't simply accept
the opinions of 'experts' on the future status of the stock market,
why should I do so for the R.E. market ? This is simply one more
factor to take into consideration when deciding whether to buy,
sell, or hold R.E.
Guido
Guido