Charles Peabody, Portales Partners, LLCInflation--not a problem. Increasing unemployment--not a problem. We have stability in California house prices!!
2008-08-01: California hints at bottom to housing slump
SAN FRANCISCO (Reuters) - California's battered homes market may be hitting bottom, suggesting a national housing recovery may follow, veteran banking analyst Charles Peabody said on Friday, citing a rebound in home sales as renters become owners.
"The key is to try to get some stability in the price of homes, which appears to be happening in California," Peabody, of the independent research firm Portales Partners, told Reuters by phone on Friday.
5 comments:
Tyrone,
I assume he's assuming PITI, but he doesn't mention insurance. He seems out of touch with how things are. I remember an acquaintance who bought at the peak of the bubble (in our area, it was mid-2005). He had a job transfer the next year, tried to flip, and became the first, and to date only HD to sell at a loss. When he bought, he though things would stay high. How wrong he was! Peabody's words reminded me of this man, because they do not ring true. Conversely, they have that "hollow thud of falsehood".
The next round of ARM resets is not far off, and the bailout will not have the intended effect. Even where rents and mortgages are in line, and buying looks more attractive than it has in years, sales remain slow, because personal savings have been low (if not negative) for years in most households, and 20% is jsut out of reach. Equity as down payment is an option to fewer applicants than ever due to HELOC-ing, negative-am, and other products; for all to many people who sell their homes, their will be no equity to apply to future purchases of any kind. What am I missing here? How can Peabody say that things are stabilizing and mean it?
Tom
Tom,
Couldn't agree more. I just don't understand these experts and their rosy predictions. Perhaps they believe if you think happy thoughts, everything will get better.
Lack of savings will also factor into future homebuying. In my situation, ample savings have me thinking about buying rental properties in a year or two (or three). If prices get to where I think they will, it might be an opportunity, but I'm extremely cautious.
Ty
Thinking happy thoughts is one thing, but self-deception is something else. Unfortunately, people do confuse them. People are calling bottom because they want or need to believe that it won't or can't get any worse. It can and will get worse according to my understanding.
I saw evidence of increased sales activity in some of the SF Bay Area counties over the last few weeks. Was there an uptick in knife-catching? Probably. Could you interpret that as a sign of recovery? Yes, just as you can read more into the tales of investors buying up lots of REO homes in advance of an awaited recovery.
Please tell me if I'm off here, but too many lines of evidence point to a longer cycle than in the past. Higher interest rates are going to stifle sales as well, as lower rates allow you to take on a larger mortgage, and rates are almost 1% more than we're paying now.
If you can jump in at least close to that "point of maximum opportunity", you will be fine. I'm tempted to go knife-catching, but I think it's way too soon for that yet.
Tom
Ty,
thanks again for this informative and thought-provoking blog. I recently saw DataQuick's June data for SF Bay Area home sales. They brought this post to mind when I read and interpreted them.
Charles Peabody could find some stats to prop up his arguments with, but they would be logical fallacies, for the sum of those figures do not point to a recovery, but to the increasing vulnerability of high-end properties. This isn't news to you or me, but it is arcane to others.
Here is a link to those figures. Tell me what your think. It may shed light on when, where things re headed in your neighborhood.
Tom
http://tinyurl.com/5vj683
Thanks for the link. For my area, the numbers seem to be consistent with what I would guess.
In general, the Bay Area doesn't seem to be getting hit as hard as others in CA, but I don't have a lot of insight into the Option ARM exposure. That could be what breaks it!
I remember back at the start of the rapid rise of the bubble I was looking at properties in South Lake Tahoe. I thought the prices were too high, but every month they just shot higher and higher. Out of curiousity I've been looking at listings again, and I'm seeing serious weakness and falling prices. They're still way too high and have a long way to get back to where they belong, but there is a new wildcard in that equation--price per gallon of gasoline. I wonder if that will further erode prices in those areas. It becomes a pricey luxury to have that weekend retreat in the mountains.
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