The Fed can lower rates all they want (Japan went to ZERO in the 1990’s), but unless there is wage inflation people will still balk at paying current prices if they don’t think there’s going to be appreciation.

I saw it put beautifully on another forum.  “Folks are beginning to see ever more clearly that $500,000 is a LOT of money.”

This is the BIG difference between today and the late 70’s/early 80’s.  There were real problems then, but people in normal wage-paying jobs could see their income going up every year.  That is a great comfort when you’re stretching your neck right out to make your first purchase, and in the final analysis the overall RE market in the US (and Australia, where I live) is underpinned by the FHB.
——-

I disagree; I think we all DO influence the mkt.  It would be impossible to prove, but I think we do.

I’ve always found the “Median Home Price vs Rental Value” prediction graph to be the most interesting one on this blog. 

However, I think it’s time to add and track a third plot line on the graph… one for the “current median home price”.... If the dataquick estimate on the Lansner blog is appropriate, that puts the median at 582,000 for Nov ‘07… about 50k below the “predicted value”...

I’m thinking October 2011 might come early.

talk about blasting off on an ego trip !

Yeah, I second the motion to have a second curve (actual median prices) overlayed onto the graph with the predicted home decline curve that IrvineRenter put together.

I don’t think it has anything to do with gauging your “correctness” or predictive capabilities, but more of a metric to determine how fast or slow we’re deleveraging the credit cycle this time around.

Mario

The point of Bernanke’s essay is that it is a mistake to focus on the asset price (i.e. real estate values). That in a period of deflationary pressures, you want to focus on the demand side of the equation. There is still a long way to go on lowering interest rates and we have already experienced a significant amount of reduction in the dollar in currency markets.

What we will see is the fed raising it’s target inflation rate to 3-4% (straight from the essay) so there is clearly no risk of deflation.

That the fed will not care about housing prices.

That the fed will not care about wage inflation (that would imply trying to increase supply…which would require more raw inputs such as labor, which is the wrong thing to do).

In Japan, the last example of a real estate bubble, there was a lot of focus on trying to prevent the asset depreciation, so it took a decade for the bubble to deflate. In the U.S., it appears that the Fed chairman thinks that was a mistake. Whether he will be allowed to follow policies to that effect is still an open question. Also remember that the extreme price inflation in housing was localized, so there will not be as much pressure as you would expect to protect housing prices. So my guess is that there will be limited intervention to stabilize prices.

Bubbles/speculation occur because investors place too much value on anticipated future value of the asset (housing, dot.com, etc…) and not enough on fundamentals (housing cost vs. renting, earnings/share, etc…). Once those expectations change, then the crash will occur and it will accelerate as declining prices change more and more investor’s minds about their future expectations. Study (can’t point to specific ones, just remember them from B. School) after study has shown that most people base their future expectations based on what has happen in the past. This is why you see markets over correct…and why real estate agents “drink their own kool-aid”.

2008 will be worse than anyone (except for the bears on this blog ) expect.

The key to bottom will be what happens to rental prices. Do they go down because of people not being able to afford them (because of a local recession), or do they go up because more people are forced from their homes?

It looks like I may be a buyer a little sooner than I hoped.  I had hoped to wait until late 2009 but it looks like we will be moving back to CA in late 08.  I just can’t bring myself to rent again (we have been renting for almost 4 years and had to move 3 times) and then move again when it’s time to buy.
I am going to use your predictions to low ball offer home after home to try and get a price a little closer to the bottom.
Even if we are going to be in our next house for a very long time and I will have a big downpayment and 30 yr fixed mortgage, still sucks to overpay for anything let alone a big ticket item like a home.
Just to make sure my math adds up,
I am keeping my eye on an area with a home right now that sold in 07 for 700,000 now bank owned with an asking price that went from 703 to now 640 and it’s been on the market for over 6 months.  I’m thinking if I can get a house like this for about 500-550 that would represent a 20-25% drop in price.
Am I thinking this out correctly?

It will be interesting to see if Bernanke is correct. By trashing our currency and creating inflation, he has probably already pushed the real interest rate below zero—something he criticized the Japanese for failing to do. I don’t know if he will need to push the FED rate much lower as inflation is already running pretty high. I suppose it depends to some degree on whether or not other central banks start lowering their rates. If they keep them high, our inflation will run high enough to create a negative real interest rate near where our FED funds rate is now. If however other central banks start lowering their rates, we will have to stay one step ahead of them to create the currency devaluation and inflation Bernanke is looking for.

I totally agree none of this will save housing. Even with unlimited, nearly-free money, why would the markets pour resources into an obviously overvalued asset class where the borrowers have proven they cannot service the debt load?

The real unknown here is the government.  Since ‘08 is an election and it would seem there is a chance of a complete regime change in the US it’s very difficult to predict what the government will do about this.

And please don’t mistake what I saying for “the government will save us”.  Hardly.  I could wish for very few things less than that.  I hope like hell the government stays out of the whole mess (aside from actually enforcing the regulations on the books and prosecuting the criminals involved) to whatever extent that is possible.

But government is the one force that can, all on its own, change things dramatically by rewriting the rules of the game.  The media can influence and push but it really doesn’t control (despite what most pundits think or wish for).  The players, the realtors and builders are seriously limited in what they can do.  The consumer is also limited because if the banks aren’t lending then only people with cash are buying.  If the prices are still too high then no amount of pessimism or optimism will change that.

What will happen?

I don’t know.  I see the same declines that most everyone here sees though I tend to be a bit more pessimistic and bearish than most.  I think some areas are going to get whacked hard for several reasons, some reasons such as commuting costs and disappearing jobs, that aren’t the main topic here.  I think some areas built too many of the wrong kind of home and some areas are just in places where, unless you buy into the “they ain’t making more land” nonsense, make no sense whatsoever.  I also think that general sense of delusion most Americans enjoy is going to be dispelled, painfully so.  I think we see some of that already and while it will difficult, in the end, we come out a little more realistic and perhaps better off for the experience.

Finally, I think the timing is real thing that’s going to be impossible to predict.  We can look at past events and relate to them current ones but we all know the factors involved are difficult, no matter how similar in some ways they appear now.  The thing that’s scary for me is I see a confluence of a number of different, unhealthy trends all converging.  If these trends do indeed converge, we might see things happen much more quickly than we imagined.

Thanks to all the great IHB team for their work and my sincere thanks to the many great commenters here that make these threads informative and entertaining.

Everybody…  Let’s take a guess!

Is Mav a realtor, home loan officer, knife-catcher, home-debtor who HELOC’ed into oblivion?

the economic events of the past 6 years make more sense when one understands that it is part of a concerted effort to destroy the middle class (or at least a concerted effort to expand the wealth of the very top of society at the expense of everyone else.)

it’s really quite simple - who benefits from $100 (or $200, $300) crude?

it’s naive to think that the wealth from inflated commodity and asset prices won’t result in joe lunchbucket getting crowded out of the market they might feel entitled to.

My prediction for 2008:

1. House prices will continue to fall. I just saw a house in Hacienda Heights that is now on “backup offer” status. I dont know what the offer price is, but the “for sale” price is 499k. The last sale of the house was on 11/2005 for 756k. Thats a 250k+ reduction is price from last sale. Its a pretty nice place and I think it will be worth about 400k in 2008.

2. I could be wrong, but I don’t think we will go into a recession. Target and Costco is packed everytime I go there. My travel agent says they are busier than ever booking 2008 trips. She says most people are paying cash for their trips and not using credit. Cruises and Disneyworld are hot items she says.

I personally think the baby boomers have alot more disposable income and savings than everyone thinks.

troll homedebtor is my guess.

Great post as usual IR, the graph vs rental value is really informative. Happy 2008 and keep up the good work.

“...most people base their future expectations based on what has happen in the past…”

Adaptive expectations. I.e. basing your estimate of what’s going to happen in the future on what has happened in the past, especially the recent past.

We humans are a remarkable species. Adaptive expectations makes a lot of sense, especially in an evolutionary psychology sense. A great predictor of tomorrow’s weather is today’s weather.

But the problem is most people don’t recognize their expectations as adaptive - they actually think they have rational, logical reasons to expect the things they do. If people just understood that their own expectations were adaptive, these bubble busts wouldn’t be nearly as bad as they tend to be. To the extent that adaptive expectations dominates the thinking of a herd, they are totally blind to any changes that lie directly ahead, by definition. This makes the herd blind to the cliff it is about to run over.

I’m thinking by the time we vote in November ‘08, it’ll be too late to change the psychological damage that is done.  At that point, people will see the $500,000 home as a place to live again instead of either a place that’ll provide them a $100,000 in ‘instant’ equity for slapping a coat of paint on or as a place that by next year, they’ll never be able to afford.

In essence, the fear paradigm will have changed.  During the bubble, the fear was of being priced out, missing out.  By November, the fear will being priced in, being stuck.

Thank you for your analysis.  I agree with it.

I think 2007 was a denial year for many homedebtors, and in 2008 that fog will be lifted and they will start to see just how screwed they are.

I predict that 2008 housing values will drop hard as homedebtors scramble to unload or just walk away with Bush’s bailout “tax forgiveness” plan.

Fortunately, I am on the sidelines observing.  I have always been a “live within your mean, cash is king”, minimalist type of person, so I, and my family will be fine, save the crazy inflation that we will be dealing with.

Anyways, Happy 2008!  Loved the Fog Hat video.

so you both think you can effect the market by posting here?

interesting…... fire up the rocket ship !

FYI: I’m a hungry bear, renting, plenty of cash on hand with affordability an after thought, more of just an investment baseline.

Happy new year to you both

If you post a link to the listing, we can analyze the property for you.

You are right about low-balling but I suspect you are rushing into the whole purchase thing.

If you are forced to move frequently, why does that make you want to buy? That will turn out to be a very expensive proposition. If you have to move a lot, that’s a great justification for renting.

Prices are going down in a big way, period. Only the dummies don’t realize that. Any bank-owned deal you think you can get now, the bank-owned deals of the future are going to be better.

And if you think a bank is going to accept a steep low-ball offer, just because that’s what it’s worth, you got another thing coming. They’d rather sell it to the bigger dummy than you for more money and that’s what they’re going to try to do. You’ll have to wait for their asking price to come down without anybody taking it. The REO managers right now are sponsoring a game called “who’s the biggest dummy?” and they’re going to play that game for some time.

My friend’s mom just tried to play that game with an REO in LA. She said she wouldn’t pay more than a certain lowball offer she made. Well, she lost that game and ended up paying the full list price on the REO. Way over-priced and unaffordable for her. She has no hope of ever paying off that loan herself. Her only justification for that purchase is an expectation of appreciation in the near future. Well, we tried to warn her but she preferred the advice of her broker to the advice of her friends, family, and personal CPA. Imagine that.

My advice: rent (big surprise there!). Choose your landlord very carefully, and you’ll be doing great for you and your family. Find a landlord who’s owned the property a long time and doesn’t want to sell it. Look for a deal - I can tell you for sure the rental deals are out there.

I think the collection of blogs about the market are helping people recognize the reality of the market more quickly.

Blogs like this are getting notice from mainstream media, as witnessed by the occasional links to this and other housing blogs.  People who were only hearing the “housing only goes up” message are getting an alternative view.

This and other blogs like it could not move the market on their own if there was not underlying truth to the message.  But I think the are speeding up the spread of the information.

Bubbles/speculation occur because investors place too much value on anticipated future value of the asset (housing, dot.com, etc…) and not enough on fundamentals (housing cost vs. renting, earnings/share, etc…). Once those expectations change, then the crash will occur and it will accelerate as declining prices change more and more investor’s minds about their future expectations. Study (can’t point to specific ones, just remember them from B. School) after study has shown that most people base their future expectations based on what has happen in the past. This is why you see markets over correct…and why real estate agents “drink their own kool-aid”.

That is about the perfect 1 paragraph explaination of bubbles.

people who bought at the peak or HELOCed to the max have high loans which they can not get out of….....  unless the banks are willing to take 20 - 30%+ less in a short sale….. foreclosure is the only option.

Blogs (and the flow of information) have no impact on this….... 

the velocity of foreclosures and the banks willingness to liquidate dictate the speed of price drops.

Lack of demand can be a catalyst, but at the end of the day, supply’s willingness to sell below a loans value creates a deal in a crashing market.

bidding $500K on properties listed for $640K is going to be a big waste of time.

I’d say rent a house and buy in 2 years.

Thanks IHB and friends for an eye opener 2007 from the SoCal persective and beyond, great blog and comments.

Personal responsibility was mentioned earlier and that is the centre of all that we are talking about here. Individuals with their families will wrestle through some of the most painful and life changing ideas that they have ever had to think about and the sooner that these areas of concern are addressed the sooner the situation will improve.  Yes the government and foreign markets will have their effect but so will people giving up their houses for the sake of their health, marriage, families or other reasons, finally coming to grips with how powerless they are with having too much credit.  These decisions made thousands of times over the space of the next year will add to the cumulative effect of all the adjustments, man made and other.

Just as in a health challenge the sooner one takes responsibility for their condition the more likely improvement will happen. 
Metrics, adjustments, wringing of hands, government tinkering can only go so far add in a good dose of personal responsibility and change will be hastened.

Happiest new year to all.

You’re wasting your time doing lowballs. 

Banks are holding firm on thier REO properties.  For now.

There will be a point (which I’m guesstamenting at end of the 1st quarter ‘08) where the banks will have REO’s stacked like cordwood and panic.  It will only take one bank to drop the hammer and the rest will follow like lemmings. 

Then you can proceed making all the lowball offers you like.  You won’t get many of them accepted, but a few is a lot better than zero.

Well we have not had to move, it just seems that every rental here in Vegas is a foreclosure waiting to happen.  We are tired of living in this wasteland and are moving back to CA permenatly.  I own my own business and plan on dying in our next home.
Here is the listing for the home.  There are better homes in the area that I am keeping my eye on, but this one seems to be chasing down the fastest.  I was not planning on offering 500k on the 640k asking price (in fact I am more interested in other home around the area not this one) but I do think in 6 months this asking price could easily be under 600 and maybe even closer to 550.

http://www.redfin.com/stingray/do/printable-listing?listing-id=895633

thanks for all your suggestions, I love the insight on this blog.

*Affect* the market but who’s reviewing it anyway (IR?).

I think the house is pretty nice. The lot is small, so I dont think you could put a pool in there.

Very nice view from the back. It saddens me to see a very nice lawn turn brown, but thats the way things are going.

2001 price is about 400k…..so I am thinking this may be in the 450k - 550k range before all is said and done.

Its nice up there although that is fire country.

I would be proud to own a home like this.

Near Santa Clarita, hey? As far as LA basin weather, doesn’t it get kind of cold at night in winter and really hot in the summer? At least you’re close to Magic Mountain.

I concur with IR’s housing analysis.

My concern is what happens to the Market in 08.  I think it may continue to go up for a short while at the start of 08, I’m worried downside risk w bears taking over if recession takes hold.

What do you think the maket will do?  Should I be worried for 08 and get out?

This is the best post and responses I’ve seen all year.  And I’m not saying that just because it’s January 1, haha.  Reasonable, logical, and well thought out positions, rather than “I wouldn’t pay more than $1000 to rent that cracker jack box…” 

I do have a different opinion than Graham.  Unfortunately, I don’t think the masses will wrestle through any life changing ideas.  It’s in the moral fiber of most Americans today to evade personal responsibility not only for themselves but for society in general.  In short, for most, it will be “It wasn’t my faut, I was lied to, why isn’t the government helping me?”  I’ll bet a dollar on it.

Not as hot and cold as Vegas!  I don’t care if I ever step foot in this city for as long as I live!

Hope your right…good stuff thanks

Yep.

Fed Gives Tanta a Hat Tip
http://calculatedrisk.blogspot.com/2007/12/fed-gives-tanta-hat-tip.html

Target/Costco isn’t really a good gauge as both are discount stores selling the necessities (ex. no matter what, you still have to buy food to eat, some kind of kid clothing in their new size, and stuff like towels).  A better gauge is the non-necessities type of stores (ex. handbags, designer duds, etc.) which seem pretty quiet.

Travel agent is interesting.  Boomers probably do have lots of cash, and are also more likely to use a travel agent (ie. internet & computers too confushing for many of them).  Be interesting to know how the online travel places are doing for the younger crowd who don’t have their homes paid off.

The bottom of the present decline is prices is independent of present prices or prices within the last couple of years, or the past will not dictate the future.  The bottom will be determined by many factors, affordability, availability of credit, rental rates, etc., but a percentage drop or an amount drop, or previous prices are irrelevant.  If you are thinking of buying a home in the future, it will be a mistake to base your decision on any particular percentage or price drop.

Hello IrvineRenter

I am most curious about your prediction of a severe local recession.  How local do you mean (Six Counties - LA/Orange/Riverside/SB/Ventura/SD Counties?)?  Also…how severe?

Do you think it will be as bad as the one in the early 90’s?  I was working for Glendale Federal Bank at the time (which no longer exists, of course) and we had a TON of bad residential AND bad commercial loans.  I would drive up and down Ventura Blvd. in the Valley looking for lease comps and all I could find were vacancies - but no one was signing leases, and properties were not selling. 

Unemployment is still fairly low in SoCal.  Do you see it headed up to…say 8% or more?  At those levels, folks, the pain is pretty real and deep.  Might not seem like a huge increase, but it is, and everyone will feel it.

If you plan on dying in your next home, then a short-term lease definitely isn’t a good idea…

http://en.wikipedia.org/wiki/Recession-proof_industries

*Entertainment
*Necessities: food/grocery stores/chains

I was at both Target and Costco in Irvine on New Year’s Eve, doing some food/entertainment shopping.   

It shouldn’t come as a suprise to hear that cruises and trips to Disney World are hot at the moment.  “Entertainment” has always been a sector that thrives during economic downtimes.  Escapists, the lot of us.

Ok, so we are making predictions. Mine is…

The banks will panic and go fire-sale on their REOs when Countrywide and/ or WaMu goes BK.

We have an office betting pool on who goes down first and those two lead the league, but it could be one (or more) of two or three dozen. They were all playing a high stakes game of hot-potato and we’ll know in the next couple of months. I’ve got WaMu ‘cause they gave me an obscene HELOC with a one page form in 2004 along with everyone in my hood. I sold and never used it, but that kind of -0- underwriting has to take them down, IMO.

Happy New Year all.

I found this site by reading slate.com a little while ago. I know this site has been mentioned at least twice, maybe more, by that site.

The first mention is here http://www.slate.com/id/2171235/

with a wonderful title: “The Real Morons of Orange County…
Why America’s most reckless real estate investors come from Irvine, Calif.”

What was the difference between the lowball offer and the full list price?

Call her a f’n idiot for me, please. Did she not remember that nice rule in negotiating? Always be prepared to walk. Did she get emotionally attached or something and forgot to use that big forebrain us humans have? She just fell into the trap that caused this whole mess the market is in right now! OMG!!

That kitchen if fugly!! Can anybody spot hardware on those cabinets?

Also, haven’t the prices dropped faster than on that chart, so horrible tho it is, it is overly optomistic?

IrvineRenter:

I presume that if rent inflation averages 5% instead of 3% then the bottom where the two lines first touch each other may move up by 1-2 year at about 3rd quater in 2010?

I agree lawyerliz - I think we can influence it, but that is just the nature of mass psychology. 

In any case, the media helped inflate the bubble to absurd and unsustainable levels in the first place, both due to the usual mass psych effects, and also because the media itself is very much biased by the overpowering influence of REIC advertising dollars. 

The people who will be complaining will just be lashing out and ignoring basic economics to blame the blogger bears; it was never sustainable for LA’s median housing price to be 10x the median income, prices had to revert, and you can’t sensibly blame the media for that, other than to blame the housing bulls and the other members of the REIC for inflating the bubble in the first place.

capocorso:

Make sure you check with a good HOI agent on getting insurance for this place.  not just a quote, either—verify you can get coverage.  In addition to the old tricks, the insurance companies run a google maps (no kidding) to see what you’re surrounded by and may deny coverage… heads up - I had that happen to me and scrambled to get an overpriced policy.

It depends on what measure.  I hate median sales price as the mix is weighted toward what’s moving, but it’s one of the few with deep history.  I saw an analysis of OC’s “median listing prices” on Lansner’s blog (OC Register real estate/finance guy) that was more than 20% below the median sales price (reflecting a complete lack of movement in the lower end of the market).

Flippers (or would be Flippers) who bought at the peak can get out of these Investment ATM properties if they can find some poor, unfortunate, oblivious KnifeCatcher to offload it to.

Blogs like this can have a great effect. With more information, a prospective buyer can decide if it is the right time for them to buy or not. I am sure there are many who would have bought one of these “deals” had they not done their research on IHB or the like.

Zoiks, I found it funny that in one paragraph you refer to a game called, “who’s the Biggest Dummy?” and in the next you say your friend’s mom played and lost. It sounds like if she bought at the Bank’s REO price, then she won. She is “The Biggest Dummy”.

i’m not sure knife catchers at these prices are smart enough to even consider a blog like this

you have to accept the fact that most people here still look at us as crazy bubble heads

Mr Vincent: It saddens me to see a very nice lawn turn brown, but thats the way things are going.

Our utility has asked customers to voluntarily conserve this season. Grass is a very thirsty thing. I’m not removing my grass; no reason we should have dirt in front of our homes. But doesn’t golf-green lawns in arid semi-desert California seem like a little Pollyanna-ish?

We have new timed drip-irrigation in our gardens (the fringe around the property) and timed sprinklers in the lawn using ancient steel pipes that are past their lifetime. We turn off the lawn sprinklers half the year, and the other half the year we run them for fifteen minutes twice a week.

I don’t suppose any one on this blog has considered installing a greywater system. My wife and I are be interested, but the permitting authorities are so unfamiliar with it that (almost) all the existing setups are essentially illegal. We want to do it right, but not necessarily be on the bleeding edge of the legal and permitting headaches.

Why not Santa Clarita?  It’s the other California city most like Irvine.

Just think of the celebrities you’ll rub shoulders with at the Lucky supermarket: Tiffany. Jerry Mathers. Jamie Lynne Spears!

She definitely got emotionally attached. The difference between ask and original offer was 65k. Yes, she’s not a good negotiator. The ability to walk is the number 1 most advantageous thing to have for negotiations.

Also, I had told her the bank wouldn’t take it. It’s like I’m a freaking psychic or something.

Don’t forget also you need to expect a serious discount on a bank-owned neglected property like that, should you decide to buy right now. IMHO, it’s priced too high, especially since it’s REO.

Also - it’s in Castaic. I mean c’mon, you know?

Try your hardest not to get emotional and apply calm, cool, clinical logic.

I’m somewhat skeptical of the “Americans Are So Much More Irresponsiible These Days” explanation to the current housing price bubble. Ponzi Scheme was pulled off 100 years ago. The Tulip bubble happened 300 years ago. In my opnion, there has always been people who are greedy and shortsighted.

This is not to say that culture does not matter, but that I’m not convinced that Americans were virtuous and hardworking in 1995 and then within 10 years became shortsighted and greedy on the aggregate.

That being said, I agree with you that it is important for individuals to make sound financial decisions.

My bet is on Countrywide.  Have you seen the “We’re Stong…” commercials they’ve been running day and night?  When you see a company running prime time ads to tell you that they are still in business, you know the clock is about to strike midnight.  Countrywide—BK within 180 days.

I think it’s that the intelligence of the average american is pretty dang low, and the financial intelligence is even lower. It’s not being able to fully understand what something is going to cost as well as not being able to delay gratification.

Countrywide’s business will slow down, sure, and people will be laid off as business slows, but people will always need mortgages. I don’t see them going BK, just going through a round of large layoffs or two.

I presume you’re talking about equity markets: Don’t get out!! Buy buy buy!! As markets decline, buy even more! As always, diversify.

IrvineRenter,

According to you, Chris of Beacon said “Prices must and will fall. Everywhere. Probably 25% to 30% from their peak.”

You are saying ” Between 2008 and 2009, I believe we will see a 28% decline in the median home price”

This is a big difference!  Considering the market has come down at least 10 to 15%, your prediction is 38% to 43% from peak just to 2009, which is about 70 to 80% higher then that of Chris.

With that much difference, he might just call you crazy…

I am not giving my opinion here. I just want to make sure we are comparing apples to apples here.

An afterword…

As of Monday, August 24, 2009,

“I will make the not-very-bold prediction that 2008 will see the worst single-year decline in the median house price ever recorded.”

2008 was certainly a record maker. Some markets had falls of over 60 to 70 percent in prices. The notorious sand states- California, Nevada, Arizona, and Florida have seen some of the most catastrophic declines in home values since this collapse. The State of California alone is facing very grim financial prospects and insolvent municipal governments. Some state that close to 1/3rd of all mortgages in the US are now underwater. Deutchbank estimates that by 2011 the number will be 1/2.

“another not-very-bold prediction for 2008: one or more of our major financial institutions and one or more of our major homebuilders will fail”

There is no longer a single independent investment bank left in the United States. The last one was Morgan Stanley that Converted into a bank holding company to accept Federal Troubled Asset Relief Program funds(TARP the bailout that was approved by congress and President Bush late 2008). Every one of these institutions have either been bought by larger banks or declared bankruptcy. AIG a primary insurer for these banks declared bankruptcy as well. Many of its shares are in the hands of the Federal Government. Indy Mac, Freddie Mac, and Fannie Mae have all gone into receivership and are owned by the Federal Government. Washington Mutual, Countrywide, and Wachovia have all been purchased by larger banks after each of their collapses. It is still uncertain whether or not Bank of America is solvent enough to continue after its acquisition of Countrywide. The economic shockwaves in Europe are still crippling the continent. As an aside, the Nation of Iceland declared bankruptcy and dissolved its parliament from these events. As for home builder bankruptcy, the entire industry has estimated that 2009 will see over 90 percent falls in sales. Subsequently layoffs and bankruptcies continue to occur in this market sector to this day.

“My next not-so-bold prediction: a severe local recession”

While the unemployment rate has fallen to 9.4 percent, it is estimated that the real number is closer to 16.9 if discouraged workers and underemployed people are taken into account. In many parts of the country unemployment has hit over double digits and in some parts over 1/5th are unemployed. Until April of 2009 there was a sizable tent city outside of Sacramento along with several major cities in the US. The populations have for the most part been dispersed or helped into newly built homeless shelters. 

“For my final not-so-bold prediction for 2008, I predict we will see many more angry homedebtor’s troll the blog.”

By August of 2009 there are hardly any angry homedebtor’s that troll the blog. Most people see that IR was just about right. If there was something IrvineRenter was wrong about, it was the actual severity of this collapse. To be fair, he does state in an Aug 25th, 2008 post that he was wrong. He admits the situation was much worse.

http://www.irvinehousingblog.com/blog/comments/i-was-wrong-its-worse/

Many of us are bracing for a cold and potentially disasterous second phase collapse in the fall and winter.

One last thing,

His blog is so well known that a small group of people across the country now know of it and visit it daily. I am one such person.