Hey-Hot off the press!!
Gary Watts looks forward to 2008.
I am positive on re in the long run but even I like some credibility.
Don’t shoot the messenger. This should be classic as to the responses here.
Enjoy!

Eyeball: What’s your outlook for the O.C. housing market?

Gary: My forecast for 2007 appears to have been too rosy!
Gary admits he was wrong.  First sign of the apocolypse.
Eyeball: Any “off-beat” economic indicator you’re watching now for signs of recovery?

Gary: The number of foreigners taking advantage of our cheap dollar and low prices to buy our undervalued real estate.
Ah, those furriners.  Buying all those tract homes in Anacrime and Santa Ana.  RIGHT!  THEM!
 
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They skewered him pretty well on Lansner’s blog. I don’t have much to add. I am surprised anyone can take him seriously. It is akin to asking Richard Perle what would happen if we invade Iran. He was so totally wrong on Iraq, his judgment cannot be trusted. Gary Watts was so wrong for the last 2 years, his judgment is beyond suspect. The guy makes a living predicting prices will rise. This works well in a bull market, but not so well in a bear market.

Where is awgee when you need him??

There are some real gems in the responses to that column.
crispy&cole says:
Where is Pat “Taco Industrial Complex” Veiling? Can we get his opinion (spin) too?
george says:
Inventory is through the roof and pool of qualified buyers is way down.
This is not a formula for stability. This guy is an idiot.
<cite>lessismore</cite> Says:

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<em>For all his puffery, Watts is correct about one thing: There is “pent-up demand” - lots of us want to buy houses in OC. But, you know, I also have “pent-up demand” for a Ferrari 599 GTB. That does not mean it makes financial sense for me to buy the Ferrari. Just like it does not make sense for me to buy an over-priced house, no matter how much I want one and no matter how many stupid lenders will give me the money to get it.
Brice Says:
Having had dinner a few months ago with a prominent CEO of a local home builder a comment he made was extremely hilarious “I knew the game was out of whack when I saw strippers carrying century twenty one business cards driving mercedes”
<cite>Charles</cite> Says:
Gary - I’m not sure in what areas Realtors service who raise their hands when asked if they have prequaled a buyer. I work out of a broker’s office in Anaheim and couldn’t begin to tell you how many transactions have dropped out of escrow because the buyer couldn’t get the loan.
I can’t post anymore.  I have to go do something productive - fold clothes.

Actually I did a closing with a stripper back before Aug 9/10 and she reported all her earnings, and she did very very well financially.  She called herself as being in "entertainment" on the application, which is whitewashed but true.  The broker found her very easy to qualify.

“Where is awgee when you need him??”
I am right here with you buddy.  Right here whenever you need me.
Watts was right once, about eighteen years ago when he called the last real estate downturn.  He is right less often than a broken watch.

That is twice a day and you are correct in that he is right less than that.

Actually his stats were very accurate for the last 10 years. When many experts were calling for a decline he was correct in the appreciation numbers. His problem was that a couple of years ago he started believing his own PR.

As a side note, last week I made an offer for a client of $900K on a $1.2 million listing in south county. large lot, single level, no mello-roos. They sellers didn’t even counter. Part of the problem is that it was a 2 week old listing.  I get as frustrated as many others on this forum do when both agents and sellers just don’t have a clue. We will see if they get the message in a month or so.

I will keep you all posted as to action “in the trenches”.

Enjoy!

" Watts was right once, about eighteen years ago when he called the last real estate downturn."

Is this true? I know it is commonly believed, but does anyone have any documentation or actual memory of him doing this? Graphrix suggested this may just be a myth, and I have not been able to find any real proof he did this. Anybody care to find an old newspaper link or something to prove it?

Actually, he has been right more often than that.  I do not have proof, just memory.  But it is fun to say that he is right less often than a broken watch.  When someone starts paying me for my predictions and opinion, I will be more accurate and less hyperbolic.

Gary did predict the late 80s decline when nobdy else would believe that things would slow down. His nickname became “Scarey Gary” because of his negative predictions. At that time he was a contrarien and that got him notoriety. He then beat most of the major economists and forecasters which upheld his sucess rate.

He gave presentations 2 times a year and I have heard most of them since the late 80s.

I was there and remember it well but don’t have much in the way of proof to refer to. He was mainly listened to by agents and investors.

Enjoy!

When did he decide to simply become a shill for realtors? Was this a development of the bubble? Also, when you read his analysis, he is obviously totally clueless. Did he get lucky in the late 80s, or did he dumb down his analysis when he decided to become a shill?

"Scarey Gary"....I like it !

IR
He is not a "shill for realtors".
Gary is a broker and deals mainly with investor clients. He began his forecasts for his clients and became somewhat of a local "Guru" by calling the earlier downturn. As far as being clueless I have a recap of his predictions and he has been pretty accurate up until mid 2006. His overall averages beat UCLA and Pepperdine real estate predictions.
I am not waving a flag but sometimes facts do help prove a point. Many professionals and government types totally missed the implications of the sub-prime mess. Most bears missed the upside due to constantly believing the crash would occur and missed 5 years of appreciation and potential profit between 2000 and 2005.
As I have agreed not to use rose colored glasses neither should one use blinders. There are now and have always been cycles in real estate, and business in general, and this one appears to be "bigger and badder" than prior ones. Profit can be made on the upside and the downside if one really focuses and does not to follow the herd.
Gary Watts’ forecast for 2007/2008 marks the 34th year of bringing to the real estate industry his outlook for the resale housing market. More than just forecasting appreciation numbers such as those below, Gary looks into the various factors that effect real estate values and growth. These detailed searches point to various trends in housing. From those trends, he forecasts what is most likely to happen.
For the record, here are his appreciation numbers compared to actual numbers since 2000:
                    2000  2001  2002   2003  2004   2005   2006   Totals:    2007
Forecast:  12.5% 12.0% 10.0% 15.0% 25.0% 15.0% 15.0%  102.5%   7%
Actual:       13.0% 10.1% 16.8% 19.1% 24.8% 16.5% 3.4%    104.1%   1.9% (as of Aug. ’07)
It is hard to follow the addage of "Buy when everyone else is selling and sell when everyone else is buying" but can be very rewarding.
Enjoy!

“I am not waving a flag but sometimes facts do help prove a point. Many professionals and government types totally missed the implications of the sub-prime mess. Most bears missed the upside due to constantly believing the crash would occur and missed 5 years of appreciation and potential profit between 2000 and 2005. “

This is exactly why we needed a bear on the board.  Thanks XS for being the voice of reason.

The market might of been overbought in 2000 and that didn’t stop it from continuing to run up another five years.  Just like the stock market in the late 1990’s when I pulled the plug in 1998 - two years and a couple of months too early.

That doesn’t mean that Gary’s forcast is currently credible.  If someone is giving you directions and they get 90% of it right, you’ll say they weren’t any good.  This is the same deal - he missed the last turn and drove off a cliff.

No_Vas

Thanks. I think that many of the bears will be surprised in the future when it is hard and expensive to obtain a loan and even though prices are low the mentallity will be to wait. An example was a couple of years ago you could get a 30 year fixed loan at a little over 4%. That was a historical low but I know people who wanted to wait for lower rates or went with adjustables. You didn’t have to be a rocket scientist to realize that there was only one way for rates to go and that was up.

Gary based his numbers on the underlying economic information and somehow didn’t read some of the day in day out evidence that was popping up in the market late 2005 or early 2006. He may have been somewhat cought up in his semi celeb status.

In the future this may bite some of the bears since it is easy to over analyze the market. There is still a certain amount of “seat of the pants” thinking that seems to do well in decision making.

Enjoy!

xsc,
The problem as we see it now is mobility.
My dad and I were talking a couple of months ago and he made the comment he felt bad for me and his other three sons.  His comment was it used to be when you bought a home it was because you were ready to strap on for 20 years of payments and then move in.  He recognized that the work world is much more fluid now than it was then and it was unrealistic to assume you’d be in the same spot for 20 years.  Which was exactly my problem - I couldn’t justify a property that was so cash flow negative and couldn’t eat the short sale bill because the ammounts we are talking about are so big.  The possibliity of relocation was so big it stopped me from buying, among other things.
If I had my way, I’d move back to the Fresno area to be closer to my family and buy back my home I sold in 2001 for $68,000 (that today sells for about 80K).  Problem is, I’d be unemployed and so would my wife.  Plus, I’m sick 200 or so days a year up there because I have a bunch of allergies that aren’t a problem in SoCal unless the Santa Ana’s blow.  Ohwell, that’s life.

No_Vas

Its is very hard to understand where we are in the cycle until we look back. I have sold several properties based on my perception that the market was near the top only to see it move up further. Better to do that than get caught holding when it is going down unless you are in it for the long run.

Mobility is a new factor in life decisions. It does put a new spin on the decision to buy or rent. There are times that either renting or buying based on personel needs rather than market timing should drive the decision.

Housing will always be driven by employement generators like SoCal which will keep demand and prices higher than in areas that were “investment” driven. It is a viscious circle as you said, both you and your wife generate income but have to compete against others in the same boat for housing.

Operator error!!!
To finish my thoughts: SoCal in general and the coastal areas in particliar will continue to hold up better than IE and other inland areas due to jobs and demand for the coastal lifestyle.
It will be interesting to see where some of the bulls are in 2009 as far as buying, waiting, or just plain stuck in the same old rut. Following the herd is easy and I see a lot of it here.
Remember that if you are not the lead dog-the view never changes.
By the way I am going to the Barrett-Jackson auction for the first time since I now live a little over an hour from West World.  That might be a whole new thread as to value and spending when it comes to collector cars. Many of them have inflated many more times than housing and there are no signs of it leveling off.
There is a lot of money available in this country.
Enjoy!

xlm - Interesting that you would mention the Barrett-Jackson.  I have been planning to watch this year to see if those in the higher income brackets are spending like they did last year and the year before.

“As I have agreed not to use rose colored glasses neither should one use blinders. There are now and have always been cycles in real estate, and business in general, and this one appears to be “bigger and badder” than prior ones. Profit can be made on the upside and the downside if one really focuses and does not to follow the herd.”

Agreed.  I also have to agree on Gary Watts.  He is usually good at analyzing economic factors contributing to the local IC housing market, but I think he completely failed to recognize the influence that easy credit was having and the inevitable and historical consequences of easy credit.  I also think that most are failing to recognize that business has also taken advantage of easy credit and the excesses incurred in the corporate credit markets have only begun to retreat.  But it is alot more fun to call Watts a moron than it is to be reasonable.

Also, I don’t know if folks will not desire to purchase at the bottom, but it may be unattractive to do or they may be precluded from doing so because of interest rates, high prices on neccessities, lack of down payment, extreme tightening of loan standards, etc.

Telling Good Analysis from Bad

I suggest you read the post I did about Gary Watts analysis a few months ago. As someone who routinely purchases market studies for the acquisition of raw land parcels subject to real estate development, I would never use him. In fact, none of the developers I have ever worked with in Southern California do. Compared to Real Estate Economics, Developers Research, or John Burns Consulting, he is a joke. If I were to go to an acquisition meeting with a proposal backed by a Gary Watts report, I would expect to be fired.

It isn’t just me who has issues with Gary Watts. Chuck Ponzi has ripped on him as well.

Gary Watts is clearly a shill of local realtors. He puts out puff pieces used by local realtors to dupe buyers—nothing more. He has a counterpart in San Diego name George Chamberlin. Rich Toscano at Professor Piggington has exposed his BS on numerous occasions.

xlm,

Whose actual appreciation numbers were you using in your chart? I know for instance that Data Quick has the median down 7% comparing mid-Dec. ‘06 to the same time ‘07 and was wondering what to compare it to. Also appreciate your point of view and posts.

awgee

It will be interesting to see if the wealthy dudes are still spending the big bucks on the hemis and 427 vettes and older shelbys. They may do this to beat inflation as their money is in a tangible asset that can be sold with no tax consequence. There is also the ego premimium. I am excited about attending just to see the cars in the lot and the for sale area. I will keep you posted and take some pix if there are any cars that interest you.

caliguy

I copied the numbers from a google search on Gary Watts. They were pretty close to what I remembered.I am not sure where the actual figures came from. Thanks for the good words.

IR

The point I was making was that his information was never aimed at being first tier research such as the companies you mentioned along with Gobar, Market Profiles or people at that level. He is kind of a “pop culture” guy. That is why I wonder about all of the comments here since he really has little credibility. What kind of product to you buy land for?  Public or private company?  Just curious.

I work for a private developer. We do a lot more looking than buying right now. Raw land is coming down to land bank prices all over California. Most buyers are waiting as there is little urgency to acquire any properties. They know they won’t be able to sell them to the builders for several years. I see a lot of wishing prices on raw land. My company is planning to purchase a few select properties this year and more in 2009 and 2010. We will likely be negotiating directly with lenders on foreclosed properties as we have been reviewing a numerous properties with debt on them. Given the negative residual values all over Riverside county, few of the property owners with equity positions are motivated to keep making payments.

I’m sorry, but I don’t buy the "scary Gary" story. I have searched high and low for an article in the 90s that quotes him. I have never been able to find one, and it wasn’t until late 2004 that his name comes up.  A Lexis Nexis search confirms this. Some of the regular IHBer’s can attest to how good my google-fu skills are, and how I can find just about anything. Especially if it is a craigslist ad.

Here is the puff piece from the OCR to get him some free advertising.

[url=“http://www.ocregister.com/ocr/sections/news/news/article_520497.php”]

High Hopes For Housing. May 15th, 2005[/url].

In the fall of 1989, Watts told a large group of real-estate folks packed into a Laguna Hills auditorium that O.C. prices would fall.
He expected it to happen within one year and span at least four years.
Watts further shocked the audience when he said values in some neighborhoods could plummet as much as 40 percent over that time.
Dave Knox, who was working in the title business, was at the event.
"I can’t say I believed him," he said. "Nobody wants to hear that the party’s over."
Did this really happen? I do not know. Typically any lecture or forum, would be advertised somewhere. Does anyone have evidence that Gary predicted the last bust? Maybe, a newspaper article, advertisement, or an old market report/flyer? There has to be something out there.

And he’s no star among the local real-estate seers. After three decades of forecasting, his popularity is pretty much centered in south O.C.
Esmael Adibi of Chapman University in Orange has been predicting local housing prices for decades. He’s not familiar with Watts’ work. Neither is Al Gobar – a venerable local real-estate watcher since the 1960s.
Watts knows that no one in his game is correct all the time. For example, his crystal ball didn’t reveal the housing slowdown that hit O.C. in the second half of last year.
So how would Watts define the art of housing prediction?
"Educated luck," he said.
I find it ironic, that I can find quotes from Esmael Adibi, John Burns, and Walter Hahn from the 90s, but nothing from Gary. The "no one wants to hear doom and gloom" excuse doesn’t work, because all three of the other economists have had a pessimistic opinion at various times. Granted, Walter Hahn has had his head in the sand more than once, Adibi has been overly optimistic in the 90s and too early with pessimism this cycle, and John Burns has been consistently cautious at the right times throughout his career. And, having worked for a homebuilder, I can say I never once saw any of Gary’s economic reports used to determine the market. They used John Burns and Mark Boud’s reports for the market outlook. I would imagine IR is correct, and if someone brought his report, they would be fired. Well… maybe not fired, if they brought it as a joke.
I love to bring this one up every time his name comes up.

Bullish on O.C. Home Prices. December 15th, 2005.
Anyone waiting for a major spike in foreclosures to buy a discounted home should forget it, said broker Watts. "They’re not going to see it," he said.
Two years later, with an ever increasing amount of foreclosures, OC will break records this month, and in the year to come. Check another one off in the wrong box for Gary.
So… until I see proof he called the last bust, then I am not buying it. At least he could be man enough, like Walter Hahn, and admit his head has been in the sand.
You would think, someone with "advanced" studies in psychology, would recognize overly optimistic probability bias. I read a paper titled, The Totalitarian Ego today, and it reminded me so much of Gary, that it is scary. Don’t let the scholarly paper scare you, it is a fun read. How can it not be, when the author cites Orwell and Vonnegut? Of course, a real economist will appreciate the Tversky and Kahneman citation. I wonder if Gary would?

“They may do this to beat inflation as their money is in a tangible asset that can be sold with no tax consequence.”
If you sell an automobile, (personal property), for a gain, you are required to report the gain as capital gain and pay the requisite tax on the gain.  If you sell an automobile for a loss, you may not deduct the loss unless you can show that the car was purchased as investment, (business), property.
Nice, eh?
Thanks for the thought, but I do not want to purchase any car(s) right now.  But, if it wasn’t tax season, I would be inviting myself to go with you to the auction.