"Real Estate Timing Letter" by Campbell
The latest "Real Estate Timing Letter" by Robert Campbell (858-481-3236) just came out. This is a unique and excellent technical-fundamental report by a real estate expert -- Robert was one of the first to call the top of the real estate boom.
Campbell believes we're still at the beginning of a long bear market in real estate. Here are a few of his reasons --
"Real estate downturns typically last 4 to 6 years after housing prices peak out."
"A huge wave of ARMSs are scheduled to be re-priced in 2007, causing a significant rise in mortgage payments and an acceleration in foreclosures."
"A credit crunch is looming on the horizon, which make mortgage financing harder to get. If you contract the availability of credit, the housing bubble deflates.
"After rising by a spectacular 200% during the boom, history almost assures us that the resultant fall in housing will be equally spectacular during the bust."
This is a bearish view of the real estate situation. The Fed will want to counter the fragile real estate situation by flooding the markets with liquidity. Money will be, and is, available everywhere in enormous quantities. The banks are choking on liquidity. And although they don't want to -- if need be (to "levitate" housing), the Fed will again lower short rates. In my opinion, the Fed has been concentrating on housing ever since housing topped out last year. The Fed considers a soft landing for housing an absolute must, and the way to prevent a housing bust is to make money abundantly plentiful.
posted by Dr. Jeff Lazarus MD at 11:53 PM
5 Comments:
I come down between these two positions,one thing i have noticed recently is that hard money loans are getting harder to fund.as far as the availability of money,it may be available,but at what cost? here in california most of our loans are jumbo loans,since GSE's are limited in the amount they can lend.with the avalanche of resets coming,and the subsequent defaults i suspect there will be a higher risk premium for low down mortgages...what was the average down,2% or so?if there is a perception of a better risk/return in some other asset class,the $ will simply go there.double digit rates and a 10% downpayment might have an affect.
If you are waiting for a major price correction in Palo Alto you are missing the boat. If you look at recent jobs data and the fact that there is no more available land to build on it all adds up to a very active market. Our inventory is starting the year at a very low level and yes we still have more buyers than sellers. Markets such as LA and Santa Barbara saw 50% appreciation rates in one year--our market was much more stable than that.
LA saw job gains in the last 5 years, while, Palo Alto and the Bay Area has lost 20% of jobs since 2000. Palo Alto already saw a 50% appreciation from 1996 to 2000, while, LA prices only started going up in 1999, and even today, are only 50% of what Palo Alto prices are. Both LA and Santa Barbara have an ocean, while most Palo Alto homes are too small to even have a swimming pool. Palo Alto and the entire Bay Area are way, way overpriced, and, believe me, there is nothing "special" about this place or any other place in this country. Once, the foreclosures start piling up, and banks stop lending money, the "we are special" crowd is going to be in for a "rude awakening".
oh man this bubble is bursting! I can literally hear it around here in Santa Clara county.
On the other hand, prices are still going up. But I guess that is all part of a housing bubble, right? Nobody says that prices actually have to come down during a bubble burst. All a question of terminology. I myself love the bubble as my house in West San Jose is steadily going up in value. Gotta love it. Yo bubblers.
I was lucky enough to be asked by Robert Campbell to speak at one of his seminars in may 2005.
he told everyone to flee southern california and told them to head to Utah.
i got out at the peak and bought in Utah at the bottom.
the more things seem to change, the more they stay the same. Yeah, this time will be different. More people will get screwed!
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