Tha Mama’s & The Papa’s famous tune states- ” I’d be Safe and Warm- if I was in L.A.”
They may be warm in LA. , But How Safe is it really?
Is it Safe to get back into Housing ? Many of the So Cals seem to think so . Currently in our crazy economic times , So Cal is experiancing – 4 STRAIGHT MONTHS OF INCREASING MEDIAN HOME VALUES! Like- Wow ! and how does that make sense? I thought we were in a MAJOR recession? I See new stats that the average So Cal homeowner is so far underwater that a Obama search mission cannot possibly rescue their floundering ship. But yet, prices are going up and Inventory is going down ! Some one please explain how this can be occuring. I will tell you all- Here is what is happening and what will happen:
TULIP MANIA – part Duex
As many know, the first speculative bubble in recorded history is thought to be The Tulip Mania which occured in Holland in 1637- during which a rapid frenzied rise in prices for a new tulip bulb contract gave way to a price collapse that wiped out fortunes for many. Popularized in Charles Mackey’s; “Extraordinary Popular Delusions and the Madness of Crowds” the concept covers many bubbles with the assumption that crowds of people often behave irrationally.
Currently we are seeing a mini REO buying mania in So Cal -and to some degree here in Vegas and the other hardest hit metro areas . Vegas and these other areas are also seeing a inventory falloff due to the Obama stimulus plans as well as a “leveling” of prices. Of course , So Cal likes to go about things “In Style” so this mini drop in inventory causes a panic that “the bottom must be in” and “now is the time to get a great deal on a bank owned home” as it might be your “last chance” to ever see these prices again. This perceived Supply shortfall has caused a Demand Mania. I just came back from a REO conference in Denver and I talked to a couple of big agents in San Diego and Orange County who talked about receiving 30 offers on every single bank owned home that was priced well. 30 offers? on every house? are you kidding? Nope – they are not. As in all frenzy’s, these tales of having to put in 20 offers to get one accepted and 30 offers on every house tend to only augment the size of the mania- it feeds itself. So supply will keep going down for a while and the median price will show a continued rise for next couple months-but the best part is -THIS ENITRE MARKET IS FAKE!
WHEN YOU DROP A FURRY LITTLE KITTY FROM A 60 STORY BUILDING………
Yeah we all know what happens and this current real estate market is right in the middle of this famous quoted “Dead cat bounce” . For the 3 of you that doesnt know what this means-basically when a market collapses it will bounce up only to fall to new lows as each bounce gets a little smaller than the previous one. What we are seeing is exactly the work of a maddening crowd- a crowd that should of took more Economic Courses in College rather than the easy 4 credit So Cal 101 course-”My house is bigger than yours and my wife is hotter too” .
Basically it goes like this … as stated in one of my previous rants http://vegasandre.wordpress.com/2009/08/16/whats-next-for-vegas-a-great-rebound-or-planet-of-the-apes/, No matter what stimulus package is enacted -nothing will get rid of the negative equity-And when we say negative we mean huge- most are upside down over 100k. Another amazing stat is that in So CAL the amount of loans hitting 90 days delinquent IS TRIPLE what is was this time in 2008. Amazing isnt it? and of course the rising unemployment . Parden my algebra but I am curious how severe under water + record 90 days late + record unemployment = increase in median prices. Maybe I should of studied more. Oh yeah – one more secret ingedient to throw into the mix…
A NEW PSYCHOLOGY
A paradigm shift is underway in our society where it is now Accepted and Smart to let your house go rather than working out a solution. At this REO conference I heard from a agent that he is underwater on his 10 homes over 100k each and that he was letting them all go and collecting free rent till they get repoed by the bank. Another agent listening to this gave him a ”Hi Five” and applauded this action. How times have changed- once it was a Scarlet Letter and now it is the “smart thing to do” in many eyes. I heard it all weekend- “hey you can repair your credit in a couple years but how many years to get back that negative equity?”
THE RESULT
Straight to the point- this mini bubble will be our new foreclosures in 2011-2013 and extend this downturn many more years . I guess as a REO agent -I have some job security ahead of me.
vegasandre