The following is an interesting and detailed counter-perspective to the article "The Most Interesting Housing Event Since Prices Began to Decline in 2006".  It is thoughtful and creative.


Posted by REinsider:

Excellent report! Brings into focus many factors and most notably the effect of government policy on the markets, both in causing the Great Housing Bubble, and the current Mini Bubble.

However much I agree that prices are being influenced by government intervention, I don't agree that home prices will "collapse" after Nov. 1st (or whenever the $8,000 tax credit program eventually stops).

We would be wise to not underestimate the ability of Wall Street and the Banksters to continue the charade.

Just as yesterday the Senate voted to continue Cash for Clunkers, there will be great pressure applied to extend the $8,000 tax credit(they will extend thru Jan 31st or longer).

GS and the Banksters planned this whole easy-credit Housing Bubble "from the very beginning" (Clinton/Rubin/Summers, repeal of Glass-Steagall, Bush/Paulson and Obama/Summers/Geithner). The game they haved rigged and their "next move" is planned several steps ahead.

Suppose the home buyer stimulus package ends soon, and doesn't get reinvented in some modified form. Eventually the majority of these home buyers (that still have jobs) who were priced-out by the Bubble will have "bought". Eventually even THIS stimulus takes its natural course and spends itself out.

What then? Total market collapse? I don't think so. Maybe some softening, maybe some roll-back of the "gains" (10% to 20%) of the past few months. But systemic "collapse". No. Don't think so.

To be clear, when I talk home prices, for this post I mean homes "affordable" to the 80% majority, which are priced in the "bottom" 20%. A distinction if NEVER see Case-Shiller, nor may pundits!

Here in the SF Bay Area, I am referring to homes priced below $495K. In our Central Valley major metros (Sacto-Fresno) homes priced below $250K. In the secondary markets hardest hit by Sub prime (Stockton-Modesto, Merced-Madera, Salinas) those homes priced below $150K)(now well-below the National Median in these areas).

Everyone (Whitney included) seem to have forgotten the huge pool of Boomer investors well-familiarized with RE investment, quite comfortable with RE for asset diversification/preservation, cash flow, and as an inflation hedge. This group of investors represents a HUGE pool of funds itching to get back on the playing field. Waiting for the "right . And there has been no "stimulus" for INVESTORS (other than a 75% decline in prices down to just 100-125 times monthly rents). Not even a level playing field for most investors. By design!

Sure, Fannie raised its conforming "investor" loan limit from four (R1-4 loans total) to ten. But NONE of the big banks raised their investor loan limits to ten. And NONE will make such favorable rate "conforming loans" to LLC's (investment groups). None! Zip! For us to make a true "business" out of acquiring, renovating, renting, and the long-term "hold" within the safety and utility of the proper professional "entity" (LLC) in an reasonable quantity we have to pay "cash".

Section II of the Post
Whitney, I love that you have a "character counter" for our posts. Unfortunately I couldn't come in under 3000 characters, tried to "edit" it down to finish my point, and decided to "submit" what I had written, and add this post to finish and make my point:

Despite the wishes of the Bears, and the counter-hype of the Bulls I do NOT see any significant "collapse" in home prices within the most-affordable "bottom" 20% of home prices, at least not here in Northern California.

Let me explain:

Despite Case-Shiller's National News-Making Index: REAL ESTATE IS LOCAL (and this fact has hardly ever been more true than it is today!)

Within these NorCal markets cited in my prior post we have seen 60% to 80% declines in prices since the Housing Bubble peak for which our secondary market declines have led the Nation. Remember the 60-Minutes segment on Stockton?

And our primary markets, represent some of the still-strongest job markets in the country (SF, San Jose "Silicon Valley") yet we have already seen 35% to 50% price declines in our "most affordable" bottom 20% in these areas.

This said, since March-April I have seen these "affordable" prices ranges boosted off the price bottoms of Dec-Jan by 10%-20%, which as Whitney so perfectly made the case in this report, is almost entirely due to government intervention (stimulus of various sorts).

The fact that no one mentions, and the case my post is intended to make, is that there has been no "stimulus" (other than today's relatively good pricing, i.e. for investors many opportunities now at 100x to 120x monthly rents, which historically has been the investor-price inflection point).

Therefore, when all the current "first time buyers" buy their homes and get place, OR interest rates rise, affordability drops, and they as well as most of the "owner-occ" market gets priced-out, THEN, and probably only then, will our "policymakers" play one of the cards they have been holding:

Financing for "investors". Financing for "entities" (LLC's). My expectation is this will occur sometime during 2010, probably after next year's summer run-up, as the market slows into the "bottom of the fourth (quarter)".

My HOPE is that our "policymakers" don't' give away the store as they did to stimulate this year's first-time buyer and side-lined buyer driven Mini Housing Bubble. My HOPE is that the Banksters will realize that ALL they have to do is provide an ample source of 6.5% money at 75% LTV. And homes in our NorCal markets, which have ALREADY PRICE-ADJUSTED will fly off the shelf IF they make this money "non-recourse" OR lend to qualified LLC's with no limits as to the "number" of homes per borrower or entity.

THIS is the "Great Back-Stop" card the policymakers are holding against any sort of systemic housing price collapse!

Whitney, love your "Check Spelling" feature too! Wish all the bloggers had this and used it!