All Forum Posts by: Ken DiPietro

Please note - the delinquencies are not Sub-prime or alt-A — they are Prime, the highest quality borrowers possible.

A half century of housing starts.

Courtesy Ritholtz.com

Mike,

Thanks for the response. Being a member of this forum ensures that I will continue to learn something new every single day.

The first link you provided is titled "Financial experts say recession ends by year's end" and seems to be inline with many of the projections here. I'm sure you realize that financial experts are not the administration nor are they actually part of the media and that financial experts have occasionally been wrong in the past.

The second link you provided is titled, "Obama sees US economy moving from recession to recovery" and neither of these articles confirm your original claim that the media or the administration are saying, "that the recession is over" but you certainly knew that.

If it makes a difference to you, I did not vote for the president, I do not support a lot of the policies this administration is implementing but I am willing to give it a chance, because, in the final analysis, that is what we are going to have to do, isn't it?

Mike,

Perhaps you can find me a quote where anyone in the administration is saying that the recession is over because what I am finding is exactly the opposite of what you claim. As an example, here is an from the day before yesterday titled "Recession far from over, Obama says."

One of the truly remarkable things about this forum is the experts here who have earned their credibility and our respect by repeatedly providing both the best information as well as excellent analysis.

Conversely, members here who routinely provide misinformation, inaccurate forecasts, and/or sloppy analysis generally find themselves marginalized and ignored.

It is my hope that neither of us will find themselves in that latter category because to be quite honest with you, I find that having access to this incredibly high quality information and advice to be invaluable.

The best, credible, estimates I am seeing concur with Dave's post. It should be pointed out that the rate of inflation (again, as Dave mentioned) seems to be determining the rate of deflation.

One of the resources I regularly read segregates the different segments into high, medium, and low appreciation tiers so as to be able to differentiate what the projected deflation might look like.

On the lowest end of the scale, the 10 to 20% decrease in average pricing is what is projected by this group. In the medium tier, we might expect to see between 20 and 35% before prices stabilize but the highest tier could see (in the most extreme cases) 60% loss in average value over the next 24 to 36 months.

It should also be pointed out that there will most likely be a drop below what the real market value of these homes should be in many areas as the momentum will carry prices down past where the real bottom should lie.

In case anyone might have missed the news...

Jeff,

Thanks for bring that information up. In fact, this is in-line with the information I am seeing.

The two to three hundred thousand number I quoted earlier is what will be added to the already in foreclosure inventory over the next four to six months, (or what is considered to be the peak buying season) directly due to Alt-A and Option ARMs. The problem is that this will continue to add as many as another 50K homes per month to the housing inventory, perhaps for as long as the next three to five years.

While I do believe these properties can and will be absorbed, the effect they have on the lower priced range of homes interests me as does the potential effect this will have on any appreciation that we might forecast over the next several years.

Okay, this is an interesting assertion to me.

It is/was my understanding that as residential real estate values decrease, rents will follow, albeit on a delayed schedule. If this is the case, the best possible scenario for residential real estate would be a duration of one to two years, based on the length of the lease.

Did I make a mistake in assuming that rental rates will decrease in down markets?

Richard,

I agree that trying to buy at the absolute bottom of the market is more of a fool's errand than anything else but I'm more concerned about a false bottom occurring. In fact, this is what we touched upon initially with the probable coming of a second wave of foreclosures.

Hypothetically speaking, let's assume that this buying season gets off to a good start. Supporting this, we have the federal government's 10% grant program for first time home buyers adding to the motivation, a housing inventory that screams buyer's market as well as what appears to be consumer confidence making a rebound. Add to that the group of people who are beginning to believe that the current prices are too good to pass up and I can see sales ratcheting up.

Now, three or four months from now another two to three hundred thousand homes get foreclosed on and added into the inventory, in addition to the ones that have been backed up during the foreclosure moratorium. These homes are in the mid to high dollar range and as one would expect the prices get cut (appreciably) slamming the entire price structure all the way down the market.

As you mentioned, for the single home buyer who plans to hold their properties on the longer term, this really isn't a problem. For the investor, knowing that rental income will decline with the value of housing, and that they will be upside down, this sounds like it could be a real challenge moving forward.

Again, I am still trying to become educated enough to plan the next several moves and I do appreciate everyone's input.

Richard,

What you have described is exactly what I am trying to work through. What I can seem to rationalize is why I would start investing in real estate now, betting on the inflation/hyperinflation happening when we also are apparently looking at a continuing deflation of the housing market.

Add to that my concerns that there will be an unsecured debt crash, which will deflate most other hard goods (er, cars, boats, TVs, etc.) and the question becomes when is the right time to invest?

Of course, the question always has been, when is the right time to buy and sell, hasn't it?