Do you ever get tired of doing something? I know I do. And, frankly, this was it.
I hated writing growing up. Whether it was for a writing class, business paper, work plan, or even my Master’s Thesis. It was mostly plain drudgery. Mostly because I wasn’t interested in the topic. Nothing felt natural, nothing came from a desire to say something or be heard. All of that changed when I began my blog in April 2005.
But, enough about history, what’s really going on now? Are we going to all continue to hear from Chuck? Is he throwing in the towel in ignominious defeat? No. I’m just taking some well-deserved time off from writing. If I lost a few readers, I apologize, please come back, but if you don’t, we’ll manage.
I think back to when I started the blog. No one, and I mean no one believed there was a bubble. Only a few crackpots starting blogs on the internet even dared mention the word for fear of igniting a flame-fest of near biblical proportions. We’re talking fiery serpents, here, people. There were even bloggers publishing under pseudonyms for fear of retaliating friends, or worse. Even truly inspirational nerds were publishing under names such as “Professor Piggington” and “Calculated Risk”. Others cleverly disguised their names like Mish or Patrick. No amount of right, history, data, or conviction was sufficient to convince.
I still remember a particularly poignant comment left by a reader that basically said that the housing market was a non issue. Hardly a blip in the screen for the overall economy; a non-story of the 21st century. I mean, honestly, who ever heard of a housing-based economy? How would that have happened in the largest economy in the world? Absurd, I tell you. At the time, it seemed, the question was worse than being wrong, it was about relevancy. I can handle being wrong on a point, but to have it be irrelevant was that worst.
All the while, prophets promising 15% to 17% per year gains into infinity were held up like gods by the financial media. However, the traditional print media likes a story, and a story it got. No graphs, no data, no reason, just a boatload of Gary Watts. And I mean a boatload. His speaking agenda made it so he no longer needed to sell houses. He was getting rich telling everyone else how to get rich.
To me it was the largest story in the economy since the dot-com bubble. And, it seemed the more I researched, the more I realized that the scope was much broader with participation never seen before. Everyone, it seemed, was hoarding real estate. Even stuff they couldn’t afford. All seemed to take out loans that they could never repay in their lifetimes, but properly bet, could make them stinking rich in a few years. If it all worked out as planned. All they had to do was hold out for a few years and then sell.
And then it ended. With a whimper, not a bang.
The merry-go-round just stopped spinning.
Now, as it slows, all of the riders look around and realize that they’re maybe a little sick from the ride. And, it wasn’t that much fun anyway. Now comes the headaches and sickness.
The big news today was big. Bigger than it’s been in many, many years.
1. Two Bear Stearns’ Subprime Hedge funds were obliterated. (1 lost 100% of capital, the other 91% loss of capital). Yes, leverage is a female dog.
2. Foreclosures in our favorite dead canary (San Diego) increased 566% over last year. No decimal places missed there.
This, if anything, is the credit event that I have warned about.
I was skeptical when New bit the dust.
I was skeptical when Subprime was “contained”
I was skeptical, even when ML-implode.com reported a fascinating number of failing lenders.
I am skeptical no more. This, it seems to me, is the real deal.
As Peter Plaut put it
There’s going to be more risk aversion.
So, is this housing story still just some backwater discsussion to our economy? I still don’t think so. Never did.
I hope to be posting on it as it develops even more over the coming years. I still believe strongly that we will see our real estate prices bottom not in 2007 or 2008 as some inexperienced (or wolves in sheeps’ clothing) pumpers in the real estate world would have you believe, but in 2010 or 2011. With the caveat that the banking systems’s ability to produce as many zeros behind our dollars as they wish while doctoring official measures of inflation can shorten even that likely date.
I’ll leave you with this moment of Zen:
“This is a watershed,” said Sean Egan, managing director of Egan-Jones Ratings Co. in Haverford, Pennsylvania. “A leading player, which has honed a reputation as a sage investor in mortgage securities, has faltered. It begs the question of how other market participants have fared.”
John Doe or Chuck Ponzi:
Thanks for the update. I agree it is all over except for the wailing and knashing of teeth for the next 3-4 years.
Post as often as you want and I will keep checking back occasionally.
I echo your sentiments and have stopped talking about the bubble with people.
I don’t think they understand the freight train that is coming down the tracks.
The simply fact is, if you can’t afford an indexed payment, you can’t afford the house.
Thank your for the insightful posts. I’ve followed you since your day’s on Ben’s blog.
Even though you’ve been on hiatus, you’re in my startup websites and will look forward to occasional posts.
Hello Chuck,
I´m in Cancun enjoying the occasional topless sunbather. Put down the axe and relax for a while.
Love the site and link to all the great econ sites and HBB too.
When all this went crazy it was great to go out and find useful information. Rare these days with all the spin.
Try to find information on anything and you are burried falacious crap from MSM and other bull.
Thanks for all the hard work. You can ease up because the crisis is now apparent to everyone and acelerating. We will all get burned by this but at least you helped keep a few people from making it worse.
LAEF2
Thanks for the hard work.
I’m now officially a senior, and I’ve seen several real estate cycles. For those enjoying affordable housing, this is not a doomsday scenario.
The high living and greedy will get burned, but their lifestyles and/or their gamblers’ mentality was bound to be their downfall.
Hang in there. While you’re busy just living, this will slowly pass.
I am curious how 2011 was picked as a bottom for this market. Was this based on mortgage renewal dates?
It is a SWAG.
Based on:
1. Lessons gleaned from prior real estate cycles
2. Knock-on effects of removing monetary and housing-credit related stimulus.
3. Resets and neg-am blow-back.
4. Propensity for markets to achieve MAX PAIN.
It’s still just a guess. I think we’ll lose quite a bit of value on the books next year when the knock-on effects start to really pick up steam.
Confidence is not yet destroyed for the mortgage market, and that will likely happen late this year and early next year. People still believe it is subprime related, when fraud was rampant throughout it all, subprime just resets at least one year earlier than all others. That takes another 6 to 18 months for the full effect to be felt in the housing market.
If anything, that date would be pushed out, not shortened.
People have a tendency to underestimate the full effects of proximate causes. Think the Iraqi war. In and out in 18 months? I don’t think so. So far, the media is vastly underestimating the ability of the economy and general population to absorb the losses we are just now incurring.
Chuck Ponzi
Chuck:
Nice to have you back. I will continue to check in, as I really enjoy your posts.
I plan to buy in 09-10, that gives me another three years to keep on socking it away for my 20% down.
This market is in stall mode. Sellers unwilling to go down on their prices not seeing reality. Buyers staying back and starting to see reality.
Foreclosures are up and they sooner or later are starting to go up for auction and this process is just beginning. Once in auction then the vultures come in and bid low and low and sooner or later a house that sold for 600,000 will be auctioned off for 300,000 or less.
Then the stalled greedy seller who is asking 650,000 for his house will realize that the foreclosed home in his neighborhood just sold at auction for 300,000. Problem is that the more this happens these houses become comparisons and they will, they will, bring down the prices.
The buyer now thinks to himself, Joe is asking 650,000 and the house next door just sold at auction for 300,000, who is the fool?? Wait to buy this thing is comming.
Housing market is overpriced anybody buying in this market pays 4,000 or more a month not including taxes this is inflation but were told there is no inflation? 8 years ago people were paying 1,500 for mortgage now it’s over 4,000 and we don’t have inflation! The housing market is way over inflated!!
Nice to see you back Chuck!
We all have lives outside of the blogs, I’ll still keep coming back – I appreciate your hard work.
Hi Chuck, Thanks! for all you do..
Do you feel high end areas such as RSF, La jolla, Del Mar etc. eventually will be affected by the crisis in the next couple of years?
Wow, for someone who used to dislike writing, you definitely have a gifted mind for writing now!
Chuckie… been with you for a year on the assessment of where this was heading. It’s been really fun now to see all those who thought we were being “wishful” thinkers that a real estate downfall would ever occur in California… Where are all the so call Real Estate experts now?? I saw it happening in 2005 and sold my property to recapture a better situation that I knew would happen. It really disconnected when the sub-prime loans began to be the mainstream and anyone, I mean anyone who understood the nature of this had to see it was going to be short term. I cannot understand how anyone (other than those who bought years ago) thought that an income to housing ratio of 10+ to 1 would get to far. It’s a great conversation to listen in on for those who purchased recently and their disposition… really, where did you go to school. See ya on the surf….