Chuck Ponzi January 16th, 2008

Last year, my predictions for 2007 Southern California Housing turned out to be of all things, too optimistic. Let’s take a quick peak back at my predictions with respect to the most recent Dataquick information.

1. The bubble will or will not burst depending on your definition:

Predictions:

Sales Price: Down 5-7% correction

Sales Volume: Down 10 to 20%

Actuals:

Sales price: Down 13.3%

Sales Volume: Down 45.3%

Comments:

I whiffed this one. I believed strongly that we could encounter a credit event at some point in 2007, but as all events are, they are hard to anticipate exactly how swift they will start or end especially a year in advance. I was way too optimistic in 2007, though not nearly as optimistic as Gary Watts who predicted a 7% increase in prices.

I think that no matter whose definition you are using, the bubble burst in 2007. Only Gary Watts can’t see it, and he’s got to be the only person in the entire world who cannot see it.

2. The Subprime Mortgage market will shrink considerably.

Volume Prediction: Down 40%

Volume Actual: It has been difficult to find a reliable source that can be quoted, as even the MBIA doesn’t have a grasp on what happened in 2007 yet, it is safe to say that subprime was likely much more than 40% off from 2006. Many of the major subprime companies went Tango Uniform this year, while those that (somewhat) survived have been castrated (Countrywide total volume was halved, subprime near nonexistence)

Comments:

This again was unpredictable due to the sheer volume and speed of failures of subprime lenders. It is very likely that subprime will contract back to its 2001 or 2000 originations volume, which is about a 95% retracement. Reversion to the mean.

3. Gary Watts will not realize how bad he is at predicting things, and he will still make a lot of money this year.

Comments:

This is a no brainer. Gary Watts is quite possibly the worst predictor of housing in Southern California. Even the most hardened and staunch supporters were asking questions at the beginning of 2007. If you were completely surprised by last year, I suggest you stop covering your ears and eyes.

Still, I’d like an opportunity to offer as many workshops as he does. He knows no more about the local real estate economy than my 4 year old, and yet he’s highly paid for his “work”. So much for reporting integrity if he’s just doing it for the money. If he really believes it, I have to wonder how he’s able to dress himself in the morning. Normally that kind of mental retardation imposes some pretty stiff limitations on your ability to care for yourself.

4. We will have asset deflation with stable (high) CPI inflation.

Lead story on Yahoo finance today was titled: “Inflation Rate is Worst in 17 Years“. Housing prices are plummetting in almost every locale.  Nuff said.

5. I will be spending more time on posts

I did… I really did. Sometimes it seems like I take long breaks between, but it’s because I hold down a regular job, run an internet business on the side, am involved in community and church affairs, and I have a wife and 2 young children.

I will be following up shortly with the belated 2008 predictions. Suffice to say, it’s not going to be positive. We won’t be seeing a bottom in 2008, much less a rebound.

• Denial , Mean Reversion , predictions
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