Friday, April 6, 2007

In every bubble I've experienced, there is a period of grace at the end, when it is still possible to get your affairs in order. To escape. You have to be paying attention, you need to trust your instincts, but that moment is there.

I do believe it's possible Bend is at that moment.

A couple of days ago, there were three positive economic news items on the front page of the Bulletin. I then turned to my U.S.A. Today, and there were four negative economic news items on the front page.

It's spring, and if houses are ever going to start selling, it is now. But if they aren't selling, we aren't going to really hear about it for another few months. It's still a positive moment in time.

We are the second fastest growing urban area in America. But that information is from last year. You can ride that wave of positive news, but paddling out to sea expecting another big wave is more questionable. There will be plenty of people who will look at the improved sales this spring, and the positive news in the newspaper, and think the lull is over, good times will continue. That's what gives you your opportunity. You have a period of grace.

And if it should happen that they're right, and you're wrong, you don't look back. You at least got out while it was still possible to get out. You at least didn't lose money, and you have removed the distinct possibility that you could be the last fool.

It appears to me that the fundamentals just aren't on the side of the optimists. Reality has a way of reasserting itself. But there is always that moment when the optimists are still in charge, but the pessimists are right. There is no proof, no one knows for sure, but that's the way it feels to me. Feelings can be wrong, but if you wait for the evidence, it's usually too late.

God knows, I could be completely wrong. And I don't have a house for sale, which would color my thinking. And to be honest, I'm kind of in the middle in my own business between the expansion of the last few years, and the cutting back in fear of a downturn. I'm sort of maintaining the momentum. But this feeling I'm having, that this is the period of grace, is very nostalgic and very strong. As usual, I'll wait to take action when there is a bit more evidence, and as usual that may be a little too late. I'm no different than anyone else.

That's the way of a bubble. Everyone tries to play it a little too cute.

15 comments:

MissTrade said...

Duncan, in the trading world we term your "grace" period a "dead cat bounce". A great analogy really, and we are very clearly in the sweet spot of seaonality and the view from the middle is all is fine. Unfortunately, no matter how your cat bounces, it doesn't land pretty. I agree with your assessment and if you are a seller in this current environment, lower your price because it will be higher than the market gives you in a year I do believe here in Bend. Grace is a perfect description. And in the spirit of Easter, I love Grace!!

RDC said...

The other point is that housing cycles are multi-year cycles. Housing prices are very sticky on the way down. As a result you tend not to hit bottom for 5-6 years. Its not a oh its been bad for 3 months and now we have hit bottom and good times are back. This early into the cycle change the trends are not even clearly defined yet, let alone hitting bottom.

Flicka said...

In every bubble I've experienced, there is a period of grace at the end, when it is still possible to get your affairs in order.

**

The above quote is PURE weasel-wash, I haven't been to your bookstore, but from reading your stuff, I can imagine your that christian next door to the Simpsons that always has something good to say.

First of all there is NO bubble, there has NOT been a real estate correction in Oregon since 1983, since then its been up all the time, Bend is 50% over-valued and prices have over-reached the average shmuck. The RICH are NO longer moving to Bend so the easy money is over, the folks who make $11/hr @t-mobile can not afford to buy a home.

There is NO grace in stupidity, anyone who can breath could and did get a $500k loan nothing down, interest-only, var-rate, and this year the payments will reset, 1/2 the homes in Bend will default.

The good lord is not caring for his sheep with Grace here, your jesus inspired chief-cmd'r, said create sub-prime for all Bend, and saw it was good.

Nobody can sell a house that owes more than its worth, so everyone just sits and waits. Waits for that mythical californian with silver saddles, and GOLD dropping from his horse to come into Bend, and all the shop-keepers run out and say "eureka", Bush, I mean god is good.

What affairs can a person sitting on a no-down,interest-only,var-rate loan for $500k on a house thats worth $250K get in order? He cannot sell the house, all he do is wait or walk.

It will be over TEN years before Bend prices reach over the 2005 high, and that is BEST estimate, most of our bend kool-aid drinkers, bought into the loans on the one year get rich flip-plan. Do they really have the patience? Again I ask what affairs can be in order on paying $4,000/RENT for a house that family next door to you is renting for $800/MO??? Soon smart burger flippers in BEND will realize that renters are RICH, and HOME owners are LOSERS.

Duncan McGeary said...

hmmm,

I think you need to read a few more of my blog entries. You've pretty much misread me every which way.

Whether my timing is right -- that there is a last point in time where you can actually sell a house (I called it grace not out of any religious overtones) -- would seem obvious.

If a person has zero equity, then I'd say that moment in time passed -- about the time they bought their house.

Duncan McGeary said...

Oh, an you've got you Simpson's references wrong: I'm the Comic Book Guy!

Flicka said...

If a person has zero equity, then I'd say that moment in time passed -- about the time they bought their house.. - duncan

*

Thanks for the clarification, but the OREGON average for the past ten years for loans has been 88% were zero-down,interest-only, variable, subject to reset in 2 years.

That means that 90% of ALL the homes in Bend sold in the last thre e years HAVE NO HOPE whatsover of 'grace' according to your revision.

So your feel good is for the 10% newbies from old-skool that paid 20% down? Or is your feel good for the old timers in Bend that missed the window to pump&dump up to 2005?


Duncan, not picking on you, your obviouly a nice guy, just like Ned Flanders, but nice guys ...

Flicka said...

Thanks for the clarification, but the OREGON average for the past ten years for loans has been 88% were zero-down,interest-only, variable, subject to reset in 2 years.

**

Whoops I'm sorry, this average is for the past three year's 2003->2006

Unknown said...

I also think your "feelings" are about right, Duncan. Even when the tide is going out there are still waves that push the surf in towards shore. The spring selling season right now is a wave pushing in against the tide.

There is a great deal of optimism now for the spring. There have been a few houses still selling at silly prices. That's why the average sales price is still around $400k.

Now that's not to say that things are as great as they were a year ago. But if you are overextended and thinking about getting out of the real estate market sometime soon there is a window of opportunity in here that probably won't last.

Unknown said...

great stats, bust. where did you get 'em?

Duncan McGeary said...
This comment has been removed by the author.
Duncan McGeary said...

That was my own comment I deleted.

Jason said...

"Oh, and you've got you Simpson's references wrong: I'm the Comic Book Guy!"

Little trivia question here: the Comic Book Guy's real name was finally revealed not too long ago. Anyone know what it was (or want to take a humor-laden guess)?

Unknown said...

bust, the stats i can find reveal that, "one-third of all Oregon mortgages issued in 2005 required interest-only payments, according to the Oregon Center for Public Policy." if you have stats that show this number is actually 88%, i would love to see them because this is a serious disparity.

Anonymous said...

"one-third of all Oregon mortgages issued in 2005 required interest-only payments, according to the Oregon Center for Public Policy." if you have stats that show this number is actually 88%, i would love to see them because this is a serious disparity.

*

I'm NOT going to get into your quote, but OCPP is damn think tank, where in the hell do they get their data? Thier arse.

WRT to quotes I have given "88% of all mtgs sold 2003-2006 were zero-down,interest-only, var-rate" this came out of the Oregonian last year.

I'll try to find some update info,
All me to say this on the subject, this is NOT a public record, and the MTG companys don't want folks to know anything about when you buy a house the ONLY public record is the price you paid, your actual MTG is a private contract between you and the MTG company that wrote your loan.

I believe YOUR 1/3 being interest-only is symbiotic of the fact that you MAY be a moron. Allow me to explain to you what YOUR quote means.

1.) zero-down means what you paid to close
2.) interest only means that during the life of your loan you never pay any principal [ your quote is #2 only ]
3.) var-rate means that over the life of the loan you will get screwed, ..

My figures which came from the Oregonian last year, and at my leisure I'll go back and find them, have nothing to do with your quote. This is an apples and oranges comparision, and proof that you shouldn't argue with morons on the web.

Unknown said...

whoa, hold on there shooter. you've got some serious animosity built up there.

first of all, i was just asking to see your refernces for those #s. i'd be very interested to see them.

secondly, i am very familiar with the mortgage terms you are using. if you check my blog you'll see i've been writing about them for about 2 years now.

third, if you are saying that, "88% of all mtgs sold 2003-2006 were zero-down,interest-only, var-rate," then at least 88% of all mtgs should be interest-only. no? again, i provided data. where is yours?

finally, just a piece of advice: ad hominem attacks do nothing to bolster your argument or enhance your appearance of credibility.

since duncan removed his comment i'll say it: my name is jesse felder. what's yours?