• Recently Written

  • The Great Disconnect
  • Prop 8 - Why We Were Duped
  • The Deliberate Destruction of the Economy
  • How to Fix our ECONOMY
  • What’s the Difference between Madoff and Fannie Mae?
  • Why Title and Escrow Should be Separate
  • Another Take on the New Paradigm
  • Obama and HUD: A Brand New Day
  • Computers CAN Replace Humans
  • The Bottom Cometh (too soon!)

• Categories

  • General Thoughts and Comments

• Archives

  • October 2009
  • May 2009
  • January 2009
  • December 2008
  • November 2008
  • September 2008
  • August 2008
  • July 2008
  • June 2008
  • May 2008
  • December 2007

• Admin

  • Login
  • Wordpress
  • XHTML

• Search

I just don’t know when. I have spent a great deal of this last Labor Day weekend thinking about it though and, of course, I had to spill my thoughts here. I think that the prevailing wisdom says that we should see another 20% decline in home values before we see a bottom. That same wisdom also says that we probably won’t see the bottom until 2009, possibly 2010. I think a great deal of the numbers and available accurate data support those predictions, HOWEVER!………………… It was not sane numbers or data that got us into this mess and so using George Soros’s theory of Reflexivity I am predicting that the market drops only about 10% more (+/- 1.5%) and that will be the bottom. I further guess that this will happen sooner rather than later, 2009. For the purposes of this argument, it is not important wheather we think this is good or not, in the long term (I think it is not).Reflexivity, if I understand it properly, is Soros’s theory that markets do not always move to equilibrium. They, instead, are influenced by investors and therefore move where investors believe they should. In other words, the markets are not islands. They are influenced by the participants and therefore cannot be described or predicted independently of the market participants. It is a very similar  theory to other theories I have read about matter and energy. These other theories suggest that our perceptions of things shape those things. A rock is not just a rock  but something that my perception changes. It may have been a rock before I saw it, but after seeing it it is a different rock. A bit like the butterfly effect.Using this theory, I believe that many people are believing that the bottom is near. They want to believe that. When you compare the current prices to the reality we knew a few years ago, it looks like we have fallen a long way.I think that the early part of this decade changed, forever, the way we view real estate and therefore we cannot predict, based on older models, how this downturn will shake out. If the house down the street from me, used to sell for $150,000 four years ago and is now selling for $80,000, I may perceive that as a steep decline and I may believe that it will not go any lower; time to buy. My Realtor may reinforce this attitude. A 46% decline looks like a bottom to the untrained eye. Is it really 46%? The market rose approx. 50% in that timeframe, so 46% is just losing the crazy runnup. The perception is different though. On the flip side, to get  back to that $150,000 value, it has to appreciate 87.5%. My point is that the numbers can get confusing and people tend to go to what they know. The equilibrium, in this case is that real estate may start to behave, as much as it can, more like stocks, with more volatility because that is the new paradigm that people believe.Based on the numbers, I would never have guessed that real estate would continue to appreciate past 2004. I was consistently calling the top and I was consistently wrong. I miscalculated the fact that numbers don’t move markets, people do. The numbers may be telling us to be cautious and have patience right now. The numbers may still be very high, but I think that people are waiting on the sidelines, anxious to jump in again. Many of them don’t know any other market but what they saw a few years ago. My guess is that if lenders were willing to lend more right now, you would see the market take off again, even against common sense. So that is my prediction on this 2nd of September, 2008. I predict that we won’t fall as far as we should and as far as we think. I hope I’m wrong

Comments

• Blogroll

  • CF Escrow - San Diego Escrow - 239 Laurel st. Ste. 203 San Diego CA. 92101
  • What is Escrow anyway - Why are you here if you don't even know what escrow is? Read this now.