Calofornia is DOOMED!

[CanuckinTX]

Re: Calofornia is DOOMED!

Jimmy, Good point. The below seems to suggest today's prices might be inline with a 30 year trend (i.e. not in a bubble). However, perhaps that trend is on FIRE?

But your chart doesn't support Jimmy's claim - it shows that 1997 is back to the previous high from the last fall - hardly a bottom of any sort.

And why do you think we've bottomed at a 44% decline when this housing bust is probably the worst of all time and yet we saw a 61% reduction in the early 80's? The banks have so far avoided a free fall in the housing markets but it doesn't mean we've stopped hitting new lows as they release inventory to the market over the next many months if not years.

Remember a correction rarely goes back down exactly to the long term trend but will probably overshoot it before coming back up.

[GRG55]

Re: Calofornia is DOOMED!

...Not only this, Canada is running a surplus, and BC I think is running a surplus too...

The Canadian deficit for the current fiscal year is forecast to be CDN $49.2 Billion, down from last year's RECORD deficit of $53.8 Billion. That's according to Finance Minister Flaherty in the budget he brought down on March 4...apparently you don't listen much to the CBC...

[ThePythonicCow]

Re: Calofornia is DOOMED!

But your chart doesn't support Jimmy's claim - it shows that 1997 is back to the previous high from the last fall - hardly a bottom of any sort.

Are you discussing sales (number units sold; blue bar graph) or price (the black line)?

Price is only back down to about 2004 levels and still almost twice what is was in the decade of 1988 to 1998. The one particular piece of California residential real estate in which I have an interest has followed this price line fairly well.

[btattoo]

Re: Calofornia is DOOMED!

CanuckinTX, I actually agree that prices will continue to plummet. I guess I just meant that, eyeballing it, it looks like a best fit curve for the last 30ish years' median prices would support Jimmy's point.

My own belief on housing is the same as EJ's.

[Starving Steve]

Re: Calofornia is DOOMED!

Canada had surpluses until Bernanke asked that all nations spend on stimulus ( and run deficits ) in order to bail-out the world economy. This policy has been a complete failure, and the deficits will be reigned back in, at least in Canada. In other words, the deficits were stage-managed (orchestrated) here in Canada by Marc Carney, Bernanke's pick for the Bank of Canada.

The deficits will be paid-down in Canada probably by a hike in the GST. That is one of the options now being discussed in Canada by the Ministry of Finance.

The failure of Keynsian economics to work is proven by the fact that deficits add to the misery of the economic down-turn because the deficits have to be paid back........ Again, I just can't believe that universities teach Keynsian economics as a strategy to control or cushion economic down-turns when there is not a shred of evidence that deficits work to cushion anything. The Bank of Japan said that Keynsian spending didn't work there, and now we know in Canada that they didn't work here. They didn't work in Europe, nor did they work in America.

We are deeper into the economic mess than ever, just the rate of decline into the morass is decreasing. Was that decrease in the decline rate ( the second derivative of the decline rate in calculus ) worth the trillions of dollars spent by central banks worldwide to cushion the decline? :confused:

[jimmygu3]

Re: Calofornia is DOOMED!

CanuckinTX, I actually agree that prices will continue to plummet. I guess I just meant that, eyeballing it, it looks like a best fit curve for the last 30ish years' median prices would support Jimmy's point.

My own belief on housing is the same as EJ's.

I actually think there's more downside too. I was just making the point that the author of the original article did not prove it with his faulty logic.

It is clear that CA median prices are at or below their long-term trendline. It's worth noting that btattoo's chart only goes through '08. Median prices are now below $300k. Adjusting the chart's 1980 value of ~$100k with the the BLS inflation calculator, we get $263k, or roughly where we are now, and that's using 30 years of notoriously under-reported CPI.

Smith could have said, "While prices are now in line with the long term trendline, overshoot is to be expected." But that's not what he said.

-Jimmy

[c1ue]

Re: Calofornia is DOOMED!

And the beat goes on...

Another year, another $20B deficit.

http://www.sfgate.com/cgi-bin/articl...BA501CEHGE.DTL

The first attempt at solving some of California's $20 billion budget deficit ended far short of the goal Thursday, as the Legislature adjourned its special session on midyear cuts to the state budget.
Lawmakers and Gov. Arnold Schwarzenegger had hoped to solve between about a quarter and half of the projected deficit, but managed to chip away a few hundred million, with some lawmakers putting the number as low as 1 percent.
"We didn't even begin to address California's deficit," said Sen. Robert Dutton, R-Rancho Cucamonga (San Bernardino County), the vice chair of the Senate Budget Committee and incoming Republican leader.
"It's going to be a long summer," he added in a written statement.
So far, the governor has signed bills to:
-- Transfer $100 million from tribal gaming compacts to the general fund.
-- Extend a 3 percent cut, worth $61 million, to regional centers for people with developmental problems.
-- Expand eligibility for foster care, which is estimated to bring in $75.5 million in federal dollars, though that figure is not guaranteed.
-- And increase court penalties for forensic lab tests, worth $59 million.
The governor has yet to act on a complicated change to the fuel tax that will bring in $1.1 billion to the general fund and he has not indicated what he will do.
Lawmakers also are counting $450 million in "miscellaneous revenues" that are far from certain and about $56 million by delaying Medi-Cal payments, actions that did not need legislation to enact. Earlier this week Schwarzenegger vetoed a bill that would make $2.2 billion in cuts next year, most proposed by the governor himself, because he said they were not "real."
The bill would have put into law that it is the Legislature's intent to make the cuts.
Several tax enforcement measures, including the so-called "Amazon tax" that would force online companies in other states to collect and pay sales taxes on sales in California, failed to make it out of the Assembly though they could come back later this year.
State Senate President Pro Tem Darrell Steinberg, D-Sacramento, sounded an optimistic note on the action so far.
"I think we're off to a very solid start. ... It's really important to put this into context: We're on the 80th billion dollar of deficit since I was sworn in as pro tem" in December 2008, he said.
Steinberg said the state could expect more federal aid and noted that revenues into state coffers are about $2 billion higher than estimates. Democrats have refused to consider cuts to education and health and human services until later in the year.
Assemblyman Jim Nielsen, R-Gerber (Tehama County), vice chair of the Assembly Budget Committee, said it is still business as usual in the Legislature.
"No significant changes in the budget or budget situation occurred," Nielsen said. "It's good that something happened, but it's unfortunate that nothing significant happened."

[CanuckinTX]

Re: Calofornia is DOOMED!

Are you discussing sales (number units sold; blue bar graph) or price (the black line)?

Price is only back down to about 2004 levels and still almost twice what is was in the decade of 1988 to 1998. The one particular piece of California residential real estate in which I have an interest has followed this price line fairly well.

I meant the black line. I just didn't think the 97 value was that much different than the 90 value so it was a bit of a moot point where the author started the comparison from. The years after 2000 is when the moonshot in prices occurred.

[CanuckinTX]

Re: Calofornia is DOOMED!

I actually think there's more downside too. I was just making the point that the author of the original article did not prove it with his faulty logic.

It is clear that CA median prices are at or below their long-term trendline. It's worth noting that btattoo's chart only goes through '08. Median prices are now below $300k. Adjusting the chart's 1980 value of ~$100k with the the BLS inflation calculator, we get $263k, or roughly where we are now, and that's using 30 years of notoriously under-reported CPI.

Smith could have said, "While prices are now in line with the long term trendline, overshoot is to be expected." But that's not what he said.

-Jimmy

I see - if the median is really below $300k now then I can buy the argument that by eyeballing it we're near a long term trendline.

Didn't stop my in-laws from just plunking down $1.2m on a new home in Yorba Linda. Interesting that the builder (I think Toll Bros but not sure) isn't breaking ground on any homes until the buyer puts down 5%. Now they will list their Brea home. I'm not sure they understand the haircut they're probably going to take to move their house in a timely manner. They listed their current home 3 years ago for $1.2m and turned down an offer of $1m. Now I think zillow has it listed around $675k.

[jimmygu3]

Re: Calofornia is DOOMED!

I meant the black line. I just didn't think the 97 value was that much different than the 90 value so it was a bit of a moot point where the author started the comparison from. The years after 2000 is when the moonshot in prices occurred.

The difference is the additional 7 years of delayed price appreciation, even as the CPI climbed. $195k in 1990 had 26% more buying power than $190k in 1997. Smith intentionally picked the inflation-adjusted low as his baseline in order to make current prices seem high.