Friday, December 08, 2006

Back from the basement

As this massive credit bubble unwinds I will periodically look back at some of the foolish claims made by the REIC. Today, I want to focus on the claims made by "veteran analyst" Michael Youngblood of Freidmans Billing and Ramsey. Back on May 15, 2006 in Business Week he made some rather foolish claims. I assume he was trying to flip a house and needed to find a greater fool or maybe he is part of the marketing arm of the REIC trying to suck a few more GF's (greater fools) into the residential real estate market.

This guys analysis says Bakerfield will be up 43% this year. Are you kidding me? What does his analysis involve - sticking his head in his a$$ and pulling out some combination of fingers and then making up a number? By the way Bakersfield is down 2% YTD. Also, Fort myers Florida is down significantly YTD.

I emailed him and asked him what the hell he was thinking when he made these outlandish claims and if wanted to retract his pie in the sky analysis; surprisingly, I received no reply. Maybe when he gets to the pearly gates he will have to answer for these claims he made. I wonder how many young families took the bait and choose to buy into the American dream and instead it became their American nightmare?

Why The Housing Bubble Won't Burst

Veteran analyst Michael Youngblood explains his unusually optimistic take on the real estate market.

He bases this assessment on a new economic model he created that forecasts housing prices in 379 metropolitan statistical areas. Associate Editor Toddi Gutner spoke with Youngblood about his upbeat view and his surprising prediction that the greatest price appreciation will be coming in so-called bubble markets.

What makes you more optimistic than other housing experts?
I look at two economic indicators that I think drive the housing market: the growth in employment and the growth in personal income. Getting a job or a salary increase is what motivates people to buy their own home. This is different from the data the National Association of Realtors and other organizations rely on. They are more concerned with technical indicators such as the inventory-to-sales ratio and the number of months a house is on the market. These aren't leading indicators. Instead, they move with current changes in the market, rather than predict those changes.

Do you think the housing bubble argument is overblown?
Absolutely. It's overblown because there is no national housing market, so there can't be a national house-price bubble. However, there are bubbles in 75 of the 379 markets I studied. A bubble exists when the ratio of the median existing house price to per capita personal income exceeds 6.8 times. This definition is based on historical data of when other markets, like Houston and Boston, had bubbles

What markets are likely to show the biggest price gains and declines this year?
We expect the greatest gains in Bakersfield, Calif. (43%), Fort Myers, Fla. (42%), Stockton, Calif. (39%), and Punta Gorda, Fla. (35%); the biggest declines in Harrisburg, Pa. (8%), Odessa, Tex., Roanoke, Va., and Utica, N.Y. (all 6%).


Housing Wizard said...

I have gone back and looked at a number of your articles and enjoyed them .
Can't believe a economist could predict that much of a increase in Bakersfield .I'm beginning to think these guys just don't understand why they was they fake short term demand .
I would think the high end would be taking a bath right now in Bakersfield .

Bakersfield Bubble said...


Thanks for the kind words.

Anonymous said...

Youngblood is nuts. The bubble is huge is California and Florida. Do certain places in Texas have room to grow certainly. But anyone forecasting any price gains in California over the next few years is way off base.

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