In today's Bakersfield Californian Ryan Schuster reports on the local housing market. The report title includes the words debate. However, after reading the report I found very little debate. It is just a series of quotes by people who make money when you sell your house. There is no counterpoint or statement by anyone else. I would like to "debate" this story and provide a rebuttal of this items presented.
The reporter quotes Jon Busby who has zero credibility with this blogger. Busby was on a Channel 17 news special at the peak of the bubble in the Summer of 2005 and claimed that prices will go up 10-15% for the foreseeable future. Prices are down since that point in time. By making this statement he has been discredited as nothing more than a cheerleader.
As has been pointed out numerous times on all the national bubble blogs; the USC Real Estate Center is funded by the real estate industry. Hardly independent. They have been cheerleading all the way up during this boom.
Only one paragraph was used to "debate the opposition"and no one was actually quoted. Not much of a debate here.
No mention was made of the continued contraction in loose lending standards. As pointed out by this blogger (and many other bubble bloggers) 7 sub-prime companies have gone bust in the last 30 days with several others rumored to be going under. A significant portion of the purchases made in this town during the boom were made by those with less than stellar credit. Even a minor adjustment in the credit requirements will price more households out of making a home puchase. This will place the supply/demand curve even further out of whack than what it already is.
The article makes mention that inventory is down 13% from the month before. This happens every year - inventory decreases during the winter months. What matters is that inventory is up 53% year-over-year (YOY). Our prices will be down in 2006 primarily because our supply of homes outpaced our demand last year. This year we begin with even more supply and with credit contraction we will have even less demand. Not one of the "experts" quoted in the article mentions this.
I have noticed that many "experts" who did not call the top in the housing market are resorting to a straw man agrument:
A straw man argument is a logical fallacy based on misrepresentation of an opponent's position. To "set up a straw man" or "set up a straw-man argument" is to create a position that is easy to refute, then attribute that position to the opponent. A straw-man argument can be a successful rhetorical technique (that is, it may succeed in persuading people) but it is in fact misleading, because the opponent's actual argument has not been refuted.
Notice the straw man agrument here "It is not taking this gigantic nose dive everyone was predicting." Everyone was predicting? Gigantic nose dive?
The goal here is to make the other side seem so extreme that they are immediately discredited by these sorts of outlandish statements.
When I read this comment by Crabtree :"Sellers have come to the realization that the party is over and they can no longer get the prices they were expecting before. We've reached a plateau and that plateau is holding" this reminded me of a similar comment made by Irving Fisher in 1929 just before the depression and the stock market crash of 1929:
The stock market crash of 1929 and the subsequent Great Depression cost Fisher much of his personal wealth and academic reputation. He famously predicted, a few days before the Stock Market Crash of 1929, "Stock prices have reached what looks like a permanently high plateau."
There are many other issues not addresses in a detailed manner - Will investers and their false demand return to the market? Our median price is still 8 times household income - Will this number come back to the pre-boom level of 3 times income? And so on....