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October 9, 2008

Quote of the Day

quotation-icon.jpgAsking prices are currently irrelevant. As I have pointed out many times, the top of any asset bubble is typically characterized by decreasing supply and barely increasing prices. Prices start to decline, and some sellers hold out thinking things will get better. They don't. Prices decrease some more, and the weakest sellers give in. Inventory increases, sales volume increases and prices decrease. The cycle continues until everyone who thought that holding out was a good idea kicks themselves for not selling at a mere 15% discount when they had the chance. Sellers capitulate. The market bottoms.

— by lechacal in Average Prices Up in BK, Inventory Down




Posted by Brownstoner at 3:28 PM | Comments (18)
Categories: QOTD

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Comments

The question is: as a prospective buyer, how do you know when the market's bottomed?

Posted by: cwbuecheler at October 9, 2008 3:33 PM

I don't doubt the truth in this... but I wonder, in NYC anyway, how low the floor will be.

I really think that 75% of home buying in this city in the past 5 years has been recreational. Or a family with 2 kids in a 2 bedroom rental or coop thinking they are entitled to a house. NYC will see a change in priorities when it comes to housing. People will be happy to keep whatever roof they have over their heads. Yes, some people will have to sell. But far fewer will choose to.

Posted by: Architerrorist at October 9, 2008 3:42 PM

You don't cw. Nobody does. that's what makes a market function.

Posted by: daveinbedstuy at October 9, 2008 3:48 PM

I cannot believe that DOW8000 is about to become more than a commenter name on Brownstoner. I want to cry.

Posted by: AndYouWillKnowUsbyTheTrailofRenters at October 9, 2008 3:50 PM

daveinbedstuy - understood. But of course, one always wants to get in as close as possible to bottom!

Posted by: cwbuecheler at October 9, 2008 4:10 PM

"I cannot believe that DOW8000 is about to become more than a commenter name on Brownstoner. I want to cry."

Ya never know. We still have a massive 579 points to go! See DIBS' comment.

But stocks are getting mighty attractive looking, more so than housing. I'm gonna be looking at dividend-paying stocks soon.

This may be the third October in history where being in the market is a bad idea. What are the chances of that?

PS: Today is my birthday. I can't believe that my last birthday was the Dow all-time high, and this is happening today!

Posted by: denton at October 9, 2008 4:13 PM

DOW 8600.
Yikes!


Posted by: sam at October 9, 2008 4:13 PM

denton...we are buying Pfizer (PFE) today...yield is 7.9%. BAC yield (after the dividend cut) is 6.4%

Posted by: daveinbedstuy at October 9, 2008 4:16 PM

denton, now we know --- it's all your fault!!!!

Posted by: ontheparkway at October 9, 2008 4:23 PM

DOW8000 is going to be changing his name to DOW7500 or DOW5600 in the next month, I betcha.

Posted by: Polemicist at October 9, 2008 4:33 PM

How the hell much farther do we have to go before the market has priced in all of the negative outlooks and expectations? I don't pretend to be any expert on the equity market but to see these devaluations across the board regardless of industry, balance sheet, p/e ratios, etc. is unbelievable.

Posted by: AndYouWillKnowUsbyTheTrailofRenters at October 9, 2008 4:59 PM

I think the American economy just drove off a cliff. I never thought I would see the Dow at 8600 again.
I think it is meaningless to talk about real estate prices. There is no market right now and there will not be again until things shake out.

Posted by: sam at October 9, 2008 5:05 PM

"The question is: as a prospective buyer, how do you know when the market's bottomed?"

The answer is: When the year over year change of the New York S&P Case-Shiller Home Price Index http://tinyurl.com/3x5p34 approaches zero. That is, when it permanently goes from "the red" (negative) to "the green" (positive). The converse is true for the top.

I tested this theory for the last top (9/88) and last bottom (4/91). The YOY through zero lagged by only 5 months in the former case and by only 9 months in the latter case. Not bad for the very slow speed of real estate price changes.

And for those of you who think this index is irrelevant to Brownstone Brooklyn TM, it was 72.29 (Trough) on 4/91 and 215.83 (Peak) on 6/06. That's a 200% increase. A tripling if you will. Sound familiar?

Posted by: DOW8000SP800 at October 9, 2008 5:21 PM

I think the NYSE will be padlocked tomorrow.

Posted by: DOW8000SP800 at October 9, 2008 5:31 PM

I like this analysis

http://itulip.com/forums/showthread.php?p=53115#post53115

Posted by: Polemicist at October 9, 2008 5:55 PM

Hey DOW what do you mean "I think the NYSE will be padlocked tomorrow"? Do you mean they will stop trading a la Russian Stock exchange from several days ago? Or do you mean this in terms of increased physical security?

Posted by: pierre de taille at October 9, 2008 6:24 PM

What a colossal pile of horse s**t. (Any post that starts out,"As I have pointed out many times" usually is.

If you were one-millionth as smart as you claim you are, you would be drinking Critstal right now instead of pathetically posting incomprehensible economic theories (mostly cut-and-pasted from other internet blogs) here.

Posted by: bpi of clinton hill at October 10, 2008 1:46 AM

A la Russia and Iceland, pierre. By mid-day?

Posted by: DOW8000SP800 at October 10, 2008 10:42 AM

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