How Far Up OR Down in 3 Yrs.?

Posted by Dave Fratello on Monday, June 30th, 2008 at 4:21am.

No one can reliably predict anything in financial markets.

But anyone can try their hand at predicting. That's why we have pundits. And blogs.

So let's try some predicting. Read the story here for context and vote in the new poll. We'll keep the votes open until Saturday, July 5, at 7pm.

When a subject is really close to home – like, for instance, your home – you would like to think that you could predict its value more reliably over time than you might be able to guess, say, whether that hot biotech stock you picked up 2 years ago is ever going anywhere.

But predicting the future of Manhattan Beach home values is looking more difficult by the day. There's an interesting confluence of indicators in both directions: some signs that we're possibly on the verge of noteworthy declines, and other signs suggesting MB is weathering the storm very well.

You have to pick a timeframe to make a prediction. So, we'll call the question this way:

Where will the MB median price sit 3 years from now, at the mid-point of 2011?

Please answer with nominal prices in mind (i.e., the dollars of the day), no adjusting for inflation in this case.


THE BEARISH CASE
  • Home-value appreciation was out of whack in the runup of the early 2000s. Nominal values nearly tripled in just a few years (+161%). (See "Charting MB's Bubble" and "The Whole Enchilada.") A new down cycle could set new records, too.
  • Home values are down sharply in general and in LA County specifically.
  • The sales pace in MB is down nearly 50% from last year, much lower than years before.
  • Some MB homes are listed for or selling for the prices paid in 2005-06, sometimes lower.
  • The credit crunch is stifling willing and able buyers. People don't think they can sell their homes at a good enough price to "move up."
  • The national economy is poised for recession, the stock market has given up all the gains since Summer 2006, and much more pain may be coming our way.

THE BULLISH CASE
  • There is little reason to think that a new down cycle should be comparable to the mid-1990s housing recession in MB. Then, aerospace layoffs took a huge bite locally. The population has changed. Newcomers overwhelmingly have the money to live here, regardless of other trends.
  • Home-value appreciation in the early 2000s partly reflected changes in MB and changes in fundamentals. There's more new construction, a more attractive downtown and more new residents of greater means.
  • MB cannot be compared to LA County or other markets. Luxury markets like ours are not taking the hits that far-flung regions or inner-city areas are taking.
  • Most resales continue to be above their in 2004-06 prices.
  • The sales pace reflects more of a "normal" market, if not the overheated sales pace of recent years.
  • The credit crunch is a non-issue for many current buyers.
  • The national economy is not in recession yet, and the Fed has shown it will intervene appropriately to keep damaging trends from taking hold.

OK, that's our best summary of the case for and against a declining market over the next 3 years. Now, where do you think we'll end up 3 years from now? Vote in the poll and support your position in the comments.
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