Sometimes I Hate Being Right
By: Spencer Rascoff, Zillow COO | October 28, 2008
John McCain, Barack Obama and countless other politicians are scrambling to find old footage of themselves predicting the current economic apocalypse in an attempt to seem prescient. And with good reason — everyone loves an accurate prognosticator.
Well in my case, look no further than Zillow Blog to find evidence of my own predictive preeminence. On March 23, 2006 — two and a half years ago — I wrote the following post on this blog:
The Tidal Wave is Coming
By: Spencer Rascoff, CFO & VP of Marketing | March 23, 2006
“I’m usually a pretty optimistic guy, but I’ve started to see some scary things on the horizon. And I’ve gotta pass it on. Check this out: 9.4% of all mortgage borrowers now have no equity or negative equity in their home, and 29% of new mortgages last year had no equity. $800 billion worth of mortgages owe more than their homes are worth, and that’s optimistic since it assumes no reduction in home values. One study estimates that if home prices fell by 10%, the share of 2005 homebuyers with negative equity would shoot up to 48%. Yikes! What happens when all those interest only mortgages flip from their low fixed rates to a much higher variable rate? A lot of homeowners who bought houses beyond their means a few years ago via low introductory rate ARMs are suddenly going to find themselves unable to pay their new higher mortgage. And guess what? They have no equity in their house. So they’ll have to sell and/or dramatically reduce their consumption. This is a disaster waiting to happen….”
I concluded with this uplifting coda: “Sorry to be such a downer, but I’m worried about the impact that this will have on housing prices and more importantly on the overall American (and global?) economy.”
As my wife can surely attest, I don’t think I’ve ever been this right about anything. How I wish I had been wrong.
- Stumble it!
- Categories: Mortgages, Real Estate, Real Estate Analytics
Comments
3 Comments so far
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D. Lambert on October 28, 2008 10:31 am
It’s frustrating being right two years ago. I’ve run into this in my work, and there’s just no joy in showing up to say, “I told you so” while everyone’s staring at the wreckage.
I’ve often wondered what I could do in those moments when I’m absolutely positive I’m right about something, but nobody seems to be listening. Sadly, I’m convinced that merely jumping up and down and yelling at the top of my lungs never stood a chance of working.
I’m sorry you were right.
GregC on October 28, 2008 7:18 pm
So what, they send the keys to the bank, the cleanout guys show up and clean the house out, they go back to renting and the bank sells the house to someone who wants a house and can afford it, probably at a lower, more reasonable price. People who’ve own houses in the same neighborhood who bought with real mortgages a while ago (2003 or earlier) have to sweat it out for a while until the market clears and many of them are still above water. Meanwhile they will earn the imputed rent of a roof over their heads and those of their family The market works.
I have “negative equity” on stocks I bought in 2004 but I know they re good stocks and will eventually recover, I’m not moving out of them. Will they reach their 2007 peak, probably not. Do I think the world is ending, no.
Read Karl Case’s (of Case Shiller fame) Aug 2008 on the eventual stabilization of the housing market then look at the recent data on absorption rates as foreclosures get sold. There is light at the end of the tunnel so stop flapping yer wings, the sky is dark grey and stormy but it ain’t falling.
If you bought a house with zero down and an adjustable rate with no way to refinance you basically were renting it from the bank for a little while and now it’s time to give it back.
Drew Meyers on October 29, 2008 5:29 am
I wish you were wrong on this one too…