OC Pricing falling 24.8% more - Much of that drop, an 18.5% drop will come by this November!

NEW -> Contingent Buyer Assistance Program
[quote author="ipoplaya" date=1211508889][quote author="stepping_up" date=1211507102]That's an econ 101 supply and demand graph. The econ 201 graph will have different slopes for each. The econ 301 graph will have even more precise formulas for the slope. Quantity of buyers may be higher today than it was three years ago as prices prevented many from buying, population increase and people who had more time to build reserves and credit. A higher quantity of demand doesn't change the demand curve, but it moves it up. A lower quantity of demand moves the curve down.</blockquote>


You are referring to a shift in the demand curve. A shift in the demand curve occurs when a variable OTHER THAN PRICE changes. Yes, population increase would likely shift the demand curve. Expectations re: home prices falling could/would shift it as well.



Your contention that there has been a demand curve shift because prices went down is unfortunately wrong. Ceteris paribus, and for a normal good (there are goods for which quantity demanded could rise as price rises, i.e. an upward sloping demand curve), when prices go down, quantity demanded goes up as a result of movement along the same demand curve NOT a curve shift...</blockquote>


I didnt' realize that was what I was saying, but I guess it was. I was trying to get my head around what factors were involved in the current demand curve and the future demand curve. I understand that demand shifted lower when the speculators and exotic loans left the market and that increased supply of foreclosures shifted the supply curve, thus lowering prices. I'm still very curious about the slopes though, how each 1% drop in price relates to the % of Q increase. Is there any way to estimate that?
 
on second thought... are the foreclosures an increase in supply or just a move along the supply because they will take a lower price? i.e is the supply only determined by the housing stock or is it determined by the quantity of homes for sale?
 
Tough, and this is all coming totally out of my arse mind you, but here?s a go at it:



2008 decline = 23% (full year figures, Jan through April 2008 was probably 16%)

2009 decline = 15% (hopefully concentrated in the early part of the year as I?d like to buy next summer)

2010 decline = 5-10%

2011 decline = flat



[ Edited: 22 May 2008 01:00 PM by ipoplaya ]



Interesting? So your forecast in 2008 is almost double that decline of what Irvine Renter predicted with his chart at 12%, but seem to agree with 15 - 16% decline in 2009.



Orange County is -19% in 12 months and -10% in 6 months, so it seems like the decline is like 10% every six month in OC as a whole. Man, I wish there was a housingtracker.net just only for "Irvine". Anyone know if there is such a site. Thanks IPO for your educated guess. I actually like your forecast better than Irvine Renter's.



Panda's forecast:



2008 decline = 27.8% (full year figures, Jan through April 2008 is 16% + 11.6% from now to dec 31, 2008)

2009 decline = 16%

2010 decline = 7-9%

2011 decline = 4

2012 flat

2013 flat

2014 possible appreciation = ??



http://www.housingtracker.net/askin...es-LongBeach-SantaAna/SantaAna-Anaheim-Irvine

Trend 05/19/2008 1 month 3 month 6 month 12 month

Median Price $525,000 -1.9% -4.5% -10.9% -19.0%

Inventory 17,956 +0.8% +5.5% -4.4% -0.7%
 
[quote author="stepping_up" date=1211511694][quote author="ipoplaya" date=1211508889][quote author="stepping_up" date=1211507102]That's an econ 101 supply and demand graph. The econ 201 graph will have different slopes for each. The econ 301 graph will have even more precise formulas for the slope. Quantity of buyers may be higher today than it was three years ago as prices prevented many from buying, population increase and people who had more time to build reserves and credit. A higher quantity of demand doesn't change the demand curve, but it moves it up. A lower quantity of demand moves the curve down.</blockquote>


You are referring to a shift in the demand curve. A shift in the demand curve occurs when a variable OTHER THAN PRICE changes. Yes, population increase would likely shift the demand curve. Expectations re: home prices falling could/would shift it as well.



Your contention that there has been a demand curve shift because prices went down is unfortunately wrong. Ceteris paribus, and for a normal good (there are goods for which quantity demanded could rise as price rises, i.e. an upward sloping demand curve), when prices go down, quantity demanded goes up as a result of movement along the same demand curve NOT a curve shift...</blockquote>


I didnt' realize that was what I was saying, but I guess it was. I was trying to get my head around what factors were involved in the current demand curve and the future demand curve. I understand that demand shifted lower when the speculators and exotic loans left the market and that increased supply of foreclosures shifted the supply curve, thus lowering prices. I'm still very curious about the slopes though, how each 1% drop in price relates to the % of Q increase. Is there any way to estimate that?</blockquote>


What you are referring is the price elasticity of demand. An elasticity of 1, if I remember correctly, would be called unitary elasticity. That is the common rule of thumb with regards to modeling supply and demand as the majority of goods and services likely cluster around 1 in terms of elasticity measurement.



I would venture that owner-occupied housing demand has a higher elasticity in general over the long-run as such purchases can be deferred on a discretionary basis for longer and/or substituted for via rentals. I'd guess housing demand would likely have a price elasticity of around 1.5 or so which would mean a 1% drop in price would produce a 1.5% increase in the quantity demanded. I don't think the nature of housing demand has changed much so the LT elasticity is likely the same as it traditionally has been.
 
[quote author="stepping_up" date=1211512179]on second thought... are the foreclosures an increase in supply or just a move along the supply because they will take a lower price? i.e is the supply only determined by the housing stock or is it determined by the quantity of homes for sale?</blockquote>


Couple of different things are happening with regards to supply. We are moving along the supply curve in that fewer units are supplied as prices decrease. This can be seen in the reduction of discretionary sellers entering the market... I think the supply curve has probably also shifted due to the nature of the supply offered, i.e. REOs becoming such a signifcant portion of the available inventory.
 
I think we're getting too ahead of ourselves.



1. Supply is <strong>independent </strong>of demand. They are two separate algorithms.

2. We have enough demand for housing. People want to live here.

3. Price is king. At the right price, it will sell.



for practice (an old favorite) : <a href="http://www.lemonadestandgame.com/">The Lemonade Stand</a>



<em>Simplify, simplify.</em> - H.D.T.
 
Ahh calculus, i remember well.

Just a crazy question, do you think that the local "marketeers" have been pushing the rents lower to keep the elasticity at current standards?

-bix
 
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