Predictions for 2010

[PaulW]

Any predictions for 2010? Please keep them specific, testable, Hawaii-related and restricted to 2010.


Here are some results from predictions made earlier this year on Punaweb, not particularly Hawaii-related alas.

http://www.punaweb.org/Forum/topic.asp?TOPIC_ID=6057&whichpage=8 and page 9 as well

esnap on 02/25/2009:
I think the Dow will go below 4k this summer and is on it's way to
below 2k.
Oil may dip to 25.00/barrel but price per gal. of gas will stay
higher than it should in relation.

Result: Both predictions incorrect.

Hotzcatz on 02/25/2009 and March 2, 2009:
I'm expecting the DOW to go somewhere around 4,250 to 3,500 but I
don't think we will see 2,000.
Gold will go to 1,800 or more.
The dollar may not survive, it may become the Amero or some such
other currency.
Food and manufactured goods prices will double this year.
Home gardening and growing food will become very interesting to
folks and backyard chickens will continue to be popular.
The unemployment rate will at least double from what it is now.
There is a slight possibility that the United States of America
could fracture and drop off a few pieces.

Result: All predictions incorrect, except for one non-quantifiable one (gardening and chickens).

PaulW on 02/25/2009:
My prediction: Dow will top 10,000 this year.

Result: correct

AlohaSteven on 02/26/2009: (quantifiable ones only)
The price of oil (and therefore, gas) will continue to yoyo up and
down on world markets but the overall trend will be toward slowly
rising, not declining

Gold, precious and strategic metals, some gems, and durable rare
collectibles will retain their value and increase in price over
the next year.

Result: both correct

[missydog1]

I predict that the wave of foreclosures will continue as the large number of people who have been caught up in the loan modification "hope" program are ultimately denied. Unless the program is changed so that banks/Fannie Mae etc. can't decline based on NPV test. Very few modifications have been done in comparison to what was envisioned when HAMP was announced, but many lenders took money to participate and have been delaying foreclosure while processing the applications. They are starting to get through the pile though, so the grace period is drawing to a close.

Because properties in Hawai'i hold more value than many declining markets, Fannie Mae will opt to foreclose more here rather than modify. In turn, that will make it difficult for non-distressed properties to be sold for a reasonable value, which will make it hard for people to make life changes who are tied to owning their primary residences.

[JWFITZ]

The topic referred to was interesting and the conversation was worth having, for sure. It's always useful to quantify predictions. Having made a few in the referenced thread, and some I feel vindicated in relatively high resolution, I feel compelled to offer another.

I wouldn't dare this year. Pull in, sit tight.

For this year, it's very simple. This year is unpredictable. Our economy is a stable but extremely fragile state. None of the issues that caused the crisis of the last couple of years have been addressed, in some cases they've hardly been acknowledged. Policy at all levels, including the highest level has been to evade the issues and to occlude real risk. Nothing is fixed, we're running on a wish and a prayer. One can indeed run a long time on a wish and a prayer. That is indeed the history of mankind.

Still, statistically, it's reasonable to expect a handful of random events to impact the stage of events annually, which are of significant enough magnitude to create societal or economic effects. In robust environments, these events have less likelihood of creating secondary impacts. In fragile environments, the inverse is true. This is where we are. We run a very significant risk of events, which we statistically can know will occur--that these will have disproportionate and negative impacts. Elsewise it's a crap shoot.

That would be my take.

http://sensiblesimplicity.lefora.com/

[John S. Rabi]

I disagree with Kathy. The highest point of the real estate market was in November of 2005 and most people on the funny mortgages were locked in for three years, so we are past of the adjusting period. Those home owners either already have been foreclosed on or they already "survived." The REO properties will dry up and the real estate market will rebound after that.

If you bet on the stock market, go with the emerging markets, those stocks are the first ones to take off in a recovery.

Aloha,
John S. Rabi, GM,PB,ABR,CRB,CM,FHS
808.327.3185
johnrabi@johnrabi.com
http://www.JohnRabi.com
Typically Tropical Properties
"The Next Level of Service!"

[JWFITZ]

On that take, I agree with Kathy. This is a great deal of a part of the "not willing to look at the issue" issue. No offense, John. An awful lot of foreclosures including one I'm personally aware of were simply floated to get them off a banks books for the fiscal year 2009 on the prayer they could short sell them in 2010. There is a lot of funky book keeping going on. As well, we can't predict all sorts of crazy moratoriums or whatevers that may come from government that may create short term effects. I'm not privy enough to the details to follow those nor financed enough to care.

Commercial real estate is a another issue entirely.

Maybe this is a clarification. Some of these trends are very predictable, the details not so much so.

http://sensiblesimplicity.lefora.com/

[mdd7000]

More foreclosures will occur because of the huge numbers of people that lost their jobs on 2009. Look at the notices that are being posted in the local newspapers - they are slowly increasing in number.

[JWFITZ]

Exactly. Unless we start manufacturing more jobs that can afford houses with real loans on real property on real valuations--well, that's it.

Ag property nationwide has held or increased in value during this "crisis," by the way, just as counterpoint. Once one removes the blue sky the picture becomes more clear.

http://sensiblesimplicity.lefora.com/

[chrisb483]

Instead of manufacturing more jobs, how about we get rid of the need for jobs?

[missydog1]

I have been monitoring some foreclosure forums where people are talking to each other. Many people stopped making payments a year ago. Their time is up. On island, a friend of a friend has not made a condo payment in two years. I guess the bank doesn't want to pay the HOA fees as it's a very high end condo with big fees. VERY FEW of the stories on the foreclosure forums involve reset rates. Most are either people who lost their jobs or had medical costs who could no longer afford existing payments. Others were people who always planned to sell their homes but found them underwater on value and stopped making payments as throwing good money after bad.

The HAMP situation (the Obama program) that was designed to help homeowners did not have enough teeth to do the job. What it did was create a lot of jobs for people to process applications. It took a good six months before the lenders began to get a handle on what if any modifications the investors were willing to approve, and they are STILL working through that with thousands and thousands of applications. Meanwhile, people got the word that they would not help you if you were making payments. So they stopped, as they were broke anyway. Now when they finally get denied they are set to be foreclosed on basically any time the bank decides to move on it. It all depends on the investors balancing between not getting payments and having REO properties on their books, and flooding the market with REO. The banks don't want to maintain the properties, but if there's any sign of the values going up, they are poised to foreclose on many properties and recover their investment.

[JWFITZ]

Agreed, there is the issue.

If a bank forecloses, it must realize a loss. Otherwise, it is able to keep the asset on its books as an asset at it's previous(fantasy) assessed value. Here's the problem. If banks marked to market--they'd fold. It's cheaper to float a bad home owner for a couple of years on a "wish and a prayer" than foreclose. Assuming, of course, we have a miracle recovery. Which we won't. The recovery we will have, if any, will be to realistic valuations where property values reflect the real "owner/equivalent rent" ratios of the wages that are paid. I expect we've got a ways to go to the bottom yet in most markets unless they offer real value add.


This is part of my personal vision for Hawaii, by the way. If you look at the issue, without the blue sky, at this point and with several functional real ag projects as case examples--I wanted to demonstrate the real viability of a 1 to 3 acre ag project, mostly following a silvaculture model. This is proven, at this point. Considering that someone who had the backbone to work it--could purchase a 1 acre parcel and within a 3 year time frame produce a real 5 ton an acre gross ag product in a variety of foodstuffs--well, that changes the local equation radically and puts it back in scale with history. Details as they evolve, of course.

http://sensiblesimplicity.lefora.com/