Tasty Real Estate

over on business week’s hot property blog, chris palmeri is talking about what pimco’s paul mccaulley calls the reflex effect. in short, this is emotional, momentum-driven behavior.

Rising prices get more people excited about buying, even though
they’re paying more. Falling prices make people less excited about
doing any transaction. This observation has broader economic
implications. Even if home prices don’t fall, sales could decline,
putting less money in people’s pockets and slowing the economy. That’s
evident in today’s stats from the California Association of Realtors.
Even though the median-priced home in California jumped 16% in November
to $548,400; sales declined 11.2%, to 579,560, from a year ago. “We are
starting to see the ‘soft landing’ we have been expecting,” said the
association’s chief economist Leslie Appleton-Young. And the reflex
effect McCaulley’s talking about.

it seems to me like leslie appleton-young and paul mccaulley can’t both be right. when a tradeable asset reaches an inflection point and starts its price motion in the opposite direction, it very often builds velocity on the way down. and mccaulley is describing, i think, a market that conforms to this type of behavior, i.e. the downturn tends to accelerate on the way down as people look around and see prices falling. so who is right? i guess time will tell.

i have had SOLD (nasdaq) in one of my stock portfolio watchlists for a while now, and today’s announcement that MSNBC has signed an exclusive agreement with them to be the network’s exclusive home buying and selling service makes it a much more compelling company to consider owning.

it looks like the comptroller of the currency is starting to look seriously at the risks of negative amortization loans. we got the sense from this frontline documentary on the credit card industry that the comptroller of the currency generally hasn’t been the strongest regulator of the banking industry, but it will be interesting to see what changes if any come about.
UPDATE: more coverage over at calculated risk.