A Greatly Inflated Perception Of Worth In Arizona
The Daily Star reports from Arizona. “Tempted by a generous price cut, Cynthia Saenz couldn’t resist buying a new house in Vail about eight months ago. She put her Southeast Side house up for sale five months ago and has reduced the 1,800-square-foot home’s price from $230,000 to $200,000. Still, it hasn’t sold. Saenz’s house is among a record number of properties on the market in the Tucson area.”
“An explosion of home-building and numerous condo conversions during the boom of a few years ago have led to an unprecedented glut of homes now that the market has cooled, according to real estate executives and industry analysts.”
“‘Three months ago, we thought we would see some degradation in the number of units in inventory, but it’s going up,’ said John Strobeck, a Tucson housing market consultant. ‘That’s not a positive sign.’”
“Residential listings averaged 9,925 at the end of January, February and March, according to the Tucson Association of Realtors MLS, nearly triple the average for the same quarter in 2005, the peak year for sales. In March alone, the number hit a record of 10,185.”
“Sales for the quarter were down about 18 percent from the same three months in 2005, according to the Realtor statistics.”
“OnSite Realty owner Caroline Auza thinks she can trace the oversupply in the market to just one day in 2005. On March 16 that year, a 120-unit converted condominium project she was handling, Tierra Catalina near Skyline and Campbell, sold out in about three hours.”
“‘After that, the supply (of condos) just quadrupled’ as investors poured money into Tucson condo conversion projects, she said.”
“‘In this market, you have a number of sellers who have a greatly inflated perception of what their home is worth,’ said Marshall Vest, an economist at the University of Arizona. ‘Eventually, those sellers will either come to their senses and lower their asking price, or they’re going to take the homes off the market.’”
“Also potentially adding to the problem, said Tucson buyers’ agent Jon Quist: Many of the buyers he represents are not interested in far-flung, so-called ‘cookie-cutter’ developments, which sprung up in response to investor demand. ‘I don’t sell these real cookie-cutter-type houses,’ said Quist. ‘There could be (for sale) signs like a forest in those neighborhoods.’”
“Saenz, the seller on the Southeast Side, said she isn’t too worried about the time it might take to find a buyer. Her house in Vail is still under construction. And under her deal with the seller, she won’t have to make mortgage payments until she moves in.”
The East Valley Tribune. “Like the rest of the languishing housing market, Valley condominium sales have slipped in the past year. But that hasn’t discouraged some developers from betting that the right project in the right location will thrive. Construction is set to begin later this year on dozens of new condos in the East Valley.”
“The condo market goes through periods of overbuilding with developers eager to capitalize on trends without doing much research, real estate analyst RL Brown said.”
“People want to be in downtown areas, near the hubbub of galleries, restaurants and bars, said Susan Bitter Smith, spokeswoman for the Main Street Plaza condos in Scottsdale. Though some in the real estate industry worry that the market is being flooded with too many condos, Bitter Smith said many projects are still selling and there are waiting lists.”
“‘(Developer’s aren’t) out there spending money for sthings they can’t sell,’ she said. ‘So far, there has not been any lack of customers.’”
The Arizona Republic. “Monica and Jaime Silva thought they were on the road to owning their first house. They didn’t have much to put down on the $215,000 house in Maricopa, but the lender approved them for an ‘80-20′ program, in which the down payment and the balance of the sale price are borrowed in separate loans.”
“But about a week before they were to close on their home, their lender canceled the loan. The mortgage company had tightened its lending requirements on subprime loans. The Silvas no longer qualified.”
“‘We were devastated,’ Monica Silva said. ‘Our credit isn’t perfect, but why would they tell us yes then no?’”
“Subprime mortgages account for a big piece of home financing in Arizona. The state ranks No. 2 nationally in the percentage of subprime loans, with nearly 17 percent of homeowners in using them.”
“Jill Hoogendyk, broker and a board member of the Arizona Mortgage Lenders Association, had nine subprime loans canceled between mid-February and mid-March. That is about half of the company’s typical volume of loans a month.”
“One client was trying to refinance an adjustable-rate mortgage but couldn’t. The couple now pay the new rate -$500 more a month -while shopping for another non-prime mortgage. They were a victim of the collapse of New Century Financial Corp. of Irvine, Calif., which filed for Chapter 11 bankruptcy reorganization in April.”
“‘There was no warning,’ Hoogendyk said of the lost New Century loan. ‘We had a loan that was approved and shipped to them. It probably would have closed in a couple days after that if they hadn’t gone out of business.’”
“Housing speculators also jumped on the subprime bandwagon. They liked the idea of paying as little as possible for mortgages that they expected to dump after selling the houses for quick money.”
“With home prices soaring, lenders came up with an array of exotic mortgages. Lenders were willing to stretch traditional borrowing standards because they were writing mortgages on properties whose values increased 30 to 40 percent a year in some neighborhoods.”
“‘There were a lot of companies that made loans that made no sense,’ said Jay Luber, vice president of First Horizon Home Loans of Phoenix.”
“‘It’s high risk. At this point, almost everyone has pulled out of the subprime market,’ said Bill Ryan, (an) agent in the East Valley. ‘If there is subprime, it has to be very extenuating circumstances, full documentation and 12 percent rates or higher.’”
“Tighter lending restrictions that are cutting back subprime loans come at a bad time for the Phoenix-area housing market. Real estate agents and lenders are losing deals because buyers can no longer qualify for the riskier loans.”
“‘Builders are going to get a bunch of inventory back, and I am, too,’ said Doug Fulton of Fulton Homes . ‘You don’t want to get one (house) back if you don’t have to. You’re kind of scratching for sales as it is.’”
“The changes in lending standards have been swift. David Blank, an agent in northeast Phoenix, closed a house with a subprime loan just two months ago in which the buyers had a bankruptcy and a foreclosure but still got 100 percent financing.”
“Blank said the buyers wound up putting less than $300 into the deal after securing $8,300 in closing-cost money from the seller, some of which was used as a fee to secure an interest rate lower than the market rate.”
“‘They got in under the wire,’ Blank said of the buyers. ‘They got 100 percent financing.’”
This dude has a slightly skewed idea of the “worth” of this place. I believe it’s been for sale for like 5 years.
http://www.dougnewby.com/acc/archsig/properties/campbell%5Fcliffs%5Ftucson%5FAZ/
Are you sure that ain’t a friggin’ museum? Yow.
Looks like odd job would step out from around corner and throw hat at you
Nah, more like an office. What a cold, hostile place; certainly not a home.
I don’t even care for that place.
I’d buy it if I won the lottery. But since I never play the lottery, I guess that’s not going to happen.
I doubt it, chick. You’d rent just for spite.
I’d love it if it weren’t in Tuscon
it’s pretty ugly
Someone once gave me the advice of always having your house on the market for what it would be worth to you to have to sell it and deal with all the headaches of finding another house and uprooting yourself and your family. That might be a boatload of money, but if someone is stupid enough to pay you for it, why not? That’s essentially what a bunch of people did during the boom. The other thing is the perspective of what a house is worth just because a realtor lists it at a given price. So, that $22M house might fetch $18M, the buyer will feel like he got a bargain, and the seller and realtor will laugh all the way to the bank. Evrybody’s happy.
At $710 sqft, that seems like quite the bargain, lol.
Something else came to mind, if the “home” is 31,000 square feet, why is only 25,000 of that air conditioned? Seriously, why skimp on 6,000 sqft?
the other 6000 sf are probably 50 feet underground.
That could come in handy…
Wow that place is cool!! Of course as you noticed he said some things are included, but how will he get around if he sales his mode of transportation? see the garage picture
“This eloquent home ”
Oh, come on…. of COURSE it’s worth the price. It’s “eloquent.”
lol
“This eloquent home enjoys more than 31,000sqft under roof, 25,000 of which is air conditioned, a 6 car garage, home theatre…”
********
Is this just more realtor-speak?
I would think that someone writing the description of a “$22 million” home would know how to use the word “eloquent”.
But I would probably be wrong. It doesn’t appear “movingly expressive” to me.
Well, except for the moonscape surrounding it.
*******
el·o·quent
–adjective
1. having or exercising the power of fluent, forceful, and appropriate speech: an eloquent orator.
2. characterized by forceful and appropriate expression: an eloquent speech.
3. movingly expressive: looks eloquent of disgust.
—————————————————————————-
[Origin: 1350–1400; ME (
I was in Phoenix (Scottsdale) this weekend, went to a D-Backs game saturday night and the park was no more than 50% full, I heard that one night during the week they had a new low in attendance ever at BankOne (Now it is Chase) park. Also, the local news had a piece on Housing Debt “Out of Control” and another on scalpers at the Suns/Spurs game who could not even get face value on tickets for Sundays game.
Related Anecdote: Suddenly nobody is asking me for loans in AZ. This is seasonally normal, but the silence is a bit more deafening than usual. I MADE a couple of new loans in March-April, which had been in the pipeline for a month or so, and have heard nothing but nothing but nothing about anybody wanting purchase money recently. Happy to report, nobody is in default. Yet.
Thanks for the anecdote.
Really interesting…
Here in the south bay it seems as if the smarter buyers have just lost interest. I’m not talking fellow HBB’ers. Its not a conversation at work anymore…
Got popcorn?
Neil
I went to that game as well - upper decks pretty barren but lower levels were full (of mets fans, it seemed).
I don’t know anyone that lives here that would buy from scalpers (at least the outside the stadium type), as they sell more counterfeit tickets than real. Outside a Coyotes game this past year, I saw 2 get into a heated argument over who was selling legit tickets and who wasn’t. Brilliant as the cops noticed and were going towards them as I went inside.
And that doesn’t change the fact that when you step outside, it’s a hundred and eighty degrees.
Ah, but then you move to your other $10M home on Hudson’s Bay in Churchill Manitoba.
I’d buy that in a heartbeat… Too bad I don’t have a spare 22 million laying around and quite possibly a spare 10 grand a month just too heat and cool it
I know a lady who owns a 3,700 square-foot house (in Oro Valley) with her husband and mother. Oh, does she grouse about the utility bills!
Used to live in Tucson 20 yrs ago it cost approx. 200.00 per month just to heat/cool a 2 Bedroom Apt.
That’s about what a 3br in Davis will run you. F-ing PGE.
So…Living where you do not have to pay $200 per month air conditioning 4 for months, but where your mortgage payment is $7,000 per month makes more sense right? Coastal California folks. Hermosa Beach. 2 weeks out of the year it’s hot but the young women parade around in their bikinis at the pier, and it’s a nice scene. I figure it’s worth it to pay $1,000,000 for 3 boxes piled on top of each other and total of $1,200 square feet so that I would not have to pay $200 per month on air conditioning! Ha!
Someone can turn it into a porn movie studio. They could shoot 10 movies at the same time.
Or a training camp for Al Queda. Doesn’t it say that it has an indoor shooting range? It looks like it’s buried in the mountain too. Maybe this is a fine example of Afghanistan construction?
“Blank said the buyers wound up putting less than $300 into the deal after securing $8,300 in closing-cost money from the seller, some of which was used as a fee to secure an interest rate lower than the market rate.”
“‘They got in under the wire,’ Blank said of the buyers. ‘They got 100 percent financing.’”
________________________________________________
THese people are F’d.
Let see, you bought right before the credit spigot turned of. This is equivalent to buying right when the music stops - sorry no chair for you, but you can thank this guy for “helping” you out!
As soon as they move in they’re upside down on their mortgage. Yeh you got in ‘right under the wire’…..Good luck.
Oh, the irony had me chuckling too. Poor sap.
Geez, it’s like “The Great Escape”, only in reverse, and with just as many casualties…
Grp Cpt Ramsey: How many of them were wounded?
Von Lugar[softly]: None…
Realtors LIKE this one are a HUGE part of the RE problem.
They DIDN’T JUST get UNDER the Wire BY Themselves !
THese people are F’d.
No, they are not F’d. They already had a prior bankruptcy and foreclosure. These people are old hands at this game. They will live rent free for a few months and then walk away. What are they going to loose? Their credit?
I agree with JCM. Those people will make occasional mortgage payments and effectively live there for at least a year for LESS than renting. They know how to game the system.
I’d assign a nontrivial probablity to that event occurring.
probability
Under the wire?. More like the scene in the movie “The Green Berets” where all the VC get fried in the wire when they set off the napalm.
Languishing.
Either prices decline or salaries rise. It’s that simple. Why all the rhetoric and debate?
Because if RE prices decline then Re agents salary don’t rise and they need to be keep in BNW’s & lattes.
This is idiotic– not your comment, but that idea that if prices decline realtors don’t make money.
Realtors make money on each transaction. The past few years, they’ve been able to get the maximum amount of compensation for the minimum amount of work. The cheerleading going on is solely to keep up their 20-hour-a-week lifestyle.
As soon as sales stop– which they have, by and large– realtors will quickly learn that their lease payments on the SLK are only going to be made if they start doing some transactions. They’ll quickly urge their sellers to drop their prices in order to attract buyers.
We’ve seen this already. Why do you think there is such a huge amount of realtor churn amongst some houses? FBers who can’t drop their price (because they don’t have any excess cash to bring to closing) are being told to reduce their price by their hungry realtor. They tell the realtor “F you!” and go with a different agency.
A lot of smaller agencies are getting absolutely crushed. Look for a lot of consolidation as the larger agencies, who are able to skate for a while longer on the lower number of transactions, stick around while the 1- or 2-person mom and pop agencies go out of business because their clients won’t drop their price.
We’re in the space between denial and capitulation. Realtors are trying to push sellers as quickly as possible towards capitulation, make no mistake, because without that flow of sales, the realtors are just as screwed.
Anyone watch “Bought and Sold” on HGTV last night? Talk about Schadenfreude! One realtor held an Open House–and nobody came. One pair of realtors did not get a single offer (after 6 weeks) on a lovely $1.8M house on 2 acres in Short Hills, NJ. Only the newby realtor (who pronouced it “relator”) got what I thought was a reasonable offer on a 500SF cottage @ $199K. The sellers refused the offer and the would-be buyer went elsewhere. It should have been called “Neither Bought Nor Sold”!
I saw that episode…even the catered lunch for the open house didn’t help. However, the other agents sure ate their fill and made the listing agent buy more food. Ha, ha, ha!
“Realtors are trying to push sellers as quickly as possible towards capitulation, make no mistake, because without that flow of sales, the realtors are just as screwed.”
What I don’t get, then, is the realtors that won’t bring lowball offers to the homeowner. You think they would want to bring these to the homeowner to soften their resolve a bit- they might be more willing to drop the price after seeing the size of the offers they are actually getting.
Listing agents are required to bring all offers to the seller. I’m looking into ways to make sure they do, like contacting the sellers somehow and checking.
Why not just call/email the seller and tell them you made an offer?
Most of these realtors are as clueless and stupid as the FB sellers. As soon as buyers (and sales) become even more rare, they will quickly be happy to start passing along lowball offers, especially if they know the seller has equity.
All the RE’s I have EVER dealt with drove huge luxury cars. Wore expensive cloths and were big time into creating an image for themselves.
I meant RE agents.
Absolutely. Only time we ever had new cars was when my wife was a realtor in the 80’s. They were leased Buick Park Avenues (my cars were still used). The extra family income put both our kids through private college without us or them taking out loans. She busted her butt, and since much of her business was conducted on weekends, I cooked many a Saturday and Sunday dinner.
LOL…my thoughts exactly.
It’s all part of the Ownership Society thing.
I’m sure CORP america is ready to give everyone a big fat 50% increase to cover the difference.
Let’s roll!
Because it’s different here.
Because it takes a village!
Because salaries are NOT going to rise, and they desperately want to keep hose prices from dropping. Hence all the rhetoric and BS.
“…keep hose prices from dropping.”
Hose prices will drop — it’s in the bag.
hose already cheap… like 5.99 for 50ft one.. but not high pressure
perhaps he meant lady’s stockings.
And we all want those to drop. Well half of us at least.
As long as it’s not nappy-headed hose.
“salaries are NOT going to rise” — hmm. Our Congresspersons are trying to raise the minimum wage from $5.15 to $7.25 over a couple years, no? An increase of 40%? Equivalently, a guarantee that purchasing power of savings will decline by 40% pretty soon.
“An increase of 40%? Equivalently, a guarantee that purchasing power of savings will decline by 40% pretty soon. ”
You seriously believe that the majority of the country is presently working at minimum wage? Most states have a higher minimum than the feds.
Someone making $8 is going to be able to buy a house?
$8 an hour with a little overtime can be $30K a year once you factor in child care credit and earned income credit. Easily good enough for a $300- $400K house. . . oops, still living in 2005.
AKron, it’s not that I think large numbers of people are working at minimum wage. In fact, I know they aren’t. However, “trickle-up” economics (which seems more accurate than “trickle-down” economics) suggests that these increases eventually ripple through everything. A person formerly earning $7.25 will not settle for that amount when minimum wage rises to meet his wage. More generally, if an increase in min. wage does not create inflation, it will create unemployment. Idiotic policy (except that it might help mitigate housing crash).
Sales have been really low this last week here in AZ. Maybe its that time of the month, but if the trend holds, we should be down another 25% since the beginning of the year. Looks like suprime blowup had a big impact here. The beginning of the year was 30% below the previous year. Ouch.
hmmm, when April/May sales volume is down 25% from the sales volume in January, that can mean only one thing: we’re at the bottom!
te he… yep. just when it looks like you’ve crested the hill, and it is all downhill from here… Everyone that makes a living off selling you a house will do everythign they can to convince you we’re already at th bottom… well we will be next week, next month, next quarter, next year…..
“And under her deal with the seller, she won’t have to make mortgage payments until she moves in.”
Sorry, I don’t understand this deal at all…..
I am pretty sure that the builder/seller does not have that in the contract. Probably more akin to “buyer has xx amount of days to take final possession of said property and execute all required purchase docs, subsequent to completion, otherwise buyer will be in default under this purchase contract…” But the sales agent made it sound as if there is no mortgage payment due until “whenever you decide to move in…”. I think this person is going to be screwed. IMHO
“Her house in Vail is still under construction.”
likely when the house is finished and certificate of occupancy issued… the payments soon begin
you all know the movies “escape form NY” and “escape from LA” where they have sectioned off these cites to be giant anrachist prisons….
I see Phoenix turning into somethign similar….
“Snake Ajmstilt”?! I heard you were dead man.
Snake Pliskin
actually it’s snake Plissken
thanks - all I know is that when I look at Kurt Russell, I see him in Disney movies, not as a hardened criminal!!!
Arizona, and the Phoenix metro area in particular, is the most bubblicious area in the country. I have seen houses on the market for 2+ years, and they NEVER lower the price.
Loco, I can think of two examples of houses being on the market for two years, and, AFAIK, no price drops.
‘Our credit isn’t perfect, but why would they tell us yes then no?’”
Because it’s their money and they owe you nothing. Did you forget that life’s a bitch? So quit sniveling and go to work on saving some money and improving your credit score. Remember what that was about?
‘Our credit isn’t perfect, but why would they tell us yes then no?’
These folks shouldn’t waste time questioning it, they should be sending a thank you note. I wonder if they realize how lucky they are.
‘Our credit isn’t perfect, but why would they tell us yes then no?’
Because they are just terrible teases ?
It’s clearly racism, Ms. Silva. Get a lawyer and sue!
Damn lenders don’t want to lose their money on me and it just ain’t right!
Daddy, I want it NOW!
-Veruca Salt
Can’t fight the seether…
This is great……borrowers are “victims” when they get the loan, and when they DON”T get the loan.
I’m beginning to wonder which came first. The toxic loans, or the morons willing to sign up for same.
It’s stories like these that get me thinking about that aluminum baseball bat in my closet.
“One of these days, ONE of these DAYS….”
Nah - my Joshua tree idea is a way better. Oh, I’m sorry, you were talking about hitting. My bad.
Something tells the Mrs isn’t missing the angry sex anymore >; )
“Saenz, the seller on the Southeast Side, said she isn’t too worried about the time it might take to find a buyer. Her house in Vail is still under construction. And under her deal with the seller, she won’t have to make mortgage payments until she moves in.”
Does this mean she believes she can defer her payments after the home is built until she chooses to move in? Methinks the lender will interperet that clause differently. This can only have a happy ending.
“Blank said the buyers wound up putting less than $300 into the deal after securing $8,300 in closing-cost money from the seller, some of which was used as a fee to secure an interest rate lower than the market rate.”
Is blank the guys name?…….or was that just the look on the buyers face.
“They got in under the wire,” Blank said of the buyers. “They got 100 percent financing. . . . That’s a lot harder to get now. They can afford the payment. By making the payment, it will improve their credit. They’re living the American dream: home ownership.”
The American Dream Baby Yeah!
That $8,300 probably was exclusive of the additional 20k+ cash back at closing they got
I certainly hope that they didn’t put any of that $8,300 towards the down payment. That would be mortgage fraud, regardless of any disclosures.
“One client was trying to refinance an adjustable-rate mortgage but couldn’t. The couple now pay the new rate -$500 more a month -while shopping for another non-prime mortgage. They were a victim of the collapse of New Century Financial Corp. of Irvine, Calif., which filed for Chapter 11 bankruptcy reorganization in April.”
Again with “victim”!?
Nope, I’d say, “willing participant”.
New Century was a victim of their ineptitude. If those losers would just pay on time, Wall Street wouldn’t be confused about the subprime market and all those poor employee victims at New Century would still have their jobs.
Speaking of New Century, I was just reading in implode-o-meter that New Century’s remaining portfolio of subprime loans was finally sold … for 34c on the dollar. Wow, that is really low. It suggests that the lenders’ subjective appraisal of the underlying properties is 50% below peak, or in that ballpark. Even the pondscum mortgage brokers who used to try to buy my notes would be offering something like 70c on the dollar. Not that I wanted to sell.
It’s just the vultures taking advantage of the situation. Fremont, which gave out loans that were just as poorly underwritten, sold their loans at 97/100
I am too lazy to research these particular MBS, but a huge component of the value of an MBS issue is the stability of the guarantor of the principle. It could be that New Century guaranteed their own MBSs, so that they were downgraded massively as soon as New Century went under. Fremont may have used a third party guarantor. I can’t think of any other reason that anyone would pay 97/00 for aged MBS with a BK servicer.
Also depends on how many of New Century’s loans were second mortgages. (you know the “20’s” on the 80/20 loans).Those suckers are now worth zero.
“Tempted by a generous price cut, Cynthia Saenz couldn’t resist buying a new house in Vail about eight months ago. She put her Southeast Side house up for sale five months ago (?!!) and has reduced the 1,800-square-foot home’s price from $230,000 to $200,000. Still, it hasn’t sold. Saenz’s house is among a record number of properties on the market in the Tucson area.”
Try not to flip yourself a falling knife.
Let’s see, she bought in Vail 8months ago and waited 3 months to put her house on the market. Must have thought she’d sell it in a week.
“Saenz, the seller on the Southeast Side, said she isn’t too worried about the time it might take to find a buyer. Her house in Vail is still under construction. And under her deal with the seller, she won’t have to make mortgage payments until she moves in.”
Can anyone tell me why it’s taking the builder over 8 months to build the house? How much money did she put down? I guess she’s not worried about losing that either!
I am stunned at the number of people who buy a second home before they sell their first (those who cannot afford 2 mortgages - which is most people)
I have family who are doing the same thing — buying the second house (a new construction home) before selling the first, despite the fact that the market is beyond in the toilet here — it’s in the sewer! I’ve done everything I can to try to persuade them to wait until the first house is sold to close on the second, but they won’t listen because it’s their dream house. I feel like I’m watching a financial train wreck and I can’t do a da*n thing about it because they won’t listen. Even with their large downpayment, I don’t think they can swing two mortgages. I don’t know what else I can do. It’s painful to watch family make such a huge financial mistake.
“The changes in lending standards have been swift. David Blank, an agent in northeast Phoenix, closed a house with a subprime loan just two months ago in which the buyers had a bankruptcy and a foreclosure but still got 100 percent financing.”
Not to worry America. His high paying job as a General Motors VP and her’s as a senior Pet Groomer at Pet. Com WILL get them throught this.
“Developers aren’t out there spending money for things they can’t sell” [said Susan Bitter Smith, spokesperson for a new development in Tucscon].
Oh yeah, my landlord in Maine is the ONLY builder in the country who is renting out a property for much less than he has to pay the bank each month.
ok, maybe 2 others guys in the country are doing this as well
Yeah, the number of aspiring landlords certainly rises in this country all of a sudden. Who new that this was a fabulous career; apparently I didn’t. The next government job report will show a sharp rise in new job creation spur primarily on by one occupation alone: landlord.
Cinch
Take it from me: landlording sucks. The only way you can put up with it over the long term is if you’re pulling in massive positive cash flow.
The stuck flippers are not going to last more than 12 months, or until the first burst water heater ruins the hardwood floors in one of their “sweet” investments.
OT - 1966 quote from Alan Greensperm:
When business in the United States underwent a mild contraction in 1927, the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage. More disastrous, however, was the Federal Reserve’s attempt to assist Great Britain who had been losing gold to us because the Bank of England refused to allow interest rates to rise when market forces dictated (it was politically unpalatable). The reasoning of the authorities involved was as follows: if the Federal Reserve pumped excessive paper reserves into American banks, interest rates in the United States would fall to a level comparable with those in Great Britain; this would act to stop Britain’s gold loss and avoid the political embarrassment of having to raise interest rates.
The “Fed” succeeded; it stopped the gold loss, but it nearly destroyed the economies of the world, in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market-triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom. But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result, the American economy collapsed. Great Britain fared even worse, and rather than absorb the full consequences of her previous folly, she abandoned the gold standard completely in 1931, tearing asunder what remained of the fabric of confidence and inducing a world-wide series of bank failures. The world economies plunged into the Great Depression of the 1930’s.
Got Milk Duds?
Yeah, but “it’s different this time.”
“‘Three months ago, we thought we would see some degradation in the number of units in inventory, but it’s going up,’ said John Strobeck, a Tucson housing market consultant. ‘That’s not a positive sign.’”
Another so Called CLUELESS EXPERT! DUUUUUUUhhhhhhhh.
These imbeciles can’t figure it out already. Dopes making $14,000 bought $720,000 houses. An Absolute disaster for many debt zombies.
ot - 1966 quote from Alan Greensperm:
When business in the United States underwent a mild contraction in 1927, the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage. More disastrous, however, was the Federal Reserve’s attempt to assist Great Britain who had been losing gold to us because the Bank of England refused to allow interest rates to rise when market forces dictated (it was politically unpalatable). The reasoning of the authorities involved was as follows: if the Federal Reserve pumped excessive paper reserves into American banks, interest rates in the United States would fall to a level comparable with those in Great Britain; this would act to stop Britain’s gold loss and avoid the political embarrassment of having to raise interest rates.
The “Fed” succeeded; it stopped the gold loss, but it nearly destroyed the economies of the world, in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market-triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom. But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result, the American economy collapsed. Great Britain fared even worse, and rather than absorb the full consequences of her previous folly, she abandoned the gold standard completely in 1931, tearing asunder what remained of the fabric of confidence and inducing a world-wide series of bank failures. The world economies plunged into the Great Depression of the 1930’s.
Got Milk Duds?
Do you ever read this stuff and get a little sick?
We repeated history because we forgot it… ghad…
No popcorn for this one…
Neil
Great Britain 1927 = US 2007
US 1927 = China 2007
Didn’t Kondratiaff say that everything ran in 70 to 80 year cycles?
No the K wave is supposed to be around 54 years. It is probably stretched out this time due to longer life expectancy.
“…..said John Strobeck, a Tucson housing market consultant. ‘That’s not a positive sign.’”
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Another brilliant insight into his local RE market. Man those RE consultants are worth every penny of their fee.
Some charts from The Fed.
http://dallasfed.org/data/data/Housing-charts.pdf
Those are great graphs. But didn’t they leave out the grey recession bars at the right end of the graph (for 2007)? The graph entitled “Home Price Appreciation Slowing Sharply” is especially striking — over six previous recessions since 1969, there was never a comparable crash in the YOY rate of median existing single-family home prices to the one currently underway (from around 13% in 2005 to -3% in 2007 — annual deceleration of 8% in the YOY rate…).
If we are not in a recession, I will eat my hat.
“If we are not in a recession, I will eat my hat.”
Et moi.
Any thoughts on why the Dallas Fed is putting up charts that provide irrefutable evidence that a recession is imminent?
Staffers discovered Mish’s and Calculated Risk’s blogs?
Can’t get over those graphs — I may lose some sleep over them tonight, they are so disturbing.
Which brings to mind a question:
How will future American history books refer to this current episode in U.S. economic history?
1) The Great Housing Crash of 2007?
2) The Housing Panic of 2007?
3) The Bubble Burst of 2007?
4) The Housing Bust of 2007?
These all sound appropriate, if a bit mundane. Can anyone come up with something more catchy?
I vote for “Great Depression II”
Fleck is with you. He can’t make up his mind whether we are in a rerun of 1927 or 1929. In either case, I am glad I told my Dad to get out of the stock market, as I don’t think the bull run has any legs left on Main Street to support it.
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Historically bull may be in china shop: Dow surge parallels ’27
By Jerry Kronenberg
Tuesday, May 8, 2007
The surging Dow Jones industrial average has rallied for 24 of its past 27 sessions - raising some alarm bells because that hasn’t happened since 1927.
“You don’t find those sorts of streaks near what have historically been tremendous buying opportunities,” hedge-fund manager Bill Fleckenstein yesterday said after the Dow rose 48.35 points to close at a record 13,312.97.
The Dow has rallied in all but three sessions since March 29 - a run not seen since July 1 to Aug. 2, 1927, just 26 months before 1929’s stock-market crash.
Although experts (Like David Lereah? Or Kuntlow? Or Kramer?) don’t see a 1929-style collapse coming, some think the Dow is setting up for at least a short-term correction.
“This rally could go on for two more hours or six more months, I don’t know which. I do know that periods where things get really crazy end badly,” said Fleckenstein, who admits his RTM Fund “shorts” the market (bets prices will fall).
Fleckenstein said today’s Dow streak parallels not just 1927, but also the June/July 1929 period, when the index rose in 19 of 21 sessions three months before the crash.
http://business.bostonherald.com/businessNews/view.bg?articleid=199158
OKay, I have most of my 401k in a European growth fund that has gone up 155% in the last 15 months. I must admit that I am getting a bit nervous as a run like that can’t continue forever. My thinking at the start was that the US dollar would drop vs the Euro, helping me out at US dollar prices. That worked, but what now? I dumped the fund when we had that semi-big drop a few months ago, but got right back in with little loss. What’s a guy to do? I have money in New Zealand and have done really well with the exchange rate recently, as well as the 7.5% deposit rate. I am selling a house in New Zealand in September but am not sure what to do re the exchange rate and interest rates. Any ideas out there? Needless to say, I don’t blindly follow advice on the internets (joke). I guess action depends on whether we will see inflation or deflation as a result of all this cr@p.
How about “The Global Depression”. We’re US-centric (typically) on this blog but the craziness is happening the world over. Spain has a more out-of-control property bubble going on right now than we do. Everything these days is leverage, leverage, leverage. There’s something approaching $400 trillion in financial derivatives floating around out there. It’s all well and good as long as the “players” are making enormous piles of money, but leverage works on the upside and the downside too. It will be very difficult to unwind the current imbalances gracefully. I think it’s the economic equivalent of Europe in the summer of 1914. There’s enormous fragility under the seeming stability and it will just take a single unexpected shot to start a chain of events.
“An explosion of home-building and numerous condo conversions during the boom of a few years ago have led to an unprecedented glut of homes now that the market has cooled, according to real estate executives and industry analysts.”
You mean the same @#$$% “real estate executives” and “industry analysts” who were asleep at the wheel the last 3 years while this was all going down….or worse?
Why does the MSM always quote the bad guys?
Especially the same bad guys who one year ago were passing out kool aid and cheerleading the bubble up?
Maybe because that is who pays their salaries…..
Yeah, but it was all for the “greater good” right? Getting people into homes, being a part of an “ownership society” and reaping the benefits of the “wealth effect” are all good things according to 80% of the populace, the MSM and the gubmint. Anyone who stands by and rails against absurd behaviors becomes nothing more than a malcontent in their eyes. Those who do not believe in their version of “greater good” are marginal characters and evil ones at that. Therefore, even when we are proven correct in our thoughts and actions it will still be said that we were not “right”.
Cassandra always gets a raw deal.
AZ is so screwed, I wish I would have sold all properties. My mistake, was keeping one of the homes. I sold one about 6 months ago. Buyer came with $500. I paid $6k in incentives and then added another $1,000 to get him to close 45 days earlier than agreed. I sold the home for 10% less than the comps and painted, fancied up the yard and installed new carpet. I cared not, just wanted to dump it. Still made a bundle, but missed the peak by 9 months.
I fear the worst is yet to come. Seems to me that there is still another 20-30% left in this downturn.
Honestly, if it’s 20-30% that only reverses about January-September 2005 appreciation - the other 60% or so run up since 2001 remains. AZ would have had “normal” 5% appreciation per year anyway, but we do need to revert to the mean.
I’m living right here in Chandler (25+ year old ‘hood’), some owned outright or 30-50%% LTV type debts. I’m really wondering if and when these big drops are going to happen - to actually see a house that closed in 2005 for $600K to now close for $400k. I’ll keep looking, but I’m really starting to suspect we’ll see $550 this year, then $555 in 2012, and $560 in 2016 for the next few owners. Either way, inflation or price drops means houses are no longer “investemnents” in AZ for a long time.
“houses are no longer “investments” in AZ for a long time.” I’m not being antagonistic here perhaps rather sympathetic to your point of view. What really puzzles me is why do so many Americans think housing is an investment? I can see builders, contractors and RE etc. see it that way; that is because they actually have to get up in the morning and go working building and selling houses.
As I understand it, you buy a house for shelter and to raise a family. For a house to appreciate in value it must mean that the person comes after you must pay you to sleep in his/her future home. This notion seems absurd to me. Unless your house is in a sleepy neighborhood, and it all of a sudden became trendy area thus commanding a premium price. Maybe I’m subscribing to my grandfather’s old way of viewing life. This postmodern world is confusing!
I can see buying stocks in a company with the expectation that it will appreciate in value. I can also see that people work at the company producing a product and selling it thus turning a profit (or not). But I cannot see a person making a product or selling it while sleeping in their beds.
I work with some very bright people who are well grounded in reason and common sense (professors and scientists), and many of them believe that their home will continue to appreciate 7% plus per year (adjusted for inflation, CPI?). I don’t know if they realize that if their $400K home does this for the next 10 years, they can happily retire by refi every year and withdrawing their new appreciated equity. Thus, they don’t have to work for living.
Good post Cinch and I agree with you 100% .
i think affordability puts a cap on any investment and more so with real estate because it’s a big ticket item and a conditional sale in which most people need financing in order to purchase .
People use to have the concept of paying off a home in the course of 30 years so they could be mortgage free during retirement . This housing boom was just a big fat mania that was promoted by cheerleading myths and faulty fradulent lending .
What really puzzles me is why do so many Americans think housing is an investment? ….
As I understand it, you buy a house for shelter and to raise a family.
You just answered your own question. A house is an investment because it provides shelter. Any asset which yields cash or a marketable good or service is an investment.
You seem to be using the popular bogus definition of investment as “something which appreciates in price”. In fact many investments, such as just about any kind of machinery or computers, are just about guaranteed to go down in price. They are still investments - depreciating ones. And of course some investments such as savings bonds are guaranteed to neither appreciate nor depreciate.
“‘If there is subprime, it has to be very extenuating circumstances, full documentation and 12 percent rates or higher.’”
May the subprime loans RIP.
MSM confirmation of my investigative reporting piece (LOL):
http://bakersfieldbubble.blogspot.com/
Wow , salespeople bashing bats around if a loan was turned down . That really explains for me why there was such a break down on the check and balance systems in lending . Unreal ,I’m speechless .
Crispy,
So you’re going to need a new handle now, no?
How about CrispyCrunch? Or CrispyToast? Or Capt’N Crunch? In any case, please give us plenty of warning when you switch handles
LMFAO!!
We have to stop connecting an emotional attachment to the purchase a house, and start thinking of it as just another purchase.
I am not going to pay the current retail price for a house, because the price is too high! You would think that the price of a home would come down, once they produced enough of them. Just like the price of an X-box, or a Play Station, or an HD TV.
The REIC has effectively manipulated all the logic out of the purchase of a home, and has supplanted it with a complete and total emotional attachment; to base your decision on a purchase. And we fell for it!
We need to start un-doing the damage wrought by the REIC, and re-educate the buyer on the proper criteria on which to base a home purchase.
You are preaching to the choir. Tragically, the choir is much smaller the the congregation.
This comment is for the MSM.
#1: I will not take out a loan for more than I am able to repay.
#2: I will not pay more for a house than it is worth.
#3: I will go no Ebay and the Internet to find the lowest price for a house, and only pay the lowest price for a comparable house.
You should not connect an emotional attachment, to your decision on a home purchase. The stakes are too high.
UPDATE:
Crisp “I can’t make payroll”
http://bakersfieldbubble.blogspot.com/
RE moguls don’t say that, do they?? LMAO!!!!!
Being generally sleazy and lazy creatures the realtors will push the sellers down, as realtors are more worried about moving the property than missing out a small part of their commission - that is true, but even with (lets say) 20% discounts - with zero down/ARM/liar loans pretty much all dried up and the magic money unavailable - there won’t be enough buyers able to even sustain these disconted levels
We are looking at a 10 year recession in real estate