January 1, 2008

Predictions For 2008

What are your housing bubble predictions for 2008? A selection from one year ago. “There has never been a YOY price decline. Don’t expect a national decline any time soon. History says prices don’t drop nationally. Part of this is because each component geographic area declines and increases at different times.”

“Sometimes no areas go down. Right now we’re seeing some go down, while others continue up. There have been many times when all have gone up together. But there has never been a year when all areas (aka the whole country) went down.”

“Prices fall by state and city. But they never fall nationally. I take reasonable sustenance from this broad swath of history.”

Another posted, “In areas where there is land, builders will buy vacant land for 50 cents on the dollar, materials at 50 cents on the dollar, and bid labor at 60 to 75 cents on the dollar (of the previous prevailing wage). They’ll sell at 60 to 70 cents on the dollar until they no longer can.”

“Do recall, building starts are *still* 50% above the natural absorption rate. The overhang is expanding. When Wells Fargo (or whatever bank) forecloses on the builder, they’ll do a cold hard calculation. In many cases, that calculation says finish the homes and sell for 30 to 50 cents on the dollar.”

One on the builders. “How about the home builders? I continue to think that TOL will be bankrupt by the end of 2007. And WCI will go before TOL.”

One from California, “There’s alot of people in their 50’s who went from dot.com/dot.bomb unemployed to living off equity. Many have used up the equity and need another draw as credit cards are reaching limits, but we know that the ATM is empty this time around.”

“I live in Monterey County, and there are many here and in about 7 surrounding counties, from Monterey County, Santa Cruz, San Benito, Santa Clara, San Mateo, San Francisco, Marin, Alameda, and further, who are living from equity. Those who went on unemployment from Silicon Valley and who lost a bundle from the NASDAQ popping at 5000 are hanging on with cat claws but there’s no more bubbles appearing and the end of the float looks near for most.”

One had specifics, “2007 prediction: Barring another 9-11 type event, or Katrina event, the bubble will continue to deflate slowly the 1st half of the year with the media cheerleaders saying the economy is great and now is a great time to buy.”

“After inventory sky rockets from a number of factors, new homes coming on the maket, re-sales coming on the market, etc., the 2nd half of the year will see some sellers start to panic.”

“The FED may lower rates to save the housing market causing the dollar (and then the stock market) to crash (or start to crash if you believe in the controlled/soft landing, which I do). The crash will not be a straight line down but may hit botttom by 2010 - 2012.”

And another, “My humble predictions. A recession in 2007 or 2008. Not for any specific reasons but just basic logic. It’s been 6 years or so since the last one and its rare to go for many years without one.”

“If we do have one it will be much more painful. Lowering rates alot is basically impossible due to massive debts at all levels of society. Central banks don’t want to change the status quo but their hands are on the trigger and their eyes on the forex/gold markets. People have no savings and real inflation is rather bad. It’s not like 2001 at all. I will say with a fair amount of certainy, that the world will be a different place by 2012.”

A little broader view, “1. 20% year-over-year national median price decline by the end of 2007. (Yeah, I’m predicting the market psychology snowballs). 2. 20% year-over-year California median price decline by the end of 2007.”

“3. A beginning of calls for changing the new bankruptcy laws to allow people less responsibility. But it won’t pass until 2008.”

“4. Jan 1 2008 will have cheaper Oil than Jan 1 2007 either due to Arab countries stocking up on money to finance the civil war in Iraq or due to Arab countries noticing the increasing worthlessness of their American investments and compensating.” An optimist,

“Here are some of my bold predictions: 1. RE bubble will bust very slowly over many years. People waiting for RE market to crash like stock market did, will be disappointed.”

“2. Lot of vulture fund money will come in to buy under-priced condos. Very few ‘normal’ everyday people will be able to get great deals on condos in desirable areas.”

“3. People who bough an overpriced house with ARM loans will cut back on their lifestyle before they go into foreclosure. I know of people getting rid of cars, etc to pay mortgage.”

“4. Most normal people (ie people who are not ‘professional’ investors) who bought multiple houses will lose all their houses and will end up with a large debt that they will have to pay off over time due to stricter brankrupcy laws. Most normal people who bought multiple properties have at least one property that they have good equity in…in the end, they will lose everything.”

“5. Some people with normal loans (who cant afford payments) will get toxic loans and postpone the inevitable.”

“6. More young adults will choose to live at home with family as they cant afford to buy a house. These yound adults will help family pay the mortgage (in cases where they are in trouble).”

“7. More foreigners will invest in real estate (Miami, NY, San Fran and other cosmopolitan areas) as the dollar weakens. This foreign investment will be limited to a few cities that foreigners typically like to visit/live….Miami being the primary city where this will happen.”

“8. Construction job layoff numbers will not be accurately reflected in stastics since so many illegals were working on construction sites.”

“Summary: This will be a long drawn out crash and there will not be a single indentifiable time period when the crash occurs. The crash will occur in the form of small drop in prices and stagnation for many years….no dramatic moments like stock market where stock drops 90% in a few months.”

One on the foreclosure market, “I think that reversion to mean prices will affect virtually all areas that do not have a specific countering event, such as construction of a new auto plant. Late in the bust, the areas that suffer most could be the small backwaters, as more desirable areas that had been most overpriced also drop the most and suddenly have renewed appeal. In general, I think that by 2009, we’ll see 1998 prices + one-third, to account for inflation.”

“The difference between this bust and the S&L one is the ‘equity that ain’t there’ because of all the subprime loans and the huge amount of MEW by so many homoaners. This could, I think, drag out the process of lenders shedding their REOs, as their percentage of loss-per-house could be significantly higher than last time around.”

And one asked, “Angry, torch-bearing mob of FB’s pays a visit to DL’s house?”

A local call, “Future of the Orange County, California, housing market: Every owner is praying for the spring rebound, inventories are up, and buyers are scarce. The median sales price peaked in June of 2006 at $640K; the median in December 2006 was $620K.”

“First, sellers will list their houses early this year to get a jump on the other sellers, so inventories will spike up quickly. Seeing this, buyers will become ever more reluctant. Also, since the median rose for the first 6 months of 2006, even if the median holds at $620K (which is unlikely), the YOY median will show steady declines. This will increase the desperation of sellers and make buyers even more reluctant. Panic ensues.”

“By June of 2007 due to a combination of the 2006 rise in the median sales price serving as a basis for calculation, and the spring 2007 panic selling, Orange County will be sporting a YOY median sales price decrease of at least 10% with 15% to 20% being a real possibility. The median home sales price may dip below $500K.”

“By fall of 2007 the panic will subside and volume will decline significantly. There will be a small dead-cat bounce, and David Lereah and all the usual suspects will call the bottom. They will be wrong. The flood of foreclosures will increase the supply of homes for sale to record levels. The close of 2007 will see median sales prices at or near the low of the year and poised to make another big drop in 2008.”

“The story of the year will be the largest YOY decline in home prices since the Great Depression, possibly the largest decline of all time.”

One saw a blame game, “Prediction: The finger pointing will pick up speed. Who could have allowed this slaughter to happen?”

Not Everyone Is Disappointed In Florida

The Miami Herald reports from Florida. “South Florida’s housing market continued to deflate in November, with prices down, sales plunging, and buyers scarce and frugal, according to numbers released by the Florida Association of Realtors. Sales of existing single-family homes dropped 59 percent in Miami-Dade County compared to a year ago, and the weak demand pushed the median price down 4 percent.”

“Michael Pappas, president of the Keyes real estate brokerage, said his agents are seeing prices slide throughout the region — particularly in the condominium market.”

“‘It would be foolish for anyone to say there haven’t been price adjustments this year,’ Pappas said. ‘You’re not able to get the 2005 prices in 2007.’”

“Potential buyers still must consider how far the pricing retreat will go. Luis Aguiar opted not to wait. Last month he paid $327,000 for a four-bedroom house in Pembroke Pines that the sellers had bought for $485,000 one year ago. ‘I couldn’t pass that up,’ said Aguiar.”

The Herald Tribune. “During November, Sarasota-Bradenton Realtors closed on 556 houses — down 16 percent from the 664 of a year ago — but a far less painful situation than in South Florida.”

“Mortgage brokers are begging for qualified customers with money to put down. ‘We can get 15-year fixed rate money at 53/8 to 51/2 percent,’ said Dave Hofer of Re/Max Harbor Realty in Punta Gorda. ‘The problem is we don’t have enough legitimate buyers. They are not motivated.’”

“When the developer of the Broadway Promenade condo began taking orders in spring 2004, Realtors, including Steve Ivan, were falling over each other trying to get to the front of the line. Buyers were finally asked to close in June 2007, but 21 of those buying the 187 units backed away, forfeiting 20 percent deposits.”

“‘There are a lot of them that are not occupied yet,’ said Ivan. One buyer picked up a fourth-floor three-two with a partial bay view in November for $399,000 — about the same price as in 2004.”

“Tierney Foster, (an) agent in Bradenton, said most of the 70 properties her team has listed are ’screaming deals.’ She cited two listings in Manatee County that have never been lived in, both selling at sacrifice prices.”

“One in Lakewood Ranch’s Greenbrook Village is now on the market for $229,000, or $52,000 less than the owner paid in January 2006. Another in East Manatee, is on the market for $525,000, or $125,000 less than the owner paid in April. ‘We have such an amazing inventory,’ Foster said. ‘Because we’ve had so many foreclosures and such a steep drop in prices, this is now one of the best markets in the country to buy in.’”

“Anna Maria Island actually saw 2007 sales rise to 199 from 158 the prior year, according to John Van Zandt, an agent on Holmes Beach. The average price per square foot of condos, houses and vacant lots sold on the island dropped to $371 in 2007 from $653 the year before, Van Zandt said.”

“One of the most spectacular deals that he brokered was a canal-front home, with three bedrooms and two baths, once listed for $795,000. ‘We sold it for $525,000,’ Van Zandt said. ‘We sold it to someone who has a real estate license. When Realtors are buying, you know that’s a good sign.’”

The Tampa Tribune. “Not since the spring of 2005 have Tampa Bay area home prices been this low. The median sales price of previously owned, single-family homes in the Tampa Bay metro area plunged 15 percent to $189,100 in November, the worst drop among Florida’s major metro areas.”

“In Orlando, the metro most similar in size to the Bay area, prices dropped 9 percent to $239,000, compared to $263,600 during the same month last year. There were 1,108 sales in November, a drop of 35 percent year-over-year.”

“But not everyone is disappointed in the median sales price data.”

“‘I think this is a good thing,’ said Deborah Farmer, incoming president of the Greater Tampa Association of Realtors. ‘Now, we’ll have more affordable housing.’”

The Palm Beach Post. “Sales of existing single-family homes in Palm Beach County plunged last month to their lowest level on record - at least a 13-year low - as the once-vigorous housing boom continued to go bust, according to a Florida Association of Realtors report.”

“Buyers of single-family homes closed on a mere 459 sales in November, down 13 percent from the 525 sold in November 2006, the association said. That’s the lowest number since the association started keeping records in 1994.”

“The median price of a single-family home in Palm Beach County came down to $345,700, a 7 percent drop from November 2006.”

“‘Now that market conditions have improved, some postponed activity should turn up in existing home sales over the next couple of months,’ said Lawrence Yun, senior economist for the National Association of Realtors, ‘and I expect sales at fairly stable to slightly higher levels.’”

“His remarks drew fire on Monday from Jack McCabe, a frequent analyst on public television business segments and president of McCabe Research and Consulting in Deerfield Beach.”

“‘The only voice suggesting that conditions are going to improve is the realtor association,’ McCabe said. ‘It is the prediction of every home builder, mortgage lender and banking analyst that 2008 will be one of the flattest years, if not the worst year, for real estate in this country.’”

“In Palm Beach County, the supply of unsold homes - called ‘inventory’ in real estate-speak - has risen to astonishing levels as the housing boom continues to go bust.”

“‘Fifty-five months!’ McCabe said.” “Actually, there’s a 57-month supply - nearly five years - of single-family homes in Palm Beach County, based on the current pace of sales, according to Illustrated Properties Real Estate.”

The Orlando Sentinel. “Shannan Buttner knows that 2007 has been a record bad year for foreclosures in Lake County, because it has been a record good year for her.”

“Through the first 11 months of this year, banks and other lenders foreclosed on 1,812 properties in Lake County, more than double last year’s total, when 878 foreclosures were filed here, according to figures compiled by Lake County Clerk of Courts Neil Kelly.”

“The bane for overextended borrowers has been a boon for Buttner, whose small business delivers the bad legal news. ‘It started picking up at the end of last year and just avalanched this year,’ Buttner said.”

“Many of the recently filed foreclosures here — a Lake County record 277 filings in November — involve people who borrowed money at low ‘teaser’ rates that have begun to adjust upward, court records show.”

“Circuit Judge T. Michael Johnson, blames both borrowers and lenders for the crisis. Some people wishfully bought homes they obviously could not afford. But they got money from mortgage companies who gambled, too, Johnson said.”

“‘For a period of time there, all you needed to qualify for a [home] loan was a pulse,’ he said.”

“Circuit Judge Mark Hill said some people even borrowed money for their down payment. ‘Those people don’t have a dime in the house,’ he said. ‘When that’s the case, it’s easy to walk away from your obligation.’”

“Hill said that every month since May has been a record month for foreclosure filings in Lake County.”

“As the holidays approached, some judges began delaying foreclosure sales of occupied homes until January, reluctant to evict families at Christmastime. But many soon-to-be-foreclosed homes in Lake County are already vacant. Some were vacation or investment homes, owned by foreign speculators, betting on a quick flip and big bucks.”

“A few never made a single payment once the mortgage rates shot up, court records show.”

“Foreclosure sales and hearings will resume this year in hordes. Circuit Judge Mark Nacke, for instance, will hear more than 80 foreclosure cases during the second week of January.”

“As foreclosure filings increase, Buttner and her staff of document-serving messengers increasingly find the job more difficult. Three of her employees have had guns waved at them by people angry and frustrated by the news that they will be tossed from their home for nonpayment.”

“‘We’re getting more and more avoiders,’ she said. ‘You know they’re in the house. You can hear them inside. They just won’t answer the door. We just keep going back and back. Sometimes it takes eight or nine times.’”

Bits Bucket And Craigslist Finds For January 1, 2008

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