It’s Like A Bombshell Went Off In The Housing Bubble
It’s desk clearing time for this blogger. “U.S. homebuilders’ shares dropped, led by D.R. Horton Inc., the latest to cut its earnings forecast after Federal Reserve interest rate increases lifted mortgage costs to a four-year high. ‘If the Fed wanted to cool housing, they certainly succeeded,’ said Dan Poole, of National City Corp., holder of 382,000 shares of D.R. Horton. ‘It’s like a bombshell went off in the housing industry.’”
“The surge in North Texas home foreclosures shows no sign of abating. Next month, 2,961 homes are scheduled for foreclosure. That’s a 26 percent jump from the number of foreclosure postings for August 2005. Dallas County had the largest number of homes facing foreclosure in the latest survey. More than 1,400 residences are scheduled for sale at next month’s foreclosure auction. That’s 30 percent more than in August 2005.”
“Harris County, Houston’s most populous, suffers from dramatic foreclosure increases from May-July. Last month, HoustonRealNews reported a 54 percent foreclosure spike from May to June.”
From Las Vegas. “Interim managers at bankrupt USA Capital on Wednesday said they have not started foreclosure on properties that secured delinquent loans and have ‘not yet’ filed lawsuits to recover assets from the owners of the bankrupt private lender.”
“The private lender solicited money from individual investors to use in funding short-term mortgage loans secured by real estate. Investors were attracted by double-digit interest rates and the relative security of having real estate as collateral.”
“Bank of Canada Govenor David Dodge met the national housing agency late yesterday to take it to task for its recent offering of incentives for interest-only mortgages. Such incentives could be inflationary and may work against the Canada Mortgage and Housing Corp.’s stated aim of making housing more accessible to Canadians, Mr. Dodge said before the meeting.”
“‘We’ll have to see, but if we look elsewhere in the world where there has been a major move to interest-only mortgages or other innovations of that sort, that has had an influence on housing prices,’ Mr. Dodge told reporters.”
From Omaha, Nebraska. “A real estate market that went nowhere but up for years is showing signs of calming down. Local builders and real estate agents say the housing market in Omaha is cooling off but that doesn’t mean it’s going bad.”
“(Realtor) Brian Carlin says, ‘The market before was euphoric. We’d have a buyer, take them out to look at a house and they’d make an offer that night. Buyers today take a few days to sit on it and decide what they want to do.’ To help push that decision-making process, Rockbrook Builders is offering new incentives on some of its spec homes; houses they’ve already built without a buyer lined up.”
“Rockbrook president Tim Lowndes says, ‘We’ve dropped prices $5,000 to $15,000, just trying to move some inventory.’”
From Arkansas. “‘Average home prices are rising and sales are slipping,’ Ethan Nobles with the Realtors association said. ‘It concerns everyone who looks at it.’”
“The fact that growth has slowed doesn’t surprise Larry Kelly, a broker and a member of the Bentonville-Bella Vista Board of Realtors.’I think we’ve overbuilt in this market,’ Kelly said. ‘That’s a typical and normal cycle. It’s done that in every area I’ve been in.’”
“In summer rental spots around the country, a number of houses sit vacant and owners may be ready to make a deal. Prices have dropped by as much as 25% in Cape Cod, Mass. In New Jersey’s oceanside-resort towns, Sotheby’s International Realty is giving discounts of as much as 25% for some homes. In South Carolina, Hilton Head has cut 15% to 20% off its remaining one-to-two-bedroom listings.”
“One factor: oversupply. In Aspen, Colo., Five Star Destinations added 30 properties this summer, for a total of 100. Occupancy is about 80%, from full last year. Nationwide, rental inventory is up 12% this year, mostly due to new second-home construction, says Michael Sarka, of the Vacation Rental Managers Association.”
“Sacramento-area home builders sold 3,124 homes during the in April, May and June, down about 25 percent from (the period) in 2005. Builders are sweetening deals to lure buyers. The average second-quarter incentive was $15,200 worth of freebies, with some ranging as high as $120,000.”
“Sales were 66 percent lower in Yuba County and down 60 percent in Sutter County the first six months of this year. Year-to-date sales were also down 60 percent in Elk Grove over last year. ‘Bay Area traffic (in buyers) has declined and that’s one of the areas that benefited most from that,’ Greg Paquin said. ‘Pricing is an issue down there as well. There’s a lot of product above $450,000.’”
“Slower sales, growing inventories and values that may not measure up to prices are conditions that should send a signal to Silicon Valley buyers to take more control of the market. Broker Richard Calhoun says the combined inventory of single family homes and condos swelled to nearly 5,100 homes on the market in June, up from 3,500 a year ago.”
“Sales plummeted too. From 2,270 a year ago to 1,670 in June this year. ‘There is no need for a buyer to race out and buy a home..All buyers should realize the market has been slowing since October and will continue to do so,’ said Calhoun.”
Summer is playing out as many posters on this blog expected. I want to thank those who support this blog. Especially those that donated, because I know that is hard earned money and it’s what is keeping this blog going lately. (BTW, the donation button will accept credit cards as well as Paypal.) I heard that today, between 80,000 and 95,000 pages were being viewed every hour on this site. That is why the comments were running slow and access was denied at times. I’m told we need to upgrade yet again.
Please check back this weekend for news, your market observations and topics!
Plug for Ben.
We have got to keep those servers running. I donated a small amount, $50.
All those of you dragging your feet, think of the amounts of $ that you will save from the service Ben provides.
I did it and it took less than 3 minutes on an American Express card.
Do it and enjoy Ben’s blog.
I concurr. Please donate.
A few weeks ago I too made a small donation and consider it a tiny investment towards future savings.
Keep up the great work Ben!
Neil
Whenever a housing discussion is discussed on other (non-housing) sites (that I read), this site is ALWAYS referenced as the best source on housing and its underlying economics.
I agree. It is taking a lot of Ben’s time in addition to the maintenance of servers. I also have donated.
I am just glad to have this website. It is so informative and gives us an outlet to openly express our frustrations with the crazy run up in real estate prices. I also have learned so much about many money related matters on this site. I am just glad we can write our opinions openly without being monitered by what we believe.
I wholeheartedly concur.. donotation to Ben overdue and sent.. thanks for the reminder.. I love this blog.. it gives the dirty little secret that everyone knows about, but WAS afraid to talk about, a voice… amen to that !
I heard that today, between 80,000 and 95,000 pages were being viewed every hour on this site.
Absolutely amazing, congrats.
jb
Hard earned? Maybe. But the money I’ve been donating is a tiny fraction of the proceeds from 2 $hit boxes on an ½ acre in yorba Linda ca. I’ll give you the name’s of the two families if you want to send them a Christmas card or something…can you write in Spanish?
Seriously…thanks for all your effort!
Got go work out now…but I’m looking forward to catching up on everything this week end.
Later
I’d been meaning to donate for awhile, and I finally got around to it. Ben, and all those who post here, you have helped me enormously. I understand much more about economics and the real estate market now than I did when I first found this blog. While my instinct was telling me that there was something terribly wrong with the RE market, and I could identify certain problems, my knowledge was very superficial; I’m no expert now, but my knowledge is greatly expanded and continues to grow as I read this blog. I also get moral support, as I occasionally doubt my convictions and think, what if I’m wrong? But, coming back here helps me to reaffirm my faith that the RE bubble not only will burst, but actually is bursting, and that by waiting patiently I will be rewarded by being able to buy my first home at a reasonable price using a conventional loan.
So, thanks to Ben and everyone who posts here. It means a lot to me. And, I will donate again (and I encourage others to donate, too), as it is important that this blog be kept alive, and it takes money to keep the servers running. By the way, congrats Ben on so many pages being viewed. Apparently, the word is getting out and more people are looking for info on the bubble. As they find this blog, they will become more informed and, with more informed people, the correction can happen faster.
That is a TON of page views! I would love to know who is lurking here? NAR, NAHB, DIck Cheney’s office, Al Queda, …
Ben - I just sent 50 bones. I think the entertainment value has been at least 10 times that amount. I would encourage any regular reader of your blog to contribute - I can’t imagine how much work this takes.
There’s a lot of responsability involved in being right. We must all take care of F%$ed buyers of 2005 and 2004.
But whatever you do, DON’T give or lend them money!
Not a dime! (You heard me)
You’re absolutely right. Although we did not cause this mess, and thus have no moral imperative to help clean it up, we have family and friends that will be crushed by the crash. So we will help as we can. Lend an ear, buy the kids a pizza, etc, IMHO
There’s a lot of responsability involved in being right. We must all take care of F%$ed buyers of 2005 and 2004.
But whatever you do, DON’T give or lend them money!
Not a dime! (You heard me)
Sorry if this is a double post!
Of late I have been contributing modest $ (actually paying for what I am taking..) regularly.
Many of you are contributing to this blog by visiting and posting your critical thoughts….links..the reason for which I visit.
Please keep this going.
I will once again contribute the suggestion that you upgrade your web server to do gzip compression. Then you won’t have to upgrade, and we’ll be able to load your website in only one-third the time.
That would increase the CPU load on the server that Ben is paying for. It’s between Ben and his host as to whether that would be a good trade-off, although usually bandwidth is far more expensive than CPU cycles. It all depends on where the bottleneck is for this blog. I’m pretty sure that if I were hosting this blog, I would be getting nastygrams (and big bills) from my upstream provider, but Ben’s situation may be different. It depends on whether he (or his host) is buying cheap bandwidth or reliable bandwidth.
Just my $0.02, YMMV, etc.
The CPU load is minimal. Ben’s likely getting hammered with iowait– the disk is thrashing like crazy. gzip is almost always a help.
Wow, is the majority of the bubble heads computer geeks? Perhaps it’s a logic thing. In terms of speed, I’ve never really noticed bad delays in page rendering. The pages are pretty quick to load and not bogged down with client side java or flash.
If this site is a blogger site, I believe it is owned and run by google. When they buy their bandwidth by the 10 gigabit port, I’m sure they get a better rate than the small guys.
gzip from a web server standpoint should compress the data before it is transmitted to the end user. So the web server’s disk IO is still going to be the same. If it really is a problem, I had thought about solutions for this at one point in time and was considering putting all content on a “ramdisk” (memory file system in NetBSD). Turning off reverse host name lookups speeds things up, and of course you can log to a separate disk or host.
Anyways, back to the bubble at hand.
I thought about making a “housingbubbleblogbubbleblog.blogspot.com” for about 3 minutes, then decided I don’t have the time. It would be funny though
A blog about a bubble in housing bubble blogs 
(Sarcasm of course, I’ve been an addict of this and a few other sites for well over a hear and a half now).
A few things I’ve noticed. My friends that are well off see no correction or issue, at all. Most of my friends only know about the bubble because of me, and many seem to think things will just slow down.
Ironically, I got “laid off” 3 days ago, due to my employer possibly having money issues. They are a startup living on VC money as far as I know. I wonder how long before VC’s start getting worried and pulling plugs?
Also, for the Norfolk VA area on Craigslist it used to be a few houses for sale a day. Now it’s WAY up. 10 fold the number of listings. Pretty wild.
90% of all households in palm beach county florida can not afford a home. Not only is the housing market over, but there is blood on the street.
1. there is not retirees in the world that will pay these prices, insurance, taxes and added expenses to live in an “urban” area with high crime and no transportation. they cant even sell their houses in the northeast now. they are moving to the carolinas, tenn and georgia and telling their friends. 2. deregualtion has cause the rising cost of health, food and basic needs. more importantly, investments and pensions are not the same now as is once where. dont rely on retirees to save the housing of pbc when retirees are moving to port saint lucie. 3. over priced housing has led to low and middle class exodus. now, that housing is going down, everyone is saying, buy now. but the buyers are not here anymore or already in homes. the population growth in pbc, broward and miami is slowing down from the past 10 years. miramar growth is from miami and not from out of the area. only martin and saint lucie county is growing and the population is from pbc. scripps are bring in people slowly, but not the numbers for the whole county. pbc and south florida do not invest in quality and is paying the price. there are no buyers left and the reminding low and middle class is just barely surviving. add crazy loans (foreclosure increase) and overall cost of living increase is going to cause major problems for sellers. one last word, PAY ATTENTION TO ISREAL AND LEBANON. IF WAR GOES INTO SYRIA, WE WILL BE PAYING $4.00 BY OCTOBER. GAS PRICES AFFECTS ALL PRICES AND I WILL PREDICT BY THE APRIL 2007, THE HOUSING MARKET WILL PLUNGE 20% ACROSS THE BOARD. THE MEDIAN PRICE WONT GO DOWN AS MUCH, BECAUSE THE LACK OF TRANSACTION, BUT PRICES WILL GO DOWN. PRAY WE DONT HAVE ANY HURRICANES HIT SOUTH FLORIDA! MARK THIS DOWN AND TALK TO ME IN OCTOBER 06 AND APRIL 07.
How can I donate ?
click on the paypal icon.
They accept all major credit cards (MC/VISA/AMEX/Discover)
Ben, my donation is on its way, but…I am wondering, shouldn’t the people reading the blog (as opposed to posting) be donating?
Perhaps more popular posters should both donate but also get paid based on their bookmarks?
Dunno, just throwing out a business idea because I’ve always thought housing bears were the ones doing a favor.
somebody humor an out-of-towner:
what is it with queens creek. i am not very familiar with phoenix. it seems to be the favorite whipping boy whenever the topic comes up.
It’s the poster child for the housing bubble in Phoenix. Cheap spray stucco shitboxes in endless amorphous rows all “owned” by people with a ass size larger than their IQ. Nearly all for sale now with each idiot still trying to make a profit.
Queen Creek is a really bad place. It is over a hour to down town Phoenix due to really bad roads. There are thousands of houses being built out there. If you go onto Craigslist and type in Reduced Queen Creek you will see hundreds of listings. Most say “new never lived in” meaning they are pre-construction flips. Most what 100K more than they paid six months ago. Ha Ha Ha. HB reducing pricing every week.
Ohmygawd…”ass size larger than their IQ”.
Damn, girl, you are GOOD!
What do you think they meant by “Queens”?
Queen Creek AZ is the poster child for a place where builders built endless rows of look alike houses for the sole purpose of selling them to flippers. Saying that Queen Creek is a suburb of Phoenix is similar to saying that Yuba City is a suburb of San Francisco. It is way out there. This will also be the prime test case for what happens when thousands of illegal immigrants decide to squat in abandoned houses.
Why would they squat, when by the sounds of things they’ll be able to afford the rent soon on even a minimum wage job?
Queen creek is everything the rest of these posters say…plus it is in a completely FLAT area with no mountain views. None of the desert ambiance that can be found in other areas. It is all being built on ex-farm land.
North Texas is a shark sandwich. Hope the California Clownbux enjoy their stay in the Big Dump.
Dallas before LA. Way before LA.
You mean that you expect Dallas to implode way before LA does? I am not sure about that.
All of the Clownafornian fluppers here in north Texas could implode tomorrow, and I doubt the locals would notice all that much. Working class people here can still afford modest, decent* homes without getting in over their heads. When was the last time you could say that about LA?
On the other hand, it’s possible that visions of cheap prices have caused the Clownbux to really overdo it in Texas, taking on more properties than they could elsewhere, only to discover that they won’t be able to sell them at a profit (because they didn’t pay down any equity) until sometime after peace is declared in the mideast. Perhaps then they’ll be running out of fiscal rope sooner here than in LA?
Perhaps we are arguing detailed specifics… I think we both agree that CA flippers will be comparing Texas to Waterloo.
Problem is, in Dallas, everyone is all hat and no cattle. Modest doesn’t cut it. Image is everything and how you swing that is your own problem.
Come on, Los Angeles invented “image is everything”. How many stretch hummer limos did you see on your way to work today?
Well, none, now that you mention it. My dogs cardio commute to work with me (my home office, lol)
There is plenty of that kind of poseur culture in Dallas. The difference is, sometimes in LA you see a bit of humor in it, such as a shark fin on the top of a car. In Dallas, you have two fake sharks prominently displayed on the roof of a plaintiff lawyer’s office.
…such as a shark fin on the top of a car
That’s just the navigation antenna for the new BMWs *yuck-yuck*
don’t forget the longhorns on the Escalade
TXChick is 100% right - that Plano crowd and their ilk (”aspirers”, pseudo-yuppies) reminds me of the Sunset Plaza crowd sitting at Clafoutis - the ’see and be seen’ ppl….
Someone has to keep Needless Markups in bidness….
Image seems to be EVERYTHING to these people and it is scary what they will seem to do to keep up appearances…
You wanna know what they’ll do - go down to the Plano bankruptcy court and watch the 341 meetings on any given day. Or go on pacer, pick a consumer 7 case in Plano or Frisco, and read the bankruptcy schedules. Infreakingsane!
And the most maddening part is, these people want to chuck their consumer debt but keep the lifestyle. In the budget which a debtor must file, almost every one of them have the three figure cell phone bill (plus a line for each kid), the $600/month contribution to the 401(k) (exempt), $1,000 for food for a family of 4, entertainment expenses, etc. It’s unbelieveable. Fortunately, the Trustee’s Office in Tyler takes a dim view of people living high off the hog at the expense of creditors and will boot these losers for bad faith filings.
Well, that’s my problem then. I’m too busy living practically to care what people think of me.
Same for most of those I assosiate with.
Seriously though, it’s been my observation that there are as many, if not many more people in CA that fit the “all hat, no cattle” mold.
Yeah, I thought all the big “economists” said it couldn’t happen here; that prices were so reasonable that there was no Dallas bubble. Well, flat or dropping prices and no buyers equals foreclosures, especially with toxic loans resetting for a boat load of folks. The downtown condo crash hasn’t even started, yet. Throw all the folks that overpaid for McMansions inside the loop with liar loan option ARMs and this part of the country is toast.
The unrest in the Middle East, oil prices, etc. are only quickening the crash. This is really going to be bad.
I look for those gigantic monuments around Whole Foods on Greenville to be among the first foreclosures. Those had to sell for over 500-600K in a neighborhood where 250K was high.
I agree. I personally know a number of friends that stretched to the limit to buy one of those using an ARM because they thought prices would continue to go up. My rational thoughts were pooh pooh’d when I tried to tell them that no one would pay more for that trash in a couple of years. Those places were truly slapped together, too.
Yes, this is really going to be bad.
KBTC interrupts this blog to bring you the following educational program.
BTC Episode #7
Hi boys and girls! Guess who? That’s right, it’s Bubbles The Clown back from re-hab and here for another court ordered episode of your favorite show!
Now some of you have written in wondering where Bubbles has been so I thought we should start off by reading some viewer mail! Yea! And kids, make sure you stay put until the end of the show for another zany BTC Fun Zone!
Okay, this first letter is from Huggybear, and he writes:
“I hope the Betty Ford Center wasn’t too rough on ol’ Bubbles, are you ok?”
Bubbles was ok the minute he jumped the fence with the Olsen Twins and spent 2 weeks in Mexico with the Chuapa Indians eating peyote and wandering around the desert looking for Jim Morrison. Yikes!
Okay, now several of you wrote in with this next question:
“I heard a rumor that you were performing at Disney World in Orlando, is this true?”
Well, Bubbles was performing in Orlando, but it was more like “community service”. But what Bubbles did see while he was in Florida is a whole bunch of people trying to sell their houses. The problem is that the asking prices are so high that it’s like tying to sell a bag of diarrhea! And buyers don’t wanna buy these overpriced houses, so it’s turned into an old fashioned stand-off! It’s gotten so bad that Bubbles had to write a song about it! Sing along kids!
“The Level Went Down in Florida”
The Sellers were down in Florida
They were cookin’ up some curb appeal.
They were in a bind
But they were not inclined
To entertain any deals.
When a Buyer came upon this young man
Sellin’ a house that he recently bought
The market slumped
Upon this greedy chump
So the Buyer said, “Boy, let me tell you what”.
I guess you didn’t know it
But last year is all through
And if you’d care to price it fair, I’ll take your debt from you.
Now you’ve got a pretty nice listing, boy
But give the market it’s due
If you want it sold
With what you owe
I’d say you need a clue.
The man said “Try and con me?”
So the markets a little thin
But I won’t sweat
You shouldn’t forget
In Florida you always win.
Buyers pause and up your dough and spray the piddle hard.
Cause hell’s broke loose in Florida in this Bubble house of cards.
And Sellers if you price your house to sell then it is SOLD.
If you refuse, the bank will just foreclose.
The Seller opened up his place
And said “This house will show!”
And flyers flew from his fingertips
Just to cause an ample flow.
Then he pulled the door to start the fling
But something was amiss
Demand this season wasn’t there
Just an empty black abyss.
With the Seller finished
The Buyer said “Well you’re pretty cooked old son.”
So sit down in that chair right there and
I’ll show you how a short sales’ done.
He said “Hire an accountant” run boy, run
Liquidate your assets one by one.
Pickin’ up your spread man, I think I’ll bid low.
Fannie Mae will help out?
No child, no
The Seller bowed his head
Cuz his ruin was complete
And he laid that folded deed
On the ground at the Buyers feet
The Buyer said, Just come on back
If you ever wanna buy again
I done warned you once you wanna-be rich.
Your greed done did you in.
He said Higher prices mountin’, done, boy done
The level of your house is a sinking sum.
Stickin’ with your price plan, I think you’re real slow.
Uncanny how the market got this low.
Yippie! Did you like that song boys and girls?
We’ll see what happens down there in Florida but Bubbles doesn’t think it’s gonna end well for those greedy sellers and their fantasy prices!
Boiiiing!!! Uh-oh, you know what that sound is! That’s right, it’s time for the BTC Fun Zone!
Today in the Fun Zone we’re gonna play “Match the Quote”! Below are some quotes from either David Lereah (Booo!) or Leslie Appleton-Young (Hisss!). Your job is to match the quote with the Real Estate Economist that said it to test your Bubble IQ! Have fun!
Okay, here we go, was it DL or LAY who said:
#1.
Well, first, I think the housing markets are like the Energizer Bunny. They just keep on going and going and going.”
#2.
“Many in California have reached the dream of living in a million-dollar home without moving.”
#3.
“We are really on track for a soft landing. There are no balloons popping.”
#4.
“It’s very difficult to concoct a scenario where if the demand for homes drops meaningfully, you would have a large drop in home price appreciation.”
#5.
“It’s Economics 101, it’s demand and supply.”
#6.
“Home sales are coming down from the mountain peak, but they will level out at a high plateau — a plateau that is higher than previous peaks in the housing cycle.”
#7.
No Bubble but “a soufflé with the steam at the top coming down.”
#8.
“The only bubble out there has been a bubble in articles about the housing bubble.”
Wow! That’s hard to take all in one place isn’t it boys and girls? How’d you do? I hope you got ‘em all right!
Well that’s all the time we have for today, Bubbles has a date at the clinic to see if he is the father of Mary-Kate’s baby………or was it Ashley? Bubbles is so confused.
Remember kids,
Bubbles the Clown is fun. Housing Bubbles are icky.
A rainman18production 2006 copyright
BTC#7
I’m sending a donation to Ben and Rainman, Bubble’s is the best. Just cash the checks before Suzanne tries to pick my pocket again.
“I done warned you once you wanna-be rich.
Your greed done did you in.”
(monotone voice) Bubbles the Clown, Yur my HEeeero.
Can a get this man a standing ovation please?
-We Rent!
(Notice I spelled “yur” correctly, folks. Ain’t that hard.)
That’s the line that made me laugh out loud as well!
Clappity clappity!
Awwww, Bubbles you CRACK ME UP. Good luck on the DNA check.
Rainman18….you got to be in show biz . Are you ?
Rainman — excellent, truly excellent. Thanks.
Suzanne’s Ex - Please send all donations to Ben. If Bubbles gets any it will go straight to his ex-wives, the liquor store or the track.
We Rent, Feeps - “Buyers puase and up your dough and spray the piddle hard” tickled the hell out of me for some reason!
Wiz - Yes I am, but behind the camera.
Thank ye all!
Rainman
Fantastic, Rainman! Get an agent!
“Calhoun said the higher prices could be reflected in the larger than normal percentage of homes being sold in the more affluent northwest quadrant of Santa Clara County including Palo Alto, Cupertino, Los Altos and similar towns of wealthier residents where home prices are always higher.
“A lot of people are paying cash and are not impacted by interest rates.”
I’d love to know how many people he means when he says “a lot” are paying cash for homes in the Bay Area. If someone has $1 million in cash, they’re going to want a $2 million home; $2 million cash, $4 million home, etc. It’s the American way.
How many employees does Google have?
just like at Yahoo in 2000 when their stock 300+ per share. The early ones woke up and called in their retirement. You wont find any there who was around before IPO… their gone.
I know of a couple of people from start up they joined in …. 1995 and were fully vested by 1999 peak. They all left the bay area.
As for current google inside share holders not to mention others making big $$$…. you will find the most recent scandal around stock option back dating. This is really big… over a dozen companies have been named regarding recent fraud. If this proven true by SEC investigation , you got some big CEO and CFO names soon leaving. Any gains benefited will be required by SEC rules repaid.
How that?
Man, home prices in Houston are cheap. I think the forclosures are happening in non-bubble markets first because borrowers haven’t had the protection of rising home prices (rising prices make it easier to keep a home by allowing refinancing, equity extraction, and an easier time selling).
With prices starting to fall I think the bubble markets are going to see a forclosure eruption.
But they are not cheap relative to historical local values. They’re expensive. This seems to be a hard sell to people. If some shitbox in a Houston suburb is $150K and said shitbox would cost $600K if picked up and moved to San Diego, that does not make it cheap by Houston market historical standards. That $150K shitbox probably sold for $90K 6-7 years ago and the wages of people who are potential buyers have not increased by anything near that amount.
$150K, let alone $90K, is just beyond my comprehension. I’ve lived in SoCal all my life, and while I’ve seen some ups and downs in the RE market here, it seems like those prices are what we had here in the late 1970s (I might be off a little, as I was pretty young in the 70s). I’m just hoping that prices here get back down to $300K for a starter home, because the $600-700K that starter homes (in iffy neighborhoods) are going for now are just absurd.
If the median returns to 1997 + 1% + inflation, you’re there. Sorry—WHEN.
To me, $600-700K is not a starter home, it’s a starter coffin.
But they are still cheap relative to median incomes.
Median prices are 3 to 5 times higher in major CA cities than in Houston/Dallas/Austin, but CA median income is only slightly higher, if at all.
CA has a lot farther to fall, unless they have a sudden dramatic rise in wages. Freeloading roommate is right that the lack of appreciation in non-bubble areas forces people into foreclosure more quickly.
You are assuming that there is nothing else they can do. They can find a room mate to help pay the debt. Sharing a room can bring in $400 to $500 a month. Also, there are a lot of business owners in LA. They are making more money than what is reported in gov’t stats.
Hmmm… so exactly how many roomates does it take to make the I/O mortgage payments on my $750K 600sft 1Bdm San Diego condo? Even better question, how many roomates can I FIT into my 600sft 1Bdm condo?
dl,
I could be wrong, but I’d guess most people who buy houses with multiple bedrooms have families, and would have a hard time renting out rooms. The single people most likely bought small condos, and don’t have many rooms to rent (if any at all), or they are already renting them out.
“dl” - not David Lereah by chance?
‘It’s like a bombshell went off in the housing industry.’”
or maybe like sound you hear when a really big “bubble bursts”
“From Omaha, Nebraska. “A real estate market that went nowhere but up for years is showing signs of calming down. Local builders and real estate agents say the housing market in Omaha is cooling off but that doesn’t mean it’s going bad.”
A bubble in Omaha, NE?????????
Google “equity locusts”.
Ben,
I wanted to correct this error in the report.
It should say,
‘If the Fed wanted to cool housing, they certainly succeeded,’ said Dan Poole, of National City Corp., bagholder of 382,000 shares of D.R. Horton.
Those 382,000 shares are worth $8 million less than a year ago.
$1,069,600 less than last week.
$634,120 less than yesterday.
Yeh and he probably bought more today to average down!
“Can’t get enuff of those sugar crisps”!
“But they are not cheap relative to historical local values. They’re expensive. This seems to be a hard sell to people. If some shitbox in a Houston suburb is $150K and said shitbox would cost $600K if picked up and moved to San Diego, that does not make it cheap by Houston market historical standards. That $150K shitbox probably sold for $90K 6-7 years ago and the wages of people who are potential buyers have not increased by anything near that amount.”
txchick57,
I have to fully agree with your logic here. A cheaper house in a different location is not a necessarily good value.
Conversely, a more expensive house in the right location could easily be the better value.
Chasing prices can be a bad bet. It all depends on the local markets…
Right, it’s like a $3 stock with no earnings and a PE of 500 vs. a 50 stock with a PE of 12.
If there are “no” earnings, then how would you calculate a PE (Price-Earnings) ratio? Wouldn’t it be infinite ($X/0)?
it would be undefined, which is far from infinite.
What a week. YOY Declines in a bubble city! HB’s stocks tanking! It feels good to be right - finally. Let’s look at someone who is WRONG:
“I just don’t think we have what it takes to prick the bubble… I don’t think prices are going to fall, and I don’t think they’re even going to be flat. ”
- Diane C. Swonk, chief economist at Mesirow Financial in Chicago, New York Times, Trading Places: Real Estate Instead of Dot-Coms, 3/25/05
And the stock markets are tanking, too. Wow!
Ok, listen up boyz and girlz
http://www.itulip.com/forums/showthread.php?p=1132#poststop
First a plug for donating: I used to run a small web site and I know from experience that bandwidth is not free or cheap. So please, please donate something, anything to help Ben keep the site going. $2.00, $5.00 anything will do.
Now to the housing issue: It’s very strange to see the mainstream media ’surprised’ by the dramatic changes in the housing market. This was inevitable. Either we take the losses now, or wait till a future date and take bigger losses. I truly believe that we haven’t seen the tip of the iceberg yet. The slowdown from housing has not hit other areas of economy yet. But, believe me, its coming.
Haven’t posted in awhile. New job actually forces me to work
What’s up with this OC median price going up?
http://tinyurl.com/lzgbg
At least Lansner mentioned the lagging sales. I would expect to see some YOY price declines by now, especially with gas being $3.50/gal. and rising rates.
On a side note, got into this big discussion about r/e with some co-workers. I was blabbing how conditions were ripe for a downturn with the marginal areas getting hit hard (rising rates, affordability, r/e cycles, etc.) and forgot one of the guys just purchased a home in the high desert area of Adelanto. For all you non-CA people, this is out in the total boonies away from the job centers in the LA basin…and where most of the really cheap land is to develop homes…this area always gets over-developed in a “boom” cycle and is the first to crash hard.
Anyway, I changed the subject matter pretty fast as I didn’t want to ruin lunch.
I just donated. As promised it only took a minute or two. I think it’s the best investment I’ve made in years.
Here’s an article about the new condo high-rises in OC…I like how the interviewee evaded the question about investors making money
Homebuyer beware: High-rises not for all
http://tinyurl.com/jnl33
I’m still not 100% sure that house bubble is bursting/deflating everywhere. For example, in San Francisco, the houses are still insanely overpriced and sales are not slowing down.
For example, 870 sqf house is for $650K:
http://tinyurl.com/qmwj2
Even as the bubble implodes in the most extremely overbought areas, I think we will continue to see price rises in *some* markets.
People will be taking their bubble bucks elsewhere and won’t mind paying a little more than the locals traditionally have. Don’t underestimate the investor grapevine, either. If there are still some towns or neighborhoods with rising values, the flippers will be whispering that to each other (or bragging on internet forums). Why do you think places like Boise and Bozeman became flipper markets? I know the bubble is national, but this is a big country, and places will be found to park money.
For now, Austin is booming this year:
http://crosslandteam.com/blog/2006/06/22/austin-homes-sales-jump-15-percent-in-may/
We bought a new home in 2002, sold last Nov’05 and lost 13% but if we had sold now, we probably would have lost less or maybe break even (before commissions, however). For us, we couldn’t see the future [I thought that the trend was down rather than up] so we were happy to sell. Now, for the past 8 months, we’ve been debt-free and stress-free! Priceless!!!
Interest rates set by the Fed are National Interest rates. The rate rises in every city in USA. Anytime interest rates rise 17 times by the fed in a little over a year, houses become less afordable everywhere. And when the banks get spooked in San Diego or Phoenix, they will tighten their lending standards everywhere. This is a national bust.
“…and sales are not slowing down.”
Statistics, comparing YOY in particular, would help. How about # of units sold 1/1-6/30 2005 compared to # of units sold 1/1-6/30 2006, for a start.
I have just rented a house in Manhattan Beach, CA (kid starts kindergarten this year and good schools). It is 3 bedrooms and remodeled. 3150/month. Last sale recorded sale was for 1.15M dollars in August 2005. It was sold for 375K in ‘97.
If that guy bought it with a 30yr fixed with 20% down, just property taxes and mortgate would add to 7500$ per month.
Ouch.
We talk about the economy constantly. Oil,Gas housing,Transportation and what all will do to the economy. Let me just say that Gas alone which represents about 5% of the house hold budget will not break the back of the economy. Nor will high oil prices because each $10.00 increase in oil only represents about .25 cents at the pump. NOW for housing. It represents up to 50% or more plus taxes to live in some of these newly purchased homes. OUCH! This is where the real impact will come as these funny loans start to squeeze the budgets of the american households and send the economy into the sewer. It won’t happen all at once but the long term impact will be felt for years.
The problem, however is that people have only fooled themselves into thinking they can afford these houses. The old “max 35% or so from gross income” rule was designed around the possibility of a bust or one spouse losing a job.
The new “50% of income” rule leaves no margin for error. And even a miniscule rise in gas affects the costs of many other things (that must be moved several times in the supply chain before being purchased).
Now that the bust is beginning, it won’t stop until traditional affordability returns, or true investors can buy units for prices that rents can cover.
You miss the oil/petrochemical component of food production.
If I recall correctly, ~30% of the cost of agricultural products are tied to oil. (fertilizer/pesticides are derived from natural gas, transportation and feed).
Look up the embodied energy of any of your common household items to get an idea, oil pervades the modern human’s lifestyle.
High energy prices aren’t limited to gasoline for transportation.
Gas adjusts $0.50 per $10 increase per bbl. If the base price were $72/bbl you would be correct. The base price for most buyers from 2004 & 2005 is ~ $40/bbl. The effective doubling of the price of fuel without corresponding wage increases is straining or has strained the lower 45% of the work force to the breaking point. WalMart sales are down, thrift sales are up, Payday Loans Companies have gone from a handful 10 yrs ago to 100+ new ones per month (thanks Kim for mentioning payday loans last November - my best investment last yr). Send something by UPS and look at the gas surcharge applied. The oil price flow thru hasn’t even hit the economy yet and when it does… we are in for a wild ride.
We should be very grateful for the CA locusts. They extracted their equity from CA and exported it to other parts of the country, leaving CA poorer in the process. Just think of those who they sold to, who are upside down on all those toxic mortgages, an how this will bring the CA real estate market to its knees.
As I’ve written before, borrow 100k, it is the borrower’s problem…. borrow a few trillion, it is OUR [taxpayers'] problem!
Parts of CA will basically become third world. There will be so much poverty and cities will be unable to provide all the services they used to. I would not be surprised to see Latin American style corruption appear — have to tip each government employee you meet in order to get anything done.
Obviously you haven’t been following the news the in San Diego. We’ve already got an incredibly ugly, twisted, corrupt government. Duke Cunningham was just one of our bought “boys”…
San Diego has always had shady local government, at least in my lifetime.
Look up stories about SouthGate, Ca. It “IS” a Third World Government.
And there is no stopping it. Gangs,Drugs,Crony-ism,Elections that make Chicago in the 1930’s look honest! And it is spreading. Look for Central LA to have Race Based(Black-on-Brown) Violence over who controls the ‘perks’ in City Government in the next 5-10 years. In these small,no-longer viable “City-lets’ the only income is from political favors or crime. Now, there is little distinction to be made over which is which.
Corrupt Police help the Drug Gangs,Corrupt Officials buy the high priced drugs, Watch Southgate, Compton and others.
Hey…you are describing Miami-Dade county & parts of Broward. Once you get too many immigrants in an area, their cultural mores replace those that were in place. Soon the police & government adapt to what is put in place by the new society. Thus, becoming a replica of where they came from…Latin America. I agree that much of CA is headed for the same destiny.
can someone tell me how the mortgage and financial stocks are holding up but the homebuilding stocks aren’t?
Good question. I’m short HBs (yay!) and lenders :(. It’s amazing how the lenders are holding up, especially since their margins have supposedly been decimated by the yield curve.
My guess is that there will be consolidation in the lending industry (also HBs, but who knows who/when). Perhaps one of the large companies will buy out many/most of the smaller ones??? I’m trying to guess as well. If you figure it out, let us know.
I was watching bubble vision yesterday (CNBC) And some of their guests are truly amazing. One Greg Lavalier said ‘Now that the FED will stop raising rates (No August rate increase) The housing ‘problem’ will be in for a soft landing- and ‘no longer be a problem’ to the economy. It really amazes me how these same people 6 months ago said there was no bubble, and now with inflation up- really believe Bernanke will stop- it shows both their desperation, and hope for ‘redemption’ from this huge mess.
I quickly changed the channel not wanting to listen to any of this group, including poster girl and interviewer/ charlatan Marie Bartrilomo.
We’ve only seen one engineered ’soft landing’ ever — in 1994 — and that put Orange County and Mexico into bankruptcy.
Oh yeah. This is not going to affect anyone.Suuuurrre.
the money honey !
speaking of - can anyone please tell me WHY Maria Bartilomo has been on and why anyone would listen to her? What are her qualifications other than being a poor man’s Sophia Loren?
tarun sadana,
I don’t know what happened to your post, but thanks!