July 21, 2006

‘It Was Naive To Say, This Will Go On Forever’

It’s Friday desk clearing time! “Just more than one year ago I wrote in this column ‘the residential real estate bubble isn’t ready to burst.’ Now I can say it already has. The process of correcting the biggest housing boom in history is under way.”

The Cape Codder. “In what real estate professionals are calling a much-needed correction, real estate prices on the Cape have begun falling as sellers try to avoid getting stuck in a glutted market. But although it’s clearly a buyers’ market, buyers aren’t exactly rushing to buy.”

“The correction was not unanticipated, everyone knew the bubble had to burst at some point as prices climbed higher. ‘It really had to become a self-fulfilling prophecy,’ (realtor) Steve Whitehurst in Harwich said. Not everyone is convinced the market has indeed hit bottom. Wilkinson, who has been in real estate for some 30 years, has seen all kinds of slumps and adjustments, and in his opinion, ‘the adjustment is not over.’”

“Last month, only 8,456 existing homes were sold in the Washington metropolitan area. That’s a drop of 34 percent compared to June 2005. It’s the largest drop we’ve seen yet this year. In fact, I looked back through 15 years of sales data, and I couldn’t find another month when sales had fallen 34 percent.”

“Such a sharp decline in home sales has sellers in the area frustrated, and the number of additional homes coming on the market is only making matters worse. In June, another 19,300 homes received for sale signs in their front yards. With less than 9,000 homes selling last month, you can see what sellers are up against.”

The Washington Post. “‘I spent the past five years listening to all of you blather on about RE. The smug attitude. The snotty ‘oh you rent’ comments. We warned you that this was a bubble. But still you bought the condo for a half mil on $80K income. And were condescending about it.’”

“‘I’m not buying your overpriced place on some silly discount. I’m buying at 2002 or earlier prices. If not from you, then from your bank when you forclose.’ Maryann Haggerty: ‘Who is sounding a little, well, smug and condescending now’?'”

The Journal Sentinel. “A decade after investors hit pay dirt in metro-Milwaukee subdivision development, they’ve struck rock. ‘I’ve been in the business since ‘61, and I’ve never seen it quieter than the last six months,’ said Mike Rosen in Mequon. ‘Things were tooling along beautifully for like the last 10, 15 years. Then all of a sudden, business dried up.”

“This is the kind of lull that often follows a boom, Waukesha developer Bryce Styza said. ‘We had a terrific 3, 4 years,’ Styza said. ‘It was naïve to say, ‘This will go on forever.’”

The Duncan Banner in Oklahoma. “Realtors in Stephens County are laughing. And, enjoying their careers. Michelle Kennedy, a Realtor-associate, describes the market as ‘God sent.’ Kennedy said she first noticed the upward trend in home sales in Duncan about a year ago. The home sale frenzy began and hasn’t let up, she said. She’s seeing an influx of..California newcomers.”

“If you want the latest news about the American real estate boom. and whether it’s about to go bust, you have plenty of options. David Streitfeld (is) a reporter in the San Francisco bureau of the Los Angeles Times. This is, he told me, ‘one of the great stories of our time, ranking with terrorism, obesity, and whatever we’re calling the Internet revolution these days.’”

“Streitfeld jumped into the market himself last summer and bought a house in the San Francisco suburbs. ‘If there is a bubble and it pops severely, I’m probably doomed, like much of California.’”

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Comment by Ben Jones
2006-07-21 14:28:51

This has been a big week for building housing bubble consensus. My thanks to those who support this blog. Check back this weekend for news, your market observations and topics!

Comment by Sunsetbeachguy
2006-07-21 17:44:36

Holy cr@p! The amount and quality of bubble news is unbelievable from just a couple of months ago.

Comment by Mozo Maz
2006-07-22 06:43:48

Ben should post a pageview chart.

Comment by nick the wizard
2006-07-21 14:41:53

they don’t make land anymore. you can never go wrong buying land. but you may have to wait a hundred years to profit.

Comment by Gekko
2006-07-22 04:50:47


just like Japan.

Comment by dwr
2006-07-21 14:53:03

“The most striking exception to this rule is David Streitfeld, a reporter in the San Francisco bureau of the Los Angeles Times who has been writing housing stories on and off for the past two years. (Disclosure: The Times published an op-ed by me last Sunday.) Though Streitfeld doesn’t cover the beat full-time, when his byline appears over a housing story, you know you’re in for something smarter, and a lot better written, than the usual fare. His work isn’t just a cut above — it delivers the boom as a tableau vivant of life in America right now.”

He’s so smart, he bought right at the peak!

Comment by Backstage
2006-07-21 18:09:50

But at least he knows he’s doomed.

Comment by Mark
2006-07-21 18:37:54

Those who support taxation, regulation, Israel, the welfare state and foreign wars deserve to be doomed. I welcome the coming collapse and ensuing deflationary depression with open arms.

Comment by sellnrun
2006-07-21 19:40:38

“The argument that weaker growth will somehow cause consumer prices to rise more slowly focuses on the demand side of the price equation and ignores the supply side. Prices are a function of both supply and demand, and while slower growth, or an outright recessions, would certainly reduce demand, it would also work to reduce supply. The result could well be equilibrium prices that are higher during a recession than during an expansion.

As the U.S. economy contracts, the Federal budget deficit will grow and the perceived appeal of U.S. financial assets will be lost. As a result, foreign capital will flee at precisely the time it is needed the most. This will put additional upward pressure on interest rates, further increasing mortgage rates, suppressing real estate prices and consumer spending. More importantly, it will also cause the dollar to fall, making imports more expensive and pushing up raw material prices, thereby increasing production costs for domestic manufactures as well. As the dollar loses value relative to other currencies, foreigners will be able to outbid Americans for scarce consumer goods. As a result fewer products will be imported into the U.S. and more of America’s domestic production will be exported. Therefore, despite the fact that financially strapped Americans will be consuming much less, they will be paying much higher prices for the privilege of doing so.”

Peter D. Schiff, President
Euro Pacific Capital, Inc.

A well-put take on the likelihood of an INFLATIONARY depression, or, stagflation.

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Comment by feepness
2006-07-21 21:32:24

The alternative is the US could look the safest once other countries US consumer-oriented economies start to fade.

I’m not saying I’m long the US dollar, but I try to look at all sides. Wasn’t I being called a gold bug just the other day… ;)

Comment by Loafer
2006-07-22 01:50:10

Very good summary.

feepness - it’s good to look at all sides, but I suspect your “devil’s advocate” view is wrong. The US economy is fundamentally unsustainable if credit dries up domestically, and more importantly from other countries into the US government.

The big question is, what will it look like under the new scenario - my guess is more introverted, and much less involvement in world affairs.

I read a very interesting paper on the tri-polar economy (China, India and the US). It estimated 2030 for it to be achieved, but I suspect it will be alot quicker, because the US economy will contract, whilst the others expand, meaning they meet alot quicker than anticipated.



Comment by Mark
2006-07-22 05:37:34

Those who think we will get INflation should buy as much real estate as they can afford right now. I think too much credit/debt has already brought inflation, and now the credit cycle will bring DEflation; therefore, I rent.

Comment by Greg
2006-07-22 05:50:47

Mark, I respect your idea but inflation/ deflation is a product of central banking now that we have a centralized monetary system. Not only the US but the power house economies of the world. Central banks inflate currency- it is their nature.
The following is from speculative-investor.com…
“When there is confidence in the integrity of government, monetary authorities — the central bank and the finance ministry — can issue unlimited claims denominated in their own currencies and can guarantee or stand ready to guarantee the obligations of private issuers as they see fit. This power has profound implications for both good and ill for our economies.

Central banks can issue currency, a non-interest-bearing claim on the government, effectively without limit. They can discount loans and other assets of banks or other private depository institutions, thereby converting potentially illiquid private assets into riskless claims on the government in the form of deposits at the central bank.

That all of these claims on government are readily accepted reflects the fact that a government cannot become insolvent with respect to obligations in its own currency. A fiat money system, like the ones we have today, can produce such claims without limit.”

Comment by Mozo Maz
2006-07-22 06:47:55

I agree with Mark. RE is still a good inflation hedge, if you buy in reasonably priced areas and let the lenders eat the inflation, via your fixed rate payments.

Comment by Hoz
2006-07-22 10:51:30

IMHO asset bubbles (including housing) have collapsed during inflationary periods. In the 6 bubbles I have traded in the last 35 years, the railroad bubble of the mid to late 70’s collapsed during the highest period of inflation ever recorded in the US.
I also believe that the US economy (which has been the sole support for the world economy over the last 5 years) is now only 8.5% of the worlds GDP and a 10% drop in US GDP (not likely IMO) will mean diddly squat to the expanding world economy. Houses are collapsing as a result of unaffordability - inflating the cost of consumer goods, the collapsing US dollar and the thru put of rising oil prices will all strongly influence inflation. Housing will collapse along with inflation that could be in the mid teens in a year.

Comment by nhz
2006-07-22 02:29:54

collapse of the middle class in a country striving for the number one spot in the world often does not end pretty (think Weimar republic and other examples).

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Comment by Poshboy
2006-07-21 15:06:27

Interesting that a very Washington political journal like National Journal would say that this is the most underreported story today. NJ does not tend towards hyperbole; looks like the story is so bad that even these publications are starting to pick it up. Which means Congress is now reading about it.

Comment by need 2 leave ca
2006-07-21 15:09:43

The politicians are the last ones to figure it out. Or the last ones to accept it, because they are all on the take from the RE industry. They will line their pockets first, at the expense of the country. All of these clowns should have done something years ago.

Comment by kipper
2006-07-22 07:40:53

I think it was Mark Twain who said, “It is hard to get somebody to understand something when their paycheck depends on their not understanding it.”

Comment by need 2 leave ca
2006-07-21 15:10:10



Comment by Rainman18
2006-07-21 19:00:30

Bubbles accepts!

Now about that background check…

Comment by We Rent!
2006-07-21 20:38:10

There may be a drug test, too. :mrgreen:

Comment by Sammy Schadenfreude
2006-07-22 09:20:09


Comment by need 2 leave ca
2006-07-21 15:10:43


Comment by auger-inn
2006-07-21 18:23:53

What can I say, I’m honored! Which reminds me of an old Navy toast: Here’s to Honor! Get honor and stay honor!

Comment by Michael Viking
2006-07-21 19:52:02

She offered her honor. I honered her offer, and all night long it was honor and offer!

Comment by kipper
2006-07-22 07:44:19


I left my pants upon her chair, she was a widow, so she said. But I was apprehended bare, by one who rose up from the dead.

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Comment by need 2 leave ca
2006-07-21 15:11:51




Comment by Melody
2006-07-21 17:53:03

Can I be something?

Comment by jl in sd
2006-07-21 18:03:07


Comment by Backstage
2006-07-21 18:11:19

She can start all her press conferences with, “Hear about…”

Comment by Melody
2006-07-22 00:59:21

LOL, maybe PR work… so when is our party? I was hoping in Sept and I really want Auction Heaven to be there…. He is so entertainable… I really enjoy what he has to say among many others. I think we could have a really good time. So how is Sept for everyone… at least in the OC area?

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Comment by CA renter
2006-07-22 02:11:49

I think Sept is good. Do you still want to have the party in OC or Vegas? We could invite Vegas Gal (LV Landlord). :)

Comment by Polo bear
2006-07-22 07:35:50

Dual parties in both! Perhaps we can get one of these tec guys to link us up so we all can party together???

Comment by agentn2o
2006-07-21 15:14:34

There were a few sage prophets who predicted that things would unravel pretty quickly after the 4th of July long weekend… what are those identified stages one works through to get out of denial? It looks like stage 1 has definitely passed (like a kidney stone) through the a$$es of the RE / lending / builder trade.

Comment by Portland, Mainer
2006-07-21 16:28:37

Come July, if you’re still looking for a house, you’ve blown it as far as getting in for the September start of school. So what’s the hurry. The long dark winter lies ahead. Will we have a second silent spring in a row?

Comment by Pen
2006-07-21 17:22:33

FYI…you can enroll a child in a school system based on a signed P&S…

Comment by Portland Mainer
2006-07-22 05:45:37

Yup, did it ourselves, but we had to get a rental 30 minutes away for two months, a big pain in the neck. The start of school in September is one of the biggest drivers behind RE’s spring seasonality.

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Comment by Doc
2006-07-21 16:38:05


Comment by Getstucco
2006-07-21 16:47:55

And before all of the above, where many still remain:


Comment by Les Pendens
2006-07-22 01:16:24

We still have a way to go.

I say we are currently in between Denial and Anger.

Anger will kick-in full swing this fall.

After Christmas, income taxes, property taxes and credit card bills come due……then we go into Bargaining.

When the Bargaining phase kicks in in the Spring of ‘07 is when I plan to pick up a nice clean used 20-22ft center console fishing boat…..there should be plenty available here in Central Florida.

Cash will rule.

2006-07-23 12:38:52

a kidney stone passed through the a$$ would hardly be felt, whereas one passed through the male urethra would be excruciating!

Comment by simmssays
2006-07-21 15:42:59

Wilkinson, …has seen all kinds of slumps and adjustments, and in his opinion, ‘the adjustment is not over.’”

I think its pretty clear the adjustment is just starting.

Simmssays..Sony v. Microsoft

Comment by DannyHSDad
2006-07-22 00:10:09

The question is: are we at the end of the beginning or the beginning of the end?

Comment by CA renter
2006-07-22 02:13:31

Beginning of the end. :)

Comment by Sarah in DC
2006-07-22 06:27:21

I vote for beginning of the beginning of the end!

Comment by need 2 leave ca
2006-07-21 15:57:01

The Duncan Banner in Oklahoma. “Realtors in Stephens County are laughing. And, enjoying their careers. Michelle Kennedy, a Realtor-associate, describes the market as ‘God sent.’ Kennedy said she first noticed the upward trend in home sales in Duncan about a year ago. The home sale frenzy began and hasn’t let up, she said. She’s seeing an influx of..California newcomers.”

Now, please tell me. Even California equity locusts can’t believe that Oklahoma is going to double and triple in the next three years? If they do, they literally have to be the most idiotic people around, and hope they come flopping in to the BK courthouse. There are some very nice people in Oklahoma, just politely send the locusts into the Mississippi River.

Comment by Backstage
2006-07-21 18:15:09

Some do, but many folks are taking their equity gains and buying with cash. I know at least 6 families who picked up and left, 1 to MT, 1 to OR, 1 to WA, 2 to TX, and 1 to TN.

They are escaping.

Comment by Sold at the top
2006-07-21 18:44:09

That’s what my parents did. Sold and took their equity to OK.

“Realtors in Stephens County are laughing. And, enjoying their careers. Michelle Kennedy…describes the market as ‘God sent.’”

-I’ll bet. Some of them are also enjoying doing nothing and getting paid for it. Like the listing agent of the house my parents bought. Could NOT be bothered to show them the house on the one weekend they were in town house-hunting. No, no, absolutely not! SHE had family over. So, the sellers had to show their own house, but she still collected full comission. Turns my tummy.

Comment by nnvmtgbrkr
2006-07-21 19:56:38

She’ll have her day of lamentation. This flood of liquidity is just working it’s way through the system….kinda like a bad Mexican meal.

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Comment by sellnrun
2006-07-21 19:01:23

Ditto. 2 to CO, 1 to OR, 1 to TX, 1 to ID and many more have talked about it…

Comment by Backstage
2006-07-21 18:16:00

P.S. There are some very nice people in CA, too.

Comment by jd
2006-07-21 20:45:35

I have a funny feeling that in a place like Oklahoma, if 1 in 100 home sales are to someone from California, heck, they all are!…

Comment by pismobear
2006-07-21 16:05:20

I see Appleton-Young (don’t you love these bit-hes who hypenate their names) is eating a bit of crow saying there is no soft landing. What is it Leslie? An ass pounding crash then? Check with Lereah first, eh?

Comment by argentinian_seller
2006-07-21 16:11:26

How about real estate in Lebanon? It was supposed to be a red hot market just one month ago.

Comment by Luvs_footie
2006-07-21 16:15:00

Still hot……..but for a different reason now

Comment by Getstucco
2006-07-21 16:57:35


Comment by Rainman18
2006-07-21 18:49:13

House for Shell……I mean Sell
2 Story Town House….I mean 1 Story…

please excuse the dark humor…I’m not amused by the conflict.

Comment by rent2home
2006-07-21 16:18:49

OT : but this struck me and got me thinking.

The most striking exception to this rule is David Streitfeld, a reporter in the San Francisco bureau of the Los Angeles Times who has been writing housing stories on and off for the past two years

A self-described “agnostic” about the bubble, Streitfeld jumped into the market himself last summer and bought a house in the San Francisco suburbs. “If there is a bubble and it pops severely, I’m probably doomed, like much of California.

This is the reporter this week wrote about housing bubble in San Diego, interviewed Rich Toscano and the article was the most viewed and emailed article of LA Times.

Is is not strange! Is there a different angle to it ? Why did he write this article , to atone for the “mistake” of buying into the bubble last summar? Can this be a case pf STOCKHOLM SYNDROM ?

from Wikipedia:

“The Stockholm syndrome is a psychological response sometimes seen in a hostage, in which the hostage exhibits seeming loyalty to the hostage-taker, in spite of the danger (or at least risk) in which the hostage has been placed. ”

Did many bought last summar because they have been held hostage since 2003 when the bubble was supposed to burst but did not? So at the end people gave up resistance and joined the hostage taker.

Or is it me showing signs of losing it ;-)

Comment by Mort
2006-07-21 16:41:54

No, not losing it, loosing it. :D

Comment by Melody
2006-07-21 18:01:05

Verb: loose loos
Grant freedom to; free from confinement
- free, liberate, release, unloose, unloosen

Turn loose or free from restraint
“let loose mines”; “Loose terrible plagues upon humanity”
- unleash, let loose

Make loose or looser
- loosen

Become loose or looser or less tight
- loosen, relax
Adjective: loose (looser,loosest) loos
Not restrained or confined or attached
“a pocket full of loose bills”; “knocked the ball loose”; “got loose from his attacker”

Not compact or dense in structure or arrangement
“loose gravel”

(of a ball in sport) not in the possession or control of any player
“a loose ball”

Not tight; not closely constrained or constricted or constricting
“loose clothing”; “the large shoes were very loose”

Not officially recognized or controlled
“a loose organization of the local farmers”
- informal

Not literal
“a loose interpretation of what she had been told”
- free, liberal

Emptying easily or excessively
“loose bowels”
- lax

Not affixed
“the stamp came loose”
- unaffixed

Not tense or taut
“the old man’s skin hung loose and grey”
- slack

(of textures) full of small openings or gaps
“a loose weave”
- open

Not fixed firmly or tightly
“the bolts became loose over time”; “a loose chair leg”; “loose bricks”

Lacking a sense of restraint or responsibility
“a loose tongue”
- idle

Not carefully arranged in a package
“a box of loose nails”

Freely producing mucus
“a loose phlegmy cough”

Having escaped, especially from confinement
“dogs loose on the streets”; “criminals on the loose in the neighbourhood”
- at large, escaped, on the loose

Casual and unrestrained in sexual behaviour
“he was told to avoid loose (or light) women”
- easy, light, promiscuous, sluttish, wanton

Not bound or fastened or gathered together
“loose pages”; “loose papers”
Adverb: loose loos
Without restraint
“cows in India are running loose”
- free
Derived forms: looser, loosed, loosest, loosing, looses

Comment by rent2home
2006-07-21 23:11:54

Impressive. Is there a LINK you can refer to!

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Comment by chilidoggg
2006-07-22 02:43:16

you forgot Lou, oooh, hooooooh, zer! (Jim Carrey)

Comment by Housing Wizard
2006-07-21 17:53:52

No , I think you have a good theory . Plus , after he finally broke down and bought a house ,he could see the folly in it .

Comment by DannyHSDad
2006-07-22 00:14:37

Some learn from other’s experiences, some have to experience it themselves.

This blog is for those who are the former [or want to express (confess?) the latter].

Comment by Portland, Mainer
2006-07-21 16:25:36

“Buyers, she said, lack the motivation they might have in other circumstances: “Nobody’s getting transferred here and their back is against the wall,” she said. “And conversely, a lot of the sellers don’t have to sell”.

Very true - a lot of sellers don’t have to sell. Byt a small number do - deaths, divorces, disability, downsizings, etc. As these unlucky persons put there homes on the market, if buyers aren’t in a hurry, inventory builds up and buyers take even more time as the cycle reinforces itself. The very motivated sellers who have the most reasonable prices are the ones who will make the sales and determine the comps.

The fact that 99% of homeowners are staying put is irrelevant. It’s only that 1% for sale which determine the market.

Second home markets such as Cape Cod or the Hamptons in NY are extremely vulnerable because indeed, nobody HAS to buy a second home and in times of crisis, the second home is the first thing one sells. These second home vacation markets are going to get decimated.

Besides, do the math - you can rent an awful lot of hotel stays with the interest you’d make on the money that’s not tied up in a million dollar weekend retreat. There’s also something to be said for not being a prisoner of a single vacation destination. Those staying in hotels and motels go wherever they want.

Comment by tj & the bear
2006-07-21 17:58:12

One of my theories behind why the high-end properties drop first is that house purchases for the rich are discretionary, too. They never have to do anything. Of course, the rich tend to be better informed, too.

Comment by Judicious1
2006-07-21 16:26:00

“But although it’s clearly a buyers’ market, buyers aren’t exactly rushing to buy.”

That’s because it’s not a buyers’ market, it’s a fools’ market.

Comment by Gravity 'ON'
2006-07-21 17:55:07

Yes, yes…a ‘fool’s’ market.

A ‘poison’ market.

A ’suicide’ market.

Just gotta get a more accurate term into the vernacular and plug it into the brains of the masses. Get it into Matt Lauer’s morning spiel and RE will be havin’ a bad time after that.

Comment by Polo bear
2006-07-22 07:44:25

Good idea. Let’s get in touch with him and move this thig along.

Comment by Flic
2006-07-21 16:44:49

Manatee County,FL sales down 52%, yet this idiot still thinks prices will be up nearly 15% for the year. I believe we are already down 10-15% since January with a record glut of inventory. I’m also seeing listing prices that have been dropped 20-30% and still sitting. But everything is fine here…move along….

Home sales fall 52 percent in Manatee County

Manatee County recorded a 52.1 percent drop in single-family homes sales in June compared to the same month last year.
Condominium sales were off by 41.4 percent, said Dale Friedley of the Manatee County Property Appraiser’s Office.
“This is also the first time I can comfortably say that prices are flattening,” Friedley said.
The median condo price fell by 8.2 percent to $220,600 in June from the same month a year ago, and it only rose by 2.2 percent to $230,000 over the three month period ended June 30 compared to the same period in 2005.
At the same time, the median single family home price rose by 9 percent to $327,000 in June and by 12.1 percent to $290,000 during the second quarter.
“Projecting forward, prices of single family homes will probably rise 12 to 15 percent this year, which takes us back to 2002 levels of appreciation,” Friedley said. “Condos probably won’t appreciate much at all.”
A total of 560 single family homes were sold in Manatee County in June compared 1,025 in June 2005, while 211 condos were sold compared to 360 the year before.
“We had a 27 percent increase in the number of sales in 2005 and are likely looking at a 35 percent reduction in 2006,” Friedley said.

Comment by Getstucco
2006-07-21 16:50:11

“Streitfeld jumped into the market himself last summer and bought a house in the San Francisco suburbs. ‘If there is a bubble and it pops severely, I’m probably doomed, like much of California.’”

There is a great sense of comfort in knowing that you are moving with the rest of the herd as you all run over the cliff.

Comment by Thomas
2006-07-21 16:50:47

David Streitfeld - This guy reminds me of some tech workers who had these bizard college degrees from the East Coast. They majored in English Literature, International Langauges, or some other non tech or business field.

All they did was BS their way day in day out not really know what they were talking about.

After the dot.com bust in 2000-2001, they all vanished. I guess some became realtors. I bet is the same BS coming of them.

Comment by ockurt
2006-07-21 17:43:43

lol, thomas. good one!

Comment by Getstucco
2006-07-21 16:51:38

“In what real estate professionals are calling a much-needed correction, real estate prices on the Cape have begun falling as sellers try to avoid getting stuck in a glutted market.”

Oooh - yessss — this market discipline hurts so good!

Comment by Gekko
Comment by Salinasron
2006-07-21 16:55:13

I still say that the SHTF in October. Summer will be behind us, kids back in school and all those predicted sales went ‘poof’. The winter sales slump will continue into its second season in FL and AZ. Holiday shoppers will be in a funk about their financial plight and the November property taxes will be rolled onto their already overleverage CC.

Comment by Wes Chester
2006-07-21 17:01:43

Interesting observations on price of land outpacing cost of structures built on it:

The Hamptons are among the most magical places on earth. Every year, the NYTimes, New York Magazine and numerous other publications come out with their “Hamptons Are Dying” article, where the author happens to be someone who knows someone who knows someone else who wears Gucci loafers and sold their house in the Hamptons (and made $500,000 in two years) because they went to Sullivan County and bought a 15-acre parcel for $125,000. Wow! Unbelievable! That’s tooooo gooooood toooo beeee truuuuueee! Everyone’s going to do that and that will be the end of the Hamptons!!!! Yeah, right. Hey, send me a postcard, will you? While former farmland and wooded sites continue to be developed, changing the vistas we have seen for generations, there is still a tremendous amount of open and preserved space. The Peconic Preservation Tax has worked! One of the most common complaints is that houses are getting bigger and bigger all the time. “It’s starting to look like Syosset, where you can pass a cup of flour between houses”, whined an acquaintance recently. “No”, I said. “Flowers maybe, but not flour.” Most of these people use their stoves as planters. Aside from our tastes becoming more upscale and desirous of more square footage, the price of land has appreciated even more greatly on the East End than the prices of homes. That means that in order for builders to justify the end price for the homes they put on these expensive lots, they need to make them larger and with more amenities. Many builders use the formula of thirds: land cost 1/3, building cost 1/3, profit 1/3. So, if a plot costs $500,000, the building cost might be $500,000 and the home should sell for $1.5MM. That builds-in a reasonable profit margin. Make that lot a $5MM purchase price and you end up with a $15MM home value, at least. With half-acre lots going for over $1MM in the villages these days and one-acre lots in the woods and fields going for the same, it drives the size of the houses larger in order to justify the end price. Now with energy costs going up significantly, I see a movement toward more efficiency but with super-high quality. We’ll see how much bigger things go with fuel oil at $3.50 a gallon. Hey, can you spare a cup of oil?


Comment by Portland Mainer
2006-07-21 17:03:08

Hamptons and Cape Cod both headed down, down, down.

Comment by dawnal
2006-07-21 17:07:42

One of the factors that keeps the prices up more than logical is that “free money” is still flowing. So long as it does, sellers can hold out as they see sales at good prices occurring. Clearly sales are down a lot and inventories have soared but prices have not fallen commensurate with these trends. At some point, doesn’t the Fed have to crack down on toxic lending? I wonder if it is being stalled until after the November elections?

Comment by sellnrun
2006-07-21 19:13:20

The yield curve can kill toxic lending. Rates, values, and income can kill lending also. Rates have increased to the point where values must necessarily fall to make housing affordable.

Comment by nhz
2006-07-22 02:51:41

in Europe it was mostly the same in recent years: inventory up, sales numbers stable or down, incomes stable or down - but median prices still keep rising (while the bubble is much older and gains are sometimes much bigger than in the US).

People are still buying and they can only do that because of increased leverage and still more crazy lending. I’m sure the banks have agreed among themselves to keep the free money flowing. At least in Europe, there is NO sign that financial authorities are going to take the RE punch bowl away.

Comment by pismobear
2006-07-21 18:04:41

The KONDRATIEV winter will begin.

Comment by Getstucco
2006-07-21 16:56:36

“Not everyone is convinced the market has indeed hit bottom.”

What?! I would venture that next-to-nobody who reads here thinks the market is anywhere near the bottom. The rest of the world either doesn’t know the bubble is deflating, or has no clue about how long these ordeals play out. And then there are the realtors, who keep trying to assure us that the market has bottomed out already, in order to find some greater fools who might be interested in catching a falling knife.

Comment by SeattleMoose
2006-07-21 17:43:09

Well, well, well….looks like Seattle REALLY IS SPECIAL.

How special? Click my name to find out…..LOL. No bubble here folks.

Comment by ockurt
2006-07-21 17:50:25

Ha ha. That’s cool. At least LA isn’t top of the list. I feel way better that we are #10 ;)

Comment by SeattleMoose
2006-07-21 18:01:32

This article is A YEAR OLD!

Since then:

1) Prices have spiked upward
2) Interest rates have spiked upward
3) Traffic has increased (CA equity locusts)
4) CA equity locusts keep coming
5) Wages have been flat

Seattle is a “lock” for a 3-peat. We be SPECIAL!!

Comment by DannyHSDad
2006-07-22 00:23:33

Actually the latest Forbes list is out:


And Seattle didn’t make the top ten….

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Comment by tom stone
2006-07-21 17:57:25

streitfeld is doomed,and so are most of the shysters i know in the real estate biz.they ended up believing their own lies.F’em with a redwood 4×4.

Comment by keb
2006-07-21 18:06:58

Its tough for the MSM to report on RE because there is no easy and quick figure to report (like the DJIA). I think the story is going to manifest itself this winter when unemployment crosses 5 percent, lousy christmas shopping season and the big R word in 2007, thats the real carnage story, consumers can’t buy little johnny the toy he wants because they realize they didn’t actually have income to match all the money they were spending the last 5 years.

Comment by ockurt
2006-07-21 18:20:39

Sorry if this was posted already.

California Hiring Slows in June

California employers added fewer jobs in June than in May, mirroring the nationwide slowdown in hiring, according to state figures released today.

The cooling housing market contributed to net job losses in the construction and financial sectors.

Several of the sectors posting job gains — including manufacturing, mining and trade — were buoyed by booming economies in China, India and other countries.

Overall, 11,000 net new jobs were created in June, down from a revised 15,300 in May, state figures show.

The state’s unemployment rate was 4.9% in June, down from 5% in May and 5.4% a year ago.

According to a separate survey, 16.87 million people held jobs in California last month, down 39,000 from May but up 136,000 over June 2005.

Also in June, more than 40,400 Californians made new claims for unemployment insurance — about the same as a year ago but up from 37,041 in May.

Comment by Shannon
2006-07-21 18:29:44

My Father just retired, June 30, from Boeing in Anaheim. On the front page of the Orange County Register today is an article announcing the closure of the Anaheim plant. We talked a few minutes ago and he said, “Although the article says there will be no layoffs of the 3700 current employees, and they will all be moving to the Huntington Beach plant, they are actually all being laid off.” My Dad was in upper management and I did question him about that but he said everyone was being shipped out of state or losing their jobs.

Comment by ockurt
2006-07-21 18:41:05

Hey shannon, I read that this morning and was questioning whether those people were getting laid off or not. I guess I shouldn’t be surprised. Say one thing do another. My neighbor works (worked?) for Boeing at the Anaheim facility…I’ll have to get the scoop.

Congrats on your dad making it this far…my dad put in 30+ yrs with Shell Oil…ahhh, the old days…

Comment by Sunsetbeachguy
2006-07-21 19:33:24

The OC Register is terrible at covering layoffs.

They missed the closing of the Quest Diagnostics campus in San Juan Capistrano off of Ortega Highway. Probably 300+ employees gone. A poster at OCR’s RE blog mentioned it.

I never got past the significant security gate when I was in the outside sales business.

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Comment by ockurt
2006-07-21 20:19:21

sunset, you are right…the Register is a 2nd rate paper…

Comment by mrincomestream
2006-07-21 18:53:48

Boeing laying off hunh? Know someone who bought a house out that way within the last two years thinking Boeing was going to get them through retirement. It’s different this time I was told. LMAO I am so glad I stopped chasing that fools gold many years ago.

Comment by Bill in Phoenix
2006-07-22 06:27:21

“Know someone who bought a house out that way within the last two years thinking Boeing was going to get them through retirement.”

Substitute any company name for “Boeing” in that. And maybe that is part of the reason people went out on a limb. They forgot the word “outsourcing” too. I just kept laughing. Now I have nearly half my assets in government securities and cash, and half is tax-deferred in mutual funds. Yes, it’s our turn to be smug. And we will be smug for years.

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Comment by Greg
2006-07-22 05:55:48

Shannon (or anyone who may know),
Question on the export of Boeings and how they are accounted for in our national trade deficit calculations. If 50% of the dreamliners are constructed in places like Japan does Boeing attribute 50% of the sale to export or does the entire cost of an airplane be counted as an export even though only half of it was built in the U.S.?

Comment by Mike G
2006-07-22 23:13:10

The imported components count as imports and the final product counts as an export. A lot of US exports contain imported parts. It’s the trade balance of exports minus imports that count.

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Comment by Eastofwest
2006-07-21 19:43:30

…Just on the local news: Citizens Ins. Co. (Insurer of last resort in Fl.)
granted Fl. homebuilders coverage until the end of the year…It was unclear what will happen after that. Anyway they said the builders premiums will be rising substantially ,and will have to pass those cost onto the buyers…The who?

Comment by mikey
2006-07-21 19:56:53

Went for a drive through Milwaukee and a couple of the high end suburbs. Unbelievable the number of Realty Companies For Sale signs and FSBO’s signs out there. If you lost control of your car on many streets, you’d wipe out at least 5 or 6 of them. The real mind bender is how the Local Real Estate Industry folks are keeping THIS out of the newspapers off the local TV news stations….Utterly Amazing !

Comment by Mike/a.k.a.Sage
2006-07-21 22:01:50

A society that could be mobile whenever they choose, are now constrained. Stripped of their freedom to choose; The time or the place to move at a moments notice. This is what a precipitous downturn in real estate does. It makes you less free.

2006-07-22 00:22:30

I like to think it will paralyze the morons. The prudent will still have their mobility. A vertible paradise. True freedom includes freedom from the whims and greed of the masses.

Comment by Bill in Phoenix
2006-07-22 07:30:32

After reading Harry Browne’s classic 70s “How I Found Freedom in an Unfree World” over 2 decades ago (and re-read some of it from time to time, I think a new “trap” can be coined. Mortgage trap, ARMs Trap, “It’s Different This Time” trap (which also applied to the dot bomb days)…

Comment by John in VA
2006-07-22 04:33:05

describes the market as ‘God sent.’

Yes, as in God sent a plague of locusts.

Note that there was no mention that Oklahoma realtors might be concerned about the market becoming unbalanced or worried that working people in their own communities might not be able to buy homes. They’re not worried about their friends and neighbors getting in over their heads with loans they can’t afford. Nor are they worried about the economic consquences of a sudden housing reversal. They don’t care that their cities and towns will become less attractive to potential employers as housing costs escalate and commercial land becomes more expensive.

Nope, they don’t care about any of this. They’re just laughing and enjoying the mayhem being wrought by an irrational speculative frenzy.

Comment by Midi
2006-07-22 04:41:30

Still 90 degrees at 5am this morning in Tucson AZ, Scottsdale showing 97 still, good day to go House Hunting? ;-)

Comment by Mozo Maz
2006-07-22 07:21:56

120F in Cathedral City CA. 118F in Phoenix yesterday.


Only the most desperate would ever go house hunting in these temperatures.

Comment by Sammy Schadenfreude
2006-07-22 09:25:45

Only the most idiotic would BUY in these sun-glazed badlands, as global warming combines with inexorably rising fuel costs and aging, inadaquete electrical grids. Wait until the rolling brown-outs and black-outs kick in…how much for your stucco crapbox NOW, flipper-scum?

Comment by cactus
2006-07-22 09:18:34

Very hot in Phoenix, and the houses are built here like thay are in California, were it is 30 degrees cooler.
The concrete is too hot to stand on here in bare feet…. at midnight. really this place needs better planning, its a big heat bubble now. all these new houses? this can’t end well for Phoenix.

Comment by kipper
2006-07-22 08:03:59

Does anyone else think this Maryanne Haggerty was being tacky in insinuating that the poster who was a renter was as “smug and condescending” as the people she accused? I think she was just responding in like manner to how she was being treated when she tried to talk some sense into people who had bought during the bubble.

Comment by eastcoaster
2006-07-22 10:12:45

I’m just wondering if “Your worst nightmare” is someone from this blog. :-)

Comment by kipper
2006-07-22 13:26:12

Are you? Hmmm. That would be nice wouldn’t it.

Comment by masssyett
2006-07-23 04:46:20

From the “Washington Post” bit:

Q: “What is the best way to determine how much house you can afford?”

A: “Ask a mortgage lender/broker.”

Dirty, rotten, terrible advice. Makes her look like a complete industry shill.

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