‘At Some Point, You Run Out Of Fools’ In DC
The Washington Times has this report on the DC area. “The housing slump reached a new milestone this spring as home prices started to decline in many once-booming areas, recent reports show. The rapid slowdown in housing has particular repercussions for areas such as Washington, where the local economies are driven in part by real estate.”
“‘We’re seeing a shakeout’ in the mortgage industry, said Christopher Cruise, who trains mortgage loan officers. ‘People were just answering the phone during the refi boom and making six-figure [incomes]. Now, the phone’s not ringing any more.’”
“The slowdown is healthy in a market in which prices climbed too high, homes became unaffordable for young buyers and too many people were rushing into home purchases thinking that prices could go nowhere but up, he said. ‘It was like the greater fool theory, there has got to be a fool out there who’s willing to pay even more than me for this house. At some point, you run out of fools,’ he said.”
“Job opportunities are declining in housing-related areas such as architectural and engineering, according to an employment index.”
“Paul Yalnezian, president of the real estate firm Right Home, said the housing slump has been precipitous in California. ‘The number of able, ready and willing buyers has dwindled significantly. We are seeing more and more price reductions,’ he said.”
“Some industry observers fear the fast-declining housing sector is headed for a bust this fall when sales and prices typically decline from high-season levels. ‘August will begin the buyers’ market,’ said Donna Evers, president (a) real estate brokerage.”
“”Robert Dye, analyst with Economy.com, said areas where housing soared the most are the ones most likely to see outright price drops in the months ahead. Among the areas where he sees a ‘risk of correction’ are the Washington area, California, Florida and Arizona.”
I have reviewed the complete history of human beings this morning and have concluded that there probably will not be a shortage of fools for the forseeable future.
And how does that impact Santa Clara? This was posted at indexcalls.com this morning:
QUOTE
…..
” I predict a 5-10% drop from June to August for Santa Clara County home prices (an easy prediction from the data) and 10-20% by Feb’07. High-priced places like Los Altos should see a 20-30% decline, if not more, by Feb’07.
When the Existing Home Sales are reported for August, in late September, all hell will break loose in financial markets because the current “slowdown” mantra for the US economy will be replaced by recession in the near future mantra. The Yield-Curve is better predictor of the economy and the future course of inflation that all the economists that “inform” the public, including poor Benny, of course, combined. I know my US Treasury Yield-Curve history better than anyone (I didn’t six months ago). People who ignore it do it with their own foolishness. And the people who are trying to explain it away are charlatans. Two clear messages of the current Yield-Curve are: high likelihood of a recession and falling inflation in not-too-distant a future. That would be devastating for Santa Clara County home prices and the e-CON-omy, because but for housing bubble the county would have been in a depression for the past four years. The employment is still significantly below where it was in 2000.
An apt epitaph for Santa Clara County housing: Homes that Fraud Money bought and Honest Money can’t afford, or maintain.”
http://www.safehaven.com/article-5609.htm
I have said that for some time, this country never recovered after the technology bust in 2000. That is 6 years. There are fewer jobs now that in 2000, and if you look closely, except for Google, there have been no new companies, technologies, or products (ipods do not count) that have broken any barriers.
Even Google is a rehash of older technology, like hotbot, but with complex algorithms.
Any Techie out there, has mostly been suffering through the last couple of years, and has not seen any pay increases, most of the time, we have taken pay decreases, just to get a job, or stay in our current company. Not only that, but my gut feeling was confirmed today, as wages have been falling for the last 4 years compared to inflation. I believe that wages went up around .9% on average, and inflation was much more than that.
Our future is grim, as we keep on fighting a losing war in the ME, We keep on exporting our jobs, we stopped manufacturing stuff that the world needs, and we no longer have any savings.
If our Country does not get back to basics, tells WS to go and F*ck themselves, and starts producing goods and services that other people want and need, we will turn into the England of the ’60s, where manufacturing was of dismal quality, and everything was a joke.
Sorry, Rant off.
Alternative energy companies are booming in this country. That’s one new wave of innovation.
Yes, we could fuel a next wave in a energy revolution. But the powers to be in oil industry, goverment, and general population arnt for it. LOL!
The main brains behind alt energy are outside of California near the Corn Field of Wyoming and Kansas.
I wish them well and lots of luck in their passion.
With all due respect, I wish people would stop making any comparisons to the number of jobs in the Bay Area today to the number of jobs in 2000.
The year 2000 was fantasyland. You might as well be comparing Kansas today to the Land of Oz. You have got to throw out the high (and 2000 was the highest of all highs), and go back to the trendline. Once you consider that, things aren’t go-go 1999 fantastic, but they aren’t as bleak as they would be if you have your year 2000 glasses on.
Doesn’t change the fact that housing prices have far outstripped incomes, or that wage growth hasn’t been great, but at least you are talking about HAVING a job, just not your ideal job with the pay you want. When there are no jobs to be had, we will be in real trouble.
With all due respect, I failed to mention the OC anywhere in my post. The US as a whole has stopped investing in its future. It is not only a lack of future looking companies, but a lack of future looking technologies.
I might be wrong to compare the employment situation with 2000, but then that makes housing even more susceptible to a correction, as jobs drive the housing market. The pay I want, is the pay I need to buy a decent house and save some money for retirement, according to my skills and education. The world does not owe me a living, but I have worked hard to earn one. Now it is being outsourced to Mexico or India.
The companies that are working in alternative energy always seem to pop up as there is an energy crisis. I remember going to Epcot when I was a kid, and the Science pavilion next to it was dedicated to alternative energy, Solar, Eolic, and Geothermal. This was in the mid to late ’70’s. Sound Familiar?
Looks almost like a repeat of that dreaded decade, does it not?
The total employment count in Santa Clara county is much worse than you think. According to data at http://www.melissadata.com, SC county total employment as of May 2006 is about 773k. From 1990-1992, which were recession years, SC county employment was in the range 780k-830k. So total employment in SC county is slightly lower than it was 15 years ago.
Don’t bother comparing SC county employment to 1998-2000. We can’t even compare favorably to the early 1990’s.
Good point, with no new sparks in the Santa Clara Tech Industry we still have loads of competition on our heels.
We still compete with Euro and Japanese Tech giants too.
I forsee weaking salary gains due to these factors when price cuts on products are hitting.
The shake out of the 2000 has yet to be completed. Some employees still have huge salary increases from 2000 (Legacy Costs) which have not yet been adjusted. This is also the reason for no new salary increases.
The saying is ‘greater fools.’ Maybe we should qualify it, and say ‘greater fools that can get a loan and an appraisal.’
Plenty of fools, yes. The problem is that mania like this require bigger and bigger fools. As the foolishness level goes up, the number of fools goes down.
“I have reviewed the complete history of human beings this morning and have concluded that there probably will not be a shortage of fools for the forseeable future.”
We are not talking about running out of fools per se, but rather running out of fools who are interested and qualified to buy a home.
A ’shortage’ doesn’t mean that there aren’t lots of fools, only that the demand for fools exceeds the supply of fools.
I would second the point and emphasize that we are talking about Washington, D.C. for crying out loud. Fools gravitate and congregate around the place!
But fools usually make a lot of babies. That would be a good idea . Sell SUVs to 8 year old children. Why not real estate also? Just joking. I think people who bought real estate these last years had probably a mental age of 10.
Don’t laugh, some of those 8 year-olds probably qualify for stated-income loans. After all, third graders routinely earn six-figure salaries.
What’s that, Lassie?
BARK, BARK, BARK, BARK
You got a stated income loan? For how much?
BARK, BARK, BARK, BARK, BARK
How will you ever pay all that off? You are a dog!
BARK, BARK
You got low payments with an adjustable rate?
BARK, BARK, BARK
And the loan is interest only?
BARK! [wags tail]
Bad dog! Bad!
whimper
She only bought a dog house. Unless it is located in La Jolla, she will have no problem paying it off…
There’s a good reason collies are called “the blond of dog breeds.”
Clearly the Administration has been addressing the wrong problem — it has been trying to solve the fuel shortage when it should have been looking at the fool shortage. Who would have ever thought America, the wealthiest country in the world, would run out of fools?
Actually, now that I think of it, the Administration hasn’t been doing anything about the fuel shortage, either. But that’s for another blog.
It is not possible that Washington will ever run out of fools. We vote every few years to send new fools there.
My marketing degree taught me “The leader sets the tone”..and my early reading led me to “What me worry” What do expect from the masses when we have such a brilliant leading heading our country
Shh! Don’t tell those clowns at GMU’s Center for Regional Analysis. It’s all rosy here in DC, we have tremendous job growth, a massive housing deficit and no bubble. http://www.cra-gmu.org/forecastreports/WashiOutlookJuly2406.pdf
My favorite outrageous price mark-up of the year was just listed on the MLS. http://www.homesdatabase.com/FQ6134800
Good old Martin Pickett’s house, a representative to the Constitutional Conventions, and Great-Uncle to Civil War Gen. George Pickett.
Price: 1.8 million
Purchased in 2002 for 500K, and assessed by the county (fair market value) just this year for 659K. For sale by Owner/Agent (not surprising).
I recall in the 90’s driving by General Pickett’s decrepit old house in Fairfax, VA on Pickett Road. It was finally restored a few years ago.
Arwen - if you go back to the GMU Center for Regional Analysis website, there is a “client list” posted there. They do work for, ahem, Pulte, Richmond American, Dogwood Development, Winchester Homes, and others - including, ironically (or not), the car salesman’s association - no joke. Here is the link:
http://www.cra-gmu.org/capabilities.htm
At least that property has something special about it. Not that I’d pay that much for a 200 year-old house to actually live in.
But when the anonymous suburban crapboxes are selling for $700k, I think we can safely say things are overheated.
w many species of exotic scrubs
From the listing
MjM
‘risk of correction’ are the Washington area, California, Florida and Arizona.”
Which account for what?…70% of housing value nationwide?….
And you can lump in, places like Paris, London, Moscow, the South of France, Italy, Spain etc.. etc… etc….. where real estate prices wil also implode in the same way. These things are all related. As for the fools, it’s a global network.
I think Europeans, particularly the Brits, are even more crazy when it comes to brick and mortar. They are as foolish in “Old Europe” than in Washington. “Monkey see, monkey do. Monkey want a big big big banana.” Folie furieuse globale menée par une bande de mongols. Crazy, fou, fada, coucou, everywhere you look. Americans are not the only fools.
As a European native, I can tell you that the real eastate boom is everywhere in Europe. All my frinds and relatives are either building homes or buying lots. The adds on TV tells them to buy now, or be priced forever; and all the other cr@p, like that the country is running out of land. The mortgage industry was as developed in the 70’s and 80’s as is it now, and people usually inherited home from generation to next. Now you can see condos development in remote areas of Carpathians mountains, all bought by speculators. Locals cannot efford them are most of the units are empty.
There is even a real estate boom in Ukraine, a poor country with a declining population, clapped-out Soviet-era industry, and no natural resources.
At least Moscow has oil money.
i would exclude germany from the bubblecamp
jmf
There’s always a greater fool. Success in any field often depends on your ability to identify the greater fool.
If you can’t find the greater fool, try looking in a mirror.
If you don’t know who the sucker is in the game, it’s you.
Warren Buffett has echoed those same sentiments, “If you’re playing poker and you don’t know who the patsy is then you’re the patsy.”
Nice quote from 2 years ago
http://nvar.com/newsdetail.lasso?articleno=nvarn100457
That’s hilarious. Pigs have wings.
I think the lipstick is starting to come off this particular pig.
and the wings are on the monkeys coming out of Leareah’s posterior.
Did he mentioned according to http://www.census.com, income per capita in DC is $43,000 (2003) and poverty level is 70% higher than national average? 68% of DC households earns less then $74,000 and 52% less then $50,000 and income projection growth is about 1.6% . How many people can buy McRoach for 350-450K with this earning?
“The rapid slowdown in housing has particular repercussions for areas such as Washington, where the local economies are driven in part by real estate and are seeing a marked slowdown in job growth in highly paid professions such as real estate sales, mortgage financing, architecture and construction engineering.”
I’ve noticed more than a few 1-million-dollar-plus homes for sale on the market lately that say “owner/agent,” in and around DC. Just adding to the inventory glut around here.
I’ve noticed the same thing. Lots of new condos in Arlington are being flipped by owner/agents. No wonder they can’t stop saying great things about the future of the housing market - they got so caught up in the hype that they trapped themselves into condo flops. They only way out is to find greater fools, thus the perma-bull appearance.
Well when you’re approaching 1 mil it’s probably cheaper to get a real estate license than to pay seller’s comission. During our insane sellers market when selling didn’t require any skill makes perfect sense.
Strangely no mention of the impact of speculators, how they were all buyers a year ago, but are now all sellers today.
I know SO MANY realtors who got their license within the last two years and their one and only listing is their own “investment” property…many have said the ONLY reason they got their license was to do just that. Some have bought several homes. I see many, many listings like this.
Not only realtors, also loan “officers”, contractors … all jumped into this mania. Particularly Asians, several of them
bought not one, but multiple houses.
There were organized plane/bus tours from builders/realtors that targetted Asians. Hispanic is the last group being targetted now.
waahoo said… I have reviewed the complete history of human beings this morning and have concluded that there probably will not be a shortage of fools for the forseeable future.
Sure, but the area of foolishness changes all the time. Sooner or later we’ll get to the point where you can actually buy a house for the same or even cheaper than you can rent– and some people will still be saying, “Not me, no way! Why should I buy when it’s just going to go down again next year? Don’t you know housing never goes up?”
Funny. And probably true!
And that’s the clearest “buy” signal that there is.
‘August will begin the buyers’ market,’ said Donna Evers, president (a) real estate brokerage.”
Then I wonder what January will bring. Bwhaahaha
Simmssays…10 Types of MEN to Avoid
http://www.americaninventorspot.com
That “August” comment was probably one of the most honest I’ve heard from a realtor ™.
You’re right… January will be ugly.
But its the build up in refinancing that will create the pain in 2007.
What we’re seeing is the warm up act, nothing more. Its going to get very ugly next year.
Those people making six figures for answering the phone had it pretty good. The problem was the people ordering those financial products paying huge fees so that people could make six figures for just answering the phone. In a normal environment, you would shop around and there would be competition for financial products. But in a mania, you buy when prices are going up and ignore the fees.
michael,
So true! When you think about the fact that we were in the new millenium and still paying out huge commissions to mort. brkrs. and realtors it really is out of whack. Virtually every other tangent of financial services had already moved to much more discounted model with ongoing service and commitment to the client. But not in “cartel world”! You’re right, had it not been for the maniacal “appreciation” we would have never seen fees at these levels. Think there’s any chance of FB’s getting some kind of a rebate? Didn’t think so.
I’ve noticed that inside the Beltway some neighborhoods (22314 in and around Old Town), 22003 (Annandale) seem to be dropping rapidly, while other neighborhoods (Pimmit Hills in Falls Church, parts of Arlington) seems to be still rising. Need to start looking for a house soon (rather wait, but that’s another story). Any ideas on which neighborhoods inside the Beltway are declining fastest/have the best deals?
Rick Bosl, who manages http://www.arlingtoncondo.com, emailed out this July 2006 newsletter. A bit optimistic in my opinion. It seems that “now” is always a good time to purchase real estate:).
“There’s little doubt that the real estate marketplace is now in transition. Although sales volume has remained steady the past few months, inventory has increased to levels we haven’t seen in years. As of today, there were 700 active condo and coop listings in the MLS, ranging in price from $143,000 to almost $7 million.
More sellers are aware of the current market conditions and are pricing their units realistically. The rental market continues to be strong and some sellers are realizing their best option is to rent their unit.
August is typically a slow month for housing sales as many people are away on vacation. Past years show some pickup after Labor Day. For buyers waiting for the right time to get back in the market, now might be the time. Inventory is high, mortgage rates are steadying and the market is showing some signs of leveling.”
Notice in the last sentence that the realtor doesn’t mention price among the key factors to consider in today’s market, only inventory and rates. wouldn’t it be more truthful as follows:
“Inventory is high, prices are extremely high, mortgage rates are steadying and the market is showing some signs of leveling.”
“
‘The number of able, ready and willing buyers has dwindled significantly. We are seeing more and more price reductions,’ he said.
This number dwindled years ago, but lending institutions were more than happy to accommodate. But surely they’re at the end of their rope, and perhaps only have enough to hang themselves with.
I think the rule of thumb is to look at neighborhoods that are the most out of whack to begin with. I think the further out from DC you go, the correction is going to be harsher. I’m sure there are local deviations. I live near Crystal City, and there are still sales closing here, though not as many and not nearly as quickly. But it’s a close-in neighborhood of SFHs within walking distance of the Metro, so it has much more going for it than many other areas around here.
“Now, the phone’s aren’t ringing any more”
Amen! I had so many former co-workers that after the last bubble decided to “try their hand” at being mortgage brokers. Many of these people had never actually MADE a mortgage payment! (They shared apartments and partied like dogs). After an introductory cup of coffee and a tour around the office they became “mortgage specialists”! Most weren’t even required to be in to work until 9:00am, 10, NOON? (After a night of “clubbing” one can’t be expected to be bright eyed and bushy tailed at the un-Godly hour of 8:00am now can one?)
Many contend it was “the easiest money I ever made” (and most of it with very little effort). When you think about the sheer amount of money that Americans paid it out in loan fees and “points” (on top of the 60 BILLION paid out in realtors commissions) it can make you quite ill. The only silver lining here is that folks that worked in the sleazy world of “brokering loans” will probably attempt to gloss over these stages in their illustrious careers by having to either claim they were in Nova Scotia clubbing baby seals or stripping to cover the time gaps in their work history!
I should add that I have the utmost respect for people that either club baby seals or strip for a living so I intended no disrespect to those honorable professions.
I’m only going to reveal this once: The best time of year to buy or RENT is in November, December or January.
That’s when the sellers or lettors are most desperate.
Thanks anyway, Scoop, but someone already let the cat out of the bag on that one.
About a year ago, My wife was taking some classes, and one of her “friends” was a RE agent. Before that she was selling Avon and Amway for a living. She is a Latin American Women that is always positive, and I got to talk to her last year, and she was trying to get me to see some properties she had listed. I told her that I was not interested because prices were way out of line, and that they would correct.
Last night we went to a downtown Beach Volley ball tournament (held every year by the Down Town Association) and lo and behold, we bump into the same woman. Now she has a Salon, does haircuts, nails etc, and is still selling the Avon stuff. Now, I was polite and declined to ask her about her RE adventures, but, she opened a salon in a town of 18K people where there are 500 Salons! Every frustrated RE agent is either opening up a tanning center, or a hair and nail salon…. Maybe that is the next bubble, get in as you know they are not building any more nails, or hair!.
David,
I’ve seen some price drops in my (shabby) part of the 22207 (Arlington) zip code. (Single family houses, not condos). Also
If you are looking in Falls Church city for the schools, I think it will be awhile before you see price drops just because it is so small and most people stay long term.
“Some industry observers fear the fast-declining housing sector is headed for a bust this fall when sales and prices typically decline from high-season levels. ‘August will begin the buyers’ market,’ said Donna Evers, president (a) real estate brokerage.”
Try August 2008…
“Among the areas where he sees a ‘risk of correction’ are the Washington area, California, Florida and Arizona.”
He forgot to mention the multitude of feeder markets where “equity” was reinvested. Oregon. Idaho. Nevada. etc.
I don’t think you should include Oregon in that list. According to my realtor, it’s different here, and not like California, Florida and Arizona.
Yeah, the weather’s worse.
The fact that this comes from the Washington Times is significant. They have been a major bubble cheerleader, even moreso than the Post.
A few months ago a mortgage co. moved into my office building. They are a break away group from a much larger outfit. I’ve never seen a more unprofessional bunch in my life. Mostly twenty-somethings with heavy tatoos, piercings, etc., who usually stroll in about noon to play office for the day. The aroma of dope wafts through the air on occasion, and the restrooms haven’t been the same. As best I can tell, they’ve closed about one deal a month (collectively) since moving in, but they all drive new $60k+ cars. Is this the type of person you want to handle your loan? I would be sure to look real close at the yield spread premium.
At the beginning of this month I was discussing with a colleague how long the group would last. He believed 6 months, and I said the end of the month (July). I Win. A little bird told me they are skipping out this weekend!!!
Suzanne’s Ex,
“the restrooms haven’t been the same”
Yep. Yet another vote for going independent. I worked downtown for years and before I left we had an ex-stripper twenty something for an “office manager”. No dear, I do not want to see your “above the hiney” tattoo!
“above the hiney” tatoos are known as Tramp Stamps here in San Diego.
Ditto NOVA, but it’s getting worse here. It’s not just limited to offices. People show up in court now, everyday, with tattoos, piercings, navel rings exposed, overhanging cleavage, etc., etc. I saw one fellow yesterday who was wearing a shoulders-bare muscle shirt. He was charged with reckless driving, possible jail time, which he promptly turned into probable jail time by his image and demeanor. Some of these get-ups, you wonder what they actually thought they were doing - going clubbing or going to court. They can’t have expected to get any respect from the judge because they sure weren’t giving any to begin with.
Funny thing you say that. I have always thought that by respecting others, you gained respect yourself. In the last couple of years, that has been twisted around to, if you respect somebody and actually treat them like human beings, then you are a putz to be taken advantage of….
I have yet to show up for an interview in jeans and hawaian shirts, but It would not surprise me that people have been doing that!
Yeah, we have “tramp stamps” in my area of Maryland, too. It’s sort of like a “beware of dog” sign, only the details are different.
I work in a professional environment (in theory), and we have shmucks showing up in ripped jeans, random t-shirts, and other crud, and women in low-riding hip-huggers, and so on. There’s one woman there who comes as close to wearing bare-midriff clothing as she can get in an office, and she slouches in her chair, thus one gets an detailed look at exactly what type of underwear she is or is not wearing that day even if you’d prefer not to know that information - disgraceful!? And then we have the losers who spend the day playing pranks on each other and/or skipping out early to go to sports games or get drunk.
I have no idea how I am supposed to take these people seriously! Fortunately (or perhaps not), most of them are as much of a joke as their unprofessional clothing would suggest, so I suppose that is not a problem.
Heck, I am not even 30 and I am cynical enough for a guy twice my age - yeah!