Only Recent Purchasers ‘Likely To Be Hurt’: Washington
The Herald.net reports from Washington. “Reflecting national trends, home sales in Washington dropped in the second quarter, Washington State University reported. The statewide decline in sales of existing homes was 12.5 percent from the second quarter a year ago.”
“‘As more homes come on the market buyers have the opportunity to choose homes which match their needs, and individual homes may be selling for less than might have been received at the market peak,’ said Glenn Crellin, director of the Pullman-based center.”
“But only buyers who purchased homes recently and now must sell them are likely to be hurt, he said.”
“Among Washington’s largest counties, King County sales declined 13.7 percent, Pierce County slipped 10.7 percent, Snohomish County slid 11.8 percent, and Spokane County declined 11.9 percent.”
“The sharpest declines were seen in Island and Jefferson counties, each of which experienced nearly a 33 percent dip in sales. Only three counties, Yakima, Thurston and Grant, reported modest increases in the number of homes sold.”
The Columbian. “The number of houses, apartments, mobile homes and other housing units in Clark County continues to grow faster than in the rest of Washington and the nation, the Census Bureau reported.”
“Franklin County saw its housing stock shoot up from 18,681 units in July 2004 to 20,433 units in July 2005, a 9.4 percent increase that ranked fifth out of more than 3,000 counties across the U.S. No other Washington county ranked in the top 100 for percentage increase.”
“Since the 2000 Census, the number of houses, apartments and other housing units in Franklin County increased by 27 percent, or 47th among counties nationwide.”
“The inventory of houses for sale in Clark County has almost tripled in the past six months. There are now about 4,000 new and preowned homes on the market, the most in six years. Prices could start to soften as sellers are forced to lower prices to unload inventory.”
The Yakima Herald. “Yakima County’s home sales jumped 9.3 percent, according to data released last week by the Washington Center for Real Estate Research at Washington State University. Center director Glenn Crellin, who notes that Yakima missed out on the huge gains that other markets, such as Seattle, have seen in the last few years.”
“When interest rates were rock-bottom, there was a heavy stream of buyers for homes in the larger urban areas in areas like California and Florida, which caused double-digit price increases.”
“Many subdivisions are in the works, but most of those homes are purchased before being finished, said Pat Strosahl, owner of United Builders of Washington, who has several subdivisions under way statewide, including several in the Yakima Valley.”
“‘We don’t know what our demand is,’ broker Doug Rich said. ‘(We know) that there’s plenty of demand to meet the supply we do have. “We’re in the middle of it,’ he said. ‘I don’t think it’s going to end anytime soon.’”
“Strosahl said his homes have attracted out-of-towners looking for more house for their money, and baby boomers ready to retire. ‘My sense is that everybody is building as fast as they can,’ he said.”
Yeah, ok. How about the people that took out home equity, which was, well, A LOT.
So many people who took out home equity,…. if you asked them why they did it, many would say they needed it. More simply, they just substituted the word ‘need’ for ‘want’, like a 2 year old who needs everything right away. They will find out what it really means to need something, but no one will be able to get them out of the mess they ‘needed’ to put themselves in.
I’m wondering how surprised we’ll be if we learn the proportion of home equity loans that were used, at least some of the time, to make the primary mortgage payments on the same property.
Oh yes ….. but oh so sad.
I know an old goose wakes up in a new world every day, but when a functional breathing adult can’t see they are in a Ponzi scheme with only one player, we are truly a country of greed at the end of our rope…….
“Only recent purchasers likely to be hurt”
Oh Nellie, what a sudden change from “Better buy now! RE only goes UP!” Looks like they are in full-blown CYA mode now.
Ben, For Gods sake slow down, I used to read all the articles and replies with a glass of wine, now I am drinking the whole bottle.
I’ve learned to cut back on the blogging, but I’m once again having trouble as there is no shortage of entertainment.
Did someone say entertainment?
Open the accompaniment in a new window, minimize and sing along. (warning, long intro)
I push my LTV…
I push my LTV…
Now look at them flippers that’s the way you do it
You push the limits on the LTV
This ain’t workin’ that’s the way you do it
Money for nothin’ and your digs for free
Now this ain’t workin’ that’s the way you do it
Lemme tell ya them guys ain’t dumb
Maybe get a knock against your sterling FICO
Maybe get them sayin’ that you’re scum
We gotta buy italianate granite
Custom kitchen stupidities
We gotta own chrome refrigerators
We gotta have those plasma TV’s
See the little flipper with the Hummer and the ski boat
Yeah buddy, he owns all that stuff
That little flipper got his own McMansion
That little flipper he’s a millionaire
We gotta buy italianate granite
Custom kitchen stupidities
We gotta own chrome refrigerators
We gotta have those plasma TV’s
I shoulda learned to bid past market
I shoulda learned to beat them comps
Look at that mama, she got it stickin’ in the camera
Man we could have some
And she’s up there, what’s that? Usin’ sex to sell?
Playin’ on the suckers like a wild banshee
This ain’t workin’ that’s the way you do it
Get your money for nothin’ get your digs for free
We gotta buy italianate granite
Custom kitchen stupidities
We gotta own chrome refrigerators
We gotta have those plasma TV’s
Look a’ here
This ain’t workin’ that’s the way you do it
You push the limits on your LTV
This ain’t workin’ that’s the way you do it
Money for nothin’ and your digs for free
Money for nothin’ and digs for free
Money for nothin’ and your digs for free
~
Look at that, look at that
~
Money for nothin’ and your digs for free
I push my, I push my, I push my LTV
Money for nothin’ and digss for free
(Fade)
I push my, I push my, I push my LTV
Dude. You rule. Great work.
yes - very cool
This one’s getting to be a three beer blog. Can my liver hold out for the bottom?
Well, if your heart held out for the top, I’m sure the rest of you is good for the bottom…
One of the pernicious side effects of the real estate bubble will be increases in alcoholism and blogoholism.
“Two of the…”
Oh well.
“But only buyers who purchased homes recently and now must sell them are likely to be hurt, he said.”
What exactly is recent?? Last year? Last two years?? The recent years that have seen record home sales, maybe??
“But only buyers who purchased homes recently and now must sell them are likely to be hurt, he said.”
Another good reason why you shouldn’t buy right now
Indeed, Recent is a relative term. To a newborn baby recent would be yesterday, to my 90 year old Grandmother recent was in the past few decades…….
“to my 90 year old Grandmother recent was in the past few decades…….”
LOL. When I see that a movie was made in the 1980s, I think of it as kinda’ recent.
By ‘recent’, I would say all of the gains from 2002 on will vaporize. Welcome to RE.bomb
Yeah, and if the average person moves every 7 years, then that’s basically only 55% of the US population. No bubble here. Nothing to see folks, move along, nothing to see.
“But only buyers who purchased homes recently and now must sell them are likely to be hurt, he said.”
and those sales are going to set the comps for all the neighbors and drive down values for everyone
OT: In the Tampa area, I received this email:
M/I Financial in conjunction with M/I Homes has introduced a new Financing program that will allow you to sell your existing home while living in your new home. For more details contact me and I will try and walk you through it. We understand the difficulties that some people are going through in selling their homes and although the market is on the upswing we want to help should the situation arise. We have a lot of good opportunities on Inventory homes should you need something to move into quickly. As always please feel free to contact me with anything that you might need.
Mike Kelley C.S.P.
M/I Homes
Great news everyone!!! The market is on the upswing! It’s ok, Mike understands our difficulties and is going to TRY and walk me through it! That Mike is a great guy, he cares about me. You might as well retire this site, Ben, as we were all wrong, Mike says the market is on the upswing. Thanks for everything.
Umm..what is a C.S.P.?
CSP= Chartered Scam Professional
No …….. Can’t Sell Properties.
No - C S P stands for..
Criminally Sleazy Professional
Great we are on the way, thanks Mike. BTW it should be no problem for you to sell the 5 flips I have will it? I just love a guy who’s only there to help and perhaps “feel my pain”….. Some dipshit will fall for it and give this clown a call.
According to my acronym dictionary, C.S.P. can stand for either “Customer Service Professional” or “Casual Sex Partner”.
Did a little net searching and CSP seems to stand for Certified New Home Sales professional. Don’t know what the hell that means. Didn’t know you could become a certified sales professional for anything let alone houses. Next will be certified used car salesmen. God I can’t wait for this to end and all of these shills and scam artists can go back to working at Wal mart and Burger King and stop pretending like they are doing something worthwhile.
Another Tampa anecdotal: people here have gone nuts and are completely desperate. If they can’t rent the 3 BR homes and townhouses they purchased to a single family or person, they are trying to run a boardinghouse, looking for people they can put together as roommates. And some, who maybe were doing OK before the insurance crisis, now can’t make ends meet and are looking to take in boarders to snarf up some extra bux. It’s actually kind of repulsive.
Is Florida’s population still growing? I noted that U-Haul charges almost twice as much for a truck one-way from Sarasota to Raleigh, NC as it does for a truck one-way the other way. That says there’s more demand in Sarasota. Has the exodus begun?
SoCal to parts of the PacNorWest the U-Haul ratio is 10:1.
Please say it’s not true! Hey, it really does rain in Seattle ALL THE TIME !!! It’s raining right now!
People are leaving in droves. It was even hot here last month. Earthquakes, Democrats, taxes, smog, housing bubbles, traffic congestion, liberals! Get out now, stay away! Evil is here and I’m only thinking of others when I say these things.
Yes I agree with you Palmetto Tampa has gone nuts. The people here are just starting to do the math.
A guy I work with has been telling me for the last few years how he feels so sorry for me because, I will forever be one of the “have nots”, because I have resisted buying. Today he comes up to me and tells me he has a condo that was purchased some years ago for $75,000, “It is now supposedly worth $150,000″. He says he has it rented for $800.00 a month. So far doesn’t sound too bad if you use the 100X rule. He pays the condo fee of $200 a month, he said his property taxes just went up to $200.00 a month. He did not mention insurance, but if that is included in the $200.00 I guarantee that is going up, as everyone here has been getting the dreaded, “we have dropped/raised your insurance”, letters in the mail. So lets say conservatively an extra $50.00 a month for insurance increase. He is down to $350.00 a month cash flow. Take out a visit from a plummer or anyone else, $100.00. Down to $250.00. A month vacant between renters, takes out $66.00 a month averaged. Cleaning fee, he has no time for this, takes off $34.00 a month averaged. Down to $150.00 a month for all the headache. Oh I forgot advertising and of course there is RISK he gets a dud renter and then he is minus.
To sum up he purchased this probably 10-15 years ago. So to say that, “Only recent purchasers are going to be hurt”, one has to ask also, “How hurt?”, You mean they won’t be on the street hurt?” or “Just out a lot of money hurt?”. That is just another myth to ease everyone down the chute to the slaughter. Next they will be saying, “Well at least you are breaking even, so you are not really hurting”.
This little “have not”, has been urging him to sell for the last 2 years. Now that he is sure it is not appreciating and sees the condo glut here, he is worried he can even get the original $75,000 out of it. Well I guess he could just not sell and keep getting the extra $100.00 bucks a month. When he gets a call at his 4th of July BBQ that the toilet is clogged, he can tell himself, “Hey I don’t mind I am getting $100 bucks for this and I purchased a long time ago so I am not hurt. P.S. this guy makes at least about $100 an hour at his job, Mon-Friday.
It has become an anectdote a day here in Tampa. REAL BAD here.
janni, I hear ya. As far as I am concerned, a condo in Florida is like rolling the dice. You never know what will happen to the building, or the association. Condo owners are worse off the homeowners, because not only do they have insurance and taxes to worry about, but there’s also the condo fees, which can go up at the drop of hat and they always do. Not to mention “special assessments”. There’s a very ugly, scary mood in the air. Even people who bought just prior to the boom are running scared, due to insurance and energy costs. These politicians are making me sick with all their double talk about fixing the insurance problem. They’ll never fix it and they know it. That situation alone guarantees prices have to drop in Florida.
Oh and I forgot to mention the above scenario assumes he has no mortgage. If I was going to go in and buy that condo with financing-a mortgage, I don’t have time to figure it out now but a rough guess is that I would have to offer about $35,000-$40,000.
Think about it how many people are going to pay $75,000 Cash for the above scenario, of the people who have $75,000?. Boomers are thinking retirement.
Yes the wealthier “won’t get hurt”, i.e. lose their shirts, but they can and are unloading these losers.
The condo listings have exploded on realtor.com and they don’t have them all listed. I have monitored the listings for about 5 years now and in places where there was rarely a condo for sale and it sold right away, now have a large percentage for sale. It is a massive dumping.
This is what I was thinking. I really wouldn’t be surprised to see these condo go for $50k eventually. It’s just a damn box for God’s sake.
These Washington numbers reflect the market changes in other states. Biggest drop in Island County–that’s mostly a second home/vacation market, like Gulf Coast Florida. Yakima increases? Hispanic population increasing there. Clark County activity–it’s the bedroom community across the Columbia River from Portland where people are going to find bigger, cheaper homes than they can find in Portland proper.
I work in Clark County. There is a development of 130 row houses next door. It was built out last summer. This summer 33 of 130 are For Sale and many others show the signs of neglect/emptiness. I go through their every week and count them. I’ve seen 3 ‘Sale Pendings’ all summer.
A generation of insane urban plannig experiments have squandered Portalnd’s natural advantages. The extremes of irrational Metro policies are explicity designed to make Portland more like Los Angeles. Seriously:
Metro again, from their report comparing Portland to 50 other large urban
areas, entitled “Metro Measured”, May 1994, page 7:
…in “the LA region, we find high densities and low per capita road and
freeway mileage….In public discussions we gather the general impression
that Los Angeles represents a future to be avoided… [Yet] with respect
to density and road per capita mileage it displays an investment pattern
WE DESIRE TO REPLICATE” [emphasis added].
Let’s also keep in mind that, despite the rhetoric about wanting to reduce congestion, if you take a look at the Metro publication called “Regional Transportation Plan Update”, March 1996, pages 1-20, you’ll see stuff like:
“[Increased congestion in many residential and commercial areas will]signal positive urban development for these areas”.
In other words, congestion is a *goal* and natural consequence of their deliberate policies. What is unique is that in Portland they actually admit as much. Likewise it is no surprise that affordability is declining and average lot sizes are shrinking.
you see, this is how leprosy works:
some areas are in a more advanced state, like phoenix, sacto, dtsd, nova and so fla. others are just now seeing the skin peel from the fingertips - portland me, portland or, washington etc….
but one thing you can say about leprosy, it starts and spreads the same way. very, very predictable stuff it is.
We get YEARS of this? It’s delicious, really.
In an evil way. To wit:
http://tinyurl.com/kae2f
“Why did you sell? Why did you sell?”
. . .
. . .
. . .*pop
THAT’S why, ya Sheep.
This is going on the bulletin board at my work……
I thinkthe effects of the Washington market are a direct result of the (uncertainty of) California housing prices. Many buyers up here are either from overpriced markets, and find housing prices still a bargain, or buying second homes. Either way, their decisions could be impacted by illiquidity of theor homes for sale, or uncertainty of their overall worth with the crisis looming.
It is going to take a while for this thing to play out when you consider how many greedy people are listing houses right now for absolutely absurd prices. Check out these listings I found in Reno, NV. There are literally thousands of these kind of people waiting for “a bucket of money and a box of stupid” as one previous poster put it. Check out the price tag of $1,850,000 on this first one.
http://tinyurl.com/qooy8
Let’s see, they paid $799,000 for the place on 2/4/04 which was totally bubbly. And now, they are trying to get nearly 132% appreciation since then!! What kind of greedy a$$hole idiots are they?!!
http://tinyurl.com/qooy8
And moving on to this next one, with a price tag of $2,200,000, it looks like they are in the same dreamboat…
http://tinyurl.com/lw6wo
While they did purchase in pre-bubble 1999 for $565,000, their entitlement of 289% appreciation is more than just a tad greedy wouldn’t you say? And let’s also consider that this second house is listed by our realtor friend from Reno Mr. David Morris who acknowledged recently in the local paper that the city faced inevitable price declines. And this is your idea of priced to sell Mr. Morris? I would like to take this opportunity to tell you and your greedy client to go f$%& yourselves!
OMFG.
These people must still believe in the tooth fairy.
No, actually the greater fool fairy who buys anything at whatever price you ask. “If I just put my property under this zillow, go to sleep and wait long enough, I’ll get my price”. Dream on, dreamer. Your prince will be along soon enough…
After your bones rot…
test
New Mortgage Product:
Perpetual Mortgages:
http://www.dailymail.co.uk/pages/live/articles/
news/news.html?in_article_id=401839&in_page_id=1770&ico=
Homepage&icl=TabModule&icc=NEWS&ct=5
http://www.dailymail.co.uk/pages/live/articles/news/news.html?in_article_id=401839&in_page_id=1770&ico=Homepage&icl=TabModule&icc=NEWS&ct=5
Couldn’t pull up the page, but I think the only substantial difference between a perpetual mortgage and rent is that you can *always* bail fast and relatively painlessly on the latter.
“‘We don’t know what our demand is,’ broker Doug Rich said. ‘(We know) that there’s plenty of demand to meet the supply we do have. “We’re in the middle of it,’ he said. ‘I don’t think it’s going to end anytime soon.’”
Is this “real” demand (people who are actually moving into the homes) or pseudo speculative demand from “investors” who refuse to let the bubble die?
“‘We don’t know what our demand is,’ broker Doug Rich said. ‘(We know) that there’s plenty of demand to meet the supply we do have. “We’re in the middle of it,’ he said. ‘I don’t think it’s going to end anytime soon.’”
From under which rock is he talking from?
So let’s get this straight: If I bought a home in 2005 which falls in value by 30% (from $1m to $700K) between now and 2008, I get hurt. But if I bought the same home in 1990, the loss of $300K does not hurt me at all, even though I was counting on steadily increasing home values to provide me with a comfortable lifestyle and, eventually, a comfortable retirement, given that my household savings rate is negative. Does anyone else smell something fishy about this logic?
Either way, you end up upside down (at the porcelain bowl)…
You are conflating two entirely separate concepts. If you bought the same home in 1990, the loss of $300K does not hurt you at all. This is true. What you do is then add a new wholly unrelated issue namely your “counting on steadily increasing home values to provide… a comfortable lifestyle and, eventually, a comfortable retirement, given …household savings rate is negative.” Living in a house is unrelated to any of those. Indeed, if you live in a normal property taxing state the decline should benefit you. It isn’t logical to include the place where you sleep in your investment portfolio. If you want to invest in the housing market do what many of us here did, buy an income property. Sell and trade those, take writeoffs, buy low sell high. Just don’t do this with the roof over your family.
“Strosahl said his homes have attracted out-of-towners looking for more house for their money, and baby boomers ready to retire.”
Granted, I have very little direct knowledge about WA, but looking at the big ‘ole map of the U.S.A. on my wall, I don’t think of Yakima as baby boomer retirement heaven.
I think the good part about this bubble has been the civic pride it has created. People look through the rose-colored glasses, and they fix up their homes and yards. I wonder if an equal measure of pessimism will accompany the collapse.
No reason to wonder just look at NYC circa 1974.
Yakima is nothing special, trully. Unless dry and barren is your thing. If I was a boomer with bucks, I’d keep heading east through Yakima til I hit Idaho.
This “boomer rumour” must have been started by the NAR because every single place uses it to justify high prices and over -building.
The fact that even places like Yakima use it says a lot.
I’m developing an alternative financing vehicle. It’s called a RELOC - Rental Equity Line of Credit. In areas where rents are rising, you’ll be take the equity out of your lease, to use for whatever purpose you wish. Want to see “Snakes on a Plane”? No problem, buy a couple of tickets AND popcorn and candy.
That’s a bit like the one I’m developing……..It’s called a NELOC…..Negative Equity Line of Credit. No problems, it works this way………..when you borrow you then have another negative……and as we all know…….a double negative = a positive ……..Right?
OMG !!!
ROTFLOL !!!!
That is the funniest thing that I have read on this blog in awhile !!!
Agreed, very nice.
Maybe an exotic product called DredLOC. So expensive you cannot even afford haircare.
“But only buyers who purchased homes recently and now must sell them are likely to be hurt, he said.”
He forgot to mention how anyone who buys NOW is going to be hurt as well. Prices have not fallen much from last year, and they will have to fall a great distance before it would be safe to buy RE again.
Prices here in east central Florida have fallen noticeably from one year ago. We are seeing 20% drops already. Two waterfront flipper-owned condos to be auctioned on Saturday. It’s here, it’s now and it’s as bad as we thought it would be.
NB: at this point, the 20% cuts are the exception (but boy, do they screw the comps). Prices are not rising one cent; only reduced pricing is selling; price cuts of 5-20% are the only things moving the properties. We’re already on the fast part of the slope and it’s not even Labor Day.
No worries, spring ‘07 will save the day!
Or the pine box will!
“There’s ALWAYS a Plan B.”
I’ve seen some of those auctions in FL advertised in the back of Fortune magazine, which, obviously is a national mag. Must be pretty bad.
I have been keeping eye out for new rental here in the OC, and expensive houses do seem to have driven up rents a bit—maybe only bec. most renters feel like such 2nd class-citizens they are afraid to haggle with the Landed Gentry? Anyway, seems like long-term renters whose rents have not increased that much, should be able to sell OPTIONS to other renters to take over lease should they decide to relocate… for instance, I pay $1400 for my SFR while houses on both sides of me are $800-1mil. properties. Seems like that should be worth something, hmmmmm…
What does “recent” mean, within the last 3 years? Tell these Greater Fools with $4,000 - $5,000 PITI payments each month for the next 30 years that they have nothing to worry about.
Recent: any year that starts with a “2″.
Exactly!
Ben…you left out the part that says:
But prices continued to climb at double-digit rates
The full paragraph should read:
Reflecting national trends, home sales in Washington dropped in the second quarter. But prices continued to climb at double-digit rates, the Washington Center for Real Estate Research at Washington State University reported Thursday.
The Seattle market is still very hot right now….
Meshuganah
Are the sheeple in seattle just a bit slow on the uptake?
Meshugy — are those askin’ prices or gettin’ prices? Huge difference. As Robert Cote says, the former are accurately called Wishing Prices these days.
Seattle sold prices are up 15% YOY.
Check out this from the Wall Street Journal:
Housing slump proves painful for some owners and builders
In some other parts of the country, notably Texas and the Seattle area, local housing markets remain robust. Texas’ low housing costs are attracting new residents and investors, while Seattle’s strong job market and shortage of homes have kept prices rising.
Puleeeze. Running out of houses? How many times have you heard that lie demolished on these pages? Then the false logic of “there’s never been a recession while jobs were plentiful.” Just because it hasn’t happened doesn’t mean it cannot happen.
The median price is rising because Seattle is in the late stages of a bubble topping process. It would be unusual for the median to not rise until inventory grows a bit and true DOM lengthens. It’s hard to find a comparable metro area for many aspects that make Seattle and Portland outliers on the national spectrum. The bursting bubble will play out there in slightly different ways but play out it will.
So hot that 27% of the homes on the market are price reduced.
OUCH!!!! Take your hand away from that stove!!!
Meshugy’s arguments are quite lame now. They have crossed over from once being mildly interesting, to now being sadly nothing but realtorspeak propaganda.
I guess you missed this part:
“As more homes come on the market buyers have the opportunity to choose homes which match their needs, and individual homes may be selling for less than might have been received at the market peak.”
Doesn’t sound like a “very hot” market to me.
Where were you at the start of the bubble when Seattle (and Portland) lagged the appreciation of other areas? What we observe here is perfectly normal and predictable bubble behavior for that specific market. Seattle is also the reciepient of an interesting phenomena where the median home of 2006 is radically different than the median home of 1996. That 1996 house unchanged and on the market today would be priced and appointed far below the current median home.
OT……..but this from Korea.
Seems everybody except Wall Street and the NAR know about the bursting US housing bubble
http://www.hani.co.kr/arti/english_edition/e_editorial/150951.html
The author is…
“Dr. Dean Baker is a macroeconomist and Co-Director of the Center for Economic and Policy Research in Washington, D.C. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University. He received his Ph.D in economics from the University of Michigan.”
http://www.cepr.net/pages/dbbio.htm
And his last two paragraphs are:
“There is no obvious way to prevent the collapse of the housing bubble from leading to full-fledged recession, and quite likely a severe recession. Over the longer term, the U.S. economy will eventually be lifted by a reversal of its trade deficit, although this will require a sharp fall in the dollar, which will in turn lead to more inflation and lower living standards. The reversal of the trade deficit will also lead to a loss of an important source of demand for major U.S. trading partners. This will spread the fallout from the collapse of the housing bubble around the world if effective policies are not pursued to sustain demand elsewhere.
It was an enormous mistake for the United States to allow a housing bubble to grow to such dangerous proportions. It is unfortunate that the Federal Reserve Board and others in policy making positions ignored warnings when this crisis still could have been averted. ”
Where has he been until now???
> Where has he been until now???
Dean Baker has been warning of a housing bubble since 2003. His left leanings seem to make him, however, less influential among economists who in general favor the market.
> His left leanings seem to make him, however, less influential among economists who in general favor the market.
I just made the same “mistake” that Dean Baker sees in many discussions: I wrote that his political opponents have more preference for market economics. According to Dean Baker, conservatives often limit the market politically to promote their own material gain, and the political left should insist on more market, when it favours the poor, see
http://www.conservativenannystate.org
He sounds like one of me.
He was the earliest of the early bears.
He sold his suburban condo outside of DC in 2002 or 2003 and published bubble articles then.
CEPR held a contest for refutations of his bubble thesis.
The winning no bubble article was from an underlying just minted Bachelor’s degree in econ that sounded just like all of the realtor tripe.
Look it up on CEPR’s website, Housing Bubble contest.
I just love “irrational exuberance”:
“We’re in the middle of it,’ he said.
In the middle of what? That’s right, the middle of the bubble. Combined with denial:
‘I don’t think it’s going to end anytime soon.’
Yeah, it’s differnet here.
I have a great idea for something that will
1. Generate more $$ for the government
2. Make bubbles a little less likely to happen
3. Make it so YOU aren’t subsidizing your neighbor’s SUV or Granite Countertops
“In order to take the Mortgage interest Deduction, you must have a lower principal portion of the [sum of] mortgage[s] on this property this year than you did last year (at the same address).”
In other words, I/O and negative ammo mortgates should NOT qualify for mortgage interest deduction.
I’m writing my representative now!
(BTW, even though I’ve personally benefited from the Mortgage Interest deduction, I would LOVE to see them get rid of it completely. It simply makes house prices higher.)
No, it is an accounting convienience to bring individuals and businesses closer in practice wrt to debt on the balance sheet. Getting rid of the HMID would cause rich people to form dummy corps whose only asset would be a house and whose only customer would be the rich “tenant” who coincidentally would be the sole owner of the corp.
http://exurbannation.blogspot.com/2005/10/home-mortgage-deduction-myth.html
You’d have to have some fair way of determining it too, say, it has to be reduced by X amount of dollars or in a graduated way. You don’t want people being able to take a straight deduction simply because they sent an extra dollar to go towards principal in with the last payment for the year.
There’s an article about the housing market that’s on the front page of the WSJ for tomorrow (8/23) which I’m sure will be the talk of this forum tomorrow. Bottom line is that the “soft landing” scenario is pretty much not happening. Also has a great anecdote about an auction sale in Virginia.
Send the link to Ben Jones, please (thehousingbubble@gmail.com).
Not sure where to post.. We’re looking for a few humble opinions and educated guesses. We are considering a transfer to Flagstaff from the valley. We are happily bubble watching from our rental in Gilbert and would do the same in Flag until this thing comes completely unraveled. We’ve lived in the east valley since the early 70s and feel that we’ve got a pretty good idea about how things are going to play out around here and about what we’re going to be able to get when we buy back in. Our concern (read fear) is that since we really don’t know much about the dynamics of Flagstaff’s market (where prices started, growth outlook, speculator activity, availability of building lots) we don’t really know where we can expect to end up. Ideally we’d like to buy a lot and build. Not a lot in the nicest neighborhood in town, but not a place where our closest neighbor is 1/2 mile away either. If anyone has any ideas on how much of a drop and the time frame for it might be expected on both existing older homes (no cookie cutters) and custom lots we would surely love to hear them. Thanks for your time and any input.
Snippet from the WSJ article:
This is unbelievable (ok, it is VERY believable…but I didn’t expect it so soon)
“Joan Guth is one homeowner who was taken by surprise. Last September, she put her stately five-bedroom home in Herndon, Va., on the market for about $1.1 million. She was confident she would get something near that price, and planned to use the proceeds to buy a retirement home in Florida. But her home in the Washington suburbs attracted few serious lookers, and in March, she cut her asking price to $899,900. Still there were no takers. Finally, on the advice of her broker, she called in an auction firm, beginning a process that would eventually reveal to her just how weak the Northern Virginia market had become.
Ms. Guth, whose home in Herndon, Va., had failed to attract a buyer after months on the market, eventually turned to Tranzon Fox, an auction firm based in Burke, Va. Ms. Guth had based her initial $1.1 million asking price on a 2005 appraisal of her home, which now appeared far off the mark. She and her family decided they would accept the highest bid of at least $675,000.
Kristin Eddy, a 35-year-old pediatric occupational therapist living in a town home in Reston, Va., had noticed Ms. Guth’s dark-green turreted home with its wraparound verandas while riding her bike along a nearby trail. “I’ve had my eye on that house for a long time — as a dream,” Ms. Eddy says. When it first went on the market, it was far beyond her price range. Then she noticed the sign announcing the auction.
On the morning of Aug. 5, the auctioneer, Stephen Karbelk, set up loudspeakers on Ms. Guth’s side lawn. Ms. Guth handed bottles of chilled water to the several dozen bidders and curious neighbors who showed up. “I have a whole stomach full of butterflies,” Ms. Guth said.
Ms. Eddy figured her chances of winning were near zero. When the auction began, it became clear that there were only two serious bidders. Although Mr. Karbelk tried to stir excitement, the bidding petered out within minutes. Ms. Eddy was the high bidder, at $475,000.
Looking stricken, Ms. Guth and one of her sons huddled with their broker for a few minutes. Then they told the auctioneer they wouldn’t accept the bid, which fell below the stipulated minimum that hadn’t been revealed to bidders. The auction was over.
Ms. Guth said she would move and leave the house empty until she could sell it at a reasonable price. Late that afternoon, Ms. Eddy raised her offer to $525,000. The Guths wavered for two days before agreeing to accept about $530,000. Ms. Eddy is getting a home with five bedrooms, four full bathrooms, a half-acre lot and a three-car garage for about what some people had been paying until recently for town houses in the area.”
Holy Crap!!
Full link:
http://online.wsj.com/article/SB115630090176442994.html?mod=home_whats_news_us
Well there you go…………so much for just the recent purchasers getting hurt.
Huh? Who was hurt here? Not winning the lottery is not the same as being hurt.
Ms. Eddy, your catching a falling knife. I hope you had lots of free bubble cash for that deal.
That is huge! I live in that area and that is amazing. No. Va. has a large number of houses like this. If this is the trend it is going to rip the financial guts right out of a lot of families. That wasn’t an auction it was a filleting.
stcamp
Obviously, this bubble is just beginning to pop, but it’s unravelling a lot more rapidly than I’d expected. When do you people think it will be time to buy? (Ben, maybe we could do a separate thread for this question)…
The Labor Day massacre is here! Listing price will drop like the dot.com crash of March, 2000. Fear turns into Panic
It’s always a good time to buy, haven’t you been paying attention? Seriously though we can’t tell yet. If all goes according to plan: -20% now, -7% per year for 3-4 years at least then pick your comfort point and dive in. Waiting for an additional 6mos-1yr may “save” you a few percent but you’ll have deprived yourself of 6mos-12yr enjoyment and tax benefits. IOW there’s little to gain by calling the absolute bottom. Kinda the reverse of getting out at the tippy top. The front of the roller coaster is already plummeting, the middle however cannot even see what’s coming and the back foolishly thinks the ride is still going up. Some people will suggest trite phrases like “when there’s blood in the streets.” I think I’ll wait until the blood starts drying.
The front of the roller coaster is already plummeting, the middle however cannot even see what’s coming and the back foolishly thinks the ride is still going up.
Great metaphor, I’m going to steal it.
Doesn’t everybody steal my stuff? Go ahead with my blessing.
For GS….
http://yahoo.reuters.com/news/articlehybrid.aspx?type=comktNews&storyID=2006-08-23T083040Z_01_N23306795_RTRIDST_0_ACCOUNTING-OPTIONS-KBHOME.XML
In Tampa, in the past year, we have sold off the majority of apartments that we bought after the last crash (early-mid 90’s). We were in them around $15-20K/unit, and they had decent cash flow for us.
Doctors from L.A. and other out-of-state “investors” have been buying them sight-unseen (literally, day of closing is first time they’ve seen them) for $60K/unit and then trying to condo convert them and sell them for $100K/unit. All in an area where you are lucky to get $650/mo rent.
Do the math, this will not end well! But we’re happy to take the Wacky Californians money and then buy everything back in a couple of years when they go belly up (just like last time!).