The Housing Bubble

here a sumary from the warning/desaster at hr block

http://immobilienblasen.blogspot.com/2006/08/hr-block-mbs-bad-loans.html

Toll Brothers April 18, 2005

But can this magical market really defy gravity much longer?

Shockingly, despite his paranoid questions and years of hardscrabble experience, Bob Toll’s answer to that question is a resounding yes. For Toll, what looks to many people like pure craziness is perfectly normal, a reflection of a new supply-and-demand equation that will last a long time. He’s an outspoken believer that, yes, the world really has changed this time. That the traditional boom-to-bust housing cycle is now a smooth upward climb. That housing prices will keep rocking practically, well, forever. “We’ll reach the point Europe reached 20 years ago, where families pay 45% of their income on housing and married couples have to live with their parents for years before they can afford houses,” he says. “Prices will keep going up in double digits for years.” (seht euch den chart an/look at the chart, das war das top/this was the top)

Toll Brothers Aug 23, 2006

“It would be difficult to characterize the position of home builders as other than in a hard landing,” says Robert Toll, chief executive of luxury home builder Toll Brothers Inc., which reported yesterday that net income fell 19% in the third quarter ended July 31.In his 40 years as a home builder, Mr. Toll says, he has never seen a slump unfold like the current one. “I’ve never seen a downturn in housing without a downturn in employment or… some macroeconomic nasty condition that took housing down along with other elements of the economy,” he says. “This time, you’ve got low unemployment, you’ve got job creation, you’ve got a stable stock market and relatively low interest rates.”

more on http://globaleconomicanalysis.blogspot.com/

some news from the uk. it seems they are different
at least that is what are the uk builders are telling

http://immobilienblasen.blogspot.com/2006/08/uk-uk-builder.html

Kramer on the Today show this morning. In his infinite wisdom:

Slowdown in housing? YES (but not to worry)
Slowdown in overall economy? NO

He says buy stocks in drug and grocery stores, as we still have to eat.

At least he said 1 thing that was true

I didn’t thhink it would start so soon. Some people are in complete denial until the sheriff shows up to ask them to move! WOW!

http://www.msnbc.msn.com/id/14506353/

Sad Very sad!

More MSM on the housing bubble from CNN Money:

http://money.cnn.com/2006/08/24/real_estate/pluggedin_tully.fortune/index.htm?cnn=yes

Dispelling four myths about the real estate bubble:
- As long as job growth is strong, prices can’t go down
- Builders won’t swamp the market with new houses
- Low interest rates will keep prices rising
- Land is scarce, forcing prices up.

Shawn Tully offers convincing (though not very elaborate) arguments to Joe Sixpack about why all these are wrong. We know all this, but it’s good to see yet another MSM writer getting on the bandwagon.

Doc

This is fun. Make up your own sign.

http://www.ronaldmchummer.com/airamerica.php

Here’s a post from a message board that deals with mortgages and credit:

“I started to feel so terriffied of the real estate market now, I purchased my house last May for $395,000, it was for sale for 430,000. Houses around me are not selling for 8+ months, prices of sales are going at least 30,000 down. What really terriffies me now is that I have 3 yr arm loan, Im just thinking when the three years passes and the market is still the same or worst what will I do then, I cannot afford to pay more in mortgage payment when the 3 yrs of financing are up and at the same time I cannot sell more than what I purchased the house for… I don’t have good feelings at all. When is the soonest time to try to refinance to a good rate that will equal to what I’m paying now. I have a two yrs old bk 7 and clean since, scores are all around low 700’s. Who could be my best option? Is anyone here in my situation??? what are you planning to do??”

Thread here. I get the feeling alot of people are gonna start feeling like this guy…

my husband and i were discussing the re bubble today and we realized that there’s no good name for the greedhead sellers who refuse to realize that the glory days are over and won’t cut prices. i think we need a good nickname for these goofballs. any suggestions? i have one- how about “baathist dead enders”

Arson Statistics: http://www.usfa.dhs.gov/statistics/arson/

Not much information, but something to keep an eye on for the next few years….

I need some assistance. I need to find all transaction records for a particular address in Pennsylvania from 2005 to present. If anyone has the means to assist me with this, please contact me at eemail_mee at yahoo. Thanks.

here is something on commercial real estate. looks to me that there is another bubble in the making

This year, about 47 million square feet of new office space is expected to be completed, up 30% from last year, according to Reis. Next year, office completions are projected to increase 37% to 65 million square feet, which signals strong demand for wallboard suppliers.

the whole story here.
http://www.thestreet.com/newsanalysis/homebuildersconstruction/10305737.html

to txchks : this is a free story from the street.com

2nd.try.
the only part that maybe will stay at the same level or maybe see an uptick will (maybe) the part of gouverment building (roads etc).
i think that the us gouverment will maybe in the face of a recession pump money into those projects to dampen the freefall regardless how red the budget will be.
as far as i can judge the us gouverment from germany i think this is a relativly safe bet.
but this will never offset the decline in the rest of the construction sektor.

our gouverment here has not done that. we have now our first upyear in construction since 15 years. orders are up 10%. the worst is over.

thta gives you a timeframe howlong it may take. because of the possible intervention from the gouverment the timeline definitly will be shorter. but at least 5 severe dwonyears are likely.

one example for overbuilding in europe/germany is our capitol berlin. after the wall came down there was a rush to build officespace (pushed by taxbreaks). since 15 years there are massive and i mean really massive problems there. a lot of empty space. that despite all the gouverment workers that came to berlin from the former capitol bonn. very very ugly.

http://www.immobilienblasen.blogspot.com/

Pig Men and Riskloves Worshipping at the Altar of Natural Disasters:

http://www.xanga.com/home.aspx?user=russwinter&nextdate=8%2f25%2f2006+23%3a59%3a59.999

LA Times has this:

Beverly Hills paving streets with Granite

So are these leftovers from all those granite counter top from failed flops? Or just one last sign of the housing bubble excess?

This may have already been posted early this month and I missed it but Florida second home owners who do not qualify for homestead exemption and owners of homes over $1m better get the lube ready by 2008 because a new state law excludes them from obtaining insurance from Citizens Property Insurance, Florida’s insurer of last resort.

Apologies if this is old news:

http://www.gulfbreezenews.com/news/2006/0803/Front_Page/001.html

PS: Flippers and FB’s better think twice before dabbling in homestead fraud in Florida:

http://www.srcpa.org/indexfraud.html

I MUST SELL THIS HOUSE!!!!! lets make a deal im open to ALMOST anything

http://boise.craigslist.org/rfs/198601697.html

This must suck- an investor with a Sacramento area code trying to unload his “investment” property in a dead market. Probably on the hook for some properties around Sacramento also.

so … are we officially past the denial stage?

KB Home Shares Fall As Stock-Option Review Emerges, Analyst Downgrades

NEW YORK (AP) — Shares of home builder KB Home traded lower on Wednesday after the company said it is reviewing previous stock option grants given to Chief Executive Bruce Karatz, and a JPMorgan analyst downgraded the stock.

aw naw.

An article about increasing rent prices with a quote from NAR about the rental market tightening up. It contains the usual “apartments converted to condos” scare tactic and concludes with:

“Of course, not everyone is convinced that renting, particularly at current prices, is the better alternative. For the $10,000 a month you shell out for a rental, you could buy a $1.5 million house, says Keller Williams Realty’s Leider.

“And you don’t even get the tax advantage,” he says.

The Most Expensive Rental Markets in America
http://biz.yahoo.com/special/re0912_06_article2.html

Here’s a Vegas rental listing that’s good for a laugh. Talk about name dropping.

http://lasvegas.craigslist.org/apa/198712186.html

The Economist Print Edition
Friday August 25th 2006
America’s house-price bubble
What’s that hissing sound?

Aug 24th 2006
From The Economist print edition
A slowing, perhaps even falling, housing market spells trouble for the American economy

IF YOU could watch just one indicator to gauge America’s economic prospects over the next few years you should pick house prices. A year ago most economists thought that average prices were unlikely to fall across the nation. Now many of them have begun to worry about the consequences of falling prices for America’s economy. Figures out this week from the National Association of Realtors show that average home prices barely rose over the past year, compared with annual growth of around 15% in mid-2005. In some parts of the country, prices are already falling (see article). Adjusted for inflation, the average home is worth less than it was a year ago.

The housing boom has been the main engine of America’s economic growth in recent years. Indeed, it is the main reason why the American economy held up better than expected after the stockmarket bubble burst at the start of the decade. Since 2000 the real wages of most American workers have barely budged, yet surging house prices have allowed consumers to keep spending. Over the past five years the total value of American homes has increased by more than $9 trillion, to $22 trillion. These gains helped to offset both the slide in share prices and feeble wage growth.

This is the biggest bubble in American history: in real terms home prices have risen at least three times as much as in any previous housing boom. In the past average nationwide house prices have experienced year-on-year declines for the odd, isolated month, but they have not fallen on a sustained basis since the 1930s. However, most states have seen prices drop at some time in the past three decades. Since the housing market is looking bubbly in more states than ever before, prices could simultaneously fall in enough places to give America its first nationwide price decline since the Great Depression.

On the surface America’s housing boom looks more modest than booms elsewhere. Since 1997 average prices have doubled, compared with a gain of almost 180% in Britain. But the economic consequences of a bust could be more severe, because the economy has become so addicted to rising prices.

The boom has lifted the economy in three ways: it has boosted residential construction; it has made people feel wealthier and so encouraged them to spend more; and it has allowed home-owners to use their property as a gigantic cash machine, taking out money by borrowing against their capital gains. Merrill Lynch estimates that the three together accounted for more than half of America’s total GDP growth last year. Counting construction, finance and estate agency, the housing boom has also been responsible for one-third of all jobs created since 2001. If house-price rises level off, GDP growth could dip below 2% in 2007. If prices fall, expect a steeper slowdown.
Ben to the rescue?

If house prices do slide, the Federal Reserve will probably slash interest rates so as to save the economy from recession. But the Fed’s ability to do this would be limited if inflationary pressures remain strong. And it would surely be wrong for the Fed to support the property market when a slowdown in spending is part of the rebalancing America needs to increase its saving rate. The Fed saw off a fall in spending at the start of this decade after share prices tumbled. To do the same again could damage the long-term health of the economy.

The tech bubble left behind a modern capital stock that continues to yield productivity gains. In contrast, the investment stimulated by a property boom does little to boost long-term growth. Expensive houses merely redistribute wealth to home-owners from non-home-owners. Worse still, the boom has diverted resources away from productive sectors and caused households to save less, exacerbating America’s economic imbalances. It is surely better for Americans to start saving in the old-fashioned way by spending less of their income rather than relying on rising asset prices. The party has been fun; but it has to end.

Everyone who does not take The Economist should at least open up a copy of the current (8/26-9/1) print edition and look at the NAR median sales price graph on p. 55, which shows how the YOY appreciation rate plummeted from the all time high of 17% last year to its current (nominal) level of 0% or so. The real YOY median is already falling, and if the trajectory of the YOY median change graph continues along its current path, the nominal median price will be falling quickly in a couple of months. The article which this graph accompanies is posted below.
————————————————————————————————-
House prices in America
Gimme shelter

Aug 24th 2006 | CHICAGO
From The Economist print edition
Now that the party is over, how bad will the hangover be?

AMERICA’S housing market has banged its head on the ceiling; now investors and homeowners alike are wondering how soon—and how hard—it will hit the floor. On August 23rd the latest figures showed that in July prices of previously owned homes rose at their slowest pace in more than 11 years. In the past 12 months they are still (just) up in nominal terms (see chart), but down in real terms. The number of units sold fell by 11.2% from a year earlier, and the stock of unsold homes reached its highest level since 1993. Markets were waiting for figures on prices of new homes, due out the following day. But the softness was enough to stoke the worries that have been mounting about how badly the end of America’s housing boom will hurt the rest of the economy.

Falling demand is already pounding the construction industry. Housing starts, seasonally adjusted, fell by 2.5% in July and were 13.3% lower than a year earlier. Building permits for privately owned houses were down by 20.8%, year on year. And although the number of homeowners applying to refinance their mortgages has risen over the past five weeks, the demand for loans to buy new homes has fallen by nearly a quarter in the past year. It is little wonder, then, that an index of housebuilders’ confidence has plunged by 56% since June 2005 to a 15-year low.

The slump has been especially harsh at the high end, because rich buyers were at the forefront of the housing boom over the past few years. Toll Brothers, the biggest builder of luxury homes, said this week that in the latest quarter its orders for new units were almost half those of the previous year. The slowdown is also a worry for home-improvement chains such as Home Depot and Lowe’s, as well as for other businesses that have benefited from the housing boom.

If most of the pain remains confined to those bits of the economy, America will probably emerge from the end of the housing boom in decent shape. What has spooked investors of late is the risk that slowing demand for homes will be severe enough to blast a wider hole in consumer demand.

The biggest worries involve the parts of America that have seen the frothiest price increases over the past few years. Those include cities in the south-west with fast-growing populations, such as Las Vegas, and places that attract lots of wealthy elderly people who want to retire. Over the past five years, house prices have more than doubled in California, Nevada, Hawaii and Florida, for example, but have increased by less than one-third in some parts of the south and the Great Plains, according to a house-price index kept by the federal government. In some places, such as Detroit and other hard-hit towns in the rust belt, prices are falling year on year.

That regional variation is comforting, because it suggests that parts of the country are in good shape. The trouble, says Ethan Harris, Lehman Brothers’ chief economist in America, is that, measured by value, the regions that have experienced frighteningly rapid house-price increases account for about one-third of the country’s residential property. So if prices were to fall sharply in those areas, it would take a bite out of Americans’ wealth.

How far might prices fall? Since house-price fundamentals depend so much on the wider economy, especially incomes and borrowing rates, opinions vary. Housing bears chiefly fret over two important measures. One ratio—house prices now equal 3.8 times median income—seems too high by historical standards. The other—rental income to house prices—seems too low to offer property owners a decent return, suggesting again that houses are badly overpriced.

Nearly everyone now expects prices to level off for a bit and slow the economy, but optimists find those valuation measures only modestly worrying. The high ratio of house prices to incomes is less alarming, they argue, because low mortgage rates have held down the real cost of owning those homes. That has not changed much, despite a rise in interest rates over the past couple of years. American homeowners remain exposed to a sharp rise in long-term interest rates—say, if foreign investors in American treasury bonds head for the exits—but otherwise are not obviously in trouble.

Also, although rents have failed to keep pace with the rising price of “equivalent” houses, that comparison partly reflects a failure to adjust for the growing quality of the homes Americans have been buying—these are increasingly being fitted with better creature comforts, such as marble countertops. As house prices peak, moreover, Americans seem now to be more willing to rent; so long as incomes keep growing, rising rents could raise the floor under the value of many houses.

Another argument of optimists is that house-price weakness in Britain and Australia, two other countries that worried bubble watchers, has proved much less damaging than many expected. Tim Bond, of Barclays Capital in London, points out that both countries’ economies performed so well after house prices peaked that their central banks found it necessary to raise interest rates again afterwards. Yet America has depended particularly heavily on buoyant house prices as a source of jobs and cash that can be extracted through equity withdrawals.

Even if prices do fall in some regions, forecasters do not yet think that will trigger a recession. But everyone on the housing ladder is hoping that the floor will not turn out to be a long way down.
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GOOD NIGHT AND GOOD LUCK!

GS

Are you saying that here in the OC, the “Spectrum” might one day get named the “Rectrum”?

From Mozo Maz (Go-o-o-o-o-al!!!):

OMG! OMG! Folks, you just have gotta see this! The N.A.R. admits the bubble has been going on for a year. This looks like a farce. It isn’t! They knew it all along.

http://paper-money.blogspot.com/2006/08/lereah-mea-culpa.html

Secrets, Lies, and Real Estate are revealed in this powerpoint presentation like you would never imagine!