Bits Bucket And Craigslist Finds For August 28, 2006
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
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summary on thr barrons cover story about the builders
Summary cover story:
Highlighted companies: Homebuilders’ ETF (XHB), Toll Brothers (TOL), WCI Communities (WCI), Home Depot (HD), Countrywide Financial (CFC), Centex (CTX), Pulte (PHM), Lennar (LEN), KB Home (KBH), Levitt (LEV), Bluegreen (BXG), Whirlpool (WHR), Cendant (CD), Realogy (H), Wyndham Worldwide (WYN), MDC Holdings (MDC), Hovnanian Enterprises (HOV), Lowe’s (LOW), Mohawk Industries (MHK), DR Horton (DHI)
Weak home sales, growing inventories, dwindling orders and falling prices have all contributed to a weakening housing market. Hardest struck have been the home builders, who are off as much as 65% from last summer’s highs. But with the investment community firmly entrenched in their bearish outlook, the time to consider catching some bargain-basement prices in housing stocks may be rapidly approaching. Various companies are analyzed in depth , considering factors such as book value (many home builders presently trade at or below book value) and price-to-earnings ratio (P/E) — home builders currently average about 6. While it’s possible the current lull is just the beginning of a full-out bust of the housing boom, similar to the tech-stock-bubble bust of the late 1990’s, bulls counter that such factors as relatively low interest rates, a still expanding economy, and positive demographic factors bode well for the sector.
Many top investors, while admitting they were too early in buying-in to the group, are sticking with the sector, sensing the bottom is near or “within squinting distance.” While conceding that “it may be early for housing-related stocks,” Bary concludes that with its attractive valuations, the housing market may bottom sooner than later, especially if signs of recovery begin to emerge or if the Fed starts cutting rates, and that these previously battered stocks could take a sharp upturn way before any corresponding growth in profits.
Quick comment:
This week’s Barron’s cover story take a clearly bullish stance on homebuilder stocks, the opposite of Marc Gerstein’s must-read argument that homebuilder stocks are a value trap, Lon Witter’s prediction in last week’s Barron’s that the broad market will fall 25%-30% as it becomes clear the housing market is in significant decline, and William Trent’s bearish summary of the housing market data. Clearfish Research, in contrast, takes a bullish perspective consistent with this Barron’s article, making the case for an easy landing, in which he points out that predictions of housing-market gyrations have historically been unreliable and the numbers behind the headlines continue to surprise the pessimists. As noted in the Barron’s article, Toll Brothers CEO Robert Toll argues that the market has illogically lumped together well-capitalized builders and weaker upstarts, providing opportunity for value investors to buy stocks of companies with solid track records at close-to-book-value prices. Note that famed contrarian investor Bill Miller has almost 4% of his portfolio in homebuilder stocks, namely Beazer Homes (BZH), Centex (CTX), Pulte Homes (PHM) and The Ryland Group (RYL). See Bill Miller’s entire portfolio as of June 30th, including the allocations to each of these stocks, and the excerpt from his letter to shareholders in which he discusses housing stocks. Seeking Alpha has an easy-to-bookmark section devoted to ongoing coverage of the housing market.
source
http://usmarket.seekingalpha.com/article/15981
This is what I kept trying to tell Stucco a few weeks back. People couldn’t resist trying to buy this dip in the HBs. I tried it myself and didn’t make enough money to even have bothered. I personally don’t think they’re “investible” at this point but certainly buying the panic and selling to these bottom fishers was a reasonable thesis.
You’ll know you can buy them when Fidelity dumps 15 million shares of all of them and everyone not only knows it but is frontrunning it.
2nd try.
the timing is impossible. (at least for me)
i am short all major builders since last summer.
since then there was every quarter a piece in barrons whre “value” investors like the homebuilder and try to push their positions. often to quarterend.
you really wonder when almost every builder has a junkrating from s&p or just a bbb- and often negative cashflow.
rationally these are not ratings that value investors are interesting in.
http://immobilienblasen.blogspot.com/2006/08/immobilienblasen-homebuilder-bonds.html
this is for a very small bump on this kind of coverstory from barrons.
i remember from much higher levels rallys at leat 5% plus x.
no real shortsquezze (so far)
Even if they are at the bottom, that dosent mean that they will be reaching their lofty heights any time soon. Unless you are doing some swing trading, you might get returns in a passbook account for the next few years, with lower risk.
They can’t be at the bottom. To many fools are unaware that housing is crashing, and others who are not fools are still hoping that fools will buy these newfangled value stocks. Only when Newsweek, Businessweek and Time are putting gloom-and-doom stories on their covers about how much money everyone who bought real estate lost (including investors in these stocks) will a bottom be reached.
“Too many”…
I am more in this camp.
Nouriel Roubini 8 Market Spings by Perma-bulls…
http://www.rgemonitor.com/blog/roubini/143257
great summary
Summery ???? Hell, that was a friggen thesis…..
Good info though…..
Me too longer term. But things always bounce around and that’s where I make my money.
OT: well i have bad news for the blog. i have given to my wifes desire to be a homeowner. i just couldnt resist her wanting to buy nw rather than later. short story, sold 2/1 house no garage in running springs ca last aug2005 for 225,000. i have been renting in kingman for a year and the prices have softened, but i wanted to wait till the builders felt the pain. so i have put a deposit on a new 3/2 /3 car garage. 80by 120 lot 192,500 price and i will put 20% down and 6.5% fixed for 30years. about 925.00 per month piti, plus about 150.00 for taxes and insurance for 1075.00 mo total. i am renting for 875.00 now and the rental is smaller house and yard. the house i am buying is simallar to mls# 125419 on prairie view in kingman but it has 3 car garage and is accross the street from that listing. nice hood and ccrs are strict. no homeowner fee. i will let you know when i move in. its framed now so about 60 more days till its built.
AZ, sounds like you got a decent deal, and with PITI payments not too much more than your rent (for improved quality, no less), you should be okay as long as you don’t have to sell.
Good luck, and enjoy your new home!
This is a lot different than a $600,000 shack in San Diego. You haven’t even figured in tax savings yet, so I do think you did fine. I am curious however - how do you have “strict ccrs” but no HOA fees? Will that continue?
the ccrs are writen into the deed. one of them is that if you build a shed or extra garage it has to match the house. stucco and matching shingles.i will make damm sure its fixed 30 yr. i am financing thru a local bank. all the local banks here are supplying the builders with construction money so they want thease homes sold.
I agree; sounds like you did okay. Your increase is only $200/month. If that kills you, you had much bigger problems anyways.
However, MAKE SURE AT CLOSING that they didn’t put you into an ARM, and if they did, SUE or WALK, or BOTH!!
hussman with report on the market
http://www.hussman.net/wmc/wmc060828.htm
great report on 2 housing storys from charles hugh smith
http://www.oftwominds.com/blog.html
JMF — great article — thanks for the link.
“Here we have two common threads: massive equity withdrawals which have either been spent or “invested” in risky real estate wheeling-and-dealing, and would-be landlords realizing that local rents cannot pay their carrying costs.”
This is just what some friends of ours did. They have a house in San Diego that they bought many years ago. (They moved to the Seattle area several years ago) Last year they put it on the market and when it did not sell they refinanced and took out as much equity as they could, which I believe was 300-400k, and used the equity to pay the bills they had run up while the husband was establishing a business and this past April the wife told me they were planning to invest in RE here with the remaining money. I told here about the RE bubble, but she said that her husband was also a RE agent (in addition to his Tax accounting business) and he knew all about the RE market. Now they have bought a run down 6 unit building at what we will probably later know as the top of the market here, plus they have their house in San Diego so they are poised to lose everything they gained and then some. Just last week the husband commented to us that they had paid 100K for college for their son and that was why they were invested in RE; because it is the only asset that appreciates enough to pay for the high college costs. I wanted to mention that in that case it was strange that no one used to think of doing that, all my life (I’m 48) until now I have never heard anyone say “I need to buy some RE so that we will have money to pay for our kid’s college expenses,” but I knew it would’t do any good now since they have already bought so my husband and I just didn’t say a word in reply and the conversation moved on to other subjects.
The whole paying for college with the house thing is very common now … ick.
My father did the same thing - for three kids - in the mid-to-late 80s. Nothing new. In fact, if anything justifies using home equity it’s a college education. Not a fancy car, plasma t.v. or trip to Hawaii.
Tho’ for it to be your SOLE purpose of buying RE, well that’s just plain asinine. My dad used his existing home - bought in `78 . . . still lives in - to put us thru school.
I guess you’re right - education IS the best investment.
“My father did the same thing - for three kids - in the mid-to-late 80s”
Your father did it during the last RE boom. It doesn’t work except during RE booms. This is another sign that it is a boom and not normal.
How do you figure it only works during a boom? He was 10 years into the mortgage. We didn’t go Ivy league - it was state schools or nothing.
this is for sure the quote of the day
“I need to buy some RE so that we will have money to pay for our kid’s college expenses,”
scary.
Good thing there are some very nice community colleges in Seattle.
No. You needed to sell some RE last summer so you have money for your kids education. Worked for me!
My understanding is that small apartment buildings in Seattle have been below value since the dot-com bust because rents went down and haven’t quite recovered yet. Also many landlords were hitting that age when they wanted to sell. Many of these buildings need work, so they could not easily be turned into condos without a large investment.
This is in Everett. I don’t think there is anything at all that is not at least 30% overpriced around here right now.
Topic suggestion: “What did you do in the housing bubble?”
1) When did you (readers of this blog) realize that a housing bubble was developing?
2) What made you think this was happening?
3) What did you actually do because of this belief?
4) In retrospect, are you pleased with your actions (or inactions?)
I am ultra-sensitive to signs of bubble activity since I literally spent 60 hours a week for 3 years working on bankruptcies and FDIC/RTC work in the early 90s and 1989. I saw activity beginning in Dallas in 1998 which of course was the same year that home equity lending began in Texas. Allowing that into the state sealed the deal for me that I could not buy in that market since I value freedom (ability to leave at will without a ball & chain to sell) above everything else. If that idiot in Virginia who keeps trying to jerk my chain thinks I made some idiot rich by paying his mortgage, I’d suggest that she relax in the safety of her own delusions. Every place I have rented was cash flow negative to the owner and was offered to me under the market price as a buy.
“I am ultra-sensitive to signs of bubble activity”
Me too. I spent most of the 80’s doing what I called “crisis management in conjuction with disposition” after the 77-81 boom. Also owned real estate that was flat for 15 years. Hell, I thought we were in a bubble in 1998-99. It was only after my girlfriend told me that the townhouse she bought in 2003 at $220K had a comp sale in late 2005 at $365K. I thought she overpaid at the time, and still think she should bail out before it drops back to $170K. To say the least, I found this rapid run-up alarming, hence my “crazy” shift to hard assets in anticipation of a global systemic financial breakdown.
1) I thought that housing took off in the late 1990s and thought that it was a bubble back then. We were looking to buy a bigger place but just waited for prices to come down. And waited and waited and waited. The kind of sites that I visit like CapitalStool.com had the bubble pegged in early 2005 I think. Or maybe a little earlier. The guy that runs is used to be in real estate and he sold his house some time ago to rent.
3) What did I do? Nothing. Made some money shorting a few homebuilders.
4) Yes. I didn’t buy something really expensive but just kept our current place that we bought in the 1980s.
1) Late 2003 (in Portland, OR and Austin, TX)
2) The comps around a house I’d struggled to sell (in Orenco Station) 7 months earlier, started taking off to even higher levels. I moved back to Austin, TX (moved to Oregon in Jan 2001), and saw: a) local high-tech economy struggling, b) house prices had jumped an unreasonable amount, c) realtor friends talking about out-of-state investors
3) Continued renting and stashing cash to buy after the coming bust.
4) Looking better every day.
i realized that there was a housing bubble when there were layoffs in our area (western suburbs of boston ma) and housing prices continued to go up. why, in an area with fewer jobs and a declining aging population would housing go up? because…it’s a bubble? i also had colloquial data which wanged the nail over the crumpet for me. certain individuals personally known to me to be morons believed implicitly that the shabby broken down ratholes last updated in 1974 that they were living in were suddenly worth 450k and that prices were going to keep going up oh say 20% a year. my response to all this has been to do nothing and keep renting.i have 280k in a 401k and 125k in a brokerage fund and essentially i rent for free.
“i also had colloquial data which wanged the nail over the crumpet for me.”
I’ve never heard this expression before, can you tell me what it means?
it’s a british saying which means that there can be now be no possible doubt about a certain situation.
To Ozarkian:
In 2003 I realized this was a real estate bubble and houses were overvalued. Combined with Harry Dent’s (Roaring 2000s) assertion that baby boomers in 2012 will dump real estate and stocks, I became averse to real estate. At least you can dollar cost average in stocks and have trailing stops.
What made me think this was happening? As time went on from 2003 I noticed the incomes were stagnant while RE prices skyrocketed - all over. New jobs created were mostly in Real Estate while former high paying jobs continue to be outsourced to India.
What did I do? I became more conservative in my investing: In stocks I tend to value stocks with good dividends and I like to buy just when they are coming up off their 52 week lows. I buy T-bills, I buy into Vanguard Prime Reserve Money Market fund and I buy Arizona municipal bonds (in a mutual fund). I also buy Series I savings bonds, gold, and platinum.
In retrospect, I could not be happier with my portfolio, compared to the portfolio I had in 1999. I think we are in for a heap of trouble economically. We may have to go back to agrarian lifestyles. I’m seriously considering looking for 5 to 10 acres where there is plenty of natural rainfall (northern California?) or a good water supply from wells. I also read http://www.theoildrum.com - many people here are intelligent and recognize the false economy of RE and saw through the hype. But the bottom line is oil is finite. It’s a rougher world these days with more nations competing for the same amount of resources. Even if explorers discover 4 times the size of North Sea oil fields, demand will outstrip what that supply will offer. Matt Simmons says that there are plenty of unexplored areas in the world where oil may be found. But it takes quite a lot of investment to exploit those areas. “Twilight in the Desert.”
We are 1 hour north of Seattle. I was expecting housing to take a drop when we bought our home in 2001, but we payed cash for it so we were willing to take a loss. In 2003 when ARMS were on the rise in a low interest invironment I knew things were crazy because we had an ARM in 1984 when the interest was over 12% even with an ARM and rates were dropping so buying at such low rates could only mean trouble ahead. We sold our home this year in March for other reasons, we planned to only live in it for about 5 years when we bought it, and we are renting now because even though we have enough money to buy another house with cash, we just don’t want to pay the current rediculous prices when we can rent for less and the prices look much more precarious than when we bought in 2001.
We don’t do too much in real estate investment anymore. As I have posted here before, in 2004 we had sold my husband’s condo which he had inherited from his father ( for cash — but it was down $ 20,000 from the so-called appraised valuation done in 2003 ), and we had 3 properties left. One was my house — it was in very nice shape, but in a declining neighborhood. We sold it and bought a timeshare at Disney World. Maybe not what everyone would do, but it means a lot of vacations for us. We are using it for the 2nd time this Chrismas season. The other 2 pieces of r.e. are a paid-off rental house which generates excellent income for us, so we are keeping it, and the house we currently live in. It is surrounded by 3 houses in foreclosure in a nice neighborhood. My husband has had it for 5 years. Would we buy it today ? Probably not. But, the mortgage is reasonable, and we plan to have it paid off in 6 more years. Fait accompli - we need to live somewhere….but we are conservative financially and have a great deal of cash/hard assets, much to the consternation of our financial advisor. Taking some of our own advice, there….
1) I first noticed that something was up in the middle of 2003 when me and my wife lived in Fairfax, VA.
2) I’m a bit younger than most people here (I think) and I really had no experience with housing, so I can’t claim it was my excellant knowledge of finance or anything. It was more like an instinctual b.s. detector going off when I would talk to realtors.
I wanted to use owning as a path to increasing my wealth, since a lot of my money parted ways with me every month for rent. I understood fairfax was just expensive and was used to living in poorer neighborhoods so I figured that’s where I could save. The most glaring warning went off when I realized there were no cheaper neighborhoods. At first I thought everyone made craploads more money than me. In Fairfax proper, that was pretty much the case. But, for the area I had an above average income. This led me down a path of research that eventually brought me here to all the wonderful and intelligent people on this blog.
3) To remedy the situation (I’ve always been a saver, and I don’t like to see my bank account empty each month) me and my wife stepped up our job searches in our home town of Pittsburgh. We moved back and bought an older home for about $28K and have proceeded to fix it up. BTW: Fixing up a house that’s 100 years old is a nice cure for any romanticizing of housing. It’s all just sticks and bricks. Very, very dirty sticks and bricks.
4) We’re happier now than ever. We’re back to being near our families, we can save almost all of our income. I feel like I found my way out of a maze where almost everyone else my age (26) seems stuck, never being able to save anything because they’re either giving up all their dough to a landlord or the bank.
My answers:
1 & 2) I realized it was happening when the value of our townhouse doubled in 3 years. I was sure when it tripled in another 2 years. The final clincher was two people at work earning in the $30-40k range each bought condos or townhouses to rent out. That was my ’shoe-shine boy’ moment.
3) Sold in May, 2005.
4) Vastly relieved is a better description. Since my husband’s a construction worker, we really dodged a bullet.
Well, I guess I should answer my own question!
p.s. there are more answers by others below…
1) When did you (readers of this blog) realize that a housing bubble was developing?
Like others on this blog who live(d) in Silicon Valley, I couldn’t believe housing prices went up after the stock market crash. It didn’t make sense. I “lost” a lot of money in the tech crash and I started worrying then that housing prices would also crash. I owned a house in Saratoga, CA and had responsibility for another in Menifee, CA. I started following the market by going to local open houses.
2) What made you think this was happening?
I’d been thru the previous real estate bust (1990s) and thru sheer luck did OK. But I knew that bad things could happen in RE. And when the value of houses just didn’t make any sense given what you got for the money. Plus a LOT of people were out of work.
3) What did you actually do because of this belief?
When the prices became clearly ridiculous in early 2005 I decided to sell. I had to wait a bit for unrelated reasons but put the house on the market in Sept. ‘05 (after 15K in cosmetic improvements, it had already been remodeled). It sold it 2 weeks, closed in Oct. ‘05. I also put the Menifee house on the market in Dec. ‘05 and fixed it up too, along with paying for closing costs. It sold in May ‘06 (whew, that was close). I had several friends who also sold in 2003-2005 but most of my friends and colleagues thought I was crazy. Other family members also sold (in S. Ca) in 2004.
4) In retrospect, are you pleased with your actions (or inactions?)
Very. I had been unwisely overinvested in high tech previously and am glad I didn’t make a similar mistake. My only regret is that I am so house buying shy that I passed up an opportunity to buy an nice little inexpensive house here in the Ozarks.
1. I realized the bubble existed probably late last year but was questioning things well before that.
2. Two things made me aware of it:
-reading about I/O mortgages and thinking that anyone who took on something like that was crazy or stupid.
-housing prices here in the DC area reached a level that only the truly wealthy could afford to buy a regular suburban tract house without using ‘creative’ financing. I simply asked myself “who in the hell is buying these houses?”.
3. Haven’t done anything, as a mountain of student loan debt has left my wife and I out of the game despite relatively high incomes. Thankfully, our financial picture is rapidly improving, and we should be ready to enter the market in really good shape right about the time things bottom out in another 3-5 years. I’m not looking to buy as an investment, just a decent roof over my head.
4. I didn’t really have any choice in the matter during the bubble, but actually I’m kinda glad I was in financial straits during the last five years or so, because I used to have the same emotional wish for home ownership as most folks, which is what I think convinced a lot of otherwise sane folks to get into toxic mortgages. Being unable to get into things ultimately may have saved my ass over the long run.
1) I knew it was a bubble in 2002. My house was rising in value faster than the mortgage payments themselves!
2) At the time, I thought it was psychological. The stock market bubble had been taken away, but people still needed to feel like there was an easy way to get rich. The liquidity argument hadn’t sunk in, yet.
3) Sold and moved to NC, where I bought another home and two rentals.
4) Even in 2002, I was telling relatives that I know most people are more irrational than me– and the market might go up “another year”. But I was tired of CA. I don’t have any regrets. I have a more stable job, and NC is a more stable market to hold the wealth I saved up over my life.
Both nonconforming loans and foreclosures were already way up in the second quarter. Clearly these problems for lenders are accelerating. During the past two weeks, lenders have taken big hits. My best lender put positions have been Accredited lending (LEND), Corus Bank (CORS), Country Wide Financial (CFC), and Fremont mortgage (FMT). I am looking to buy puts on IndyMac (NDE). These are all banks or mortgage Reits focusing on subprime lending, with one exception. The exception is CORS, which specialized in lending to condo developers. Sept LEND was the best position. It gapped down two weeks ago, moving the Sept 45 put (bought in June) from -25% to +250%. I sold half at a 300% profit and am holding half at 370% profit.
I am now buying Jan –Mar 07 at the money or slightly in the money puts on lenders. I am also buying leap puts on larger banks. That (LEAPS) might be a better strategy for the likes of Washington Mutual (WM), FMN and NYB, for example . I think that the 4-10 month time frame represents a good risk to leverage tradeoff for most of the subprime lenders. The hit to H&R Block due to its Option ONE division reverberated through the whole banking and lending sector on Friday. Keep an eye on lenders this morning.
Bill , thanks for your insights. Nice to see someone with similar thinking and postitions. CFC LEND , shorts have been good to me. As has BHS, SPF. Looking at more lenders now. Elsewhere was suckered out of COF short at 81 last month for loss as it entered the gap from earlier in the month. So may be leaps will be less emotional play. Keep us posted on your ideas. Thanks.
I shorted LEND at $51 and $55. Covered 1/2 at $34. Niiiiice…
You should wait a few more weeks IMO. I think there’s going to be a short squeeze thru possibly the 1st - 2nd week of Sept. That’s why I still have puts to buy.
Radio, TV and web are bombarding us with refi adds for getting into fixed rates. Is this going to create an temporary earnings bounce for these guys? Fees, maybe higher spreads….thoughts?
Yes, I am concerning about an early Sept bounce, which I would regard as a great shorting/put buying opportunity. On the other hand, the lenders are in strong downtrend and the charts look good. I am looking at IndyMac in part because of low short interest and low Put/call ratio.
I have sold most of my Sept WCI and CORS for good profits But I am still holding 40 CORS Sept 25 and 30 puts with the stock around 20), because near expiration makes me nervous. I try to sell on days when the stock is down and the puts are up, like on Friday, when CORS was down 5%.
My positions are usually long enough that I don’t feel too bad and certainly don’t sell when the position goes again me. The main frustration about buying puts before a bounce is not having much money to buy more puts after a bounce. At least that has been the scenario since last April. My take is that the housing collapse is accellerating and the Home related stocks are always basing their projections of stabilization of the current conditions. I am looking at the second derivative over the last few months, not a horizontal line drawn from the most recent data. Who knows what happens in the next two weeks? However, I am also a fan of the idea that the whole market might take a big hit during the Sept/Oct bearish season. I have some SPX puts, but I also figure that a general sell off will be lead by housing related and retail stocks.
WAMU had an ad for 5.85%apy for a 13 month CD, for amounts over only a $1,000.00 today. I am headed down unless anybody thinks otherwise?
Desmo
I saw the same thing at a Simi Valley Branch. I now rent in East Ventura. I think this is a “no brainer” and going to flip a 50K cd into it in Sept if it is still around.
I sold out last year and this is some of my “buy back-into money” I am alread commited in other CD’s but wish I could get the whole lot into this……. the maturity is good too… plenty of time to “pick and choose” in Oct. of 07′. By that time the slaughter will be on in ernest. At that time I would roll into a money market and buy my last house and close my eyes to this RE bull for the rest of my life.
This week’s Desperate Real Estate Bagholder Index:
http://louminatti.blogspot.com/2006/08/desperate-real-estate-bagholder-index_28.html
Craigslist in Dallas is weird today. Suddenly it seems that all the New Jersey bagholders think they can hawk their crap to people in Dallas. There are about 20 of them in a row in the RE for sale section.
Weehawken. 400K. You’ve got to be kidding. My sister was born in Weehawken. It’s a toxic waste dump!
Weehawken. Local joke is - It’s the next Hoboken!!!(and always will be).
Tax bills should be out soon !
My brother owns a piece of land south of Sarasota, FL. His tax bill was the same for the past 10 years. This year it is up 400% (not a typo; it has quadrupled). Maybe not typical, but signifies a trend.
Tax bills in Florida came out at the end of the week. After the shock wears off a bit, there will be uproar all over the state. Many speculators didn’t bother to consider what the taxes might be, particularly out-of-staters who thought that Florida was a low-tax state. Sure we have tourist tax revenue and no income tax, but we don’t have a lot of income to tax, either. As in the rest of the country, most taxing districts spent their “windfall” (”There was a lot more money in the strongbox on that stagecoach than we thought, Billy!”). Those that spent it on recurring costs (more employees, buildings to maintain, etc.) are the worst off and their subjects will be the most pissed off. For Florida, this might trigger a “Labor Day Massacre” interpretation in the media, about the wisdom of owning such over-priced real estate.
Prop 13 except bigger. There’s nothing like the stupidest person on the block setting the taxes for the rest of the us.
Amen, Robert!
400% is a typo if it quadrupled. It should be 300%.
400% of last year, 300% more than last year. Pretty much the difference between falling off a cliff at either 400 feet or 300 feet. This is exactly what caused Prop 13 in California.
Fed says: Housing boom not our fault
http://tinyurl.com/zagp6
Summary: A fed study says the housing boom was driven by technology-driven wealth creation, not fed policy.
Thought you’d all like to know.
Did the blame game start already? (outside of this blog)
This seems like a preemptive deflection of blame. Maybe guilty conscience?
here is something new from “enron style acounting on medicare” from barrons
http://immobilienblasen.blogspot.com/2006/08/creative-enron-acounting-medicare.html
ot but here is a great piece on the health of the broader us stock market from barry ritholtz
with more than 3,700 companies reporting
the growth in the first quarter was much broader than in the second, when energy and financials ruled the roost. Energy companies have recorded 50% growth in net income, while financials grew by 19%. Exclude those two groups, and net income is down 1.1%, in part due to significant dropoffs in basic materials (down 12%), consumer goods (off 11%), health care (37% lower) and technology ( down 4%), and a 13% decline in telecommunications.
http://bigpicture.typepad.com/comments/2006/08/about_those_ear.html
not very balanced
1) When did you (readers of this blog) realize that a housing bubble was developing?
Around 2000. I thought 9/11 would stop it before it got out of hand, at least in NYC. Wrong.
2) What made you think this was happening?
Housing prices getting out of line with income, as it had back in the late 1980s. It was deja vu all over again.
3) What did you actually do because of this belief?
I already own. I started warning people they might not make much on their homes. Then started warning people they might lose, and might not want to buy unless they plan to stay a long time. By 2004 I was begging friends and family members not to buy anything.
4) In retrospect, are you pleased with your actions (or inactions?)
Yes and no. I was generally ignored, and because the bubble went on so much longer than I might have expected, I looked like an idiot. But if I hadn’t said anything and friends lost money, I would have felt worse.
1) June 2001 (in Australia).
2) I took a 2-month holiday (US/Canada/UK), and when I got back I was blinking in disbelief at the prices in the local paper’s RE supplement.
3) Sold in mid 2004. I now rent.
Talked mother into selling a UK house she inherited in late 2004.
4) I am pleased mum isn’t trying to be a landlady in her late 70’s with a property on the other side of the world. I am relaxed about my own decision, mainly because it gives me flexibility when my current job ceases (which will definitely happen in late 2010 if not sooner).
1. Around 2000.
2. Visited a friend in California and heard about ridiculous prices and increases.
3. Refinanced my mortgage at 2 points lower than it was and to a 15-year. Started doubling up on payments. Started reading housing bubble blogs.
4. Yes and no. I almost own my house now, but I am addicted to housing bubble blogs.
2003, but in retrospect, 2002.
In summer 2003 I was shocked out how much the townhouse (in NoVa) down the street sold for (I had bought summer 2002).
But in retrospect, I guess it was 2002. In between signing my contract in December and looking for a place in May, prices had increased so much that I was no longer able to afford a place within a few miles of work, and was forced to buy a place 15 miles away.
However, I’m waffling on 2002. At the time, rents were the same price as my mortgage. In addition, historically (http://tinyurl.com/mld22) NoVa/DC had been flat for 10 years, and home were actually undervalued (compared to the long-term trend) in 2000, with prices only starting to increase in 2001. So, in retrospect, in 2002 I might have been caught out by the return to normalcy.
1) When did you (readers of this blog) realize that a housing bubble was developing?
I thought we were at the natural peak of the housing cycle in 2001. Convinced we were in a bubble by 2003 (San Diego).
2) What made you think this was happening?
Housing prices in our very modest neighborhood doubling in a few years, and then the prices accelerated even more!
Our local 21 year-old waitress and her 21 year-old **boyfriend** who was also a waiter bought a $400K house.
EVERYBODY I knew was buying. Even people who were unable to get checking accounts because they kept bouncing checks.
3) What did you actually do because of this belief?
Sold our house in mid-2004 and shorted homebuilders in early 2005 (too early, but bought leaps, so okay), and bought more puts in summer 2005 on HBs, lenders and retailers (still buying puts in certain sectors).
4) In retrospect, are you pleased with your actions (or inactions?)
VERY pleased. And so glad to have found this blog in spring 2005 to help me realize I wasn’t alone in thinking housing prices (and EZ credit) didn’t make any sense.
1&2) had an inkling in 2002 when the neighbors sold for a lot more than the most recent comp. New for sure in 2004 when another similar home sold for 50% more than the neighbors.
3) Sold and are renting. We sold for a lot of reasons (crappy construction, schools, location vs. jobs). Bubble was in the middle of the list. We did not buy because the prices were simply insane.
4) Very happy, and will continue to rent. I got a $50 Home Depot gift card for XMas ‘05. As a home owner, it would have been spent in a day. As a renter, I still have a few dollars on it.
1) I thought it was a bubble in early 2002.
2) Bay Area prices had stayed flat instead of imploding amidst 10-20% job losses and a declining population. Once prices started rising again later in 2002, I got really scared.
3) I started full-tilt saving and investing. I also started trying to find every source for statistical data on the housing market and economy so that I could understand how far from fundamentals we were getting. I also read everything I could about the Great Depression.
4) On paper, I could have a lot of equity gains, and if I had sold in late 2004, when I thought the peak was at hand, I probably would have gained another 40% over where my other investment strategy has put me. I would have missed out on another 15% of growth. I certainly didn’t lose money, so I’m happy with what I chose.
1) 2001, but bought a week before 9/11 anyway since I was getting married and probably starting a family soon.
2) Remembered late 80s/early 90s real estate bubble - prices fell in Sacramento too and there wasn’t an aerospace cutback there. In addition, I was in Japan when their bubble popped. Couldn’t believe RE kept going up so fast and so long after the dot.com bubble.
3) Sold in July, so I got out at probably the top in Irvine.
4) Have to wait a year or two to confirm selling and renting was the right decision. With each passing day, I think it was.
Just read a story on Bankrate about a guy who has two kids and can’t seem to save a dime. While I’m sympathetic, he wasn’t told how people in other parts of the world not only cope with miserable incomes, but sometimes prosper in spite of them. Go to the boonies in Asia — to many of those people, “eating meat” means one to four ounces of chicken once a week — the big treat. The rest of the time, it is rice and fruit. Rice is dirt-cheap eating; add some chicken broth and you’ve got a decent meal that probably is healthier than Ramen noodles if you don’t risnce it too much.
I suspect we are entering a period when people will wail about their relative “poverty.” But not one of them will be able to say they did not buy a meal at an eatery in the last month. A 5-7 year old Grand Marquis not only gets better gas mileage than most people would assume, it most likely was driven gently by an older person and would be a pretty reliable car relative to its used-car price. My wife knows how to cut my hair; women aren’t going to hit on me over it, but it works. Clothes at Target are pretty inexpensive, particularly when on sale; ditto the Burlington Coat Factory if you’re a Yankee. Cable is not a necessity of life. Nor is a cell phone — nervous-Jervis types can buy the cheap pre-paid type for emergencies. There are countless ways to cut back when a person really needs to — or OUGHT to. All that is lacking, most of the time, is realism and self-discipline.
I love your post. I’m thinking ALOT about how we live in America, how our sense of entitlement has upset the definition (held by our grandparents) of success in America. Success used to mean security, a way to provide for your family and to share with others, the idea that you made something good of your life. Now, it’s flash, trash, big tits, and Paris Hilton.
I agree with you totally.
The big unknown is whether this current population of Americans can really downsize, hunker down and revise their notion of success.
They may not have a choice in the matter.
From Todays
Christian Science Monitor
“…The United States is the world’s only military superpower and has the globe’s largest economy. Yet, by some measures, the US is a second-rate industrial nation - at best.
“Compared to other advanced economies, our market-driven model yields highly varied results regarding the living standards of our citizens,” notes a study by the Economic Policy Institute (EPI), a nonpartisan think tank in Washington….
In terms of the percent of its population living at or below the poverty line, for instance, the US ranks worst among 16 wealthy countries, according to the Luxembourg Income Study…
he usual comeback to such comparisons is that the US has a marvelous job-creation economy. But the EPI study find this claim “exaggerated.” US job growth since 2000 has been “lackluster” and “far worse” than several other well-to-do nations belonging to the Organization for Economic Cooperation and Development.”
http://tinyurl.com/ndccf
One of the reasons for the Asian Tiger is that there was no previous infrastructure. Every factory, building, machine shop is less than 20 years old as opposed to the US where we are dealing with aged facilities that have outlived their usefulness. There is no economic reason to build new in the US because the ROI is not sufficient.
Any reports in the heartland on the “FB next door” index? Maybe not as dramatic as 16 “For Sale” signs on a single corner, but there if you’re paying attention.
For me:
1) Next door neighbors about to “celebrate” one year of addition construction stalled - that blue sheeting stuff that protects wood from the weather has been up on their unfinished back-of-house “bump out” since 9/05.
2) We got a visit from the municipal ordinance police - mea culpa. Between wet weekends and bad planning, our lawn got a bit shaggy, for the first time since renting it 3 years ago. The officer was very friendly and somewhat apologetic - don’t even think we’d gotten to the point of code violation, so much as one or all of three homes for sale within rock throwing distance are pushing the panic button on the slightest affront to their “staging”.
3. We’re in the good area with the vaunted schools, town is hemmed in with “no place to grow”…but construction of subdivisions started last year in remaining non-greenbelt area by river (read “flood plain”) has slowed, and I think possibly stalled. $650K “and up” for a big ugly box on landscraped zero-lots, across from mature, leafy subdivisions with smaller (2K to 3K square feet) homes with generous yards in the $250 - $450K range.
TxChick, 13 in AZ
http://www.greenhomesforsale.com
Wow! Love these two.
http://www.greenhomesforsale.com/listing.php?id=17943&PHPSESSID=1db5994d6ce3bc703c014b7337e4bd57
and the red one in Tucson. I may actually go take a look at that. Both are ridiculously overpriced but worth keeping an eye on. I wish that NM property was just a little bigger.
Check this out. Also waaaay OP, but worth watching.
http://tinyurl.com/zgbp5
I’ll say. What a complete joke of a price. I say $275 tops for that place. Boy we still have a long way to go…
Fred — what is an R-42 bib roof? Is it a type of false roof with venilation for the sandwiched area?
Some of those houses look like they’d cost a zillion dollars. Like the one with 3,200 acres.
ARCH BIB ROOF
A roof used primarily in industrial buildings, and having the shape of an arch or crescent. It is supported by a bow-string truss which spreads the roof load evenly.
If you’re interested in these things, do some research on vacuum glazing. I’ve been watching the technology for some time anticipating design and build of a highly energy efficient house.
Thanks. Definitely wouldn’t have stumbled onto that term without a lead.
The house you’re looking at is probably this: Blown-In-Blanket insulation, instead of typical batt fiberglass insulation.
Yeah, Lee Adler (the Capitalstool guy) unloaded his home mid-2005 IIRC. In his subscription service he’s been tracking various mortgage indexes and interest rates, and it’s not a happy picture for the housing bubble.
1) When did you (readers of this blog) realize that a housing bubble was developing?
When the checkout clerk at the grocery store told me she was buying property to flip.
2) What made you think this was happening?
I was able to check local MLS and watch specifically the nonsense that was going on.
3) What did you actually do because of this belief?
Sold home, moved into space above our business, hunkering down.
4) In retrospect, are you pleased with your actions (or inactions?)
Yes, although I’d keep my yap shut because no one has appreciated my views about their property investments.
1) I thought a housing bubble developing in 2000 when everyone started talking about property values in the Bay area, and I already thought they were insanely high. Then, I did a calculation of a $400,000 loan and concluded the payments were unmanageable. Guess I was wrong then.
2) - see above -everyone asking me when I would buy, and I didn’t. They thought I was nuts.
3) - did not buy in Bay area. Was offered a friend’s home in San Mateo in 2002 for $680K. Probably could have sold for over a million in 2005. Hindsight better than foresight.
4) - Got the hell out the nutty Bay area and went to a quieter laid back more affordable place. ABQ - quality of life is higher. WIfe/children happy where they are. Have money saved, got out of a horrible job, and developing anew. We’ll see now.
Nice topic thought
1) When did you (readers of this blog) realize that a housing bubble was developing?
I have family in the Atlanta area, and when I went down to visit in ‘04/’05 and saw multiple signs at every corner pointing to “NEW HOMES FROM THE LOW 700′S!”, I about passed out. Then a family friend down there told us about interest-only loans, and I thought, “Wow, stupidest idea ever!”
2) What made you think this was happening?
See #1. Also, Atlanta-area infill housing–giant houses stuffed onto teensy lots only feet away from major roads with 45 MPH speed limits selling for 800K. Also went to Vancouver in 2004 and 2005 and couldn’t believe how quickly housing prices were rising there.
3) What did you actually do because of this belief?
I started reading the VHB and scuttled my daydreams about moving to Vancouver realllly quick. I bought a small older house in 2001 (in retrospect, I think I did overpay 3-5% for what I got, but oh well, live and learn) and am paying down the mortgage and building up my savings each and every month. I hope to have the house fully paid off in another ten years.
4) In retrospect, are you pleased with your actions (or inactions?)
Yes. I think I will be able to ride out a recession in decent shape.
AARRRRGGGH! Morning call just did piece on home sales rebound based on number of hits on “Hitwise” and the number of hits on ‘homes for sale’.That’s a pretty big jump to conclusion but time will tell.
I saw that, what a load! Probably just a bunch of FBs checking out the competition. LOL
Existing-home sales for August will be released September 25. The next Pending Home Sales Index will be on September 1 and the forecast will be revised September 7.
These numbers should really put the nail on the coffin…what will be the MSM headlines when this number is released. Stay tuned.
1The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns.
Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings. This differs from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which generally account for 85 percent of total home sales, are based on a much larger sample – nearly 40 percent of multiple listing service data each month – and typically are not subject to large prior-month revisions.
2The only valid comparisons for median prices are with the same period a year earlier due to the seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns.
Inventory numbers, gleaned from realtor.com, Single Family Houses, select California cities:
Altadena (LA Area, next to Pasadena):
3/4: 97
8/28: 189
94% increase in inventory
Arroyo Grande (Cali central coast):
3/4: 173
8/28: 274
58% increase in inventory
Pismo Beach (Cali central coast):
3/4: 290
8/28: 437
50% increase in inventory
Apple Valley (Cali high desert):
3/4: 796
8/28: 1552
94% increase in inventory
Joshua Tree (Cali high desert):
3/4: 183
8/28: 276
50% increase in inventory
It will be interesting to see what happens as we go into fall and winter…if the inventory stays stable or goes up only a little, then it could mean that sellers are taking their houses off the market, waiting for next spring (when they hope the market will bounce back). If the numbers keep climbing, it either means that (some) people have given up hope of a spring bounce, or that more and more people are being forced to sell (loan readjustments?)
1&2) Recognized bubble in late 2003- early 2004 when every bankrupt debtor started filing motions to sell their houses to pay off their Chapter 13 plans. Many of them got money back, too, going from bankrupt to having some cash. Good for them, once in a lifetime break. Simultaneously I started noticing that the percentage of homes being advertised for foreclosure decreased, and I noticed that more than 90% of those which were advertised didn’t go to sale because equity locusts got to them and made deals. Possibly good for them. Diversified business away from pure foreclosure and bankruptcy with moderate success.
3) Changed investment patterns and have moved substantially to cash, with some money markets and very limited stocks. Still expecting an October disaster in the markets, see my earlier posts in other threads. Have renewed my stocks of food, water and supplies. These are always good to have, although a disaster of the magnitude requiring this is a remote possibility. Still, stashing a few hundred bucks against a “bank holiday” and putting a couple hundred bucks into food which can be stored for long periods of time is a very reasonable hedge against what could be dire need.
4) In retrospect, I’m not sure there is anything else which I could have done other than to be a lemming and try to ride the wave. I still think the risks were too high and there are much better investments for money. In fact, no stock and no investment can reliably return as much as a sound, wholly-owned business. Still looking for business opportunities and think that having cash will be a very big advantage over the next couple of years.
Interesting article re comments re inflation by the chief economist at the Bank of England. Basically he says that using the “core” rate of inflation (i.e., stripping out energy) is faulty because the rise in energy costs is in part a result of the same phenomenon that causes a drop in the price of manufactured goods: Chinese industrialization. He argues that you can’t take out one and leave the other in. I’ve often heard grumblings about the use of the “core” rate, but I’ve never seen this particular argument. Also, the fact that it’s being made by a guy with these credentials means that it can’t just be dismissed as the grumblings of an uninformed amateur.
http://tinyurl.com/fbkaj
It would be even better if they dropped VCRs from core inflation, when was the last time someone bought a VCR?
(Basically he says that using the “core” rate of inflation (i.e., stripping out energy) is faulty because the rise in energy costs is in part a result of the same phenomenon that causes a drop in the price of manufactured goods: Chinese industrialization. He argues that you can’t take out one and leave the other in.)
Interesting! Kind of like you can’t base inflation on rents when they are falling and housing prices are spiking, then switch to housing prices when they are falling and rents are rising.
Man, the FED is in a tough spot.
Interesting! Kind of like you can’t base inflation on rents when they are falling and housing prices are spiking, then switch to housing prices when they are falling and rents are rising.
————————
I am definitely expecting this change. We really need to stay on top of this, and let our voices be heard if they move in this direction.
Can’t sell your house? How about a career as mortgage banker:
http://realtytimes.com/rtcpages/20060828_creatfinance.htm
(I think they meant “Need Creative Financing”, but they probably can’t use that word.
Who do you think are better off according to the realtors, renters or buyers?
http://realtytimes.com/rtcpages/20060828_renterscore.htm
Duh! Buyers of course, they have better credit rating.
(At least until they default….)
They actually claim that people with HELOCS and second mortgages are the “credit elite”.
These people are something else!
But, but, but my score is in the top 15%. How can I have a top credit scare as a renter for the past few years? Now I am so worried. To think that even though I pay off my credit cards each month, have long-term cc’s and checking accounts, have huge credit limits with no balance due, and pay cash for cars, etc, that my credit will be questioned/compromised as a non-homeowner! I’m going to run out and buy a house immediately. Thanks for letting us know!
Buyers have been able to HELOC themselves out of trouble…until recently…
Emphasis on the “until recently”…
Of course their data was not weighted by income, or any other pertinent demographics. Throw in 30 million welfare families in rented housing and the stats are going to skew everytime. Throw in the fact that the scoring uses LTV and credit length, and people with HELOC are more than likely going to have owned longer, with higher equity levels (except the worst bubbles).
Exotic loans have reached a permanently high plateau in San Diego:
http://www.voiceofsandiego.org/articles/2006/08/28/news/01exotic.txt
John Williams’
Shadow Government Statistics
Alternate Data Series
Interesting new stats from shadow government showing negative GDP as well as 11% inflation.
http://tinyurl.com/zyey9
Also I went to Home Depot, Lowes, HOBO, Menard’s and Farm and Fleet over the weekend (She who must be obeyed wants to redo the house). In past visits I never received any offers of assistance, I could not walk 10 steps without someone offering to help - and I wasn’t buying - just picking up color chips and brochures.
Anecdotally: The wife and I track all expenses using software. We charge about 99% of all expenditures, so there is a solid record of where the money is going. (Yes, we pay it off at the end of each month. We use it in lieu of cash.)
Our trailing-twelve-month expenses are declining. 11% inflation sounds quite wacky to me.
I would expect individuals to have different experiences, particularly where one lives and what one does. I chose (and still choose) to live in the country. My expenses gas and transportation, home owners insurance and education costs have gone up dramatically. I am also sure that friends that live in the city of Chicago have benefitted from the lower prices of items coming in from China and India and are not impacted by oil prices etc. IMHO this is actually why outlier areas should be hit harder and faster than city areas.
Somebody smarter than me pointed out that the reason that 80/20 (80% first and a second note for the rest) loans are popular is the simple fact that the MBS market ads a smaller risk premium for defaults than the mortgage insurance market does. Since they both rely on the limitation of risk via aggregation; there would seem to be little reason for the difference except for the reduced transparency caused by shunting the risk through another pair of hands.
Good point. Insurance companies are **very good** at determining risk. MBS buyers, on the other hand, I’m not so sure about. If prices drop by a mere 20% (and I expect much more), your investment is gone. Can’t see how they’re only charging 7-9% (or less) for that risk.
Well said, journalists lurking here this would make an interesting story on PMI’s letter to Congress of about a week ago.
When did you realize that a housing bubble was developing?
I was almost blindsided by it in early 2005, when I finally realized how much prices had gone up in the last 4 years (LA area). Early on, I was under the delusion that “everyone wanted to live there” (southern Cali), but then I noticed how much speculation was going on (when the shoeshine boy gives you tips on RE investing, it’s time to get out). EVERYONE was talking about real estate investing, and how you could make a killing at it. It was EXACTLY like listening to my friends in SillyCon valley talking up tech stocks, all the way up to the big bust. “This is the new economy, companies don’t need to be profitable, they just need market share” was the equivalent of today’s “everyone wants to live/retire here”. Ben’s Blog confirmed that a lot of this was going on in the rest of the country.
3) What did you actually do because of this belief?
Didn’t buy when we moved. We rent a house on the central coast. Still have a few rentals and some land, but refuse to buy at today’s prices.
4) In retrospect, are you pleased with your actions (or inactions?)
So far, but STILL get pressure form people (and sometimes the wife) to buy. With the wife, it’s mostly the “nesting instinct”, and wanting to make changes to the property. With others, it’s the same as when I took my money out of tech stocks before the bust: “you’re going to lose out on making a lot of money, real estate never goes down *in the long run*”. Contrast this to a year ago, when they didn’t even include the “in the long run” when they were saying it.
Still holding to my predictions: LA times to show YOY decrease in price in LA County starting in Oct. numbers. Panic doesn’t start until fizzling summer selling season NEXT year (2007).
You guys might get a little kick out of the Sun’s managing editor giving a little dig at the silly capitalization of “R” in “Realtor”…
“What’s this about Realtors?
A reader’s query.
In a … story about a Baltimore stream reclamation project, the reporter quoted a person whose field is real estate.
“This is our little spot of heaven. It’s just gorgeous, and it’s unbelievable the way they are destroying it,” said Pat Perkins, a Realtor who lives next to the wooded park.
Whoa! Capital R? At a picnic today with an editor, I lamented that some sort of publicity push for the real estate industry has infiltrated the palace. He told me - immediately - that the AP stylebook has always capped the R.
1) isn’t it sad that this came up at a picnic?
2) why would the AP cap the R in realtor and not, say, the L in linebacker?
That capital letter in Realtor has irked editors for decades, but there is a reason for it. Garner’s Modern American Usage explains that the word was invented and trademarked in 1916 by the National Association of Realtors. It is captialized because it is a trademark, and technically, it should be used only to refer to a member of the association. The term real estate agent is generic, and that is the usage we typically prefer.
If I wanted to dignify my work further, I presumably could make up a word, say Correctorificator, register it as a trademark, put it on business cards and demand that any who writes about me use that word, capitalized.
That would be silly.
We recently published articles about Dr. John Cameron, one of the foremost practitioners at Johns Hopkins, which is one of the nation’s pre-eminent teaching hospitals. He is called a surgeon, lowercase. Though some publications operate otherwise, The Sun calls George W. Bush, along with his predecessors, the president, lowercase. Benedict XVI is the pope, lowercase.
To get a capital letter for their job descriptions, they would have had to go into real estate.”
Touche…
Simple. Realtors are much more important than doctors, lawyers, teachers, nurses, mechanics, etc. Because we can all live without doctors and teachers, but try surviving without a Realtor!
I like this description of the Bubble:
“We’ve all seen those animated cartoons where Daffy Duck or Elmer Fudd walks nonchalantly off a cliff. The sap continues walking on thin air for a few moments and then notices where he is. Legs whirl in a wild effort to gain traction, but—the law of gravity is reinstated, and—whoosh!!!”
From:
http://bridgenews.org/news/082006/bubblebill
From the Baltimore Sun’s managing editor, a little dig at the silly capitalization of “R” in “Realtor”:
“What’s this about Realtors?
A reader’s query.
In a … story about a Baltimore stream reclamation project, the reporter quoted a person whose field is real estate.
“This is our little spot of heaven. It’s just gorgeous, and it’s unbelievable the way they are destroying it,” said Pat Perkins, a Realtor who lives next to the wooded park.
Whoa! Capital R? At a picnic today with an editor, I lamented that some sort of publicity push for the real estate industry has infiltrated the palace. He told me - immediately - that the AP stylebook has always capped the R.
1) isn’t it sad that this came up at a picnic?
2) why would the AP cap the R in realtor and not, say, the L in linebacker?
That capital letter in Realtor has irked editors for decades, but there is a reason for it. Garner’s Modern American Usage explains that the word was invented and trademarked in 1916 by the National Association of Realtors. It is captialized because it is a trademark, and technically, it should be used only to refer to a member of the association. The term real estate agent is generic, and that is the usage we typically prefer.
If I wanted to dignify my work further, I presumably could make up a word, say Correctorificator, register it as a trademark, put it on business cards and demand that any who writes about me use that word, capitalized.
That would be silly.
We recently published articles about Dr. John Cameron, one of the foremost practitioners at Johns Hopkins, which is one of the nation’s pre-eminent teaching hospitals. He is called a surgeon, lowercase. Though some publications operate otherwise, The Sun calls George W. Bush, along with his predecessors, the president, lowercase. Benedict XVI is the pope, lowercase.
To get a capital letter for their job descriptions, they would have had to go into real estate.”
Ludicrous price but this is a very cool place. I’d pay about 500K for it. Maybe.
http://www.greenhomesforsale.com/listing.php?id=17947
Too bad it’s not a little bigger.
Too bad it is in the Florida Keys… Hello Ernesto et al.
Excellent thread!
1) When did you (readers of this blog) realize that a housing bubble was developing?
February, ‘06. My brother borrows an investment letter from a friend, and then lends it to me. In the 02/06 issue, the writer trashed the Tech sector, then concluded that he expected to see a return of the secular bear market. This started me researching, and I eventually wound up here!
2) What made you think this was happening?
I was convinced when I read that investors accounted for at least 28% of all 2005 home purchases.
3) What did you actually do because of this belief?
A lot. Through March and April, I liquidated my entire portfolio, except for energy stocks. Put 5% into GLD and 5% into USO, invested 30% in a wide variety of LEAP put options, and kept the rest in cash. When stocks tanked in May, I sold off half the puts, then started buying more as the market rose. When Israel/Hezbollah erupted, basically repeated the same process. Currently taking it on the chin now, but … oh, well!
I live in Pittsburgh, so it really didn’t make a whole lot of sense to sell our house, which has not appreciated any more than 3% or less annually. If it winds up going down in value, I can accept that as the tradeoff for staying in the same house in which our children grew up.
4) In retrospect, are you pleased with your actions (or inactions?)
Heck, yeah. My brother thinks I’m nuts to be so heavily invested on the short side, but it certainly feels safer to me than being invested on the long side.
Just remember that our govt has identified asset price stability (translation: asset prices which often rise and seldom fall) as a matter of national security, and will take action to ensure that they keep going up… (google Working Group on Financial Assets for more information)
More pie charts and graphs than a person could ever want about Mpls real estate:
http://www.mplsrealtor.com/Segments/Realtors/WMAR_2006_08-21.pdf
What it boils down to:
http://www.aaronsold.com/blog/wp-admin/wmar_2006_08-21.pdf
AUGUST 2006 CURRENT RMLS STATISTICS MARKET UPDATE
69 Average days on market
45% More listing on the market than 1 year ago totaling 60663.
35% Of the inventory that has sold in last 30 days has had a price adjustment
5.3 Months Absorption Rate=the time it would take for all the listings to sell if no more homes were put on the market
6 For every sale that takes place, there are 6 more homes that haven’t sold
36 Showings for every home that sells (From Edina Realty appt center statistics)
(I’ll try posting one more time before I give up today)
Tampa - I am in the process of trying to rent from a FB. My current place is fine and dandy but the bi$ch neighbor keeps complaining about my noise level (funny that I’m never home) and now I am threatened with eviction. I figured it was time to go instead of go through that process in the event she gets upset again (and I really don’t know why). Anyone (lawyers) want to comment on this situation?
I am looking at a couple local condo conversions that have plenty of rental units available. Hopefully I can get into a stable situation but who knows. I’ll keep you updated. The place I was trying to get I could never get a hold of the owner and now it appears to be occupied.
Moman,
We know you’re really a party animal.
Careful about those FBs. If they go into foreclosure, you will be SOL. IMO, better to rent from a stable, long-term LL who is aware of the market, but wants a decent income from his/her rentals. Preferrably, the LL has paid off most of the mortgage and keeps up the property.
Good luck!!!
Glad to hear that attendees at the KC Fed Jackson Hole conference are as flummoxed about current economic conditions as I am…
——————————————————————————-
THE FED
Fed seen on hold in September
Uncertainty is buzzword at Fed mountain retreat
By Greg Robb, MarketWatch
Last Update: 1:47 PM ET Aug 27, 2006
JACKSON HOLE, Wy. (MarketWatch) — The economic outlook remains so uncertain that the Federal Reserve is very likely to hold rates steady again at the next policy meeting in September, according to participants at the Fed’s annual retreat near Grand Teton National Park.
“Broadly, within the FOMC, there is enough not well understood about what is happening in the U.S. and the rest of the world. It will take more time than six weeks to know whether the shift from suspension,” said Robert Dugger, a hedge fund adviser attending the conference.
The Fed held rates steady at their August meeting after 17 straight rate hikes. Economists said they were struck by the lack of certainty in their private conversations with central bankers. Key questions remained unanswered about whether the economy will slow gradually or sharply, and whether inflation will moderate or continue to move higher.
“Talking to people, there is a tremendous amount of uncertainty about the economy. There is a tremendous range of views, not just of GDP growth but of different sectors,” said Mickey Levy, chief economist for Bank of America.
Economists said the uncertainty is reasonable given current economic circumstances.
“Anyone who says they are dead certain is either lying to you or to themselves,” said Lewis Alexander, chief economist for Citigroup Global Markets.
http://tinyurl.com/meqgt
1) When did you (readers of this blog) realize that a housing bubble was developing?
We had to move to Texas in 2002 from Florida for 9 months and when we returned we couldn’t afford the house we had sold less than a year before.
2) What made you think this was happening?
I was not sure what was going on but it was a bit unnerving.
3) What did you actually do because of this belief?
We moved further north so we could afford the housing and kept an eye on the market. Organized my job so I could transfer to NC. Sold our house 6 months ago, bought a house with a very small mortgage and don’t plan on looking back.
4) In retrospect, are you pleased with your actions (or inactions
Yes in general…should have sooner……I was delayed on selling my house because we were blindsided by a hurricane which caused damage that had to be repaired.
1) When did you (readers of this blog) realize that a housing bubble was developing?
2001
2) What made you think this was happening?
I bid on several homes, but kept losing out to buyers with cash (oftentimes foreigners). And it seemed prices were rising on a regular basis. By 2003, I was priced out.
3) What did you actually do because of this belief?
Fired my realtor first (felt like if he’d hustled a bit more for me in 2001, I’d have been successful - I’d find listings he hadn’t told me about and every time it was too late). Walked around pissed off at anyone who owned a home for a while. Found this blog and chilled out. Oh, and I’ve been saving, saving, saving.
4) In retrospect, are you pleased with your actions (or inactions)?
No, not pleased. I wish I’d been more interested in buying in the late 90s when it would have been easy for me. I just assumed it’d continue to be relatively easy for me to buy a place when I was truly ready. I could NOT have seen what was coming (never really followed historical real estate cycles prior to this boom).
Monday, August 28, 2006
Auctions still going, going
Crowds seeking land shrink, but bidding remains intense.
By MARY ANN MILBOURN
The Orange County Register
ANAHEIM - Going, going, sold!
The phrase repeatedly rang out in an Anaheim Convention Center ballroom Sunday as would-be buyers pitted their skills and their nerve against each other in search of an increasingly rare find these days – a bargain on land.
About 500 people packed the room for Sunday’s draw – 200 parcels of land from throughout the West being auctioned off by Irvine-based LandAuction.com.
Jeff Frieden, company chief executive, said that, like the housing markets, crowds have thinned at the land auctions this year and selling prices are down. But bidding remains intense for those who attend.
Nearly half of the crowd Sunday said they had never attended an auction before. Others were veterans, knowing just what they wanted to buy and how much they would spend. Some just wanted to learn how it all worked for a future bid.
“Who doesn’t want to be a landowner?” said Tom Williams of Long Beach, who came with his wife scouting property to buy for a sheep farm.
To get people in the proper spirit, pastoral scenes appeared on giant screens at the front of the room as the theme from “Rocky” blasted from four loudspeakers. Then, the tuxedo-clad auctioneer stepped to the podium and the game was on.
Bidding for the first parcel, five acres near Rome, Ore., opened at $500 and ended in less than a minute. Final price: $1,500. Sale of Parcel No. 2, a lot in Costilla County, Colo., was over in another minute. Price: $3,000.
And so it went with the auctioneer rattling off the bids in a rat-a-tat delivery as auction assistants button-holed bidders, often urging them higher. Each sale rarely took over three minutes.
Elva Garcia of Santa Ana was one who hung in during spirited bidding for a 2,500-square-foot parcel in the Arch Beach Heights section of Laguna Beach. She got the winning bid for $70,000 and won first rights to pay the same amount for an adjacent parcel, which she also purchased.
When asked if she got a good price, she just shrugged. Like many, she said she liked buying at auction rather than through a broker because of the potential for a better deal and avoiding commissions. LandAuction.com, which owns the parcels, charges a 10 percent buyer’s premium.
The auction brochure admonishes would-be bidders to check out the property before bidding. Some of the potential obstacles are obvious.
Parcel No. 2 in Colorado “may not have road access,” said the brochure.
That was a problem for Sue Lucas of Ladera Ranch, who said she went to look at another parcel that was listed.
“I looked everywhere, but there was no road to it,” she said.
Still, there were buyers for everything –– even two other Laguna Beach parcels that went for $80,000 each, a price that had John Wilson of Costa Mesa shaking his head. He went to see the property and said they were on a very steep slope.
“I looked at them and they were so high, my ears were popping,” he said. “They are totally unusable.”