‘A Badly Timed Fit Of Happy Talk’
The Boston Herald looks at home sales reporting. “A bad storm is brewing in the once high-flying real estate market, and the Boston area, is right in the eye of it. For many hapless home sellers, desperately scrambling to find living, breathing buyers, this tempest appeared to come on as quickly as a Gulf Coast hurricane. Or did it?”
“The monthly home sales reports put out by the Massachusetts Association of Realtors for years have been the main indicator of the health of the Bay State’s real estate market. And as recently as last fall, the trade group was crowing about near-record sales.”
“However..a steady decline in home sales across the state began in the spring of 2005 and has been building steam ever since, data released by the Boston-based Warren Group shows.”
“Year-over-year declines in home sales of roughly 10 percent or more began in April 2005 and continued steadily, hitting nearly 14 percent in October and nearly 27 percent in July. Meanwhile, median home prices peaked at $364,000 as early as June 2005 and began dropping steadily after that.”
“By last summer, let alone last fall, anyone following the Warren Group data would have been well aware of the real estate storm clouds on the horizon. Yet, except for a few experts and insiders, no one was.”
“As the real estate market began to turn sour last year, MAR was still the main source of statistics for most news outlets. And the Realtors group saw more evidence for optimism than concern.”
“No increase was too modest to celebrate. A 0.5 percent increase in single-family home sales in September. Roll out the barrels. ‘Sales of single-family homes remain strong last month, climbing to their second highest level on record for the month of September in state history,’ the group touted in a section of its Web site called ‘talking points.’”
“That was a badly timed fit of happy talk. Since October, the market’s downhill trajectory has been too steep for anyone to ignore, with prices, not just the number of sales, falling.”
“But there are no apologies from David Wluka, MAR’s president. And Wluka further contends that MAR has always offered a sober appraisal of the market.”
“Not everyone is convinced of that, though, including Wellesley College’s Chip Case, one of the nation’s top experts on the residential real estate market. ‘They (Realtors) have a stake in high (home sales) volume,’ Case said. ‘They care if people are trading. They have a huge stake in optimism. When optimism goes away, people don’t spend money on big-ticket items.’”
The Worcester Telegram. “Foreclosure actions initiated against Massachusetts homeowners rose 56 percent in July, to 1,348, compared with the same month a year ago. For the 12 months ended July 31, foreclosures statewide were up 43.5 percent, to 14,552, with Barnstable, Bristol and Suffolk counties posting the biggest increases.”
The Sun Chronicle. “North Attleboro recorded 61 foreclosure cases in July, up 118 percent from July 2005. ‘The vise grip of rising interest rates and soaring energy costs are squeezing thousands of Massachusetts property owners out of their homes,’ said Jeremy Shapiro, presidentof ForeclosuresMass.com. ‘The dramatic increase in foreclosure filings is symptomatic of our slumping housing market and tightening economy.’”
Well, it looks like the news media is calling out the hucksters (realtor associations). People are steadily realizing that they have been “had.”
The doldrums and negative sentiment should begin to gather steam from this point on, no area will escape what is coming, even us up here in Seattle, which the cheerleaders love to point to as escaping what is coming.
One could make the case that the last place to fall will be “the last place anyone can afford to move to” and hence may fall a bit harder in the end as other places seem relatively cheaper and start their recovery earlier.
If Seattle is still high and the traditionally “more attractive” areas (southern CA) have already fallen, then Seattle’s fall could overshoot in the negative direction as people migrate to the nicer/cheaper areas of the country.
Of course the Seattle “wine and cheese crowd” will simply blow this off and say that the old price/location differentials have been replaced by a new paradigm….which ultimately boils down to “Seattle is special”….yawn.
Good point Moose. If prices even out between areas like … say… San Diego to Seattle (which I think they are close to doing) then there is no impetus for the CA refugee to move here. Once the lemmings realize what they have done…game over…
Yes, I am in this boat. And I am sure there are a fair number like me. Live in SF bay area. Looking at bay area or SD. Expect to want/need to move in spring or summer 2007.
According to housingtracker, in summer 2005, the San Diego “premium” over Seattle was $161K ($545K vs $384K) for a median priced home.
Fast forward to summer 2006. Prices in SD have been flat, maybe falling. Seattle continued up.
Now, that SD premium has been cut in more than half to $71K ($510K vs $439K). Note: I am using the “old housing tracker numbers here to compare consistently with 2005.
By this ratio, Seattle looks comparatively overpriced to Seattle. Is $70K (14% of purchase price) worth going to the beach and having sun for 2/3 of the year instead of rain for 2/3 of the year? I think so…
In case it wasn’t clear, I like Seattle. It is also on my “short-list” where I’d like to move (Microsoft, etc).
Point is how many of the ~130,000+ residents moving out of CA each year are rethinking moving to Seattle, Boise, Pheonix, Las Vegas, etc, now that these locals are no longer “cheap” —even though they remain cheap by today’s (maybe not tomorrows?) CA prices.
People, it rains in Seattle ALL OF THE TIME!!! It’s a horrible place to live, unless you are a waterfowl AND REAL ESTATE IS NOT CHEAP ANYMORE!!! SoCal is a much better place to be.
Excellent point. SEA is up in the bottom of the third. We’re still in the second inning.
I’ve never lived in Seattle - but did visit during late August when it was sunny and very nice for at least two weeks. It does not rain all year, by any means.
‘I’ve never lived in Seattle - but did visit during late August when it was sunny and very nice for at least two weeks. It does not rain all year, by any means.’
A similar statement might be:
“Phoenix isn’t that hot at all, I was just there in January and it was beautiful.”
….Make that 9 months of gray and drizzle…. August and September are glorious… Born there. Lived there 25 yrs. Couldn’t see staying if it required medication to get thru most of the year…
Seattle’s fall could overshoot in the negative direction
Absolutely correct.
I can confirm that Realtwhores will always tell you the most rosy outlook for real estate: This weekend my wife’s mom’s realtor friend candidly told us that when she goes to their semi-annual realtor rah rah conferences that they are told by their conference leaders that in order to be successful as a realtor that you have to:
Always give their potential buyers the most optimistic outlook and it is always time to buy.
Prices never go down.
Never ever give the impression the market is weak or going down.
Use literature that supports this like this beautiful piece done by Gary Watts. Hand out good ol’ Gary’s write up at all your open houses.
She also told me that they are in cahoots with most Mortgage brokers in supporting this rosy outlook environment so you will be getting the same spin from them too. Hey, and guess what? My mortgage broker sent me his newsletter last month with a copy of Gary Watts article. Also provided in his newsletter that prices arent going down but you should be able to get sellers to cover your closing costs and then he put in some scenario where if you offer full price you should negotiate with the seller to buy your points down in your loan to lower your payment………Man these a’holes are really putting on all types of spin to keep prices up and finding so many ways to incentivise a sale.
I cant tell you how much I hate the RE industrial complex.
they are in cahoots with most Mortgage brokers in supporting this rosy outlook environment so you will be getting the same spin from them too.
Add crooked, “rubber-stamp”, appraisers to the mix.
These are the jokers who grease the skids for the whole she-bang.
Anyone worth his salt will note the dismal marketing conditions and falling values in a report . Kiss of death to the selling of the mortgage, so you can be damn sure any deal will have its’ appraisal shopped out to a deceiver.
The entire real estate transactional market is now built on lies.
the Watts flyer should be a warning signal for anyone who gets it in the mail (i.e. “if things are so great, why are they sending me this obviously biased flyer to justify the market?”), and anyone who buys now deserves to lose every stupid penny.
“However..a steady decline in home sales ….
The media talk still only has its main focus on SALES DECLINES
- NOT THE DECLINE IN SALES PRICES.
You mean…they were…fibbing?
Good or bad, watch for new regulations to come out of all this.
No, it’s a “fit of happy talk” and it’s apparently acceptable as long as you have a huge stake in optimism.
It will be interesting to see what sort of new regulations come out of this, if any do. Very interesting that the bankruptcy laws were changed in favor of the banks just ahead of the bubble bursting, making the penalty very heavy for going along with the cheerleaders.
It does seem there is an increasing amount of CYA type reporting…
What will Kudlows’ spin be after all is said ,and done? Regardless, the rollercoaster at the top of the parabola is increasing speed as said below…
This is an overlooked nuance to this whole mess. Gonna be a lot of FB’s in real financial trouble and nobody can bail them out. The LLCs financed w/credit card cash advances? Ouch! That’s gonna hurt! Those used to be dischargeable!
Those used to be dischargeable
But the damage is still limited to the LLC? (ie. How exactly have the BK changes affected LLCs/S Corps?)
I think the timing of the new bankruptcy laws are interesting, too. I really believe the “cheerleaders” could foresee everything. And even now, though the public spin they put on it isn’t terribly negative, they suspect (or downright know) home prices are going to fall - a LOT - and that many people may go down with them.
This is what bothers me most about the housing bubble, the timing of it. It appears to be another wealth transfer scheme, on a national and even global scale. I don’t think any one group is responsible, many cooks have been stirring the soup. But they all have a common, vested interest in shearing the sheep.
Over the past 25 or so years, there has been the S&L Scandal, which effectively transferred a trillion from the middle class to ???, Then there was the dot com bust along with the corporate scandals which cost the middle class big again, and now, for the grand finale… The real estate bubble. The grandest ponzi scheme of all..
Palmetto-
You have to admit the “shearing of the sheep” scam has been absolutely brilliant.
Mask the horrific decline of living standard for the average American with an ability to offset it by borrowin’ the shite against an inflated, illiquid, depreciable asset.
An oxymoron for sure, but it sure the f*ck put allot of loot in the moneychanger’s hands. I watched POS mortgage O’s take commissions of $5k on a loans of $90k.
And the suckers who took the deals never flinched.
Course it was all a Ponzi game in the end, and now the music’s stopped and there’s allot of FB’s left without a chair to sit in.
“If americans ever allow private banks to issue their money, first by inflation then deflation, the banks and corporations that grow up around them (the banks) will deprive the people of their property until one day their children wake up homeless on the continent their fathers conquered.”
Thomas Jefferson. 1819 during debate over recharter of 2nd U.S. Bank.
Anybody who regularly reads last 18th century and early 19th century prose would readily come to the conclusion that this quote is a fraud.
Should have been “late 18th century” …
Here’s evidence.
http://tinyurl.com/rnvwq
Here are some authentic quotes to the same effect:
“I sincerely believe… that banking establishments are more dangerous than standing armies, and that the principle of spending money to be paid by posterity under the name of funding is but swindling futurity on a large scale.” –Thomas Jefferson to John Taylor, 1816.
“I hope we shall… crush in its birth the aristocracy of our
moneyed corporations, which dare already to challenge our government to a trial of strength and bid defiance to the laws of our country.” –Thomas Jefferson to George Logan, 1816.
hd74, it has been a brilliant scam, but then, I and many of us here like yourself have not been taken in by it. I imagine, then, that we are somewhat dangerous to the powers that be. I had a little bit of insomnia last night and tuned into a PBS documentary on the kidnapping phenomenon in Brazil, mostly focusing on Sao Paulo, with sweeping aerial shots of the city, wealthy households alongside of favelas (barrios, slums). Almost no middle class to speak of. It was a frightening vision of what could happen here, especially with unfettered illegal immigration, combined with the mother of all depressions/recessions. Kidnapping is quite an industry there. They have two kinds: traditional kidnapping for ransom, mostly targeting the wealthy and famous and “flash” kidnapping, where some unsuspecting schmoe can be kidnapped off the street or at the grocery store, and forced to withdraw his ATM limit day after day until his bank account is cleaned out. I found myself wondering why the banks in Brazil were not forced to eliminate the ATM machines, which would certainly cut down on this sort of crime. But even more, it seems that many of the disproportionately wealthy do not realize that a strong middle class is their best buffer from this sort of widespread crime, and yet they seem to want to eliminate the middle class with a vengeance.
We can talk about regulation, etc. But the only real solution to bubble scams is personal responsibility and education, combined with a healthy skepticism. If individuals were able to recognize crazy financial stuff, they’d just say no and there would be no market for the scams.
“As the real estate market began to turn sour last year, MAR was still the main source of statistics for most news outlets.”
You mean the reports only got their info from one source and it was presenting the data in a biased way?
“The Boston Herald looks at home sales reporting. “A bad storm is brewing in the once high-flying real estate market, and the Boston area, is right in the eye of it. For many hapless home sellers, desperately scrambling to find living, breathing buyers, this tempest appeared to come on as quickly as a Gulf Coast hurricane. Or did it?”
Ah, the light shines on Marble-head!
I shake my head to think that the high flyers never consulted the Warren Reports. I was pulling their site up when I was merely in the market for my first home….sitting in my little rental in Norwood with my firstborn napping.
Very interesteing.
1. The fed recently came out with a report saying the housing bubble was not their fault. Avoiding blame.
2. Here, the Herald is blaming the realtor associations. But aren’t they the ones who have been pushing the realtors’ garbage? Did they just figure out the inherent conflict of interest with realtors’ spin. What happened to two sides of the story?
“The fed recently came out with a report…”
That is a fairly inaccurate statement, as the many regional banks make the Fed a bit of a hydra. What happened is some Chicago Fed researchers published a paper which cited reasons why we are not in a bubble and why even if there were a bubble, it would not be the Fed’s fault.
My apologies,
“a” housing bubble is not their fault.
JA, you have to realize what a huge source of income the real estate industry is for the newspaper business. I work for Community Newspaper Company, which is a conglomerate of 100 or so weely and daily newspapers in Massachusetts. Most papers have an entire section dedicated to just real estate. The advertising income keeps these newspapers a float. Not to mention all the housing related businesses that bring in advertising dollars (landscapers, contractors, etc..) Reporting the “truth” about the housing bubble situation would be like slitting ones own throat.
Asg,
Wow, you’re shattering my image of a newspaper editor standing up for the people.
That sounds naive, but then what’s the difference between journalists and the Realtors Association?
The realtors spin numbers to make housing seem like a good investment, do editors/writers create copy to satisfy the advertisers? I hold the editor of a newspaper to a higher standard than a realtor.
A year from now when it’s painfully obvious that housing has declined, will the community newspapers still tout what a great investment RE is? What about the advertisers?
(Please see the irony in this. I’m standing up for newspaper editors, but I’m on a blog b/c I don’t trust traditional media’s stories anymore. )
Masachusetts YoY comparisons are now comparing to sales rates that were already declining a year ago. The entire roller coaster is on the downslope. Not only is Massachusetts losing gross population lots of what remains is ageing out of home buying demographics and those of the correct age are leaving. What replacements there are cannot afford the products available for sale at these prices.
Foreclosures are not a concern, yet. The rates were so low in recent years a large percentage rise is meaningless. We have orders of magnitude increases ahead. Patience.
The Realtor industry clearly has no clue what they face. 80% of the process could be accomplished at a kiosk in the Assessors office and another 10% on the internet. Think Travel Agent 1990 = Real estate Agent 2008.
I agree, to a degree Robert;….The commsission’s are already comming down but the one factor that may hold them up from a complete meltdown is “Liability”….
Nail on the head. Or think retail(esp nondiscount) stockbroker in 2001. If there is one thing our economy can still do efficiently , it is eliminate the middle man .
“The Realtor industry clearly has no clue what they face. 80% of the process could be accomplished at a kiosk in the Assessors office and another 10% on the internet. Think Travel Agent 1990 = Real estate Agent 2008″
I couldn’t agree more. The Title company does all the real work, and they make a fraction of what the Realtors ™ make. However, the Realtor ™ empire has done an excellent job of lobbying to make selling increasingly fraught with pitfalls for homeowners who wish to sell themselves.
Here in CA, if you read a standard Realtor ™ purchase contract, with all of it’s disclosures and disclaimers, you’d think that selling and buying without a real estate “professional” would be suicidal. Back in 1997 I marketed and sold my 3 bedroom home in Lodi, CA without the aid of a Realtor ™. During the process I received many calls from agents quick to point out the potential liabilities associated with selling without a professional. One in particular, who I called my heckler, called every other day to warn me of the big trouble I could get into by not properly disclosing potential hazards (radon, chemical contamination, etc.). Finally I asked him “If i list with you, are you and your company going to assume all of these liabilities and be responsible for litigation fees and damages? “Well no, we’re not going to do all that” he replied. “Well then, what good are you?” I asked, and I never heard from him again.
Massachusetts has a strong higher-education economy in
good times and bad and traditionally, many students would stay and find work in Boston enjoying big city life.
It’s pretty clear that affordability for families, though, has been on the decline and so you see a drain to places like North Carolina.
When the college grads find out that they can’t really afford to live in Boston unless the leverage to the hilt, I think that they will look for greener pastures in larger numbers.
Yeah, dropped of my thesis, borrowed $200 from my uncle and never looked back. Great my 19 years of edjucatin, 12 at Commonwealth expense and I up and off to California. Some economic engine. Anyway it is good to find out Boston is special. Sorry for any confusion.
I wish I had $1 for every time I have to hear that story (and the concomitant slamming of Boston), for I would have enough for 20% down on a house in Seacliff!
Boston has more going for it than all but a handful of metro regions in the country, if not the world. For starters: 250,000 students from across the globe (like you, many are “exported” after graduation to other areas, and have been for decades, but a large proportion stay), leading academic institutions/communities, the best hospitals and MD’s in the world, a tech and venture community, some arts, professional sports and those sublime coastal and mountain New England summers and falls.
Is it really surprising or alarming that Boston has gotten expensive and some people have to move to find homes to live in? It happens with every boom period, just as in coastal California.
or stock broker of 80’s
the net will kill RE agents off after the crash
In UK they get 1-1/2 % and it’s going down
Decentralization of the RE complex may only be accomplished through an internet revolution. Breaking up the unholy alliances between brokers, sellers, appraisers and the builders means separating them into pieces, pieces available when and where the buyer needs them - not how the complex wants them.
There is always one objective source of information — the government. It gets the price recorded with deeds.
Unfortunately, the government is very, very slow. If it were organized to provide housing prices, we’d probably be getting 2004 prices right about now.
An interesting corollary to your point is that the government revenues are shrinking as the prices and sales drop, therefore government spending next year will either a) drop or b) incur further deficits. Both of these outcomes will create another negative ripple.
There is always one objective source of information — the government.
Hahahaha. You slay me.
There is always one objective source of information — the government.
It’s a good thing it’s too early for beer or else you’d owe me a new keyboard and a beer.
OER, CPI, BLS, NFP, current account balance. Objective?
Zillow provides sales prices as recorded at the city/county recorder’s office. But except for the recent comps map/table which lists sales prices you have to click on each property to get the price. There are holes in their data–transactions recorded twice or at unbelievable prices.
you mean like ownership society, or the downpayment assistance programs supported by politicians and reic alike
Happy talk, keep talkin’ happy talk,
Talk about things you’d like to do.
You got to have a dream,
If you don’t have a dream
How you gonna have a dream come true?
If you don’t talk happy,
And you never have dream,
Then you’ll never have a dream come true!
[Spoken]
It’s good idea, you like?
Uh oh. Old person alert.
Da stimmt — ich bin sehr alt…
Mein condolences, herr alt. (pardon my germanglish.)
Verzeiung mein anglichesdeutsch.
“Not everyone is convinced of that, though, including Wellesley College’s Chip Case, one of the nation’s top experts on the residential real estate market. ‘They (Realtors) have a stake in high (home sales) volume,’ Case said. ‘They care if people are trading. They have a huge stake in optimism. When optimism goes away, people don’t spend money on big-ticket items.’”
Too bad all the optimistic happy talk (”real estate prices always go up”) helped push affordability to its all time low. When affordability goes away, people can’t spend money on big-ticket items.
I know it is too much to hope (and probably no legal basis for) but I wish someone who relied on the MAR report for accuracy would take those guys to the legal woodshed for an ass-whooping.
I thought that real estate “experts” consisted solely of agents and homebuilders
This Chip Case is my hero. Its still *very* unpopular to be against real estate interests… So to go so public is worthy of some note.
I agree 100% with GetStucco… How can you have optimism when no one can afford. We’re answering the question of what happens when people in mass are priced out of the market.
Gee… we have so many buyers on the sidelines waiting to jump in when homes become affordable. oh wait, we’re entering this downturn with record “home ownership.”
Limit buyers goes to zero equals prices plummet.
I *really* hope our schools still teach limit theory. But from what I see on the pro-real estate boards, it just didn’t sink in for the majority of the population…
Neil
I know we are all expecting an implosion but could it be that we will just see a slow drift to normality over the next 5 yrs? I’m just not sure that there will be climactic panic that just unravels the RE bubble. I know there are parallels to the Stock Market but RE is much more illiquid and much more likely to just keep stumbling rather than stock market like sell offs(which also allow for eventual recoveries) so instead of the immediacy of the SM which sold off over a span of 9 mos, we are in for a slower(but not orderly) shakeout that will wreck a ton of people.
IMHO, we are already seeing a major unraveling but since we have never seen anything like this type of credit bubble, we may not be able to recognize that the s*** is already hitting the fan and instead of bottoming fast and beginning to recover, the bottom is miles away and we are traveling at a snails pace to get there. So all of this “it’s coming so get ready” is actually wrong-minded;it’s more accurate and admittedly less satisfying to realistically think “we’re here already and we are going to stay here for a long time because its going to be slow”.
A long slow decent or even a plateau off may be expected during “normal times.” During normal times, people could afford the homes they bought even if they over paid for them. Also, rents were somewhat inline with mortgage costs so, you could rent a house and cover a mortgage, if need be.
However, thanks to the emergence of option arms, zero down / zero move in and other exotic loans, there are a significant number of people out there that simply cannot afford the home they have bought. Also, there is a ton (and I mean a ton) of short-term speculators out there. These people have bought property at prices that they cannot rent out and break even. Therefore, its going to be scary but there is going to be a lot of people whom will need to get out of the market because they are burning cash (underwater on rents) or have run out of credit.
Roger that Roger,
There is nothing more frustrating that being in a competitive financial/business environment against an idiot with unlimited access to capital. Brewster’s Millions I’m afraid.
If there’s any consolation, it is entertaining watching stupid people ruin their lives and the lives of their loved ones. “Take a number and go wait in that line by the cliff.”
dd
“There is nothing more frustrating that being in a competitive financial/business environment against an idiot with unlimited access to capital.”
It’s like playing poker with unlimited buy-ins. Eventually some idiot who keeps pumping money onto the table is going to get lucky and cause trouble. An experienced player might lose his initial buy-in to this punk and walk away in disgust, while the money burner plays on with three buy-ins down the hole.
The housing bulls as Harvard’s Joint Center for Housing Studies still have their heads firmly buried in the sand. They have this to say in their 2006 report:
“…Nevertheless, the housing sector continues to benefit from solid
job and household growth, recovering rental markets, and
strong home price appreciation. As long as these positive forces
remain in place, the current slowdown should be moderate…”
I’ve seent those flipper shows with people who either didn’t sell thier house, or sold it but didn’t make that much or had it on the market for long. sure seemed like a crash to me, even w/o a price decline. that’s because part of the crash is not being able to sell, or the fear of it. carrying a property and making unforseen mortgage payments must feel like a crash.
More happy talk came out of the Harvard Joint Center…
Look at home prices for the last 100 years:
http://graphics10.nytimes.com/images/2006/08/26/weekinreview/27leon_graph2.large.gif
We’re in for a STEEP decline. People who bought at crazy prices are going to pay a huge price.
I saw that graph over on Charles Hugh Smith’s blog. Whew! Talk about nowhere to go but down. How far down is the question. It will be an interesting toboggan ride.
What I found most impressive about that chart is noticing the steep decline during World Wars I and II. I personally believe that we are either currently in or on the verge of World War III. When historians look back, they may decide it started on 9/11/2001 which led to US invasions of Aghanistan and Iraq. Or maybe the onset of Peak Oil in 2006, or maybe some future event. In any case, when it becomes clear that there simply isn’t enough oil to both continue US economic growth as well as 2.1 billion new Chinese and Indian consumers longing for the western lifestyle, then the gloves will come off. I hope not, but all signs seem to be pointing toward a huge battle over the world’s remaining hydrocarbon resources.
That puzzled me a little. It seems odd that the ‘Roaring Twenties’ produced relatively little housing speculation– The only thing I can think of that might account for it is the massive influenza outbreaks that killed millions and depopulated large areas. Nothing like a sudden decline in population to dampen housing prices.
The roaring 20s involved speculation in unimproved land, maily in Florida. Thus, it dopes not show up in this chart of housing prices.
When that collapsed around 1926, a lot of cash flowed to Wall Street, the reverse of what happened in March 2001.
Re: Graph, ..we were all discussing that the other day..Quite scary if you see that for the most part the rises are symmetrical with downturns. Even if the reversion is only 50%..Lots of financial misfortune
Seems that the ‘premanently high plateau’ has a 105 floor, beginning about 1960. Reversion to the mean (in this case the floor) calls for a 45% drop. Seems right to me.
I’ve always liked that chart and I’ve used it in a few arguments.
However, as scary as it looks, it simply shows that housing prices are 80% above the post-WWII baseline. That’s alot, but the people who argue that there’s been a permanent “paradigm shift” can point to the historical example of the “permanently high plateau” after 1945 that’s demonstrated by the chart. The bulls will look at this chart and argue that, post “information revolution” of the 90’s, 160 is the new 110. I disagree with that of course, but I wonder if we’ll ever see 100 again - probably not.
The chart is deceptive. Housing prices are far higher than 80% above the Post-WWII baseline. My parents’ waterfront house today has been appraised at 100 X what they paid for it in 1968, when nobody wanted Victorian Gothic relics. The big old house behind him sold for 10K in 1974, and today could easily sell for nearly a million. In both cases, the houses have been fixed up a lot, but not enough to remotely justify their current valuations.
“And Wluka further contends that MAR has always offered a sober appraisal of the market.”
Well it looks like Mr. Wluka has no idea just how much the kool-aid is spiked.
Just saw the MBA report..down .9%,and 22% . Trying to find the link.
http://www.mortgagebankers.org/NewsandMedia/PressCenter/44251.htm
(I know we are all expecting an implosion but could it be that we will just see a slow drift to normality over the next 5 yrs?)
I’d expect a combination of the two, with one implosion year (a recession year) and four years of slow drift.
The implosion year could be mid-2007 to mid-2008, two years after the start of the slow drift. That would leave two years of slow drift afterward.
A review of the Nikkei and NASDAQ bubble pops from time to time is good for reminding us how bubble pops can play out. These bubbles are credit led and they reach a crescendo and
then there is some kind of severe drop. Ideally, things just wallow around after a crash for a few years to grind out the holdouts.
Seattle is definitely not on the list of “the last of the affordable places to move.” It has a notoriously “high cost of living.” Housing is only one of the factors. Anyone buying in this area right now is paying through the nose. $450k gets you a piece of crap 1200 sq. ft. north seattle home that needs tlc at this point. If you want anything “nice” you get into the $600k to $750k range real quick unless you want to live on the fringes and endure the gridlock that is EVERY DAY NOW! The prices around here are ludicrous unless you are one of the wealthy elite. Forget about it if you are an equity locust trying to “upgrade” at this point as those days are gone. While Paul Allen is sinking lots of money into the Lake Union area, hoping to create lots of high paying biotech jobs, etc., this place is hopelessly overpriced with bigtime problems. If Microsoft and Boeing had a few hiccups (layoffs, etc.) the economy could crash in a heartbeat. Seattle seems to draw the well-educated 20-30 something nerds. The nightlife is very average at best, and the people not overly friendly or attractive. As far as a destination for retirees, well, forget it. While the area is beautiful, the weather is never going to be a selling point. Let’s be honest. How many people want to spend the last days of their lives in a place with more than six months of gloomy, overcast skies and seemingly nonstop rain and drizzle? And if you have allergies or respiratory problems, good luck! The whole “it’s different up here” bullshit is just that. This place is going to crash hard.
Was in response to SeattleMooses comments above. Am not sure how it ended down here.
Just got a happy talk postcard from a realtor. It talks about some properties in my neighborhood selling for 33% above comps. Well, that
property has had a ton of upgrades. It open housed a month ago and I
guess it’s still on the market. In the past, the postcards would say that
this property sold for such and such a price.
Then it says that Interest rates are up, but they are still very attractive to buyers. They are actually quite a bit lower than the 20 year average.
We don’t have that many properties in our neighborhood for sale but I haven’t heard any sales lately and do know that there are about 8 for sale. I think that the asking prices are high and really high for one.
Must be cash buyer cause it would not appraise if it were 33% higher
It’s priced 33% higher. Doesn’t mean he’s going to sell it there.