Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
Post weekend topic suggestions here! Also, send in your housing bubble photos to:
photos@thehousingbubbleblog.com
A schedule note; this blogger is taking the holiday off, so on Monday looks for a Bits Bucket and Labor Day predictions thread.
Name:Ben Jones
Location:Northern Arizona, United States
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Photo Submission: hbbphotos@gmail.com
View the HBB Photo Gallery *updated 4/13/2008
Just finished reading this article on a link from itulip.com
http://tinyurl.com/h2hx7
Goldilocks Data from the Ministry of Truth, and Where is Joe Soccer Mom’s Money (from yesterday):
http://www.xanga.com/home.aspx?user=russwinter&nextdate=9%2f1%2f2006+23%3a59%3a59.999
HIC is dying and MIC may die when Dems take over
wow, deflation central ?
happy Thaksgiving
http://biz.yahoo.com/ap/060901/construction_spending.html?.v=2
construction and RE employment is underreported
many contruction deals are off the books and the self employed RE/Mort agents can’t easily collect unemp
so it’s BS folks !
The Bill Gross piece is one of best I’ve read on the long term financial issues.
Even if social security and Medicare were truly backed by financial assets, someone would have to produce the goods and services those assets claimed. Not enough goods and services, then the financial assets bid up their price — inflation.
Of course, the U.S. could have underconsumed while lending to developing nations, then cashed in later to import goods from them. That’s what China and Japan are doing. They are expecting our children to produce a surplus, in addition to caring for us and our parents, while somehow raising their own children as public schools collapse and taxes soar? Unbelievable.
Going house hunting, Ben?
LOL. Just kidding.
Let’s have some fun over the holiday… post funny media and pictures related to the bubble:
The infamous Suzanne Researched this:
http://www.youtube.com/watch?v=Ubsd-tWYmZw
David Lereah from NAR and his DotCondos:
http://www.youtube.com/watch?v=lPnA1cnewLA
Today Show “Bubble Bursting” & “Fed Sez Boom is Over”
http://www.youtube.com/watch?v=lEIc9Mi5K08
Discount-o-rama
http://jatshergill.com/images/realestate.gif
more…
Heloc fun:
http://www.youtube.com/watch?v=O0vBO2oKBb4
Old WAMU ad with “flexible lending rules” makes Paul in a good mood. Watch now in our present day context and I’m thinking he’s about 1 week from going postal.
http://www.youtube.com/watch?v=laot_Eomr3s
more… Heloc fun:
http://www.youtube.com/watch?v=O0vBO2oKBb4
Old WAMU ad with “flexible lending rules” makes Paul in a good mood. Watch now in our present day context and I’m thinking he’s about 1 week from going postal?
http://www.youtube.com/watch?v=laot_Eomr3s
Good links
Hello,
We just came back from Virginia’s Eastern Shore. We stayed in a little town called Cape Charles. I realized that for me the entire town was a micro example of the real estate bubble for most of America based on what I have learned from this blog an other sources.
Cape Charles died as a viable community in the 1950’s when the ferry and railroads left. It was a nice town with some the houses reminding me of Savannah. By the 1980’s the housing stock, especially the wooden frame/shingle houses were in serious disrepair. In 2002 approx. a developer began breaking ground on a Nicholas golf course, marina, and housing development.The houses are currently priced around $750k and up.
This brought in a lot of people who started buying up the old houses and rehabbing them. Money was brought in to improve the beach. The creative types who are drawn to beach life began opening upscale restaurants an galleries. The rehabbed houses are being listed in the 300k range.
Now? The fancy development is half way built out with a lot of empty houses. The town looks like it is literally for sale with a sign in every third yard. I told my daughter to look around as everything she saw was not going to be there in a few years in the same shape. So will go a lot of communities.
Let’s have some holiday weekend fun… Post fun bubble media, pictures, and stories…
The infamous Suzanne Researched this:
http://www.youtube.com/watch?v=Ubsd-tWYmZw
David Lereah from NAR and his DotCondos:
http://www.youtube.com/watch?v=lPnA1cnewLA
Today Show “Bubble Bursting” & “Fed Sez Boom is Over”
http://www.youtube.com/watch?v=lEIc9Mi5K08
OK, as of today it’s September.
How do we think the August figures will look compared to July, which was (like June) right on the edge of a YOY decline in national median?
I’m torn. At least in San Diego, inventory has leveled off (slight decline). I doubt sales are increasing, so I’ll guess that generally the volume is decreasing (which is to be expected at this time of year).
So, is the real estate market like the stock market and nature? Liquidity makes for price stability (at some level) so if sales volume is down that means that prices can more wildly fluctuate. I would think there is little upward impetus at this time. In nature, the weak get culled. I’d like to think that the homes that remain on the market now are truly “motivated” sellers that a real reason to sell. They or their agent should also know that the typical selling/buying season is months and months away.
So I think we’ll see some decent downward (and negative YOY) in August with the surprises coming faster and more significant each month thereafter. Is this contrarian? Is winter normally boring? (More desparation, more people realizing it’s time to get out now while they may be in positive territory, and more people with their toxic loans reseting.)
Here in NYC, the Great Depression led to an upgrade of the housing stock.
The city had just passed housing and building codes, and with people forced to stay with their parents and fewer new households, the demand for housing went down. It wasn’t profitable to upgrade the “old law” tenements with bathrooms and the like, so they were just boarded up. All over the Lower East Side, you had buildings with ground floor retail and nothing above for decades. In the 1970s, people squatted in them. Finally, in the last two decades, some of those buildings have been rebuilt.
What will be boarded up this time? 1950s era cape cods in original suburbs? Or will the poor move out of the cities to the original suburbs, which they can suddenly afford?
http://www.latimes.com/news/local/valley/la-me-skyview31aug31,1,4739567.story?coll=la-editions-valley
The biggest underreported story regarding the Re Bubble runup in Scal is the huge buying of homes by immigrants. This is taking place in the more affordable outlying regions of the Inland empire and the outer desert areas such as the Antelope valley(Palmcaster, vivtorville, adelanto, apple valley, coachella valley, ect). Also taking place in the innor LA County run-down areas such as the 710 corridor cities and in the LA innor ring margins.
Most of these recent immigrants have no doubt used the lowest subprime loan products, and are likely candidates for defaults down the road.
The immigrant purchases created two problems. The first problem was orchestrated flipping fraud with a pre-planned default of the mortgage. e.g First buyer at 400K sells to brother in law for 600k - split money and leave country - side effect is new comp for appraisals.
The second problem is not fraud but default (for whatever reason) resulting in loss of workers fleeing the country to avoid laws. Effecting all those looking for lower paid workers.
And not just Mexicans either. This to me is one of the biggest undiscussed issues in this bubble and will have wide repercussions.
I wonder if we’re also going to see the same effect as occurred in the 1970’s-1980’s in the UK, where large numbers of then-recent immigrants sought to ‘maintain the dream’ and moved to rundown industrial cities where housing was very cheap. Once there, classic poverty trap problems ensued and prevail to this day.
Possibly this was exacerbated by the UK welfare system, where people from places like Pakistan and Bangladesh could then actually improve their living standards by moving from the London area to towns like Bradford, where due to population decline there was an ample supply of accomodation available at nominal rent, and living off welfare.
I could imagine immigrants (legal and illegal) being tempted to try their luck in places like (to use examples I have seen quoted on this blog) Detroit/Buffalo/Waco? Maybe it’s already happening, and maybe it will impact at the bottom of the burst in places like the Phoenix outliers.
Heck, I’ve seen numbers implying that even a season’s stoop labour from a family could generate enough to buy a run-down house in some locations outright.
This could be a topic in itself.
An example of “soft landing”, in Sacramento, CA
MLS 60011176
ZipRealty Price Track: DOM 211
Price Reduced: 02/21/06 — $485,500 to $480,000
Price Increased: 03/06/06 — $480,000 to $499,900
Price Reduced: 03/15/06 — $499,900 to $495,500
Price Reduced: 04/03/06 — $495,500 to $489,000
Price Reduced: 04/20/06 — $489,000 to $480,500
Price Reduced: 05/01/06 — $480,500 to $475,900
Price Reduced: 05/03/06 — $475,900 to $472,500
Price Reduced: 05/17/06 — $472,500 to $470,500
Price Reduced: 05/23/06 — $470,500 to $465,900
Price Reduced: 06/01/06 — $465,900 to $465,000
Price Reduced: 06/06/06 — $465,000 to $462,000
Price Reduced: 06/15/06 — $462,000 to $459,999
Price Reduced: 06/24/06 — $459,999 to $459,000
Price Reduced: 07/18/06 — $459,000 to $452,000
Price Reduced: 07/23/06 — $452,000 to $437,500
Price Reduced: 08/15/06 — $437,500 to $434,900
Price Reduced: 08/29/06 — $434,900 to $430,000
Oh for the love of Pete. If the owner had just ripped the bandaid off and reduced the price (say, instead of raising the price $20K, what the hell, back in March, they’d dropped it the same amount), they might have sold it. Per Zillow, it was purchased for $309K back in ‘03, so assuming it’s not HELOCed to dea- what am I saying, of course it is.
The stupid, it burns!
But ,I think the lower end houses will remain more stable in the upcoming downturn . That’s what I have observed in prior downturns ,(except if its in a area were major job loses take place ).The upper middle takes a major bath in downturns in the past that I have witnessed ,(that would now be the 700k to 1.5 mil range ). Who knows what’s going to happen with this market this time .It stands to reason that all price ranges are going to be going down .
Wizard, that is a great observastion. i am out of the market now (obviously), but for at least 5 years I have been trying to tell people how housing downturns work. The stuff at the bottom is always more stable, because there are more people who can afford those homes. Its the stuff that is now priced above $300,000 that is going to get ugly. Especially as you mentioned the stuff in the $750K range. These people cant really afford their homes (for the most part), as they would need to make upwards of $200,000 under traditional lending standards. Oftentimes people say to me “but we can afford the payments”. What these people fail to realize is that their home is only worth what a similar income-level family can pay. So if rates go up (or the ARM stuff goes away) prospective buyers have to qualify at the current rates/guidelines. If they cant, then by definition the home is worth less money. Similar principle when you look at FB’s who bought homes above $500,000 to rent out. How many people can actually afford to pay over $2,000 in rent. Here’s a clue for these FB’s - not many. So when they are unable to secure tenants for their homes, then “walla” the lightbulb turns on in their head: “I’m *ucked aren’t I”
Beg to differ…
a) Job losses hit the low end first and hardest.
b) Low end households tend to have little or no savings.
c) Low end households have little or no assets to liquidate.
Watch “Cinderella Man” for a good take on what’s coming.
The Australian experience over the last couple of years is quite complex and doesn’t fully support either you or wiz ; I will post at greater length if this is used as a topic.
if anyone gets bored this weekend…
“OFHEO is seeking public comment on the proposed strategy. First, review the five-year plan at http://www.ofheo.gov/media/pdf/OFHEODraftStratPlan83106.pdf. Then, send an email addressed to Susan Jacobs to strategicplan@ofheo.gov no later than September 13.”
http://www.dsnews.com/view_story.cfm?id=443
What are people’s opinion on today’s employment numbers? 128K jobs added in August. I just happened to do a little digging to see how many jobs the CES Net Birth/Death model added to the total this month. Would you believe +121K? So that means we gained 7K if you exclude this questionable government model. Utterly amazing. Look for yourself. Here’s the link.
http://www.bls.gov/web/cesbd.htm
Ben,
I’ve got a Labor Day weekend topic suggestion. It’s good time to look back at how far we’ve come and what the important milestones have been. I’ll suggest a format:
1. What marked the top of the housing bubble? (e.g., last summer’s Time magazine cover)
2. What have been the three most important events/milestones/turning points since the top? (e.g., July 2006 — Countrywide CEO says he’s never seen a soft landing in his 53 years)
3. What will be the next key milestone? (In my opinion, when public perception shifts from the housing bubble to the lending fiasco — the Business Week cover seems to be pointing in that direction).
Next key milestone - negative YOY price change in the national median for existing homes.
No matter how flawed that measure may be, it will be a headline statistic that the MSM will use. Joe/Jane Sixpack will see it and react.
Anger management.
I’m seeing some very touchy stuff on some housing blogs. I’m no anger manager, and I’ve ranted at some possibly nice folks. Forgot they were people like me, with kids to feed, just with different abilities and tools.
How to constructively communicate with agents, sellers and Joe’s on the street about the issues.
Let’s all agree to live together. Some folks are gonna burn. Face it, but don’t push their faces in the pee just because they pissed on the rug.
A lot of people here are highly-educated, learned on the job or had very terrific mentors. There are regular people out there who didn’t have the same opportunities. Our schooling system has failed. They never even learned to balance a checkbook in school. Remember, they are getting their stock advice at the legion hall.
“How to constructively communicate with agents, sellers and Joe’s on the street about the issues.
Let’s all agree to live together. Some folks are gonna burn. Face it, but don’t push their faces in the pee just because they pissed on the rug. ”
I think the backlash directed at many of these people is a result of their own arrogance and know-it-all attitude that they projected over the past five years. I think they brought it on themselves with all of the buy now, RE never goes down, etc. crap. They took the ARMs, HELOCs, etc. resulting in the massive price escalation, while we took normal mtges and did the what was right for us. Now, we are supposed to have sympathy/patience for/with them????
Sorry, I don’t think so….Homie don’t play dat!
The “rode” the crest, they crash with the wave.
Pen,
I give your entire post… two snaps up!
“Face it, but don’t push their faces in the pee just because they pissed on the rug.”
Not after I’ve listened to them tell ME how stupid I am for not buying a house - ‘real estate only goes up,’ ‘rent is just throwing your money away,’ ‘I’ve already made 200K’ or having to stomach the general bragging of how great they are at ‘investing.’
These morons deserve every bit of ridicule they’re getting.
Ben,
Hope you have a great holiday (what’s that…one day off in how many months???). You deserve it!
Thanks, Ben!!!!
PRIME CANDIDATES FOR SHORTING / PUTS, NOW & LATER
Obviously, the HBs are hot now, banks/finance soon thereafter, retail not far behind… but what else?
p.s.: Here’s one I’d like to short in the not-so-distant future: chrome wheel manufacturers. I love nice wheels, but come on… everybody’s kids shouldn’t be running around on $5K rims.
I suggest this as a topic for discussion.
On Friday, Sept 1, the discussion concerning “Paternalistic regulations” caused me a great deal of concern. The reasons are that I regard government bureacracy somewhere between slime molds and city rats. I do not think many if any on this blog wish to see the gov step in and bail out the FB’s or see forced national insurance to bail out borrowers in Florida, California or Wisconsin etc.
I read the comments and the general attitude was “Requiring some significant level of real disclosure is hardly onerous regulation.” There are “real disclosures” in every financial transaction in a mortgage one document is called the “Note” - this spells out the terms and conditions of the loan , another document is called the Truth in Lending - this spells out the interest rate. These are not difficult to read.
My concern is that it was not the banks that created this mess, it was a quasi government agency. That thru incompetence this entity created a bubble in formerly inviolate housing. Now some are asking this same entity to create new laws?
IMHO it is in the best interest to eliminate as many bureacracies as possible not add to them. Does anybody feel safer now that we have Homeland Security? Is anybody worried that our governments budget is improving to only a 430 Billion deficit? When I grew up, it did not require 2 people working to buy a home, a house loan was 10 - 15 years, a car loan was 1 year maybe 2 and we had the highest standard of living in the world. Now our countries standard of living has dramatically dropped - 50 year mortgages, 6 year car loans, 2 people working to meet ends let alone save!
I submit these problems are the direct result of an expanding bureacracy.
I submit these problems are the direct result of an expanding bureacracy.
——————
I submit these problems are a direct result of an expanding credit market (largely private money). IMHO, regulations (especially with respect to business, truth in advertising/lending) are a necessary component of a civilized society. As a registered libertarian, I am extremely opposed to govt’s intrusion into peoples’ private lives (from seatbelts, helmets, smoking, parenting, marriage, etc.); however, if we intend to have something other than a third-world society and economy, we need a neutral and honest entity to monitor the markets and protect against fraud. I believe the best possible choice is a govt run by the people and for the people (which is not what we have now, but that is O/T).