Bits Bucket And Craigslist Finds For September 8, 2006
Post off-topic ideas. links and Craigslist finds here.
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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socalmtgguy is out with a new post
always worth reading
http://www.housingbubblecasualty.com/
Using “you” in place of “your” is almost as bad as using “loose” when you mean “lose.” I have extreme pet peeves. But I do not take businesses seriously nor patronize them when they do not use proper spelling.
aftre all the warning here a new look from cramer&co
on the homebuilders. not too interesting
http://www.thestreet.com/markets/activetraderupdate/10307770.html
Here is a VERY interesting article just for the “Tin Foil Hat” crowd concerning the Goldman Sach’s/Greenspan/PPT link and stock market. To the non-tin hat guys; nothing going on here just move along and have a happy day.
http://www.siliconinvestor.com/readmsg.aspx?msgid=22789705
Oh happy happy day!
danke/thanks!
us and free markets.
long long time ago…….
very good post from mish
more on deflation etc.
http://globaleconomicanalysis.blogspot.com/2006/09/beige-book-highlights.html
I’m no monetary scientist , and while I understand the logic behind some of the arguments for deflation , I just have a hard time believing it will happen. The unprecedented increases in money supply is what sticks in my craw. I think I understand that were debts to be paid off under a fractional reserve system such as we have, money supply would decrease- but I see no sign of that happening. I mean who actually pays down debt in this day and age. Let me ask though - if we have any eco-historians on the board - is there any historical precedent for deflation following a massive increase in money supply? Thanks in advance for input.
From: http://www.amatecon.com/gd/gdcandc.html
“The Fed took several actions that, in retrospect, were quite bad. The first thing it did was to inflate the money supply by about 60% during the 1920’s. ”
Does that answer your question?
From: http://www.friesian.com/money.htm
“Instead of inflation, sometimes loans and credit get overextended and their abrupt collapse can decrease the money supply to produce a conspicuous deflation.[10] This was particularly severe in 1929. Such credit crises previously had healed themselves in a year or two, as bad loans were written off and the extension of new loans began again, without causing a Depression.[11] Herbert Hoover and Franklin Roosevelt, however, both thought that high wages were the key to healing the economy. They promoted high wages all through the Thirties. But, in a deflationary period, that far overvalued labor, which in effect was priced out of the market. People with jobs, especially union jobs, were very well paid in the Thirties, but unemployment peaked at 28.3% in 1933 and was still up at 20% in 1939 — it had previously never been higher than 18.4% (in 1894). The inflation and price controls of World War II broke the logjam of wages, and unemployment didn’t return after the War (to everyone’s surprise).”
I think you can count on the government doing the wrong thing again this time.
Thanks Kim. I hope we do not have a depression again , but if we do , all bets are off!
I hope we don’t have a depression, too, but I would rather see it coming ahead of time than to let it hit me with my head in the sand. The goverment could let things follow their course and the economy could work out the imbalances in a few painful years, and get back on solid ground, but politics being what they are, that isn’t likely.
“I think you can count on the government doing the wrong thing again this time.”
Increasing the minimum wage would be a good start (to the wrong thing), IMO.
Kim, I *really* want to disagree with you right now. I *really* wish I could…
But I believe the government will do what they can to protect wages and in the process muck up the whole economy. Unfortunately the first thing they will do is restrict trade (Tariffs/protectionism/China bashing/whatever):
1.) That suddenly ends the tap of easy money from forign sorces. Abrupt might be a better word.
2.) If the job is import/export related, its gone
3.) Quick domino effect. e.g., stocks, banks, jobs that depended on the wages of those in import/export
Don’t believe me?
Smoot-Hawley tariff act
http://en.wikipedia.org/wiki/Smoot-Hawley_Tariff_Act
Its often believed that the anticipated passing of this tariff act spawned the stock market crash of 1929.
Neil
“sometimes loans and credit get overextended”
I think it is safe to say that this is one of those times.
For those who think the deflation of 1929-1932 was caused because the Fed didn’t inflate enough; the Fed tried like mad to inflate during this period, but economic forces were too strong to overcome. Check out this site for the details:
http://www.libertyhaven.com/regulationandpropertyrights/bankingmoneyorfinance/moneygold.shtml
Thanks Kim. One major difference I see is that in that time period the US was still on the gold standard, right?. Wouldn’t this make inflation a much more difficult policy to pursue than the current fractional reserve system? What I mean to ask is that currently isn’t the only way to see the money supply decrease through the reduction of debts either public or private , or both? Is it possible to have defaltion without a reduction in money supply? TIA
It depends on your definition of deflation. My definition of deflation is a reduction in the money supply, but if you mean can prices drop without reducing the money supply, the answer is yes, if there is a decrease in velocity of money.
I know that the article is long, but the point as far as the Fed’s ability to cause inflation at will is that when economic conditions and social mood cause people and institutions such as banks to want to flee to safety and cut down on debt, this desire overrides the efforts of the Fed to inflate. The Fed creates more money in one place while it is disappearing at a faster rate somewhere else. I don’t see why the fact that we no longer have a gold standard would make this change is social mood less likely to happen, if anything it would be more likely to happen because the Fed has had so much more opportunity to inflate, making the resulting desire to pull back just that much stronger. You aren’t seeing a reduction in debt yet because we are at the very beginning of the change, but the social mood is changing as shown by the turning of the RE market and the stock market, which is returning to the bear market.
Thanks. My head hurts thinking about all of it. LOL. My observation of the Gold Standard did not include a look at social moods , but was rather just an observation that it made it difficult , at least much more difficult than now imo , to pursue measures to combat deflation. I look forward to seeing if Americans can embrace debt reduction and hope that they can , though the larger problem seems to be that I am not so sure that the government itself can especially since so much of the true deficit is in the form of future transfer payments social contracts etc etc. I just don’t see it being possible , but who knows.
Anyway , thanks for the articles. I enjoy seeing both sides - here is link to the counterpoint that I found that is also intere
sting:
http://www.321gold.com/editorials/saville/saville071806.html
and
http://www.321gold.com/editorials/saville/saville081506.html
what finally ended the depression was WWII, but not in the way you thought. it was the END of the war and the unleashing of the consumer, coupled with those returning from the war, that sparked the expansion after years of not spending because people had a depression mindset.
Here’s how I see it:
Inflation = expansion of money and credit
Deflation = contraction of money and credit
Price inflation = general increase in prices
Price deflation = general decrease in prices
Generally, prices and money supply goes hand and hand, so the term inflation can be used interchangeably either way, with the Austrian meaning or the common meaning (i.e. when one kind of inflation happens the other is likely to occur, and vice versa).
But when the two are manifestly decoupled, that is when the Fed has lost control, and all bets are off, and right now things aren’t looking so good.
Another way to look at it may be to call it “Fed” inflation (instead of Austrain inflation, or simple inflation) as compared to “price” inflation. BOTH money supply and prices ought to be considered in any analysis of inflation. One shouldn’t look at it as one or the other.
“Fed” inflation the fed has control over. “Price” inflation the fed does not have control over– that is ultimately controlled only by buyer and sellers in the free market. But the Fed TRIES to have control over and regulate prices in the marketplace by doing what it can do: affecting money and credit supply. Whether it succeeds, or is beneficial to the overall economy, is another discussion.
hello from germany
i think japan is a good example of how the boj failed for nearly 10 years to inflate.
money was free and nobody wanted to borrow or better the banks don´t want to lend.
this year was the first year that they have had a groth in credit from the banks. of course the gouverment spent like mad. but no consumer wanted to borrow.
it is possible.
i will be interresting to see how this fits with the mentality from the us consumers. i have problems to belive that this will happen in the us. but maybe if the crises is deep enough….
sign of the times: Dutch ABNAMRO bank just fired a topmanager who told a major newspaper that the bank was too easy in lending money to people who ‘invested’ in a tulip bulbs fund that went bust (not in 1635, but last year). Are the times of easy money coming to an end?
i hope!!!!
Question:
Sortof for GetStucco:
Many moan and groan about the Homebuilders stock RISING after bad news, presumably due to the PPT.
Is it possible (honest question) that this is due to the traders?
It seems to me, that if there are people who shorted the market, they may be closing the position to take their profits (which would make the HB stocks rise a little bit), or perhaps people who sold a put who are now buying to cover their sold put (did I get that right, I sometimes confuse myself) or there could be people who believe the hype and are Dollar Cost Averaging all the way down. Not to mention the stock buybacks that have been announced across the board.
Just wondering if the HB stocks are maybe overrun by traders now, and that accounts for the odd behaviour of their stock.
clouseau
“Is it possible (honest question) that this is due to the traders?”
Yes. My darkest thought is there is some kind of behind-the-scenes public-private partnership involved, but I have no basis to test this empirically. But it could just be due to dumb and dumber individual-investors, or maybe even institutional money managers, who believe that homebuilder shares are beaten down and represent good value, given their low P/E and price/book value ratios…
Well,
I may be wrong on this, I am no stock expert.
When you purchase a short position in a stock, what you are actually doing it borrowing the stock with the promise to pay it back later.. I am sure someone can explain that alot better then I can.
Anyway, the point is this, as people buy short positions in the HB stocks, the demand for that stock goes up. As the demand goes up, so does the price. I have NO evidence to support this, but what may be happening is people are purchasing lots of shorts of HB stocks. This will push up the price. As we always say, supply vs demand. There is more demand for the stock; because people want to borrow it to pay back later.
And, I agree, Wall St smells blood. Where there is blood, there is money to be made. So, I think that regarless of the bad description I gave of short selling, what we are seeing is some weirdness because of large instituational traders getting positions on these stocks for the coming drops in prices.
You are pretty close.
You are borrowing a share (from a broker) and selling it again on the market. This drives prices down (which is why shortsellers can only short on an uptick in price).
When the short position is covered, the stock is repurchased and would theoretically drive the share price up.
Wouldn’t a short position in essense create an ‘inflation’ in the particular stock, and hence lower it’s value, the same way that the central banks use shorts of paper silver and gold to lower the price of those precious metals. Say someone had product X that was in short supply, but wasn’t a necessity and wasn’t needed immediately, but they wanted a lot of money for it because there was only so much of the stuff and they had the lion’s share of it. You’re forced to buy from him at that price. Now, Joe Schmoe Central Banker comes along and claims to have 10 times as many claims on it (his short positions), that in turn drives the price down. Then when the price goes down the central banker closes his short positions, thereby controlling the price of silver and gold. Same should apply to HB stocks, no?
I think the weird behavior we’re seeing is stocks purchasers basically attempting to catch falling knives along with builders companies buying back their stock (creating demand and limiting supply of those overpriced stocks). Of course the CEOs already sold their personal shares, now they’re using there stockholders earnings to buy back stock, but the CEO is already in the clear.
Shorting stocks has a nice benifit
1. Since it creates sales in the stock, it can often reduce the peak of an overpriced stock.
2. Long term investors get extra income by loaning out their stock. Unfortunately, most brokerages pocket every penny of this…
3. After a stock drops *below* its fair value, the shorts cover their position pulling the stock back up toward fair value.
But then there are short squeezes, stock manipulation, etc. that makes the market less than ideal.
Neil
New Century Financial Corporation Announces August 2006 Total Loan Production of $5.8 Billion
“While August’s total loan production volume of $5.8 billion was down 5 percent compared with our record production volume in August 2005, it represented a 9 percent increase over July 2006 and we are pleased with this level given market conditions
“We are also pleased with the quality of the loans we are originating. August’s production includes an increased amount of our highest non-prime credit grade and a reduction of interest-only loans to 17 percent of non-prime production from 35 percent in August 2005. Additionally, we have become more geographically diverse, reducing California-based loans to 32 percent of non-prime production in August 2006 from 37 percent in the same period a year ago.
what a joke. they were forced to go to higher subprime from the mbs market.
this is from fleckenstein
Turning to the financial-rot department, New Century Financial missed its number slightly, though that’s totally immaterial. What is important: the fact that loans it held for sale ballooned sequentially from $6.3 billion to $9.3 billion. (Of course, that’s on top of the $16 billion or so that New Century holds away from that particular category.) Nevertheless, the company chose not to bump up its loan-loss reserves.Further questionable developments: “Other income” was up radically year-over-year, and no one seems to have a good handle on exactly what’s in that category.
More ominously, FPDs (first-payment defaults) were up considerably. A very knowledgeable friend who’s an insider in the subprime industry said: “That is the single-worst thing you can see in a company — people who never make the first payment. I cannot begin to tell you how bad things are, and getting worse.”
since than they were forced to sell first franklin to merill lynch
http://www.immobilienblasen.blogspot.com/
Some very candid comments from Janet L. Yellen, president and CEO of the Fed’s San Francisco branch:
“The Treasure Valley (Boise) has not been spared from the slowdown in the U.S. housing market, the regional head of the Federal Reserve Bank said Thursday.”
“She said she does not expect a housing market collapse, “but we can’t ignore the risk that a more unpleasant scenario could unfold.”"
“Another risk is that as home-price appreciation rates slow, consumer spending could be affected as homeowners are unable to tap the skyrocketing equity in their homes to meet their cash needs, Yellen added.”
http://www.idahostatesman.com/apps/pbcs.dll/article?AID=/20060908/NEWS02/609080324
“It’s not surprising that people were pulling money out of their homes to support their spending,” she said. “But that piggy bank isn’t getting as full as quickly now.”
in reference to all the fed members and their comments.
they are clueless or they are all spinning things to the positive.
or both? i don´t know what is worse.
clear to me is that they are very very overratet.
here is one from bernake in oktober 2005
bernanke “There’s No Housing Bubble to Go Bust”
http://immobilienblasen.blogspot.com/2006/09/bernanke-theres-no-housing-bubble-to.html
“bernanke “There’s No Housing Bubble to Go Bust””
The Fed is going to look like a pack of fools by the time this is all over.
maybe they are fools…..
I like LA Times [Reuter's] start
http://www.latimes.com/business/la-fi-econ8sep08,1,2772025.story?coll=la-headlines-business
“She said she does not expect a housing market collapse, ”
Isn’t Yellen aware how often this line is repeated in the MSM? At this point it sounds so much like whistling past the grave yard…
“It’s not surprising that people were pulling money out of their homes to support their spending,” she said. “But that piggy bank isn’t getting as full as quickly now.”
Main street to Central Bank Temple: The piggy bank is empty, and a giant sucking sound of falling home values is vacuuming out the oxygen.
That piggy bank is spitting quarters out of its snoot - right into your eye!
She is the mother of the California housing bubble. Did she take any action or raise any concern in the last four years? Nope.
An eye opening article on the front page of the San Diego Union today about Nat’l Real Esate Prices cooling.
David Pinnochio-Liareah still cannot tell the real truth. He said that falling home prices is a “bit worse” than we had anticipated.
Just a BIT you nose lengtthening liar?
By Jeremy W. Peters
NEW YORK TIMES NEWS SERVICE
September 8, 2006
Concerns about the U.S. housing market deepened yesterday as the nation’s leading real estate brokers’ group issued a more pessimistic outlook for the year, and two major builders cut their earnings estimates by hundreds of millions of dollars.
The news added to a growing unease about the economy and helped drive shares on Wall Street lower for a second straight day.
The latest report to predict a decline in the housing sector was notable for its source. The assessment from the National Association of Realtors, which has until recently been generally upbeat about the health of housing, was the group’s least optimistic yet.
“The boom is cooling now,” said David Lereah, the chief economist for the association, who added that falling home sales have been “a bit worse than we had anticipated.”
The group said that it now expected sales to fall further than it has said – about 7.5 percent this year compared with an earlier projection of a 5 percent decline.
It also said it expected prices nationwide to drop during the next few months from the same time one year ago – instead of appreciating modestly. If that happens, it would mark the first time since 1993 that U.S. median home prices have fallen in any given month from one year earlier.
The revised Realtors’ forecast came on the heels of announcements from KB Home and Beazer, two of the nation’s largest home builders, that profits this year would be lower than initially predicted.
A third builder, Hovnanian Enterprises, said yesterday that its third-quarter profits fell by more than a third. It left its guidance for the year unchanged.
The Realtors Association said it expected both home prices and sales would slide in the coming months as the upper hand in the housing market shifts from the seller to the buyer. But that shift has yet to occur fully, with buyers and sellers staring each other down while unsold houses pile up.
“The seller is a lot more stubborn than any of us had anticipated,” Lereah said. “Sellers for the last five years have been in control. It’s very hard for them to give up control and revise their expectations downward.”
But once sellers begin to drop their asking prices, housing industry officials hope that home sales will start to rise again.
The rising number of homes on the market and aggressive discounting by home builders are putting pressure on sellers to lower their prices, said Ronald J. Peltier, president and chief executive of HomeServices of America, a subsidiary of Berkshire Hathaway that owns real estate brokerages nationwide.
“It’s going to take the rest of this year at a minimum for that inventory to be liquidated,” he said. “This period of correction is going to take a little while, but it’s healthy for the market.”
The Realtors Association predicted that, at most, prices will decline for two or three months before picking up again. For the year, home prices are still expected to appreciate, on average. Not since the Depression have home prices fallen over the course of a full year.
There are already signs that prices may soon start to decline nationwide. In a report issued last month, the Realtors Association said home prices in July barely inched up. The median selling price for existing homes, which rose at double-digit rates for much of the previous two years, rose only 0.9 percent compared with a year earlier. And that rise was entirely dependent on a 3 percent median price gain in the South, the only region in the country where prices did not fall.
San Diego County has been ahead on the national housing slowdown. DataQuick Information Systems earlier reported county sales in July totaled 3,370 homes, down 29.3 percent from last July.
The median price for all San Diego homes sold was $487,000 in July, down 1.8 percent from July 2005. The resale single-family-home median was unchanged at $560,000, while the resale condo median was $384,000, down $14,250 or 3.6 percent over the same period.
Liareah (not to mention Robert Toll) are now playing up the direness of the situation in the hopes that the Fed will throw them a lifeline.
“The assessment from the National Association of Realtors, which has until recently been generally upbeat about the health of housing, was the group’s least optimistic yet.”
My vocabulary must me larger than the one of the reporter. We have a WORD for “least optimistic” PESSIMISTIC.
“The Realtors Association predicted that, at most, prices will decline for two or three months before picking up again”
This is a very specific prediction, and will be easily verifiable, although in my ignorance I don’t know what factors would allow a worst case pricing limitation of two or three months down, and then not only returning to today’s price but going beyond. I was just as ignorant in understanding their prediction six months ago that, at worst, prices would rise only 7 or 10% this year.
I liked the prediction of Ronald J. Peltier, president and chief executive of HomeServices of America: “It’s going to take the rest of this year at a minimum for that inventory to be liquidated,”
WTF? Didn’t we just see a chart the other day showing nearly twice as many houses have been built than are actually needed? All I can figure is this Bozo must be expecting a clearance sale around Thanksgiving.
fools day?
[KBH] CITIGROUP CUTS KB HOME PRICE TARGET TO $75
That target will take more than a little bit of help from the Working Group on Financial Assets to reach! When is the target date — 2020?
a very good call from stephen kim (analyst).
i hear him often on the calls. i wonder really if he is
on drugs or something.
that means his older taget must even been highr and he must a have a “superstrong buy” on the stock .
because the upside to his target is 88%!
i love wall street
http://www.philly.com/mld/inquirer/business/15465389.htm
The Economy | Housing decline: How ‘temporary’?
You’ve got to love the fact that the NAR is “FORECASTING” a price decline for the year. Thank goodness for this level of expertise.
In the spirit of NAR forecasts, I’m offering a forecast as well:
2 days ago, we generally find that the Red Sox will lose to the White Sox, 8-1.
http://www.atimes.com/atimes/Global_Economy/HI09Dj01.html
America’s unreal estate problem (from the Asia Times)
Good article. Hits all the main points in a well-written style. The author is an economics PhD student in MA doing freelance work for this Asian newspaper. http://www.selvesandothers.org/view2141.html
“It’s not surprising that people were pulling money out of their homes to support their spending,” she said. “But that piggy bank isn’t getting as full as quickly now.”
It’s not surprising?!!! That’s just why we are where we are today. This teenage, valley girl, entitlement, I want it now mentality. And she isn’t even ashamed to blurt it out to the media!!
http://www.charteronebank.com/promotions/homeequity/luckyzero.aspx
Scratch-off loans. LOL.
I’m impressed with my Acer monitor — for a low end model, I hadn’t thought it would be able to display, readably, a font size as small as the fine print that constitutes most of that tout.
LENNAR CUTS 3RD QTR OUTLOOK
Homebuilder Lennar Corp. reduced its third-quarter earnings outlook on Friday, citing increased sales incentives driven by a soft housing market, as well as certain land adjustments.
“Certain land adjustments” OOPS…
Interesting action on the home builders today. The stocks so far are holding up and even increasing, but under very high volume. Evidently a lot of people are bailing out and the “value” crowd is snapping up the shares
Tried to tell you all this would happen. Doesn’t mean they won’t crater down the road but now is not the time to be shorting them or buying puts.
My opinion and worth what you paid for it.
I was looking a homebuilder chart, a few years ago some of those stocks were in the single digits.
Through Mr. Miller’s excellent site I found this list of RE terms that are considered discriminatory. Watch out for the use of “family room.”
http://www.mvfairhousing.com/ad_word_list.php
I think the term “family room” is indeed acceptable, according to the site. (They use different fonts to show acceptable/ questionable/ discriminatory.)
What really gets me is that you can’t say “must be employed”!! Oh jeez, this is going to far. What about “must pass credit check”? That one is still OK… for now anyway. Er, right?
You’ve gotta love the ‘optomism’ of the realtors still polishing that turd out there:
“My marketing friend, you are a saleman, you are a marketer.Do what Sales People do. Sell.
Sell your industry, sell your market conditions. Sell emotionally, back that up with logical irrefutable facts. “Mr/Mrs Buyer if you wait, you could be priced out. If not you , then who will. Who will sway public opinion?”
After all if you truely believe. Then you should have no problem in convincing your prospects.What is your alternative?”
From this wack blog.
yes, they have shty credit
why don’t libs lend them their money ?
http://biz.yahoo.com/ap/060908/fed_mortgages.html?.v=3
The racism on this blog is disgusting.
Hey coward how come you arent killing brown people in the GWOT????
Too busy wearing sheets and burning crosses on Friday night?
Good write up about the (nearly) false marketing tactics by Home Builders here:
Homebuilders Get Comical - September 7, 2006
For example, teaser rates, “instant equity”, advertisting only monthly payment amounts not total sale price, etc.
Also, discusses hidden costs of these teaser loans.
Good read to forward to any of your friends who are enticed by these (obviously) bad offers.
jim juback “a houisng correction or a bust?”
http://articles.moneycentral.msn.com/Investing/JubaksJournal/AHousingCorrectionOrABust.aspx
nothing really new to us on the blog.
Anyone want to by a half finished bag of bricks in BedStuy for 3/4 of a mil?
http://www.propertyshark.com/mason/Reports/showsection.html?propkey=x79-22-90-15-113-7&ref=4sale
Anyone else seeing these kinds of ads for half-finished buildings? I’m seeing ever more of them on craigs and propertyshark. We should never allow these cowardly builders to cut n run this way…
PNC Financial says it will incur a $200 million pretax loss as it takes steps to restructure its investment portfolio in light of the Federal Reserve’s decision to hold the line on future interest rate hikes.
The Pittsburgh-based regional lender says that as part of the restructuring it will sell about $6 billion in securities, resulting in the estimated $200 million loss.
“As a result of these actions, management believes that it will reduce its securities portfolio credit spread and interest rate volatility exposures,” PNC said in a regulatory filing. “In addition, it will position the securities portfolio for a steeper yield curve while maintaining flexibility to extend duration through the interest rate cycle.”
PNC says it began reassessing its investment portfolio in mid-August, after the Federal Reserve decided not to raise interest rates again.
the reaction from the stock is up! close to a new 52 high.
the net income n 05 was 1.1 billion$. so this should be very significant. the pe on this years earning without the loss from today
is already around 14-15.
i am sure that when they have made a gain on the interest bet the stock would be through the roof.
strange
http://www.immobilienblasen.blogspot.com/
I got a call this week from my former neighbor in Atlanta. Turns out that the house that I just sold is already back on the market. Reportedly the new owner has told the neighbors that he is “not a flipper,” but he never really planned to live in the house for more than a couple years. He’s decided to move to “one of his other houses in Atlanta” and therefore needs to sell. OK. So he’s not a flipper. Well then, I’ll just address him as a buyer.
Dear Buyer: When you come to Georgia, please do your homework before purchasing. I’ve lived here 17 years and loved it. Like any place, life here has its plusses and minuses. One of the current minuses is that there are more than 90,000 houses for sale in the metro Atlanta area. That means that if you move here and then suddenly change your mind, you will probably have trouble selling your house right now.
Of course you can increase your chances of selling if you price your home appropriately for the Atlanta market. What is appropriate? Well, that is something that you’re going to have to research for yourself because houses and neighborhoods do vary in value. But I’ll give you some info to help you get started:
Atlanta has been the focus of several fraud investigations in recent years, and we’ve worked hard to put new laws into place to stop this thievery, but depending on when you purchased your home, the simple truth is that it may not be worth what you were told. Better check it out. And oh, yes. If you bought after our new fraud law was enacted and you committed residential mortgage fraud when you purchased, you can face up to 20 years in prison, a $100,000 fine, and your properties can be confiscated.
But that’s right. You purchased your homes using a valid appraisal and you wouldn’t think of committing fraud because you are a buyer, not a flipper. Well, when you are thinking about pricing one of those homes for sale, consider this: According to the latest report by FHL Bank Atlanta, there is currently a need for an additional 300,000 houses for middle-income families in metro Atlanta. That’s right…right here in our wonderful, affordable, undiscovered little gem of a city, middle-class families are struggling to find housing. So do them a favor, and put your home back on the market at a price that they can afford.
What’s affordable for a middle-class family in Atlanta? Well, I don’t know how much you earn, but I’m assuming that since you’ve got more than one house you certainly earn more than the average Atlanta. FHL Bank Atlanta quotes the following stats for Summer 2006: 63% of the jobs in metro Atlanta pay under $40,000 a year and 1/3 of households earn $40,000 or less.
Think about how much you could afford to pay if you earned less than $40,000 and price your house accordingly. When it sells…and at that price it will…we will all give you a heart-felt thank-you for coming here to Georgia and taking one of our many homes off of the market for a long, long time. Because I guarantee you, the family that buys that house from you will stay awhile. After all, Atlanta is a great place to live.
Is his asking price higher than his purchase price?
Yes. $30K
how much less than that do you think he’ll get?
I’m not sure. We underpriced the house in order to sell it, so the fact that he’s asking for more money is not surprising to me. In a few years time, he might get it. Who knows?
Right now, I think that his problem will be selling the house at any price. It is amazing how quickly the market seems to have changed. A few months has made a big difference IMO.
Good zinger.
I couldn’t afford to buy your house when you were selling it. Maybe you should have been forced to lower your asking price so I could afford it? I bet you sold for a lot more than you bought it for; couldn’t I call that profiteering?
The fact is, a house is worth whatever someone will pay for it. I believe prices are dropping, but your appeal to sell the house for an “affordable” price is disingenuous.
Actually, the only reason we didn’t have to lower our price was that we listed low to begin with. We felt that when inventory is high, you have to ask for a low price in order to sell. Of course it’s even better in that situation if you can wait and sell later, but we could not do that. We needed to sell.
I don’t believe that I know you, but I’m sorry if my post offended you. It certainly wasn’t my intention. I just want the flippers to stop driving up prices and making it harder for working families to afford housing.
Don’t worry, Peggy–in the several-year timeframe, the flippers fleeing the market will have driven prices way DOWN, and you can thank them for their contribution to society in the form of affordable housing.
Jon
I hadn’t thought to look at it that way. Thanks!
Another Business Week piece.
Builders Brace for a Housing Downturn
“The housing market is looking sicker by the day. On Sept. 7, the perpetually optimistic National Association of Realtors acknowledged for the first time that housing prices are likely to fall on a year-over-year basis, at least for a time.”
I’ve often been told by housing bulls that the median nationwide housing price has never declined.
Once this happens (and it will) will be when we see whether this bust is a full blown catastrophe or simply a market undergoing a minor correction.
The Real Estate Market
9/8/2006 11:52 AM EDT
The PHLX Residential Housing Index (HGX) is holding up well despite the woes from the homebuilders. HGX is above its July 21 low of 186.87 and has been trading back and forth around its 200-week simple moving average since mid-July and this average is now at 200.39. The momentum is rising on the weekly chart so the technicals are neutral suggesting that the bad news from the homebuilders just might be factored into the weakness into that July low.
The America’s Community Bankers Index (ACBQ) is also holding up well, and its closer to its all time high of 300.31 set on August 4. ACBQ is above its 50-day and 200-day SMAs at 293.80 and 290.87. This index does not yet reflect the overall stress among more than more than 500 publicly traded regional banks. I still believe that this segment of the finance sector is the most vulnerable over the next few quarters.
Position: none
txchick, I really enjoy your stock analyses here. I think more of our fellow blog readers should be availing themselves of the opportunity to profit from this housing bubble bust. I’ve made some good money shorting various homebuilders over the past several months, but I think you’re right that the easy money has been made there already.
Do you know if there is a way to short the ACBQ (or something like it)?
something new from itulip “bubbling credit”
http://www.itulip.com/forums/showthread.php?t=403
very good
NAR still hasn’t collected enough money to have a contract killer take out Casagrand:
http://realtytimes.com/rtmcrcond/California~San_Diego~bobcasagrand
August 2006: San Diego Housing Market - single family attached and detached homes: Home sales continue to decline, sales for August were 2,592 down 34% from last August. August Pending sales were 2,413 which is an indicator that future sales will stay in this 30% to 35% decline range. It does appear that inventory has stopped growing in absolute terms. The Active listings on Sept 1 were 22,965 or 295 days, almost 10 months supply - versus 22,902 July 1. I expect there to be further declines in the absolute number in inventory as we move toward the holidays. However, the sales will also decline which should keep the inventory supply in the 9 to 10 month range, still a buyers market. As long as this supply/demand relationship exists there will be downward pressure on prices.
The average price for August was approximately $614,000, down about 2% from last August. If you break this down between attached and detached homes you find that the attached average price of $445,000 is down 5% from last year and the detached average price of $713,000 is flat with last August. The homes that closed escrow in August with the average selling price of $614,000 had an average asking price of $650,000. However, the homes in inventory have an average asking price of $747,000, up 13% from the sold homes. Part of this difference is that the homes in inventory are about 100 sq ft larger on average than the sold homes; another part is that the homes that are priced for the market are selling. The average price change is varying from house type to house size. The smaller condo’s - 900 sq ft - have seen a price decline of 7.6% from last year while the larger 1500 sq ft condo has seen a price increase of 1.8%. While in detached homes the 2500 sq ft homes have seen a 12% decline in prices and the over 2800 sq ft - the smallest market segment - have seen prices remain flat from last year. I am sure if I broke the sales down by neighborhood we would see the same pattern of increases and decreases. As we leave the peak season for the slow part of the year, I expect to see the downward pressure on prices to increase unless we see something that brings buyers back into the market. Affordability is the key to bringing buyers back.
Hey look there is Blanche Evans up the right hand corner! Does she still write those funny pieces about how newspapers are conspiring against realtors?
Oh would that someone post a link to one of her loony articles!
These ones?:
http://realtytimes.com/rtcpages/blanche.htm
Seems like she stopped writing articles in mid 2005, but she has a new book out, “Bubbles, Booms, and Busts. Make money in ANY Real Estate Market”.
Looks like the tune has changed a bit. In late may ‘05 she had an article:
“Realty Times Housing Outlook - Let’s Party” with great snippets like these:
“It’s still a great time to buy houses because demand isn’t going away, and it’s a great time to sell because buyers are lining up.”
“A year ago, the 30-year FRM averaged 6.30 percent, when annual housing sales hit their last recorded high in April 2004 of 7.02 million. This figure alone hints that housing could still continue to boom even if interest rates were to go higher by another percentage point or two, or even three.
While sales could slow, they won’t stop due to the “Fear Factor.” Buyers are more afraid of not earning equity as they are losing it.
There’s also the “SUV Factor.” Gas-hogging car owners are finding they are suffering accelerated depreciation as well as higher gas prices – a fast-appreciating home on the coast could keep them in their V-8s.”
And don’t forget the new investment mantras where it’s OK to blithely ignore the economic lessons of the past – you can hardly lose money on housing because of rapid appreciation. “
It does look like she has removed the links to her conspiracy theory articles.
If memory serves (and many times it does not) her nutbag articles came out after any of these, but thanks for the link!
With this publication and Blanche allowing this fellow to post such down-in-the-mouth numbers, clearly the REIC has bugled “retreat.” (”Fall back,” for the purists.) Won’t be long at all before they will be crowing “We told you so!” as if they had timely warned sellers to cut and run.
This may have been posted, but it’s an excellant read from Bob Bronson on the economy and for this forum the last half is on housing. Great Read!
http://financialsense.com/editorials/bronson/2006/0907.html
Here’s a fun entry into the mind of a flipper, from his Seattle-area based blog. He sounds so logical, yet it’s all based on a series of assumptions that are soon to be proved wrong…..
http://seattlerei.blogspot.com/2006/09/evaluating-potential-flip.html
Wow! I can’t believe someone would assume that kind of risk for a less than 4% profit. If it takes him 4 months rather than 2 to sell, he is screwed. (Including the rehab time.) If prices drop by 3.5% from his “conservative bottom” (i.e. Lowest comp) he is screwed.
The absurd part is that the real estate agents will be making more off this deal than him. In fact, if this wasn’t a FSBO (he is an RE agent) the total profit from the “flip” would be $1,050 using all his cheery assumptions.
Assuming he spends only 40 hours on this, that equates to $26.25 an hour. Of course, then he needs to find a job for the next week.
VERY interesting that the flipper’s final phrase in what appears to be his final post, countering the point that the riskless bird-dog would make more than he, is “My response was that if he’s that bloated when the market turns, he’s going to be in a world of hurt.” So the flipper, who flamed the bears who were warning him off the deal because they were pessimistic about prices, admits that the market will turn.
Wonder how many times that guy’s been married.
AAAcchh, it gets worse and worse with this guy:
- He began flipping houses August ‘05 at the top of the market in Seattle- just in time for the Fall price drops and houses selling under asking. (This was obvious to anyone who followed the MLS lists and checked county records for even 3 months last Fall/Winter.) So the trend was out there. No excuses.
- Spring ‘06, when it was becoming clear to all but the most braindead among us that the market was toast, he quit a good job to go into RE full time.
- This weeks’ update:
He is now finding it hard to turn a profit on RE in Seattle (LOL) so has set his sights on other horizons:
This week his wife went to- hang on to your hats folks- BUFFALO!- to check out some multi family (read crumbling, abandoned brownstones- just my guess) “investment” properties.
Okay, first Seattle at the top and now Buffalo, NY., where RE investors go to die.
Here’s my prediction:
By this time next year, this family will be so broke that they will be moving to Upstate NY to LIVE in one of those 20K Buffalo dumps.
Too sad.
Did somebody already mention that CNN has an article on the bubble? http://money.cnn.com/2006/09/08/real_estate/caught_in_the_bubble/index.htm?cnn=yes
Nothing shocking to regular readers, only perhaps that a male couple in MN can’t sell their townhouse at a profit.
Pretty lame article. Link at the bottom: “Home price increases are rapidly diminishing.” Wrong. Home price increases are history. Home price decreases are increasing and very soon the decreases will be rapidly decreasing.
very soon the decreases will be rapidly increasing.
Ben,
I’m a newcomer to your site, and I just want to say thanks for taking the time and making the effort to create this forum to share thoughts and ideas about what’s going on in regards to people, homes and how they are effected by the events of the real estate Industry. I will be making a PayPal deposit to you, a much deserved token of appreciation. I’ve learned many new things. I’ve always been amazed at the complexity involved in securing a shelter for one’s self or family. More so today, then at any point since I purchased my first home (at age 24) back in 1981 in Nebraska (assumed a VA loan for $26,000 @ 15.5% interest for 30 years, I clearly remember the pat’s I got on my back for getting such a great interest rate! My, how times have changed! But that is another time, place and story. What I read in a lot of the blogs is how dumb people can be when agreeing to these “toxic” loan arrangements. I think that much of that stems from what is not mention much in the blogs and that is how desperate individuals and family’s become when they are at the mercy of profiteering landlords or they have “High Hopes”. Hope shines brighter than despair, and that is what is really being sold to these folks, deceptive as it may be. They may be eager, a little self delusional, and not entirely educated to the ways and means of real estate finances, but they are not innocent and blameless either. Unfortunately, because of these types of “toxic” loans, packaged, presented and promoted by ALL the agents who profit by them, these folks will soon be going from one form of desperation to another, way more damaging desperation, as the bloggers on this site accurately and with much keen prediction, have foretold. I’m with those bloggers that have always believed that it’s not a matter of IF, more like: how many and over what length of time will the destruction unfold and touch. The great mystery!These” new” homeowners will soon become big time financial losers. ( I fear my little brother and some dear friends will be included in the “up & coming attraction”). As regards to ALL the agents involved in this grand charade, I’m on the side of the bloggers who have no sympathy for your lost glory days of profit, let your greed be smashed and the pain of it be well felt and remembered. I also, fear what the near future holds for all of us. Millions of people and family’s in financial trouble with their homes is not something that bodes well for our Nation. However. when out of this gloom and dispair, if in the end, the result is that Homes are priced more realistically in regards to affordability and ambitions become aligned with actual incomes, then such is life. If greed by all is remembered and diminished, great! But maybe, I’m being to HOPEFUL!
Timothy
my favorites:
1. courage born of despair = Boy have we got a loan deal for you!
2. a furious struggle against adverse circumstances, with utter disregard of consequences = I can buy a $399,000 house for only $999.00 a month? Wow, where do I sign!
de?spair?er, noun
—Synonyms 1. gloom, disheartenment. DESPAIR, DESPERATION, DESPONDENCY, DISCOURAGEMENT, HOPELESSNESS refer to a state of mind caused by circumstances that seem too much to cope with. DESPAIR suggests total loss of hope, which may be passive or may drive one to furious efforts, even if at random: in the depths of despair; courage born of despair. DESPERATION is usually an active state, the abandonment of hope impelling to a furious struggle against adverse circumstances, with utter disregard of consequences: an act of desperation when everything else had failed. DESPONDENCY is a state of deep gloom and disheartenment: a spell of despondency. DISCOURAGEMENT is a loss of courage, hope, and ambition because of obstacles, frustrations, etc.: His optimism yielded to discouragement. HOPELESSNESS is a loss of hope so complete as to result in a more or less permanent state of passive despair: a state of hopelessness and apathy.
Antonyms 1. hope.
Welcome. Loved your post. Very insightful.
Timothy –nice post. Sounds like you’ve been evangelized and are spreading the word. Glad you contributed to Ben via PayPal — he is, IMO, the way-most undercompensated guy in the entire housing bubble circuit. Hero-worship works for a good long while, then “duty” kicks in and that is harder to set the alarm clock for — he has been doing this 7 days a week for soon to be two years. Thankfully, Ben’s blog is completely free of the trolls we experienced in Year One, so that the postings are rich in information, insight, forecasts and humor.
What I’ve picked up on in the past two weeks: heavy-hitters are not just reading and taking note of Ben’s blog, they’ve begun to post to it. While that should be no surprise, I’d bet that the true number of movers and shakers who scan Ben’s blog, or pay their minions to, would be very impressive indeed.
Do sellers really think buyers are that stupid? I’m watching the real estate market in Boston, and I’m constantly seeing listings that just blow my mind. A crackhouse in Roxbury bought 9/05 for 255K now on the market for 350K. Not even renovated!!! A dump in East Somerville on the subway tracks (close to public transportation) for TWICE what it got in 2002. Do people think we can’t find out these things? Or do they just think we are that stupid? Or are there really buyers stupid enough in the current market to accept a 50% mark-up in one year? OK, I’ve vented now, I feel better. Back to your far more erudite comments…..
Maybe they are FB’s, bought this crackhouse for 255k, took out as much HELOC money as they could, spent it (maybe on crack?), and now need 350k just to break even. No money left to renovate.
You’re not the only one wanting to vent, Bostonian.
The List Prices here in Los Angeles are almost as pie-in-the-sky. It’s not called ‘LaLaLand’ for nothing…;-)
I don’t know if sellers think buyers are stupid as such…my thinking is that they feel we should all ’share the wealth’ - as in ‘if I had to overpay for my “bijou” bungalow (read: 900 sq ft, 2,000 ft lot) then I don’t see why buyers shouldn’t either’.
As for reading things into the blurbs that each place has…this blog, along with many others, has taught me the Magic Art of Reading Between The Spaces…
‘easy freeway access - READ: 100ft from the on-ramp of the I405′, ‘garage converted to granny flat - READ: the brother-in-law but up some sheetrock, without permits. You’d need to tear it down to comply with building/earthquake regulations’.
’sold ‘as is’ - READ: its a dump. but we can’t afford to fix it.That’ll be your problem if you decide to buy. And, no, we won’t lower our asking price’.
and so on…there are so many ‘flag’ words that a thread was made about them a few weeks ago.
I would guess that much of Boston, like many parts of Westside LA are “PRIME”, and therefore prices will never go down. Hehehe….my guess is that they will, eventually, but not before the sellers hold out to the bitter end. I don’t think there’s much point in seriously looking for places until summer of 2007 over here, and even then some sellers still won’t budge.
On my “My Homes” section of Zip, when i find a place i like the look of, I find the last sale price on Zillow and put it in the notes section. If the place has is being sold less than two years after being bought, I put an asterisk. I’m starting to try and estimate the selling price in 1999, using Zillow graphs, and estimating - using the 1999 estimate plus 3.5% per year appreciation - as a reasonable offer, when I’m ready to buy next year.
OK, I know that this is a very unscientific way of doing it, but it gives me a ballpark figure of what the place is ‘worth’. If and when the asking price starts to approach that figure, thats when I’ll start making offers….as of yet, almost nothing in Westside has even come close.
No matter, I have time. And money. And a decent rental agreement. And I can stare a lonnggg time without blinking
That’s where we are all at right here, buddy!
Good to hear that you are holding out. I’ve noticed a few condos in Santa Monica finally dropped into the low 300s. I check the mls all the time and I’ve seen much of the same inventory all summer. Should see some desperation before Christmas.
Is anybody noticing that the headlines are getting funnier? The MSM is really getting a chuckle out of the bursting bubble. I know we like to say that the fishwraps are in the pockets of the real estate complex - but I bet there are a fair number of editors and reporters who just love getting a chance to stick it to the smarmy sales people and flippers.
Fishhawk Ranch in Lithia, Fl, suburb of Tampa. Phase 2, very nice.
Bedrooms: 4
Full Baths: 3
Partial Baths: 0
Square Feet: 2,924
Lot Size: 10,018 Sq. Ft.
Year Built: 2003
Listing Date: 05/22/06
On Market: 109 days
Type: SFR
Status: ACTIVE
MLS #: T2169810
Brazilian cherry floors; oversized rooms; lge private bckyrd w/ beautiful landscaping & custom jungle-gym for kids; the master runs the entire width of the house- enough for a full sitting area; nothing in fishhawk gets you more for your $ than this home!New brazilian cherry floors! Come see! Best deal in fishhawk! Newly painted and carpeted; extra large rooms; professional landscaping; big back yard with wooden jungle-gym; no backyard neighbors- adjacent to park-like setting; come see it soon! Extremely motivated seller! Home warranty paid for by seller too!
Price Reduced: 06/13/06 — $449,500 to $419,500
Price Reduced: 07/21/06 — $419,500 to $419,000
Price Reduced: 08/15/06 — $419,000 to $401,500
Price Reduced: 08/20/06 — $401,500 to $401,400
Price Reduced: 09/01/06 — $401,400 to $354,900
We’ve been watching Fishhawk for a couple years now. They took a little longer than some areas to catch on to the falling real estate market, but now it has hit full force. I’ve seen homes there on the market for over a year with little price decreases. Builders that once laughed when you wanted to buy a lot because you had to stand in line for a lottery ticket, are now discounting in Fishhawk! Of course the builders will tell you it’s only the condos that will get hurt in the falling market. The houses were too expensive for investors. WRONG!
Having trouble with posts.
Fishhawk Ranch in Lithia, Fl, suburb of Tampa. Phase 2, very nice.
Bedrooms: 4
Full Baths: 3
Partial Baths: 0
Square Feet: 2,924
Lot Size: 10,018 Sq. Ft.
Year Built: 2003
Listing Date: 05/22/06
On Market: 109 days
Type: SFR
Status: ACTIVE
MLS #: T2169810
Brazilian cherry floors; oversized rooms; lge private bckyrd w/ beautiful landscaping & custom jungle-gym for kids; the master runs the entire width of the house- enough for a full sitting area; nothing in fishhawk gets you more for your $ than this home!New brazilian cherry floors! Come see! Best deal in fishhawk! Newly painted and carpeted; extra large rooms; professional landscaping; big back yard with wooden jungle-gym; no backyard neighbors- adjacent to park-like setting; come see it soon! Extremely motivated seller! Home warranty paid for by seller too!
Price Reduced: 06/13/06 — $449,500 to $419,500
Price Reduced: 07/21/06 — $419,500 to $419,000
Price Reduced: 08/15/06 — $419,000 to $401,500
Price Reduced: 08/20/06 — $401,500 to $401,400
Price Reduced: 09/01/06 — $401,400 to $354,900
Once they gets it under $300K they might get some serious lookers. At $250K they probably could put themselves out of their misery.
Some Friday night insight and entertainment from the mortgage brokers’ inner sanctum…
http://tinyurl.com/rjzvs
In response to an apparent newbie’s request for advice about mortgage telemarketing, topic, “Do you cold-call?”:
“Cold calling is all about keeping a positive attitude and correct training,(take Chez advice) having a script as a guideline and knowing your rebuttles for objections. I cold call subprime ARM refi’s, prospecting for FSBO clients and setting up appointments with Realtors to discuss how our FSBO program can give them unlimited prequalified buyers in exchange for loan referrals. Stay positive, upbeat and stick to the script. In all three cold calling target markets it is all a numbers game. After every no you are one more call closer to a yes!!Go the loan officer training thread and ask for help and you will get better responses!!!”
“Hire female telemarketers….. They get more apps…… I am not saying that to be mean or anything just from years of experience. Hire females, give them a phone, a list, a script and a bonus plan. And never make them knowledgable about what we can or can’t do. As soon as a telemarketer starts pre-qualifying it’s time to fire and re-hire..
But to answer your question No, no I don’t cold call.”
“not everyone hates telemarketers… I tend to get a lot of lonely old fixed income people on calls… cant get them to shut up”
Check out this flopper in Largo, FL
http://tampa.craigslist.org/cgi-bin/search?areaID=37&subAreaID=0&query=largo&catAbbreviation=apa&minAsk=895&maxAsk=995&bedrooms=&addThree=wooof
A 7,011 sq ft monstrosity now priced $180,000 lower than appraisal in a high-end suburb of the “safe haven” of Kansas City. (Hi everyone. First post, but I’ve been lurking for a while. My own personal year-long real-estate nightmare recently ended.)
http://www.mlsfinder.com/moks_hl/jasonbrownsellskc/index.cfm?action=listing_detail&property_id=1310416&searchkey=93830cee-f141-71b1-a081-979a7674e7bb&npp=10&sr=1