‘It Has Been Very Easy For People To Borrow Money’
The Sydney Morning Herald has this report from Australia. “Sydneysiders are losing their homes at a record rate, forced out by crippling mortgage payments, exorbitant petrol prices and high personal debt. The latest NSW Supreme Court figures show repossessions by financial institutions are approaching an annual total of 5000, more than twice as many as three years ago.”
“Sydney real-estate agents have reported a sharp increase in repossession sales after home loan interest rate rises in May and August. ‘It’s very, very sad,’ said PRD Nationwide Liverpool’s Ray Dimarco, who has a number of default sales on his books. ‘We’ve had some cases where they’ve handed the keys over and they’re still wiping the kitchen down. They’re still proud of their home.’”
“Mr Dimarco said the market had slumped by up to 25 per cent in some pockets of Sydney, which had added to the panic in the market. People who had borrowed heavily to buy a $400,000 property just a few years ago wouldn’t sell it now for much more than $300,000.”
“At Annandale, a ‘mortgagee in possession’ house, bought 18 months ago for $750,000 was up for auction. But only a handful of interested parties went looking for a bargain. The Susan Street home passed in at auction without attracting a single bid.”
“Before the auction, Century 21 City West principal Matthew Meynell expected the three-bedroom, two-bathroom strata home to sell for about $550,000. Afterwards, a potential buyer offered a mere $330,000.”
“It’s not the only repossessed home in the popular inner-west. ‘There are a couple coming up and we have another in Annandale in a few weeks,’ Mr Meynell said. ‘I think some people overcapitalised and it has been very easy for people to borrow money.’”
From Lew Sichelman. “The lending business is marshaling its forces on an unprecedented scale to get in front of what could be a flood of foreclosures. With mortgage rates climbing, millions more borrowers with pay-option and interest-only loans face the prospect of larger payments in the coming months. Even those with conventional adjustable-rate mortgages will feel the pinch.”
“An estimated $375 billion worth of loans will adjust to higher rates this year and $1 trillion in 2007. Add in higher energy costs, higher homeowners’ insurance premiums and higher taxes, and it’s easy to see a disaster in the making.”
is OZ is sckin wind, they have a commodity bus that’s booming
can’t find LIErah’s book on Amazon
wow, what a bomb
I found it, search under his last name.
The reviews have gotten even more bearish.
I wouldn’t be suprised if they pulled it in a couple more months.
Amazon won’t pull it or the reviews. Even if a book goes out of print, its ISBN is there for life and it will stay on amazon with its reviews.
Maybe they can do a two-for-one bundle: DL’s piece ‘o crap with the infamous “DOW 36,000″ published just before the tech bubble implosion.
For those of you who think that Dr. Lereah’s credibility is now shot, you might wish to consider that Glassman and Hassett, the authors of Dow 36,000, are still doing quite well for themselves (although Amazon shows used copies of their book available for .01). Hassett is still the director of research at the free market oriented American Enterprise Institute, and Glassman is a fellow there, along with being on some sort of advisory committee for Mid East Diplomacy, which may, come to think of it, explain a great deal of our current predicament. You can find Hassett’s info at http://www.aei.org, and Glassman’s at http://www.tcsdaily.com/Authors.aspx?id=292
I went to Harry Dent’s web site recently and he too, predicts a Dow of 36,000 still. Get this: He predicts it will be 2009! And he reiterated this just a few weeks ago! LOL.
Were you searching under “Fiction”?
For those of you who think that Dr. Lereah’s credibility is shot, consider the case of the authors of Dow 36,000 Glassman and Hassett. They are still doing quite well for themselves, Hassett as director of research at the free market oriented American Enterprise Institute (you can look him up at http://www.aei.org), and Glassman as a fellow at AEI and an advisor to a MidEast Diplomacy group (which may explain a lot about our current predicament, come to think of it). Glassman’s bio is at http://www.tcsdaily.com/Authors.aspx?id=292
Yep, it’s sad– no consequences for being wildly wrong– and very little credit for being spot on, either. Both Glassman’s ridiculous piece of crap and Buffett’s fingering the stock market bubble and going to pretty much all cash seem to be equally forgotten.
no consequences for being wildly wrong
There are no consequences in the US today for anyone being wildly wrong, from Dubya on down.
Yet.
The problem with Buffett’s move is that the stocks he’s usually interested in have nearly doubled since 2000 rather than fallen, yet he’s been shifting to cash for 6 years.
Try spelling his name differently — Lereah, not LIEreah…
…” People who had borrowed heavily to buy a $400,000 property just a few years ago wouldn’t sell it now for much more than $300,000.” -
Wow! Perhaps future things to come for us here in the states.
I was in Sydney in Dec 2004. Everyday in the newspapers that week was a story on how the bubble was starting to defalte. Almost 2 years later and they are finally there. I think this is where we will be in the Summer of 2007 - A full scale bubble ROUT!
Yep………stay tuned folks, we in Australia are the canary in the coal mine
That canary is starting to looked a little sick if you ask me.
- 1 “At Annandale - $750,000 was up for auction.
- 2 But only a handful of interested parties
- 3 passed in at auction without attracting a single bid.”
- 4 expected to sell for about $550,000.
- 5 Afterwards, a potential buyer offered a mere $330,000.”
Stupid Australians. It’s different here in the USA. Down in Jackson Hole prices are going up. I know this because I read it.
A “mere” $330,000 is a lot to pay for an increasingly gang-infested Suburbistan like Annandel. Most of the homes are modest ’50s and ’60s ranchers or ramblers in dire need of updating, and whole blocks are going barrio.
For the Californians
http://www.altosresearch.com/blog/archives/125-How-is-the-Real-Estate-Flipping-Business-in-San-Jose.html
“At Annandale, a ‘mortgagee in possession’ house, bought 18 months ago for $750,000 was up for auction. But only a handful of interested parties went looking for a bargain. The Susan Street home passed in at auction without attracting a single bid.”
“Before the auction, Century 21 City West principal Matthew Meynell expected the three-bedroom, two-bathroom strata home to sell for about $550,000. Afterwards, a potential buyer offered a mere $330,000.”
$330,000 offered for a place bought 18 months ago for $750,000!!!
Get used to it folks. This is not a “lowball” offer, it is just what the place is probably worth. $750,000 was just a BUBBLICIOUS FANTASY!!!
But some poor sucker bit on it. Must have been swayed by “buy now or be priced out forever”.
My sister lives in Terrigal (couple hours north of Sydney) and she said AUS prices are really coming down after peaking in late 2004.
The point is, of course, that the mortgagee refused to sell the place for $330,000. I’m having the same problem in buying a house in Sydney. I’m offering 20-30% off the asking price which is closer to what I think is fair value (though not necessarily the bottom it will hit when it does get to the bottom) but the vendors I’m in negotiation with (I am bidding on several properties) all refuse to budge from their asking price by a single dollar … despite the fact that the agent agrees that there are no other bidders except me …
In 1990 a friend offered x to someone, they declined. A while later they came back to my friend and said “I’ll take x”, he declined but offered x-y. They, again, declined to sell. A while later they came back again and said “I’ll take x-y”…….
They sold at x-y-z. It may take a while but, if you are patient and tough, you’ll get a shot at a “reasonable” price.
Just a few months ago, pundits were pointing to Britain and Australia as examples where home prices jumped and then landed softly, so no need to fear here. I guess now they’ll leave off mention of Australia.
UK prices up in july and again in august
The source of global MONEY (at the margin, Debt = NEW MONEY) was US Housing Bubble. This led to boom in commodities and finance, which benefited OZ and UK quite a bit.
Jas Jain
of course not; some housing bubbles in Europe are FAR older than the US housing bubble. The Dutch housing bubble started around 1991, UK around 1995 and most other EU countries a few years later; and not only in age, also in % gains those bubbles are far bigger than the US bubble that didn’t really start until 2000 or so.
Now if you would say that the US Credit bubble was the source of all this, it would sound a bit more credible.
Prices up in the UK at the very high end. Mostly Russian money buying what they consider safe havens for their money. The rest is stagnent. When three Russian billionaires buy a $26 million home $31 million and $49 million it skews the stats slightly. Lots of Russian money in London these days.
Netherlands still rising as well, up 4.6% over last year (and in my region up 9.4%). It’s not the double-digit gains of the nineties, but certainly far above inflation. Everything points to a new acceleration in price growth and why not, the ECB is pumping like mad and nobody cares about credit conditions.
sorry, I should have said ‘far above official inflation’; Dutch CPI is officially around 1.5% but real inflation is probably around 8%.
http://www.housepricecrash.co.uk/index.php
UK house prices are STILL going up, against all logic. The British value and protect their green spaces and rural areas far more than we do — no suburban sprawl there — so the prices might remain firm longer than they do here. The cracks are already appearing, however.
I agree, but the other thing that Australia and the US have in common that you don’t get in the UK is ARM’s.
This is what has led people to speculate and buy homes they can’t afford. The symptom we have seen in the UK is an increasing proportion of interest only mortgages, but it is still a small proportion.
Regards,
Loafer
it’s not about interest rates or ARMs, it’s all about crazy lending. In the Netherlands ARMs are relatively unimportant, but the Dutch bubble probably has the highest gains worldwide if you look at individual home prices (up 600-1000% over the last 15 years or so). And there are other countries that don’t have ARMs but still have very high bubble gains. Same story regarding available land etc., it simply does not matter as long as the credit spigots are wide open (Oz and NZ are prime examples here).
Fundamentals will matter at some time in the future, but in most countries they are still irrelevant thanks to central bank policy.
Has this already been posted?
http://biz.yahoo.com/weekend/mortgagepain_1.html
Frightening stuff, but what’s amazing is that so many of us have been predicting exactly this for over a year. And that doesn’t make us geniuses - all one had to do was look back a few years at the dot-com bust to see what follows a financial mania. But when the history is written on this whole sad episode, people will ask, “My god, where were the banking regulators?” Of course, as we know, they were probably at Donald Trump’s Real Estate Wealth Expo
What the heck John??? You left??? I just moved to Cascades and you leave!!! What a bummer….I was counting on ya to help me lowball the place we’re in now in a couple of years! Sorry to see ya go…
NurseLiz,
It appears as though Sterling is leading the pack in foreclosure activity in Loudoun. http://www.foreclosure.com/search/VA_107.html
Then perhaps I’ll finally buy in ‘08 or ‘09 when the prices are so low and they can’t give ‘em away!
Don’t be so anxious, Nurse Liz. It will take many years for the mkt to bottom out. What is more, rents in 2008-9 will be so cheap that it would not make any sense to own.
Jas Jain
Yeah that’s getting re-posted to thehousingbubbleblog about as often as “it’s different here” posts in 2005.
Frightening stuff, but what’s amazing is that so many of us have been predicting exactly this for over a year. And that doesn’t make us geniuses…
Actually, John, I choose to believe that I am indeed a genius.
Speaking of the itiot Trump, I saw an interview with him today. I believe it was CNBC. He thinks he’s so brilliant. That son-of-a-whatever would have tasted jail time if daddy hadn’t bailed him out.
Trump had the gall to blame Bernanke’s rate hikes for the softening in real estate.
His nerve got worse. He stated how the oil industry shouldn’t be allowed to raise prices so much. He didn’t mention that somebody should have stepped in to halt the real estate madness any earlier. Gas at $3 a gallon is criminal but real estate at $1,000 per square feet just shows the inherent genius in real estate investors like him. Along with Fidel Castro he might be the most despicable person on this planet.
Gas at $3 a gallon is criminal? Somebody should have stepped in to halt RE madness? But, wait - Castro the most despicable person?
Does not compute - sounds like the New York Times, Joseph Stalin, Sean Hannity, and Bill O’Reilly rolled into one.
Trump is the only man to lose money owning casinos. Note that he recently set up a real estate mortgage firm…….
Seems symetric in some way, no?
BWUHAHAHAHAHAHAHAHAHA, ROTFLMAO.
I have many,many times thought Trump seemed like the US equivalent of Alan Bond, and that quote just affirms my belief.
Mr Bond’s main claim to fame in the US might be that he headed up the syndicate that won the America’s Cup in 1983, but he was also a big time wheeler-dealer who went spectacularly bankrupt in the early 1990’s. Paul Barry wrote an amazing biography, which demonstrated fairly conclusively that behind the affable facade was an out and out psychopath.
Anyway, one of the great quotes about Alan Bond was that he was (via his ownership of Bond Breweries which took over Castlemaine Perkins) the only man to ever go broke selling beer to Australians.
He used to put his name on all his companies, as well.
Just remember that cash will soon be king for some of us who may have sold too soon, and want to buy back in at some point in the cycle. Just don’t try to catch a falling knife.
This might be the first time that I have seen the word “PANIC” casually slipped into the real estate convsersation. From the Australia article above:
“Mr Dimarco said the market had slumped by up to 25 per cent in some pockets of Sydney, which had added to the panic in the market.”
Notice how that little word PANIC was slipped in there. I will love it when the US market picks up on that little gem of a descriptor.
Buyers paniced in 2004 and now it is sellers turn!
Here is what I wrote a couple of months ago:
I think that one can characterize the bubble and the post-bubble periods as follows.
Buyers Panic (2004Q2-2005Q3) – Buyers afraid that if they don’t buy now the prices will go up and they wouldn’t be able to afford to buy later.
Period of Transition (2005Q4-2006Q1) – Few buyers left too panic and affordability becomes a serious problem. The idea that the bubble has burst start to take hold and fewer people are in denial of the fact that it was a bubble after all.
Buyers’ Strike (2006Q2-Q3) – More and more buyers start to realize that it is stupid to pay such ridiculously high prices and that it is better to rent until homes become more affordable. It becomes a self-fulfilling prophecy as the weak demand leads to more and more price reductions.
Sellers Panic (2006Q4?- ) – After months of frustration in not being able to sell, enough sellers, many of whom were speculators to begin with, decide to, or are forced to, get out at the “market price” before thing get even worse. The problem is compounded by the talk of a recession to begin soon. The slow-down mantra starts to sound hollow as job losses accelerate. Scam Market leads the way by tanking. Fed panics and starts to lower rates.
Jas Jain
I like to see the real life stories. Sometimes it is hard to know who to blame. The end user certainly has caveat emptor. But the weasals pushing these things only point out the big print and purposely ignore the fine print and the sheeple didn’t WANT to do their due diligence because it would ALWAYS go up, so no problem.
I personally find the assigning of blame to be kind of boring. The fun part is the economic and psychological analysis and trying to predict future consequences and events.
I agree, Paul. Reading the blame game comments was fun [an anticipation-type learning tool] for a while, but it got old by - about May - for me. But there are many, many people who don’t understand what happened, why, and how to fix the fallout, so the repetition serves a purpose.
At this point, we’re down a few feet from the top of the rollercoaster, and I’m interested in velocity, how tight my seatbelt is, and whether or not the guy in front of me is blowin’ chunks before the bottom.
I’m sure there are a tremendous number of opportunities right now that I’m missing. The future may surprise, disappoint or relieve us, but at least we get to think about it and toss around some ideas.
You know what is scary?
The market in Sydney didn’t even come close to being as insane as California. Trust me, I experienced both and bought in Sydney in 2002. $50k under asking price. I put down 25% and the lender still still put me through the wringer.
I put 6 offers on San Francisco homes the same year and got outbid every single time by a minimum of $50k, some by as much as $125k over asking price. Australians NEVER had access to the type of easy money available in the US. Also, Australia’s economy has been bolstered by the resource boom, tax cuts and a fiscally cautious government that runs surpluses which offer wiggle room should it be required.
Recently, I refinanced my Australian propoerty and the new lender asked me to bring money to the table, which I did. They valuied my place 25% below a recent (2 month old) sale in my building of only 4 units and would only lend up to 75%LTV to qualify for the best interest rate. That’s conservative.
The real estate bust in California is going to be absolutely brutal.
cali only has imports
-illegals demanding mo free sht (welfare)
I agree with the illegals and if we give them amnesty we’re nailed to the wall people!!! There won’t be anything to bail out anyone except the freaking illegals!!!
I agree with the illegals as well. Of course, I mean something intelligible by that.
thanks for sharing that San Mateo, I agree with you that this thing is going to get a whole lot scarier for people here in the US than they can imagine…
anyone know what state David Lereah lives in?
and I don’t mean his state of mind.
Why? Do you want to TP his house? If you do, count me in.
Make sure you do it with “used” toilet paper.
11605 Havenner Ct, Fairfax Station, VA 22039 1 week change: $7,358
Last updated: 09/01/2006
ZESTIMATE™: $948,292 (What’s this?)
Value Range: $881,912 - $1,033,638
other is a cheap condo. at least it’s not a po box mail drop
Showing 33 homes at 3217 Wisconsin Ave NW, 20016
I sold my home in 1994, to move closer to work (to end my 60 miles each way commute). I started looking in Huntington Beach for a mid-size 4 bedroom house. At that time most were in the mid-500k range. Based on my income (I told the truth), my broker pre-qualified me for a 600k no-doc, ARM loan, 5% down. However, I have always only accepted fixed rate loans. When I looked at every loan calculator I could find on the internet, including one related to the broker, all of them said I could qualify for a mid-300k loan at a 5.5% fixed rate, with 20% down. Something was definately worng with that picture. Then, after seeing the ridiculous bidding wars happening and watching prices climb even higher (600-700K), my common sense got the better of me. I am still renting a 1 mil house for less money, right near the beach and loving it. Oh, I will buy in a few years when them houses get back to the 300-400k arena. In the meantime, I am thankful every day I “missed the great opportunities” all the realtors said I should get into.
Another thing that amazes me is how people complain about the rates causing the bubble to pop. I first bought in 1981 and had a 13 7/8% 30 yr fixed loan. That’s when you can complain about rates being a problem.
Oops. Actually I meant I sold my home in 2004.
“…the Minneapolis-based Homeownership Preservation Foundation’s hotline at (888) 995-HOPE, which will guide callers to free counseling services from federally approved local agencies.”
(888)995-HOPELESS
Good read w/funny videos
http://www.itulip.com/forums/showthread.php?t=412
Could be trouble for OZ and UK economies —
http://www.bloomberg.com/apps/news?pid=20601103&sid=anGapbe7rscI&refer=us
Commodities Bust Underway, Morgan Stanley Says; Goldman Bullish
By Saijel Kishan
I agree with Morgan Stanley.
Pl. don’t forget that the Federal govt. has been contracted out to Goldman – the firm with white shoes and black hearts.
Jas Jain
Limber and cement already headed down. Copper soon to head down. construction labor likely to head down. Builder profits headed way down.
= much cheaper newly-built homes coming up, from the builders who survive.
Yep! I guess then the Chinese and Indians will decide to reverse their desire for more material things then. LOL
They won’t be able to buy them if they can’t sell their goods and services (respectively) to the US.
I live in one of most demanding communities in Irvine, OC, renting is about 40% cheaper than owning a house, strange, a for lease sign usually takes 3 months before it got took out.
The best reason to explain this is because landlords still following 33% income policy and do tight credit check.
And, nowadays, not too many people can pass credit check to rent a house, instead it is much easy to buy a house since no income and credit check is needed.
That’s true - while hunting for a rental in San Diego a couple of months ago, I had several property managers tell me that they had no shortage of applicants - but very, very few with decent credit. The place I finally wound up in had two or three leases rejected because of poor credit. When the leasing agent saw my credit score (pretty good but not spotless by any means) she started offering to reduce the monthly rent before I could even ask.
We have a friend in Albuquerque that is trying to rent a larger house and said that they are asking for his first born son. Yet we see people buying new homes in our neighborhood that look like very shakey income earners.
What would be the reason why it would be so hard to rent, especially when people need to partially stop the hemoraging on their speculation mortgages?
Perhaps the speculators are smarter than the banks that lent them the money and they realize that the real valuable commodity here is someone that can make a consistent payment (regardless of how low it is).
If you have really good credit your costs go down. That’s always how its been. If your credit score is good enough, they will let admit you into the privileged status of renterhood at an attractive cost. But if you’re a deadbeat you are forced into the more expensive form of housing, ownership! No contradiction at all .
Rental - it’s the American Dream to which we all aspire.
Good point. My landlord has all the risk involved when I rent - I could fail to pay the rent or trash the joint. Whereas if I buy, the mortgage broker & bank pack up the loan with a thousand others and offload them to overseas investors. No risk at all. It also goes a long ways towards explaining why there is massive inflation in housing prices but litle or no inflation in rents.
I was thinking about this earlier. Housing prices may fall somewhat over the next few years, but the real correction is not going to start until lending standards revert back to their historical norms. I don’t see that happening now, nor does it seem likely to happen until financial institutions start failing.
“Housing prices may fall somewhat over the next few years, but the real correction is not going to start until lending standards revert back to their historical norms.”
exactly. As far as Europe is concerned (I can’t judge what is going on in the US), lending standards are at historic lows everywhere and I wouldn’t be surprised to see them fall even further. All the lenders are pricing zero risk into the equation. Although housing bubbles are to some extent local, the credit bubble that is the cause of all this is global. It probably will not stop until some big central banks fail.