‘A Buyers Market That Hasn’t Bottomed’
It’s Friday desk clearing time for this blogger. From Massachusetts, “Numbers just released show mortgage foreclosures are at their highest level in more than a year leaving current real estate prospects will the question of whether to rent or to buy a property. ‘We found the housing market around here was way to high,’ said Marcella Sablan, who relocated to Massachusetts from Alaska. ‘We decided that renting was a better option.’”
“Take one Brookline condo listed at $499,000. With 10 percent down plus condo fees and taxes, the monthly expenses are $3,400. You could rent a similar apartment for $1,700.”
From North Carolina. “If you head east you’ll see twice as many homes for sale this year than last in many areas. Coastal communities are seeing a huge slowdown. ‘Because prices are going to keep going up, I don’t know if you know what sheetrock is going for right now but it’s $4 a sheet more than it was last year,’ Realtor Linda Craft said. That’s why prices will likely continue to rise even as sales are expected to steadily slow down.”
“Maryland home sales declined for the 11th straight month in August. Realtors reported sales down 25.2 percent from a year earlier. Among the areas reporting the steepest declines in sales compared to a year ago were: Queen Anne’s County, down 53 percent; Baltimore, down 30.7 percent; Montgomery County, down 26.6 percent; and Prince George’s County, down 19.7 percent.”
“Active inventory at the end of August totaled 40,311 units, up 97 percent from 20,499 units a year ago.”
From Oklahoma. “Local builders and analysts report that Bartlesville is immune to the ups and downs of national trends, but that new housing sales are lagging. Builders are optimistic and are using creative marketing techniques to move the homes including incentives. A builder in Bartlesville for 50 years, Gerald Coast said, ‘People are getting hired. They are coming in from all over the country, California, overseas.’”
From Australia. “Prime Minister John Howard blames an increase in the number of people having trouble paying their mortgages on their decision to borrow too much, rather than rising interest rates. ‘It’s rather ironic that the lower the interest rates, the more people are encouraged borrow..and, as a result, some people, particularly those who deal with non-bank lenders, end up over extending themselves,’ he told parliament.”
From Louisiana. “Harmon says many of his clients are trying to refinance, despite the hefty penalties they have to pay. They want to jump from one low-interest product to another. ‘I had a guy in here the other day, and I had to explain to him that you can’t keep refinancing every two years,’ Lyle Harmon says. ‘The value of your house isn’t going to keep going up every two years, and your note isn’t going to keep going down.’”
From Illinois. “If you think you’ve been seeing more ‘For Sale’ signs in the front yards of Logan County homes lately, you’re right. About one-and-a-half times more homes have been on the market than last year, a local real estate official said this week. Logan County Board of Realtors President Cindy Pagel said she can’t explain the shift in homes for sale. ‘It does definitely show more residential listing this year than last,” said Pagel.”
“Utah’s continued increase is because of investment from out of state, said Kevin Call, the executive VP of the Utah County Association of Realtors. For now the market remains strong but times could change. Realtor Brandon said now is the time to buy while it’s a good solid market. ‘I think [the market] will go up for another six months to a year then it will probably level out or shoot way down,’ Ploehn said.”
The Odessa American from Texas. “Two men spoke out against the proposed property tax increase in a public meeting Thursday night at the Ector County Commissioners Court. ‘We really can’t afford y’all,’ Odessan Chet Bales said. The thriving local economy led to higher appraisal of homes, Judge Jerry Caddel said. ‘I don’t mind the increase, because I know the value of my house has gone up,’ he said.”
From Danielle DiMartino in Dallas. “About 3,300 homes in the D-FW area have been posted for possible sale in October, up 23 percent a year earlier. September postings were up 30 percent. ‘People have used adjustable-rate mortgages and interest-only loans,’ George Roddy said. ‘It’s a combination of factors but comes down to over-exuberant lending and borrowing practices.’”
“‘We just haven’t seen the price appreciation needed to offset the over-lending that’s taken place,’ he said. Another evolving factor is the rising value of homes coming up for foreclosure. ‘Three to four months ago we started seeing higher-dollar postings,’ Mr. Roddy said, ‘and it’s becoming an even bigger issue; there’s more to come.’”
Another big week of building a housing bubble consensus. My thanks to those who support this blog. Check back this weekend for news, your market observations and topics.
Ben, this blog is mythic. I can spend an almost unlimited time reading the articles and reader comments. It’s the best reality (realty reality?) show around.
PHOENIX INVENTORY HITTING A NEW ALL TIME HIGH LEG!!! It was kind of stuck there since early August in the 53,000 area but in the last 2 weeks we have added another 1000 houses to the mix for a NEW ALL TIME HIGH OF 54,145
I expect that number to continue going higher for the rest of the year and into next. Can Phoenix inventory see 60,000 by year end? I think it can.
This Palm Beach inventory is amazing. In June, they had 10.3 months inventory (inventory/sales), today it stands at 46.4 months. That’s a 113% m/m increase. At this rate, Palm Beach will have 169 YEARS of inventory by January.
http://www.ipre.com/trendg/images/palsld.PNG
Palm Beach, imho, is just cooked.
I know everyone thinks that the bubble is “biggest” in their area, but I just cannot imagine a more “perfect storm” coming together then what we have here. People here are also very delusional about the ending of this bubble (flat for a year, then back to 20% YOY as far as the eye can see).
The ratio from rental price to price to own is just out of control; I have seen multipliers as high as 4X (2K to rent, 800K to own), and they just seem to be climing higher. Seems once you get over about 1300-1500 for rent, the ratio just gets crazy. I would guess that’s because about 1500/mo is what the income level here will support; when you start getting to 2K a month, not many people can cough that much up.
I am just shocked at how fast it has turned around here.
With all that excess housing, rents will eventually decline, creating more negative cash flow for the FB trying to rent the property, resulting in a BK, with more excess housing eventually bought at auction and put on the rental market, and down we go in a spiral.
I wonder how many single family houses are available in the Pheonix area. Even if it’s 500,000 (which I doubt) that means 1 in 10 houses is currently for sale — which is crazy. This trend is not going to reverse anytime soon, and the way things are going they will hit 60K, then 80K, then 100K+ within the next 2 years. I predict Pheonix’s R-Day (the day when 100% of houses are for sale) will occur within 5 years.
54,145 homes for eh, now lets do some quick sums………
54,145 X by say $200,000=$10,829,000,000 in stock.
ummmm, a bit overstocked I would think.
Ok lets cut the price and have a clearing sale
Sheetrock to justify higher prices? In the face of declining demand? Nice try! She should go to work for Ford Motor… oops, they’re downsizing.
Yes, they are. Here in Southeastern Virginia, it is all the news. The Norfolk Assembly plant is closing, and taking with it some of the higher paying non-gov’t jobs.
From North Carolina. “If you head east you’ll see twice as many homes for sale this year than last in many areas. Coastal communities are seeing a huge slowdown. ‘Because prices are going to keep going up, I don’t know if you know what sheetrock is going for right now but it’s $4 a sheet more than it was last year,’ Realtor Linda Craft said. That’s why prices will likely continue to rise even as sales are expected to steadily slow down.”
this is a friday afternoon riddle, right ben?
I’ve got it: What does Karl Marx have in common with a redneck NC realtor? They both believe in the labor theory of value.
Wow….wonder if I should shift my 401K into sheetrock futures? So THAT’S what’s been driving the bubble the past few years….
Buffet did… check out USG
$4 sheetrock will hold up like $3.30 gas in the face of waning demand.
3.30 gas will seem cheap in a year.
Diceman, I am generally a peak oiler but gas will be cheaper in the near term.
All energy market prices are declining.
I was in Carolina Beach recently and (seriously) 75% of the properties were for sale. According to people in the area realtors were trying o determine who really wanted to sell and who was just looking for a GF.
i live in wilmington, nc, and beach house prices are sinking like an anchor.
I live in Wilmington, NC as well and I am still amazed at how high the prices are still. 17th street (in the DMZ) has some flipper houses on it for sale and I am waiting for the specuvestors to get it handed to them financially because they bought 38% of the homes sold here in recent years driving up the price for every one and ruining affordablity for joe six pack like me.
“I think [the market] will go up for another six months to a year then it will probably level out or shoot way down,” RE agent Ploehn said.
———————————————————————————
Gee, I know that if I was looking to purchase property in Utah this Realtor’s advice would definetely spur me on!
I want to do some rent vs. buy comparisons this weekend. Could someone explain to me what to factor into my “buy” calculation. Do I assume no-down payment and a 30-year fixed rate loan?
go to dinkytown.net, quicken.com cepr.net. They have them for you.
Or there is a poster here with an Excel file that he was soliciting feedback on.
First, factor in the current price of sheetrock, then calculated the expected rise in sheetrock prices over the next 1,000 years…then divide by the number of flipper TV shows times the number of taxi cab drivers in your MSA with more than 3 properties.
Sorry–I don’t think I explained my question very well. I want to see how much I would be saving by renting. If I were an investor buying a house to rent it out, what do I assume? Do I assume an investor would put 20% down. I just want to see how overpriced the houses in my market are.
For a true investment property loan, the minimum down is 25% and the term is usually shortened to 25 yrs.
I have a relative who is a glutton for punishment. She bought a house last Aug. It sat unrented for 6 months. She spent about 5k on improvements including shrubs, washer, dryer, and window treatments. Finally, it rented for $200 below her IO ARM mortgage and she has to pay RE agent 130 monthly commission. What does she care RE only goes up and the equity will take care of everything; plus, you get tax benefits. Get the picture? Its a fools game.
She forgets to add:
-tax
-insurance
-repair
Also if she gets a bad renter, the place can be trashed, then legal cost for eviction, repair, vacancy …
Oh, yes. My parents were brokers/investors for a couple of decades. The stories they would tell about some of those renters… Better have LOTS O’ MONEY to fix things up if you’re not very, very careful about who you rent to.
The people who rented our house before us didn’t pay a dime in rent (their deposit check even bounced, but the LL didn’t notice for over a month) and stayed for over six months. Physical threats, sheriffs, left all their junk, holes in the walls, etc.
These flippers-turned-landlords are gonna be in for a rude awakening.
Renter quiz (true story):
You discover your car won’t start early in the mornin. There’s no outlet outside where you need a work light to inspect your non-starting car in the driveway. You do one of the following:
A. Get a longer extension cord and run it out the door
B. Open garage door (but non-starting car is blocking it, so you’d have push it back, or slide cord under garage door )
C. Break a window in garage door and run the cord through the window.
You know you’re a renter when…
A. Call a tow truck because you can’t fix your car
B. Leave car in the driveway blocking garage with extension cord running through window amd work light still hanging from hood for a month.
Go to http://www.vancity.com and click on calculators, they have a very good rent vs. buy calculator.
One problem - it’s Canadian and does not factor in mortgage interest deductibility. You can get around this by figuring out your after-tax interest rate, and entering that.
What you need to do is to construct a 2 cashflows for the period you think you will be in the house.
In the buying one, put the equity investment in, the cost of debt, maintenance, local taxes and so on, add back in any benefit for tax relief, and then end on the residual value of the house price you think it will be worth at the end (take into account that prices are dropping and that real estate is more likely to go down than up!) less your debt level at that point (could well be negative). Do a Net Present Value based on, say, the savings rate.
On the renting side, do the same, and add in anticipated rental inflation over the period. Use the same discount rate.
You can then use the NPV’s to compare the costs of both over the period.
Loafer
“Maryland home sales declined for the 11th straight month in August. Realtors reported sales down 25.2 percent from a year earlier.
Now wait a min. 7,8,9 10 months ago we never heard sales were going slower.
What gives?
Sheetrock now costs $4 more! Another realtorwhore bimbo trying to use the old car dealer trick of using a positive to counter a negative! CUSTOMER: “Gee. There’s no tread on those tires!” CAR DEALER: “You’re right but bald tires save a lot of gas.”
Property in many areas are 50% plus overvalued! Where I live the average property costs $700,000. 5 years ago the price was $350,000. You can buy a helluva lot of sheetrock (even at $20 more a sheet) for $350,000 once the prices regain their sanity and any builder still building around here should take a break and pick up bankruptcy filing papers from the couthouse!! Meanwhile, Ms. Linda Craft needs to go back to McDonalds and ask the manager for her old job back and get used to saying (again), “You want supersize fries with that,” instead of, “Better buy now before prices go up. Sheetrock is already costing $4 more than last month”.
Mike comments Sheetrock now costs $4 more! Another realtorwhore bimbo trying to use the old car dealer trick of using a positive to counter a negative! CUSTOMER: “Gee. There’s no tread on those tires!” CAR DEALER: “You’re right but bald tires save a lot of gas.”
LOL! I always liked “but the tire is flat, Yes but only on the bottom”
From what I hear in my country, maybe 25% of the building cost for a new home is the materials, the rest of the cost is labour and taxes. Labour at artificially inflated prices that is, just like the building materials. Builders charge their customers 50-75 euros/hour for construction work, while there are Polish workers who get paid maybe 7.50 euros/hour to do this work (for the builder or a subcontractor).
A major part of the cost of a new home is the land value (in my area around 50% of the price for the cheaper homes). These land values are even more inflated than materials and labour costs; farmland that is changed in to building land over here magically appreciates to 50x the old value. There’s plenty of farmland available for building, but zoning is restricting the supply and keeping the land prices elevated. It’s all one giant bubble.
In my city homeprices are around 8 times higher than 15 years ago while real wages have hardly increased (maybe 10%).
Sheetrock? That’s what caused this whole bubble mess. What a dumb bee yatch.
‘Because prices are going to keep going up, I don’t know if you know what sheetrock is going for right now but it’s $4 a sheet more than it was last year,’ Realtor Linda Craft said. That’s why prices will likely continue to rise even as sales are expected to steadily slow down.”
In all honesty, I have to say that I don’t know that she knows what we know that she doesn’t know.
-mr. b.
She didn’t tell you that all other building costs went down . Don’t know why sheetrock would of gone up . Any construction people know why ?
A lot of homeowners have been banging their heads against the walls lately, resulting in an unusually high demand for sheetrock replacement. Sheetrock prices will likely continue to rise over the next few years, but as far as building costs go, this will be more than offset by continuing declines in the cost of lumber, concrete etc.
aka..drywall screwed
I think she slept through her high school econ class. That whole supply and demand thing seems to have escaped her completely.
- “‘We just haven’t seen the price appreciation needed to offset the over-lending that’s taken place,’ he said.
This guy must be Sherlock Holmes. Ray Charles saw this coming.
“ray charles saw this coming.”
deservedly, ‘best of ben’s’. bravo!
“Renting now and waiting out the market is a gambit, but so is buying a home right now if you don’t think you can stay put long enough to weather the change. Renting could pay off, over time, in a buyers’ market that hasn’t bottomed.”
He makes buying and renting sound almost equally risky. With purchase prices at all-time high levels relative to incomes and rents, and prices already declining in most major markets, it is hard to understand where the risk is for renters begins to approach that of buyers.
I agree. Although rents have gone up a bit lately, the only risk for waiting to buy would be a sharp rise in mortgage interest rates. waiting for a 50k drop in price would be offset by a quick rate run-up. In the early 90’s normal rate was about 8.5% for 30yr fixed.
Not on the attack here, but if rates shot to 8.50%, then homes prices would most likely drop all that much more. Income/family budgets are nowhere near elastic enough to absorb that. Also, where would that put short rates?
Yes, eventually the rates did drop. But even after a 20%+ drop in home prices in 1991-1992 it took a couple of years for that to happen. The only thing I am saying is, nobody can predict where interest rates will be in a 2-3 year period.
Not many folks remember the rate for fixed loans was about 15% in 1981. It seems to climb a lot faster than it comes down. I doubt we will see anything under 6% for a long time if ever. Oh, I seem to recall short rates at about 10% or so in 1989-90. I had a MM account we used for saving our down payment then.
Alright I am going to say it. It’s different this time!
The last time we saw a national drop in house prices (in real terms) was the early 80’s. It was not as bad then, because of these 3 differences.
1) Bankers in those days had a quaint cartel where they would only lend mortgage debt to 3x your income. As income was fairly stable this tended to keep houses appreciating slowly in line with wage growth.
Over the last 30 years the rules have changed. First came the idea you could borrow as much as you want as long as your debt did not exceed 28% of your pay. Next came the reduction of down payments. Finally we have no down payments and no income requirements, on floating rate mortgages. These changes have all enabled to borrow more, as long as they can make the monthly payment.
2) We have just come of the greatest bond bull market in history. The 81 - 05 run is without precedent. Each time interest rates went down asset prices went up because people could afford to borrow more for the same payment.
3) The resale market of mortgage securities have now become standard. These securities have had a good track record in terms of defaults as the real estate market has had a wild up ride since the mid 90’s. So investors are probably overpaying for them. This enables people to borrow at lower costs and hence push up prices.
When the market turns many things will be corrected. Mortgages will become harder to get, and investors will demand more security (down payment and income verification) as well as higher interest rates.
People will also discover that their house is no longer the “safe” asset is used to be, but rather a sophisticated financial instrument. Some wise sage on this blog once said, “Who do you think sets the price of a house? The guy who puts down 20% and borrows 3x his income, or the guy who puts down no money and borrows 10x his income on an I/O loan.” I can’t find who said this so I can’t credit them for which I apologize.
The key is when the house price is determined by how much you can afford to spend a month, which is how the market now works, prices of houses have to move like a bond. And when interest rates go up, bonds go down. The longer the maturity the more they go down.
With bonds, it is fairly easy to determine what will happen when interest rates change, but houses are much more difficult. First the maturity might well change if house prices fall. Second the absurd transaction costs, makes trading houses prohibitively expensive, so the market tends to take a long time to adjust. Finally the owners of houses might have irrational behavior holding onto a clearly hopeless asset.
Despite all these uncertainties, if mortgage rates were to leap to 17% (as they were in 1981) I am prepared to bet house prices will slide badly in real terms this time around. Because this time it really is different.
Oliver
P.S. Note to Ben, a search feature would be nice on the blog.
I distinctly remember getting 15% on my money market fund account in the early 1980’s. Talk about compound interest. Too bad it didn’t last.
No, not too bad - it was a mess, but then again it was a symptom (the anti-Keynesian Volcker paradigm shift of targeting money supply growth) of something that had good long-term effects. I was a money market trader at the time. 3-month CDs hit 21% and I think the repo rate got up to 23%. 100 basis point moves in short paper after money supply was announced every Friday afternoon were common. Kind of stressful. BTW, mortgage rates topped out around 17% (and forget even that without a really fine job) - now that was a real inverted yield curve.
Since I’ve been pounding the table for bonds the last few weeks I should admit I sold today. Momentum seems to be gone and even though I still think we’re more likely to see 4.50 before 5.00 in the 10-year, because I think the deflation scenario has the upper hand, the risk of holding debt is just getting too great.
But rates have been going down lately…. This is perplexing
seeing that the housing market is still imploding and the US debt is going through the roof. When are the rates going to start going back up? I really want to see the rates go back to the historical norms. It must be all the foreign money floating around in our markets that is causing this. Very frustrating!!
Rates will rise when the Fed does what the bond markets are forecasting: monetizing the recession by cutting rates. At that point the foreign money will back out, weakening the dollar and sending rates and precious metals into the stratosphere. How much foreign capital was going into the Yen when they were slashing their rates to less than zero? Will there be a carry trade for the US dollar?
re: oliverks - searching blog
Google allows you to enter the domain name (thehousingbubbleblog.com) in their advanced search, which will limit the search to this blog.
“Who do you think sets the price of a house? The guy who puts down 20% and borrows 3x his income, or the guy who puts down no money and borrows 10x his income on an I/O loan.”
The guy who lends the money to both.
“The key is when the house price is determined by how much you can afford to spend a month, which is how the market now works, prices of houses have to move like a bond. And when interest rates go up, bonds go down. The longer the maturity the more they go down.
With bonds, it is fairly easy to determine what will happen when interest rates change, but houses are much more difficult. First the maturity might well change if house prices fall.”
Oliver — Excellent post. And bingo: a home viewed as an asset (something to buy-and-hold, invest-in, flip, whatever) is essentially a variable-duration bond whose market value is inversely related to interest rates (same as a Treasury bond in that sense). This is why Geithner (Prez of the NY Fed) said that home prices were not overvalued at the peak, as “fundamentals” (interest rates) explained why they were so expensive back then. The same “fundamentals,” coupled with the fact that many used I/O Option ARMs to buy homes at 10X income, suggest that homes have dropped by a lot in value since the market top in August 2005, reflecting generally higher interest rates. To make matters much worse, the duration of homeownership generally increases with falling prices, as many would-be sellers are not sufficiently financially astute to realize that they actually will probably lose much more money by holding on rather than selling quickly. And I am sure from the quality of your post that you realize that lengthening duration coupled with rising interest rates spells an even larger loss in value compared with the effect of the same interest rate increase on a fixed-term bond.
Uptown,
Good point about the searching using Google. However, google does not update that quickly. The most recent point I could find of mine is over a week out of date.
Oliver
But there’s a crucial difference between homes and bonds, in that no brokerage will let you speculate on bonds with a margin loan at anything like the degree of leverage implicit in today’s mortgages.
I agree with Pen. The only thing FBs have been asking the last few years is “how much a month?” The savings rate is negative, and most don’t have anything saved for a down payment. So, if interest rates shoot up, it will cause prices to fall so that the monthly payment remains about equal (all other things being equal - which of course they aren’t, since sales are plummeting and inventory is skyrocketing). Just one more reason that prices will crash.
You could be right, it may really be different this time. Last crash only ate up most peoples down payment, this time many are underwater already, they don’t have the luxury of
just waiting it out like the sellers did in the 90’s.
It wasn’t the FB asking this. It was the Reamtors telling them…”Don’t look at the total, look at the monthly payment”.
yes, same story here in the Netherlands. This message has been pushed year after year, not only the the realtor and mortgage mob but also by the banks, investment advisers in newspapers and on TV, consumer organisations etc. People have learned that there is only one thing that counts and that is the monthly payment; all the rest is irrelevant and you don’t need to understand where the monthly number comes from.
The “28%” rule, when it was applied, most likely related only to the lowest teaser payment and not to even the middle level of what payments could rise to, much less the max. So even the minority of applicants with stated income who did not lie, or even fudge a bit, about their income are screwed. They just might rotate on the spit a little longer than the liars.
“Although rents have gone up a bit lately, the only risk for waiting to buy would be a sharp rise in mortgage interest rates.”
Actually, I would consider a sharp rise in mortgage rates a much greater risk to home prices than to renter’s ability to afford a purchase, at least those of us with savings. After all, it was low (negative real) interest rates which really kicked the parabolic price blowout into overdrive, and the measured series of 1/4 point hikes in the Fed Funds rate which put a stop to it.
The biggest risk for renters is a general inflation of the currency which results in a huge increase in nominal home prices. There is some chance that we have already seen this, as these ridiculously high prices could, in principle, stick, provided that wage inflation rose much faster than housing prices over the next fifteen years. I personally don’t see this happening, but I am not God or Bernanke or Paulson, so I am not at all convinced my hunch is correct…
GS,
Exactly. I am anxiously waiting for very high interest rates which would knock even more buyers out of the market, forcing prices down. What many don’t seem to realize is that prices overshot whatever difference lower interest rates made. Both prices AND **monthly payments** are at historical highs in CA (and many parts of the country & world) because people were buying ATMs, not houses. And they were doing it without any intention of actually paying back the borrowed money, as the “house” was going to pay it back for them.
Without price appreciation (which the FBs have been living on), there is absolutely NO ROOM for monthly payments to rise. Higher interest rates would actually be a tremendous blessing to those of us with good down payments, income and credit scores. High interest rates mean there is less money to lend, and those who lend will suddenly concern themselves with the borrower’s ability to actually pay back the loan.
CA renter,
You are, unfortunately, like me….a fiscally responsible person. And while we would both like to believe that the FED will do something responsible, I really kind of doubt it.
I had been saving money in a MM for a down-payment on another house, recieving .75% interest (no money) on my money when this “Boom” started. I was loosing while the Pigs were buying. But they are the consumers, not the savers. Wall street hates savers. Business needs debtors.
And the government needs to INFLATE away the huge debts they have incurred. While I am still holding out hope the FED will reign in the money supply and reward the savers, I don’t think it will happen.
They need to save the debtors and keep the inflation going as high as possible to devalue the costs of give-away programs, “entitlements” and various spending programs for which they cannot pay.
I fear the new values of houses will hold higher than one would expect as Bernanke manuevers to save the debtors.
“Wall street hates savers. Business needs debtors.”
Capitalism needs savers for innovation and entrepreneurship, which requires capital = savings. Though, perhaps less so now with a Fed that can wave it’s magic wand and come up with all sorts of “capital” out of thin air. The problem with this whole system was revealed in the dot.com bust, and is now underscored with the housing bust.
“While I am still holding out hope the FED will reign in the money supply and reward the savers, I don’t think it will happen.”
Yep, I’m banking on that too. I have my doubts as well. I guess we’ll just have to keep our ears perked for subtle changes in the market and hope for the best. The hope I have is that a strong dollar benefits those who have the dollars, i.e. those doing the lending, or the banks, which the Fed represents.
“I fear the new values of houses will hold higher than one would expect as Bernanke manuevers to save the debtors.”
Sigh… in these crazy times anything can happen. Any maneuvering outside of free market mechanisms only delays the pain and only makes things worse for everybody, probably even us, when the day of reckoning comes.
the greatest risk is probably that risk is priced into the mortgage market again and that instead of 10x income, 120%, IO loans we get again 3x income, 80% 30-year fixed rate loans like 10-15 years ago. That would cause a much bigger price change than just the interest rates themselves. I could cause homeprices to drop while interest rates drop further.
?Because prices are going to keep going up, I don’t know if you know what sheetrock is going for right now but it’s $4 a sheet more than it was last year,? Craft added.
That’s why prices will likely continue to rise even as sales are expected to steadily slow down.
First of all, this quote (from the NC link) is completely idiotic.
Secondly, the question marks in the first paragraph actually showed up in the article when using Firefox browser. I am assuming some editor put them in somehow while wondering whether to remove the ridiculous statement.
Good catch — you’re probably correct.
“Realtor Brandon said now is the time to buy while it’s a good solid market. ‘I think [the market] will go up for another six months to a year then it will probably level out or shoot way down,’ Ploehn said.”
Let’s get this advice straight: Buy a Utah home now, before the market goes up for a few more months, then potentially shoots way down? Why is this a sensible plan?
I agree - what a moron - however, that is the typical quality of financial advice a RE agent gives his clients. Remeber - For RE agents and stockbrokers “now is always the time to buy” - so they can score their pot and move on to the next fish.
Maybe someone could apply their FireFox X-ray vision in a search for secret embedded editor comments. Look for something like #@!%j or WTF.
I think those were two different people being quoted, though.
very sensible plan because you have to pay the realtor twice within one year; first to get in during the frenzy and a little later to get out as soon as possible
“From Danielle DiMartino in Dallas.”
Can’t find Danielle’s piece from the link…
Speaking of Danielle…
As stated yesterday by some other posters, she will no longer be writing for the Dallas Morning News. She got a job at the Dallas Federal Reserve!
She’s been one of the few journalists who was warning about this bubble (and all the potential consequences) all along. The Fed is lucky to have her!
Anyone in MD/VA get the K.Hovanian flyer in the mail today? It says “NOW IS the time to buy and celebrate Octoberfest. Save up to $100,000 on a new home through Oct 31st 2006″. The fine print says the deal is only good if you use their lender/title co. and some other nonsense. There are 39 Maryland, 39 VA, 5 WV, 1DC, 1PA & 6 DE communities listed. Thats alot of inventory. We had looked at one in Anne Arundel Co in Jan 06. The sales lady assured me that they would be all sold by June so I better get a deposit in. There are 2 spec homes still available.
I heard if you offer to bring your own sheetrock, they’ll cut you an even better deal.
If that offer is what they “Say” they can do, they can do even better.
MAZZ market still on total drugs…
1400SF low income condo’s in Gloucester for $369k.
State housing programs even sets up the financial noose for the FB’ers to hang themselves.
Wait’ll the insurance industry hurricane analysts come to town!!!!!!!
Meanwhile..Avalon Bay Communities has built a couple of nice apartment complexes all over the North Shore. You can rent a brand new 2-3 bedroom for around $1600/month. Not cheap, but a long way from what it would cost to own a condo or townhome of the same size that cost $369k plus taxes/condo fee and any upcoming assessment. Some of the condo complexes on the North Shore have been hit with some big @$$ assessments in the last few years.
“Meanwhile..Avalon Bay Communities has built a couple of nice apartment complexes all over the North Shore. ”
and Avalon is the expensive one. They were renting 1bds for the price Archstone was renting 2bds when I looked in the spring. Archstone was in a way better locale too.
I wonder if these people might skate on the insurance hikes. I see now that El Nino has formed and all of a sudden there are predictions that 2006 and 2007 will be relatively mild hurricane seasons. Without noticeable 2005 damage to pin a hike on, and a benign forecast, perhaps the insurors will have to cool their heels for a year or two.
The ultimate “flip”???
http://tinyurl.com/goef2
Not sure whether or not this passes the sniff test.
Everybody loves some body sometime.
Wonder if he’ll need to deed over the ghost. Talk about a weird cloud on the title. “Did you feel something?” “No, did you?”
I really hate to do this to all you nice people, but I would like to try out a new RE Bubble term…
flipper in serious trouble entirely defeated= FISTED
I think Auger-Inn will enjoy it, but others with different value system (say based in Colorado Springs) wouldn’t like it very much.
I think it is funny but too wordy to catch on.
-I have benn thinking about a new term for flipper …
Flipper = Flipflop
Hey, wadda ya trying to say here?
I’m some sort of value-challenged individual? I guess I’ve been called worse.
houses = value-challenged
auger-inn = unscrupulous pain voyeur
Weren’t you going crazy with the ass-pounding jokes?
If not, my apologies.
For all its other failings, I think it would register as a hit on a vast number of websites with which we can well do without association.
“Take one Brookline condo listed at $499,000. With 10 percent down plus condo fees and taxes, the monthly expenses are $3,400. You could rent a similar apartment for $1,700.”
No bubble there. Move along.
Not to mention you could take your 50K downpayment and use it as seed money for a sheetrock manufacturing business.
lol.
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It looks like this “Help! Home For Sale” is now a regular weekly article on CNNMoney.com.
You have to love the arrogance of these people:
“We had someone make an offer of $275,000,” says Eaton. “I didn’t even counteroffer. “The most I’ll come down is $10,000.”
http://money.cnn.com/2006/09/15/real_estate/help_home_for_sale_Eaton/index.htm?postversion=2006091512
- “I didn’t even counteroffer.
Is that ‘Measured Confidence’ or ‘Confidently Optimistic?’
I went to Realtor.com to check this out. Normally, I like the big ranches, but this thing is pretty ugly and quite dated in design. It’s going to be a long winter waiting for it to sell.
26 PINEWOOD DR, CARBONDALE, IL 62901
Zillow didnt work. i wonder what/when they paid.
This is one of the houses that is like art…when you buy it, you had better love it, ’cause it ain’t ever gonna be an easy resale. The more “unique” a home is, the harder it is going to be to move.
so they already bought their 2nd house and they have the daughter and son in law in there freeloading. and if it doesnt sell at their price theyll just take it off the market and relist in in Spring and it will magically sell? and this is a “bargain”?
I like it, it’s not everyone taste but looking at the two pictures you can see how well constructed it is. Certainly replacement cost could be more than current asking price, but it local can’t afford, they can’t afford.
1. price
2. price
3. price
“Even in the slow Carbondale market, $358,000 is a bargain,” says Judy Eaton.
CARBONDALE for $358K! HAHAHAHA!
Carbondale = BFE Illinois. Across the river from Nowheresville, Kentucky.
They should just go knock on the doors of the 2 families in the 50 mile radius of the town and ask if they will buy. If they say no, then I suggest they DROP THE PRICE!
Hey! I went to SIU. Best 6 years of my life.
One gets tired of a college town, but you can always go down the road to Marion and look into the State Pen.
What is it with Crown Moldings (sp)?
These are surely the cheapest and easiest things to put up, and yet seem to be how realtors differentiate a “quality” house. How about energy efficiency? How about construction guarantees?
Quality hardwood crown moulding, while not very difficult to install, is very expensive.
I thought you folks might this interesting. Be sure to notice the NAHB vs SP500 chart…I might make a Halloween costume out of it…
http://bullnotbull.com/archive/good-bad-news.html
Pen “I thought you folks might this interesting. Be sure to notice the NAHB vs SP500 chart”
Good Lord! Say it ain’t so.
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Nice Video below. And this Asian anchor chick is SO HOT.
Housing bubble blues?
CNNMoney.com’s Allen Wastler reports on evidence of a housing market slowdown and more .(September 7)
http://tinyurl.com/ffu65
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Oh - I forgot to mention, the CNN Reporters says he is “bubble-sitting” - he sold his place and will be renting with his family for the next 6-12 months.
This is incredible. The finance reporter assumes his audience isn’t too smart BUT to explain it to us dummies he tells his own story — he is selling his house in one area and renting in another (where he wants to move). I wouldn’t call him a “bubble-sitter” yet though since he hasn’t actually sold his house. He says the place where he is selling the house still has good prices, but where he wants to buy is going to go down. He admits this doesn’t really make any sense! He also advises anyone with a “risky” mortgage to get a fixed mortgage. And the anchor woman says she knows lots of people in this situation. But how easy is it to get a fixed? Don’t many people have ARMs because they didn’t qualify for fixed?
“Don’t many people have ARMs because they didn’t qualify for fixed?”
Not only that, but the fixed rate at the time they failed to qualify was lower than it is now, so unless they got a heckuva good pay raise recently, they are even farther away from qualifying. I’m a little surprised that this “shocker” has not gotten any MSM attention yet.
And let’s not forget many of the ARM-holders are (or will soon be) underwater, so they won’t qualify for any refinancing regardless of rates.
“And this Asian anchor chick is SO HOT.”
Yes, very nice curb appeal.
” ‘I don’t mind the increase(property taxes), because I know the value of my house has gone up,’”
But has your paycheck increased correspondingly? Not in my neck of the woods.
“But has your paycheck increased correspondingly? Not in my neck of the woods.”
Not here either. That is the squeeze. I read from time to time that the economy is doing well and I wonder, just who is it that is doing well? My expenses keep rising and my pay doesn’t. Boo-hoo for me, except that this seems to be common to the great majority of people, not just my pity-party self.
who is it that is doing well?
The rich, stupid. As has been pointed out by everyone from Paul Krugman to Warren Buffett.
yes, and that’s happening all over the world. In my country (NL) the difference between median and top level wage is now 418x instead of 18x about 20 years ago. The numbers I have seen for the UK and US are similar. In my country the average (nominal) wage is increasing 1-2% per year, but I’m sure most of that increase comes from a tiny group of top-level earners who get around 30% more every year.
You missed out on the new paradigm: Housing wealth extraction. Forget that old-fashioned work ethic. It will be your undoing.
Buy house……….125% LTV.
Spend surplus on toys and Mtg. Payments for 2 years.
Re-finance. Extract more “free” money.
Spend on toys and mtg. payments.
Repeat ad infinitum.
If possible, buy more houses and extract more money.
Why do you need to work for a living??
“A builder in Bartlesville for 50 years, Gerald Coast said, ‘People are getting hired. They are coming in from all over the country, California, overseas.’”
Quick. Someone clue the California “investors” in to the fact the salaried big-money oil jobs in places like Bartlesville have moved about 500 miles south to a humid hellhole on the Gulf Coast. The oil biz continues to consolidate.
Oh Christ, I’ve ben trying to stay away from this blog…but I can’t stand it any longer.
Sheet rock is gypsum…CALCIUM….if I remember my periodic table, it is the 5th most abundant element in the earths crust. There is no shortage!
Gonna go kick the realtor in the nuts tomorrow…must vent…need help.
good day!
The penny (or should that be the $4) drops. I guess this sheetrock stuff is what we call gyprock in Australia? Used as the basis for internal walls?
Yep, that sounds like the same stuff as sheetrock.
Sheetrock is up because a few million homes and businesses in LA/MS/AL had to gut the rock to at least half-height. That happened almost overnight and at the climax of the housing contruction boom in the rest of the country. Simple supply and demand. With housing crashing, and the tapering off of repairs in the Gulf region, sheetrock prices will dive soon enough.
They’re called bullfrogs.
What? That’s an odd name. I’d have called them “chazzwazzers.”
I don’t know if you know what sheetrock is going for right now but it’s $4 a sheet more than it was last year,’ Realtor Linda Craft said. That’s why prices will likely continue to rise even as sales are expected to steadily slow down.”
Boy!!! Where did this expert economist come from? With this kind of thinking the whole world will go MAD in several years. High Prices and increased inventories will spell DOOM very soon!
A builder in Bartlesville for 50 years, Gerald Coast said, ‘People are getting hired. They are coming in from all over the country, California, overseas.
Yeah, it’s different here, we’re having a regular friggin’ boom over heya. Everyone wants to live here. Gosh dang Halliburton has enough money to hire on another coupla million people or so, so come on out. Gosh darn fratter beratter frickin frackin low life so an sos. The grass is always greener, er, in Oklahoma. We only just now started another bleatin’ blattin’ 47 new housing developments just yesterday. Better get ‘em while they’re hot boys and girls, these puppies won’t last long. Dad gum californicator granite, no down, no doc little slice o mutha luvin’ heaven, that’s what we got. Heck, bring a friend and buy two! They make great birthday and bar mitzvah presents! Heck you can buy a whole neighborhood because, unlike San Diegans, we uns ain’t runnin’ outta cheap land like them gummies over on the toastal coastal nether regions. Give me a shout if you want to buy one of these high quality, high efficiency homes located right next to your ever lasting gobstopper of a new high paying job (with benefits, of course). This little slice of Eden has been hidin’ under all y’all’s noses all this time you just didn’t know what you wuz missin’. Just funnin’ ya, really, wouldn’t you like to be, my neighbor?
Renting now and waiting out the market is a gambit, but so is buying a home right now if you don’t think you can stay put long enough to weather the change. Renting could pay off, over time, in a buyers’ market that hasn’t bottomed.”
Look at this …Perkins has come 180% on the Silicon Valley RE market…. at a time it too late for those that already signed on the dotted line. They are collared with a massive/
Perkins was always talking about how diserable SV property is and it wont experience any bubble. SV had several equity and RE bubbles in the past..
For those who waited … say I TOLD YOU SO!
“It’s rather ironic that the lower the interest rates, the more people are encouraged borrow … and, as a result, some people, particularly those who deal with non-bank lenders, end up over extending themselves,” he told parliament.”
WOW and we just had a recent congressional commitee meeting …
Crammer says -
RealMoney Radio Recap
RealMoney Radio Recap: Keeping House
By TheStreet.com Staff
9/15/2006 2:51 PM EDT
URL: http://www.thestreet.com/funds/realmoneyradiowrap/10309296.html
Tech, financial and drug stocks have been good bets, Jim Cramer told “RealMoney” radio show listeners Friday; and now he says you can add homebuilders.
This is a group that everyone hates, but Cramer says the big slide in commodities prices is going to give the sector a lift. “This stuff is coming down faster than they can cut the prices of the houses they sell,” Cramer said. This means extra money for these companies, even if housing slows.
It’s also time to get into anything that goes into the home, he said, including American Standard (ASD) , Sherwin-Williams (SHW) and Black & Decker (BDK) .
“Buy anything you can get at Home Depot and Lowe’s,” Cramer said. “In fact, buy Home Depot (HD) and Lowe’s (LOW) .”
He also said that it’s time to get out of oil and gas, and that today is an opportunity to ring the register and make a little money because the stocks are up.
From Ben’s Louisiana link:
‘Kim Williams is one such example. The day-care owner and mother of three put down $5,000 on her 1,800-square-foot home near Howard Park two years ago, leaving her with a $74,000 mortgage and a $664 monthly note. Recently, that note jumped nearly 25% to $822, taking her quite by surprise.
“We were under the impression we were on a fixed mortgage, then we got this piece of paper in the mail telling us it’s going up and that it’s going to keep going up,” Williams says.
To make up the difference, Williams is cutting back on some of her business costs in order to generate a little more cash to cover her expenses. She’s also in the process of trying to refinance her home, something others are attempting as well, with varying degrees of success.’
This woman has her own business, a day care center. Are we to believe that this businesswoman was so stupid that she did not know the terms of her mortgage when she signed on the dotted line? I do not believe business people are this stupid. Stupid people do not start viable small businesses.
I believe she was simply pipe dreaming about how in two years her business was going to improve to the point that she could afford the higher payment when it kicks in. This did not happen.
So now she wants to say she did not know what she was doing, things where hidden form her, she asked questions but they gave her elusive answers, they lied to her, she was led to believe, blah, blah, blah.
UNBELIEVABLE
Happy Renter,
I truly believe many borrowers did not know what they were signing up for. As they went through the overwhelming stack of loan papers, the notary/originator likely rushed them through, stating, “it’s just standard paperwork, you don’t have to read every page.” (this happened to me, but I didn’t listen) Also, they were marketing these hybrid ARMS as “fixed-rate loans” since the rate was fixed **for a limited time** (but they didn’t mention/stress the limited portion of “fixed”).
No, the lenders, who do this every day, are more culpable than the borrowers who might do this only once or twice in a lifetime, and are relying on advice from those who do not have their best interests at heart (realtors, mortgage lenders, etc.), but who the borrowers believe to be more knowledgeable and certainly not scheming (sp?).