‘Maybe We Should Ask, Did The Media Do Enough?’
The Orange County register looks at reporting and the housing bubble. “Gary Watts cites news coverage as a major, depressing market force in his latest outlook. ‘I think the media, in general, needs fear-driven articles to keep readers interested or viewership up,’ Watts told me. A bold headline highlighting what Watts sees as minor market trends ‘makes everybody’s think is this the beginning of the end.’”
“By any measure, the housing market is struggling. So what should this columnist do when, say, my proprietary economic index shows local housing suffering its worst quarter since 1995?”
“‘Isn’t it important for the skepticism to take place?’ says investment adviser Charles Rother from Los Alamitos. ‘Housing prices in many areas of California are no longer supported by income, rents or likely employment growth. Maybe we should ask, ‘Did the media do enough?’”
“Paul McCulley, the top Fed watcher at Pimco bond traders in Newport Beach, summed up the media’s housing pickle best: ‘If some broker is blaming you now, he should also thank you for two years ago. Can’t have it both ways!’”
“Nobody complained in 2003 or 2004 about frequent reports of all-but-instant real estate wealth.”
The Palm Beach Post. “As the housing cheerleaders constantly reminded us, a plethora of fundamental factors drove the historic housing boom of the past few years. Now that the boom is over, the same cheerleaders point to a single reason prices have fallen: the media.”
The Herald Tribune. “Some Reader Advocate callers aren’t happy with the way the Herald-Tribune is covering the downturn in the real estate market in the area. One woman said that we were killing the housing market by continuing to publish stories about how bad the market is.”
“Another caller agreed, suggesting that we’re perpetuating the problem by reporting on the decline in median prices.”
The New York Times. “A report today showing that sales of new homes rose for the first time since March was — at first glance — a welcome respite. But economists warned that underneath the headline numbers, signs of a weakening housing market were more prevalent than ever.”
“Sales figures for July were revised to show that fewer homes were sold than the government first reported. As a result, the August sales data probably exaggerates the resiliency of the market. Economist Stuart Hoffman called the August increase a ‘dead cat bounce.’”
“The August numbers could also be inflated. Because new home sales are recorded when the contract is signed, not when the deal is closed, the data do not factor in cancellations. Yet builders have said recently that cancellation rates are running as high as 30 percent, suggesting that the Commerce Department’s numbers make the housing market appear healthier than it actually is.”
“‘It certainly is possible that for a variety of reasons you could have a one-month upturn, but I doubt that will reverse the trend that seems to be occurring,’ said Kenneth Simonson, chief economist for the Associated General Contractors of America.”
“Mr. Simonson noted the possibility that the August sales numbers could be revised downward, just like the July numbers were. ‘I think we could still wind up seeing that this month is a continuation of the downturn.’”
The Associated Press. “Analysts were unimpressed with the August rise in new home sales, noting that it followed a sharp 7.5 percent drop in July and still left sales 17.4 percent below the pace of a year ago.”
“‘August is just a blip. Housing is still headed down,’ said economist Mark Zandi. ‘Everything still points to continued weakness in sales, construction and home prices.’”
“Many analysts said the government statistics understated the drop in new home prices because they don’t pick up heavy discounting that is under way as builders offer incentives to move unsold homes.”
“The inventory of unsold homes did decline slightly to 568,000 houses, but that was still the second highest level on record after July’s backlog of 570,000 unsold homes.”
“‘Many builders still have large inventories of unsold homes and we expect to see aggressive use of sales incentives over the balance of the year,’ said David Seiders, chief economist at the National Association of Home Builders.”
The Amherst Times. “Home prices fell in August compared with a year earlier, the first such decline in more than a decade. David A. Lereah, chief economist for the Realtors association, said the price drop was a taste of what the market should expect in the coming months.”
“‘We’re in for a ride right now,’ Mr. Lereah said. ‘This is the first of many price corrections for the remaining months of the year — for at least the next three or four months.’”
“In the West, prices have held steady there this summer, sales have fallen. ‘Something’s going to give in the West,’ Mr. Lereah said. ‘The correction has not occurred in the West yet. Sellers are stubborn there.’”
Gary Watts is bad for America.
Seriously. If there’s no law available to prosecute this guy for something, then I’m all for creating one.
Learah, too. Although Learah clearly is back pedaling and trying to cover a little bit, now.
Also, the problem is not just that Gary Watts says things like this. It’s that people believe it. And will therefore use Realy Clown propoganda as their only compass, leading them down the primrose path.
Doesn’t the fact that people do believe it tell you a little bit about the state we’re in?
Maybe Gary Watts is the next Marshall Applewhite:
http://www.wave.net/upg/gate/heavensgate.html
Everybody got your sneakers? The Real Estate Mothership is leaving with the comet.
Product is product is product.
Truth is truth is truth.
Having the ability to distinguish between the two is a very difficult thing to do for most people. Be wary of people with product to sell that also say they are telling the truth. When there is a large proportion of the populace that is bound to believing that a salesmen is the disseminator of truth about the nature of their product then those folks better be damn sure about their choice.
Regardless, the unwritten law of the land is caveat emptor. As long as this is the case, multiple versions of the “truth” will be uttered to get the deals done.
Interesting to me is all these incentives that the lenders are allowing.
In the late 90’s I had cases of lenders throwing a fit over items included in the sales contract that were not RE. Had lenders squalk over washer/dryers incluced in contract “We are financing the home only, not the appliances”, had another case where the lender squalked over a frigging window air conditioner because it wasnt bolted to the home! Today these same lenders are allowing two year leases on damn BMW’s.
It got so irritating that I would put all the piddly item request on an addendum and not give it to the lenders. Pissed me off that they would cause trouble over $50-100 valueless crap. Now they are allowing “Incentives” to the tune of 10’s of thousands of dollars.
I’ve wondered that too. When we bought our house the sellers offered us $400 to pay for our rent so we could close earlier. We had to take that out of the contract because the lender wouldn’t allow us to have anything that might be considered fraud. That was for a normal 30 year fixed mortgage, though. Maybe if you do an I/O stated income loan they don’t care how many cars or TVs you put in the contract…
Perhaps we’re overestimating the influence of the media as it relates to RE, here. Most people don’t even know who Gary Watts and David Lereah are. And I don’t think that many people read newspaper reports that were bullish on RE and run out to buy a piece of property.
I think that a more powerful force in this bubble was that people heard about friends and family members making a killing in RE. That lured people in and toxic loans facilitated the urge for those who couldn’t afford it. Peer pressure continued to build on non-homeowners as prices soared, making it harder and harder to resist that urge.
I think the media was more or less reporting the facts on the way up and they will on the way down. They probably could have done a better job finding less bullish sources for their reporting of the boom. In addition, there were plenty of articles warning of a RE bubble in a number of magazines and papers (The Economist and WSJ immediately come to mind) years ago.
In the end the media probably played a small role in feeding the bubble, but in the end this thing was so big that almost all of us had a part in feeding.
sorry for the double post.
True gar,
It has been my experience that people act and then look for evidence that supports their action. My bet would be that if someone does know about GW, DL, or other RE bulls. It is only because they have already overpaid for a house in some way, shape, or form.
That or a RE bear with his bull!@#$ sensor turned on.
Perhaps we’re overestimating the influence of the media as it relates to RE, here. Most people don’t even know who Gary Watts and David Lereah are. And I don’t think that many people read newspaper reports that were bullish on RE and run out to buy a piece of property.
I think that a more powerful force in this bubble was that people heard about friends and family members making a killing in RE. That lured people in and toxic loans facilitated the urge for those who couldn’t afford it. Peer pressure continued to build on non-homeowners as prices soared, making it harder and harder to resist that urge.
I think the media was more or less reporting the facts on the way up and they will on the way down. They probably could have done a better job finding less bullish sources for their reporting of the boom. In addition, there were plenty of articles warning of a RE bubble in a number of magazines and papers (The Economist and WSJ immediately come to mind) years ago.
In the end the media probably played a small role in feeding the bubble, but in the end this thing was so big that almost all of us had a part in feeding it.
That was worth a double post…!
Bubbles burst by their own weight.
A film of liquid forming a ball around air or gas.
A transparent dome.
A plausible scheme that proves worthless.
I think that the press or any of us here have any influence…it will or has popped on its own!
I do not agree garcap the the media influence was minor .IMHO ,if I remember correctly the main media gave the cheerleaders for the uptick market a very loud voice in this housing bubble . Countless articles would appear interviewing either realtors or speculators about gains etc. I remember watching channel 7 news in Ca. and they were reporting Orange County having a record breaking year ,(no counter view that the gain were not normal .) The news stations would have guess real estate bulls giving advice on how to buy in the always going up market .
We all know that the main advertisers for almost all media was the real estate industry .
New shows cropped up like Flip that House , Design To Sell ,etc. painting a up picture of real estate also .
When I went to sell my house in 2005 I was hard pressed to find any neg, projections about the housing prices ,(I hadn’t found this station yet ). I finally came upon a news report from England talking about how likely it was that America was in a housing bubble .
My point is that the bubble was just not challenged enough by the main media in spite of the prices going off the charts .The lack of affordability should of caused a few in the news media to question who the future buyers were going to be for these ongoing gains .
If all of a sudden beef went to 200 buck a pound in 6 months the news media would be all over it ,not cheering the profit takers but questioning the grounds for such a increase .
The media is always going to be a trailing indicator though. They weren’t writing housing bubble stories in 2001 for a reason - it hadn’t really taken hold yet so where’s the news? Of course once it’s a big deal and everyone is jumping in with both feet they’re happy to report on it. People act, media reports. The housing slowdown was started by people who were exhausted and couldn’t pay anymore for homes. I’m not sure why people think the media started it. They’re just reporting the numbers they see AFTER the fact of what the people do.
Wiz-
I agree that the media was not terribly critical of the boom in housing, but let’s remember that the media’s main role is to disseminate information objectively (outside of the Op-ed pages).
With respect to the housing bubble, the media observed and reported on a fact (soaring home prices) and searched around for the proximate causes, which were readily served up by the RE industry’s hacks.
It’s like when stocks go down, financial reporters have to have a reason to explain the obeservable fact. So they find a few memebers of the financial community who will say that the market went down because of higher oil prices or concerns about earnings, etc. etc. Same is true when the markets go up; the media find someone to provide the bull case. Ultimately, there are a million minds that comprise the stock market (and the RE market!) and the media are struggling to understand those minds at least as much as they form them.
I am equally shocked that the lenders didn’t balk at the yearly increases in prices as well as the media .
The cheerleaders ended up making up reasons why the prices soared . It was a mania ,and it’s just hard to believe that a National housing mania could get this out of hand without the media just closing their eyes .
the lending standards are simply a joke and I think the lack of them was a huge driver in all of this. I just can’t believe that anyone who fully understood the nature of these loans would choose to underwrite them and hold them on the books.
On the MEDIA!
Did today’s New home sales report, “Headline the truth?” Mislead the average citizen?
First paragragh ” August New home sales rebound from 5 year lows in july!!!
New home sales came in @ 1050/ per annual sales versus July 1001.. 10,000 above Wall Street’s “Expectatiosn”
That is how it was reported. How many of YOU checked the revision? That’s right July sales were (mysteriously?) revised as always…This time they revised July from 1.092 million annual units by 92,000 / average annual sales! So the 1050 looks like a BUMP..
So will august also require a 90,000 lower revison? Especially as we know SEPTEMBER will be an abyss!? Also new home sales are nothing more than deposits!!! not closings!
The add by subtraction GOVT. rule is in effect! Everytime the Government Media Comples reports….The head line number is Goldylox, the revison is adjusted to make the current number what they want to report!
There is NO integrity in any of their numbers and have failed to inform the uniformable national public.
Oh for the Bush haters:
The practice of sending the Budget or Commerce guy back to the drawing board to recompute the “RIGHT” number has been with us since LBJ…
Even back in the 1930’s FDR manipulated everything from gold to coffee, while he selected the daily price shortly after arising from bed each morning. He told Morganthal to make it happen backed by the US buck- Money supply- Morganthal wrote his memoirs on his interactions As Treasurer and later Sec. of Sate (I beleive) !
Today they have fromalized the practice now 12 years old…PPT..Plunge Protection Team….Bernake is to report on this at the Next Humphrey Hawkins sessions, thanks to Ron Paul, Texas Congressman.
The simple practice of revising the previous months numbers downward, in order to make the current months numbers look better, is not a difficult concept to understand. Why it is lost on most reporters minds, is evidence of the dumbing down of those doing the reporting. The lack of intelligence of those people employed in the media is astounding. The new qualification to be employed in the media is to have an IQ less than 100.
Total new home sales will drop below 1 million soon, as the downward revisions continue.
The problem isn’t Gary Watts, or the media, or the dissembling of the entire RE industry. No, the real problem is that 99% of our fellow citizens are sheep. After this train wreck plays out they’ll still be sheep, but at least some have acquired enough wisdom — the hard way — to start listening to the thinking 1% who tried to warn them.
I agree Sammy that the real problem is people are sheep ,that are lazy ,who are looking for quick sound bites to brainwash them into what to do .i just think if the news media in large part wasn’t questioning this real estate mania than why should the lazy people question it .
When the media first started reporting bubble news the realtors /cheerleaders/NAR started getting mad at the media …..remember . Remember how the media published main page articles about buyers having psychological problems with commitments etc. I remember all these articles in the news .IMHO these news articles prolonged the bubble another 6 months .Remember how the media gave big new coverage to the Smith’s who were professors that claimed they proved that real estate was a good investment ?
What % of people count on blogs for their daily news ?
I agree that 99% of people are sheep. However, I do not believe that the sheep were the main cause of the housing bubble. I believe that around 99% of people have always been sheep. If you were to go back to 1930 (hard-times) and move a cross-section of that population to ours, do you really believe they would have all shunned real-estate when they saw the other sheep gaining unheard of equity in their homes? I believe they would have been right there with the rest of them! The consumer products (IO ARMS, etc. . .) were the main cause of this bubble, without them, this bubble would have been impossible.
I am also convinced that in addition resetting exotic mortgages, tightening lending standards adopted by the banks will be the most significant catalyst in the upcoming real-estate crash.
Gary Watts is nothing more than a pimp. When no one wants his overpriced prostitutes, he resorts to desparate mesures.
Yes but try to see it Gary’s way — the press lapdogs have done nothing for years but parrot the realtors’ happy tune — quoting their industry sources even in the face of hard data and unbiased economic analysis to the contrary - leading their readers down the primrose path to toxic loans and debt servitude.
The press’s first loyalty is kowtowing to its advertisers, and the RE industry reaped the benefits of this. But its second loyalty is not to make itself look too stupid to the ordinarily-informed masses - so when inventory started to really pile, the press had no choice but to start telling the truth - Pity Gary and his cohorts — even this little bit of truth can be really, really painful to an industry used to getting its lies broadcast unchallenged year after year.
“In the West, prices have held steady there this summer, sales have fallen. ‘Something’s going to give in the West,’ Mr. Lereah said…
David, David, David, where have you been? Prices in Sacramento have declined for the median numbers and the REAL DECLINE, measured in $/sf has exceeded 20% in the 18 months after June 2005. I will say you are nearly right about one statment…”the correction has not occured in the west yet.” Correctamundo…a 20% decline in nothing yet. All told we will see 50%+. And guess what, that overpriced $225,000 house in 2003, which ballooned 100% to $450,000 in 2005………….will soon be worth the $200,000 you could buy it for…….in 2002. Simply amazing how this is going to work. Reversion to the mean.
- “Paul McCulley, the top Fed watcher at Pimco bond traders in Newport Beach, summed up the media’s housing pickle best: ‘If some broker is blaming you now, he should also thank you for two years ago. Can’t have it both ways!’”
“NOBODY COMPLAINED in 2003 or 2004 about frequent reports of all-but-instant real estate wealth.”
FINALLY! Someone with a Clear head and voice!
Well, Salt Lake City seems to be in the holding steady camp. I started thinking about purchasing a home 4 months ago saw trends like this
http://housing-watch.com/regionview.aspx?city=Salt-Lake-City
got a bit sick to the stomach about my timing , and then started to realize something was fishy. The above site, housing -watch, I think overstates the climb a bit, but the increases were certainly dramatic. Our wages are pretty stagnant like elsewhere. I soon found blogs like this one. I am in an analytical field that has nothing to do with housing or economics so I was pretty ignorant regarding the whole area. However, I find borrowing large sums of money pretty intimidating and did a lot of research about economics, loans, the money supply, irrational exuberance,the history of housing, etc.
Needless to say, I have renewed my lease and continue to rent. But now that I am more enlightened about the state of the economy I feel a bit depressed, a lot disgusted, and have developed an addiction to this site that is somewhat analogous to rubbernecking behavior. I feel like I am watching a slow-motion, horrendous train wreck.
-
I’ve said all along that the markets that boomed first and highest will fall first and lowest. They lead the rise and the will lead the decline in both timing and severity.
‘ I feel like I am watching a slow-motion, horrendous train wreck. ‘
Same feeling and nightmarish, as I can’t stop watching and I can’t tell if I’m far enough away not to get smacked. Then I really go south and wonder if I’m on the train - just a more informed dead-man-walking.
Brandy helps.
Remember, he’s in Salt Lake.
I’m in the “blue” city center, so brandy is allowed.
In th e19030’s are people were independent NOT dependent of the Government….If you are not familar with the cycle of Tryanny to Freedom back to Tyranny go read something on the subject It’s interesting. We are definately somewhere between Complacent and dependent.
At least 15% are now dependent. But that is Direct dependency
When you include Soc Sec., Govt Pensions, trnasfer payments etall it must be 45%!
Trillion dollar trainwreck
My girl asked me
why I’m so fascinated with
real estate
the bubble blogs are buzzing
with little bits of bad news
from markets everywhere
we’re watching a trillion dollar trainwreck
with bodies and debris spread out
all over the country
From Buk-y Ball
I can identify with your addiction; Ben’s bubble mania reports are gripping; after reading some of the reports, I often ask myself, WTF? Did so and so really believe a 2% increase in interest rates was going to increase his pmts by only 2 percent?
So, pull your chair up a little closer; fasten your seatbelt; and put on your housing bubble crash helmet b/c you’ve got front row seats to the biggest event in a lifetime.
SLC was last down in the 90’s
but it will come down too
“However, I find borrowing large sums of money pretty intimidating and did a lot of research about economics, loans, the money supply, irrational exuberance,the history of housing, etc.”
Which is why anyone who bought in the past few years deserves to get their head handed to them. Underneath the refusal to do research before purchase lies nothing but greed. Why do any research when real estate is the road to free riches?
I would catch snippets of a housing bubble in basic online articles, but like you I also was not in any industry supported by housing so I didn’t understand. Where I live I would see people all the time with new toys and I was mystified as how on their income! I also have had the “pleasure” of watching a “friend” buy a home furnish it with new appliances and toys, go bankrupt and 7 years later remodel again. All the time feeling like I was paying for her lifestyle ve my taxes and I was living without. After I found this website this year I finally feel like am not going crazy. Some poster a while ago stated basic economics should be taught to all highshoolers. I definitely agree and even though I don’t have a background in econ I can add 2+2=4 no matter what the loan said.
California market trumps Manhattan market or any other market. The losses in California will dwarf the losses in any other market, given their current high levels of price. Must support California market at all costs. This is the mentality.
For years, the REIC has trained everyone - the buying public, the media, themselves - that median price was THE housing price metric. Now we hear:
“Another caller agreed, suggesting that we’re perpetuating the problem by reporting on the decline in median prices.”
What do they say? You made your bed - now lie in it.
Posted ““Paul McCulley, the top Fed watcher at Pimco bond traders in Newport Beach, summed up the media’s housing pickle best: ‘If some broker is blaming you now, he should also thank you for two years ago. Can’t have it both ways!’”
Here, Here….Buy that man a pint!
Remember several months ago, Pimco’s Exe VP, Mark Kiesel, sold his house and moved into …. A rental apartment I think? He felt so strongly about this housing bubble, he made that bold move.
That really impressed me, and signals someone I wanted to listen to. I remember reading his story, and breathing a sigh of relief after selling my home. He might be 15 years my junior, but knows a boat load more than I do about where the fundamentals that support this housing market are headed.
I’ll buy this man all he wants to drink …..
In my mind, the Palm Beach Post wins hands down for the most realistic reportage of this bubble in the past 6-12 months. They are RELENTLESSLY bearish. I think that’s totally funny considering how big the RE interests are there in South Florida.
TxChick,
I agree, PB Post is my paper, and they are very bearish. The Sun Sentinel (Miami) paper is pretty good too.
But come on, how on earth could they not be? Their office is about 5 blocks from my front door, they see the 1000’s of empty condos every night when they look out the windows. Its SO obvious down here that we are in the middle of a meltdown that I just can’t imagine how some people are putting their heads in the sand.
Check out the blogs on the PB Post site. They have some SERIOULSY delusional people down here. Too much sun.
You really have to live here to understand Florida’s housing mania; POS homes built 20+ years ago with no architectural flair or hurricane structural integritywere recently commanding 350k +; it was only 5 short years ago they were selling for 140k. As a result, everyone dropped whatever else they were doing and got into the ‘real estate only goes up’ game. The popular reinforcing mantras here were (1) ‘the baby boomers are coming, the baby boomers are coming, (2) we’re going to be the next California, and (3) buy now or be priced out forever!
PB post is deservedly bearish; Florida is over built and everyone, I mean everyone is thinking about moving North to get away from the high prices, taxes, and insurance.
This ol’ Gator resides in Carolina now. I feel bad for a lot of the folks in Florida who want to leave, but can’t sell their homes.
Florida used to be a great place to live with an affordable cost of living.
Sadly, those days are only a dimming memory now.
The Palm Beach post must have been onto something. There is now *years* of inventory in palm beach county. As I once worked there and liked the area… I feel for the community and the pain its about to see. However, what’s done is done and its time to face the music.
Curiosity, will any Palm beach condo tower be left incomplete? Will we see any frames left sans glass and maybe even floors?
Does anyone have a link to a photo of the condo craze in Palm Beach?I hear there are still a ton of condo cranes still up and working in Palm Beach County.
As to the press, they deserve little blaim nor credit. Most of this mania was self feeding. Yes, the press made it worse, but Gary Watt’s and others who provided the quotes were the culprit. The press should report not invent the news…
Neil
Nope, greed was the culprit.
Gary Watts could have talked to me 24/7, it wouldn’t have made a difference. Americans drooling for ’something for nothing’ is another story.
The fact remains it is the end user - the FB’s who bought into it - who deserves the most blame.
You can’t swindle an honest man.
That’s all you can say about that!
“the press should report not invent the news”
I agree. So what if I called up a reporter and said I sprouted gossamer wings and was flying around my apartment like an angel- how about a front pager on that?
In saying the press should report the “news,” there is an implicit understanding the press should be able to separate news from b.s. In the case of housing, not only did most of the media not try, they actively pursued sources with a financial interest in continuing the b.s. mania over those who could offer unbiased analysis and historical data indicating that something was likely to go terribly wrong. Bloggers like Ben had to step in and fill the gap.
The important thing is not what they’re doing now (that it’s too late) but what the press could have done last year and the year before to shed light on the market when it really would have mattered to readers. This was a breach of trust, no doubt about it.
Gary’s a bad sport! Over the last 3 years, nobody in the RE industry complained about the steady stream of “cheerleading” articles in the local media. I remember it was very common to have the newest “Median” price increase prominently displayed in large bold print on the cover of the OC Register every month. Realtors were giddy in their enthusiasm to proclaim the new paradigm of prices can only go up!..never heard Gary, Dave or Leslie complain!
It will be interesting to see how this whole RE bubble in the OC will play out over the next few years. The internet is playing a center stage role now in getting the right information out for review (much to the RE industrys consternation!).
“Gary’s a bad sport! Over the last 3 years, nobody in the RE industry complained about the steady stream of “cheerleading” articles in the local media.”
Not only that, the reporters always tacked on the title “Economist” after Watts’ name, lending him more credibility than he deserved.
It always amazes me how many of these shills and cheerleaders go around calling themselves economists. I may be mistaken, but I always thought an economist was somebody with a PhD in economics…most of these “economists” who publish newsletters, etc., are just 2nd tier MBAs who couldn’t hack it in banking or corporate America.
uh, I wouldn’t put too much weight on credentials (for anyone, in any position). Probably one of the most famous economists in the 80s was Lester Thurow of MIT. His claim to “fame” was that Japan was going to take over the world (essentially). They were much “smarter” than us. You probably haven’t heard about him much since the Japan debacle.
I have a degree in economics. Everything I learned in college has essentially been refuted over the last 30 years. IMO the best, most common sense, economic thinking has come out of George Mason and Walt Williams group there (I believe Buchanan got a Nobel for his work). George Mason has hardly the reputation of an MIT or Harvard but, for my money, its the best for current, rational, economic thought.
Yeah, its inronic to note that no one ever chastised the MSM for cheeleading on the way up.
Now the shoes on the other foot, and suddenly its the fault of the MSM for scaring buyers away.
Give me strength….
I quickly wrote the following and am considering emailing it to Gary Watts’ website, but it’s probably not worth my time. Comments are welcome.
Gary,
I hate to be rude, but stop lying. Calling for continued real estate appreciation is actually a public disservice. Record levels of inventory, rising rates of foreclosure, rampant mortgage and appraisal fraud, builder sentiment at multi-year lows, cancellation of new home contracts running at 30% amongst the builders, etc., etc.
All of the items I mentioned are factual and easy enough to discover via the internet. This may very well prove to be the largest credit bubble of all time, and when it becomes obvious that the average family can never afford to TRULY buy a median priced home in CA, this great Ponzi scheme will come tumbling down.
When I saw that you are also a graduate of Cal State Sacramento, I was ashamed. It may not be Harvard, but I am nonetheless proud of being a college grad.
By the way, please correct the section of your website where you lamely try to compare press coverage of the bubble to prior non-events. The correct name for one of the illnesses you list is SARS, not scars.
CA Guy posts “I quickly wrote the following and am considering emailing it to Gary Watts’ website, but it’s probably not worth my time. Comments are welcome.”
You might as well be writting Charlie Manson or a monkee, or just talk to a brick wall.
I do not want to mean ….. but this guy is “Bagdad Bob” net sum zero.
Hey go for it. It will be interesting to see if you get any kind of a sane reply.
But don’t be too hopeful. My experience with the folks who have drunk the kool aid is that they are so deeply in denial that they will clutch to whatever rationalization they can to keep their fragile paradigm intact. As evidence by Mr. Watts deperate MSM finger pointing.
Hi CA Guy,
I also went to Sac State. I was not impressed with the quality of my classmates. the group projects were the worse. A finance guy plagerized irrelevant pension info word for word from a company report for his part of our paper, and when I brought it to the attention of the dean of the school of business, I got downgraded for not being a team player. I also had a bad time with an accountant major whose favorite saying was “C’s make degrees!”
I’d be very cautious about hiring a Sac State grad due to the crap I saw there. It makes sense that Mr. Watts came from there.
Paul
The “OC”? I’m surprised anyone would even live there. Ugly butt of a place.
The place may be ugly, but the people are beautiful. Isn’t that what really matters?
The “OC” just might define and and sum up what’s wrong with America.
Depends on what part you are talking about.
Yeah, you couldn’t pay me enough to live in Laguna Beach, Corona Del Mar, San Juan Capistrano, or Dana Point. Just try me. Please.
Aliso Viejo(OC) is probably what an urban planner had in mind when they drew up a community with housing clusters surrounded by greenbelts and parks with the shops, commercials, and city agencies smack in the center. There must be more developed parkspace per capita in Aliso that in any OC/LA area.
The term to describe such OC areas as Aliso Viejo, SJC, RSMargarita, laguna hills, Laguna Nigel, Dana point, ect is ” Manicured green belts”. If anything they sure like abundant tree-lined pkwys with pedestrian footpaths all over the place. Must cost a fortune in city bonds,fees, special assessments to maintain all that parkspace. I wonder who bears the brunt of the fees?
I have heard of parents that would move closer to Laguna so that their kids can go to high school there with the remote chance that they would end up on the MTV reality TV show. The superficiality appalls me.
There you have it. You just named the only 4 desirable communities in Orange County. Although SJC will soon enough join the undesirable list.
“One woman said that we were killing the housing market by continuing to publish stories about how bad the market is.”
Think happy thoughts
Seriously though what is the press to do? Hide the truth?
And what about sellers greed and over inflated prices? They don’t have anything to do with this?
Sure!
This woman has nothing to worry about, remember RE prices always go up.
Any negative media should have zero impact because it is always different “here”.
GH posts ” And what about sellers greed and over inflated prices? They don’t have anything to do with this?
Sure!”
But if you get free cupcakes, that counts for something!
AE Newman for free cupcakes, I’ll buy your house
So…you can not report the news, or put up a for sale sign now that things are turning away from pure insanity? Of course, if people in this country actually thought for theirself, and did not rely on the telivision and talking heads to to their “thinking” perhaps it would not be this way. The problem with this country is it’s full of people too intellectually lazy to find anything out for themself. On the bright side it does help with the herding!
I’m kinda stunned. Fingers won’t type. The tone of these recent articles is so damn negative toward RE hype. It’s like a swarm of killer analysts just got their hive smacked and they are pissed. As in ‘how dare you make these unsupported claims (for the last 4 years) and I am only now realizing the extent of the possible damage’. Poor Watts. Poor Lereah. They will likely end up being poster boys for the crash, on the cover of the Economist as cartoons spreading pixie dust and moonbeans.
You mention Watts and Lereah, what happened to Suzanne and Nina???
Nina’s got a flip on my block.
OK well maybe not Nina but 3 partnered lesbians rehabbing a 60 yr old Huntington Beach cottage.
They have taken their sweet time 4 months.
I know Suzanne. Who is Nina?
“In the West, prices have held steady there this summer, sales have fallen. ‘Something’s going to give in the West,’ Mr. Lereah said. ‘The correction has not occurred in the West yet. Sellers are stubborn there.’”
They are in Southern California. But “stubborn” really isn’t the word, Davey-boy. The truth is most SoCal sellers are still living in Fantasyland, thinking that “everyone wants to live here” (my family and I are leaving this weekend, BTW), and thinking that RE never goes down.
As Liar-ah continues to spin, there is a slight amount of truth to what he’s saying, at least in SoCal. Many people here are willfully blind to what’s going on, and refuse to believe that RE is going to have anything more than a “temporary lull” in OC. I saw them every day, when I worked in the escrow business. Refused to call a white wall, white…
Jason, if I may ask, where are you moving to and why?
Moving to Texas. At this point in our lives we’re looking for affordability and nothing more. I’ve lived in Orange County for years and years, and I no longer feel the same mystique that I had about this place long ago. It’s a place to hang your hat, when it comes down to it, except the price of that hanger is about 3 times what it is elsewhere.
Someone may suggest that the amenities here are greater than anywhere else, but having lived around the world, I know that isn’t true. Weather is nice, for sure, but I can no longer justify so much of my hard-earned salary going to housing. When that is the condition, you can’t get out and enjoy what you’ve worked so hard for. You’re then working to keep the house monster well fed.
I don’t want to do that anymore, and rob my children of what they deserve.
What about arizona? This state is the greatest in the union.
Arizona is affordable, but not as much as Texas right now. Arizona used to be, but so many people from here in California thought they should buy “investment” properties there in AZ that it’s not what it was. I’m sure that will change back, once the bubble truly pops.
- I work in the beach area as well as Pacific Palisades and Malibu.
The builders are reeling. The market is very soft. As you go inland just several miles it is worse off by every step you go east.
Head out to Fontucky, Riverside and San Bernadino and it is toast.
The beach/ coast areas don’t have the room to develope these cracker box house size sites. Head up to Palmdale / Lancaster and you will soon see Watts / Compton North.
I agree about Palmdale and Lancaster. I read someone posted here one time it is the same story in Chino and Chino Hills, and those sorts of areas, going downhill.
When you see the kind of fake “appreciaition” that has occurred around all of SoCal over the last five to six years, it is a wonder that more people don’t acknowledge that this “appreciation” really was just a fantasy, and nothing more. Now the chickens are coming home to roost, and people here don’t want to believe it, at least where I am they don’t. They really wanted to believe that double-digit appreciation would occur indefinitely, until the 2 bedroom shack in central OC craptown was going to be a million dollar estate…
Robert Cote’s got a great palmcaster rant but he is pretty subdued lately.
Cmon Robert.
You don’t wanna get me started on Palmcaster.
Yes, and I’ll remind people about my discussion about “critical mass.” Critical mass is when a region becomes internally self sustaining. Phoenix has crossed the threshold, Palmcaster & IE have not. It is much harder to when you are next to another accessible region even though many would argue that Los Angeles is no longer accessible from either Palmcaser of the IE. Man were those places ever desolate in the early 90s and this time it is going to look like a suburban shantytown. These people will have no place to move to and this time they cannot walk away and they cannot move “back” or folow the jobs as the “back” is in a neighborhood they won’t live in and there were no jobs created.
Robert Cote posts ” that Los Angeles is no longer accessible from either Palmcaser of the IE. Man were those places ever desolate in the early 90s and this time it is going to look like a suburban shantytown.”
Another great post! The IE is real thorn in my side, 3 years ago I nearly moved there. Now I wake up in So. Ventura thanking God for delivering me. This summer it was 35 degrees cooler during the day, every day compared to that toic, foul, frying pan.
To get to your point. They are toast….the akward young teen that can not stand on its own, nor get to where it need’s to be. The IE wil not be able substain it’s self.
I live in Lancaster and work as a planner for the city. Crime is a problem, but it’s sometimes overstated. The real problem is lack of industry and good paying jobs. There are currently 16,000 approved single-family lots yet to be built on - about a 10 year supply. 1 out of 2 homes here foreclosed during the 90s. The same will happen, but it might not be so easy to walk away this time if people have all their other assets tied to their home. It’s going to be ugly. I fully expect median to drop from 300K to 150K in two years.
The “real” problem? Lancaster has so many problems it’s hard to know where to begin. Here’s a crime comparison to a similar sized city only a few dozen miles away:
http://lancasterca.areaconnect.com/crime/compare.htm?c1=Lancaster&s1=CA&c2=thousand+oaks&s2=CA
posted ” I live in Lancaster and work as a planner for the city. Crime is a problem,”
Along with Plamdale, when everybody is stuck on the 5 going to work, the little gang bastards are skipping school. Getting stoned and stealing everything that is not nailed down.
I have traveled on job trips in the Palcaster/IE region, mostly to deliver stuff to businesses and “industrial “establishments. I always am amazed at the few really good-paying industries out in these parts. There is not A SINGLE HI=TECH TECHNOLOGY PARK ANYWHERE IN THE PALMCASTER/IE REGION, PERIOD.
There is limited areospace work out in palmcaster which employs maybe 2% of the workforce? thats it. The rest of the IE/hi-desert is min-wage/$10-$15 /hr service-type jobs(retail.sweatshop factories, distribution,drivers,ect.). This actually may describe large parts of the LA county Jobs sector as well(take out the westside and southbay and LA has a mediocre service-based economy as well.
No way an economy of mostly low-paying service -type jobs can sustain the $500,000 median LA housing prices. It’s all bubble hype and hot air in SCal la- la Land.
I hate to mix political comment into this topic, but it sure is relevant in this case.
I believe the media in this country, large and by, is no longer an objective reporter of facts but instead a pawn in the hands of government and corporate interests. This is why I love blogs and see them as a resurgence of free and unfettered speech. For now at least.
The way the media has shored-up thru propaganda the insane rise in home prices is obscene. As mentioned in Bens article above, despite the fact that housing price gains NATIONWIDE have NOT been supported by income, rents or likely employment growth for the last few years, the media has merrily fueled speculation & greed by promoting articles and commentary which supported home-buying as the quickest way to make a fast buck for any Joe-Schmoe willing to take-on a 0% interest ARM or lie on Stated-Income declarations.
NOW that the market is seeing the logical results of this new dot.com bubble, it has taken the media MONTHS to START to step forward and admit that things might not be as rosey as they seemed.
It’s basically the same bull-shit we get from our goverment when we’re attacked by a group of individuals with no allegiance to any particular state and we wind-up going after Saddam Hussein who has provenly had NOTHING to do with those attacks. What does the media do?. Do they chide our government for wasting our resources and our soldiers lives & limbs?. NO!. They publish any crap that will keep us fearful and promote the interests of Halliburton and the corporate moguls who know there’e no money to be made in finding Bin Laden but TONS of cash to be made in taking over foreign oil-refineries and fanning global fears of ‘terrorism’.
I’m disgusted with this nation right now …a dn so should YOU be. Remember that when you lose your home to foreclosure.
Trust is tough to earn, but very easy to lose. Those of us who read this blog and others are more clued in than the vast majority of folks. I think most of us watch the media with significant skepticism. Instead of blaming the media, tell your friends and family about blogs such as these so that they can get unfiltered information. The media has a lot to answer for, but popping the bubble is not one of those things.
“in the hands of government and corporate interest”
Nah, there’s a much simpler explanation. I got my degree in a journalism-related field (long story short, I needed a fast major after switching from engineering) and if there’s one thing that’s evident, that is that “news” is a field conducive to slacking, and a large portion of people in journalism majors are, in fact, slackers.
Lazy reporting means rewriting press reports that are handed to you, rather than looking up the sources and seeing for yourself. Lazy reporting is accepting the ponzi scheme numbers without bothering to run the math to see if they are sustainable.
Lazy is living for today, with no sense of history, so it doesn’t even feel strange when the person who told you two months ago that there is no housing bubble is now speaking of how the bubble collapse is unfolding as predicted.
The problem of most media is not that they are beholden; it is that they don’t care enough to get up off their asses and perform journalism.
Desk Sgt. — thanks for your post — you seem to be new here. I agree with weinerdog and Durbin. Trust the Net and particularly the blogs. MSM is for grocery-store sale coupons.
Don’t agree with you on the war on islamo-fascist terrorism, The threat is real. But, the main stream media is owned by the 1% of the population, who own more than 51% of all the media company stocks. Only their agenda is promoted in the msm. And we know what that is.
“By any measure, the housing market is struggling. So what should this columnist do when, say, my proprietary economic index shows local housing suffering its worst quarter since 1995?”
This columnist should point out that your forecast for a 15% “in the bag” 2006 OC price increase doesn’t look too promising anymore.
(your = Gary Watts)
My comments. $289K median in Salt Lake - boy is that a bubble and will be a big burst. I will ask my family about the happenings.
Just came back from SoCal. Everyone wants to live there to experience the traffic, pollution, noise, crime, high cost of living, everything crowded, long commutes, etc. I am in a hurry to move back. But Disneyland was nice (also very crowded and expensive).
Gary, WTF have you been drinking? Even looking at real facts, you are still trying to lead the lemmings over the cliff. I would like to know how you sleep at night with a clear conscience.
He counts sheep of course…
So cal is not the place to be. Get out while you can.
need 2 leave ca — “I am in a hurry to move back.”
??? You’re a long-time poster here. If you’re hot-to-trot, why don’t you just rent until the sales-market flattens?
Chip,
I think he was being sarcastic about moving back to So Cal. My husband and I are both natives, but are seriously considering leaving as well. This is definitely NOT the So Cal we grew up in.
Everyone wants to live in SoCal except Carlos Ghosn and Nissan and [fill in the blank] …
A co-worker visited Disneyland in June. His comment when he returned was, “Man, was it crowded. You had to wait in line to use the trash can.”
“The August numbers could also be inflated. Because new home sales are recorded when the contract is signed, not when the deal is closed, the data do not factor in cancellations.”
They are talking about potential “inflation” in the reported number of sales — definitely a concern. But what about the other kind of “inflation” — due to not reflecting the value of incentives used to move inventory? IMO, this is the larger concern, as I believe that properly adjusting new home sales prices for the value of incentives would paint a far more accurate and dire picture of the housing price declines which have already occurred.
In Huntington Beach 92646 We’ve been watching the house count drop from a high of 180+ to .
But the interesting thing is that of the 8 homes now in escrow, only two are priced over $800k, and only one is priced over $1m. We see them go into escrow, then out of escrow. We see lots of them re-list as “just listed”. Across the street from us is a house that has been “priced to sell” for months now, and it is about to go to auction as a foreclosure. The numbers don’t tell the whole story.
Here’s a do-over. In Huntington Beach 92646 We’ve been watching the house count drop from a high of 180+ to 161 — see link.
But the interesting thing is that of the 8 homes now in escrow, only two are priced over $800k, and only one is priced over $1m. We see them go
into escrow, then out of escrow. We see lots of them re-list as “just listed”. Across the street from us is a house that has been “priced to sell”
for months now, and it is about to go to auction as a foreclosure. The numbers don’t tell the whole story.
Here’s the real link.
Jerry — I don;t know anything about your market, but if Huntington beach is hot stuff, that first listing, 8386 Terranova, with ocean view, even at $2M, doesn’t seem like highway robbery to me, relative to California prices. That is a big-kahuna house, nicely decked out.
Chip, what you fail to realize is that there are four of them on the same street for sale… AND three of them are being AUCTIONED to the highest bidder… one with NO RESERVE. So, big spender, come bring your checkbook and buy into this “rising housing market”. NOT.
But wait, there’s more. In Huntington Harbor, a North Huntington Beach tract has a beach-front house that is also being AUCTIONED with NO RESERVE. This is just your lucky day. Buy them while they’re hot.
Finally the crash happens in Surf City. It’s about time.
As for the “everyone wants to live here” argument: it’s ridiculous.
I look at commentaries that support the price-rise in the Florida real estate market -for example- and they argue the same thing to support their boom, “everyone wants to live here”.
Same in NY.
Same in Oregon.
Same in Virginia.
Same in Arkansas.
Same in Texas.
Same in Colorado.
etc. etc. and on down the line it goes.
The moment that homes became investments vs. places to live & bring-up a family was the moment we ALL lost. It seems the only real place “everybody wants to live in” ..is in DENIAL!.
It’s a no money down interest free option after all…
“In the West, prices have held steady there this summer, sales have fallen. ‘Something’s going to give in the West,’ Mr. Lereah said. ‘The correction has not occurred in the West yet. Sellers are stubborn there.’”
What now — is real estate’s cheerleader in chief trying to precipitate a hard landing in the West? Doesn’t he, of all people, realize that Calfifornia real estate prices always go up?
He’s foreshadowing his scapegoat plan; he is going to blame the West coast for all the bad news he is anticipating.
posted ” Mr. Lereah said. ‘The correction has not occurred in the West yet. Sellers are stubborn there.”
We are about 6-9 behind the curve out here. Just like last time.
I would make the comment in the last go around thr internet was not much if any factor. Here we are 15 years later or so…. but we still got an old time butt whoppin’ in the last one. I do think about the likes of Ben’s Blog and the speed of info bouncing around and it’s impact?
I have no answers but these POP’s are never quite the same. Just a thought…. any comments? all welcome!
“In the West, prices have held steady there this summer, sales have fallen. ‘Something’s going to give in the West,’ Mr. Lereah said. ‘The correction has not occurred in the West yet. Sellers are stubborn there.’”
Oh, spoken like like the insulated Virginian economist he is. Yeah, David, us dang Westerners are stubborn as hell…and if you think that’s bad, just wait until you meet up with some recent buyers! Come on down here to the West… I’m sure txchick will b*tch slap you with a 20 lb trout.
Maybe too many of us Westerners read Lereah’s books…
Fannie Mae and David Lereah…one degree of separation.
“An important book, whether you agree with the author (as I do) that housing will remain an excellent investment or are convinced that home prices are poised for a plunge, David Lereah lays out a compelling vision of housing as a continuing positive investment—and how you can profit from real estate if you already own the home you live in, are looking to move from rental housing to an owner-occupied home, or want to use real estate as an investment.” —DAVID BERSON, CHIEF ECONOMIST, FANNIE MAE
Remember that da man downstairs has a really hot furnace and a big shovel for the coal pile for our buddy Gary.
http://socalbubble.blogspot.com/2006/04/gary-watts-will-still-burn-in-hell.html
More on Gary and the land really down under
http://socalbubble.blogspot.com/2005/10/gary-watts-will-burn-in-hell.html
It is not just the media, but people with “expertise” and titles, including tenured professors at Ivey League schools, who appear in the media to inform the public. They are all trying to make money for themselves and their “employers.”
More or less, they have to become Money Whores, i.e., prostitute their minds, at the expenses of the public, who are Johns, in order to have good access to the media.
The end of the road for the Money Culture has arrived. It is going to be ugly for the system that gave rise to extreme of the Money Culture. Money is just a means, but we have turned it into an end. Media reflects the Money Culture.
There are other values you know. They all are being destroyed to serve the Money Monster. BFNYC are worshipers of the Money Monster, who is Satan’s right hand man.
Jas Jain
Home prices must be stubborn in the west because, after all, there is only one Alhambra.
thank god…
C’mon now - Alhambra gets instant cred for Phil Spectre blasting B-movie actresses in the face. Now the second coolest place in the SGV (after Bahooka.)
the newspapers and all MSM have a big interest in a buyers market-
ad revenue
Some of us who work for big newspapers have indeed been trying to hint to our co-workers that those pages and pages and pages of RE listings are going to shrivel up before too long, making our tanking ad revenue tank even farther. So media outlets can definitely be considered potential collateral damage in a bust.
Sorry OT, but the WSJ Online just posted a story of a town falling victim to Mortgage Fraud. Dont have access to it.
Nevertheless, it looks like the mortgage fraud thing is making the news more and more. Looks like the whole lending sector is already under alot of scrutiny for all these funny loans now that it is making headlines day after day. - Can only get worse, and couldnt happen sooner to “such a nice group of folks”.
WSJ Article title: Major Mortgage Fraud is Alleged.
Summary: An alleged mortgage fraud is being investigated in a town in Virginia, where people say they were duped into applying for loans.
Link is at wsjonline.com.
I don’t have a password, but the story sounds very interesting. I’ll bet Virginia is just a sample of the kinds of things going on all over the country.
This is link to the article in NY Times online:
http://www.nytimes.com/2006/09/28/us/28martinsville.html?hp&ex=1159502400&en=1f71a480b049e52c&ei=5094&partner=homepage
Sorry, just had to comment on this one…
“The development had sold just 30 of 434 units, for $59 million. ‘I’m disappointed the market turned prior to us getting it out fully into the marketplace,’ Kelly said.”
Translation: “I’m disappointed I couldn’t find 404 more suckers to screw over before the market imploded. And now I’m the ultimate sucker.”
Other tranlation: I’m disappointed we were left holding the bag.
Does the housing bubble follow Le Chatelier’s Principle?
http://en.wikipedia.org/wiki/Le_Chatelier’s_principle
Surely the Media is NOT helping now!
This is an interesting article on MSB what I came across…and after this no, no fixer upper house please!
” Snakes on my head! In the grass! In my home!
Idaho couple’s fixer-upper turns out to be crawling with serpents…”
….The Hepworths knew the house would require some maintenance. But they never thought they’d need a snake charmer…
…Snakes, perhaps thousands of them, fell on Lyman Hepworth’s head when he opened the door to a pump house near the small house the couple planned to buy…
…One day, Lyman Hepworth reached to turn on a light and discovered the pull cord was actually a snake…
The full MSN article is here
http://tinyurl.com/egttn
As my husband said, nightmare-inducing even if you like snakes (which I do.)
After today’s bogus data (housing sales up 4.1%, margin of error 11%), NBC tv sites posted a story with the headline: “New Home Sales Shoot Up”
The accompanying story was completely misleading amd made NO mention of the margin of error, an example is at http://www.turnto10.com/money/9946350/detail.html. This is the same network that runs CNBC whose reporter had done her job and reported the margin of error. Even CNN had mostly positive spin in the first few column inches of the story and headline: http://money.cnn.com/2006/09/27/news/economy/newhomes/index.htm?postversion=2006092712
I’ve been googling for some media reference that includes a phrase like “margin of error” or even error and the closest I’ve found is http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B4A9E1C6E-3542-41E0-9537-D116DAC97F8E%7D&siteid=mktw which skips the actual statistics but does summarize:
The government cautions that its housing data are subject to large sampling and other statistical errors. Large revisions are common.
The standard error is so high, in fact, that the government cannot be sure sales increased at all in August. The 4.1% increase is statistically meaningless.
If consumers are not given access to actual statistics, how can they begin to comprehend what I think will be the biggest economic event of my generation?! Shouldn’t there be a law against interpreting a report that should generate a headline like “Housing Sales Data Meaningless!” as “Housing Sales Shoot Up!” Seriously, shouldn’t printed media reports that use statistics from a single report be REQUIRED to include the margin of error?
““In the West, prices have held steady there this summer, sales have fallen. ‘Something’s going to give in the West,’ Mr. Lereah said. ‘The correction has not occurred in the West yet. Sellers are stubborn there.’”
More likely, sellers are stubborn everywhere, but in the West, where the run-up was the greatest, there’s more paper equity to burn through. When a northern Virginia house goes from $200,000 to $300,000 in five years, if a seller knocks $30,000 off the asking price, that’s a 10% reduction — which may look substantial enough for someone to bite. When an Aliso Viejo house goes from $300,000 to $800,000 during the same period, knocking the same $30,000 off is only a puny 3.75% reduction.
$30,000 is a healthy chunk of change. Presumably, the Aliso Viejo guy winces at giving it up nearly as much as the Northern Virginian. I’ve noticed that no matter what the initial asking price is, there tends to be an upper limit on the absolute (not percentage) value of the reductions.
$30,000 seems to be some kind of magic “reduction number”. I’ve noticed it popping up a lot around here. It doesn’t seem to matter what the original asking prices was: 300k, 500k, 700k, it’s reduced 30,000. Must be some kind of psychological impact number (’hey, I’m saving enough for a new car!”)
Same in my neck of the woods (SE PA). I first became aware of the 30K carrot in June. A new acquaintance told me then that “we NEVER would have been able to buy this house, but the sellers took our offer in April …$30,000 off the list price.” After that, the 30k number kept coming up. Weird.
I am renting having paid the enire one year rental up front. If the owner were to loose the house to a bank would I be protected for the years rent or could the new owner kick us out? Anybody know the anwer?
If he loses the house how can he uphold the lease? I think he would have to reimburse you for your rent remaining on lease. I cannot see a new owner being obligated to keep the lease.
Thank you.
If you could find him. If he loses you lose.
Why would you do that? You can be earning interest on the $$ instead of the landlord. With savings rates as high as 5.40%, it’s wasteful to pay for anything up front that you normally don’t pay interest on.
We do the same thing primarily because we want to maintain a very good relationship with our LL in hopes that they don’t decide to sell or raise the rent to market rates (33% higher than what we currently pay). Their former tenant lived here for over 6 months and never paid a dime (deposit even came back NSF). By paying 6-12 months in advance, they technically get a better yield and know they have good tenants who pay on time. Rentals here (San Diego) are scarce in good areas and are in high demand when they come on the market.
I get a break for lost interest. The landlord is wealthy so our risk is rather low. Now days you never know.
P Bear - Don’t be so sure that you are out of luck. If the foreclosure / sale happens, see a real estate attorney, assuming you didn’t lease through an agent. In most states (if not all) sales are subject to liens and encumbrances and your lease is an example of one, unless you didn’t read your lease and signed your rights away. Even at that, get the leasing agent or bank to show you the state ruling. Most, but not all, states err on the side of the tenant. Definitely do not assume that you are screwed out of your remaining pre-paid rent. REO Banks probably will want to make you happy, to get your butt out of the equation.
Thank you for your viewpoint.
PB - I presume you have a lease? Did you pay in cash, on a handshake?
State and local law governs tenancy issues - the rules vary from place to place, but, generaly speaking, a rental lease works just like any other property lien. The bank can’t kick you out. Nor could any other new owner.
What you have done is essentially pay for services up front - not always a wise move, but I wouldn’t worry about getting the boot.
“Why won’t someone buy my house?”
Desperate seller?
http://longisland.craigslist.org/rfs/213094174.html
flagged for ‘best of” for all to see
…”If you are a buyer, please tell me what would compell you buy my place?”…
Three words, hon:
“Lower. The. Price”…
I’m sure someone would buy it for free.
If owning a home is the American dream, then that ideal needs to be protected. I have said it before on this blog and I truly believe it……….A very punitive capital gains tax has to be slapped on residential real estate……the family home should be the only situation exempted, within very strict guide lines………full stop…….end of story. Who would bother to speculate in it then?
That goes against the credit cycle we are experiencing.
Besides no politican could be elected today with the idea that the capaital gains tax on RE would be rolled back. bah bah bah!
This is in line with the rest of this post. How many problems would be solved with punitive gasoline taxes? Never gonna happen. I want it all, and I want it now. Someone else will pay for it.
Home ownership is a great thing for society. Most owners take pride in their property, protect and improve it and take an interest in their community to preserve the value in that respect. However, I agree that, beyond the initial home purchase, government should NOT encourage home escalation. It makes no sense to subsidize (by the mortgage interest deduction) million dollar homes. Nor does the capital gains policy make sense as it simply encourages bigger homes at the expense of more AFFORDABLE homes. All subsidies should be targeted SOLELY at the lowest end of the spectrum and cut off at a level that reflects median affordability. Maybe this will take place at the same point as the lobbying money for the real estate industry drys up…….
But why should the American Dream be protected luvs_footie? Folks have been falling over themselves, and each other, for years now selling it down the river. When grown, supposedly educated, people behave like teenieboppers at a Beatles concert in their rush to through money away - why should anyone believe there’s anything left worth protecting? No one twisted anyone’s arm to buy overpriced RE - they did it of their own free will and thought they were clever for doing so. Another tax would just mean more government interference - and it would come at a time when it would probably only punish those who did keep their heads through the mania. There’s no accountability - people have learned that from the behavior of pols, CEOs and other schmoes. This story will end just like all the rest - those that lived within their means will get screwed and the rest will obliviously keep thinking they’ve got it so good.
The biggest joke here is that this is happening only five years after the stock bust.
Noam Chomsky has said it best - America has become a “huckster” nation. Can’t you hear everyone already rushing for the “next big thing”. (which incidently will never be hard work and saving - not in a nation of hyper-consumers - our economy couldn’t stand it!)
posted “Noam Chomsky has said it best - America has become a “huckster” nation.”
I have been told, ” America is not a country, it is just a place to make money”
Chomsky’s a tool.
Interesting phrase, “nation of hucksters.” In a similar vein, Napoleon famously referred to the British as “a nation of shopkeepers,” shortly before they booted his midget arse to St. Helena.
Free economies do have a nasty habit of blowing bubbles and then crashing and burning, thanks to the herd instinct, but also have a marvelous ability to recover. Things are never as good as they seem; things are never as bad as they seem.
I think the speculation rate use to be more like 7% or less of sales in a non mania market . It’s likely that the investor portion of sales soared to around 40% or more by 2005 . The only way that would be OK is if these investors could cash-flow the units which wasn’t the case in any of the purchases .It only shows that the objective was appreciation gains rather than gains by renting out the purchase for long term investment .
As far as I am concerned these flippers took these properties that should of gone to end-user buyers ,they ran up the prices while they created demand and shortages.Now all these short term investors want to unload and the end users got priced out or they don’t care to buy anymore .If it wasn’t such a sad state of affairs it would be funny .
Let’s be clear who you’re talking about when you say “end users”: families who have been unable to find a home to raise their children in, in all but the most undesirable parts of the country.
Right , sorry ,I should be more clear . “End users” are families and people who are interested in a home as a place to live long term and something to meet the family needs .
All I can say is if the market corrects , as it should , hopefully families again will be able to afford homes to raise their children in .
Isn’t that what it really comes down to. God, why, why is this country determined to torture the most hard working and generous segment of our society, the American family.
I’ve said all along that the markets that boomed first and highest will fall first and lowest. They lead the rise and the will lead the decline in both timing and severity.
Amen! San Diego FIRST and the rest of the WEST second. I live in Irvine and was talking to my neighbor who told me this story about a property in Woodbridge. A couple in New York inherited this home and put it on the market 4 months ago for $600,000 plus for a 1500 Sq. Ft. home and have since lowered the price 3 times with two different realtors and no offers at $575,000. They think they have incompetent realtors. These condos are 30 years old and origionally sold in 1976 for $35,000.
And to whom, exactly, Dennis, did you you say this?
Gary Watts has probably not yet unloaded his speculative properties so he has to keep painting this as a temporary and minor downturn so that he can keep those GFs out there in the market. Learah on the other hand has probably already unloaded his speculative properties and now he can start to reveal the sordid truth even if ever so lightly. It’s that or these guys were so blinded by what their industry needed to be their reality (as well as how they themselves had cast the picture) that they really did not see the numbers or facts in the same way we did. The brain and sense organs of the REIC kool aid drinker was modified by the ingestion of the kool aid rendering it incapable of acquiring raw data or aggregated data that would even come close to yeilding any negative statistical position for housing. They had to believe, they needed to believe, their sense of self demanded that the fabrication continue for to end the pyramid means a return to truth and frugality, and certain death to those whose sense of self is so entwined in being a successful RE investor/economist/whatever. Or maybe Learah sees the handwriting on the wall with regard to Congessional hearings and he is scampering very quickly to do the CYA dance. Too late for both of em, they are on record so many times putting lipstick on this pig of a debacle. But like Lenny Bruce said, “deny everything, even if they have pictures.” These goofballs will try anything in their desperation.
The media is not at fault for the bubble. Bubbles just happen. But if you want to blame someone, I think Fannie Mae is the best place to look.
No, I disagree, lainvestorgirl. The CSE’s did not do Jumbo loans. You can’t blame them.
I believe FNM and FRE have been a smaller and smaller part of the market since 2004. Seems private “investors” have a limitless amount of money to throw at bartenders, hairdressers, etc. who wish to pursue a $600K speculative play. Go figure…
O.K. I had enough of these mother f@*kers.. No mercy click on this link to find out the real story about people in trouble.. http://cbs5.com/video/?id=16607@kpix.dayport.com
Inflated appraisals my ass… Go screw yourself Erin Toll
Really good link. Thank You!
Absolutely terrifying. Last week’s cover story in Business Week was also a fright show. How can UCLA come out and say prices will simply flatten or gently go down?? How many people are in homes they can’t remotely afford??!! Who is going to buy them at these ridiculous levels once price appreciation is a thing of the past?
Gary Watts is a lying windbag. People should listen to his lunatic ravings at their peril.
“By any measure, the housing market is struggling.”This statement would have been impossible a year go.
latest BS from UCLA.
http://www.latimes.com/business/la-fi-ucla28sep28,1,1800483.story?coll=la-mininav-business
Note that Christopher Thornburg FORMERLY at UCLA is also quoted, and he is “more gloomy”. It’s pretty clear why he left UCLA a few months ago.
———————————–
UCLA Group Predicts Flat Home Prices
The Anderson Forecast backs away from its dire projections last year but says things could worsen based on recent data.
By Lisa Girion Times Staff Writer
Times Staff Writer
September 28, 2006
With home sales slumping faster than predicted by even the most pessimistic prognosticators, the question is: How low will prices go?
The UCLA economic group that was among the first to declare the housing market a bubble now is saying that prices, at least in California, probably won’t decline significantly anytime soon.
In its widely watched quarterly outlook to be released today, the UCLA Anderson Forecast reiterates earlier projections that the deteriorating housing sector will slow state and national economic output and job growth through 2008. Although it doesn’t rule out a recession, it doesn’t expect one.
Absent a recession, it reasons, homeowners would rather hold than sell into a deteriorating market. Unless a job loss forces a sale, many homeowners would rather stay put than sell for less than the high they recall some neighbor getting last year.
“Expect home prices five years from now to be about the same as they are today, though lower in real [inflation-adjusted] terms by 15%-20%,” the forecast said.
Although the statewide average price might not decline, a few areas where about 40% of the housing stock is new construction — such as in Yolo and Placer counties — are expected to see drops as builders cut prices to move inventory, UCLA economist Ryan Ratcliff said. In contrast, during the last housing market decline, which was accompanied by recessionary job losses, prices fell more than 10% statewide from their 1989 highs.
“We’re not going to see anything like the ’90s again,” Ratcliff said.
Although that might sound like good news to homeowners, the lack of a significant price correction is bad for the economy overall because it will lead to further job and productivity losses in the housing sector, said Edward Leamer, director of the UCLA Anderson Forecast.
“So while your happy homeowner is pleased by the fact that home prices are not going down,” Leamer said, “the unhappy home builder is not going to have anything to do.”
Leamer cautioned that the outlook was based on data trumped by recent reports showing that housing sales and starts were sliding more rapidly than the group had projected.
If the trend accelerates, he said, “then our forecast is too optimistic.”
The latest UCLA housing forecast, at least for California, is less bearish than its outlooks issued last year. Christopher Thornberg, the UCLA economist whose California forecasts last year called for the housing bubble to burst with dire consequences, recently left the school’s forecast group to form his own consulting firm. He said last month that his expectations were growing more gloomy.
UCLA’s national outlook forecasts turbulence through 2008, including mild stagflation — that dreaded 1970s phenomenon marked by rising prices and, at best, slowing growth.
It expects inflation-adjusted economic growth to slow to an average annualized rate of 1.8% through the first half of 2007 and unemployment, now at 4.7%, to rise to 5.1% by the end of next year. At the same time, core inflation, which excludes energy and food prices, is expected to increase to an average rate of 3.2%.
“While not a recession, it is hardly a pretty picture,” the UCLA report said. “The combination of sluggish growth and rising prices will have the look and feel of a low-level stagflation.”
But it won’t be anywhere near as bad as the stagflation of the 1970s, when output declined and broad price increases pushed inflation to 8%, said David Shulman, a UCLA senior economist and author of the national forecast.
“What we had in the 1970s you could call pneumonia,” Shulman said. “You could call this a low-grade cold. It’s some of the symptoms, but you are still walking around.”
The group’s outlook for California’s economy is much the same as the national picture and past projections: a continued slowdown in growth caused by the slumping housing sector.
In a separate report, the University of the Pacific’s Business Forecasting Center projected that payroll employment in California would grow at a rate of 1.2% to 1.4% through 2008, slightly higher than the UCLA group’s projection of about 1% over the same period.
This is nonsense. These guys predict prices won’t rise for years. OK.
So, if you’re in the market and you see this article and you go out to buy are you going to pay the current “median” price for the “median” property and simply accept the fact the price won’t go anywhere for a decade and that it will depreciate 20% after inflation?
No sentient person wouldn’t accept that deal. Not in a market with excess supply. Some will NEED to sell more than the others (at some point) and they will offer a discount to move the property. The moment THAT one discount appears, ALL SALE prices will decline and the downward spiral will begin and only worsen until prices reflect the REALITY of no future appreciation. Absent the promise of future appreciation the only factor in buying a property becomes affordability.
I love “economists” like these who, though everything in economic life is based on incentives and future expectations, make a “prediction” that prices won’t change EVEN THOUGH THEY THEMSELVES have given potential buyers every INCENTIVE to modify their price expectation DOWNWARD.
Unbelievable.
Quoted from the internet:
Gas prices plummeting.
Stock market skyrocketing.
Consumer confidence rising.
Housing market stabilizing.
Unemployment low.
Inflation low.
Interest rates low.
Can the Dems still win Congress? What about the Housing Bubble? Will prices ever go down or are we in a new paradigm?
“One woman said that we were killing the housing market by continuing to publish stories about how bad the market is.”
= “why couldn’t you have not reported on this until after i sold my house to a greater fool for 3x what it’s worth??? i’m really getting tired of cleaning up for open houses where no one comes.”
Off topic
Ignorance?
http://money.cnn.com/POLLSERVER/results/27648.html
IMHO, a perfect summary as to why we have a housing bubble. Although many here think it’s been pure greed, I disagree. Certainly the specuvestors were greedy (well over 40% of the market in bubble areas, IMO), but many people just reached that point in their lives when they were “supposed to” buy a home (marriage, chidren, age, etc.) and they feared being “priced out forever”.
Those who sat this out are true contrarians (& overly confident??) who were willing to take constant flack from spouses, family members, friends, co-workers and the general population. And many of us are just as greedy/fearful of loss (put myself at the top of this list as I hope to time the bottom of the market, or close to it).
Anyway, here it is:
“Case and Shiller (2003) report survey evidence of homeowners’ naive beliefs about the real estate market. The residential real estate market is populated by amateurs making infrequent transactions on the basis of limited information and with little or no experience in gauging the fundamental value of the houses they are buying and selling. It is highly unlikely that residential real-estate prices are always equal to the present value of the expected cash flow if market participants almost never attempt to estimate the present value of the expected cash flow.”
Sorry! Here’s the link (from those Pomona college professors, BTW).
http://tinyurl.com/ewggy
Here’s a laughable RE cheerleader article entitled, “The housing bust that ain’t.”
http://www.capitolhillblue.com/content/2006/09/the_housing_bus.html
The author, Nicolas P. Retsinas, is director of the Joint Center for Housing Studies at Harvard University. Every time I see a ivory-tower RE shill from Harvard promoting the industry, I am reminded of the Harvard Economic Society that existed in the late 1920s. The “esteemed” professors of America’s oldest college said that the 1929 stock market collapse–and the late 1920s land crash–were not symptiomatic of anything larger.
Over the next three years, the Society continued to pump out this bilge in the hope that lies and mass stupidity would be stronger than capitalism and the huge market correction called the Great Depression.
Eventually the Society folded in the early 1930s. No one bought their bogus “appeal to authority” fallacy anymore, once the breadlines became national.
I added a plug for this blog in the comments section.
Retsinas says, basically, that housing isn’t affordable and it will get more unaffordable. He attributes some of the rising demand to “immigrants” but, in the next breath, says low wage earners will never be able to afford anything (without goverment assistence).
He says interest rates will rise….and how, exactly, is that going to factor into stable, much less higher, home prices?
If this isn’t gibberish, what is?
The only way housing prices can remain stable is for sales activity to slow to a trickle. There are simply more houses on the market, and set to come on the market, than there are buyers with the wherewithal to afford them.
Who’s going to buy them? First-time buyers are priced out. With prices flat, neg-am loans (the only way for young buyers to get into even a crackerbox starter house) make no sense, and won’t be made as soon as it’s clear the stagnation trend is here for the long haul. People “trading up” can’t sell their starter houses to first-time buyers. With prices flat, speculators seeking short-term gains (i.e. most of the “investors”) can’t make a profit.
A huge number of houses for sale in California are vacant — either new homes or owned by investors. I agree that people with long-term fixed mortgages on primary residences probably won’t sell, unless they have to (job loss, divorce, death, etc., all of which misfortunes happen more often than the Anderson group apparently remembers).
The question is, how much staying power do the holders of non-primary residences have? How long can flippers keep bleeding negative cash flow. Anecdotally, it seems there are a lot of amateurs operating on a shoestring out there, and plenty of owners of multiple properties. A thousand bucks negative cash flow here and a thousand bucks there adds up. And the builders, though their balance sheets still look fairly nice, are relatively cash-poor. They’ve got huge amounts of inventory sitting around, and unless it moves (which requires lowering the price), it will quickly burn up their cash reserves and borrowing ability.
A substantial percentage of jobs in California are connected with real estate. It doesn’t take a slowdown in price to clobber the holders of those jobs; if nothing gets sold, they don’t get paid. Assuming those people are homeowners, that adds another group to the “must sell” category.
In summary, with prices unaffordable to the entry-level buyer, a long-term stagnation is impossible. Prices will go down. I’m afraid, though, we’ve unconsciously chosen the Japanese method of liquidating a bubble — long, slow, and laced with denial, rather than quick, healthy, and realistic.