Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
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a fantastic piece from calculated risk on the correlation
between new home sales and recessions
http://calculatedrisk.blogspot.com/2006/09/new-home-sales-and-recessions.html
Quick and dirty site that tracks asking prices and inventory.
http://housing-watch.com/home.aspx
more evidence that there is troublebrewing
Home-Equity Loss Rate Rises to Most Since 2001
http://immobilienblasen.blogspot.com/2006/09/home-equity-loss-rate-rises-to-most.html
very scary graph for vegas
http://housingdoom.com/2006/09/28/las-vegas-single-family-housing-market/#more-217
All they need is to roll one “11″ and they’ll be rich, baby!
the best chart i´ve seen so far on the rise homebuilder vs. nasdag since 1994-2005. gives you a feeling how big the runup in the builderstocks was.
from charles hugh smith
http://www.oftwominds.com/blog.html
that is an eye opener.
And a mouth closer.
The Angel was waiting this morning. The homebuilder stocks opened sharply down. But she was ready! Immediately she sprang into action and reversed the direction sharply of each and every one of them, all at precisely the same time. Ain’t she somethin !
But she has been struggling to keep them up so far this morning. It is now 11:07 and she has been working, working to keep the HBs up today.
Take a look at the charts here. Note that the homebuilders all reversed direction sharply within minutes of the opening plunge. Mixed in are charts of non-homebuilders. There are sub-prime lenders and mining stocks in the mix as well. The pattern of trading of the non-HBs is not at all the same as the HBs. I guess they don’t have an Angel.
http://tinyurl.com/ovpm8
It’s scary if you look at the chart… every hour, almost on the hour, the market stages a reversal. It looks so goddamned planned.
To Buy or Not To Buy That Is The Question:
http://tinyurl.com/hz9kf
David
Bubble Meter Blog
The Housing Bubble is Not Bursting, Now Buy My Property!
That made me want to puke.
Notice the first comment from “Ser Casey?”
That’s the 24 year old crook and FB.
I wonder if he’s lurking here….
was postet late yesterday from arm apocalypse now
from asia times. i hope that a lot of asians read this stuff and maybe ine or to foreign central bankers in the asian region…….
US housing bubble: Economy in denial
http://immobilienblasen.blogspot.com/2006/09/us-housing-bubble-economy-in-denial.html
U.S. Q2 GDP DOWNWARD REVISION DUE TO INVENTORY, TRADE
U.S. Q2 CORPORATE PROFITS UP REVISED 1.4% VS 3.2% PREV EST
U.S. Q2 CORE PCE PRICE INDEX REVISED TO 2.7% VS 2.8%
U.S. Q2 GDP BELOW 2.9% FORECAST
U.S. Q2 GDP UP 2.6% VS 2.9% PREV EST
WASHINGTON (MarketWatch) - Second quarter U.S. growth increased at a 2.6% rate, slightly lower than previous estimates of a 2.9% growth rate, the Commerce Department said Thursday.
Economic growth has averaged a 3.6% rate over the past four quarters. The economy expanded at a 5.6% rate in the first quarter.
The revisions to second-quarter GDP were largely due to lower inventory investment and a worsening trade balance.
Final sales of domestic product increased 2.1%, down from 2.3% in the previous estimate.
As in the previous estimates of second-quarter gross domestic product, consumer spending was the main engine of growth, rising at a 2.6% annual pace. But this is down from an increase of 4.8% in the first quarter.
There were signs of a weaker economy. Spending on software and equipment fell 1.4%, the biggest drop since the fourth quarter of 2002.
And residential investment, reflecting the slumping housing market, fell 11.1%, the largest decline in 11 years.
Inflation
Key inflation data were revised marginally lower. The core inflation measure, closely watched by the Federal Reserve, rose 2.7% in the second quarter, down from 2.8% reported earlier. The year-over-year change was revised down to 2.2% from the previous estimate of 2.3%. This is still above the Fed’s comfort zone of 1% to 2%.
Profits
Corporate profits were revised lower to an increase of 1.4%, compared with the previous estimate of a 3.2% increase. This is the smallest gain in quarterly profits since the third quarter of 2005. In the past year, before-tax profits are up 18.5%
What you might be missing is 2nd quarter CPI was reported at 4.7% unchanged, but even if we allow the CPI at 2.6%, and with the lowering of the GDP; The US is in negative growth. GDP minus CPI = A falling economy and lower standard of living.
So how long before the Fed starts lowering rates? (I can’t believe this is even a possibility in the foreseeable future, but there it is…)
IMHO the Fed cannot afford to lower rates without crushing the dollar. Foreign purchasers of American debt is the only thing keeping us afloat. With the revaluation of the renminbi underway another log has been thrown on the inflationary fire. And if the Fed does not act to prevent runaway inflation who will buy worthless bonds?
I understand that line of logic — it’s been near and dear to my heart for months now. What confuses me is that the assumption now seems to be that the Fed is done raising rates (the next move being to lower them, whenever that might be), even as the ECB has hinted at at least two more rises. How can the Fed blithely keep rates steady, while the ECB raises, and still expect foreign purchases to buy our debt (at presumably lower rates than the ECB is offering)? And I admit my grasp on the whole macro picture is shaky…
Housing and the Market article at Schwab
http://www.schwabinsights.com/2006_09/mktoutlook.html
Dan posts “Housing and the Market article at Schwab”
Good Work Dan!
That was one of the best “stand-up” bits I have ever seen, written by a vested pro. This lady did not pull any punches, head for the bomb shelters folks…. BTW I loved the Report card on the HB’s….LOL….LOL
great piece
On the Schwab ABCDF scale, of the 26 homebuilders they cover, none are “A” (= buy) or “B” (= accumulate/buy), 3 are “C” (= hold), 15 are “D” (= reduce/sell), and 8 are “F” (= sell).
Now there’s a vote of confidence in the homebuilders as a group: NOT.
Maybe a good reverse indicator! Schwab says sell ergo BUY!
I cannot post? I cannot see my posts. Firefox.
What a beautiful Haiku!
I’ll answer with one.
Best results
for posting and/or blogging
MS IE
I sometimes can’t see my posts in IE, but always with Safari.
ummm….that’s not a Haiku!
Here’s mine!
I’m using firefox
Has worked just fine since day one
Always blame the browser?
No Haiku.
Opera > *
There, touchy blog system maybe?
The one exception was in the mid ’60s when the buildup for the Vietnam war kept the economy out of recession.
The new paradigm is the bombing. I read some articles about worldwide productivity increases in countries that sucssesfully bombed their enemies. That Calculated Risk page is another support of that idea being the next thing. ugh. On to Iran.
Clark “The one exception was in the mid ’60s when the buildup for the Vietnam war kept the economy out of recession.”
That was LBJ’s “Gun’s and Butter” War. I have thought a lot about Bush’s “Gun’s and Butter” War….LBJ’s ended in inflation. I am convinced this will end in deflation or the death of the US buck or both.
When the “blood” is on main street and wall street rolls over we will be too broke to fight in Iraq any more. Perhaps the Pol’s will start to worry about civil war here?
La guerra nunca esta “civil,” amigo.
chilidoggg La guerra nunca esta “civil,” amigo.
Of course, you are right, buddy.
I posted something yesterday that got me thinking.
Should we really be waiting for big price declines? Do home improvements hide the real housing decline?
Imagining someone who purchases a home fixes it up and then ends up selling it for the same price they bought it, there is a zero price decline. In reality though, the owner has lost money on the improvements. This loss doesn’t hit the NAR’s numbers. In some cases where the owner improves and loses, there might even be price appreciation.
The fact that we don’t see the price decline makes me worried. I’m waiting for big price drops. But with all the improvements being made to homes, maybe prices won’t decline as much as we think. Maybe all the FB’s have done the country a favor and fixed up 80% of the nations fixer-uppers. For free.
Again, it’s their loss, but the price indexes might not reflect it.
Have all the FB’s have simply made America’s homes more valuable?
I suspect it’s more a case that the improvements some people make in some homes are offset by the wear and tear, both in those homes (in areas that haven’t been improved) and overall in homes that have had no significant improvements.
In other words - if the housing market/median really was flat - in that you would pay the same amount this year as 5 years ago for the same exact size and quality house, and if no one did significant home improvements, then the overall median home price would actually be *decreasing* because the quality of each house would be decreasing.
If the countertops were in solid 24 carat gold, you could be tempted.
Have all the FB’s have simply made America’s homes more valuable?
I have a perfectly restored 70s gold lamee wallpaper / wood paneled home with deep orange shag carpet and bright lemon countertops. Wanna pay top dollar?
By the time prices come back into line it won’t matter… styles will have changed and the current improvement will have been “used up”. The vast majority of steel appliance/granite countertop upgrades will be worthless and standard maintenance cycles will have come around once again.
I do agree that for someone looking to flip houses in a few years the real advantage will come from being able to align financing rather than foundations.
Aren’t granite countertops vulnerable to damage from things like lemon juice?
I’m convinced granite/steel will be this decade’s shag/pastel. I’ve already seen opinions (in print magazines) that the “professional” stainless steel kitchen look is out and people want a more “homey” feel.
I’m curious if the “punch out every non-load-bearing wall” trend will reverse as well. I do like the open space look myself, but will that be classic “turn of the century” look in 20 years? Probably when it’s 4 families to a McMansion!
“Flip This House: 2020″
“We’re going to be pulling out this granite… which is known to harbor E. Coli… (ewww!) and dingy stainless steel for some carbon-fiber countertops and appliances hidden behind retracting doors. No one wants to look at their appliances!”
“Next we’ll be putting up some dividing walls to make this huge impersonal open space a little more cozy. And over here we’ll be removing some of these windows to provide a little privacy. Not to mention both these improvements will provide energy efficiency with oil at $800/barrell!”
Ten years from now no one will care, it will just be another house that is not current….will cost the same to update as the 20 year old home.
Those “rennovated/fixed up” homes scare the s@#t out of me.
Does anyone seriously believe that more than 2% of those people who were do -it -yourself-ers during this boom had a clue about what they were doing?
IMO, any older home sporting granite substantially lowers it’s value. I’ll be running fast from those homes when I go out looking to buy.
Granite, crown molding and all the rest are just catch words that to me signal “we wanted a quick profit from this baby”. I take them as surface clues to what could be larger, more fundamental problems with the home.
Case in point: Friends bought a tricked out Seattle home a couple years ago and paid top dollar cuz it “looked so nice” and was in a trendy neighborhood.
Within a few months after moving in the basement was severely flooded. Couldn’t even handle a normal amount of rainfall.
In a normal market, home improvements were done so that the home would be more comfortable for the currents owner/s. They had a vested interest in doing the job right.
That has not been the case the past few years. Most of these rennovators have added absolutely no value to the homes they practised and experimented on.
Not sure if this was posted earlier - massive mortgage fraud in VA results in civil lawsuit:
http://tinyurl.com/gclq4
From the VA mortgage fraud article:
The civil lawsuit, filed in June by one of the nation’s largest mortgage lenders, describes an elaborate confidence game in which Martinsville residents with good credit ratings were enlisted last year to join what they believed was a risk-free investment in Indiana real estate. Instead, they found themselves responsible for hundreds of thousands of dollars in unpaid mortgages.
Whenever I see “risk-free” coupled with “investment,” my BS detector goes into high gear. These people should have done a lot more homework.
They will never be able to recover those mortgages from folks in Martinsville. It’s a nice enough place, but it’s dirt-poor now. Looks like many bankruptcies and probably more than a few indictments.
I will do a rather long post - Ben bear with me for a while - but these types of religious scam artists have to be exposed for the little devils that they truly are.
First, the set-up:
“Although she was not a member of Mrs. Penn’s church, Mildred said, “she knew that Beulah Penn was “a minister, a woman of the cloth,” and so she let down her guard.”
“She also saw that the Penns were making a lot of money and talking about how “blessed” they were, she said. She agreed to join, she said, on promises that she was part of a no-risk partnership in a development of brand-new houses on which payments were guaranteed by the federal government.”
Then, their MO:
“According to court papers and to four participants, the investors were told they would not have to contribute any money but would simply allow their credit ratings to be used in acquiring the properties, which would be owned and managed by the group. Each were promised checks of at least $2,000.”
“But Mr. Jacobs and others were, by all appearances, the pawns in a quick-flip mortgage scheme, designed to gain control of a property at a low price and sell it quickly at a profit. The game is often rigged at every level — from doctored applications, to bogus property appraisals, to the loan approvals themselves.”
Then, their cup runeth over:
“Mr. Penn’s group then bought the homes, according to the lawsuit and documents reviewed by The Times, in the names of the Martinsville residents at the inflated prices — or even higher — but paid only the agreed-to market price to the seller. Mr. Penn’s companies then received the substantial difference, the documents contend.”
And then, the let-down:
“From a leather valise in the back of her car his week, she produced documents showing that two of the three houses she owned were built in 1950 and 1917. The outstanding mortgages on the three homes total more than $500,000. The houses, she said, were worth about $30,000 each.”
“That is when Mr. Thompson learned that he owned five houses in Indiana, all in default, with mortgages totaling close to $1 million.”
When people tell me that their non-religious organization is “Christian” (and I have heard this many, many times since I live in the bible belt) I tend to run for the hills.
My life experiences have taught me that religious affiliations with otherwise secular for-profit motivated enterprises are like oil and water; they do not mix very well.
Years ago, I loaned to a religeous relative of mine the down payment on their house. It was agreed that it would be paid back with interest. They paid maybe $300…
This individual is a deacon at a church where the people throw their arms up in the air and have yelling and shouting contests and they get full of the Holy Ghos. I figured when people are THIS Holy they could not possibly be crooks.
I live in the bible belt and I can tell you that even some (not all) bible thumping ministers of churches walk into “buy here, pay here” used car lots and walk off with vehicles for which they have no intention of ever making a payment on. If you do not believe me, then ask the people who repo cars for a living.
I rented from an extremely religious individual once who advised me to simply omit on my State 1040 any capital gains from my stock market investments. “How could they find out,” was his motto. This man is a very successful businessman, and many at his church look up to him. He can go at full length about the history and lives of the first 12 Apostles. He knows the bible inside and out. But the fact remains, he made his fortune because he is well practised both as a cheat and a liar.
I have no problem with people who are ministers or profess to be extremely Holy. I am just saying that when it comes to making money decisions you can not let your guard down because of religion, no matter how zealously they pursuit their religion.
My conclusion: When ANYBODY, and I mean ANYBODY, appears to be extremely, extremely Holy, then you must assume the worst case scenario. If you are about to enter a financial transaction with these people then you must check them out; perhaps with even GREATER scrutiny.
I have been told by people who have rental property that they have learned to conduct criminal background and credit checks on EVERYBODY.
I am now to the point where I just can not stand it when every single sentence people use have to include an “Amen” or “praise God” or “thank you Jesus.” I recently tried to buy a new car but this salesman was all about “Jesus” and “Amen” and “praise God” that I simply had to make an excuse and leave.
Word to the wise is sufficient.
OK, I am through with my rant. Now back to Ben’s blog.
I am what you would probably call religious; I consider myself a Christian, but I would feel suspicious of any person who was supposed to be a minister or pastor who tried to get people involved in any kind of investment for monetary profit. It does not jive with the teaching of the New Testiment.
My former landlady, who was quite religious, got burned by a number of tenants who came to her, proclaiming their faith.
sounds familiar. BTW, in the Netherlands many realtors come from the most conservative religious groups (’zwarte kousen kerk’, about the same as ‘bible belt’ I guess). Apparently religion and big money mix very well.
’zwarte kousen kerk’
‘black stockings church’…mmm…seems pretty exciting!
LIHO — thanks — was just going to post it myself. I found it at latestblognews.com — a very useful “successor” to Patrick’s site that listed current RE-related articles.
These people in Martinsville are toast. Sad case, too, as it looks like they were seeking modest investment returns of $2K or so and are getting wiped out.
If somebody told me “let me use your credit and good name to do what I want with it and I will pay you $2,000,” I would tell them to “go to Hell.”
New-home sales rise called ‘blip’
Analysts say market heading down, citing near-record inventory
By Associated Press | September 28, 2006
WASHINGTON — Sales of new homes, after falling for three months, rose in August. But the gain was expected to be temporary as the battered housing industry struggles with a near-record level of unsold homes.
The Commerce Department reported yesterday that home sales increased by 4.1 percent last month, the best showing since an 8 percent increase last March.
But even with the increase, the median price of a new home fell to $237,000, a drop of 1.3 percent from August 2005. It was the first year-over-year price decline since late 2003.
Earlier, it was reported that sales of existing homes fell for a fifth straight month in August while the median price of an existing home dipped on a year-over-year basis for the first time in more than a decade. Also, construction of new homes and apartments plunged by 6 percent in August.
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 Mark Zandi, chief economist at Moody’s Economy.com. “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 underway as builders offer incentives such as kitchen upgrades and free landscaping to move unsold homes…..
http://www.boston.com/realestate/news/articles/2006/09/28/new_home_sales_rise_called_blip/
And from this morns New York Times
Report Shows Home Sales Rising, but Skeptics Abound
…That helped push down the inventory of unsold new homes 5.7 percent, to a 6.6-month supply, meaning that at the current selling rate, it would take 6.6 months to sell all the new homes currently on the market.
But 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.
Stuart Hoffman, chief economist with PNC Financial, called the August increase a “dead-cat bounce.”
http://tinyurl.com/ne6me
Casey the Sacto RE Mogul is back up.
yup…against the advise of his legal counsel. I think I’ll post some encouragement so he keeps running his mouth.
I quite appreciate his lack of intuition and common sense and only wish more of these fools would commit financial and criminal suicide the way he is. I happen to think he would be the perfect poster boy for the prison for fraudulent flippers crowd. Unfortunately, prison will not be very kind to Casey.
It’s like a car crash, you can’t help but slow down to look.
Hmmm, I think they’re asking about $1000 more for rent than they should be: http://fortlauderdale.craigslist.org/apa/213299544.html
This one is looks better:
http://westpalmbeach.craigslist.org/apa/213136791.html
Yeup - the second one looks purdy good
In my marina here in NJ I remember all the .com boats. After that bubble burst, boats with names like Cisco Kidd and IPO were hauled out, sold or never seen again. Yesterday I came across this beauty, a 2006 model with only a few hours on her engines. It’s not cheap yet but come on, lets get this party started, I can’t wait to start low balling boats with names like this. Please note this boat is located in Option ARM ground zero.
Click and scroll down a bit to see the name on the stern.
http://tinyurl.com/s99bm
This is reminiscent of the real estate developer in “A Man in Full” who named his racehorse “First Draw”.
Grubner, When I bid with you lets name her the “Anopheles”.
I was thinking about a name like “Redemption”
Housing starts fall, confusion rises
“The experts are putting out a lot of mixed signals about the housing market - so should you sell or not?”
“What does it mean for you? If you want to sell your house, local conditions mean much more than national stats. But there’s little point in holding out for the kinds of prices your neighbors were getting last year. In the current environment, chances are that the longer you wait to sell, the less money you’ll get. But if you’ve owned your home more than a year or two, chances are also good you’ll end up with a nice profit.”
Hi, folks, your Billings, MT field agent here. I’ve changed my nickname (thanks to RC for the idea).
Without further ado:
Video report for Billings, Montana
Now for the ado. Lou Minatti’s cool videos inspired me. Unlike his nice short ones, though, mine got out of hand and turned into a 20-minute monster! It’s kinda long and boring, partly because I want to use this video to make a case for the bubble to friends, realtors, etc. around town. It’ll face close scrutiny there, so if you see any flaws let me know. If you want to skip to the condo action, fast-forward to the 5:50 mark.
Also, kind of a funny story. I was going to have a friend of mine do the narration, since he has a better speaking voice than I do. He got half way through the script and started getting really uncomfortable. He was afraid that his employer’s clients (developers, realtors, others in the REIC) would recognize his voice and get angry at him! So I let him go and did it myself.
Here are a few highlights of the video:
- Downtown condos with 40+ units in the last year. Of five developments, three have not sold a single unit. One has sold 2 out of 5 units since summer 2005. Incredibly, one conversion, with 14 units in a historic building, reports 11 have pre-sold (with prices up to $440,000).
- High-end Ironwood subdivision. Started in 2003, now 1 in 6 homes is up for sale. Median price around $500,000. (Just yesterday, I got a tip that a lot of them might be realtors looking for a quick flip. I’ll have to check county records against the list of realtors, hmmm..)
- Copper Ridge subdivision. Roughly 20 houses under construction, and 15 of them are on the MLS (median around $300,000)
- Even with danger signs, construction at a breakneck pace in every direction. Inventory up 50% since December, now holding steady.
So that’s it. I hope you enjoy it. Lou’s got a new blog featuring housing bubble videos, so let’s get going out there!
Rats, sorry for the double post. Should have been more patient.
Holy, cow, this is a great video. Very low key, but chilingly complete. Well done!
What’s the word on Bozeman & Missoula?
this is fantastic/wunderbar.
tryed to blog this video on my blog.
unfortunatly it failed.
will link it instead
you need to post this message in every topic that comes up!
have put it in the next to topics
florida plus ohau
Thanks for the kind words about the video. Actually, thanks to everyone on this blog. I’ve learned so much. Barely a year ago, I was looking up “mortgage” in the dictionary. No, really!
As for western Montana, it’s probably in deeper trouble. There’s more romantic “A River Runs Through It” country out there. I think there may be more speculators. I’ve noticed a few out-of-state phone numbers on Craigslist lately.
As for Bozeman, didn’t you hear?
It’s different here!
Check out the author’s response in the comments section. Everyone wants to live here, etc. According to a poster here awhile back, Bozeman prices really were cheap 15 years ago. Look at inventory, the ratio to population was unreal last time I checked.
Great documentary! Feel like I have been to Billings!
Who the hell would buy a condo ANYwhere in Montana?
I dunno.. if I didn’t care much about money, I wouldn’t mind having one at Big Sky for kick. Ski in, ski out. I saw a 400 sf one (didn’t know that was legal) going for $200,000.
After attending an open house for one of the “hip”, “funky”, “urban” condos in Billings, I almost had to talk a friend out of buying! He liked the open styling, stainless steel, Ikea. People everywhere are too into “shiny things”, as I call them, lately. If it looks good, and it’s RE, it must be a good investment.
Great job, lots of detail. Thanks.
Great Job !!!
Hmm, first post didn’t seem to make it. Hi, folks, your Billings, MT field agent here. I’ve changed my nickname (thanks to RC for the idea).
Without further ado:
Video report for Billings, Montana
Now for the ado. Lou Minatti’s cool videos inspired me. Unlike his nice short ones, though, mine got out of hand and turned into a 20-minute monster! Sorry for the length, but if you’re interested in seeing how this mania has spread to flyover land, it’s worth a look. It’s kinda long and boring, partly because I want to use this video to make a case for the bubble to friends, realtors, etc. around town. It’ll face close scrutiny there, so if you see any flaws let me know. If you want to skip to the condo action, fast-forward to the 5:50 mark.
Also, kind of a funny story. I was going to have a friend of mine do the narration, since he has a better speaking voice than I do. He got half way through the script and started getting really uncomfortable. He was afraid that his employer’s clients (developers, realtors, others in the REIC) would recognize his voice and get angry at him! So I let him go and did it myself.
Here are a few highlights of the video:
- Downtown condos with 40+ units in the last year. Of five developments, three have not sold a single unit. One has sold 2 out of 5 units since summer 2005. Incredibly, one conversion, with 14 units in a historic building, reports 11 have pre-sold (with prices up to $440,000).
- High-end Ironwood subdivision. Started in 2003, now 1 in 6 homes is up for sale. Median price around $500,000. (Just yesterday, I got a tip that a lot of them might be realtors looking for a quick flip. I’ll have to check county records against the list of realtors, hmmm..)
- Copper Ridge subdivision. Roughly 20 houses under construction, and 15 of them are on the MLS (median around $300,000)
- Even with danger signs, construction at a breakneck pace in every direction. Inventory up 50% since December, now holding steady.
So that’s it. I hope you enjoy it. Lou’s got a new blog featuring housing bubble videos, so let’s get going out there!
I watched the whole thing. I love the low key voice over and the music
What’s funny is that I could essentially do the SAME video for Springfield/Republic (MO) here in the Ozarks. A local banker told us yesterday that there are 400 empty new homes in Republic. Of course, SW MO is special! It’s different here! There’s a row of 15 SFHs being built on the street next to me despite that there are 6-8 spec homes for sale on the next street that have been hanging around for months. An agent told me nothing over $150K is selling.
The PPT seems to be having quite a struggle getting their record high on the DJIA. Any thoughts on why it is so hard for them to push through? It also seems like minute-to-minute volatility is picking up — reminds me of the old fan I threw away because it was vibrating like crazy and on the brink of catching on fire, to boot…
http://tinyurl.com/zo7ps
I watch the increase in volatility and I like your analogy to a vibrating fan. One of the reasons for this harmonic vibration in the markets is “…Hedge Funds acting in concert.
“…The Fed now seems to singing from the same hymn book as the European Central Bank, which described hedge funds as a “major risk” to the global system in June. In a withering critique, it said the funds were clustered together on similar trades, raising the risk that speculators would capsize the ship as they rushed from one side of the deck to the other.
“Mr Geithner, who is in charge of regulating US banks, has been beating the drum for months, fearing that the world’s $300,000bn derivatives market may be concentrating risk instead of dispersing it.”
It is under abnormal conditions, when liquidity in markets is under pressure, that the leverage employed by some of the funds will be at its most damaging.” Telegraph 27 September
http://tinyurl.com/s5mdb
…Now the Fed can start singing and everybody will be out of tune!
At the end of the day, I expect the hedge funds to collectively run over the edge of the cliff like a herd of lemmings. It is too early to say when, though…
rental listings- wow, trying to rent my mom’s small house- seems there is no shortage of rental inventor either- this is in a hood w no new homes or condo inventory
Please Don’t Eat the Paint:
http://www.xanga.com/home.aspx?user=russwinter&nextdate=9%2f28%2f2006+23%3a59%3a59.999
That’s a great title for your article. You do a great job on your site. I read it almost every day.
Countrywide Stuck with fraudulent mortgages:
http://tinyurl.com/fq46s
I believe the real-estate market is in dire straights and the declines predicted by many on this board will eventually transpire. However, I cannot help but ponder whether the financial events over the past few weeks will slow this process and reinforce just how much governmental control has been leveraged over the financial markets post 9/11.
As I write this, Fox News is touting the increases in the Dow as headline news. How this headline news and why it is even good news is a mystery to me; it is just a matter of time before it begins its eventual decline, but Fox News, for what ever reason, tries to convey the feeling that America is booming economically because the Dow is near its all time high. Sound like the housing bubble? It is such an obvious ploy to lure Jan and Mary six-pack into the market to rally it even further.
So why do I mention the financial market in a blog intended for discussing housing bubble issues? Well, I believe there is a lesson to be learned here. The government is not a static entity that will sit idle and let the housing bubble, peak oil, and other events play out as many of the more radical proponents of these theories contend.
I believe a fundamental mistakes made by advocates of the housing bubble, peak oil, and financial collapse is the viewing the events as one who practices karate might view an opponent. Karate revolves around fighting a static, usually invisible opponent while engaged in a dance like ritual that is known as a kata. While engaged in a kata, the practitioner goes through a series of liner steps aimed at defeating the enemy. At one time, some believed this was an effective means of training. We now know (thanks to the UFC and other mixed martial arts), that standard shopping center Karate is essentially worthless because it makes the same mistake that some housing bubble theorist make. Specifically, your opponent is a dynamic ever-evolving adversary that is much more skilled than given credit for; if you do not factor this into you equation, your prediction will be wrong.
VR posts ” The government is not a static entity that will sit idle and let the housing bubble, peak oil, and other events play out as many of the more radical proponents of these theories contend”
I read your entire post, and I hear you! The only issue I have is you are giving Government too much credit. They act only AFTER the fact. From Hoover sitting on his butt for 2 years in 1929 right thru GW and Kratina.
“Specifically, your opponent is a dynamic ever-evolving adversary that is much more skilled than given credit for; if you do not factor this into you equation, your prediction will be wrong.”
A very nice post. I would agree with you if the government were a private enterprise. (The Federal Reserve Bank is a private enterprise.) The nature of any modern government in any nation with free press will be to employ the most incompetent individuals to positions of importance. A qualified and competent individual may join the government at any time, but will quit because of the inability to successfully complete a meaningful project. The net result over time is a lower level of competence which means the government must continually expand to obtain new ideas, talents from a diminishing labor pool. How many qualified individuals making a nice corporate salary are going to take a job in Washington that pays 20% of private enterprise? Or look at the House of Congress, The caliber of individuals running for Congress this year suggests that any competent individual would rather be anywhere else than subjected to press scrutiny.
I do not believe that any on this blog underestimate the Government, if anything they overestimate and place their trust that the government will do the right thing.
I don’t know anything about karate but I agree with you that everything in an economic system is dynamic. However, its going to take some kind of magnificent “manipulation” to overcome the fundamental problems facing real estate assets. Recent prices have been set by artificially low interest rates, artificially low loan qualification (and outright fraud) and the fact that most of the demand in housing has come not from fundamental increases in base incomes but from speculation on the asset prices continuing to increase. Fundamentally, its impossible for home prices to increase absent a growth in incomes to make it affordable. The government could inflate the currency but that would take time to filter down to inflate incomes. In the mean time, excess housing supplies would still hang over the market and buyers would (for a time) still be able to demand discounts.
Once the discount mentality becomes “real” it will be just as hard to change as the recent “appreciation forever” mentality.
Governments can manipulate a lot of things but changing psychology is not one of their strong suits.
“The market can remain irrational far longer than you can remain solvent.”
That’s all I need to know.
Fox News headlines are a single drop in an ocean of stupidity and while I know the eventual outcome I have no expectation of exactly when it will arrive.
“a dynamic ever-evolving adversary that is much more skilled than given credit for;
That is your description of our government? Wow.
FOX news is run by Roger Ailes, a long-time GOP campaign operative. It is essentially an arm of the Republican National Committee. They are spinning up the DOW as good economic news heading into the fall elections. Nothing more, nothing less.
C’mon, Fox is no more biased than CNN. They’re just biased in the opposite direction. Switching between both during the early evening news shows is like you’re watching news from two different planets.
Fair and Balanced? Not! Providing Balance would be a better tag line.
jmf-
This is from your blog:
>Housing prices will rise in each of the next four quarters, but by >progressively slower rates year over year: 7.1% in 2Q 2006; 5.7% in 3Q >2006; 4.4% in 4Q 2006 and 3.5% in 1Q 2007.
>rest vom genius youngblood
What does that last line in German mean?
he said
“We have seen much greater weakness in the rust belt cities than anticipated,” Youngblood said in an interview today
i have found a qoute from him just a few weeks old. clear that he could not see weakness in the rust belt because he predicts that
Housing prices will rise in each of the next four quarters, but by >progressively slower rates year over year: 7.1% in 2Q 2006; 5.7% in 3Q >2006; 4.4% in 4Q 2006 and 3.5% in 1Q 2007.
this was a quote from michael youngblood from friedmann billings
rest from the genius youngblood here
http://immobilienblasen.blogspot.com/2006/07/fundstck-des-tages.html
A lot of economic news from overseas this morning.
Pound Dives as Inflation Data Vastly Overstated
This may allow Great Britain to keep from raising rates and keep thei bubble going.
then
China’s overseas service trade will hit 400 billion U.S. dollars by 2010, more than double last year’s 158.2 billion dollars, said a senior official in Beijing on Wednesday.
importing tvs and garbage is one thing but financial services from China?
From Bill Bonner’s column: Here is something interesting: for the first time in 90 years, the United States is paying more to foreign creditors than it receives from its overseas investors. The Wall Street Journal says this development may presage a drop in U.S. living standards.
No surprise in a drop in the standard of living.
China, the United States and other governments are pursuing fusion research in hopes that it could become a clean, potentially limitless energy source. Fusion produces little radioactive waste, unlike fission, which powers conventional nuclear reactors.
Scientists on Thursday carried out China’s first successful test of an experimental fusion reactor, powered by the process that fuels the sun, a research institute spokeswoman said.
The Chinese facility is similar to the International Thermonuclear Experimental Reactor, or ITER, being built by a seven-nation consortium in Cadarache in southern France, according to state media. That reactor is due to be completed in 2015.
So now we’re 9 years behind the Chinese in nuclear reactor technology - another product we will license from them. Not last but I am upset at the liars and the mass ineptitude that places my (and your) future in such jeopardy.
Official: China’s economy to grow at 10% this year
(Xinhua)
Updated: 2006-09-28 16:43
A senior official predicted China’s economy would grow at around 10 percent this year and the consumer price index would stay at two percent.
The economy would maintain its steady and fast growth the rest of the year despite a slowdown of fixed assets investment and rising loans, said Xu Yifan, deputy director of the National Bureau of Statistics (NBS), on Wednesday.
NBS statistics show the growth rate of fixed assets investment,a major indicator of economic growth, dropped 5.9 percentage points over previous month to 21.5 percent in August.
Chinese banks lent 177 billion yuan (22.4 billion U.S. dollars)on average per month in July and August, half of the average monthly new loans in the first six months.
i´m not if this was postet yesterday. but this a very very good summary on the stae of the housing market and on the bogus numbers from yesterday
combined work from 3 of the best.
james bednar, calculated risk and mish
http://globaleconomicanalysis.blogspot.com/2006/09/exhaustion-process.html
Today’s foreclosure report, part I: Fairfax. It was described by one attorney as an “ongoing bloodbath.” More than twenty investors stood around and let property after property go back to the banks. Second trust lenders took back properties for $1.00 subject to large first trusts. Some investors piled into older loans, but many of the loans being foreclosed were from this year and there was no interest in those loan balances.
BTW, the current record holder in my office is a half-million dollar loan which originated in February, 2006. That property will go to sale in October.
In a side issue, and one that, perhaps I should not mention, I’ve recently foreclosed Jesus, Thomas, Mark and Lucas, all with hispanic last names. Two years ago, there were a large number of single females being foreclosed. I don’t know why. Now there is a definite increase in the number of latinos or hispanics being foreclosed. I am not sure of the causation of this, only reporting what I see.
I don’t fully understand this process.
If the Second Trust Lender takes the property back for $1:00, do they then have to write their loan down to $1:00?
Not in Virginia. The $1.00 bid means the entire balance of the loan is a deficiency. The lender can sue for that deficiency regardless of what they might eventually sell the property for. The lender also gets to try to market the property for enough to cover the first and maybe get a little back for themselves, which is rather iffy in today’s market.
“but many of the loans being foreclosed were from this year ”
I think this is quite significant. Up till now I have believed that it took a certain amount of time for persons with these loans to start having trouble paying, but it appears that more and more people are having trouble paying right from the first payment.
My take is that, the FB knows he is in the hole and his credit is going to be ruined. Why continue to pay? Its better to stop as early as possible and save some money.
This is what happens when there are, for all practical purposes, no lending standards. Why should the broker or bank care if the borrower can repay since they’re not on the hook for a default? They collected their commission and passed the loan on to unsuspecting buyers. Until the person or group that approves loans will feel financial pain from defaulting borrowers, they will continue to approve these crap loans since they benefit from them.
Part II - Prince William. Another set of a dozen houses which have mostly gone back to lenders. The REO departments must be a whirlwind of activity trying to deal with all of their new real estate. Several second trust lenders took a bath, some by a little, some by over $150k - for each property they took back.
The effects on the larger lenders won’t be known until the 3q results are published in October (3q ends Sept. 30), but if I were a gambling man (and I’m not) I’d expect severely negative results from subprime lenders and bad results from prime lenders. Of course Freddie and Fannie, who to my knowledge still haven’t filed their NYSE reports from several quarters back, will continue not to report, but they, too, will feel something shifting around in an unpleasant way. My “October shock” scenario is still very much in play and I think the percentage likelihood is climbing.
Don’t suppose the Erin Toll who featured a couple of threads back as wanting to clean up the Colorado appraisers is any relation to Robert Toll?
September 28, 2006
“Pretexting Is Clearly Unethical, Probably Illegal, but Not Clearly Illegal”
That was the testimony of one of America’s most powerful and wealthiest lawyer, Larry Sonsini, of Silly.con Valley. He was asking the Congress to make it clearly illegal. American Legalism at its best (or worst).
This, ladies and gentlemen, summarizes the cause of the widespread moral bankruptcy of American population. The primary reason that Americans are morally bankrupt is because their top leaders, economic and political, are Crooks. It is very hard for anyone who is not a Crook to rise to economic and political power in America today. The problem is lot worse than in the past based on my read of American history. In human affairs it is the degree that matters.
The most clear and obvious case of widespread Financial Fraud, on which most people I have communicated with have agreed, is the Mortgage Lending Fraud. Does anyone believe that this could have gone on without the implicit tolerance of the Mortgage Fraud by Bubble-Maestro Greenspan Bubble-Boy Ben Bernanke (BBBB)? The reports and stories, for the past 3 years, were too numerous to ignore the problem. These Crooks allowed the Mortgage Lending Fraud because the fraud became necessary for Bush re-election, Greenspan reappointment, and Bernanke’s future appointment.
The highest concentration of morally bankrupt people is “educated” population of Silly.con Valley and Manhattan. These people are clear beneficiaries of Financial Fraud and, therefore, they defend it. Scam Options Fraud was so obvious to me more than eight years ago but nothing was done to stop it. What goes on in America, when it comes to Financial Fraud, is that nothing is done until after 90% of the damage is done. Closing the barn door…
WIDESPREAD FINANCIAL FRAUD WILL DESTROY THE ONLY GLUE HOLDING THE DIVERESE POPULATION UNDER CONTROL AND IN RELATIVE HARMONY – MONEY. American System WILL collapse within the next decade or two. The first signs would be the arrival of Greater Depression, baked in the cake, within this decade.
Jas Jain
well, it’s not as bad as it seems because in Europe with its ECB bubbleheads things are at least as bad (and for some EU countries I’m sure there is even more mortgage fraud than in the US).
The only difference is that politicians here do not ‘close the barn door …’. We say ‘als het kalf verdronken is dempt men de put’ which comes down to exactly the same, of course. Looking forward to feverish proposals from all political parties to do something about mortgage fraud and crazy lending once the bubble has fully collapsed.
The Austrian School has had the best understanding of the Capitalistic Process. My favorite is Schumpeter. Thanks to him, we have known the cause of the past depressions – Bankers’ Mischief! American dupes believe that it would be different this time. We have had the two most mischievous “central” bankers in the US history – Greenspan and Bernanke. They gave the private bankers and financiers the license to fleece the population by providing justifications for the bubbles that are necessary for a few to plunder many. The process has been well understood for a very long time.
Jas
yes, agree completely. Unfortunately, there are no Austrians in influential positions anywhere; and even if there were a few, people are not listening because they have been programmed with several generations of inflationist happy talk.
there is one. Ahnold.
“Ahhnold” is the wrong kind of Autrian. Hayek and Schumpeter are my kind of Austrians.
Hayek had a tiny blind spot when it came to free markets — he assumed ethics as given. Well, Corporate Crooks of America have demonstrated that you can’t assume ethics.
Jas Jain
Your comments about the USA’s central bank’s lack of oversight are well taken. And your political analysis of the root causes for this lack of oversight will be understood by many in maybe a few years. (It takes our MSM here in the USA a while to get up to speed.)
Yes, I agree with you; in time many of the victims of this global mortgage/finance scam will come to understand that they where fleeced. And many of these people will be in very bad fiancial condition to the point that for many a lifetime of toil will not be able to shake lose their shackles of indebtedness and servitude. And I can also see how these shackles may be passed on for another generation or two. However, I do not believe this will lead to a collapse.
The American Republic has weathered many storms in the past, and it will wheather this one.
There WILL be a recession. There always is after years of a booming economy. We differ as to the EXTENT of said recession. I say it will be at least as deep as the Nixon recession of the early 70’s (a very deep recession), or maybe even deeper because of the massive debt loads, but I do not agree with you that the American System will collapse, or that there will be a depression.
Individual sectors may collapse from their massive debt loads. For example, Ford and GM may not make it past the mid-century mark, and if so, even this would not necessarily be sypmtomatic of an American collapse. We have seen the American steel industry collapse, but this did not lead the USA into a depression nor a collapse.
I would not at all be surprised if the pendulum was to swing in the opposite direction with following generations. Every time they turn around what they will see is the fall out of all of this indebtedness, and American society may eventually wise up and go back to being debt adverse once again. (Maybe by the middle of this century?)
Just the same, I appreciate being able to read your comments and other people’s comments. Nobody really knows what the future will bring until we get there, but it sure is fun trying to figure it all out beforehand
“The American Republic has weathered many storms in the past, and it will wheather this one.”
That is the PRIME source of complacency!
One day it will not weather the category 5 hurricane with 210 MPH winds.
The population has been thoroughly corrupted, which WAS NOT the case in the past storms.
Thanks a loot for your input and viewpoint.
Jas Jain
“American System WILL collapse within the next decade or two. The first signs would be the arrival of Greater Depression, baked in the cake, within this decade.”
Jas Jain, 10 years?? I’m thinking more like 2 years, maybe 5 max. Of course, I have been calling a RE bubble since 2000.
“within this decade,” my dear sir, is not ten years. We got 3-4 years for the world to recognize that the US is in a depression more serious than maybe 1930s.
Jas Jain
You could say this for just about any other country as well. America does not have a monopoly on greed and corruption. In fact many countries, such as former soviet states, have us beat by far.
I would have agreed with you about the past. Now, the US is the leader in corruption, LEGALIZED PLUNDER of the population. We are leading the world in Corporate Crookery and importing it.
Jas Jain
Sorry, I meant exporting it to other countries.
BTW, in general, “everyone does it” is a very bad argument and does lead to moral bankruptcy, over time.
Let us see what happens after more than 50 million American households are bankrupt because of the SYSTEMIC Financial Fraud.
Jas Jain
When I read this kind of crap on this blog it makes me wonder why I waste my time. I’m all for diversity of opinion, and I agree that anything is possible, but saying there will be a Greater Depression and then giving a time frame on it like it’s gospel, with no backing in terms of data as to why it’ll happen at a certain point in time is meaningless. It seems like a lot of people want a freaking depression to occur out of jealousy towards those that have profited from the re bubble.
Yeah, you know the truth and whatever you don’t agree with is crap.
I participate because we can learn from others.
Jas Jain
I like thinking that I’ll find one tidbit of information every day (that I save for future reference). I also seek many other sources of information, with opposing perspectives, then draw my own conclusions. I don’t treat anyone’s information as gospel, and always question what I believe to be “the truth”.
I’m trying to identify “triggers” that could cause a systemic financial crash. IMO, the real estate bubble busting will lead to a trigger event and consequent debt implosion. Many corporations, mutual funds, retirement funds, hedge funds, etc. are going to have big holes blown in their balance sheets in the next 2-5 years. Maybe there won’t be one big event, and just a downward economic spiral lasting many years. Who knows?
It’s best to be prepared if you think anything is possible, and many things are possible that could trigger a systemic financial event.
“It seems like a lot of people want a freaking depression to occur out of jealousy towards those that have profited from the re bubble”
Not me, but I’m afraid a long recession or depression is inevitable, and have no pity for the bankers, brokers, agents, speculators crooks and fraudsters that were part of the collapse. Many that have “profited from the bubble” are just plain liars and crooks, and they should have to pay for their little white lies and schemes.
Stan: “Help us- “”Not clearly illegal”??? We Americans sure love our euphemisms. Dissembling, pretexting — why not use lying or fraud?? If the word tastes sour no amount of flavour enhancer can really change its taste. Add to this option manipulation and inept self-serving corporate and political hacks and we sound almost like—Good Grief Charlie Brown.”
Hello Stan,
The single best word to describe Americans is: Hucksters! According to the historian who came up with this description, there are more terms for trickery, or fraud, in American language (let us not blame the English!) then the next 14 popular languages combined. American dupe thinks that it is ok as long as Corporate Crooks are only “cooking the books,” which is nothing but fraud. Americans need euphemisms so that they can still support what is a corrupt and fraudulent system. Larry Sonsini, who made hundreds of millions during the Scam Options Fraud heydays in Silly.con Valley, made it obvious that Corporate Crooks, whom he represents, will not stop at “Clearly Unethical, Probably Illegal.” The so-called loopholes are put in there at the request of special interests so that they can legally commit crimes and not get punished.
Only blind faith in the system sustains Americans’ faith in their country. Unfortunately, misery awaits those who suffer from blind faith. Far greater misery, in percentage terms, than the Civil War lies ahead in the coming decades.
Jas Jain
Immoral is not the same as illegal; lying and misrepresentation are not necessarily, in and of themselves, criminal.
Spoken like a true left wing hack.
OT, but should have its separate thread:
WSJ Sept 28, 2006:
How a typical mortgage fraud works:
1. Promoters buy a house and quickly arrange to sell it to someone else at a much higher price .
2. The promoters arrange for a loan for the buyer, often using fictitious financial information.
3. An appraiser is found who is willing to ratify the inflated price.
4. The quick resale produces a profit for the promoters.
5. The home buyer defaults on the loan.
Discuss amongst yourselves….
yes, very popular in the Netherlands in the last 5 years or so; and up to now NO one has been convicted. Probably because the game is usually played with expensive homes, by high level citizens with good attorneys and good contacts with politics.
More…
American Legalism at its best (or worst)…
Under the regime of legalism, right-and-wrong become irrelevant and extreme legalism with appropriate “loopholes” becomes the modus operandi of the population, especially those with economic power. Americans do “love” their lawyers! The problem is with the system and not with people who practice law. Alexis de Tocqueville foresaw lawyers as becoming American aristocracy and they are to a great extent.
you must be kidding. they are nowhere as rich and powerful as those corporate ceo’s and finance manager’s in wall street.
I agree with you that lawyers and economists don’t make anywhere near the money that their top employers, Corporate Crooks, make. But, you must agree that these professionals are very critical in helping Crooks fleece the population. No?
Jas Jain
Top article from p. D1 of today’s WSJ (I am hoping someone w/electronic access can post this). Slice! Whack! This housing market slowdown is morphing into a Halloween-season horror show for sellers.
——————————————————————————-
Pricing Your Home Gets Trickier
by Ruth Simon
…
Sellers are also being told to cut prices aggressively if their house isn’t moving — or desn’t get any showing in 21 days or gets 10 showings but no offers. Ned Redpath, president and owner of Coldwell Banker Redpath & Co.. in Hanover, H.H., often advises the seller to slice the asking price by 10%. “We don’t like to see $2,000 or $5,000 price adjustments,” he says. “We want to see a real whack” that attracts attention.
Forecast: 100,000 building jobs to be lost
UCLA researchers cite sluggish housing market
By Dean Calbreath
UNION-TRIBUNE STAFF WRITER
September 28, 2006
EDUARDO CONTRERAS / Union-Tribune
The California real estate market will remain sluggish through at least 2008 and spark widespread layoffs among construction and financial firms, according to the latest UCLA Anderson Forecast.
“Real estate-related employment has moved from a major engine of growth in 2005 to a drag on growth in 2006,” UCLA economist Ryan Ratcliff wrote in the quarterly forecast, to be released today.
Ratcliff predicts that nearly 100,000 construction workers will lose their jobs over the next 2½ years, with the total number of workers dropping from 926,000 during the second quarter of 2006 to 827,000 in the final quarter of 2008.
Though other economists say the Anderson Forecast sounds like a worst-case scenario, they concede that the job losses could number in the tens of thousands as home prices and sales continue to decline.
“A 100,000-job loss would be the outer limit of what I expect. It’s unlikely but not impossible,” said Kenneth Simonson, chief economist with the Associated General Contractors of America, a builders’ association. “I would estimate a net job loss on the order of 25,000 to 50,000.”
http://www.signonsandiego.com/news/business/20060928-9999-1b28forecast.html
“Ratcliff predicts that nearly 100,000 construction workers will lose their jobs over the next 2½ years, with the total number of workers dropping from 926,000 during the second quarter of 2006 to 827,000 in the final quarter of 2008.”
Good thing the job losses will be narrowly limited to the construction sector, which is quarantined from the rest of the California economy due to its heavy reliance on illegal immigrant labor.
I find it difficult to believe that housing sales are down ~20% and unemployment in the housing industry is going to drop ~10%. Is Anderson doing a CYA? Or is Anderson suggesting all the remaining employed are going to take 10% price cuts? I do not trust their reports anymore.
They were so frequently wrong in the early 2000s by being ahead of the curve that they are now trying to compensate by lagging their estimates behind the expectations that common sense would dictate.
Hoz –
The other thing to remember is that Anderson depends on REIC money to fund its operating budget. Hence one would expect them to understate the severity of any forecasted downturn, as honesty would not only result in accusations that they were prophets of doom (especially given how many of their early-2000s forecasts turned out to be worse than realized experience), but would also potentially reduce REIC profits available for funding the Anderson Forecast. Nothing could be worse than getting blamed for precipitating the slowdown, and consequently having the decision makers at your funding source squeeze you even tighter than they would have anyway when their business recessed.
‘“So far, 2006 has unfolded just about like we predicted,” Ratcliff said.
Edward Leamer, director of the forecast, said the state is only in the beginning stage of the price decline.
A decline in the housing market generally begins with a slowdown in sales – which is what has happened over the past year, Leamer said.
It often takes a year or two after a sales slowdown for prices to decline, he said. Prices have already declined in some regions of the state, led by San Diego and the Sacramento area.’
Leamer leaves open the question of what will happen to prices a year or two from now once they start to measurably decline. But if they are predicting a recession in the financial sector and the construction sector by year-end 2008, then I am thinking it might be hard to bring back the buyers in droves to get price appreciation back on track. In fact, I am thinking prices will probably fall for a minimum of two more years after 2008, just like in every other California housing correction since the dawn of organized real estate markets in the late-1800s. At that point, prospective buyers might hope to find homes which pencil out in terms of long-term purchases or rental housing.
Farther on in the article, Leamer elaborates on his outlook:
“Looking forward, Leamer expects California home prices five years from now to be about the same as they are today, which means a decrease in value of 15 percent to 20 percent after adjusting for inflation.”
So he believes that home prices will bottom out at larger values of the price/rent ratio and the price/income ratio than their historical norms? I can’t believe that he also thinks that prices will bottom out after five years, then. When knowledgable forecasters are stating their predictions, one has to pay as much attention to what is not said as to what is said.
UCLA Group Predicts Flat Home Prices
http://tinyurl.com/earcg
“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.”
“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.”"
“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.”
“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.”
I just returned to the States after 9 months away, specifically to Chicago. I have been reading this blog for at least 2 years now. I went for a walk in downtown and Lakeshore early this morning (jetlag). The number of half-built buildings and cranes amazed me. Even more telling - the number of completed buildings (new and converted) that have HUGE banners advertising availability. Funniest sighting : the Ritz Carlton Residences sign that boasted “30% Sold!”. This is something to be proud of?
Many have said the Midwest escaped the bubble. Yes, perhaps the prices were not as exaggerated as the coasts, but the aggressive overbuilding will pound the market. The sheer number of units coming online in the next 6-12 months will drive prices down, not to mention the effect of all of the other economic factors.
Amazing. Good think I get to leave the USA for another few months before I have to face these market conditions. Renting is the only option.
Did anyone see this from originationnews.
New-home sales increased 4.1% in August, according to a government report, but the unexpected pop resulted from a downward revision in July sales by nearly 6% and not an upturn in market activity. “The housing market is weakening,” said Celia Chen, director of housing economics at Moody’s/Economy.com. “The trend is still downward.” The U.S. Census Bureau reported new single-family home sales rose from a seasonally adjusted annual rate of 1.01 million in July to 1.05 million in August. July sales were revised downward from 1.07 million. The Economy.com director said she doesn’t expect new-home sales to flatten out until mid-2007. She is projecting that sales will be down 14% this calendar year and another 8% in 2007. The Census Bureau report shows that new-home sales are off 17.4% since August of last year.
Hulbert to sheep: “The bear market is officially over now. Come back into the pool — the water is just perfect!”
http://tinyurl.com/qzv7t
yeah, and let’s not talk about inflation because that makes the issue too complicated for the sheeple. If you take real inflation into account, the US stock market still has 40-50% further to go before it breaks even with the year-2000 values.
i have been watching foreclosure numbers in sac from the site:
http://www.foreclosure.com/state/ca.html
on 2/14/2006 the number of foreclosures is 75
on 9/28/2006 the number of foreclosures is 412
seems to be a 450 % increase since i started watching. i haven’t seen anything on sac forclosure in awhile so here it is.
I’ve been tracking “lousy construction” stories for a blog I hope to put up if I ever have time…
I think that one reason this bubble will crash even harder than anyone expected is the poor quality of construction. Homes were thrown up, and since the first owners in at least half of new construction never had any intention to occupy the homes, nobody cared.
That’s why we’re seeing stories like this:
http://www.local6.com/problemsolvers/7302637/detail.html
(an example of a lazy electrical installer making an entire house into a electrical circuit–with deadly results.)
In a few years, people looking at existing homes will avoid those built during the bubble years.
Wow, that is soooo sad.
Right you are. This is why there can be be no recovery in the new, non-traditional homes. They are poorly built and they don’t make any sense. People will remember that they actually want a home, not some silly idea of an investment property.
unfortunately, the situation with many existing homes is not much better (at least in Europe, maybe a bit different in US). Many old POS properties from the previous century that were ripe for demolition were quickly ‘upgraded’ to make a good appearance to starry-eyed buyers and sell for big bucks. But often the upgrade was nothing more than hiding serious problems with a layer of paint, some cardboard and a new laminate floor. Many of these homes will look really bad again within a few years; but unlike 10 years ago, you cannot easily see now what is wrong. With new homes, it is usually easier to check what you get for your money.
P.S.: so maybe it’s best to also avoid all the homes that were ‘upgraded’ during the bubble years (in Europe that’s about 1995-2006).
Here’s an entertaining link:
http://www.archive.org/stream/YourThri1948/YourThri1948_256kb.rm
A 1948 film meant to be shown at classroom on how to save money for High School students.
I wonder what they teach today:
- How to steal from your parents and sell on eBay?
= Be a Cam Whore for fun and profit?
- Get Rich Quick flipping houses?
Just saw today on the back inside page of Seattle Weekly, condo ads for Epic Condominiums. Price reduced on 2bd/2ba condos from 425,000 to 359,900 and now with 2 parking spaces..15 percent price cut.
sacramento foreclosure rate according to http://www.foreclosure.com/
on 2/14/2006 their were 75 foreclosures
on 9/28/2006 their are 412 foreclouses
haven’t seen anything on sacramentos foreclosure lately
Well, at least there is a bit of good news!