‘The Housing Market Is An Accident Waiting To Happen’
A report from the Chicago Tribune. “Applying the word ‘crash’ to sagging real estate markets in some parts of the country, a new study predicts that in the coming year, the nation’s median home price will decline for the first time since the Depression. The encouraging news for the Chicago region, though labeled ‘highly overpriced,’ is that prices here probably bottomed out this summer, according to economist Mark Zandi, principal author of the study.”
“David Lereah, chief economist for the National Association of Realtors, disagrees with the severity of the price downturn in the report. ‘It’s possible we could go under zero, if you include prices of new homes’ along with sales data for existing homes, he said.”
“Lereah agreed that broad price declines in some regions are unavoidable. ‘I don’t think I would use the word `crash,’ he said. ‘When you use a word like that, it’s almost a self-fulfilling prophecy in the housing market. These are people’s homes. Their retirement is depending on it.’”
“But Zandi defended the use of the word and his choice of 10 percent price declines as a benchmark. ‘If you have less than 10 percent equity and your prices fall by 10 percent, you’re toast,’ he said.”‘
“Paul Kasriel, director of economic research at the Northern Trust Corp., disagreed on the Chicago outlook, saying the prices here had not stabilized. ‘Not in my neighborhood,’ he said. ‘The same houses that have been for sale for six months are still for sale. Some of them have lowered their prices, and they still haven’t sold.’”
“But Zandi sees a somewhat bright side. ‘Even though this is a very serious correction, that these [market conditions] are things we haven’t seen before, I am still arguing that the economy is going to hold together.”
“‘That’s nonsense,’ Kasriel said. ‘The housing market is an accident waiting to happen. We’re already seeing a slowdown in employment growth, and a lot of it is housing-related. We’re also seeing a slowdown in consumer spending, and that’s housing-related.’”
“‘It’s beyond me how something that has dominated the U.S. economy in the past four years and is clearly in a recession now won’t have spillover effects on the rest of the economy,’ he said.”
The Capital Times from Wisconsin. “A record number of ‘For Sale’ signs around town don’t lie. The red-hot housing market has cooled off big time, leaving nervous homeowners, frustrated real estate professionals and anxious business people all across the country.”
“Even the Madison area housing market, often viewed as bulletproof, hasn’t been immune from the downturn. The median sales price for homes sold in Dane County actually fell in August, the first time that has happened since the Realtors Association of South Central Wisconsin began compiling monthly statistics.”
“The number of homes and condos sitting unsold in the Madison area has swelled by nearly 60 percent in the past year to a record 5,347, according to the association. That does not include another 1,100 area properties listed for sale on the FSBOmadison website.”
“Marc Loy and Ron Becker bought a four-bedroom, two-bath brick home near Tenney Park for $160,000 and over the past 10 years have watched its assessed value more than double. They assumed when it came time to move on, the buyers would come knocking. But it hasn’t happened that way.”
“Their house has been on the market since July without one offer. They’ve cut $20,000 off the asking price to $329,000, and still no action. ‘Everybody told us how easy it would be sell in this neighborhood,’ said Loy. ‘Of course, those were people who had already sold their house.’”
“Loy and Becker are moving to Cincinnati in January for a job commitment and have already purchased another home there. They aren’t sure what to do if they can’t sell their Madison home soon. ‘We can’t afford to pay two mortgages,’ said Loy.”
“In Mount Horeb, Joel Kahl’s got an opportunity to buy his ‘dream home’ on wooded land from a relative in the town of Vermont. The catch is he needs to close by November. Kahl and his wife have slashed the asking price on their remodeled three-bedroom, two-bath raised ranch to $196,000, $16,000 below its assessed value. Still, no action.”
“‘I put a lot of work into this place, but it’s looking more like I won’t get my money out of it,’ said Kahl.”
“‘The big question at this point isn’t whether prices are going to fall - but how much,’ said Morris Davis, associate director at the Center for Real Estate at the UW-Madison School of Business.”
“David Simon, president of Veridian Homes, the area’s largest homebuilder, has felt the pressures. In June, the builder cut 15 percent of its work force, and announced it was reducing the number of homes it plans to build this year to 500, down from more than 600. ‘We’re certainly watching our inventory,’ Simon said.”
“‘I personally believe the correction is healthy because it tempers people’s expectations and takes irrational behavior out of the decision-making,’ said (realtor) Sheridan Glen of Madison.”
“A bigger problem, Glen said, are the large number of upscale homes for sale in the suburbs. ‘Sellers who are used to getting offers at 98 percent of their asking price are being forced to settle for prices that are discounted deeply,’ he said. ‘Right now, if you don’t have to sell, I’d recommend not selling.’”
“Tamara Kaufman may be taking that advice to heart. She’s gotten so frustrated trying to sell her three-bedroom, 1.5-bath home in Fitchburg she’s ready to take it off FSBOmadison.com. ‘It’s been on there for three months and only four people have come to look at,’ she said. ‘I may just stay here for now.’”
“Lereah:… These are people’s homes. Their retirement is depending on it.”
I’m betting 90% of the readers here never heard of “Senior Vittles.”
Yeah, it’s called spam and cheerios.
Look to me like the snow ball is gathering more mass it rolls down the RE hill. the longer it goes, the bigger it gets. more bad news, more buyers waiting on the sideline. unstoppable. kind of scary. but exciting. glad I flipped that house when i did. made only 50K but still alot better off. hahaha.
The fact we and many others are hearing Liar-eah making comments… “Lereah agreed that broad price declines in some regions are unavoidable.” will be feuling a greater pull back. Once we tip over national with proof positive decline that will be the free fall going forward.
Yeah, I made only TWO thousand when I flipped mine recently. Just thanking my stars (AND this blog) that I did not LOSE money.
Yum, mixed together with a little milk…
They spent their retirement money on big trucks, big houses, personal movie theaters. Their retirement is depending on younger people to buy their overpriced P.O.S.
Arlingtonva,
Exactly!
No way I’m going to fund some irresponsible boomers’ retirement so that they can run me off the road in their oversized pickup truck on their way to the bank to cash the proceeds!
Too bad so many risked so much on real estate. No sympathy–let them crash.
I will keep you guys posted on this one. Working in South Orange County. Guy I work with is now on the clock with his home. Asking $620K. I told him it will take at least 6 months. He thinks he and his girlfriend are going to walk away with $400K after everything is closed in just a couple of weeks. He offered me the place for $600K. I told him with a smile on my face that I WILL NOT FUND YOUR RETIREMENT!
Poor bastard.
Sounds like he has a lot of room for negotiation.
or at least those forced SS payments the young workers will fork over for the next 30 years
Wait a tick! I thought retirees are the ones who are suppose to buy all the homes here in Florida. My brain hurts every time David ‘Houston we’ve got a contradiction’ Lereah speaks.
That’s the problem, the same people were expected to buy homes in every bubble area. All the builders and bankers looked at the data and said “Yeah the boomers will buy, but forgot to realize that the boomers could not buy everywhere so when every possible retirement location went on a building spree they found out that Mr and Mrs Boomer weren’t planing on nor capable of buying 5 different houses in 5 different bubble areas. And even worse is the fact that since the boomer owned a house which was listed at 1 million there was nobody in the area who could afford to buy that house so that the boomer could move to Florida, Nevada, Washington, Montana etc etc and buy the McMansion.
You can’t have a bubble unless everyone buys houses from each other. It’s a pyramid scheme after all.
Would’nt it be ironic if a large percentage of boomers bought these REIC clowns’ books and actually bought 3 and 4 homes thinking they could pawn them off to other unsuspecting boomers at extremely higher prices later down the lane. Boomers tend to shift demand curves rightward in their path and then violently leftward after they pass. This type of investment buying behavior would partially explain the ginormous housing bubble.
I’m a boomer, but not one of what all of you are talking about. I rent and I own my paid-for only car, a Toyota Matrix and live a simple life. I don’t run people off the road. Other boomers in their big trucks try to run me off. Phoenix is like Riverside - lots of pickup trucks. Many boomers drive small cars, in case you did not notice.
You are correct, everyone over the age of 60 is filthy rich, and wants to live in an inner city condo in FL that is overpriced by about 100%.
God, everyone knows that, keep up MarketMaven!
No, no, no!!!
There are buying the homes in San Luis Obispo!
Man, I hope so. I want these people to have to work until they die to keep that house so they keep paying into SS. I’m not buying their house so they can retire.
The market is what it is, the market does not care that some one’s retirement depends on RE staying over priced,a home is worth what some one will pay for it, no more.
This mentality that we better be nice and not bad mouth the RE market is crazy. It is like saying some one must hit a jackpot in Vegas to be able to retire so the laws of probability must change so the odds wont prevent them from winning it.
This statement Lereah:… These are people’s homes. Their retirement is depending on it.” honestly made me very mad. Damn, Lereah was the one telling people to gamble on RE and now that this gamble did not pay off it is our fault and the medias fault because we are merely telling the truth and our opinion. I just have one thing to say to Lereah and all of the flippers who were laughing at us housing bears-”too bad-boo f ‘ing hoo”.
Lereah, you are the jerk that lead people down this dangerous path, YOU WERE WRONG-STOP CRYING AND FESS UP!
Implosion, I think your wish will be granted. Millions of boomers will find out that leisure (aka retirement) will be much too expensive for them to afford. So, back to work they’ll have to go…
and it will be interesting to see what jobs will be available to them.
because I don’t think they’ll be able to sell real estate.
I wonder if the US seniors will become what they’re like in Korea (at least according to my father-in-law). There, employment is rather low, and society frowns on people working past 50 or so because it takes jobs from youngsters who are trying to get started. You end up with a still talented, but workless older population that may live with their kids and probably whittles away their time socializing, feeding the squirrels, and so on.
(This is why my father-in-law says he likes America so much. He’s mid 50s and a highly paid engineer who gets to keep doing the research he loves. He says in Korea he’d have been forced out by now.)
Granted, logistically this might be less possible in the US with the immensity of the baby boomer generation, but it would be interesting to see the old folks shamed out of jobs b/c they were taking them from the Gen Zer’s.
Arizona slim- the boomers rang in age from 42 to about 60, which ones do you mean ?
Paul Kasriel sounds like he might actually have a clue. Someone needs to give him a promotion.
Promotions are for something stellar, this is just plain old common sense at work.
The Northern is a very conservative institution. It mainly manages wealth for the very rich - old money and new.
Kasriel has published near half a dozen articles on the housing bubble and he is solidly bearish.
His articles are great and very hard to find after the fact. They tend to disappear from the net.
Uh, try:
http://www.safehaven.com/archive-142.htm
‘When you use a word like that, it’s almost a self-fulfilling prophecy in the housing market. These are people’s homes. Their retirement is depending on it.’
Maybe the NAR should have been urging caution the past few years instead of cheering prices higher.
Exactly.
jb
Yep, they are partially responsible for the loss of recent home owners. They should feel guilty of having manipulated the market.
Nah, to urge caution a few years ago would violate the short term quarter to quarter hitting the numbers/monthly payment mentality that has come to dominate our society. It is much easier to go with the trend then to think. That’s why we have lovely bubbles and rioting mobs.
It’s also why people like Buffet and Schiller who have the courage of their convictions and won’t be swayed by the herd are so rare.
It’s very true about our society — just go with the flow. Well, anyone can do that. I would expect people who get paid big bucks to be more honest with themselves and more competent.
crash, crash, crash crash crash
(there, I’ve done my part)
And furthermore, CRASH.
I’m with you dwr!
When you use a word like that, it’s almost a self-fulfilling prophecy in the housing market.
Wow, why would anyone want to sink their money into an investment so fragile that it can be brought down by a single word!
great post! lol makes you wonder what the foundation of the housing market is made of - eggshells?
‘When you use a word like that, it’s almost a self-fulfilling prophecy in the housing market. These are people’s homes. Their retirement is depending on it.’”
That’s scary. What ever happened to pensions and savings and social security? I think the USA is asking a wee bit much from houses and condos. It’s sad to see our security going out the window in just a few years. Seems like the 1990’s were decades ago.
Not to mention lack of diversity in their investments. If this is all they have ,in one egg, yea! their screwed… thank god im 100% contributing to 401K and auto-depositing additional amounts each month into my stock/bond funds.
I love the dudz bitching about paying two mortgages when a) they have still got 100% profit in the house they’re trying to sell and b) OF COURSE have gone out and bought something else before selling. I’d say those are sellers you can squeeze and squeeze hard if you have any interest in the place. Let’s see . . . for sale at 329K, they paid 160K and have lived there 10 years . . . I’d start with an offer around $220K and see what happens.
Well now that they told the whole town their situation, I’m sure people will be stepping up to help.
I’ve seen that many times in stories posted here. People allow reporters to say what they paid for the shitbox they’re trying to sell. Suicide.
Is that price not public knowledge anyhow? I wouldn’t submit an offer without knowing what the house was going for 1995-99, before the bubble.
You can get that information from the assessor, from the Realtor, or from Zillow.com. I like checking out that information to see just how low one can afford to go (not counting HELOCs and other debt). For example, a house down the street is asking $1.2 million. It’s a nice big house for the area (5/5), but it’s about 40% too high, IMHO. It sold in 1999 for like $250k (before the remodeling, I’d wager). Anywho, the latest guy bought in late 2004 for like $1.1 million, so I doubt he’s going to go much lower than that (until the bank takes it and does a foreclosure auction).
What’s scary/amazing - seeing the guy who owns the house (when walking the dog or whatnot) - he looks like he can’t be a day over 30. And he dropped over $1,000,000 on a house. Crazy.
Maybe it was that iambeingforclosed.com guy
Zillow and other websites have all of that info. Don’t go without checking. On the other side, most flippers won’t probably go negative on a property just to save their credit. Unless it is a short sale, they will likely just throw the keys on the lenders desk.
Yeah, this is the crux of it. They want the nearly instant doubling of return on investment because they never saved enough. Last I checked it take 15 years to actually save about $160k, these people assume they deserve that kind of money just because they lived in a house for a few years and let eveyone else bid it up over time. Number one problem, these people never saved anything. Period.
‘I don’t think I would use the word `crash,’ he said. ‘When you use a word like that, it’s almost a self-fulfilling prophecy in the housing market. These are people’s homes. Their retirement is depending on it.’”
So it’s okay to use the words “boom”, “new paradigm”, “real estate always goes up”, “can’t lose”, “great investment”, “buy now before you’re priced out”, etc., when things are going good, and that doesn’t lead to a self-fulfilling prophecy and fuel the upturn. But when things are not going so good, don’t ever use the word “crash”, or you’ll ruin people’s lives. For an economist, he’s pretty stupid about economics.
Lereah: These are people’s homes. [These are my multiple homes in Florida] Their [my] retirement is depending on it.
Isn’t he trying to sell his house in NoVa right now?
I remember someone posting that before.
What’s sad is that assets have replaced actual cash savings as a vehicle for retirement security. People spend every penny they earn and then some, leaving the official savings rate negative. They figure “Why save?” since asset values will just make up the difference. When stocks stopped going up in value, the Fed flooded the system with so much easy money that real estate values surged. Now, house values are falling … but the Dow is making a new high? Are we just going to keep ping-ponging from one asset class inflation to the next on ever-increasing amounts of debt? What a shame. Wouldn’t it be nice if we actually earned money from real jobs and real work, then spent (and supported ourselves in retirement) out of real savings?
http://interestrateroundup.blogspot.com/
How about working past 65? Why is it that everone is concerned with early retirement. The way things are going even with a savings, I tell my wife all the time that I will go until they put me in the ground. While I don’t think I will go that long, how about 70 or 75 or until I am physically unable to go any longer. I hate how all these people want us to fund their retirements and then we find out they are 55 or 58. What a load. My father, in a union I might add, worked until he realized that with all his retirement nest eggs he would make $8 less if he quit. So he did, but he put 42 years with the company. His brother went almost 45 and my stepdad put in 37 before retiring, albeit at 62. My point, however, is what is it about retirement? What makes a number so significant like 55 or 65 or even 67? Why nor be productive as long as possible. On the other hand, fine if you can afford to retire at a young age fine, but don’t expect the rest of the country to support you, esp. if you have an extravagant lifestyle.
When the age for a pension was first set at 65, the average life expectancy was 63. No one thought they’d be supporting geriatrics for decades.
posted “When the age for a pension was first set at 65, the average life expectancy was 63.”
I was told also, at first it was a German concept, way back when. This is about right. It was meant to help thoese in the very last stages of life. Thoses way past working.
Life expectancy may have been 63, but the high infant mortality rates skewed the average. Many people did live long lives, but disease and malnutrition took out far more young people back then.
If the generation born before WWII made it to say 50 then they would probably live to 80 or so easily but they also drank like fish and smoked like chimneys which brought their life expectancy down.
What we need is more drinking and more smoking!
My father’s 81 and still works fulltime and then some. And he wouldn’t have it any other way. (Don’t mention the word “retirement” around him. Just don’t.)
Ha, you must be joking about working past 65. It’s almost impossible to get (or keep) most jobs past age 50. Age discrimination is the elephant in the room.
The real fools (in retrospect) are the ones who thought they could keep working for a company after age 50. After that age if you don’t have your own company, your own independent business, or work for the government, you are toast. Of course there is always being a Walmart greeter or a Costco food promoter. Or a real estate agent. Lots of former white collar professionals became real estate agents not by choice, but by NO other choice. I know people in their early 40s (and of course 50s and 60s) — good performers, good education, good employment history, smart and presentable, who never got another “real” job after the hi-tech bust.
While there’s a lot a shadenfreude here about boomers many of you younger people don’t know the devasting employment consequences of the 2000 bust. Many people never got serious employment after that, but still had kids to raise and put thru college. Their “Sophie’s Choice” was to send the kid to college or fund their retirement. The hope was the house could then help with retirement, since the job was low-pay or non-existent, and the kids “deserved” to go to college.
Ha, you must be joking about working past 65. It’s almost impossible to get (or keep) most jobs past age 50. Age discrimination is the elephant in the room.
I call you bluff and raise you a nickel. If you have marketable skills, age doesn’t matter, at least not in the US. I have parents, in-laws, and extended family who are into their 60s working in private industry and aren’t being forced out. Why? Because they are smart and good at their job and add value (i.e., profit) to the companies they work for.
This is the beauty of capitalism. Doesn’t matter if someone’s 25 or 75. If they can increase the company’s bottom line, they’re a plus.
I see your wager and raise it a $100 bucks. I can provide you with a roomfull of people here in the U.S. who would beg to differ.
As the poster said above after 40 here you are toast if your name isn’t on the door or you’re married to the bosses daughter.
Ha, you must be joking about working past 65. It’s almost impossible to get (or keep) most jobs past age 50. Age discrimination is the elephant in the room.
Very true, companies silently add up the ‘extra’ benefits older employees will cost them compared to those single in their 20’s. At my company I have yet to see a manager higher an employees older than themselves. Its almost like they think that if you haven’t at least progressed to their level, then you must be worthless.
Just as an example, in 2003, Morgan Stanley offered a buyout to every employee over the age of 50, and they were so eager to be rid of the oldsters, they were offering to add up to 5 years to the person’s work history to boost their pension payout. No effort made to evaluate anybody–it was anybody over 50. At that point, company figured it could save plenty of health costs and way pay salaries for employees that have been around for 20-30 years when you can get college grads for cheap, and outsource the rest.
I have to say that I have a very strong bias to hire fresh clay and grow and promote internally once the company has “jelled” although at the start up or founding I have hired people in their mid thirties to mid forties. You never know what kind of baggage you are picking up with an older employee and usually (but not always) they do not readily accept the corporate culture.
I am a manager at a semiconductor company. I can tell you exactly why these fiftysomething engineers are unemployed. I know what’s wrong with the ones that can’t find a job! I interview them! And it’s not that they’re over fifty…
There’s also a group of fiftysomethings that have no problem finding work and that I’d be glad to hire.
I’m over 50 and still working as a programmer. It’s possible that I’ve been passed over for some jobs due to age, but there are still some employers out there who don’t mind grey hair, as long as there is a good brain underneath it.
I’m 47 and work as a software engineer. Finding work is a cinch for me. I just started looking Monday this week and got several contacts. I go coast to coast. I used to be worried about age discrimination, but in my recent contract I found that most of the 20-somethings I work with do not have the determination, persistance, and the years of experience that it takes to find a solution quicker than me. I make it a point to be a good example to the ones who want to excel, and some of them do. I gladly mentor them. The smart ones listen. They will do okay. Maybe in 20 years they will concientiously set an outstanding professional standard for the new crop of young ‘uns. But just in case there is age discrimination in the future, I invest as much as I can in various assets. I work with a bunch of other 40-somethings and 50-somethings, also software engineers. In my particular office, we are about to be phased out, so we all are looking for gigs. We get all sorts of head hunters calling us.
Age does not matter. There are 20-something and 50-something deadbeats. The 20-somethings need discipline and persistence of the older generation. The 50-somethings need to adapt to changing times and technology. I know I’m overgeneralizing, but I think we all of someone who fits the bill.
The real fools are ones who need corporate entitites or the government to find them jobs. Workers create jobs, not the other way around. Anybody over 40 is too old to be working for somebody else.
Nobody owes anybody anything. People need to suck it up and get a grip. Produce or suffer. Evolve or die.
there is a lot of truth to that. Another angle is contract engineering. Kind of like a soldier of fortune. No bennies, but the pay is great and major tax breaks that make mortgage interest deduction tax break pale, in comparison. It’s like being semi-independent. I only met a representative from my company for 5 minutes around the year 2001 (forgot which month). I’m like, on my own, and fax my time sheet every monday to some name without a face. Been doing that 6 years. So it’s like being your own boss, but better!
It depends entirely on your occupation.
You might say, wish, hope, brag that you will work until you drop but the fact is if whatever it is that you do and EVERY related aspect of it has been outsourced to some other country then you will NOT be working until age 70 or 75 or maybe even 50.
A lot of very, very good and intelligent people have found themselves in this situation. And even though you may have extensive experience in one field many US corps are not even interested in talking to you if your experience does not fit 100% the 30 or 40 items on their laundry list of job requirements. Especially if you are over 40. And even if you are lucky enough to get an interview the decreased pay will be a shock.
I know several people that I am afraid to even contact. Their situation was very bad a few years ago and I’m fairly certain its worse now. Like losing their homes, divorce, living in slums, etc. I do know of one person living in his van (the last I heard).
This shouldn’t be suprising - the real inflation rate is well over 10%, not that hedonically massaged tripe in the CPI.
Given that, why on earth would anyone save? Just to watch it go down in value? Don’t be silly - people are smarter than you think, about some things.
Of course, past results don’t predict future returns, and we’ll probably have a deflationary period coming up. People can also be dumber than you imagine.
And I can guarantee that the the flippers who got out of housing last year are setting up E-trade margin accounts right now.
the saving rate measures the amount of money that the average american has left after all expenses have been paid. Basically americans are going into debt or tap saving accounts to live.
The encouraging news for the Chicago region, though labeled ‘highly overpriced,’ is that prices here probably bottomed out this summer, according to economist Mark Zandi, principal author of the study.
That’s the miracle of the bubble. Real estate values everywhere else go down like a Thai hooker but your neighborhood remains unaffected…
Let’s not disparage Thai hookers by lumping them in with these retarded economists. Those gals are at least providing an honest service to humanity!
At least you know exactly what you are paying for. A economist’s study may be worth something, worthless, or cost you money with bad advice.
I see you haven’t actually been to Thailand. You don’t always know what you’re paying for, winky, winky.
My bad. But its not like I compared them to Realtors. The worst the hooker is gonna do is slip you a roofie and make off with your Rolex.
It figures the Tribune of all papers would quote this Zandi guy. They’re the biggest RE cheerleaders around and with every crooked alderman pinning their hopes on condo projects - what better idea to put out than the worst is over for Chicagoland? The truth is that the hammer hasn’t even been raised yet over Chicago’s RE prices, those arguments that Chicago has too diverse an economy to see a RE crash are bunk. This city has tons of F.I.R.E. jobs - mostly taken by twenty and thirty somethings chased out of their small Upper Midwestern towns by globalization. When this thing plays out those banks and financial institutions are going to start cutting - and there goes the Chicago RE market. As for the ‘burbs - they now stretch to Scyamore and the carange in the hinterlands will be astounding when those folks realize no one wants to pay $300k or more to sit in traffic two plus hours a day! Don’t believe this guy folks, the “heartland” will feel this every bit as much as the coasts - and then some.
“Lereah agreed that broad price declines in some regions are unavoidable. ‘I don’t think I would use the word `crash,’ he said. ‘When you use a word like that, it’s almost a self-fulfilling prophecy in the housing market. These are people’s homes. Their retirement is depending on it.’”
Aaaahhh… so Lereah admits that he is concerned with how his golden words will actually influence the market. Could this, just possibly, explain why he’s been the industry cheerleader all this time?
When Lereah says something, we can rest assured that he is not making a statement about what he believes will happen. He’s making a statement about what he wants to happen.
Lereah has never spoke his mind. I have no doubt about his credential but what good is it if he can’t be trusted. What a shame!
http://davidlereahwtach.blogspot.com
Thank you Paul Kasriel for saying it like it is.
I hear ya. I’m getting so sick of self-serving economists coming on the likes of CNBC and Bloomberg and telling us that the recent housing downturn will have little or no effect on the overall economy. C’mon….we’re not all idiots here.
Yes, the audience for CBNC are idiots. Would any body in their right mind use Crammer’s investment advice for their hard earned money. I always look for the biggest clown to get my investment advice from.
I’ve got 2 words for you MARIA BARTIROMO.
She sure is nice looking though.
Yea, But somebody somewhere is tired of putting up with her shit.
She’s not all that. She’s marginally bumpable. The attitude would kill it for me. Who needs that crap. Shove a sock in her mouth and turn her around. That’s about it.
Have to agree with you there. I have lost several thousand from his “Mad Money” advice. Caveat Emptor.
how many ppl post on this blog? how many in th US? we are not his audience. his audience actually consists of idiots….
“A bigger problem, Glen said, are the large number of upscale homes for sale in the suburbs. ‘Sellers who are used to getting offers at 98 percent of their asking price are being forced to settle for prices that are discounted deeply,’ he said. ‘Right now, if you don’t have to sell, I’d recommend not selling.’”
Nice conflict of interest from a realtor. Telling people to take their homes off the market which would mean fewer choices for buyers iin his patheticly hidden attempt to stabilise prices. Hey Glen, if a seller takes your advice, waits a few years and winds up selling at an even lower price, are you going to make up the difference?
I think most RE agents are in the same morals category as financial advisors. Either sleazy, incompetent, too blinded by commi$$ionS to see the conflict of interest/inappropriate advice spewing from their mouths.
The funny thing is, some people are taking their homes off the market, until spring. Then… Watch out below.
The snowball analogy by Nick the Wizard is appropriate. The few little snowballs have rolled for a bit and are now a few mid-sized boulders going down the hill. But their weight on top of that ridge is about to create an avalanche.
I think we’re still on track for the peak rate of declining prices to occur in 2Q2007.
Neil
plk1@ntrs.com
I sent Paul an email saying we agree with him and not that dolt who speaks for NAR.
“The encouraging news for the Chicago region, though labeled ‘highly overpriced,’ is that prices here probably bottomed out this summer, according to economist Mark Zandi, principal author of the study.”
WTF - this bubble took 6 to 7 years to get to where we are now, and people are already calling a bottom? The market just topped out in summer of ‘05, how the heck can anyone already be calling a bottom, especially considering prices are still falling? Wishful thinking, I guess, but this is absurd.
what did they do in the 90s? Exactly the same thing- call the bottom every quarter for 6 years.
Prices (reported) have only just started rolling over so I expect YOY to max out at around -25% in Oct. 07. But still neg YOY in Oct 08, although by this time prices will no longer be overstating as all the folded in closing costs, etc. will be ironed out.
“But Zandi defended the use of the word and his choice of 10 percent price declines as a benchmark. ‘If you have less than 10 percent equity and your prices fall by 10 percent, you’re toast,’ he said.”‘
Given that nearly all buyers in the last few years bought with little or no money down, add to that how many cash-out refied and HELOCed their homes to the max, we’re talking a lot of “toast” homeowners. They can’t sell, and they can’t refinance. You tell me what comes next.
Prices have barely begun to decline here. The only reductions I’ve seen are on asking prices which were a premium over 2005 prices. Prices have quite a way to go down in Chicago before they are reasonable.
I’m seeing very uneven price reductions in my area (N. AZ) I just saw (hilarious) a $500 reduction on a $500,000 house. Then again, I saw a $100,000 on a $750,000 house. And the ones most “motivated” are, surprise!…the realtor/owners.
“These are people’s homes. Their retirement is depending on it.”
If that is the case, then they shouldn’t be too offended if I only offer them what they paid for it—or less. Perhaps people need to be schooled in simple economics—a house is a depreciating asset fundamentally when you consider the constant maintenance, taxes, etc.
Everybody forgot about that these past five years and just assumed that someone younger and dumber would come by and release them from their albatross with a tidy profit.
It would be highly inadvisable to buy before everyone is lamenting how bad an investment real estate is; in other words, give it five years.
BTW, don’t you love the constant drumb-beat of FED talking points stating how inflation is running too high, and yet they refuse to raise rates any further? Bernarke has already decided that trying to save housing values is far more important than saving the dollar.
Anthony- your right, the FED won’t let housing crash. I read an article in the Economist recently that predicted 5% 30yr fixed rates will be back by spring and that will stop the price bleeding.
Yeah, amazing what a little bandaid will do for a gaping head wound.
Getstucco,
Please check you mailbox or send me an email. The way you are logging in is causing problems.
thehousingbubble@gmail.com
GS -
You have been exposed, you are a member of the REIC! LOL.
I think “Hopeful” is GS’s alter ego!
Agree!
Sorry guys — just having a little fun
Even when you appear as a blind beggar from the desert crying blasphemies there are those that will recognize you. Your need for stimulant in these times of redundancy is understandable. It is no threat to the Golden Path.
Palmdale 93551 10.3 months of inventory
Palmdale 93552 7.4 month of inventory
93552 listings up nearly 600% YOY
The Antelope Valley is in meltdown. And no amount of happy talk is going to bring it back. Look out Denver, because LA won’t take the back seat on foreclosures for long.
Aww. Nobody wants to spend $350,000 to be surrounded by graffiti, drugs, crime, gangs, and blight up in Palmdale? What’s the matter with people? Don’t they know that RE only goes up?
you forgot the greatest reason to live in palmdale: your living room is on one side of the san andreas fault and your kitchen is on the other side…
dude “The Antelope Valley is in meltdown. And no amount of happy talk is going to bring it back.”
I have lived in or around LA my whole life. Was Palmcaster ever anything eles? I agree with you 100%. My brother says they will just make the whole area section 8. Then rename it Nickerson Gardens.
Ha! Funny! You know, I had a house in Ridgecrest, bought at the peak in 1990 of the last bubble. Starting in 1993 there was talk that Los Angeles and Bakersfield moved a lot of section 8 types into Ridgecrest. Down the street (all 3 year old houses) was an empty lot with a wooden fence. And it had swastika grafitti on it. For about a year. White gangs (I’m white, but a gang is a gang). Whatever color of the gang, this is what happens in the desert areas during RE downturns. The dregs of society move in. A couple years later the apartment complex across the street was raided by the police. The upstairs of one unit was a meth lab. Meth labs are popular in the desert, and all over the United States. It’s an epidemic and I seriously think it (and other drugs) is part of the reasons for America’s decline. Drugs screw up your thinking and your ability to compete.
test
test2
test3
“We can’t afford to pay two mortgages,” said Loy.
Then why Mr Loy do you have two mortgages?
LOL! Nobody bothered to ask him that!
UHHHHHHH Because I flunked math?
“‘I put a lot of work into this place, but it’s looking more like I won’t get my money out of it,’ said Kahl.”
In times past - if you enjoyed your home and all the ammenities (new and original) - that was the payoff. Only in recent times are Pergo floors and tile countertops financial investments.
If I see “new granite counter tops and stainless steel appliances” one more time, I’m going to scream. Especially when they figure that’s worth another 75K.
I agree. Talk about homogenized design. If I were building right now, I would have to go with something different just to be unique. My least favorite upgrade (if you can call it that) has got to be fake wood flooring. That stuff looks, sounds, and feels horrible. Anyone who believes they are going to get good bang for their buck on that stuff better rethink their strategy. Last summer, I toured an open house on acreage that was “remodeled.” They took the fake wood floor thing to a new low, using vinyl with a wood pattern. Boy did that ever give me a good laugh! What’s worse, the owners did it themselves, and it did not adhere properly, which caused it to bubble. Needless to say that dump is still on the market.
Actually I think the vinyl (or linoleum) with the wood pattern may have come before the composite flooring. I think it was specifically designed for $50 a week bachelor apartments in places like Cleveland and Detroit. The whole idea of laminate flooring was to go over top of something - like a stained linoleum or cork floor that formed a good base, or to bridge two floors where one might be concrete. So it makes sense for certain applications, such as basements and dens. Otherwise, it’s only appropriate for rentals.
I used it in a few places in my house. It’s not bad. I bought it because it was relatively cheap and easy to install (even the glue kind) I put about 120 sqft in my kitchen, I also used it in by two bathrooms and the short hallway upstairs. Looks nice, feels fine, but no, it’s not an invetment, just an inexpensive way to fix the place up to my liking.
Another recent “trusim” we’re going to see put to the test is the idea of treating renovations as “investments” that would return 100% or more in the sale price. Unless you’re talking major additions, painting the bathroom or reflooring the hallway is a maintenance “cost.”
test4
fyi: sorry about all the test posts. For some reason all my comments are getting automatically thrown into moderation.
Ben, please delete these when you get a chance –thanks.
I have never talked with an economist on a personal level for the past few years who did not think real estate was going to crash, and I have had quite a few such conversations. Anyone who has taken a careful look at David Lereah’s August 2006 powerpoint presentation for a REIC conference (”Reality Check”) knows that he himself does not even believe what he tells the MSM.
Given that DL has a book out about the Housing Boom destined to become an infamous reminder of the housing crash, and that he personally owns investment properties in Florida, we should just agree that what he tells the media is meant to increase his book sales and investment returns, and leave it there.
Seriously, what does it take to be an economist. I wish I could make a living sitting around all day pointing out the obvious.
posted ” Seriously, what does it take to be an economist. I wish I could make a living sitting around all day pointing out the obvious.
The sad thing is that most, can’t even do that!
“David Lereah, chief economist for the National Association of Realtors, disagrees with the severity of the price downturn in the report. ‘It’s possible we could go under zero, if you include prices of new homes’ along with sales data for existing homes, he said.”
The existing home sales report for August already showed a national decrease year over year. What’s this guy talking about? -1.7% is “under zero”, and including the prices of new homes wasn’t required to get there. Is this the new RE math?
[Lereah]: ‘When you use a word like that, it’s almost a self-fulfilling prophecy in the housing market. These are people’s homes. Their retirement is depending on it.’
What’s more, these are realtors’ 6% commissions ! Their retirement is depending on it.
So, have pity for your local realtor: don’t ever use that prophetic word ‘CRASH’!
OK…I have said that there was no real estate crash in Atlanta….However, something is amiss. Four construction sites for condos are not dead sites. For a couple of weeks one site had workers bricking the entrance to the place…and these workers work really slow. The next week, one guy was there and drove a construction equipment doing what i couldn’t discern. On my 16 mile drive I counted more than 48 forsale/rent signs realtors. This does not include 4 auction this weekend signs. This does not include
forsale/rent signs that are homemade. This does not include numerous (for fall) garage sale signs. Not including the open house signs for weekdays. I do know that one industry that is experiencing growth is the balloon industry. Balloons everywhere. Maybe a melt down in Atlanta?
I noticed the same thing. It amazes me how many signs have been up, are slanted, but are still in the ground. Are you talking about Chamblee-Dunwoody? This is the road I take into/out of work. I especially love the day-glow orange and green open house from 11-2 on the weekdays.
OK, riddle me this…. there is a glut of houses on the market. Who is going to buy those houses ? I guess what I am asking it who wants a house and *DOESN’T* already own one ?
Its not the case of someone selling their house and buying another one, because that doesn’t sell a new house. So who is going to buy a house that didn’t have one before ?
Exactly. It’s musical chairs really, and the music stopped. About the only people that need a house are young families. But they’re finally priced out (but not forever), so the whole thing comes to a halt. No different than if you ran a Ponzi scheme in a small town and kept raising the entry price and at the end the price is high and everyone in town already bought in, except the few young people who don’t have enough for the entry price. One way street game over.
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