October 16, 2006

Some Areas Of Phoenix, Las Vegas ‘Ghost Towns’: Yellen

MarketWatch reports on a Federal presidents speech. “The housing slowdown has turned some areas of Phoenix and Las Vegas into ‘ghost towns,’ where many unsold homes stand empty, Janet Yellen, president of the San Francisco Federal Reserve Bank, said Monday.”

“Yellen said that she heard the ominous description from a ‘major home builder,’ who told her that the share of unsold homes in some subdivisions around the two Western cities has topped 80%.”

“‘Though the situation isn’t that bad everywhere, a significant buildup of home inventory implies that permits and [housing] starts may continue to fall, and the market may not recover for several years,’ she warned, according to the text of a speech.”

“‘We have yet to see the full effects of the series of 17 federal funds rate increases — some are probably still in the pipeline,’ the Fed president added.”

The Arizona Republic. “While the Valley is in the throes of a cold housing market, Casa Grande is flirting with a trio of megadevelopments that individually would have more residents than the city’s current population.”

“The three developments are all planned for northwest of Pinal County’s largest city, along the Casa Grande-Maricopa Highway. The three developments would encompass more than 30 square miles, about 74,000 houses, according to city officials and developers.”

“‘Developers are swarming us every day,’ said Casa Grande Mayor Chuck Walton.”

“In April, the Casa Grande council approved the 10.7 square mile Grande Valley annexation, which will include up to 16,000 single-family houses as well as denser multifamily housing, said Larry Yount, president of developer LKY Development Co. Groundbreaking is expected in about 18 months once the housing market stabilizes, Yount said.”

The Las Vegas Business Press. “Although the developer of the old Klondike Hotel & Casino site is busy acquiring use permits from Clark County for a hotel-condo-casino project, don’t expect to see any activity in the near future.”

“Citing changes in the Florida real estate market and rising construction costs in Las Vegas, Royal Palm CEO Daniel Kodsi said that the project will move forward but at a slower, cautious pace. ‘This is a big project for us,’ Kodsi said. ‘We are still cleaning up deals we have down here in Florida. We’re taking our time.’”

“Centra Properties, a local developer responsible for $3 billion worth of projects, is liquidating many of its assets, a victim of shifting market conditions and tougher lending criteria. The six-year-old firm recently put Centra Point, the crown jewel of its real estate holdings, up for sale.”

“Last May, Centra also sold 25 acres. The site was the location of another Centra/Related project, Las Ramblas, a $3 billion condo-hotel-casino complex that was canceled earlier this year. The company further streamlined assets by selling its construction division in May.”

“‘We are opportunists,’ explained Jim Stuart, Centra’s founding partner.”

“‘Realistically, you cannot buy property at today’s retail prices and still build things, unless your have a competitive advantage,’ said Jeremy Aguero, principal of a Las Vegas-based business-advisory firm.”

“‘Developers must now have cash on hand in order to make projects happen. Banks and Wall Street are tightening lending requirements. As a result, we’re dealing with a new reality that’s going to be around for a while,’ he said.”

RSS feed | Trackback URI


Comment by flatffplan
2006-10-16 12:24:26

what was yellen yelling 2 months ago?
“all is well”
fire this biaaaatch

Comment by txchick57
2006-10-16 12:29:38

Anyone know what subdivisions in Phoenix they’re referring to?

Queen Creek and Surprise maybe?

Comment by imploder
2006-10-16 12:37:46

I have a friend with an “investment” in Surprise. Bought it for 100k about late 03. Says it’s worth 250k. Anyone know anything about Surprise?

Comment by txchick57
2006-10-16 12:38:59

Surprise! It’s not worth 250K any more!

(Comments wont nest below this level)
Comment by imploder
2006-10-16 13:07:37

I get hit with stuff like this:

Suprise #1 in Job growth… What kind of jobs?


Comment by dannll
2006-10-16 14:17:48

“Suprise #1 in Job growth… What kind of jobs?”
Not hard to multiply from 6 jobs… Built a new MacDonalds I’d guess. What a joke.

Comment by ginster
2006-10-16 12:58:31

Surprise is in Northwest greater Phoenix. You basically start heading towards Vegas and will drive past it. It is way the hell out there. It is out around Sun City, the retirement village. Sun City used to be considered way the hell out there. I would never move out that far.

(Comments wont nest below this level)
Comment by Scorpion
2006-10-18 23:25:05

Surprise is competeing with Mesa for a giant water resort. I guess the wave pool here would be the largest in the United States. I’m guessing that Queen Creek is a definite and Surprise probably right behind. Investors struggled to rent their homes in these two cities.

Comment by AZgolfer
2006-10-16 13:03:03

Surprise is falling fast. People are getting sick of the drive and inventory is building. Nothing is selling.

(Comments wont nest below this level)
Comment by imploder
2006-10-16 13:15:48

This is what I figured. I have been there, before. My friend was told by his property management co. to “Raise the Rent”? It’s coming up for renewal I “suggested” (urged) he sell a year ago… (and every time the subject comes up)

The property is cash flow positive (paying only 100k how could it not be) I think he sees it as a fallback place to live, since it was so inexpensive.

He knows a guy that owns 150+ properties throughout Phoenix!

Comment by outofiowa
2006-10-16 21:45:21

We have rented in Surprise for the last 7 months. I would say the market price is down about 15%. but seems to have plateaued a bit lately. I believe most jobs are in retail, construction, RE, and medical. I am not aware of much industry in this area although the City is working hard at trying to attract some. A majority of the area is still agricultural land that is in crops continuously. A major shopping mall, auto mall and light industrial property is slated to break ground in the next year or so.
Total home sales are down to about 40% of last years highs. Only the houses at the low end of their price range that are in good condition and well located are selling. Most builders have gotten rid of a lot of their excess inventory and seem to have dramatically slowed construction. However, every inch of available land is slated for major developments. They are all quite livable with landscaped trails connecting the city together. Lots of young families and Sun City retirees in the area.
I have made the drive to downtown Phoenix during rush hour a couple of times and it is tough by Phoenix standards but a piece of cake compared to my many years commuting from Thousand Oaks, Ca to Westwood. Property for the 303 Loop has been purchased and will run through Surprise connecting it to the I-10 and I-17 Frwys. Tracks already run on Grand Blvd from downtown Phoenix through Surprise making the addition of a light rail line quite easy. The 303 Loop is not scheduled to be built until 2020. If planners completed light rail and the 303 immediately Surprise would probably grow at an unbelievable pace. But, all the land close to the city center and the tired older neighborhoods would completely die in the mean time. The hope and plans are that these distant suburbs will attract jobs and become self sufficient so that no commute is required. Now that highs are in the 80’s once again this is not a bad place to live.
I believe housing will continue to fall for some time unless people begin moving to Phoenix in large numbers once again. Many people purchased their home 2 or 3 years ago and should have 100K -200K in equity left if not spent. They will probably hold on if they are employed. Finding work in this area is no problem if salary is not a concern. The median age in Phoenix is 30 years old which is amazingly young. This will have some impact on the future of Phoenix if they stay.

Comment by imploder
2006-10-16 22:51:48

thank you… for your input

Comment by talon
2006-10-16 12:43:50

Lots of empty houses in QC and SE Chandler, also most of Maricopa is for sale from what I hear. And Casa Grande? Thousands of houses? All of those people hitting I-10 at rush hour? That’s nearly an hour trip into downtown PHX under the best of circumstances—more like 2 hours during rush hour. They’d better clear all of that inventory sitting much closer to PHX before they try to sell stuff in some remote hellhole like Casa Grande.

Comment by Walker
2006-10-16 12:48:22

They are saying “unsold”. Note that is different from “vacant”. My understanding is that Queen’s Creek is sold, just no one lives there.

Comment by Ben Jones
2006-10-16 12:58:06

Yes, the speculators own most and are doing the slow bleed. The amazing thing is the developers keep building, even though there are for-sale signs in front of most of the completed units.

(Comments wont nest below this level)
Comment by Catherine
2006-10-16 15:10:29

“In April, the Casa Grande council approved the 10.7 square mile Grande Valley annexation, which will include up to 16,000 single-family houses as well as denser multifamily housing, said Larry Yount, president of developer LKY Development Co. Groundbreaking is expected in about 18 months once the housing market stabilizes, Yount said.”

I’ll bet a pile of doughnuts and a bottle of wine for Mort that project AIN’T gonna happen.

Comment by ginster
2006-10-16 12:54:04

I live around Desert Ridge. The Toll Brothers community in Desert Ridge is about half empty. At least that is how it looks at night if you drive by. Half the finished homes are empty.

Comment by Grant
2006-10-16 15:26:42

Queen Creek is the southeastern corner of the Phoenix Metro area. Nothing out there except black widow spiders, houses, and a couple of golf courses. They are/were building a new freeway close to Queen Creek but the commute to Phoenix or anywhere there are jobs is probably brutal.

Comment by gary
2006-10-16 16:24:21

What about the Buckeye area?

Comment by asuwest2
2006-10-16 17:37:20

I went thru the Tartesso development which has been annexed into Buckeye (about 3 wks ago). This is one of the mega-developments on the WAY west side. Note that this is on the “ROAD TO NOWHERE” … not my name, but from the article on the developer’s website! The plan is for 300,000 homes to be built here (no, I didn’t stutter, and no, it’s not the wine you had. drink up). Read the realtor’s desc below–

Short & sweet….quiet, VERY quiet. Went thru on a Sunday. Many homes completed. less than a dozen showed signs of occupancy. It was like a spaghetti western….wind blowing, couple of people walking down the dusty road…. coyote howling in the distance….
And you get a rrreaalllyy bad feeling about the bubble.

Main developer page:

(Comments wont nest below this level)
Comment by JR
2006-10-16 17:42:24

Check out Ben’s slide show (upper right link) slide # 6. Caption: 6/184 Lincoln, (Sacramento foothills) CA, The Estates at Lincoln Crossing. These houses have been completed since March 2006. 80 have been sold to Flippers, 50 are still owned by the builder when 50 Flippers bailed. The builder is cutting prices $200,000 (from $750,000) to dump them, without much success. No one lives any any of the houses you see here, after 7 months. 138 homes in the subdivision: 3 are owner occupied and 15 are rented out. The balance are owned by FBs and FBs (Borrower and Builder). We call it Haunted Hillwood Loop.

Comment by az_lender
2006-10-16 18:51:58

Will be interesting to see what happens in The Season. If still no occupants after Xmas, they are in deep doo doo.

(Comments wont nest below this level)
Comment by AnonyRuss
2006-10-17 08:00:18

As a regular reader here for over a year, and a five-year resident of Surprise, Arizona, I figured that I might as well weigh in too. I agree with outofiowa’s points.

Surprise is definitely out there, and with the Loop 303 still uncompleted, it lacks direct freeway access. The Loop 101 is available, and is roughly 15-20 minutes east on busy Bell Road, depending on the time of day.

I frankly think that any resident of Scottsdale or the (inner) East Valley might make an unfair assessment of Surprise. There is some bias in those who have never lived west of Central that does not make much sense to me, and is largely incorrect. Yes, there are stretches of farm land slowly being covered with the tile and stucco, but that essentially describes all newer areas in Metropolitan Phoenix.

Downtown Glendale is an area that most would not consider remote, and if one avoids peak traffic, the travel time there is under 20 minutes on Grand Avenue. As for downtown Phoenix, I used to commute to Central and Jefferson regularly, and if I timed things right, it was a reasonable 45-minute commute garage to garage. There is now the recent addition of downtown Phoenix express buses for those who work there with standard 8-5 type-schedules (probably state employees, for the most part). On the commuting issue, the overwhelming majority of folks who live here and in much of metro Phoenix are not commuting to downtown Phoenix. They are teaching school in places like Surprise or Goodyear, installing satellite or cable throughout the area, serving in the military at Luke AFB, working at one of the corporate centers in North Phoenix, working in retail, building houses all over the place, working at hospitals, retired, etc.

As for infrastructure and related issues, I am pretty sure that the areas sprouting up around the town of Maricopa, Queen Creek/Pinal, Casa Grande, and Coolidge are in more dire straits. I do not want to assess what I have not seen in person, but I was around one of these areas near Maricopa about eight months ago, and saw some of these largely vacant subdivisions. There are many vacant houses in Surprise, and I have been in one subdivision that is in the final stages of construction that has many streets with several vacant houses. This last subdivision is Sierra Montana, and there are many houses there with the tell-tale signs of windows with no blinds, above average weeds, and eight issues of the free “Surprise Today” newspaper in the driveway. I think that there is just less vacancy (per capita) than in those other areas in the far East Valley.

That being said, Surprise house prices will continue to decline. Inventory is high. The same model of the four year-old house that I sold in Fall 2005 has sold recently for 15% less. There are a couple listed for even less than that with no takers. Of course, there are plenty with 2005-level wishing prices.

As for the Money magazine top job growth ranking, those numbers can be attributed largely to retail and construction. A new restaurant or a CVS seems to open here every week, but there is nothing like Chandler’s Intel or other high-end venture. Also, there are plenty of new teacher positions because they open two or three new elementary schools every year in Surprise, and they open a new high school about every two years. And, of course, the City has to hire plenty of people to pick up the trash, put out the fires, and so forth.

If you enjoy Spring Training baseball (as I do), Surprise Stadium is genuinely nice. There is a nice county library, and even a branch of the Heard Museum that opened recently. There is also a regional center of the Maricopa County Superior Court in Surprise, which is the venue for civil and family court matters for a large area of the Northwest Valley. The Surprise population is currently just under 100,000.

Comment by luvs_footie
2006-10-16 12:54:14

“Yellen said that she heard the ominous description from a ‘major home builder,’ who told her that the share of unsold homes in some subdivisions around the two Western cities has topped 80%.”

Good god!!!!!!

These numbers are mind bending.

Comment by ginster
2006-10-16 13:01:33

The executive was probably begging her to drastically expand the money supply, lower rates to 1%, and promote creative financing. She said , who the hell do you think I am, Alan Greenspan?!!!

Comment by mrktMaven FL
2006-10-16 13:06:50

Exactly! That’s the NAR’s and NAHB’s game plan.

(Comments wont nest below this level)
Comment by Rich
2006-10-16 13:54:00

Than you!

“She said , who the hell do you think I am, Alan Greenspan?!!!”

(Comments wont nest below this level)
Comment by david cee
2006-10-16 16:14:55

Sounds like these homebuilders stocks are a “strong buy” according to CNBC Crammer. What a goof ball, and the people listen to this crap. What a Country!!!

Comment by Marc
2006-10-16 12:31:57

300 million and counting. Maybe those won’t be paying in real money to get in this free housing, but the governement will be busy buying votes with american pesos. Expect the ghost towns to be theeming with teenager moms and lots of graffitis soon…

Comment by SFer
2006-10-16 12:57:16

That’s what I was going to say. Today’s ghost town = tomorrow’s worst neighborhood in town.

Comment by imploder
2006-10-16 13:36:25

If lucky will be blown up in “Legal Weapon 15″ Once Mel finishes up with his mea culpas. Only this time they will blow up an entire city!

Comment by imploder
2006-10-16 12:33:14

For a Fed Prez to come out and say that…. WOW! Fire in the whole!

Comment by imploder
2006-10-16 12:33:58

Duh…… HOLE!

Comment by Davey Jones
2006-10-16 13:13:31

You got it right both ways. The whole damn thing is going down the hole.

Comment by destinsm
2006-10-16 12:36:07

OT…. Signs of housing slowdown effecting other industries and soon to be the entire economy???

down ~ 15% after hours…

Stanley Furniture quarterly income falls; revenue declines
By Ruth Mantell
Last Update: 4:31 PM ET Oct 16, 2006

SAN FRANCISCO (MarketWatch) — Stanley Furniture Co. after Monday’s closing bell said third-quarter net income fell, as revenue declined, to $3 million, or 26 cents a share, from $5.8 million, or 44 cents a share, during the same period in the prior year. Analysts polled by Thomson First Call had expected per-share income of 28 cents. Stanley Furniture said quarterly revenue fell to $75.9 million from $85.6 million in the prior year. Analysts had expected revenue of $78 million. The company sees earnings per share of 13 cents to 16 cents for the fourth-quarter, and $1.15 to $1.18 for the full year. Analysts are looking for per-share income of 25 cents for the quarter and $1.28 for the year. Stanley sees sales for the fourth quarter of $69 million to $71.5 million, and for the full year of $305.9 million to $308.4 million. Analysts are looking for sales of $76 million for the quarter and $314 million for the year.

Comment by dwr
2006-10-16 14:13:14

I was at the mall yesterday and walked by the Restoration Hardware store. They were having an “outdoor sale” in which they had tons of merchandise out on the sidewalk outside of the store marked way down. I’ve never seen them do such a thing before. My wife asked why they were having such a sale, and the guy said “Oh we’re just clearing some stuff out of our warehouse to make room for more stuff.” Yeah, sure.

I’ve been blathering on and on to my wife about housing bubbles and recessions for about three years now. FINALLY she is starting to see concrete proof that I haven’t been off my rocker all this time.

Comment by Bill in Carolina
2006-10-16 18:06:44

Three years!

More evidence that, given enough time, any prediction will come true.

Comment by gadfly
2006-10-17 08:31:07

“I’ve been blathering on and on to my wife about housing bubbles and recessions for about three years now. FINALLY she is starting to see concrete proof that I haven’t been off my rocker all this time.”

Ditto here. My wife’s a believer now, but I don’t seem to be hearing as much these days from family and friends. Hmmmm…nobody likes a party pooper, I guess.

Comment by ric
2006-10-16 12:38:29

The Arizona Republic. “While the Valley is in the throes of a cold housing market, Casa Grande is flirting with a trio of megadevelopments that individually would have more residents than the city’s current population.”

Hmmmm….I thought we were running out of land.

Comment by Arizona Slim
2006-10-16 12:44:18

And the bad news is that without much of a local employment base, Casa Grande will continue to be a LONG commute to Phoenix or Tucson.

Comment by azSun
2006-10-16 14:25:12

Casa Grande is waaaaayyyyy out in the middle of no where. More like a wide spot in the road on the way to no where. Who is going to live there?

Comment by beebs
2006-10-16 18:09:03

“Casa Grande is waaaaayyyyy out in the middle of no where. More like a wide spot in the road on the way to no where. Who is going to live there?”

I spent a couple of weeks in Casa Grande. I can’t imagine that anyone could commute to Phx. Where the heck are they getting the water needed?

Comment by Apocalypso
2006-10-16 14:32:25

Don’t worry ric, we are not running out of land, I just found out they ARE making more LAND. I was walking my dog yesterday in a park in lower Manhattan and looking up at a residential building that was on this pier jutting out onto the Hudson, and thinking how new everything seemed.. from the building to the grass..Did a little research and discovered that Manhattan is not a bounded island but instead a growing organism with an ever expanding footprint (this was news to me).

“By 1976, Lower Manhattan had expanded an additional 23.5 acres with the creation of Battery Park City along the Hudson River. With 1.2 million cubic yards of earth and rock excavated for the World Trade Center as its foundation, Battery Park City is now home to a residential neighborhood…..”

Big sigh of releif here. I guess I don’t need to worry so much about the whole ‘land shortage’ thing that had me losing so much sleep.

Comment by sunshinestate
2006-10-16 12:41:02

History repeats itself. Back in the 1800’s it was the end of the gold rush that left the behind the western ghost towns. Now, the end of the new gold rush, housing, is leaving behind more western ghost towns. Maybe the developers can make them into themed tourist attractions, like the Calico Ghost Town.

Comment by fred hooper
2006-10-16 13:08:16

The new buzzword will be “asset stripping”.

Comment by txchick57
2006-10-16 13:27:16

It was “lien stripping” back in the last bust but that done gone away . . .

Comment by imploder
2006-10-16 13:33:08

To bad commodities will tank to….. all that copper wire! I guess they can still pull the garage doors off and sell em (if they are solid wood type) they make Houses in TJ with em… $50 bucks a door!

Comment by Hockeyman77
2006-10-16 12:42:17

Yellen is an idiot, the hosuing slowdown didnt create the ghost towns. They were already ghost towns, just nobody cared with prices rising and all the units owned by speculators. They were ever going to be occupied, just built to flip and flip. Only reason they are more ghost townish now is no speculators coming to buy. It amazes me just how stupid those people who are in charge of our financial system are.

Comment by Ben Jones
2006-10-16 12:59:53

Good point. And if Yellen had checked the photo gallery for this blog, she would have seen these subdivisions for herself months ago.

Comment by imploder
2006-10-16 13:39:11

Politics, politics… Seems they only see stuff when they “want” to see it. So why does she want to see it now?

Comment by hank
2006-10-16 13:42:48

Janet Yellen is one of the most doving Fed official. where was she when california home prices were rising more than 20% / year due to the extreme loose monetary policy.

Comment by Getstucco
2006-10-16 16:31:09

“Yellen is an idiot”

I submit that anyone who says this is an idiot.

Comment by Jas Jain
2006-10-16 12:51:33


The battle would be between the markets and the members of the FOMC (Foul Open Mouth Committee). Some members, like Poole, have already started to hint that “if” the housing gets really bad the Fed is ready to act. Act all they want, but this Mother of All Debt-Driven Bubbles is going to be beyond their control.

Fraudulentials, aka financials, are the tech Scams of late 1990s. I have been loading up on puts on these Fraudsters’ Scams. When the Crisis hits, the “shareholder’s equity” will be negative.

Jas Jain

Comment by SFer
2006-10-16 13:02:12

Ready to act? By doing what? Buying residential real estate on the open market to buoy prices? Pushing real rates into negative territory again? Any fix at this point would just create bigger problems down the line and I think the Fed knows it. Eventually the US housing market needs to take its bitter medicine.

Comment by BanteringBear
2006-10-16 13:18:23

“Any fix at this point would just create bigger problems down the line and I think the Fed knows it. Eventually the US housing market needs to take its bitter medicine.”

I agree. While it will be painful for both FB’s, financial institutions, etc., not everyone bought or sold during the bubble. I have many friends and family members who were not caught up in the hysteria. The majority of the pain will be reserved for greedheads and boneheads.

Comment by SimpleSimon
2006-10-16 20:04:46

Yes and no. There will be residual fallout as well. Many people’s jobs and/or businesses were created and built around the housing boom. Not just the obvious but anything consumer discretionary related.

(Comments wont nest below this level)
Comment by luvs_footie
2006-10-16 13:02:22

Maybe this debt bubble might just be the undoing of the worlds only remaining super power.

Sad if it happens.

Comment by imploder
2006-10-16 13:44:49

Me thinks thou art baiting people. :-)

Comment by luvs_footie
2006-10-16 13:54:38

:-)…………do ya think so?

(Comments wont nest below this level)
Comment by mike
2006-10-16 13:50:02

“The world’s only super power?” Why would China be affected by the US debt bubble? A more apt comment might be: “As US influence around the world continues to decline in line with it’s bankrupt economy, the influence of China, this century’s new economic and military super power, will continue to increase.” A super power isn’t bankrupt. The US is bankrupt thanks to George W. Bush. China isn’t bankrupt and, in a recession, they can survive because they are used to hard times. America isn’t.

Comment by imploder
2006-10-16 14:14:43

China: The Economic Superpower: when the us stops buying, China’s economy will come to a screeching halt. The Chinese leadership know that. That’s why they keep taking our funny money. Better 30 cents on the dollar than a revolution.

China: The Military Superpower: Mmmmmm, 3 Trident submarines could probably sink the entire Chinese navy. Then we’d just sit there and watch and wait for the “internal fireworks” to begin.
It is true, we would never invade China, who would?

Be realistic….

(Comments wont nest below this level)
Comment by mike
2006-10-16 15:53:03

I’m more realistic than you think. North Korea swarmed over the US and other allied forces in the Korean War with very limited aid from China. Take a long look at the current Korean military. Maybe they haven’t got electronic weaponry but they are dedicated and ready to die. Americans are not. Yes, we could knock the North Koreans off with bombs (maybe but it didn’t work in Iraq) but we couldn’t handle China. The Chinese military have already (and have done so for years) trained their troops to handle insurgents and any invading force. The US cannot even handle a bunch of insurgents in Iraq and the Chinese have a military which is far better trained than the US. Submarines? Forget them. We live in a new world. This isn’t 1941. The world, again thanks to George W. Bush, doesn’t trust the US and if war started, we could expect nuclear weapons to hit us at about the same time we hit them. The only country ever to use a nuclear weapon is the US and other countries know it and are fully prepared to hit back. People need to stop waving the stars and stripes and see what’s happened in the last 20 years. John Wayne is dead…….and George W. Bush knows the world has changed. Saddam Hussein had NO weapons of mass destruction and the US knew it. They invaded to control middle east oil and it backfired. However, they knew Saddam Hussain was a pushover but you might have noticed that Bush isn’t going after North Korea which actually has a nuclear bomb because Bush knows the US would get it’s ass kicked.

Comment by imploder
2006-10-16 17:02:50

To your surprise, I don’t disagree with much that you’ve written.
I’m not a John Wayne, Wave the flag type person. About the only thing that sounds a bit off is: ”

“The World doesn’t trust us…if war started, we could expect nuclear weapons to hit us at about the same time we hit them.”

There’s been a number of conflicts since the nuclear age, none where everyone starts lobbing nukes. How stupid do you think the leaders of the world are?

Aside from that the rest of your scenario and major points seem pretty accurate. If you note in my original post I specifically stated the US would never invade China. Basically you wish to add North Korea to that and I think your right. So…..

How does ANY of what you wrote support your statement that China is, “this century’s new economic and military super power”?

Comment by mike
2006-10-16 18:33:13

Simply because China has/had nothing. 1 billion people looking to improve their lives. They are hungry for improvement. We are complacent. Added to that, the asians ain’t stupid and they yearn to educate their children. India is the same. Let’s look at it another way. All China has to do is start switching to the plan FDR used to pull the USA out of a depression. Concentrate on building roads, bridges, dams, etc. Use money supply to coincide with a growing economy which would produce tv’s and fridges and cars and you-name-it for domestic consumption. It’s a MASSIVE untapped market and the US CANNOT compete. In the end, they don’t need the US. I suspect they are already planning to wean themselves off being dependent on the US consumer economy. Next door (almost) is India. Basically in the same situation and looking to improve it’s quality of life. Then there is the EU. A bigger United States Of Europe than the US. Sure, they will have teething problems but in the end the power of these new countries will relegate US power to a “has-been”. The US has to wake up and smell the coffee. It’s days of being top-dog are over. Also, bear in mind one vital thing. God didn’t make America great. Cheap oil made America great and it’s run out….

Of course, just like the British Empire, it takes a couple of decades for empires to decline but the decline, in my opinion, has already started. The manufacturing base of the US has gone. Those $60 per.hour manufacturing jobs are being replaced with $12 per.hour service jobs. An economy based on Starbucks and McDonalds and hospital workers, does not add up to a strong economy.

As for China’s military. They are far more disciplined than any western military and far smarter. China once had the most powerful military in the world……..and it looks like their time has come around again.

Comment by az_lender
2006-10-16 19:00:44

Besides not manufacturing anything, we have not got a lot of raw materials to export to China and India the way Australia does, and we’re farther away.

Comment by imploder
2006-10-16 22:17:33

“Et al above” perfect descriptions of a Capitalist market ripe for the wjores: I turn away…..

Comment by shakes
2006-10-17 07:56:53

Mike, Your analysis of the U.S. militarys capabilities is off base. Our capabilities far exceed what your shallow opinion holds. If you are looking for some place to blame on the current system, examine the policies that are in place not the capabilities of the US military. It is policies that prevented success in Vietman and it is policies that hamstring our current situation. Politicians pander to the US voter who are the weak underbelly of our country. I agree that America has lost what made it great. I have chosen to stay in the military, not because I need the money but because it is the last vestige of Americans who believe in working until the job is complete. I am currently serving in Iraq and am proud of what our serviemembers accomplish in spite of all the policies in place.

Comment by App farm girl
2006-10-17 09:53:05

Thanks shakes, My brother is one of the smartist individual I know and I work as a Nuclear Safety Engineer in a company with loads of PHD’s in Nuclear Engineering. He has made a career out of the miltary and will soon be back for his 5th deployment. Little history on China. It is the oldest known running empire in the world with an over 10,000 year reign. Emperor Qin the first emperor was 13 at the time he started to rule (think Terra Cotta Soldiers, Great Wall of China) gave the other provinces a choice unify or be destroyed. When they unified he destroy all but one form of money writing, you get the point. The country has never been keen to outsiders that’s how they have survived and I predict they will develop the same stragedy for the future ‘Emperor class - peasant’ except now the peasant can shop at Walmart

Comment by wawawa
2006-10-16 13:05:13

Agree. We have yet to see true dimmension of financial frauds have been commited in recent years. I am waiting for Fannie May fiasco to come to the surface.

Comment by mrktMaven FL
2006-10-16 13:11:46

Don’t think we won’t default on our national debt. It’s happened before. We were once a third world country. Creditors beware!

Comment by Jas Jain
2006-10-16 13:20:22

“Don’t think we won’t default on our national debt.”

I am fairly confident that this will NOT happen until after the US economy has been in the Greater Depression, and recognized as much by most, for 2-3 years.

The US has nothing to gain by defaulting for the foreseeable future.

Jas Jain

Comment by imploder
2006-10-16 14:04:12

So from all of your postings I’ve read I get:
The US is about to plunge in to a much Greater Depression of 5+ years, culminating in Default and then a Soviet Style collapse of the United States no later than 20 years from now. Yes?

(Comments wont nest below this level)
Comment by Jas Jain
2006-10-16 14:20:05

“The US is about to plunge in to a much Greater Depression of 5+ years,”

Into the Greater Depression to begin within this decade. The total time span of the depression would be in decades.

“culminating in Default”

I have never forecasted a default by the US govt. It is possible. Most of the default would be of the Private Debt.

“and then a Soviet Style collapse of the United States no later than 20 years from now.”

Not “Soviet Style.” Collapse of the econo-political system, as we have known it. Most likely outcome is election of the Gross Fuehrer, or the Grand Leader. We do things bigger than the rest!


I hope that I have clarified my positions for you. No?

Thanks for paying attention to my forecasts.

Jas Jain

Comment by Desert Dweller
2006-10-16 14:51:40

Note to self, this blog is getting a little creepy. Time to go visit the Y2K blog.

Comment by imploder
2006-10-16 14:52:49

Sorry if I offended you… I just noticed that a number posters held your opinion in esteem. I just was trying to find out what that opinion was. And from this I take it that a lot posters here are even more “doom and Gloom” than me.

If those are truly their beliefs, housing and where it’s heading really should be at the bottom of their concerns, wouldn’t you think? Housing didn’t “fare” particularly well over the last Depression did it? And with some sort of future Populast Uber Man coming up after that, Who knows? They may well be making “examples” out of the “landholders” in that kind of political atmosphere. Why even concern oneself with “owning a house” at all?

Comment by Jas Jain
2006-10-16 15:52:51

“Sorry if I offended you…”

I apologize if I gave that impression. I respect you and most posters here as people wanting to find out what lies ahead more seriously than the average Jane and Joe.

NOT a single one of my forecasts is ahistorical. Every forecast that I make is based on the best historical precedence that I could find and correlate to.

It is regretful that so many of my fellow countrymen are complacent and see the historically based forecasts as “it can’t happen here, or to us,” which is a recipe for inviting disaster.

Thanks again and please feel free to ask questions or for clarifications.

Jas Jain

Comment by Bill in Phoenix
2006-10-16 18:10:45

In 1979 and 1980 there were a lot of camouflage-wearing survivalists talking about war, famine, pestilence, and so on. Howard Ruff’s best seller “How to Prosper During the Coming Bad Years” was out that time. Robert Ringer had a book titled something like “How to Survive the Decline of Western Civilization.” Later, Douglas Casey had “Crisis Investing.” In the 1990s he came out with “Crisis Investing for the 1990s.” Okay I read them all. I took all them with a grain of salt except bought 400 oz of silver maple leafs in 1995. Actually that was a great move for me.

Before 1960 the highest income tax rate in the United States was a confiscatory 90%. JFK coaxed Congress to cut that rate to 70%. Then Ronald Reagan persuaded the Democrat Party-led Congress to cut the maximum rate to 35%. Deregulation was the trend. So it appeared the road to dictatorship was being reversed. Now it appears this road to serfdom is on again. We have the Patriot Act, which is designed to protect us from terrorists. But it could be used against us.

Then I did some recent research on Executive Order 11000, which allows the U.S. government to control where we work and whether we do not work. Pundits and alarmists say we are about to be real slave labor. The research? I found it was signed into law in 1962, which is 44 years ago, by John F. Kennedy. 44 years ago! The government did not use these draconian laws. But the conspiracy theorists won’t tell you what year these executive orders were signed. Okay they are there.

Reading Harry Browne’s book, “How I Found Freedom in an Unfree World,” you will realize that you can live the life you want no matter how harsh the government. There are too many people to watch. 300 million U.S. citizens. And internet with encryption. The amount of contro the government can have over us is limited by our imagination.

There, that’s the positive side of me.

The negative side: I agree the size and scope of government is getting larger. But I don’t think we will have dictatorship within the next 15 years. Americans won’t stand for it to happen all at once. It’s going to be g-r-a-d-u-a-l, and that will give you all enough time to move much of your assets to Belize.


Comment by ginster
2006-10-16 13:37:46

The government won’t technically default. But they are and will continue to make the debt smaller by expanding the money supply. This way everyone loses but the government!!

Comment by crisrose
2006-10-16 14:48:12

The government doesn’t expand the [debt] money supply - ‘consumers’ do by requesting commercial banks to create debt by signing on the loan document’s dotted line.

All the privately owned Federal Reserve (owned by member banks) does is regulate interest rates, create ‘money’ out of thin air to purchase assets for itself, and order and pay for Federal Reserve Notes from the government’s printing presses.

The government, although it takes orders from the bankers, essentially is out of the picture - it only does what it’s told.

(Comments wont nest below this level)
Comment by Grant
2006-10-16 15:37:12

Well, the federal government can (and does) increase debt by deficit spending. In fact there are some who say that the only thing keeping the party going in these past few years is the twin deficits - federal and trade. That’s why no matter who is in power there is very little chance of a balanced budget or even a reduction in the pace of spending.

Comment by Peter T
2006-10-16 13:41:41

When did that default happened? And why should the US default on their debt in US denominations now? It’s like Alan Greenspan said: There will be social security payments in 20 (?) years, but we don’t know how much they will be able to buy.

Comment by mrktMaven FL
2006-10-16 16:34:32


(Comments wont nest below this level)
Comment by imploder
2006-10-16 13:49:39

I think the Powers that be can think up something a little more creative than default… “defight” maybe?

Comment by SFer
2006-10-16 13:04:23

You mean China?

Comment by Ben Jones
2006-10-16 13:25:07

Jon Lansner at the Orange County Register picked this story up:

‘According to some of our contacts elsewhere in this Federal Reserve District, data like these are actually ‘behind the curve,’ and they’re willing to bet that things will get worse before they get better. For example, a major home builder has told me that the share of unsold homes has topped 80 percent in some of the new subdivisions around Phoenix and Las Vegas, which he labeled the new ‘ghost towns’ of the West. Though the situation isn’t that bad everywhere, a significant buildup of home inventory implies that permits and starts may continue to fall and the market may not recover for several years. While builders remain hesitant to cut prices so far, and instead offer sales incentives, price cuts at some point in the future seem almost inevitable.’

Comment by david cee
2006-10-16 16:23:28

The banks have to report, as of Jan 1, 2007, all their REO houses.
It happens once a year, and it affects their reserve requirments for borrowing. That’s why you are seeing such high CD rates from some of the most aggressive banks, like WAMU. I am not 100% sure of the exact rquirements, but if this is true, the foreclosure onslaught should being right after the New Year

Comment by bottomfeeder1
2006-10-16 17:55:18

wamu cd rates are very low around 4% i dont see the connection

Comment by truthbetold
2006-10-16 13:40:17

I had an ex who moved to Surprise becaue she got a teaching job out there. Seeing as I live and work in East Mesa, this was going to put a straight strain on the relationship. Surprise is a good 50 minutes + driving from Mesa. Well we broke up before she moved out there so it saved me some gas. Mr sensitive, i know.

Comment by Arizona Slim
2006-10-16 14:01:07

Mr. Sensitive? Sounds more like Mr. Practical!

Comment by Marc
2006-10-16 13:50:18


Comment by House Inspector Clouseau
2006-10-16 14:00:46

“Groundbreaking is expected in about 18 months once the housing market stabilizes, Yount said.”


yeah. I’ll be waiting with my shovel.

Comment by Arizona Slim
2006-10-16 14:02:15

Yup, Closeau, you’re going to need that shovel all right. You’ll need it to shovel all the manure out of the way.

Comment by Peggy
2006-10-16 14:01:23

“Ghost town” is an apt description for some of the new subdivisions in Vegas. Aliente immediately comes to mind. But from what I see it isn’t just builders who have vacant houses for sale in these areas. Lots of the vacant homes are attempted resales, judging by the FSBO signs and “better than new” ads. Driving through these neighborhoods (if you can even call them that), it’s hard to imagine anyone deciding to purchase there. How lonely that would be.

Comment by Arizona Slim
2006-10-16 14:07:19

OTOH, they could advertise these ghost subdivisions as being perfect for misanthropes. But what would happen if they filled ‘em up with antisocial types? Then everyone would have to move. Again.

Comment by Ben Jones
2006-10-16 14:11:23

Thanks for the first hand account Peggy. I have posted about how odd it felt in one ghost town subdivision in Cornville, AZ when I was there taking pictures for the gallery. There was no one around except me and the construction guys, finishing the streets out. It is creepy, like that movie Andromeda Strain.

Comment by ginster
2006-10-16 14:19:20

I live in Phoenix and I’ve never even heard of Cornville.

Comment by jeffinaz
2006-10-16 22:59:02

cornville I believe is about 1/2 way between Phoenix and Flagstaff off of I-17.

(Comments wont nest below this level)
Comment by truthbetold
2006-10-16 14:19:58

I have lived in the Valley my entire life, and have never hear4d of “cornville”. After seeing the pictures, they all look exactly like the cookie cutter homes that were built in Gold Canyon, NE Mesa, etc.

“Cornholled” is a good way to describe people who buy out there.

Comment by Catherine
2006-10-16 15:13:59

Cornville. The next Napa. Just ask any realtor around there.

(Comments wont nest below this level)
Comment by seattle price drop
2006-10-16 14:01:28

“We have yet to see the effects of 17 straight Fed funds increases…” the Fed president (Yellen) said.

Aaaargh…do these bozos really believe that this massive housing build-up and subsequent crash was/is caused by rate increases?

If they do, they are really TOO ignorant for the positions they hold.

How about all the speculation, extreme lack of affordability, nutty bank loans for people who absolutely cannot afford them, etc. etc. etc.

I know that one doesn’t have to be a genius to get these Fed jobs, but really, how stupid can you get?

Comment by seattle price drop
2006-10-16 14:07:10

And I’ll add to the above the OBVIOUS: How about the DECREASES in the funds rate that helped (along with a slew of other things) kick off the whole mess?

Looks like nothing but trouble ahead for the US if the idiots in charge really don’t understand the concept of cause and effect.

Comment by SFer
2006-10-16 14:26:21

I’ve heard Yellen speak, and she’s very good. Trust me - the people at the Fed are a lot smarter than you or I and have the academic and professional credentials to prove it. They know exactly what’s going on. However, they also know that every word they utter publicly is quoted, requoted, and overanalysed to draw inference about their next decisions on rates, OMO, whatever. They keep their comments intentionally vague to prevent funds from flowing into or out of certain asset classes and destabilizing the respective markets. After all, half the research confirming the bubble has come out of the Fed or FDIC. They’re also the ones pushing for tighter lending standards.

Comment by gepetoh
2006-10-16 15:11:17

Wait, just because they work at the Fed makes them smarter than you and I? Why? Isn’t Fed ultimately just another organization for people to work? There probably are a lot of people in here smarter than Yellen here, and some that are not.

In any case, I agree, they purposely stay vague with their comments, and that’s probably for the best. Vague is fine with me, but blatantly misleading - Liareah - is a different matter.

(Comments wont nest below this level)
Comment by Getstucco
2006-10-16 16:29:46

I have a suggestion. Why don’t you send the San Fracisco Fed bank a resume, in case they are looking around for someone as a backup to Yellen in case, say, she decides to go back to her previous post as Dean of the Business School at Berkeley? I will be curious to hear what kind of response your inquiry brings.

Comment by KirkH
2006-10-16 21:47:12

I generally agree with you but your ex girlfriend is clouding your vision! Seriously though, Karl Marx was a genius. He was wrong, but he was a genius. Seeing as how central banking is essentially financial central planning it stands to reason that Yellen could be just as smart as Marx.

Either that or you are….

Comment by david cee
2006-10-16 16:27:22

“the people at the Fed are a lot smarter than you” Except it’s a political appointment, and if you don’t play ball with the right politicians, you ain’t gettin in. You think they have another agenda than just being smart? I guarantee it!

(Comments wont nest below this level)
Comment by RE_ONLY_GOES_UP
2006-10-16 14:10:37

My cousing lives in Queen Creek. I went there about 3 weeks ago. They are building like crazy, it is a sea of homes. I wonder who is buying? In the sub they reside there is a 4sale sign on every 5th house. I can’t understand why somebody would pay $210-240k for 1,400-1600 square feet (current resale listings). They actually bought their 2,800-3,000 square foot home for $225k 18 months ago. Sounds good on paper, but it is way out there and they have to drive 20 minutes to get to a decent school.

Comment by Timothy Bryan
2006-10-16 20:28:05

DR Horton has lowered the prices on almost all their developements in Queen Creek; you can get around 2100 sq feet for around 185 K.

Comment by ACCROYER
2006-10-16 14:12:43


Just had an interesting conversation with an real estate agent about the market heading south. He is absolutely convinced that a major correctionis coming, but believes the remodeling business is going to boom. This reasoning is based on it’s cheaper to remodel then to buy. Does anyone have any insight on this?

Comment by txchick57
2006-10-16 14:20:53

And how, pray tell, does he figure they’ll pay for it?

Comment by ACCROYER
2006-10-16 14:35:21

With all that money they have in their savings.

Comment by robert campbell
2006-10-16 14:43:13

History shoes that the remodeling business tends to track closely with new homebuilding.

Comment by robert campbell
2006-10-16 14:44:04

shoes = shows

Comment by Scorpion
2006-10-18 23:36:02

Sure they will be remodeling a lot of these homes after the renters they have in these homes move out. The quality of renter in Phoenix is low because the good renters have all bought homes. I think you will see the smart people with lots of money at some point buying up these houses and using them as rentals. This won’t happen though until the price is right.

Comment by Catherine
2006-10-16 15:22:32

This asshat seems to be looking for the next big thing. What’s he going to do, represent remodelling guys?

Comment by LV Renter
2006-10-16 14:15:43

What a relief! I thought I was the only one noticing the “sold out” high rise luxury condos here in LV never seemed to have many windows lit up after dark. Those albatrosses never made much sense to me - there is nothing on the streets around them that I would call “residential infrastructure”. No places to buy food or clothing, no banks, no schools, just trendy dance clubs and the odd gas station. Little did I know that despite the resemblance, these aren’t meant to be lived in at all as a ‘home’, they’re just a medium of exchange with connected plumbing. An odd form of illiquid equity or bond. Still doesn’t strike me as the smartest investment but what do I know?

Comment by txchick57
2006-10-16 14:23:38

You’ve just described all the 500K and up “downtown” condos in Dallas, Texas which will also end up empty. And there isn’t even a casino around.

Comment by LV Renter
2006-10-16 14:27:17

Grew up in Dallas and lived there for the first 33 years of my life. Why would anyone want to live downtown?

Comment by Barnaby33
2006-10-16 15:22:05

I haven’t spent much time in Texas, but is there no market for Condo living? Maybe not at 500, but how about 100-150k?

Comment by Getstucco
2006-10-16 15:01:33

“Yellen said that she heard the ominous description from a ‘major home builder,’ who told her that the share of unsold homes in some subdivisions around the two Western cities has topped 80%.”

What makes a Fed bank president want to call attention to the carnage in speculation-driven real estate markets? Is this a prelude to some kind of a housing market bailout, or the genuine gasp of surprise which an academic economist sometimes emits when they notice a big gap between what theory suggests should be happening and what reality on the ground shows actually is happening?

Comment by Mark
2006-10-16 15:29:13

She’s going to recommend lowering interest rates. Buying opportunity for IEF.

Comment by SimpleSimon
2006-10-16 20:32:28

“genuine gasp of surprise which an academic economist sometimes emits when they notice a big gap between what theory suggests should be happening and what reality on the ground shows actually is happening? ”

I think that happens all to often, which is why I fear Ben Bernanke. Nothing against him personally, and I’m sure he’s very bright, but i would rather see someone with more practical business experience at the helm. You see this type of stuff all the time on the floor of the financial exchanges. Trader’s with just a GED able to react to what’s happening, while some of the more intellectual and highly educated get stuck on theory as to why X should go up or down, and underperform.

Comment by DAVID
2006-10-16 15:23:23

Does Realtor.com reset or something? Bakersfield CA inventory dropped 60%, what the hell. My focus is on the Central Calley.

Name (required)
E-mail (required - never shown publicly)
Your Comment (smaller size | larger size)
You may use <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong> in your comment.

Trackback responses to this post

  • The Housing Bubble Blog