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Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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everyone’s estimates for prices nationaly in 06 and 07
I’m thinking 06 off 8%
07 - 10%
This would be a fun topic. But everyone should post their “rationale” also.
Here in the South bay portion of Los Angles, home prices are dropping about 2 to 3% per month. So for 2006, the price drop is only going to be 4%. For 2007 I expect a strong steady decline. Since the first time buyer is priced out… 25% to 30%, partially foreclosure driven here in LA.
Nationally? Down, but I cannot give a rationale for a number.
Neil
While ther is a national bubble, the price movements will vary significantly from area to area and locale to locale.
I’d expect Souther Cal suburbia and much of Florida to get nailed at -15% or more.
I’d look at old (1900-1940s) Austin TX in town to be flat to +5% (topping out in 2007). I’d see old Atlanta (where I live) at flat to -3%. Atlanta suburbs at -2% to -8%.
So. Conn. / Westchester Co…-5% to -10%… Old Greenwich and Rye fare better..lesser schools and areas fare worse.
I should also add Atlanta from 4pm to 10pm on the clock around downtown will get hit worse (poorer areas, more foreclosures) than from 10 to 4 on the dial. Suburbs will vary greatly….-2 to -8 is average…some will do quite a bit worse.
I thought ATL was a 11 to1 situation- if you want your kid to survive high school
I don’t understand the point… Depends on school district.
Many are not good. A few are…and there are private schools.
fl is off 15% already since nov 05
-15+% additional! From Jan 2007 base to Dec 2007.
Geez, I hate to toot my own horn here but who told you all a year ago that Dallas would be worse than other bubble markets and would crash earlier.
Foreclosure postings jump to 1980s level
Nearly 4,000 homes up for possible sale; gas prices, debt blamed
11:41 PM CDT on Thursday, October 19, 2006
By BRENDAN M. CASE / The Dallas Morning News
Home foreclosure postings in the Dallas-Fort Worth area have surged to their highest level since the 1980s.
Nearly 4,000 homes in Dallas, Tarrant, Collin and Denton counties have been posted for possible sale in November, up 49 percent from the same period a year ago.
“It’s high, much higher than normal,” said George Roddy, president of Addison-based Foreclosure Listing Service, which compiled the data.
Oh, and the highest rate of change is in Collin County, where you want to live, Brandon. Up 67%.
If you want to buy there, you can lowball all day long.
corpus christi- trying to talk a relative from buying
new construction for 120k - has to be total crap
You want to hook the person up with me directly, feel free. I’ll give them an earful.
TxChick,
I’m looking at a CC condo for the future….personal use; not flipping investment. What’s your thoughts/info on Padre Island?
thanks
Wouldn’t it just make sense that the martkets that went up the most will go down the most?
It’s the law of gravity!
No.
The ones that “go up” the most are the ones that will also hold more of the appreciation. Places like LA, SF, NYC, etc. It’s like stocks. The bear market didn’t really “end” until they were throwing out Cisco at 8, Intel at 10, etc., but years prior to that the junk like KTEL or MSTR imploded.
I guess so. There were some bubbly areas that are truly nice places to live: San Francisco, Manhattan, San Diego. You would expect these places to always be worth more than, say, Gilbert Arizona, Las Vegas suburbs, or a Boise ex-urb…
“There were some bubbly areas that are truly nice places to live: San Francisco, Manhattan, San Diego.”
Right, and hence these areas were likely among the most overrun by speculative fervor which drove prices up to a non-permanently-high pinnacle (kinda brings to mind the DJIA-12000 stock chart on p. C1 of today’s WSJ!).
Speaking for San Diego, speculation, overbuilding of tract homes and luxury condos, toxic lending to unqualified buyers and appraisal fraud have worked together to push prices to a level where fundamental demand cannot touch them.
Stucco, when we write the final epitaph and tally it all up for this bubble and bust, I’ll bet you $1 that Dallas, Atlanta, Houston, et al will decline far more in actual dollars and percentagewise from top to bottom than any coastal California city or NYC. We’ll just have to hang out a few years and find out.
I keep reading about the market correction coming…900+ days without at least a 10% correction.
Auto purchase index is - 4.4% , anytime it falls below -2% we are ,or will be going into recession so
think it coming soon. I believe it will much worse, but where to put my small nut of fun money betting on this correction?….aside form my little pile of PMbetting on the dollar decline.
“I’ll bet you $1 that Dallas, Atlanta, Houston, et al will decline far more in actual dollars and percentagewise from top to bottom than any coastal California city or NYC.”
I won’t take the bet, because I agree with you. My prediction:
1) Larger absolute $ loss in the coastal bubble zones.
2) Larger relative % loss in flyover country, where reinvestmen of liberated coastal equity drove prices bubbleliciously high.
“I keep reading about the market correction coming…900+ days without at least a 10% correction.”
This is prima facie evidence of the effect of PPT market support in creating systemic risk. There are not nearly as many small earthquakes these days as there used to be, but when a quake hits, it is a magnitude 8.0+ on the Richter scale and lasts for a long time (like the tech stock bust). I believe this is why Geithner is so worried…
Howdy txchick, I’m also in Dallas. I disagree with both of your assertions: I don’t see Dallas being worse or crashing earlier. Foreclosures will (continue to) rise here as everywhere, but we never saw the run-up in valuations bubbly parts of the country have — so we won’t see the corresponding “pop” those areas are currently starting to experience. Yes, sales are down and inventory is up and prices have been reduced a bit; but we don’t have a California or Florida situation. And while Texas is one of the worst states for foreclosure rates, I think that’s due more to the overall economic climate in Texas than bubble factors. And the bit about postings jumping to a 1980s level is misleading — that is in absolute numbers, not percentages.
I think this time next year Dallas will look better than the bubble-markets. Of course, that’s a relative term; I define it as “not as awful”.
Oh, there’s been no run up in prices? And how long have you been in Dallas.
Let’s see. My old house in the M Streets near downtown. Offered to me at $105K in 1995, now sells for $300K.
Highland Park houses given away in 1989 for under $1M during the banking bust. Now you can’t find an outhouse there for under $2-3M and most are a lot more.
My ex-boss’ wife bought 3-4 houses in Russwood Acres (Inwood/Royal area) in 1989 - 1990 for under 200K I believe. Now those puppies go for 400K and up.
Now, go north of LBJ and there’s been no appreciation. Go south of the Trinity and very little.
But even the house I had in Cedar Hill has gone from 105 (priced offered to me in 2001) to 150K on Zillow today. That ain’t chicken feed, cowboy.
You have to think much more critically to make money in Dallas.
And of course, there’s been no mention of the role of home equity lending in these foreclosure numbers. As you know, home equity lending in TX began in late 1998/early 1999. It has to be a big factor in this.
I’ve been in Dallas since 1990, but that’s kind of irrelevant. Your anecdotes aside, Dallas Housing Sales (in case the direct link doesn’t work, that’s http://recenter.tamu.edu/data/hs/hs200a.htm) shows the average sale price in ‘95 at 124K and last year at 202K, which comes to about 5% per year appreciation. The boom between 1980 and 1985 was running at 11% per year (and the subsequent 5 years saw a total drop of about 10%, unadjusted for inflation).
There will always be pockets of greater or lesser appreciation, and of course individual houses are going to vary a lot. Your M Street house gained about 11% per year, your ex-boss’s wife’s houses gained about 5% per year.
Has there been an increase in prices? Absolutely. Has it been a bubble? Not unless you call 5% per year a bubble.
I stand by my claim. Dallas will take a hit like the rest of the country but there has been no bubble here and we’ll be in better shape than the bubble-markets this time next year.
I would agree that strong areas in Dallas, Atlanta, Houston will fare far better than SD, NJ, LV, Phoenix, FLA. However, areas of these metroplexes with monstrous commutes will get hit hard and never recover. I don’t believe one can gereralize and say “Dallas” will get hard equally across its metro area. No bust has worked that way before…prime areas hold value better and recover faster.
Condos will get hit hard in these cities, but some will recover over time.
Wrong.
And I’ve been in Dallas on and off since 1974.
Historically Austin and Atlanta is as I describe. Perhaps Dallas is “different”.
I hit send to soon.
Austin - homes close in that are in prime areas held up much better and recovered much faster and to greater heights than those further out in 1980s “boom” neighborhoods.
Example -
Home #1 - Round Rock 3-2 1400 sf Built 1980 - 15+ miles out from downtown, near Dell now (not in the 1980s).
1985 - $78K
1990 - $42K
1995 - $60sK
2005 - $110K
Home #2 - Permberton Heights 3-2 2700 sf Built 1933 - 2+ miles out from downtown. Old West Austin.
1985 - $350K
1990 - $250K
1995 - $330K
2005 - $700K
txchick,
You seem to believe that your predictions is the most probable scenario, especially for Dallas. How many houses did you buy in Dallas before the run-up in prices? Your length in residence is irrelevant.
Wow! A 200k house in 1980 going for 400+ today - BFD, at 5% annual (which I don’t believe even keeps up with inflation), you’d expect it to be around 450k - not really seeing much bubble there
sorry, 1980 = 1990
What’s the general state of the US economy? On one hand, the stock market is breaking new records and business is cash fat. On the other hand, we’re almost 9t in debt, and growing. I just finished reading an AP story out of SD. Troops are being held back from deployment overseas because they are so far in debt they pose a security risk. According to the article, over 6,300 have lost clearances between 2002-05. Are there mountains of debt hiding behind this so-called strong economy?
Day to day, looking at people driving to work doing business, nothing looks awry. But you wonder, based on all these news stories. I’ve been preparing for bad times since 2001. I have downtime coming up January through March, but I’m told by the client they want me to be available in the first of april for another 18 months work. Once I have that, my rainy day fund is in the bag and I can live in the hills in the far north for a few years if need be. Or buy a villa in central America for cash and have relative safety there. Just in case the U.S. gets riots and looters if times get “ruff”
Bill please tell me you weren’t one of those people trying to return 3 generators on January 2, 2000.
lol
had the same thought.
I didn’t read the story. The humor’s lost by me, but I know it’s all in fun
Eastern Sierra looks good to me, there’s plenty of wind and sun for power, and you could always “tap” into the aqueducts. I know your old stopin’ ground well.
You are right! And places are not that expensive out there. I did a lot of hiking and biking in the region over a span of 11 years. Interestingly, many people overlook the area. There are some pockets even in the desert “hills” that are not considered part of the Sierra and they could be fine too. I explored some peaks in the desert in the 5,000 to 6,500 foot range.
Responding to Bill on the Eastern Sierra:
That has alway been my favorite region to hike and explore as well! Have done many of the Lateral trails off the 395 hwy into the eastern Sierra back country, on day hikes as well as backpacks.
If one had money salted away and enjoys lonely, isolated unpopulated regions with vast expanses of Sagebrush, desert peaks and volcanic-lava terrain then the eastside is the place.
I always favored Lone Pine as my favorite little ESide village. See a few isolated Ranch homesteads out in Cartage and olancha, but those places seem rather dismal , with boarded-up closed shops/gas stations/eateries lining the 395 in bad times.
Bishop has a ragged population of paiutes living in ramshackle trailers on ragged lots, but also a popluation of Cal Coastal expatriates who have purchased decent homes and properties( and bid up the prices momentarily). Next several years I expect properties in EAstide to plummet, and there will be steals galore. Back in last townturn in early 90’s you could rent out a decent trailer/moblehome in LP for $250-300 a month during the peak summer season.
Remember the Mammoth Burger at A & W?
I’ve eaten at the Bishop grill and whiskeys in Bishop and the Mt Whitney Restaurant in Lone Pine.
Hope those places can hang in there during the upcoming economic/RE depression. These type of places are family-owned local establishments, not the big-chain fast-food outlets(Carls jr and McDonalds just opened up in LP recently, which will put pressure on the local family diners)
crash1,
It’s quite easy to see the charade clearly if one is willing to step back and look at the data. The “economy” surely is as good as this govt and its media minion creeps tell you…. but only if you were obscenely weathy and don’t have to work 40hours/week to begin with. Otherwise, generally speaking, the Main Street economy has never been so bad.
When economic “news” doesn’t jive with your day to day personal and business experiences, you know you’re being lied to.
Yet I keep hearing on news like CNN last night of what a crisis we’re in. The “media minion creeps” you mention don’t seem to be thumping the drum - some are crying crisis. And on the other hand, not a single person I know who wants a job, friend or relative, is unemployed. And I’m not talking about only Northern VIrginia which is booming; I’m talking about friends and family in places like North Carolina, Illinois, Texas, the central part of the country where it’s allegedly “bad times”, or bad times as I was told yesterday evening by some talking head buffoon on CNN.
Didn’t any of these TV people live through the 1970’s funk and that early-80’s recession? If this is a crap economy today, give me more of it, please.
It does not matter if jobs are plentiful. People should save a cache of T-bills and precious metals to where they have a couple years of living expenses. After that they should invest in a good international stock mutual fund, dollar cost averaging.
…and a couple of weeks worth of food and water!
(I actually only keep 1 weeks worth of water for the two of us and our too cats. I keep meaning to up that a bit. It’s not really that hard. I just make sure we always have a certain number of bottles of drinking water in our garage, and rotate through them so they stay fresh. Food is easy..cans of beans etc. We try to cycle through them, but if we don’t make it, once a year we donate the oldest stuff to the food bank (still not past its expire date) and replenish.
I’m not some crazy survivalist not, nor do I believe in the Chr-stian end-of-world scenario. It’s just common sense when living in earthquake country (and within reach of a North Korean nuke…someday.)
“…and a couple of weeks worth of food and water!”
Us in California call that an “Earthquake preparedness kit”…
I’m not gonna go deep into tearing apart those who apologize for the mess we’re in. In fact I recall how ugly the 70’s were. The criminal Nixon thugs come to mind. The night after miserable night of news reporting of the mismanagement of a failed assault on a country in Asia, the exploding fuel prices and the runaway inflation. Even the blind see the striking parallels.
Irrespective of that, Pizza Hut and Walmart is hardly considered employment. Are YOU ready to don your smock and say “welcome to walmart?” Smart money says no.
Plentiful jobs do not matter if the pay does not match living expenses. And not just flipping dough at Pizza Hut. What good is even a college-degree job, say, $60K, if a 3/2 house is $350K at least? Or if health care is $400/month or if your student loans (or kid’s college tuition) is $28K? Trimming out a few restaurant dinners — the financial planners’ favorite budget advice — is not going to make a dent. Forget about piling up the gold bars.
Spot on Oxide. Yet the constant drumbeat of “we have a roaring economy” is now tuned out entirely by the majority who know and understand it’s a lie based on their own experience and that of others.
If anything, a high Dow and cash-rich companies are a sign of a bad economy, I think. The Dow went up because everybody put their money into safe blue chips (large cap and consumer staples), which is what the Dow is made of. If the economy were really healthy, the Russell and S&P would be up too, and they’re flat, not to mention the Nasdaq. Companies hoarding cash sounds like saving for a rainy day, or prepping for a pump-and-dump on a stock buyback. Sounds like everybody is hunkering down.
Disclaimer: I’m not an economist…I just watch Nightly Business Report…and read thehousingbubbleblog…
I haven’t heard the term “soft landing” in a while now.
See Ben’s latest thread:
October 20, 2006
“It’s A Soft Landing, And It’s Here”
Revised perspective of what people think are safe and/or strong places for downpayment cash to wait in view of the accelerating crash. Review of markets, currencies, companies, banks, and vehicles we feel are well or poorly positioned to survive the potentially worst possible US housing crash and why.
We, as the people of our country (and world for that matter) need to have a discussion on money. We need to understand exactly what money is, and what makes money have an objective exchange value. We need to understand how our dollar (what we mostly use as money in the US) being tied to the selling of oil on the international markets makes our dollar the money used by the world. We need to understand how there are various forms of money in the field of economics.
There are money (commodity money, fiat money, credit money) and money substitutes (token money, uncovered bank deposits and notes, and money certificates). We need to understand that the value of money isn’t just based on its objective exchange value, but on the supply and demand for money. We need to understand how being used as the medium of exchange for oil keeps the demand for our money, and money substitutes, high. We need to understand how a drop in demand for our dollar may effect the objective exchange value of our dollar(inflation).
When we understand these basics, we’ll be on our way towards figuring out why things work the way they do.
How about a fall 2007 reality TV show, the reality-based successor to “Flip this House?”
I propose “Foreclose this House,” a cross between American Idol and Survivor. A set of homeonwers facing forclosure stand, one at a time, before a panel of Simon-like financial inquisitors. Their goal (one many Americans will soon be facing on juries) will be to determine which are unsophiticated borrowers taken advantage of by inflated housing prices and dishonest mortgage lenders, etc, and which are high-spending fast-buck operators who deserve to pay for their ways.
The panel will go over their decisions, and how hard they are sacrificing to pay off their loans. Perhaps some members could be recruited off this board. In a Suvivor-like round, they FBs would get to question each other. As on American Idol, they’ll be some Casey Serin-like operators with no chance of winning, put there for humor.
One by one, the public will vote the homeowners out. The winner will get to refinance their primary residence into a 15-year fixed mortgage that costs just 30% of their income, with the show picking up the rest.
Love it.
CAT- housing slump won’t spill over ”
right, even the porky hywy bill can’t save this pig
I have a suggestion for weekend discussion - the concept of home improvements as “investments.” In times past, if you upgraded kitchen cabinets or added a backyard deck, they were considered amenities – something for the family and your houseguests to enjoy. Now, people upgrade their kitchens, add tile to the bathroom and add wallpaper as investments to the house. I saw one real estate flier that bragged the house has been painted with the Martha Steward Line of paint (no idea why that should add 3K to the house value but the appraiser seemed to think so).
I wonder what will happen as the real estate market plays out in terms of small contractors, day laborers, and even retail stores like Home Depot.
It could be good for renovations if the market freezes. Rather than trade up, people might choose to fix up instead. Not as an investment, but to live in.
In a small way, yes. But then again, you have the frenzy of fix-up/modification that typically goes on when someone buys a house. I can’t remember where I saw it, but someone commented on that and how it will affect companies like Home Depot:
When someone buys a house, he spends the next 18 months buying tools, supplies, fixing it up, changing the landscaping, etc. Once that 18 months is over, it’s “good enough”, and he settles into his easy chair to watch football.
You can extend this to furniture and appliances as well. What’s one of the biggest motivators for furniture sales? “Honey, this old bedroom set just doesn’t fit right in our new place…”
Those kind of folk might be more than enough to offset the occasional family who renovate/expand because they need to.
(When someone buys a house, he spends the next 18 months buying tools, supplies, fixing it up, changing the landscaping, etc. Once that 18 months is over, it’s “good enough”, and he settles into his easy chair to watch football.)
Can’t argue there, since that’s what we did. And after that experience, I’ve had my fill of home improvement for a couple of years.
Meant to say has my fill for a couple of decades
The problem may be that there is no money to do the fix ups. Even if people choose to stay put they will no longer have the appreciation to tap for funding much more than small projects.
And, as NoVa Sideliner pointed out, much of the money in this area is spent right after purchase. I would also add, just before listing to that.
So, IMHO, there may be some money spent by those who choose to (or must) stay put, but the wealth effect of the last 5+ years is or has vanished and that is going to reduce the upgrade spending significantly.
I understood that in a declining housing market, homeowners choose instead to increase their pathetic savings balances due to the vanishing “wealth effect” (perhaps called the “poverty effect”?). Why would you want to renovate your property if you can’t sell it for more? You’re more concerned about being laid off or paying down your astronomical debt to keep the creditors from hounding you…
I was in Lowes last Saturday. The Oracle Road store in Tucson, Arizona. The place was like a ghost town. Only one cashier line was open, and that was enought to handle things.
This is something I think I’ve noticed lately with both Lowe’s and Home Depot, not just this month but during the summer. Crowds seem to be far less than previous years, and I’ve been in and out of there on a Saturday (!) in minutes (!!) in recent weeks.
This might only be a local situation, though, since it doesn’t seem to have shown up in their financials (yet, as far as I’ve seen).
I’d like to see a discussion of overseas real estate. There are still some places that are inexpensive (methinks). http://www.escapeartist.com is a good resource. I like Central America. Caribbean is nice but could be too expensive. A buddy of mine (American) is having his escape haven built right now in Jamaica overlooking the water. I like Costa Rica, but the prices have gone up tremendously. The great thing about going international is that you are looking at bigger markets. When you expand your choices of where to buy, you have a chance of finding better values, rather than being only in the U.S.
Bill- great topic
Costa Rica, Nicaragua, Guatamala, Chile,? I know several of us entertain the phantasy of an escape hatch out of the US just in case the Greater Depression is not so much fun… Price per square foot, stability of Govt, predicted impact of US crash on local RE market, rent vs. buy pros and cons, currency issues, amount of nice RE near ocean, quality of waves for surfing, and any incubation period for pets are some relevant issues.
I’d love to live in India. Kerala or Pondicherry to be more specific, but there’s a fierce RE bubble there too. Also in other places I like such as Sydney or New Zealand.
New Zealand or Montenegro for me.
Great topic…anybody have insight on Vancouver Island?…I love it there…or in BC?
Great place, I spent all summer cruising there on our boat. Prices are very high, same for the YVR area. Everyone in YVR thinks the olympics will save their bubble, I doubt it. Right now my pals on the Island say the prices are easing a little but not much.
I follow Costa Rica somewhat closely since I started going there to surf 2 years ago. The new hot spot is Nicaraugua, lots more flights being opened up to there, articles on people buying their dream places, etc. Still rough from what I gather, but some people like adventure. Costa has had a lot of “investors” from the US who are dumber than dirt buy places in the middle of nowhere. They are already starting to sell. It will take some time
to clear out the excesses, just like in the US. Most people can’t handle living in a place like Costa because they need their starbucks and other yuppie BS. The roads are rough, amenties limited, but if you love good surf, good food, and want to get away from so called civilization, it’s hard to beat.
I also hear Vietnam is quite a deal right now. Cheap, and good waves.
Plus info on laws and law enforcement. Don’t want to spend umpteen years in a 16th century prison just because you accidentally turned down the wrong street.
In past slow-downs, information was scarce and slow to reach sellers. Today, however, with sources like thehousingbubble.com, I think the ‘OMG it’s crashing’ information transfer process to sellers will be much shorter. Consequently, ‘panicked selling’ and the bottom of the trough will be reached sooner than we all think, 2-3 yrs not 4-5. Do you agree?
How about a discussion about how the bursting bubble will play out in the Atlanta market? Will we look back in a few years and see that the housing bubble gave Atlanta a major edge in attracting new industry and people? Let me explain. Many of the Florida articles tell of people moving to Atlanta, a market with a large unsold housing inventory (I think Housing tracker.net says it is the second biggest after Chicago). From what I have heard, Atlanta peaked in somewhere in 2002/2003 and prices have been declining because of the huge inventory. I find it interesting that the huge inventory there seems to have made it impossible for flippers to corner the market. Even with the housing bubble on the verge of bursting, people on the eastcoast will keep moving there on the next few years because of the continuing price advantage.
That’s the same BS they try to feed to keep the Dallas RE machine working. I think Atlanta and Dallas are quite similar with Atlanta having a slight advantage due to the close proximity to “nice” places like NC, Fla, etc.
Ben,
I am sick of these unethical realtors, lenders,title companies, and appraisers perpetuating nothing less than fraud on unsuspecting buyers.
Here is an informative article on Yahoo no less, that only scratches the surface of the scummy underbelly.
Please run a topic on this. I think it is a worthwhile subject to discuss.
http://biz.yahoo.com/weekend/costscam_1.html
Closing Cost Scams
Money on CNNMoney.com
By Stephen Gandel
You always thought those mysterious fees at closing were a total scam. Congrats! You were right. Here’s what you can do to avoid paying through the nose.
——————————————————–
No kidding! Everyone, read this article!!! It’s about closing cost scams. I remember going to the closing when selling my house. They never sent me the materials ahead of time…in the office, conveniently 1 hour before the office closed, we are sitting down and going thru scads of paper work. The realtor had “other business” and could only stay 1/2 hour. The office worker showed incredible disdain and rudeness for/to me. When I questioned all of the incredible fees that showed up with inexplicable names, I was told these fees were set by the state insurance office. What a bunch of b.s. I found two obvious errors that would have cost me several thousand dollars. I’m sure they figure that if you are doing a multi-hundred thousand (or million) dollar transaction what’s the big deal a few hundred or thousand extra dollars. They make you feel like a miser when you question where YOUR money is going. But let me tell you, a few extra thousand dollars at every transaction adds up to a nice chunk of change for them. I knew something was fishy and this article absolutely confirms it. It does point again (as if we needed another reason) that this whole real estate/mortgage loan business is full of scams, crooks, sharks, and worse.
Yes, yes, yes, let’s have a discussion on this topic!
This is why I’d want to get an RE license before purchasing a house. Back in the 90’s, a realtor was offering the classes (just three nights) for $125.00. If you have a bachelor’s degree, you should have no problem. At any rate, it just seems foolish to me to buy something in the 100s of Ks with out a bit of effort. Just having the license allows you to cut the commission by half. Not to mention being “inside” when it comes to those fees.
What about a thread on REIC behavior which constitutes “shooting one’s self in the foot,” virtually assuring a hard landing in the process?
This would include:
1) Builders who are building as quickly as possible, piling on new supply in the face of steadily eroding demand and growing for-sale inventory;
2) Lenders who are still relaxing lending standards even though the federal regulators are talking about cracking down on loose lending and foreclosure rates are creeping up in bubble markets (see p. D1 of yesterday’s Wall Street Journal “More Home Loans Go Sour”);
3) Owners who are still using the cashout ATM, even though home prices have flattened or started to fall;
4) Industry spokespeople who paint overly optimistic pictures of the future (e.g., Leslie Appleton-Young coming out with forecasts of only 2% decline in CA prices for 2007; DL saying prices will dip a bit into 2007 then pick up again, etc.).
5) Other examples?
How about the fact that banks are still lending money to Craig Hall?
Or Donald Trump?
Link to WSJ article referenced above:
Lenders Loosen Standards
Even as More Loans Go Sour
By Ruth Simon
From The Wall Street Journal Online
Mortgage lenders are making it easier to get loans even as the housing market cools — and as the number of borrowers struggling to make their payments continues to rise, new studies show.
In the latest sign that a cooling housing market and weaker credit standards are beginning to take their toll on borrowers and lenders, the number of past-due mortgages continued to rise in the three months ended Sept. 30, according to data from Equifax Inc. and Moody’s Economy.com Inc.
The increase is particularly notable because bad loans normally climb when the economy weakens and job losses rise, leaving more borrowers unable to make their monthly payments. By contrast, the latest increase appears to be more closely tied to looser lending standards, borrowers tapping their equity and slowing home-price growth.
“We’re seeing rises in delinquencies and loan losses that are unrelated to what’s going on in the job market,” says Mark Zandi, chief economist of Moody’s Economy.com. “It’s very unusual.”
Some 2.33% of mortgages were delinquent at the end of the third quarter, the highest level since 2003, according to Equifax and Moody’s Economy.com. Among the areas that saw the biggest jump in the delinquency rate since the end of last year were Stockton and Merced, Calif., and Las Vegas-Paradise, Nev. Delinquency rates were highest in McAllen-Edinburg-Mission, Texas; Brownsville-Harlingen, Texas; and Detroit-Livonia-Dearborn, Mich.
http://www.realestatejournal.com/buysell/mortgages/20061020-simon.html?rejpartner=mktw
Will auctions accelerate the crash? I think the answer is a resounding “YES.” I anxiously await news of the auction results at Bressi. My uninformed prediction is that they will not sell much, because they set the reservation price above market value. I also heard through the grape vine a few months ago that Carlsbad prices were already down by 10%, and I am hoping these LA-attorney-investulators take it in the teeth.
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In declining market, sellers putting homes on the block
Auction a way to grab notice in crowded field
By Mike Freeman
STAFF WRITER
San Diego Union Tribune
October 20, 2006
As San Diego’s housing market continues to slow, home sellers have started turning to a new tool in hopes of drumming up buyers – the auctioneer.
Tomorrow at Bressi Ranch in Carlsbad, 16 furnished, landscaped model homes will be up for sale via auction in what is believed to be the largest event of its kind in the county in years.
Great American Group of Los Angeles is conducting the auction on behalf of an investor group that bought the model homes in February 2005. The bidding begins at noon at La Costa Resort & Spa. Pre-qualification is required to participate.
For some home sellers, auctions are a way for their properties stand out from the crowd of more than 20,000 homes vying for buyers’ attention. At least one company that offers to sell homes by auction, http://www.dumpinghomes.com , has opened in San Diego.
Since auctions imply a distress sale – foreclosed properties often are sold at auction – such events can attract buyers looking for great deals.
“It appeals to the idea that a buyer is going to get a property under market,” said Phil Morris Jr., a sales manager with Prudential California Realty in Scripps Ranch. “Now is a buyer really going to get the property under market? Probably a little, but not as much as they think.”
A handful of non-foreclosure homes have been auctioned in San Diego County since the once-hot housing market began to soften last summer, according to real estate brokers.
But the auction at Bressi is believed to be the first involving such a large group of expensive homes. The models were previously listed for sale at prices ranging from $849,000 to $1.42 million starting in August.
“Some people believe it’s a good thing to do in a market that is poor,” said Peter Toner, a broker with Prudential California Realty in La Jolla. “It gets people interested and excited about it.”
http://www.signonsandiego.com/uniontrib/20061020/news_1b20auction.html
LMFAO!
http://www.dumpinghomes.com
An Official web site of
“William The Liquidator”
Yeah, when the assessed value is about $330,000, and he has a “bid at $590,000″… ROFLMAO.
Somewhat self-referential, but what are the activity levels on this blog telling us?
Seems to me every successive thread on Florida/California is getting a bigger response.
How is this bubble different from past real estate cycles?
How does this bubble compare to bubble’s in the 1800s?
Is this the worst bubble in terms of toxic loans and fraud in our history?
double bingo- we know this has popped- now the onle question is how far down,how fast and what’s different
Stardate 38843ja34u1-9u342 -
While enroute to the Vhortanic nebula, we received a distress signal from the USS SeattleReiBlog that two of its prime properties had lost power and were losing altitude. Last update was two weeks ago and now, ominously, we receive only silence. We are diverting from our current course to verify the SeattleRei’s last known position and status.
Kirk out.
Log Status - supplemental. Star Fleet has detected unusual unstable gravitational and financing forces around the HiYamFazing4Closer system. They’re requesting our immediate prescense and evacutation assistance….
http://www.realmeme.com/roller/page/realmeme?entry=log_status_supplemental
Did anyone catch the graph of the DJIA from early 1900s to date on p. C1 of today’s WSJ? I am wondering whether others think it looks more like a permanently high plateau, or a temporarily high precipice? (My wife voted for the latter theory!)
From Harney’s syndicated column this weekend a “survey” of the importance of real estate to baby boomers. Buried halfway down the page is: “The project was sponsored by the National Association of Realtors.”
I tip my cap to David Lereah. How does the NAR promote real estate when housing stats are lousy? By sponsoring a survey showing positive stats about PERCEPTIONS of the housing market. One also could take this survey as measuring the persistance of ignorance about the housing market. The work of this blog is far from done.
persistence
What’s going to happen to the advertising business as the housing bubble bursts and affects the economy? In particular what’s going to happen to online advertising revenue? And specifically, what’s going to happen to Google which gets about 90% (a guesstimate) of it’s revenue from online advertising? Is it time to short GOOG?
Analysis: Google’s Q3 Profit Doubles, but at Whose Expense?
“First, digital entertainment and search advertising are about to become a very crowded space. Yes, Google keeps on growing its profits at an incredible rate. But we must remember that it was just a few days ago that its rival Yahoo! reported a 38 percent decline in profits. Digital media and entertainment are not as easy to monetize as Google might make it seem. And many of the new entertainment and technology companies springing up in Silicon Valley are basing their business models soley on advertising. Will there be enough ad spending to go around, especially if the housing bubble bursts and the general economy takes a dive?“
“Is it time to short GOOG?”
I don’t think they have run out of dog-and-pony-show tricks to pump the price just yet…
More evidence that the housing slump will affect advertising revenue…
Mercury News announces layoffs
By Pete Carey
San Jose Mercury News
10/20/06
‘Other MediaNews papers around the Bay Area are experiencing the same pressures. On Wednesday, Contra Costa Times publisher John Armstrong said in a letter to staff that a “sharp and rather sudden decline” in real estate advertising had dragged down that paper’s revenues and that it must lower costs.
Soon we will be talking about divorce…
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It’s Splitsville
No, we’re not talking about divorce, but about a new way of dividing time between multiple houses.
By Daniel McGinn
Newsweek
Oct. 23, 2006 issue - For centuries, European royalty has kept country estates to complement their urban castles. In 19th-century America, Gilded Age millionaires built Newport mansions as getaways. And for decades, the wealthy have summered in places like Martha’s Vineyard and wintered in Palm Beach, while less-affluent “snowbird” retirees have made annual migrations north and south. But as large numbers of baby boomers have begun buying second homes, trend watchers are starting to see the first signs that something new is going on. Today in vacation-home hotspots like Naples, Fla., you won’t need binoculars to spy a new species of homeowner—one that some demographers are calling “splitters.”
http://www.msnbc.msn.com/id/15266554/site/newsweek/
WCI plugged four times in the Newsweek article. The WCI PR department is working hard. Excellent product placement!
The article reads like it was written as a real estate sales promotional piece.
get stucco- I think your wife is right. The higher it is, the farther it has to fall when the s**t hits the fan. Also jas jain, I’d hardly describe myself as a bull for investing in Asia.
get stucco- I think your wife is right. The higher it is, the farther it has to fall when the s**t hits the fan. Also jas jain, I’d hardly describe myself as a bull just because I invested money in Asia.
Truth or fiction???
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KB Home Disputes Purported Notice of Default Related to Its 6-1/4% Senior Notes Due 2015
Last Update: 5:37 PM ET Oct 20, 2006
LOS ANGELES, Oct 20, 2006 (BUSINESS WIRE) — KB Home (KBH 43.83, +0.03, +0.1% ) , announced today that on October 18, 2006, it received a letter purporting to be a notice of default under the indenture related to its 6-1/4% Senior Notes due 2015. The letter asserts that KB Home is in default under the indenture because of the delay in filing its Quarterly Report on Form 10-Q for the quarter ended August 31, 2006 with the Securities and Exchange Commission.
KB Home has notified the senders of this letter, and the trustee under the Indenture, that the letter does not satisfy the indenture requirements for a notice of default, in part because the letter fails to take into account the 15 day period following the Securities and Exchange Commission filing date as specified in the reporting covenant at issue.
In the event the above-mentioned letter is not invalid, or if a subsequent valid notice of default for the delayed 10-Q filing is delivered to KB Home under the indenture for any series of its senior notes, and KB Home fails to cure the default within the 60 days after notice is given, the default could become an “event of default” under the indenture, allowing the Trustee or the holders of at least 25% in aggregate outstanding principal amount of such senior notes to accelerate the maturity of the such series of senior notes.
http://tinyurl.com/tqfec
5:40 PM ET 10/20/06
[KBH] KB HOME: LETTER ASSERTS DEFAULT DUE TO FILING DELAY
5:41 PM ET 10/20/06
[KBH] KB HOME: LETTER DOES NOT SATISFY DEFAULT REQUIREMENTS
5:40 PM ET 10/20/06
[KBH] KB HOME GETS LETTER PURPORTING INDENTURE DEFAULT
6:20 AM ET 10/10/06
[KBH] KB HOME REVENUE IN QUARTER $2.67 BLN, UP 6%
6:20 AM ET 10/10/06
[KBH] KB HOME Q3 EPS TO FALL TO $1.93 FROM $2.55
6:19 AM ET 10/10/06
[KBH] KB HOME: EXPECTS BANK WAIVERS IN ‘NEAR TERM’
6:18 AM ET 10/10/06
[KBH] KB HOME: MAY NEED TO MAKE NON-CASH CHARGES FOR COMPENSATION
6:19 AM ET 10/10/06
[KBH] KB HOME: STOCK OPTION REVIEW NOT COMPLETE
6:18 AM ET 10/10/06
[KBH] KB HOME DELAYS Q3 FOR STOCK OPTION GRANT REVIEW
4:36 PM ET 9/21/06
[KBH] KB HOME Q3 ORDERS 5,989 VS 10,467
4:35 PM ET 9/21/06
[KBH] KB HOME Q3 BACKLOG 23,878 UNITS VS 27,744 UNITS
4:36 PM ET 9/21/06
[KBH] KB HOME Q3 DELIVERIES 9,523 VS 9,812
4:34 PM ET 9/21/06
[KBH] KB HOME Q3 FIRST CALL REV EST $2.61B
4:33 PM ET 9/21/06
[KBH] KB HOME Q3 REV $2.67B VS $2.53B
4:32 PM ET 9/21/06
[KBH] KB HOME REPORTS PARTIAL Q3 RESULTS
4:32 PM ET 9/21/06
[KBH] KB HOME REPORTS PARTIAL RESULTS DUE TO OPTIONS REVIEW
9:54 AM ET 9/12/06
[KBH] KB HOME UP 2.3% AT $42.07
8:47 AM ET 9/8/06
[KBH] CITIGROUP CUTS KB HOME PRICE TARGET TO $75
9:31 AM ET 9/7/06
[KBH] KB HOME DOWN 3.3% AT $39.07
5:13 PM ET 9/6/06
[KBH] KB HOME: Q3 PRELIM NET ORDERS DOWN 43% AT 5,989
Comptroller of the Currency John Dugan’s remarks to America’s Community Bankers in San Diego, Oct 17 2006 (contains clarification of “final interagency guidance on nontraditional mortgages”)
http://www.occ.treas.gov/ftp/release/2006-115a.pdf
High household debt levels hit US where it hurts the most: military preparedness…
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Debt keeping many service members home
By Steve Liewer
STAFF WRITER
and Thomas Watkins
ASSOCIATED PRESS
October 20, 2006
High levels of debt are costing thousands of military personnel their security clearances and preventing them from serving critical overseas duty.
Records obtained by The Associated Press indicate the number of Navy, Marine Corps and Air Force personnel stripped of security clearances rose from 284 in 2002 to 2,654 last year, a ninefold increase. The Army, which has the most deployed troops, refused numerous requests to provide data, citing confidentiality rules.
http://www.signonsandiego.com/uniontrib/20061020/news_1n20mildebt.html
P.S. The sidebar graph shows this problem only emerged in 2004-2005. Is the overlap with the housing bubble coincidental?
The bear is in your house
The real estate slump changes how you should look at your biggest asset - and the rest of your portfolio
Money Magazine
By Paul R. La Monica and George Mannes
October 20 2006: 10:28 AM EDT
NEW YORK (Money Magazine) — After the stock market bubble burst in 2000, millions of Americans turned tail on Wall Street and sought riches in real estate.
Spurred by record-low interest rates and never-say-no lenders, Warren Buffett wannabes refashioned themselves as budding Donald Trumps, snapping up investment properties and treating their own homes not as shelters but as the key to their retirement.
Purchases of investment homes set a record in 2005, according to the National Association of Realtors, and home improvement spending on single-family units jumped 66 percent over four years.
“Since the stock market bubble burst, equity mutual funds have attracted a fraction of what was going in during the early 1990s,” says John Norris, chief economist with Morgan Asset Management in Birmingham. “It’s fair to intuit that much of that money went into housing.”
But now real estate is entering what looks like a bear market, with more and more once hot locales turning cold. The sure thing no longer seems so sure.
http://money.cnn.com/2006/10/19/pf/realestate_investing.moneymag/index.htm?cnn=yes
Not much economic thought went into this piece. What is wrong with its rosy prediction?
1) It ignores the symbiosis (the same correlation that led to twin booms will likely result in twin busts).
2) It ignores the global dimensions of the bubble.
3) It ignores that China’s housing market is in trouble, too.
4) It ignores history (”This time is different…”).
5) It sounds like it was written by a financial journalist who never took a college economics course.
But otherwise, it entertains an interesting theory…
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The world economy
America drops, Asia shops
Oct 19th 2006
From The Economist print edition
Thanks to the vigour of Asia’s consumers, it is a good time for the American economy to slow
IT IS a commonplace that American consumers have kept the world economy spinning. Asians are frugal, Europeans are gloomy, so if Americans do not keep spending as fast as they have been lately, the world economy is in trouble.
That view will be tested over the next couple of years as Americans adjust to the end of their housing bonanza. By virtually every measure America ’s housing market is in trouble. Home sales and residential construction are tumbling, the overhang of unsold homes has soared and, according to some statistics, house prices have started to slide. And despite the odd bit of good news, such as this week’s figures showing that housing starts rose unexpectedly in September and builders’ gloom had lifted slightly, the painful truth is that America’s housing adjustment probably has a lot further to go.
The effect of that adjustment on Americans’ spending has yet to be felt. So far, the housing bust has hit builders most. America’s GDP growth slowed to a crawl over the summer as builders cut back. Consumers have barely noticed, mainly because unemployment remains low and tumbling fuel prices have boosted their bank balances and buoyed their spirits. Petrol prices have fallen by almost 30% over the past two months. The strength of consumer spending has led many economists to argue that America is headed for a soft landing. Perhaps, but as the housing bust deepens, even the most spendthrift Americans will keep a tighter grip on their wallets. America may avoid recession, but it won’t avoid a slow-down. Will it drag the world economy with it?
The reason it will not is that the common view of the American consumer as the engine of the world economy is flawed. IMF figures show that Asia, not America, has been the main driver of global demand, powering the world economy through its fastest five-year period of growth since the early 1970s. That is not just because Asians are producing so much more, but also because they’re buying so much more. Asian consumers are on a spending spree, splashing out on anything from mobile phones to designer clothes.
http://economist.com/opinion/displayStory.cfm?Story_ID=E1_RDVSVSV