“It’s Not Over”: Greenspan
Some housing bubble reports from Wall Street and Washington. “U.S. homebuilders slashed prices at the fastest pace in 36 years in September and managed to boost sales to the highest level in three months, the government said Thursday. However, sales in June, July and August were revised down by total of 67,000 annualized, continuing a pattern of downward revisions to the originally reported data.”
“Median sales prices dropped 9.7% in the past year to $217,100, the lowest price in two years. It’s the largest percentage decline in median prices since December 1970. Median prices for existing single-family homes are down 2.5% in the past year, the largest decline ever recorded.”
“Home builders have piled on incentives, including vacations and new cars, to sell homes. Such incentives are not subtracted from the sales price reported to the government. Sales are reported when a contract is signed, not at the closing of the sale. Home builders have reported a large increase in cancellations in recent months.”
“The number of homes that are completed and waiting to be sold rose by 6,000 to 157,000 in September, today’s report showed. Mortgage lenders, builders and makers of construction materials are feeling the pinch. Countrywide Financial Corp., the biggest U.S. mortgage lender, said this week that its mortgage- banking profit dropped 40 percent.”
“The U.S. housing market has ‘already had a hard landing,’ Countrywide’s CEO Angelo Mozilo said on a conference call.”
“Pulte Homes Inc. said Wednesday its quarterly profit fell 52 percent and new orders dropped 39 percent as the U.S. housing market continues its sharp decline. The nation’s No. 2 home builder also issued a forecast which was well below what Wall Street had expected.”
“Part of the downfall was attributed to $87 million of write-down in land and options on land that the company won’t exercise. ‘It’s a surprise the degree and magnitude is not only large but obviously escalating,’ said Raymond James analyst Rick Murray. ‘It’s indicative of what’s going on in the housing market now, that things are continuing to escalate in a bad way,’ Murray said.”
“New orders fell 39 percent to 7,299, with a value of $2.4 billion, down 40 percent. New orders in the Southeast fell the hardest, down about 50 percent. ‘The operating landscape for new home sales remained challenging during the third quarter, as high inventory levels, affordability issues, elevated cancellation rates and a general lack of buyer confidence continued to weigh on new home demand,’ Richard Dugas Jr., Pulte’s CEO.”
“MI Homes Inc. said Thursday its third-quarter profit fell as the homebuilder delivered fewer homes and wrote down the value of its inventory, while also abandoning previous land deals amid a continuing decline in the housing market.”
“New contracts during the quarter totaled 571, down from 1,163 homes a year ago, reflecting higher cancellation rates, an excess supply of new and existing homes, and weak demand.”
“The Federal Reserve kept interest rates unchanged yesterday for a third consecutive meeting. Analysts said there was nothing in the Fed’s explanation of its decision to shake their view that the central bank will remain on hold for perhaps as long as a year.”
“‘There isn’t anybody on the Fed considering lowering rates, and the Fed knows if you were to raise rates now you could turn what is a reasonably orderly decline in housing into a rout,’ said Lyle Gramley, a former Fed board member.”
“Former Federal Reserve Chairman Alan Greenspan said on Thursday the U.S. economy was pulling away from the shoals of a sharp housing-sector downturn. ‘Most of the negatives in housing are probably behind us,’ Greenspan said.”
“‘There are early signs of stabilization,’ Greenspan said of the U.S. housing market, although he added: ‘It’s not over.’”
Looks like we are coming down from our permanently high plateau:
http://www.kerndata.com/index.cfm?fuseaction=User.doShowAvgPriceHistory
‘elevated cancellation rates’
As has already been pointed out, the cancellations aren’t subtracted so this single digit increase in sales masks what is certainly a double digit decline.
Also, the incentives, which are not included - IMO - would result in a decline in prices of 15% YOY!
Yeah, ain’t the bubble grand?
Man posing as home inspector steals jewelry
06:43 AM CDT on Thursday, October 26, 2006
By HOLLY YAN / The Dallas Morning News
A man posing as a home inspector stole about $40,000 worth of jewelry from a house for sale this week, police said.
The imposter rang the doorbell of a house in the 700 block of Love Henry Court and was let in by a housekeeper, Southlake police Lt. Rhonda Voshalike said. The man started measuring the house and eventually stole a wedding ring and a cocktail ring. When the homeowner came home, police said, the impostor made small talk before leaving.
Lt. Voshalike said residents should protect themselves by asking for employment IDs or taking down the driver’s license numbers of workers. The man is described as Hispanic, about 5 feet 10 inches tall and 200 pounds. He had short black hair and short facial hair and was driving a white, single-cab Chevrolet pickup.
Anyone with information can call 817-748-8349.
Sorry to read about this. Sad part is … the mans discription matches 8700 hispanics in So Cal.
Add about three more zero’s to the end of that number..
How about 8,700 if he spoke english, and 8,700,000 if he didn’t?
Wait till the robber finds out that the ladies husband already switched out the stones on said rings. She kept asking him where the payment money for his new Harley came from. Of course, maybe it’s husband’s friend who helped him stage this. Rings were due in for cleaning next week.
Per my previous post, three more zeros added to 8700 is, of course a joke. One more zero could be accurate.
It is disappointing to see how xenophobic and racist these comments get, and moreso, how other posters encourage it without consequence. I don’t think immigration, legal or not, is the cause of the run-up in home prices that this blog denounces. Most people already established that it has to do with speculation, exotic loans/cheap money, high risk and particularly greed.
Can you please keep the focus on the economics and leave the linguistic and ethnic profiling to the FOX news blogs?
posted “It is disappointing to see how xenophobic and racist these comments get”
Where you from? I know it ain’t planet earth. It is not racist if it is true.
Posted ” I don’t think immigration, legal or not, is the cause of the run-up in home prices that this blog denounces.”
Reread what he wrote. He did not say the guy ran-up houses, he said they guy stole the gems!
You have made no convincing argument that it is true.
The increasing xenophobia is more a symptom of the American empire clearly going into decline. The uneducated will blame everything under the sun for the decline except THEMSELVES.
Posted ‘ Most people already established that it has to do with speculation, exotic loans/cheap money, high risk and particularly greed.
Can you please keep the focus on the economics and leave the linguistic and ethnic profiling to the FOX news blogs?
So what are you sayin’? An illegal isn’t smart or good enough cause a country -wide realestate/banking fraud crime? Only WASP’s?
I am a racist if it is reported a brown man stole gems? This on takes the bisquit old bean!
BTY on the whole both facts are true.
No, the increasing xenophobia is a result of the largest movement of foreigners into a previously homogeneous nation in history. It is combined with being past the peak of political correctness; the brainwashing is wearing off as people see the real world consequences of their baseless beliefs.
Just got back to read this. Mmmm… Can’t joke or talk about illegal immigration, if you do you are xenophobic? Apparently the US Congress is xenophobic as they discuss this “wall” they want to build. Los Angeles can be brought to a stand still, but dare not discuss or joke about it in polite society, lest you be painted with a racist brush. Bull Sh#t! There’s plenty to discuss.. and joke about!
Notice in my second post, I joked that it was probably the husband and his “friend” pulling the caper. How wild, a xenophobic would think the “inferred” “white homeowner” in this melodrama would have a “Brown” friend to help him. Of course, in reality I didn’t even make the assumption the owner was white.
Dudes/Dudettes I grew up in LA and half my friends are brown and/or various shades of what ever.
Third we discuss immigration all the time on this blog. Mostly as to how “illegal” (shudder) immigration was suppose to “save” Real Estate.
No illegals buy homes? Again, B.S.. I can prove that one easy.
Poordad:
The increasing xenophobia is more a symptom of the American empire clearly going into decline. The uneducated will blame everything under the sun for the decline except THEMSELVES.
Whoa! reading this I think we all get a feel for who the real racist is. Or more correctly “Ameriphobic”. Good luck with all of that! Clever juxtaposing American with uneducated. Wow, your propaganda skills astound me.
P.S. Many recent legal immigrants of Latino (and other) origins also find illegal immigration a serious concern, guess they are “xenophobic” too.
I’m not disputing the facts, i’m taking issue with the responses that intimate that its “sad” that slightly fewer than 8.7M people in socal who look like the thief don’t speak English. This is neither true nor sad, and it takes the debate away from issues of housing price run ups. We are all equally at risk of being screwed by this housing market.
What about the word “illegal” confuses you? Is is neither xenophobic nor racist. That illegal aliens evade and ignore the law is a serious threat to the Republic. Since they expect to be financially rewarded for breaking the law, and you have some portion of the citizenry that think this is just dandy, can devolving into a banana republic be that far off?
theboatmanscall ” i’m taking issue with the responses that intimate that its “sad” that slightly fewer than 8.7M people in socal who look like the thief don’t speak English.
Keep digging your honor… “look like a thief” plesase explaine?
“like the thief don’t speak English.”
Wow! you sound like AE Newman! I don’t really speak English and never stole a thing in my life… just ask Susan!
Now say what you will but I am missing my front 4 teeth and do have a very well derserved beerbelly…. but in my bib overhauls I clean up very well.
Now I know it would be hard to type me. Don’t be rude to me or my dog could bite you.
“What about the word “illegal” confuses you? Is is neither xenophobic nor racist. That illegal aliens evade and ignore the law is a serious threat to the Republic. Since they expect to be financially rewarded for breaking the law, and you have some portion of the citizenry that think this is just dandy, can devolving into a banana republic be that far off?”
The fact that we call people not born on this side of an imaginary line “illegals” (which, incidentally, is not a noun) is xenophobic. I don’t doubt that there is an economic basis underlying people’s fear and dislike of outsiders (ie. if we let darkies in we will become a banana republic), but this doesn’t make it any less xenophobic.
Also, when you make an appeal to the fact that an act is illegal, you are not adding anything to the discussion about what legislation about an issue *ought* to be. You are really saying nothing at all.
Bruin, Hope you come back an read this. Go try and get a Job in the EURO Zone. I work in a high end industry and am surrounded by EUROs (who work more than me)
P.S. My father has a PHD from the University of Spoiled Children.
P.S. You are quite naive…. or you have an unspoken agenda….
sorry I felt I wasn’t clear. I work with EUROs, here in LOS ANGELES, and they work more than me.
I have no idea what you are trying to say. I was just saying that nationalism is xenophobic by nature. Not passing a moral judgment; just stating a fact.
Additionally, I am quite sick of people justifying derision of a group of people by saying that they are “illegal.” There is a meta-issue here. Why are some people “illegal” to begin with? It was at some point illegal for a black person to sit at the front of a bus. Would habitually doing so make that person “illegal?” And does it follow from his being illegal that he should be derided and generally abused? The argument is a tautology that conflates legality with morality and then uses the former to try and prove the latter.
From your rhetoric it appears you are the expert at conflation. Trying to bind the illegal immigration issue with the ill treatment Black Americans received, there by hoping to stand on some sort of moral high ground. Throwing words around like “darkie” hoping you can infer “racist”.
Like I said since you think boundaries are “imaginary”. Try crossing into another Western Country illegally to live and work. Good Luck.
I tried to post about three times and nothing came up.
Maybe it will work today…
1) How is the analogy inconsistent? I used an example that I assumed most rational people would accept as morally repugnant where a subset of the population residing in the United States were marginalized using the legal system. Contravention of those laws are seen today as not only acceptable but morally incombent upon citizens. You can make arguments as to why laws that discriminate against people based on their immigration status are morally acceptable. What you cannot do is to say that the basis for the legally marginal position of undocumented immigrants is that they are illegal. This is tautological.
2) When someone uses a word to communicate an idea they may be trying to “evoke” or “precipitate” or any number of verbs, but they are not trying to “infer.”
3) I said the line was imaginary, and it certainly is. The boundary exists insofar as there is someone there impeding traversal. My point was not that borders are not enforced, most are to a greater or lesser extent. Instead, I was making a comment about the absurdity of national affinity and national claims of political obligation and allegiance vis a vis competing claims.
Bruin, you’re talking in circles. I’m really not sure what your purpose is? If your purpose is to somehow give me a public “intellectual caning”, good luck. You couldn’t convince a drunk to have a free drink.
Do you think the blog audience here is going “whoa that “Bruin” really gave imploder a mighty talking to! He used all the big words! I doubt it. More likely thinking “god that insufferable wind bag “Bruin” just rambles on and on without saying anything! Bruin, if you are a professor at USC your classes, I’m sure, are to be avoided at all costs!
So what is your purpose? Debate for debate’s sake? The elimination of all international borders? Establishment of a Reparation fund for any person who has broken the immigration laws of the United States? Please, tell us.
P.S.
As to your points:
1. I’m aware you attempting to “Draw an Analogy” I’m saying “IT’S A BAD ANALOGY” Tautological? If ever there was a description of what you are doing with your posts this is it.
def’:”redundant language that adds no information”
2. Sorry you feel “refer” was ill used. Anyone reading it in my statement would, however, know exactly what I was saying.
The same cannot be said for much of your writing. Mainly cause your not writing to communicate, you are writing to let others know how “brilliant” you are.
3. Speaking of brilliant. I didn’t realize the line was “imaginary”, I thought they actually went out with a magic marker and drew all countries borders on the physical ground. Thanks for the update!
And this finale:
“I was making a comment about the absurdity of national affinity and national claims of political obligation and allegiance vis a vis competing claims.”
I guess your trying to recite, in your own blow hard style, the lyrics to John Lennon’s “Imagine” If so, I’m with you bro!
No, the increasing xenophobia is a result of the largest movement of foreigners into a previously homogeneous nation in history.
Get real. Per capita immigration into the US was vastly larger in the early 20th century than it is now. Do the words “Ellis Island” mean anything to you?
Oh and there were lots of people who sounded just like you back then too. Study some history.
And since when has the US been “previously homogeneous”? Since never.
I am not an advocate of illegal immigration. The US government could stop illegal immigration dead in its tracks, by imposing huge fines on those who hire them. But who hires illegals, and which party do they support?
yougurt:
You are already an American i hear it in your writing. The rest you write is all “happenstance”, consider that…..
Asking for ID won’t help. When I was selling a house in MI during similar economic conditions the thieves would pose as buyers. They work in pairs one walks around with the “Realtor” and the other occasionally wanders off or lags behind and steals stuff. It’s really hard to prove theft of things like rings since the “loser” could have just as easily misplaced the item at the grocery store the same day. It would take incredibly fast police work to catch the loot since it would likely be fenced the same day.
“The man is described as Hispanic, about 5 feet 10 inches tall and 200 pounds”
The commission of a crime by a person requires that that persons descrption be reported. This is not a subject which is racist zenophobia. It is to alert the community to be on the lookout and to take precautions. Whether that person be Hispanic, Asian, Black, white, or poka-dot is irrelevant:that person needs to be described as accuratelt as possible to avert further danger to the community. If three Persons of___________(fill in the blank)certain racial/ethic description broke into a house and robbed/beat up/shot the resident(s)then hell yes a full complete description, including racial/ethnic type, should be put out on the AP.
Hey does anybody have a list for the new housing sales data month by month? These numbers have been revised down every month this year. I know someone posted it here before but search isn’t finding me the post. August was just revised down from 1.05 to 1.02 and I am looking for the revised July number. I know it was above 1.02 million.
Read the article and saw the revised 900K number.
I think it’s here:
http://globaleconomicanalysis.blogspot.com/2006_09_27_globaleconomicanalysis_archive.html
havn´t seen this postet yet.
kb home / expansive standstill agreement with bondholders
trouble with liquidity….?
first was this notice a week ago.
KB Home Disputes Purported Notice of Default Related to Its 6-1/4% Senior Notes Due 2015
KB Home Commences Consent Solicitation from Holders of Its Senior Notes
KB Home today announced that it is soliciting consents (the “Consent Solicitation”) from the holders of its $1.65 billion of outstanding Senior Notes (the “Senior Notes”) to approve a proposed amendment to the indenture governing the Senior Notes (the “Indenture”) to allow the Company to file its Quarterly Report on Form 10-Q for its fiscal quarter ended August 31, 2006 a maximum of 60 days after the current deadline, as further described below
Holders of the Senior Notes are referred to the Company’s Consent Solicitation Statement dated October 25, 2006 and the related Letter of Consent, which are being mailed to holders, for the detailed terms and conditions of the Consent Solicitation.
The Company is offering a consent fee of $7.50 in cash for each $1,000 principal amount of Senior Notes, subject to the terms of the Consent Solicitation. (i smell a little bit of panic here…)
just to remember.
latest 10q filing end of may 2006 http://tinyurl.com/y3cqnv
cash and cash equivilant end of may 9.7 mio$
total debt may 2006 3.58 b$
end of may 416 mio$ outstanding of the 1.5b$ credit facility and 437 mio$ of outstanding letters of credit
debt to capital ratio 54,5%!
when you do the math the “consent fee” is 12.4 mio$.
i don´t know for sure if this really means that every outstanding note is impactet.
they should get the amount from the ceo that caused this delay.
plus i have a “tribute to bloggers” from stephen colbert”
very funny.
Who had shorted or intend to short KB Homes? I shorted them last week.
I increased my short position on CTX a couple weeks ago. Though I expect the builders will continue to hold on or even gain … until thier bond ratings start getting hammered. And that may take a few quarters of poor earnings OR a public builder going in default. This could 6mo or it could take 36mo, IMO.
I posted exactly this in a previous thread about this. The main bond holders here are hedgefunds. Basicly KBH is offering them 75 basis points to get a wavier of default till Feb 23 2007.
At the moment KBH is rated BB+, that could change. If it did, expect a wave of short sales from capital structure arbitrageurs who are going long on the bonds and shorting the stock.
“‘There are early signs of stabilization,’ Greenspan said of the U.S. housing market, although he added: ‘It’s not over.’”
Damn right it’s not over. What a cryptic fool. OK Greeny go back to printing more money. Keynsian fool.
All the so called experts “No one could have forseen this” are now predicting the bottom. Pogues.
And those “signs” would be??????
It doesn’t really matter what AG says anymore. Apparently he thinks that he still needs to be cryptic. Fine, but useless. Greenspan would do everyone a favor by spelling out what definitive thoughts he has towards the status of housing in the economy as well as given the “unusual” condition of today’s housing market (part of which he is to blame).
I don’t see that happening so AG’s empty musings are even less valuable than Lereah’s.
This from Reuters:
“We’re beginning to see some move from the dollar to the euro, both from the private sector … but also from monetary authorities and central banks,” Greenspan told a conference sponsored by the Commercial Finance Association.
His comments pushed the dollar down, a sign that Greenspan, who retired from the U.S. central bank in January, still holds some sway in financial markets.”
Do Greenspan’s comments really have this kind of influence? Why do “reputable” news outlets still link his comments to market fluctuations. I’m baffled.
Imploder ” I’m baffled.”
Green is long the euro, short the the dollar.
that would be the final insult added to GRAVE INJURY.
THAT’S IT! It’s a short play! Greenie thinks he’s underpaid as a speaker, so he loads up on Euros, then goes in and “Drops Bomb”. Leaves speaking engagement and exits his Euro position. In this way he gets paid 1millon per engagement, instead of measly 100k.
I am becoming convinced that Greenspan suffers from senility. Anyone else here see his quote from a few days ago where he tied the housing bubble to the fall of the Berlin Wall? WTF?? He stated that his rate cuts were not the cause. The wall fell in what, 1989? Talk about a stretch of the imagination. I don’t know why this clown gets six-figures for speeches. I would demand my money back. If I want to hear the opinions of a babbling fool I can just go down to the local homebuilder sales office.
CA Guy posts “I am becoming convinced that Greenspan suffers from senility.”
No he’s married to Andra Mitchell both have the same effect.
yes I beleive you are right, and this isn’t a recent development either which is why we have this nice housing bubble blog.
has the old fart figured out how to use e-mail yet? he probably bought one of those magic health rings with the metal nubs. i’ll bet the clown’s still holding onto etoys stock.
profs chilldogg , you funny!
Exactly. He’s no longer the Fed chairman, so his statements are no longer indicative of future interest-rate moves. He should describe and defend his position. Instead he whispers cryptic comments so that we can, what, get a little peek into his personal opinion?
Opine Alan, opine…
Maybe he knows the dollar will tank.
One possible scenairo:
After spring/summer of ‘07 dissapointment in housing sales/prices, most people realize housing is dead. Further causing massive hemorrhaging in housing, and thereby, forecasting an undeniable major rescession on the horizon. Stock market starts to sell off. In respose, the FED starts to cut interest rates. At that point, and because of the high amount of consumer, GOV, and cooperate debt, the dollar is sold off agressively by all the countries thay buy our bonds, etc. The dollar is toast and all the stuff we import (including oil) surges in price.
Of course, this may not true because housing will stage a comeback in ‘07 and we will have soft landing!
Yea Right! LOL!!!
Greenspan may do everyone a favor if he did that but I don’t think anyone is entitled to that information for free. He’s a private citizen now.
Greenspan created the bubble! He knows how his comments affect market psychology! Of course he’s gonna say we’ve bottomed…and yet still leave himself an out with an afterthought of “this isn’t over”. what a chicken!
Did you perhaps mean to call them Rogues??
Greenspan has written about his wish to return to a Gold standard
….also B.Gates, and W. Buffet has many times publically stated they are short the Dollar ,and in Foreign reserves. Maybe question his motives, but beware the trend ,and hedge yourself ,and get caught like the sheep who are 100% US $, TBills, Bonds, etc..
Geenspan is no more a Keynsian than George W. Bush is a conservative. Why don’t you do some research into what Keynes actually recommended - things like running a budget surplus during times of economic growth, for starters.
Interesting, however, that even WITH incentives, the price of new homes decreased by a greater percentage yoy than did the price of existing homes. This is entirely consistent with the idea that private “owners” (e.g. flippers, investors, etc.) are stubborn in dropping their price and the builders are following the price down slower than are flippers.
I will wager, however, that sellers of existing homes will draw exactly the WRONG conclusion, and point to the fact that the price of existing homes fell less, to suggest that the prices are holding up better.
The predictable outcome is an increasingly pronounced decline of new homes (as builders continue to aggressively reduce inventory by lowering prices), a much slower lagging drop in existing home prices, and a bigger “spread” b/t the drop in New Hoem prices v. Existing home prices. That is, until the tipping point of foreclosures, REO sales and short sales dropping comparables truly begins. My bet is that the tipping point will be spring of next year…
Good analysis.
Also, remember HomeBuilders have very fat margins to cut in to; whereas, some existing sellers as a result of HEWs and so on have very little equity to cut in to. Lack of margin maneuverability is particularly worse for those sellers that purchased from homebuilders in 2005. This group of purchasers is left holding the proverbial bag.
Homebuilders only have fat margins because home prices have moved since they bought their land. On their recently purchased land, they don’t have those fat margins–of course, their land write downs today will help increase margins for the future . . .
Homebuilders price cuts are obviously going to reflect market reality faster than existing homeowners, but eventually homeowners are going to have to match price if they ever want to sell their house.
“I will wager, however, that sellers of existing homes will draw exactly the WRONG conclusion, and point to the fact that the price of existing homes fell less, to suggest that the prices are holding up better.”
Important question: How is the rate of new home sales changing relative to the rate of existing home sales? It is hard to imagine how prices of used homes could “hold up” well relative to new home prices unless the used homes were selling at a much lower rate; why would I want to buy someone else’s home when I could by the comparable new one for the same price with a new car as a bonus?
I am looking for comments. A builder is willing to sell me a house previosly priced at $447,000 for $303,000. This is in CA and situated with homes which sold for $500k+ last year. I am estimating a 30% risk of an additional 20% drop but it might be the price this house will end up at the bottom of the cycle. Any thoughts?
Where in California?
This sounds like somewhere in Inland Empire, Palmdale, Lancaster, High Desert or Bakersfield.
Posted “Where in California? ”
It is a state of mind.
Where is it?
How may sq/ft?
I would not pay more that $150/sq.ft
I would check to see if you can find the original permit filing for this house from your regional office and then go 20% over that as your counter offer. In Colorado, they build homes for under 100K and sell it for 200K+. IMO 20% is a good profit margin for builders.
See my link above on price per sq ft. Find one for your area. This will be a big help.
That is a gool link, Thanks
Another question. How long are you planning to live in this house?
I’d still do a ton of homework. What is the quality of the construction? What is the condition of the neighborhood? A lot of other properties for sale?
Do you visualize this as something you really, really, like (in all aspects, neighborhood, design, quality etc). Can you EASILY afford it? Do you forsee living there for 10 years (or more)? Is the neighborhood likely to improve, stay the same or is there a possibility that it might decline?
I’d only buy something that met virtually all of my needs, desires and fit well within my comfort level of acceptible risks and personal finances at this stage of the game.
Finally, is it a great deal? Have you thoroughly investigated comparable (or near comparable) properties?
Is this price at or near 1999 or 2000 prices?
Building in the possibility of the property declining another 30% (over the next 4-5 years) is pretty conservative but, unless there is a compelling need to buy NOW why would you risk as much as $60,000 just to buy today and not a year or so from now?
Is it in riverside? IE?
Still too risky probably.
Anyway, my thinking is if one year can get the price that much down why not wait one more at least, I would let my common sense rule over my heartfelt desire to own a home at “attractive price”
The “Anchor Theory” is in action here, our mind is comparing current price with 500k+ price and now 300K appears a steal.
If you can use Zillow a comparable home, you can see the price graph. That gives me better idea what the price I can pay without much risk. So far my target is 2002 price.
The price reduction in this case is one example of builders offering lower price than existing home sellers.
IMHO.
Look at the price to rent ratios in the area, and find when it really started to increase. Unless rents have really skyrocketed, a good guess as to the “fundamental” price of your house is the price before the rent-price ratios took off.
So, if things got out of whack using price-rent in 2002, then use 2002 comps for your house as a good measure of the value today.
Everyone’s questions above this post are all excellent in and need answering before anyone could try to give you an honest assessment. More info required. It is nice to hear builders are “starting to get it”..
appreciation will likely be slow… so i would only buy on the true floor which can only be found after the rebound (not bounce but true rebound).
Assuming you can afford the house,
First try a lowball: $250k
I estimate there is a 100% risk of another 10% price drop.
There is a 50/50 risk of another 30% price drop
and a 20% risk of a further 50% price drop.
A coworker was offered a “$420k” home in the last downturn for $380k. He declined and kept renting. Four months later, the same home was offered at $180k. This was in Lancaster, CA.
In some areas, the bottom is pretty far away.
Recall Florida 1926. Inland homes went for 50% of material cost: nothing for labor, nothing for the 1st acre of land. Water front homes went for the same price but land went for 10 cents on the dollar.
But the best prices are often the last two or three homes from the builder…
Your call, just more information.
Neil
Of course do some serious homework, but this might be an opportunity.
Speaking with local developers here, MA, they are very concerned about thier crews and subcontractors. They are afraid of losing them if they don’t stay busy. If they have nothing on the plate, there could be some wiggle room.
Losing them to what, I don’t know.
Are you looking fo an investment or a place to live? Can you afford it without sacrificeing too much?
New home prices are down 15.6% from April of this year.
“The U.S. housing market has ‘already had a hard landing,’ Countrywide’s CEO Angelo Mozilo said on a conference call.”
That’s right, nothin to see here.
Had a hard landing but we got the gear down in time.
Everything is ok.
Go about your business.
- ‘It’s a surprise the degree and magnitude is not only large but obviously escalating,’ said Raymond James analyst Rick Murray.
Ray seems to hit the nail on the head.
Ray woke up when the nail hit him on the head.
He is merely stating what anyome is able to see already happening….
Like a snowball rolling downhill.
sort of like when someone falls down a cliff, they have a lot of hard landings on the way down… as opposed to just freefall in the air and then splat on the bottom. I expect we’ll see enough knifecatchers that the trip to the bottom won’t be completely smooth.
did I get enough metaphors in there?
Remember “Super Dave” Thomas? He’d go over a cliff or something and they’d cut to an obvious dummy … BAM, BAM, BAM ! Horrendous impacts, Careening down, arms and leg flailing!
Osborne, sir.
Yes, Osborne!… use to LMAO! He still does local car LA car commercials.
There’s been a hard landing, but the plane’s still rolling at 150 knots and there’s only 50 feet of runway left.
And the airport is the one on Santa Catalina Island.
“The U.S. housing market has ‘already had a hard landing,
LMFAO-Sorry bozo…
Only the tires have hit and shredded.
The rest of the aircraft has yet to cartwheel down the runway;
blow apart; and burn into a smoldering pile of unrecognizable pile of junk and body parts.
Like that United flight that lost it’s steering awhile back.
Now that’s a hard landing…
Alan Greenspan said on Thursday the U.S. economy was pulling away from the shoals of a sharp housing-sector downturn. ‘Most of the negatives in housing are probably behind us,’ Greenspan said.”
This fellow has “pulled” away from his mental moorings, of course he uses the word probably so that’s his out if anyone calls him on it. Which they won’t. He’s the SOB that started this insanity!
Greenspan must have something for the sea. On February 23, 2000 he said the following;
“…we are like a boat heading toward the dock and instead of turning so we don’t go slamming into the dock, we go straight into the dock and find out that we should have turned at least partially in order to come into, to create the triple metaphor I guess, a soft landing.”
Why won’t Grampa Simpson Greenspan just go away? The world would be a better place. He caused the midair disaster in the first place.
” Most of the negatives in housing are probably behind us,’ Greenspan said.” ”
I know Greenspan is an intelligent man, so what this comment can be attributed to?
May be lack of integrity.
Hope that his rep as “the maestro” won’t be tarnished and he won’t be remembered as a combo of Irving Fisher, Henry Blodget, and Herbert Hoover.
Funny…I was thinking most of the negatives were just begining to erupt on to the surface of Main Street and as a result most of the misery is ahead of us.
I agree. The financial contagion has not even begun to surface.
It all depends on whether he means negative causes (i.e. his rock bottom interest rates) or negative effects (which we’ll be witnessing for years to come).
Greenspan is Lereah in a cunning disguise.
Most of the negatives in housing are probably behind us,’ Greenspan said.
Maybe he’s referring to his own actions as Fed Chairman…
I know Greenspan is an intelligent man, so what this comment can be attributed to?
All those lecture fees he’s getting from Wall Street / REIC?
If they paid me that kind of money I’d be happy to spout nonsense too.
When I see comments like Alan Greenspan’s or even Jim Cramer’s (bottom is in) I sometimes think it is lack of integrity. It also could be they have rationalized to themselves that not inciting a panic is for the greater good of the market/country.
You nailed that one. These guys aren’t idiots; they can see the same looming disaster that all of us see. But because they are major media figures whose mere words can sway the market, they restrain now from telling the truth not out of greed, but because they don’t want to get blamed–or cause–a financial panic. Their words can do that, and they know it. So they lie to all of us.
They sincerely believe their lies are for the “greater good,” but eventually the economic truth (or panic) catches up with them.
That’s when they continue the lies, not out of service to the nation, but now out of greed/protection for themselves…
“Stay calm, all is well!” — Kevin Bacon, “Animal House,” 1978
Stay calm, all is well!” — Kevin Bacon, “Animal House,” 1978
Funny!
Good point. Plus the REIC has already fired a shot across the bow of the pundits predicting any decline by blaming them for the subsequent decline. There are probably a lot of prognosticators that don’t want to get out if front too far for that reason.
I really am thankful that I discovered this blog last summer. I was going to buy a house in Colorado, but after reading here I decided to wait.
If I were to buy today I would offer 15% less than last year.
Of course I’m not going to do that as I am sure next year it will be even cheaper.
At that timeb everyone(including my family) thought I was crazy. Recently I ran into one of the biggest naysayers whose parting comment to me at that time was “well, if prices fall I will just buy more houses.”
I ran into him recently and asked him if he was buying more houses now that prices are falling. Of course he isn’t. At least he was man enough to acknowledge his mistake.
Take home lesson for me about this housing bubble is that whilst loose credit, toxic mortgages et al all played some part in the crazy run up of prices, the single most important factor has been PSYCHOLOGY. The can’t lose mentality etc.
I only hope I remember this when the next bubble comes around.
They won’t. The biggest mistakes are always made when times are good. Thinking: If anybody can make money there can’t possibly be any risks.
According to Reuters Greenspan said, “The fourth quarter should be reasonably good, certainly better than the third quarter.”
That means tomorrow’s Q3 GDP report is going to be worst than most expect.
The spin over the last two weeks has been to look for a good fourth quarter. The third quarter should be bad probably between 1% and 1.5% is my guess although the consensus at 2.2% per Marketwatch.
Exactly.
Bloomberg consensus is 1.8%. I’m sure one of the loons are calling 3%+.
There is no bubble in California!! just bubblettes.
according to:
Jack Kyser, chief economist at the Los Angeles County Economic Development Corp., noted the contrast between the California market and the national one.
“There are definitely bubble markets nationally,” he said. “We have bubblettes in California - folks are worried about Sacramento and the Central Valley - but we don’t have anything like Las Vegas or the Florida condo market.”
Kyser said two factors were keeping California housing relatively strong.
“Our economy is doing well and the population is still growing,” he said. “The demand is there. Yes, it’s a shift to a buyer’s market where prices may flatten some, but anyone looking for a blowoff like the early ’90s, forget about it.”
http://www.sbsun.com/business/ci_4550654
lovpunani
- ‘but anyone looking for a blowoff like the early ’90s, forget about it.”
Hey Jack
Tell that to my neighbor who was just forclosed on!
Yea, Jack A$$ Kyser. Pimp some more Crap A$$ Downtown Lofts for your Bunker Hill Masters!
Yea, I think this guy is way off base I had an interesting conversation yesterday with a guy who specializes in Downtown lofts for a living. In short Downtown is not going to turn out like they thought. It’s going to be ugly shortly. We’re just lagging behind the rest right now.
Your not kidding. Downtown? They put fresh lipstick on that pig every twenty years and trot it out. Usually at partial taxpayer expense. This time they were WAY behind the curve! I bet it’s gonna be a disaster…. I mean at least Downtown SD is close to the water to blow the smog away and provide views. Figure it out!
Si. The population is growing. Too bad for the housing sector its mostly imigrants that don’t have money to prop up this debacle.
I was diagnosed with bubblettes, doctor told me to put some cream on it and quit traveling to bangkok
“but anyone looking for a blowoff like the early ’90s, forget about it.”
You may all add your own jokes to this statement. It’s just too easy pickings for imploder.
Oh, Alright….
What not the “Bon Vi-vivant” we once were?
The economy is relatively good because there are still a lot of jobs in the construction and real estate industries that haven’t been cut yet, but almost certainly will by the middle of 2007.
California has agriculture and technology as its two exportable industries. Agriculture doesn’t pay a decent wage to most of its workers and technology is rapidly being outsourced. Everyone else is pretty involved in a service-sector job of some sort whose customer base is mostly located within the state. I expect that a lot of industries (particularly health care administration, which provides a lot of relatively high-paying jobs up here in Sacramento) will be sent to cheaper areas of the country or oversees.
The California economy is superficially strong, but highly susceptible to widespread instability because of its internal structure. When there’s a recession (probably precipitated by the housing slump, but it might still be a few years away), it will spread rapidly and be felt quite acutely.
Most projections (even many bears) seem to look at what needs to happen to housing prices to make them affordable again to median incomes. What many people are missing, is that affordability is a moving target: if real wages suddenly drop 10%, then homes will need to drop an additional 30% on top of the 30-40% drop necessary to make them affordable at current wage levels.
Let’s take the figure 10% fall in median home price at face value (although I’m sure that its understated by at least 50%). That means we still have another ~50% to go if I’m right about the vulnerability of the CA economy.
If we were on a cross country road trip from SF to NYC, then we’d be in eastern Nevada coming up on Utah. We just got through the Sierras, but we still have the Rockies to take on–but all we see for the moment is a long stretch of desert. If one’s not familiar with the terrain, he might think that he’s past the toughest part. But in reality, the Rockies will prove to be a much tougher challenge. And after that hurdle he’s got a long way to go on flat, unremarkable plains.
Buckle up, because this journey’s just gotten started.
Well put Walt.
Someone once told me that “unemployment is not a problem until you are unemployed”. As you aptly described, those on the desert right now don’t see a problem and will not until they find themselves climbing the much larger mountains ahead.
I see it coming down to two phases. The new homes and the resale/distress sales. New home prices will move downward first because they can move more easily with the margins. Next, as prices stay flat and resets occur folks who will not be able to refi out of nor afford the new reset payments and those who must move for various reasons will put additional downward pressure on prices. The exposure of all of this in the MSM and the web may also mean that the pool of GFs will be pretty dry. Couple that with the number of people who bought before they would have because they were afraid of being “priced out forever” and it just does not look very good for the next year or two at least.
Like you said, Buckle up …
Nice analogy.
The Rockies in Summer 2007, Great Plains and Midwest in 2008-09, and the Appalachians in 2010.
No he’s right. There are only two areas in California that are truly bubbly. The northern half and the southern half.
“Our economy is doing well and the population is still growing,” he said. “The demand is there. ”
As I recall from Economics 101, the level of demand varies according to the PRICE. And at this price, the incentive to provide supply is much greater than the incentive to provide demand.
And that my friend is what causes real estate, and business in general, to be cyclical. High prices create over-production. Over-production creates falling prices. The market corrects itself out. Rinse and repeat.
“Regionally, sales rose 24% in the West.”
How did that happen?
From CNN money-
Five Bubbleproof markets: 1. Boston, 2. San Francisco, 3. New York, 4. Los Angeles, 5. Seattle.
I guess everyone wants to live in these places and there is a shortage of land. Prices don’t matter.
They’re not bubble proof but I believe when it’s all said and done, they will decline less than other areas which are not so interesting to live in.
I would take Boston out of that group though and perhaps substitute San Diego.
San Diego should be listed as bubbleproof? Good one.
I would say Orange County instead of San Diego. OC prices hasn’t gone down sqwat. Median SFH is 700+k….what a joke.
The whole list is a joke. I can’t believe the media comes up with this stuff. These cities have all had huge RE run-ups and are loaded with toxic mortages. The affordablily is terrible. They are the definition of bubble cities.
change name to reflect accuracy:
CNN Money= CNN Funny
But places that are interesting to live in can’t just get increasingly interesting to live in ad infinitum. It has to be that they will become even more interesting to live in relative to other places, or that the housing stock is of superior quality (quality holds up better in a decline). I’d say San Francisco fails on both counts.
By the way, “interesting” can mean a lot of things - like dodging bullets, fighting traffic everyday, finding the dough to pay your property tax bill - all those are “interesting” pursuits.
I guess everyone wants to live in these places and there is a shortage of land. Prices don’t matter.
Yup, they’re different!
CNN is also telling people to invest in Florida real estate. Look at their “10 best places to buy a house” list. Half are in Florida, which is taking a real mud bath. Anyone who gives any credence to CNN, or Moody’s, or Greenspan is a jackass.
I’m not surprised CNN said this; Boston is a joke, down 20% (at least) from 2005 peaks.
Even now I’m seeing more “for sale” signs and I thought it was impossible to INCREASE the numbers from six months ago.
New York is bubble-proof? LMAO. I have people here tell me that, too. I guess all of those meltdowns of the past are history. Things that could un-bubble-proof good old Manhattan.
1) A glut of inventory - they are currently building the heck out of the city. If you run out of land just go skyward and don’t stop until you hit the sun. Condos are going up everywhere.
2) An economic downturn - boy do we have the mother of economic downturns coming our way. The housing meltdown will ensure that.
3) Less easy money - they are working on tightening lending standards as we all blog.
4) A major Jihadist attack - I think we all know the possibility for that in New York City.
Yep, Manhattan is bubble-proof. So are the surrounding sh@thole areas that have appreciated by 100% in 3 years. Nothing to see hear.
From the report- “Regionally, sales rose 24% in the West and rose 6.9% in the South. Sales fell 35% in the Northeast and dropped 6.3% in the Midwest.”
Sales cratered 35% in the Northeast but where? You have huge populations centers within those limits. Boston, NYC (and all of LI &CT), Philly, all of NJ, Philly, Balto, DC… I’m guessing DC is weighted very heavily in that 35%.
David at bubblemeter.blogspot has a good anectdotal post:
http://bubblemeter.blogspot.com/2006/10/unsuccessful-condo-projects-in.html
New home sales for August were revised downward from 1.05 mln (annualized) to 1.02 mln. That’s a 2.9% drop. So the 5.3% rise in September sales is really only a 2.4% gain relative to the numbers that the stock market had previously “priced in.” And that 2.4% gain is virtually guaranteed to be erased when the September numbers are “restated” next month. What a scam!
Turd polishing complements of the very best turd polishers at the commerce dept; of course the market is going to enjoy this new shiny treat!
Smoking cigars at country clubs, hidden away in private rooms in past era’s the same things were probably discussed: all the frauds and the fraudsters of the time. This time through the internet and Ben’s blog, the average guy has been able to stand on almost equal footings with the big wigs when it comes to access to information.
This is the key. The world is no more corrupt now than 100 or 1,000 years ago. Look at the insider trading that made fortunes in the 20’s (not naming names). It’s just that with the internet and blogs, we get to see how ugly the sausage-making process really is, rather than just the nicely packaged end product. We don’t have to read about it generations later in dry history books, we see the carnival of duplicity and self-dealing in real time.
Arlingtonva, you are right about that. Increased information for average joes like us will make a difference this time. Not a big difference like major money players can leverage, but more people this time, exposed to more information through the Internet like this wonderful blog, will make a difference in the overall results.
In a way, you are seeing that increase in information diffusion by how rapidly the market has slowed over the last three monts. It’s truly amazing to watch in real-time; these kind of massive economic changes historically take much longer to appear.
But there will still be a lot of FBs out there; it’s a really big country and there are a lot of idiots in all parts of the US. Be glad by reading this blog (and comment) that you are not one of them.
A month ago, July’s new home sales numbers were revised by -5.9%, from 1,072,000 to 1,009,000. Today, they were revised to 984,000. For a total downward revision of 8.2%.
http://www.xanga.com/russwinter
“‘There isn’t anybody on the Fed considering lowering rates, and the Fed knows if you were to raise rates now you could turn what is a reasonably orderly decline in housing into a rout,’ said Lyle Gramley, a former Fed board member.”
If current housing market conditions for new homes sales don’t amount to a rout, I wonder what a real rout would look like to this guy.
I think the real rout is in existing home sales. New home builders still have pricing flexibility.
Most existing homeowner FB’s don’t have the luxury of being flexible.
“New orders in the Southeast fell the hardest, down about 50 percent. ‘The operating landscape for new home sales remained challenging during the third quarter, as high inventory levels, affordability issues, elevated cancellation rates and a general lack of buyer confidence continued to weigh on new home demand,’ Richard Dugas Jr., Pulte’s CEO.”
These remarks contradict what the commerce dept reported: “Regionally, sales rose 24% in the West and rose 6.9% in the South.”
Won’t somebody please think of the math? A 9.7% reduction in prices only brought about a 3.8% increase in sales. I think we can learn a lot from this comparison.
Yeah, that is exactly the kind of price-demand behavior I’m observing. It’s a very steep demand curve, is’nt it?. What’s more, the sales uptick might not be real; it might actually be negative after revisions.
Comment from Thousand Oaks, Ca: There were 3 properties for sale on my street in the last 2 months. One looked like a flipper which didn’t sell and reverted to a rental. The rental sign was up for about a month but has since gone so I suspect it was rented. If it was a “flipper” it was badly done and on the cheap. The place looked like a dump. Another property sold for full price in the $620,000 range but I think the buyers were greater fools who were suckered in. It is in a cul-de-sac, backing up onto a very noisy high school, etc.
In this area, properties were selling at the peak in the range of $650,000 to $700,000. The other property was on the market for $625,00 and has now sold for $585,000. The seller was moving to North Carolina and very motivated but I heard it was in escrow for a fairly long time, needed some “fixing” and was bought by a family who sold their condo in SF Valley because they wanted a SFH. I’ve also noticed a lot of new SOLD signs in the surrounding area but in other areas many of the FOR SALE signs are still there. I assume these are the ones who are holding out, hoping for top dollar.
Which brings me to Easy Al Greenspan and his stupid hype remarks. It still comes down to the same-old-same-old. PRICES ARE TOO HIGH FOR AFFORDABILITY. Take the people who moved from the SFV into the SFH. They already had a property which probably had equity. They simply moved and “upped” their mortgage. At the current prices ‘new buyers’, that is those who have not owned property for several years, cannot afford to get into the market.
Property will only “bottom out”, when those who have never owned property can afford current prices. Thus, the property market will return to what the realtorwhores call “normal” when the average person can afford to pay the mortgage. Not the toxic loan variety. We have to return to the old, “Okay, you give me a down payment of 10% (varies) and if your numbers check out and your credit looks good, we’ll give you a 30 year mortgage.” When that happens, “normal” will have arrived. Until that happens, the bottom is NOT in. I still expect prices to become normal when the 2001/2 valuations are reached. How will we get there? The re-setting of toxic loans will be another blow to property valuations and it looks like we are moving into a recession. Todays numbers for “big ticket items” are fake. Most of the big gains were reflected in aircraft orders NOT for cars, tv’s fridges, etc. Also, there is a massive (and I do mean massive) build up of vehicles for Ford, GM and Chrysler. In a recession, people do NOT buy big ticket items…..and that includes property. Time frame of the “bottom”? No change from my last prediction. 2008 and possibly into 2009.
The only thing keeping housing to revert to fundamentals was a change in psychology–that change is occuring before our eyes.
Great posts Mike, keep your eyes on fundamentals, and you’ll see where the market is going.
“Former Federal Reserve Chairman Alan Greenspan said on Thursday the U.S. economy was pulling away from the shoals of a sharp housing-sector downturn. ‘Most of the negatives in housing are probably behind us,’ Greenspan said.”
Is the REIC paying his speaking fees these days?
He’s still covering his own butt. The seeds for this were sown on his watch. The more time he can buy until it cracks up the more likely people won’t blame him for it.
Anyone know what Oregon is doing Housing price wise?
Easy Al is fighting to preserve his reputation, which is only going to go down, it’s like President’s the ones’ who leave with stirling reputations have that reputation suffer, whereas the ones’ who leave in disrepute end up wearing a halo…….Easy Al left as the Maestro and will be eventually crowned as the Meat-head……the only eventual conclusion to excess liquidity is inflation, in monetary aggregates or real assets…..either way, eventually rates will rise….or nasty levels of inflation will embedd themselves in the economies fabric…….
Greenspan is first and foremost a banker.
He will not do or say anything to negatively affect that industry.
Saying negative things about housing could cause a lot of harm to banks and lenders holding mortgages.
First of all it is not Greenspans fault although I would like to blame it on him for what he has done. STUPID people doing STUPID things like buying homes they could not afford. Their greed to purchase with funny loans only gave them access to money that they could not get on a credit card. The same irresponsible dumb sheople ,i’ve got to have it now people, went out and got themselves in a real mess that we will all pay for in one way or another. A few of us that can think and position them selves properly will greatly improve their financial position in this world by living prudently and taking advantage of the rough times ahead.
Here is the main cause of the Real Estate Collapse. Individuals who work the banking system for their profit, and use unethical practices are the root cause of this whole mess. Example, someone buys a home for say 300,000 waits 1-1/2 years refinaces for 475,000. Now say this individual has 175,000 in Equity Line of Credit, and uses this to purchase a smaller home using this credit line. So now they have paid cash for the second house. They pack up move into the smaller house and walk away from the first one because the dont care about their credit. This leaves the mortage companies and now everyone holding the responsibilitiy. Their are millions of homes in this country that were deceitfully accuried in this matter. The vast majority of these where done by unethical immigrants that careless about this country only thier personal gain