“It’s All About The Pipeline”
A housing report from the Idaho Statesman. “The inventory of vacant single-family residential construction lots and unsold speculative homes rose dramatically in the third quarter of this year, according to a recent survey. The survey’s author and veteran Treasure Valley builders believe the increases will provide potential home buyers with more options, which in turn will help drive area home prices lower.”
“The survey, by a local Web site that tracks new subdivisions, vacant lots and unsold spec homes in the Valley, showed that 7,740 lots got preliminary approval in Ada County during the third quarter, bringing the total number of available lots to 25,883.”
“Recent industry statistics show that the drop in area home sales during the third quarter shaved 3.5 percent off the median price of an Ada County home between July and September. The median price at the end of September was $240,000.”
“Wayne Forrey, director of development for Kastera Homes in Eagle, said the growing inventory of building lots and unsold homes means the turnaround for the home building industry will not be immediate. ‘It’s going to take a while to absorb all of that (inventory),’ Forrey said. ‘And the high end housing market will be slowest to recover. We have a disproportionate number of homes priced over $300,000. But we don’t have many buyers at that price range.’”
“The Treasure Valley area housing market will remain strong as long as Idaho employment growth remains among the strongest in the nation, said Don Hubble, owner of Hubble Homes in Meridian. ‘Another problem is that most of the jobs being created are in the $35,000-a-year range, which are not top-paying jobs. And that is going to limit the parts of the market that people can afford,’ he said.”
The Morning News from Arkansas. “After a five-year bull run in area residential home construction and record real estate prices, the latest evidence suggests a construction correction is underway. The University of Arkansas report found that while the housing pipeline remains clogged with an oversupply of unoccupied homes, the overall number of building permits dropped more than 60 percent in the year-over-year quarter.”
“Rogers saw the biggest decline with 305 permits in the third quarter of 2005 dropping to only 71 in 2006, a drop of almost 77 percent. Permits for Fayetteville and Bella Vista also fell sharply by 125 percent and 122 percent, respectively.”
“One factor seen as a step in addressing the oversupply of upscale housing inventory was the declining average home value for the permits issued. A year ago, Bentonville’s home value permits were priced near $225,000. More recently, the permit averages are for homes priced at $177,000, according to the report.”
“Rogers saw home permit values drop by nearly $50,000 to an average of $162,734 in the most recent quarter.”
“Kathy Deck, associate director for the Center for Buinesss and Economic Research, said the present oversupply is a result of too many builders in the game. ‘While builders may only start a few projects at time, the present abundance is an aggregated effect. There have been so many houses completed that even our strong growth can’t absorb them all,’ she said.”
“‘While there is a public perception of greedy sellers, we have found that many times it’s just a matter of what they have invested in the property,’ (realtor) Austin Bivens said.”
“Some sellers have reduced prices in their homes with values over $300,000, he said. ‘I have seen more than one seller cut the price to move the house and then have had to take a check to closing to make up the shortfall,’ he said.”
“Bivens said more recently he has witnessed a tightening in appraisal values under the direction of local lenders. ‘I had a contract with a buyer, but it didn’t close because the appraisal came in too low. I relisted the property and quickly got another buyer and again the appraisal was short. On the third try, I finally got the deal closed.’ Bivens said.”
“Tightening appraisals produce a forced price reduction. Property can’t be sold if the bank says it’s not worth the asking price, he added.”
The Arkansas Democrat Gazette. “The increase in the number of completed but unoccupied homes in Benton and Washington counties is part of a booming building cycle that will continue for the next six months, the lead researcher on the Skyline Report said.”
“‘It is all about the pipeline,’ Kathy Deck said. ‘But we are beginning to see the market forces do what we were expecting it to do,’ she said.”
“The inventory of unoccupied houses rose most dramatically in Benton County, where an increase of 229 percent to about 2, 200 was reported in the third quarter of 2006 from the same quarter of 2005.”
“In Washington County, the increase was only 17 percent, or about 600 in the third quarter of 2006 compared with the third quarter of 2005. There were 2, 956 unoccupied houses reported in both counties.”
“‘Yes, there is an oversupply, but we are seeing a lot of activity,’ broker Meza Harris said. But the general price of some houses is down, Harris said. Harris said the phenomenal growth of housing prices and demand over the past two years has become an accepted, and expected, perception of Northwest Arkansas. ‘We’ve gotten used to the success. We just got spoiled,’ she said.”
“‘That is, of course, what inventory does. It drives down prices and puts more pressure on all the market’s properties,’ Deck said. ‘That is the market at work. And that is true in most economies, not just in real estate,’ she said.”
“The number of new housing starts dropped to the lowest point recorded in the two-year study, to 204. The number of lots approved for active subdivisions in the third quarter was 19,543, meaning a supply of lots sufficient for 112.9 months at current market demand.”
‘the phenomenal growth of housing prices and demand over the past two years has become an accepted, and expected, perception of Northwest Arkansas.’
But there is no national bubble…
more commentary from ben lately, getting ready for that book?
‘Some real estate forecasters are predicting that, even with the recent reports of a downturn, Boise will be the number one market in the nation for appreciation in the housing market for 2006. Homes being built right now in Boise suburbs will soon need better access to the valley’s main arteries. Without it, at the current rate of growth… ‘The system would crash, to be blunt,’ said Matt Stoll.’
‘ In the meantime it’s ‘all systems go’ for the valley’s housing boom. And for builders like Michael Kuhn, building well beyond 2020. ‘Bring it on! We’ll be building houses!’ said Kuhn. ‘
I go to foreclosure.com and watch the numbers. They have been going up consistently all year long. I logged on today to find a new feature, they list the number of auctions. You can also view the live auctions and with a drop down you can pick the county to view, FL is 2 of the 5 on the list. If this isn’t a sign……..
Here is the link
http://www.foreclosure.com/
Arkansas? Idaho? Idaho has fewer people in their 82,747 sq mi than Sacramento County has in 966 sq mi. These flyover areas just aren’t worth the effort to track. Don’t get me wrong, nothing against Idaho just that there isn’t going to be anything worth noting that isn’t repeated 200 times over.
I disagree. it is important to have a wide spectrum of the country. As mentioned by numerous publications, the Southeast is the fastest growing chunk of the country. The fastest growing cities like Atlanta, Nashville, Raleigh, Durahm, and so on are all in this region. On top of that, cities like little Rock Arkansas have grown dramatically as well.
They grow because they are still, even with the current bubble- some of the cheapest places to live in the country. There is a tremendous in-migration of mainly bubble state ex-patriots streaming into this region. I would say the current run up in localized prices in the SE are due to the influx of new people- many who probably have no idea what the economies are like in these regions, and probably bought site unseen just because the houses are cheap.
Despite being about 1/4th the price of places like Cali, these areas too are starting to slow. You would think it would be the opposite. By showing places like Arkansas slowing, you get the very clear picture that the RE bubble was national, and even areas off the radar like Arkansas are being affected by the slowdown.
I’m with jetsonboy
True - I know people who are leaving Arizona to go to Oklahoma or Georgia, where houses are cheaper. 10 years ago, if someone told you they were priced out of Arizona, you’d ask which newspaper they delivered for a living - was unfathomable. It’s bubble spillover.
I know of two realtors that just left Arizona for Lincoln, Nebraska. They just set up shop there.
They won’t find Lincoln an easy sell - too many houses for sale and too few buyers. Probably like Arizona, only smaller scale.
And Lincoln has those mild winters as well.
many who probably have no idea what the economies are like in these regions, and probably bought site unseen just because the houses are cheap.
Throw in their ignorance of mortgages and finance and it’s no wonder everything is the way it is.
The problem here in Atlanta is the following:
1. Overbuilding - mainly a suburban problem, but it indirectly affects intown.
2. Migration in continues, lots of FL, Northeast, Mich, Ohio, La. plates…but those people have to sell their houses.
3. Psychology is now negative across a larger spectrum of the population…particularly amongst those trying to sell their old homes to move here (even if they sell, it’s an ordeal).
4. Foreclosures in some areas are high….though notably, there are few in other long time established upper middle class and rich areas in town. My zip 30306 has a few bankruptcies..but virtually no foreclosures.
5. I still wonder what all of these 5 million people do? I mean we have some good jobs across a broad spectrum, finance, small manufacturing, high tech, medical, univs., state government, transportation and distribution. But not that many. Some NY finance has geographically diversified here post 9/11 as well. Auto mfg closing…perhaps Toyota will buy one of these?
Fast growth caused by cheaper housing is only part of the story. All of these cities (Atlanta, Nashville, Raleigh, Durham) have the trappings of high growth cities. They have schools and tech and airports and jobs and unique cultural and professional mixes that include bobos and misfits among others. Places where people want to be and feel they can succeed grow. Having the housing available is only just an aspect of becoming a destination.
they are very worth tracking to dispel the myth that there isn’t a national bubble. or that certain areas should rise because they’re nicer than others. it strengthens the notion that there is a national bubble driven by low interest rates and the perception that prices will keep rising.
John Law,
I feel like “Professor Bubble” today but what else did everyone also have access to besides free money? Uh huh, that’s right, that’s right, tax free gains! Buy, sell, trade! In fact it’s even more universal b/c fico scores vary from state to state but “cap gains exemption was bad, it’s nation-wide”!
In fact it’s what I’m going to call my band!
The Cap Gains Exemptions!
We’re Bad, We’re Nation-Wide!
“‘It is all about the pipeline,’ Kathy Deck said.”
Lady, with real estate right now it’s not “all about pipeline”…
It’s all about getting “piped.”
It’s all about getting “piped.”
Good one! And so very true. Your wit continues to impress me, not to mention cracking me up.
imploder,
I don’t mean to correct like a professor of profanity but there is a certain decorum that needs to be respected here. It’s proper use would be “taking the pipe” (not to be confused with) “taking the gas pipe” often referred to in a failed suicide attempt.
If you want to get picky, it should have been “its” not it’s.”
“it’s all about the pipeline”
and here I thought we were all going to retire and move to the North Shore
“It is” becomes “It’s” in its contracted form.
“Its” shows the possessive form.
It’s mine because I paid highly for its beautiful location.
Right?
- (:
DinOR
It is always about laying pipe.
CA Guy
imploder is my name, stupid is my game.
There is a piture in Ben’s bubble gallery of vacant new construction homes in Arkansas. Decent looking brick construction, but it says they are $500K. I have never been to Arkansas, but that sounds incredibly high, especially after seeing these articles. Who is the heck is going to buy these? The Clinton family? If not, someone is going to lose their a$$. Unbelievable, the locales this bubble has touched. Like Robert Cote says above: “Arkansas? Idaho?” I am not knocking either state, but has this nation finally lost its mind completely? The numbers do not work! Why are we the only ones to see this???
I saw those, and they are just a few pics into the gallery.
Nice enough looking homes, but $500K? They must have been built for doctors and attorneys. After 20 years under Greenspan $500K must not seem like much money to most people.
More evidence that people have completely lost their minds… Take a stroll to Carbondale IL (a place way, way off the beaten path, 250 miles south of Chicago, a university town where only the professors & the downtown landlords could afford a SFH) Where the students live in trailers (I did when living there @ college in the late ’70’s) On realtor.com there are 17 homes for sale > 300K 1 for 1.25 Million! This is NUTS
IllinoisBob,
My buddy went there in the late 70’s too. We went down to visit and he lived in an old single wide and before we left we hung a sign on the trailer park that read “Starvation Acres”. Sheesh. I have nothing against southern IL, a lot of fine people there. I can’t see the whole county being worth the value of those combined listings though.
Believe it or not, people in places like Idaho think that “everyone wants to live here.” Open land, mountains, few people, clear air, friendly neighbors, what’s not to like? These kinds of people (me included) could never stand California and can’t quite understand why anyone else would either.
Of course, not everyone wants to live that way.
People in Billings (Montana) frequently tout it as “the next Boise.” Hey, it’s something to shoot for.
The ‘everyone wants to live’ here delusion always gets me. If everyone wanted to live there, why are there so few people?
Living in CA is not for everyone, nor is NYC, nor Phoenix, nor any particular place. The ‘everyone wants to live here’ line is one of those relator feel-good lines, and a corollary to the ‘they’re not making land anymore’ axiom. Pure BS.
‘The Treasure Valley stretches from Ontario, Oregon to Mountain Home, Idaho with an estimated population of 600,000 people. As one of the fastest growing areas in America, the massive migration over the past 15 years has changed the complexion of this region forever. But what will this continued growth do to our area by the year 2020? That’s when an estimated 800,000 people will try to live and work together in the Treasure Valley.’
‘There are many, many developers looking at Boise, it is a prime market everybody sees that as the next Denver, the next Seattle,’ said Community Association Director Keven Burnett, Stapleton, Colorado. ‘Right now we have a number of planned communities in for application around Ada County,’ said Armstrong. So people don’t mind homes being so close together? Asked NewsChannel 7. ‘No people like it because it gives a general a sense of community,’ said Burnett.’
Check out the picture of the houses packed in like sardines about half way down the page.
Ben,
I’m sorry I just find that very difficult to believe. 600,000 people there now? And another 800K on the way? Are we talking cattle or people here? Are we counting all the Portland/Seattle folks that spend w week out of the year there? Please see Tango in Uniform post above.
If 3.3% of Californians moved to Wyoming next year, they would triple its population.
And that STILL leaves the state 97 % un-occupied.
Or as dad used to say;
Nothin’ times nothin’ is STILL nothin’.
Wyoming’s population is only slightly larger than that of Long Beach, California.
I have to contradict to the axiom ” they are not making land anymore”. They are making land, the different migration reasons are cleaning up big chunk of areas from one type of population and bringing other type of population to its place.
See many “anglo” Californians are moving to Northern States, leaving their sunny beaches, after the “quality of life”. In Los Angeles South Central Los Angeles growing fast and soon will reach to Beverly Hills in west and Orang County in South. Demographic and ethnic changes in population will result in socio-economic changes in California and changes in housing prices.
As you can see ” they are making land currently… “.
Tango,
Could you please re-post your link to the study you conducted on the Billings market here quick before I blow chips?
Sorry, here you go:
Billings Housing Market
More data, video, and analysis at the end of this month!
Yeah … it’s like Arkansas is the next Kentucky.
When will the madness ever end?
I grew up just north of Idaho (in Canada) and frankly we wondered why anyone wanted to live there at all. Idaho was best know for “communities” like the Aryan Nations and bad roads. And anyway, where people want to live is somewhat beside the point. People go where the jobs are. And what exactly are the good jobs in Idaho?
By the way, is “Treasure Valley” the new euphemism for Snake Valley?
Just once I’d like to see real estate speculators apply an honest name to a region: instead of “Inland Empire,” how about “Smogistan”? “Treasure Valley” would be “Welfare Valley” (though “welfare” itself is a euphemism - so maybe “Deadbeat Valley).
“Believe it or not, people in places like Idaho think that “‘everyone wants to live here.’”
This just shows the magnitude of the problem. Everybody thinks a wave of people are coming from somewhere else to fill this fictional demand. People got seduced by all the disintermediated mortgage money coming into their areas. They figured prices are going up so the houses must be worth more. It just turns out there’s a savings glut looking for a home. Oh well, easy come, easy go.
Not Chelsea…she’s working for a hedge fund.
“’Arkansas? Idaho?’ I am not knocking either state, but has this nation finally lost its mind completely?”
The short answer is yes.
I met my first flipper here in SW MO the other day. He was holding an open house in a mini-McMansion just a block down my street. He looked and acted DESPERATE. He has placed a pathetic hand-written sign all over town that says “4bd 3bd house for sale, bad credit no problem!!!”. I asked him who could afford that house (priced at $190-$225K depending on where you read about it) that had BAD credit? [Anything over $150K here is considered upper crust.] He said a doctor or dentist who got a divorce and the wife ruined the credit. Well, that’s a narrow market if you ask me, especially HERE in a town of 4000 people in farm country.
The house has the worst possible layout including a living room with no place to put a couch or a TV (it’s really a large foyer) and steps down to the lower level (with rec room, bedroom and bathroom) that do not have clearance for anyone over 6′ (my nephew is 6′6″ and he checked it out). The exterior has 5 different surfaces - (fake?) wood, fake brick, fake stone, stucco and metal siding! I guess you could see the glass as half full here and say it has it all.
Anyway, I could tell the flipper was desperate and this has been confirmed by a neighbor whose husband is in the construction business. She said this flipper partially bought into the house with the the builder expecting a quick flip — they have two mini-McMansions for sale — the other one is just a few houses from the first; they have a $5K/month builder loan and they are running out of money.
We are about 100 miles north of Fayetteville, AR off I-44 in SW MO.
Ozarkian,
I hear you on the McMansions. The facades are usually ugly beyond description (i.e. your 5 different materials, most likely fake). For their square footage, the interior layout is often nonsensical. A very inefficient use of space. I don’t know who draws up plans for the builders, but if they are architects then they should be ashamed. If they belong to AIA then their certification should be revoked.
Not only 5 different materials, but 5 different architectural styles. Drove by one in VA a fer weeks ago. Colonial structure with Italianate railings, Flemish roof, and classical Greek columns. Simply brutal.
So how was your visit to Monticello?
LOL! Yes, Monticello is a combination of styles. A good architect can get away with that. A mater architect can make it into its own style.
http://en.wikipedia.org/wiki/Jeffersonian_architecture
Hack architects makes it Frankensteinian.
That would be ‘Master Architect’
Don’t forget that “french quarter” influence w/fake wrought iron flower baskets (only on the front) of course!
I don’t know who draws up plans for the builders,
In their arrogance, a lot of the contractor’s do it themselves on the back of a coffee napkin.
Try bein’ the appraiser who walks into one of these places and says WTF????
And then bust the cost to construct by 50% due to incurable functional obsolescences.
Then these morons go positively nuclear when they get wind of the appraisal, and immediately call the bank, to say, “You better never send that POS appraiser to ANY more of my “f*cked up” houses. (italics mine)
LMAO…The disaster has only started.
LMAO. Hd, you are probably one of the few remaining appraisers who even knows what functional obsolescence means. As you mentioned, the others probably got fired already.
You know, if I was evil I would call this guy up and pretend to be a dentist whose wife ruined his credit and offer 10% above his asking price. Then I would string him along for a few months while he turns down every other offer that comes his way.
No, if you were evil you’d simply think of doing something like that…
Am I still evil even if I’m only repeating what my Rice Crispies say to me?
“The exterior has 5 different surfaces - (fake?) wood, fake brick, fake stone, stucco and metal siding!”
Followed by…
“She said this flipper partially bought into the house with the the builder expecting a quick flip.”
At first I thought that this house had had some unfortunate additions over the years. But if I understand correctly, this house is new? It is unbelievable that someone would intentionally design a house with five different exterior surfaces. And even more unbelievable that someone else would jump to buy it.
In some ways your example flip says more about the insanity of the housing bubble than any of the “suicide” mortgages do. I mean, you have to do math to figure out your mortgage. But you just have to open your eyes and look to see whether a house is ugly.
the said thing about fake demand is that it was fake demand for the largest homes possible. we’ve built huge homes on phantom demand. as we’ve discussed before, these huge homes have big fixed costs. heating bills(just in time for peak oil). the bills to furnish the homes. the need for a pool. up-keep and snow removal/landscaping. not to mention if you own one of these you have to look the part- two hulking SUVs, the clothes, watches, jewelry, boat and etc.
Can you submit a photo, sounds like a winner for out collection
Yes, I took photos. I will post them along with the horrible sign. I don’t have photos of the interior but believe me, it makes no sense. I didn’t even mention that the house has 4 levels each a few steps up (or down) from the next. And it is only 2,200 sq feet. I boggles the mind that one house could have so terribly many design flaws!
OT: Was talking yesterday to a guy who works at Target. He told me that this holiday season Target will now accept 2 credit cards to cover 1 purchase. In other words, don’t have $250 on one card, but $125 on 2, no problem, run them both through. Also, told me that hardly anyone uses cash or check anymore. All store credit or credit cards. And we all thought the American consumer was dead in the water. Really, they are zombies that keep coming back to life.
I rarely pay with cash or check. I send checks to cover my car insurance, cell phone, utilities, etc. and use my debit card for everything else. I only use a credit card when needed and it is paid in full when the bill comes. Typically, my CC debt is $0 each month. Unlike most, I don’t spend money I don’t have.
I know a guy that puts everything on his cards and has his customers write checks to the CC company. He doesn’t show much income at tax time.
Why would someone use cash, even if they had it? I pay with my credit card for just about everything. I then pay the whole bill at the end of the month. Lots of people do that.
Josh
I pay EVERYTHING with AmEx credit card and timely pay balance every month - and get about $500 cash back/year. Not bad.
I agree. After years of using plain old Visa Platinum, I am going to start doing something similar, except for air miles. If you have the discipline to pay it off each month, then it makes sense to get something in return for your purchases. That being said, I doubt people like us are in the majority.
CA Guy,
I love when people cut up their CC cards after they get out of debt. The card didn’t jump out of your pocket. Blame yourself not the card. I charges everthing and use and use online checks to pay the CC bills.
I’ll do you one better! We get money back plus I use the 0% offers to buy CDs.
Yum. I love living off the stupidity of others.
Interesting. I tried that once, but the CC company wanted a whole lot of “credit references”. I don’t have any. Just my large Merrill Lynch account. Eventually they accepted that fact, but then they screwed up a bunch of other details. At some point I said, “Take your 0% loan and shove it ! You called me, I didn’t call you !” Perhaps you just have more patience, feepness. BTW what does “feepness” mean?
These 0% loans are fraught with risk….like being late by 1 day with a payment and then 29.9% interest. Check out the fees and the term as well.
You gotta be careful and I when I get busy with other stuff I usually throw in the towel and just pay them off so I don’t forget. The thing is they are including automatic payments nowadays so that’s less of a worry but you MUST make sure there isn’t a 3% upfront fee!
“Feepness” is an obscure reference to an video game from the 80s. It doesn’t get used and so I’ve always just grabbed it.
Credit card company research shows that people who pay with plastic spend 10% or more for purchases compared when payed for with cash. I use credit card for plane tickets, hotels & rental cars only. But hey I’m not getting rich like all the other smart credit card investors.
I thought retail stores could always do that. I know we did it when I was in retail, though we preferred not to (because it was a hassle).
Sometimes people would come in wanting to split it up, so we obliged. Why they wanted that was not our problem.
However, one of our less-than-ethical salesman would even suggest that to customers who got their charge turned down; back in those days, anything under $50 we didn’t have to get an approval for — so what if you needed three charges to pay for it all. He never got called in for it. (He was our best salesman.)
I worked at a grocery store throughout college, and we always had the ability to use two CCs for exactly the same reasons you state. Target must have had an antiquated system. Honestly, I’m surprised stores still accept checks. At the grocery store I was always shocked at just how many came back insufficient funds.
CA Guy ” I was always shocked at just how many came back insufficient funds.”
At some places, they run your check thru a machine and hand the cancled check back to you on the spot. Just like a debit card, your money is gone… bye, bye…
The first time I was asked if I wanted to split a bill I was shocked. I just looked at the cashier as I readied to swipe my card… I finally sputtered, do people really need to split a $300 bill?
Apparently so…
Like the others above, every month I pay off the bills. I haven’t written a check in months though. My bank does free e-payments.
Neil
save the 39 cents too… I remember “the good old days” when bills came with return envelopes with pre-paid postage. and I’m 29.
save the 39 cents too… I remember “the good old days” when bills came with return envelopes with pre-paid postage. and I’m 29.
Yes, they do.
I was vacationing in Bar Harbor, ME late over the Columbus Day weekend. Was in a crowded sandwich shop (excellent food!) so had to share a table with a couple from somewhere in the south.
While eating, their daughter calls, and they go through this song and dance about transfering money between their accounts because she can’t pay her bills, etc.
Amount in question : $25.
I rest my case.
Centex homes has been advertising 500K homes with nothing down and no payments until 2008. Then the other day I saw a tv commercial for a Home Depot credit card that allows you to pay nothing down on purchases over $125 until 2008. Allows a FB to be very happy in a nice, new furnished home for 14 months.
Two slightly OT things.
1. I finally got my wife to concede that it is not a good time to consider a house (thank God). BTW, thanks to “Suzanneireaserchedthis!” my wife really liked that screen name.
2. Bad news about two friends of mine. They moved to Omaha a year ago, and (don’t ask me why) they bought immediately. Now, they’re getting transferred BACK to Fresno (Fres YES! they say). Well, they’ve only had their place on the market for 3 weeks, and they’re already getting nervous, b/c they move mid Dec. Poor fools. I try to tell them to cut their losses given their immediate need. But alas, they seem convinced that housing is OK, no matter what I tell them, and they insist that they NEED to buy another house the minute they get back to Fresno. My sympathy for them wanes with each passing day.
Yeah, I’ve posted one article that described Omaha as overbuilt and overpriced. It’s what happens when prices get artificially high with no barrier to building.
But, remember, the bubble is not national.
But at least Omaha has a resident who COULD buy every single household a $280K house. (WB net worth - $44bb; Omaha est. pop. 414K, pop./household 2.6.)
You may have heard that he is a housing bubble believer and acted on it.
He generally spots the big ones. Like he says, he is often early in and early out.
I have rented my whole life (was hoping to finally buy a couple of years ago, but what with the prices here, so much for that). It is hard for me to understand how the idea of renting (even in the short term) somehow becomes completely unacceptable once people have owned.
“Permits for Fayetteville and Bella Vista also fell sharply by 125 percent and 122 percent, respectively.”
Exactly how do permits fall more than 100%? Are builders giving back ones they already have?
When price can go up 300% , sure ; someone figured out; it can come down by 122%!!
One need to know ENRON accounting and NAR math.
LOL
“When price can go up 300% , sure ; someone figured out; it can come down by 122%!! One need to know ENRON accounting and NAR math.”
Speaking of Enron, apparently many former Enron commodities traders are involved in hedge funds. They even talk about the fact that they were at Enron creating a positive mystique for them. Makes you really confident that all those hedge funds are run by smart and careful people who know what they’re doing.
from the WSJ
http://online.wsj.com/article/SB116346968528722257.html?mod=mkts_main_news_hs_h
Trading on the Enron Mystique
Enron Alums Join Hedge Funds, Trading Firms
My guess on the 125% decline is something like giving back permits they already have. Remember a few days ago some builder reported “negative 4″ orders for new FL homes, meaning that there were 4 more cancellations than new orders during whatever period was being discussed.
Active Trader Update
Housing’s Softness Has Long Reach
By Doug Kass
Street Insight Contributor
11/14/2006 12:01 PM EST
URL: http://www.thestreet.com/p/markets/activetraderupdate/10322060.html
The nearly uninterrupted and intoxicating rise in equities over the last four months has caused many normally sober market participants to underestimate the severity of housing’s downturn and to ignore the likely broad multiplier effect of housing’s hard landing on the economy.
The arm of the housing market is long, and the cycles (up and down) tend to be long, too. Importantly, the lag of housing’s negative influence (from the statistical peak in housing) is typically long, too.
At first, furniture retailers are immediately affected by the slowdown in residential activity — just look at the rotten charts and continued earnings guidance of furniture industry stocks like Haverty Furniture (HVT) and Ethan Allen (ETH) .
Then home remodeling retailers and appliance manufacturers falter — just look at the bad chart and profit guidedown at Home Depot (HD) . Ultimately, the effect that a hard landing in housing has on economic activity — and the lower home prices that it portends — broadens and causes a deep retrenchment in consumption (starting at Wal-Mart (WMT) ) , and its scope and impact, as seen by the residential fixed investment to GDP chart (below right), becomes all-inclusive.
The chart clearly demonstrates how atypically strong the recent up cycle in housing was by historical standards (topping 6% of GDP for the first time since the post-World War II expansion), how far we are from a bottom (in residential fixed investment), and it speaks volumes regarding the likely economic slowdown .
Earlier this month, Richard Fisher, the Dallas Federal Reserve’s President, explained the factors that contributed to the unprecedented boom in housing over the last six years.
In retrospect, the real Fed funds rate turned out to be lower than what was deemed appropriate at the time and was held lower longer that it should have been. In this case, poor data led to a policy action that amplified speculative activity in the housing and other markets. Today, as anybody not from the former planet of Pluto knows, the housing market is undergoing a substantial correction and inflicting real costs to millions of homeowners across the country. It is complicating the task of achieving our monetary objective of creating the conditions for sustainable non-inflationary growth.
Residential Fixed Investment to GDP
Click here for larger image.
Source: Guerite Advisors
Stated simply, too-low interest rates fueled the speculative activity in housing and stretched affordability, which has resulted in an ever-expanding inventory of unsold homes. Today, a record level of builders’ unsold inventory (including homes not started, homes started but not completed and completed home inventory) coupled with the residue of speculators’ unsold homes speaks to a hard landing in housing, despite the protestations of many.
It is no wonder the Bureau of Labor Statistics reported a near 10% decline in home prices last month, and that many
homebuilders are reporting cancellation rates in excess of 40%
The chart also shows that, over the past 60 years, whenever residential fixed investment tops 5.5% of GDP and subsequently falls by at least 10%, a recession occurs (the recessions are depicted in the nonshaded areas of the chart). Already the ratio of residential fixed income to GDP (which peaked at 6.3% in late 2005) has now dropped by more than 10%. According to Guerite Advisors, the ratio has declined by another 17.4% in the fourth quarter of 2006.
Needless to say, there are other housing-related influences that will weigh negatively on forward consumption levels and lead to a period of blahflation) — adjustable option ARM interest rate resets; a clamping down on creative/aggressive financing (as defaults/delinquencies grow); the absence of personal savings; still-stretched affordability ratios of home prices to household incomes, etc. — that suggest the housing landing will be hard, serving as a strong headwind to economic growth by weighing on the consumer and countering the relatively stronger position of the corporate sector.
In this case, poor data led to a policy action that amplified speculative activity in the housing and other markets. Today, as anybody not from the former planet of Pluto knows, the housing market is undergoing a substantial correction and inflicting real costs to millions of homeowners across the country.
‘TIS SUCH A PITY.
These glass house, ivory tower, condescending banking schmucks are so far removed from the street they positively don’t have a clue. Any financially prudent person could see this all coming from a mile away.
Many Americans –including a lot of the people I work with every day– still don’t have a clue that a housing bubble even exists, much less that it’s popping right before their very eyes. As the Vanity Fair article said, “welcome to Idiot America”.
when is YOY resale prices due for nov ?
we know new homes # is BS due to”incentives”
According to the Barrons economic calender: http://tinyurl.com/8kpv2
existing — nov 28 and new — nov 29
Can anyone tell me why the lendors have yet to tighten their lending standards? Forclosures are up, and property values are heading down. In soCal I think it s down at least 10%, and if you factor in incentives, perhaps 15-20%.
Pleaple are still getting 100% financing for SFH, why?
If I was the bank, I would be thinking why would I finance an exotic morgage at 100% to somebody that has income I cannot verify.
I am sure this is not the first time this question has been posed, but frankly it is painfully obvious that these loans have been abused, yet they are still offering them.
The painfully obvious answer is that idiots are still buying the loans. The real mystery is why are they?
Fannie & Freddie’s “implicit” taxpayer bailout guarantee? Private assurances of “Too big too fail” from the Fed/PPT/Congress?
“I had a contract with a buyer, but it didn’t close because the appraisal came in too low. I relisted the property and quickly got another buyer and again the appraisal was short. On the third try, I finally got the deal closed.” Bivens said…..”
I’m sure this means the seller reduced the price to the previous two appraisals so as to move the property. No agent in their right mind would go shopping for a fraudulent third appraisal …….
No agent in their right mind would go shopping for a fraudulent third appraisal …….
Ya think?…………
Git-er Done !!!
“Tightening appraisals produce a forced price reduction. Property can’t be sold if the bank says it’s not worth the asking price, he added.”
Reads like residential credit crunch.
Right, I can’t help repeating this story: Saturday a Calif woman phoned me wanting to borrow $120K towards purchase of a $160K property in a condo-ized RV park in Pinal County AZ. I told her the largest amount that is owed me on any similar property is $77K, and that the property she wants to buy is not worth $120K, let alone $160K. She started whining about being “preapproved” by a bank, and how she can definitely make the payments, and I told her to get the loan from the bank. She said the bank had too many questions about the property. I said I had NO questions about the property, that I absolutely knew it wasn’t worth the amount she wanted to borrow. Told her to challenge the seller.
Re: Boise….”Another problem is that most of the jobs being created are in the $35,000-a-year range..”
So, new jobs are in the $35,000/year range and the median home price is $240,000. Hmmm…that’s almost 7x income. Now that the out-of-state investors have fled, how long before prices start to plummet?
PITI about $1800/mo., for someone taking home $2300 after taxes…..
Make sure you’re at least 62 before embarking on a purchase like this, so you can take full advantage of the discounted meals at the senior center.
RE: “a tightening in appraisal values under the direction of local lenders.
Here’s your evidence of realtor’s shopping for value…
So WTF is a “TIGHTENING” in appraisal value…it either “IS” or it ISN”T”…
Spoken like a true realtor schmuck…
Boise’s a nice little city but unless your OK with working at the Dairy Queen the rest of your life it’s gonna be hard making those house payments on $ 35 k a year. Plus, Boise gets damn cold in the winter so a smaller profile home is definetely smarter.