Price Decline “No Surprise”: NAR
Some housing bubble reports from Wall Street and Washington. “Sales of existing homes fell in 38 states during the summer, led by steep declines in Nevada, Arizona, Florida and California, as the once-booming housing market showed further signs of a steep slowdown. The declines were the largest in once-booming areas of the country. Sales fell by 38 percent in Nevada, 36 percent in Arizona; 34.2 percent in Florida and 28.6 percent in California.”
“The price survey showed that the median price for an existing home sold in the third quarter dipped to $224,900, down 1.2 percent from a year earlier.”
“But David Lereah, the Realtors’ chief economist, said he believed the decline in prices in formerly red-hot areas of the country was setting the stage for a rebound next year. ‘With the market in full transition, buyers now have choices and sellers are more willing to negotiate,’ he said. ‘Under these circumstances, it’s no surprise that overall home prices are slightly below a year ago.’”
From National Mortgage News. “Here’s a telling sign about subprime delinquencies: at the end of September, Accredited Home Loans had a 30-plus day delinquency ratio of 5.44%. A year earlier the ratio was just 1.95%. Accredited is based in San Diego, one of the hottest housing markets of the past few years.”
“Look in your local newspaper, in the real estate section, and behold all the deals builders are cutting on new construction. In The Washington Post, Centex Homes is willing to provide 100% financing on all its properties. In one ad I viewed, the builder wasn’t even listing the price of homes. Instead, it was highlighting only the monthly payments.”
“What does all this mean for mortgage bankers? For the next six months the industry can survive off of refinancings. After that, and if the flat or negative yield curve persists, look out below.”
From CNN Money. “Lowe’s Cos., the No. 2 home improvement retailer behind Home Depot, on Monday warned it would miss forecasts for the current period. The company blamed the weak sales comparison on the combined effects of a slowing housing market, significant deflation in certain commodity categories, and a difficult comparison to last year.”
“‘We believe many external headwinds will exist through the balance of the year and the first half of fiscal 2007,’ said a statement from Lowe’s CEO Robert Niblock.”
Caroline Baum at Bloomberg. “Alan Greenspan didn’t go quietly from the global stage when he retired as chairman of the Federal Reserve in January. His latest ‘forecast,’ that the worst of the housing slump is over, was rudely challenged Friday when the Commerce Department said October housing starts plunged 14.6 percent from the prior month to a six-year low.”
“Starts were down 27.4 percent in October from a year earlier; single-family starts have fallen by more than a third since the start of the year. Housing permits declined for the ninth consecutive month, a record.”
“Having presided over the late 1990s stock-market bubble…if the residential real-estate boom ends badly, as all bubbles do, he could go down in history as a ‘DBCB,’ or double-bubble central banker.”
“‘Among the consequences of the policy of maintaining interest rates at an inappropriate low level were credit and mortgage-market distortions, discouragement of personal savings, incipient inflation, and depreciation of the dollar foreign exchange rate,’ said economist Anna Schwartz.”
“Schwartz, who co-authored ‘A Monetary History of the United States, 1867-1960,’ with the late Nobel Laureate Milton Friedman, was referring to the Fed’s decision to leave the funds rate at 1 percent from July 2003 to June 2004, ‘a policy unjustified in view of the economy’s growth rate,’ and to raise it ever so slowly during the next two years.”
“‘Did the Greenspan Fed err by providing too much liquidity in 2001-2004?,’ Harvard University’s Jeffrey Frankel said. ‘My answer is ‘probably yes.’”
“Legacies come in all shapes and sizes. Public servants would like to be remembered for their own good deeds, as well as their contribution to the institution they serve. On the latter count, Greenspan comes up way short, according to Lawrence Wright, professor of economic history at the University of Missouri, St. Louis.”
“‘At his confirmation hearing, Ben Bernanke told the Senate Banking Committee: ‘With respect to monetary policy, I will make continuity with the policies and policy strategies of the Greenspan Fed a top priority,” Wright said. ‘No doubt Bernanke meant to reassure us. Unfortunately, we never knew what Greenspan’s policy strategy was.’”
Here is the full press release from the NAR.
Seeing more reports of builder bankruptcy:
‘There are undoubtedly going to be more foreclosures on the builders,’ said Ross Ridout, an attorney and vice president of Ridout Lumber Co. ‘Northwest Arkansas is overbuilt significantly. Builders need to sell houses, and if they don’t sell, they can’t afford for them to sit there unsold and pay interest.’
‘One Fort Wayne builder, Farmington Homes, apparently is on its way out. Local real estate sources have said the company is closing. Farmington was the area’s 10th-largest builder, by number of permits, in 2005, according to HBA figures. Another builder, Columbia City-based Bilt-Rite Homes, filed for bankruptcy in October. Wacker fears some other homebuilders, particularly newer ones that got started during the housing boom of the last few years, may be in such precarious financial condition they won’t survive the downturn, either.’
‘It comes down to a cash-flow issue … If the ball doesn’t stay rolling, you’ve got to have some reserves,’ he said.’
NW Arkansas. They’ve got to be kidding. Who would buy there.
Jed Clampett. And he hit oil.
Actually, Bella Vista, which is mentioned in that story, is quite lovely. Or I should say, it was. The developers have probably shaved all the hillsides of the trees to build these McShitboxes.
The bankruptcy story is fairly interesting. That builder looks to me to have a better chance of emerging (from what I read) as a going concern than Kara does.
Black gold……Texas Tea
Sam Walton did, for one…
Texas. They’ve got to be kidding. Who would buy there.
No argument here.
Aren’t you in Texas or have you moved? My wife and I are actually contemplating in moving to Texas (Flower Mound to be exact) if the prices in California do not go down as expected. Just one of the places we are considering.
Flower Mound is nice. Just be sure you don’t have to work too far away because the commute from there to anywhere in I-35 is absolutely hellish.
Flower Mound?
Gee, there sure can’t be a lot of exciting geographical features in the area if this is all they could come up with for a name.
What’s near it. “Flat Spot” Texas?
I doubt they put much thought into the name, as few ever imagined the development that would move into FM. When I first visited years ago, many houses had 10 acres with horses and even the occasional longhorn. Now it looks like most other pieces in the metroplex puzzle.
Sounds like a nice place… the name cracks me up. Sounds like something out of an Erskine Caldwell novel. Of course, it’s better than having to tell people you live in “Suprise”!
Flower Mound sounds like the name of a strip club.
Just one of the strippers…
Texas is so huge that they got tired of thinking about naming these places. “Hey, isn’t that a flower on that mound? Let’s name this town Flower Mound.”
Just for the hell of it, I called my wife Flower Mound when she got home today. She just gave me an icy, inquisitive stare.
Don’t think that you’re actually moving to Dallas or Fort Worth by moving to Flower Mound; it’s so far from the urban center of those two cities that any thought of going into ‘downtown’ for a cultural or sports event on a weekday evening is just about out of the question.
Walt –
LOL! You are a braver man than I!
Maybe all the people fleeing the ridiculous cost of living in the Northeast and West Coast.
I’d take the better parts of Texas over, say, Riverside or comparable parts of California. And when a house in the worst parts of California costs twice as much as a house in the best parts of Texas, that changes the equation somewhat.
No doubt you could find equal or better geography and way less smog in Texas.
Well put - though I’m aiming for TN, KY (cracks me up everytime I type it), or NC.
Maybe the thought wouldn’t occur to flippers, but from everything I hers the economy in NW Arkansas is quite good, and it’s not just Wal-Mart.
Actually, I’m pretty surprised to hear such a comment from txchick.
walmart shoppers
Fayetteville is wonderful. A big university and a Sonoma-style old downtown.
Ozark Mtns (Hills)….nice country…
“‘We believe many external headwinds will exist through the balance of the year and the first half of fiscal 2007,’ said a statement from Lowe’s CEO Robert Niblock.”
Gee, Mr. Spicoli, I like that. “External headwinds.” Im going to write that down for all my classes to enjoy with you getting full credit of course.”
Mr. Hand (Ray Walston) reference from Fast Times at Ridgemont High (1982)
Oh those are “bodily made winds” sir, but they ain’t coming out of anybody’s head. Enjoy!
This bubble is crashing. I expect Black Tuesday (1929 stock market crash)for homebuilders any day now. There is no rock to hide under.
PULTE) Chief Executive Richard Dugas said the home builder is shortening its land pipeline, lowering sales volumes and cutting costs as it navigates a difficult housing market. He said the company has faced tougher conditions since March when “literally overnight” demand for homes pulled back significantly, driving a sharp rise in inventories of new and existing homes. The market experienced a “double impact” when speculators stopped buying homes, and also put homes up for sale to exit the hottest markets. Dugas at a UBS-sponsored investor conference Thursday said cancellation rates have doubled since last year, which is further boosting the inventory overhang, while builders are offering incentives and concessions to nervous buyers.
You have less faith in the PPT than I do. HB stocks are on the endangered species list.
Interesting that you mention “March ‘literally overnight’ “. A realtor friend of mine has said housing market dynamics reversed on St. Patrick’s Day at 2:38 p.m. Of course he’s not really married to that choice, just to the notion of a sudden reversal of fortune.
I have to say that, as a Fort Wayne native, I’m not surprised to see the area builders having trouble. Good jobs are few and far between (which is why I left). Lincoln National mostly pulled out about ten years ago, taking a lot of good-paying jobs with it; the GM plant is, well, a Big Three automaker; Dana Corp supplies GM and is in Chapter 11, god help the pensioners. Okay, okay, there’s lucrative jobs from Raytheon and ITT in the ’safe’ defense sector (how safe is defense spending with the new congress?), but I doubt they employ even 5000 people between the two of them. Additionally, my dad tells me some mortgage offices have pulled out, mostly back to headquarters in Indy.
About the only thing builders in the Fort have going for them is that no one wants to buy used if they can avoid it. I have no idea why, but it’s become a ‘thing’ in the last few years. I can’t see that holding up as the city increasingly becomes service employment for other people in the service industry with very little outside cash coming in.
Sorry, thought I’d closed that tag.
But their headline reads “Home sales tumble”.
That’s not news. How ’bout “Prices Begin Their Descent”?
Please adjust your seat to the upright position, fold your tray and fasten your seatbelts.
This link has more detail on the NAR release:
‘Prices in the Northeast, down 4.8 percent, fell the most. Prices dropped 2.6 percent in the Midwest, 0.9 percent in the West and 0.1 percent in the South. Three Florida metro areas were hit hard by price drops. In Sarasota, the median home now sells for $320,700, off a whopping 9.4 percent from last year, Palm Bay/Melbourne/Titusville prices sank 9 percent to $193,600 and Cape Coral plunged 8 percent to $255,400. Sarasota condo prices also dipped, 11 percent to $275,600, the largest drop in any condo market.’
A couple trends are clear in the numbers — the markets that soared the most, the earliest, are the ones really getting clobbered in terms of YOY sales volume declines. Price declines are occurring in many more markets as well — 45 out of 148 tracked metros in Q3 2006 vs. just 6 out of 147 in Q3 2005. We’re also now seeing price declines in spec markets where the overall economy is still strong (FL, for instance). Previously, it was pretty much only regions with poor economic fundamentals (midwest, Detroit area, etc.) showing price declines.
http://interestrateroundup.blogspot.com/
I bought my home in Glendale, CA in May 1997, for 285k. The previous owner had bought it in June of 1990 for 420K. It took over ten yrs. for the price to come back to the 1990 level. I sold in late 2004. This down trend is in the 2nd. inning only and the recovery is at least 10 yrs. from 2005 level.
Second inning? That explains why things are moving so slowly. After your liesurely baseball game is over we’ve got a big Rollerball / Death Race 2000 doubleheader on the bill.
“Prices in the Northeast, down 4.8 percent, fell the most.”
And yet October new home starts in the Northeast were up almost 30% YOY? Huh? What?
Starts are based on last year’s prices. It takes a while to turn this ship around. Build baby build.
“But David Lereah, the Realtors’ chief economist, said he believed the decline in prices in formerly red-hot areas of the country was setting the stage for a rebound next year. ‘With the market in full transition, buyers now have choices and sellers are more willing to negotiate,’ he said. ‘Under these circumstances, it’s no surprise that overall home prices are slightly below a year ago.’”
A dream is a wish your heart makes
When you’re fast asleep
In dreams you lose your heartaches
Whatever you wish for, you keep
Have faith in your dreams and someday
Your rainbow will come smiling thru
No matter how your heart is grieving
If you keep on believing
the dream that you wish will come true
Argh. Now I’ve got that song stuck in my head again, as if my daughter playing the Cinderalla DVD three times back-to-back-to-back on Sunday didn’t do enough damage.
He may be rights here. The rebound may be increase in sales not in prices ! Either way, it is a good time for a commission.
‘With the market in full transition, buyers now have choices”
Yes, these choices are: sell now and loose a bit from the top price, or what till next year and lose a lot more from the top price, OR wait 2 years and lose EVEN MORE from top price, etc., etc. etc……..
“‘Did the Greenspan Fed err by providing too much liquidity in 2001-2004?,’ Harvard University’s Jeffrey Frankel said. ‘My answer is ‘probably yes.’”
Wow, Jeff, way to go out on a limb, buddy!
Jeff really takes a definitive stance on the issues, don’t you think?
Alex, I’ll take patently obvious for $200.
LOL
C’mon, guys! That is a limb for an economist. A more conservative one would have said, “My answer is probably, maybe.”
Our local paper, the RGJ covered this story and somehow forgot to mention Nevada as one of the states with a sharp decline. Gee, imagine that.
Saw a sign flipper Friday night on my way home about 5 PM. Friday night sign flippers can only mean one thing, desperation. I drove up to the new development (upper 400K) Saturday and within 400 feet from the front of the sales office there are 6 homes for sale. One car was parked in front of the sales office and the open house looked pretty desolate.
I saw a lot of desolate-looking open houses while I was bicycling around Tucson yesterday afternoon.
The Reno Newspaper, the RGJ, published this story this morning but left out the fact that Nevada had the largest decline they just cited AZ, FL and Cal as the big losers. Unbelievable.
They probably wanted to avoid the deluge of rants from Realtors and recent buyers throwing a tantrum.
Prices are not falling !
It’s not my fault I bought with a 5 year IO loan !
I deserve this McMansion !
I can’t return all the toys I bought with my HELOC !
If you would just stop reporting these lies it would all be fine !
I’m diggin’ on all the NNV folks showing up these days.
I already sent a scathing letter to the editor.
My scathing letter added as well - the more the merrier!!
“In one ad I viewed, the builder wasn’t even listing the price of homes. Instead, it was highlighting only the monthly payments.”
Sounds like the builders are taking a page out of the auto-dealer’s playbook.
Check the fine print on these ads. Some require that you give up your first born to qualify for the payment shown in the ad.
Tell me about it! I tried to read one over the weekend - the print was so small I couldn’t fully comprehend what it said - except that I recognized the symboll “I/O” and “Balloon.” Don’t walk, run….
Exactly. They advertise using the teaser rates, 20% down and no HOA etc. And you qualify with the teaser rate, although that is supposed to change soon. Anyway that first year will feel really good. Just like you can warm yourself in winter by peeing in your pants….
posted ” . Just like you can warm yourself in winter by peeing in your pants…. ”
LOL…. I am a serial joke thief. The context of your words were perfect! Tom my man I have heard a lot of good natured BS in my time but …. you really got me with that line , I have never heard it before….PROPS to you!
Be warned it WILL steal it and like a good shister claim it for my own….LOL….LOL… oncore, oncore…I will read you more carefully from now on.
Don’t use it in my native Denmark. The old “Stakket er varmen fra bukse-tis” translates to: “Short-lived is the warmth from peeing in your pants”….
Check the fine print on these ads. Some require that you give up your first born to qualify for the payment shown in the ad.
This would be known as the Rumplestiltskin clause.
I think what they need is a sanity clause.
posted ” I think what they need is a sanity clause.”
Why start now? What do you want the USA to collaspe?
“You can’t fool me. I know there ain’t no sanity clause.”
(Chico Marx)
Pretty much par for the course these days. I see that a lot in the papers.
I have seen D.R. Horton advertising a loan buy down for the first year. I was so tempted to ask the sales kid what would then happen to the “buyer’s” payment in month 13, but I didn’t want to make him feel stupid. First year of the builder financing was fixed at 4 something percent. It was this past spring.
OK. I’m officially so sick of this Lereah idiot. Please, somebody stuff a sock in his mouth. He doesn’t even bother to disguise his contradictions anymore, he just flat out makes conflicting statements like nobody has a memory.
“But David Lereah, the Realtors’ chief economist, said he believed the decline in prices in formerly red-hot areas of the country was setting the stage for a rebound next year. ‘With the market in full transition, buyers now have choices and sellers are more willing to negotiate,’ he said. ‘Under these circumstances, it’s no surprise that overall home prices are slightly below a year ago.’”
Thanks David ! Now I can ignore your expensive ad campaign and blissfully wait until next year for that rebound that is based on fairy dust and Unicorn tears……
… and sasquash droppings.
http://davidlereahwatch.blogspot.com
“Alan Greenspan didn’t go quietly from the global stage when he retired as chairman of the Federal Reserve in January. His latest ‘forecast,’ that the worst of the housing slump is over, was rudely challenged Friday when the Commerce Department said October housing starts plunged 14.6 percent from the prior month to a six-year low.”
Happy talk against the backdrop of an obvious residential construction recession will not do much to preserve AG’s legacy as a forecasting wizard.
Don’t forget his loose credit policy has created other bubbles as well - private equity firms and hedge funds, notably. Will be interesting to see how those play out.
Long long ago, When Greenspan was young (hopefully) before any of us were around, what schools did he attend. Does anyone know how he rose to power and obtained such an important post? What degrees did he obtain? What exalted positions did he hold prior to ascending to power. Maybe it would explain why he bailed out the dotcom bust with this bust.
“what schools did he attend.”
http://www.juilliard.edu/
http://en.wikipedia.org/wiki/Alan_Greenspan
Seems his PhD was done without a dissertation. I’m sure a lot of future econ docs will be writing them about his policies, though.
Looks like his PhD was actually an “honorary”. Was not from Columbia, his post-master’s institution, but NYU his undergrad institution. Amazed to learn Stucco’s link to Juilliard was not totally facetious. Also amazing that someone so intimately associated w/ Ayn Rand would be equally associated w/ what amounts to govt manipulation of the economy.
Greenspan was born to a Jewish family in New York City (the original spelling of the family name was “Grynszpan”). He studied clarinet at Juilliard from 1943 to 1944 and is known as an accomplished saxophone player. He then attended New York University (NYU), and received a B.S. in Economics (summa cum laude) in 1948, and an M.A in Economics in 1950. After NYU, Greenspan attended Columbia University, intending to pursue advanced economic studies, but subsequently dropped out. Much later, in 1977, NYU also awarded him a Ph.D. in Economics. He did not complete a dissertation, normally required for that degree. On December 14, 2005 he was awarded an honorary Doctor of Commercial Science from NYU, his fourth degree from that institution.
Starting in 1950, Greenspan began a 20-year association with famed novelist Ayn Rand. He wrote for Rand’s newsletters and authored a chapter in her book Capitalism: The Unknown Ideal.[4]
Greenspan has been married to NBC television journalist Andrea Mitchell since 1997.
From 1948 to 1953, Greenspan worked as an economic analyst at The Conference Board, a business and industry oriented think-tank in New York City. From 1955 to 1987, Greenspan was Chairman and President of Townsend-Greenspan & Co., Inc., an economic consulting firm in New York City, a 33-year stint interrupted only from 1974 to 1977 by his service as Chairman of the Council of Economic Advisers under President Gerald Ford. Greenspan also has served as a corporate director for Aluminum Company of America (Alcoa); Automatic Data Processing, Inc.; Capital Cities/ABC, Inc.; General Foods, Inc.; J.P. Morgan & Co., Inc.; Morgan Guaranty Trust Company of New York; Mobil Corporation; and The Pittston Company.[5]
Methinks the important thing here is not that he studied clarinet at Juilliard, but rather that he worked for J.P. Morgan & Co.
“He studied clarinet at Juilliard from 1943 to 1944 and is known as an accomplished saxophone player.”
A gentleman is a man who knows how to play the saxophone — but doesn’t.
I couldn’t help look up Helicopter Ben as well:
On Milton Friedman’s Ninetieth Birthday, Nov. 8, 2002 he stated: “Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.”
Mr. Friedman better get ready to spin in his grave…..
Captian jack posts ” Long long ago, When Greenspan was young ”
Once upon a time many on Wall Street worshiped him. My personal view is that he was not a bad Fed Chairman. He was faced with many lose, lose deals and did his best. He is not dumb and I for one given what he was delt did a good job.
The end of his tale has not been told. Maybe he did a good job and maybe he didn’t.
(‘Prices in the Northeast, down 4.8 percent, fell the most. Prices dropped 2.6 percent in the Midwest, 0.9 percent in the West and 0.1 percent in the South. Three Florida metro areas were hit hard by price drops.)
Just in time for the Chirstmas shopping season. Good thing most people don’t read the newspaper.
Is it too early to start calling this “Pelosi’s recession”, a la “Bush’s recession” which either started one hour after he was sworn in, or in fact many months beforehand, depending on who one listens to?
I prefer the ‘Prole Recession’ - in honor of everyone who contributes to debt (money) inflation and the subsequent debt deflation (recession) when they can no longer create new debt (by borrowing ‘money’) nor service their previously created debt.
Let’s just call it the Greenspan recession.
posted ” Let’s just call it the Greenspan recession.”
Good God Man! GWBush busted the budget. Not AG. Praise where praise is do, but let the Blame fall rightfully.
GW can have a war and a recession…. “Mission Acomplished!”
On the other hand, AG gave W’s tax cuts a ringing endorsement…
GS posts ” On the other hand, AG gave W’s tax cuts a ringing endorsement… ”
Well yes Tax cuts…….. but who told him to spend a quadzillion bucks?
AE, we’ve been on the path to destruction since AG took office. GWB just got us there a hell of a lot faster than scheduled.
“‘Among the consequences of the policy of maintaining interest rates at an inappropriate low level were credit and mortgage-market distortions, discouragement of personal savings, incipient inflation, and depreciation of the dollar foreign exchange rate,’ said economist Anna Schwartz. Schwartz, who co-authored ‘A Monetary History of the United States, 1867-1960,’ with the late Nobel Laureate Milton Friedman, was referring to the Fed’s decision to leave the funds rate at 1 percent from July 2003 to June 2004, ‘a policy unjustified in view of the economy’s growth rate,’ and to raise it ever so slowly during the next two years.”
Glad to hear the heavies are now weighing in on the side of the obvious, and I hope AG’s successor is paying attention. To Schartz’s list of distortions due to inappropriately low interest rates, I would add the severe mismatch in the quality distributions of housing supply and demand. We just don’t have enough junior CEOs in the country who can afford all the new McMansions priced at over $500K. But when real home price inflation is running at over 10%/year, and no doc, no down, low payment loans are available to anyone who can fog a mirror, I guess it makes sense for everyone to buy a home valued at over $500K, and pocket $50K+/year in home equity wealth effects…
The Reno, Sparks, Carson City, Tahoe area is bad, but look at the outlying areas like Virginia City, Silver Springs, and Fallon. The Reno/Sparks bedroom communities are going to take a beating.
Yep, couldn’t agree with you more. I can’t wait until Spring, when the market gets even more flooded, for the real pain to start. I think a lot of people in this area are waiting until then to try to sell, which is pretty scary when you consider that there is already a 10 month supply - not including new builders.
Even though the NAR isn’t surprised at the price declines, regardless, it was still a good time to buy last year (as it is now), because Suzanne researched it.
I’m beginning to think Suzannes “Research” consisted of throwing Darts at a board with ever increasing commisson numbers on it. The higher the commish the better the time to buy.
I have a pix of DL’s face taped to my dart board.
At his confirmation hearing, Ben Bernanke told the Senate Banking Committee: ‘With respect to monetary policy, I will make continuity with the policies and policy strategies of the Greenspan Fed a top priority,’’
Get used to your money being devalued further.
California may be trailing the front-runners in YOY price declines, but we’ve got to be near the front of the pack in uninformed real estate ‘investors’…just this weekend I encountered two professional-types that were looking to buy investment properties in our fair state, apparently unaware of the carnage that lies just around the corner.
One of them already bought a ‘first property’ this year and is convinced that he can write off as a business expense the difference between his $7K/mo. mortgage and what he currently rents it for (~$3K). When I told him that his tax strategy is guaranteed to put him in hot water with the IRS, he looked at me in disbelief and told me he would research it some more and get back to me.
I’m still waiting…
“California may be trailing the front-runners in YOY price declines, but we’ve got to be near the front of the pack in uninformed real estate ‘investors’”
It’s trailing because the majority of those markets have been driven by Clownifornia speculators looking to do something with their “equity”. The fuse (Arizona, Nevada, etc) is lit and the keg of dynamite is sitting in SoCal.
Better yet, what kind of idiot makes an investment knowing up front they will be LOSING $4000 a month?!
He’s screwed.
does LIErah have a blog ?
price drops never happen !
“But David Lereah, the Realtors’ chief economist, said he believed the decline in prices in formerly red-hot areas of the country was setting the stage for a rebound next year.”
Rebound based on what??!! Interest rates will probably be around the same. More inventory will hit the market in Spring 2007. Foreclosures up,credit tightening, a lot less “speculator” interest.
They also said the same thing about Spring 2006, that the market would pick up. It didn’t.
Dave’s been talking to Gary Watts…apparently, the inversion will be taking place next year, not this.
That, and he killed a chicken and read its entrails.
The only inversion that is taking place is David’s “Rectal-Crainal Inversion”
SF will lead the way down soon in $ term because the default rate will be the highest. Watch out!
OT but, There is a saying about not talking negatively about something if your own livelyhood depends on it…Can someone repost it with the author…Thanks
Upton Sinclair said:
“It is difficult to get a man to understand a concept when his livelihood depends upon his not understanding it.”
Thanks SBG!!
sounds like a scathing indictment of all “religious leaders”
You’re right, and I sometimes think we (here) need to watch out lest our own religious zealotry get in the way of objective thinking. Of course i KNOW we are right about the housing bubble, but I often feel we need to consider outside viewpoints … if there are any responsible people out there voicing them. Hmm.
Here’s some commentary from Fil Zucchi on Minyanville (a former bankruptcy lawyer) on the M&A activity in the commercial real estate space. Note the comments on the Trammell Crow acquisition by CB Richard Ellis. Exactly what I said. I remember 1989 and 1990. TC nearly went bankrupt. This time they’re selling while the sellin’s good. I’m telling ya.
****************************
Let’s move on to Blackstone for Equity Office Property (EOP) (assuming that the WSJ speculation is correct) because when thrown in with CB Richard Ellis (CBG) buying Trammell Crow (TCC), and the Reckson Assoc. (RA) / SL Green Realty (SLG) merger, it is bringing the action in commercial real estate to a fever pitch.
I was chatting with a friend of mine in the business a couple of days ago and he was suggesting that deals for entire portfolios / companies are picking up speed because it allows more wiggle room in the due diligence. When I gave him a perplexed look, he explained that it is easier for buyers to buy properties with pro-forma assumptions of $200/sq.ft. rents for trophy space as part of a basket, than it is to rationalize them on an individual basis. In other words, (writer embellishment) people are buying into the concept that, if it’s a $20 billion deal, + or - $1billion is not really going to make much difference.
What cannot be embellished is the fact that one of the shrewdest commercial players ever, EOP’s founder Sam Zell is bailing out; and perhaps the quintessential blue blood, old fashioned real estate outfit - Trammell - has unloaded itself to the CBG’s “cowboys.” If this is not the second coming of Julian Robertson folding Tiger Management right at the 2000 market peak, then this time it must be different.
CB Richard Ellis recently bought out a top Moscow commercial property company named Noble Gibbons. Noble Gibbons was founded by a couple American buddies of mine in the early 90’s and has grown by leaps and bounds over the years. My buddies after selling out founded a large real estate fund in cooperation with some of the principals of Alpha Group. Last spring/summer they raised several hundred million to invest in Moscow commercial property. And the beat goes on…
my old man was pitchin me on reits- 30% ytd
fougedaboudit
txchick - I’ve been pondering this EOP buy out all day. The value of commercial RE M&A activity is through the roof this year. Add this to recent reports of big capital flows into the exchanges (at daily new highs no less), and I begin to wonder if we are on the cusp of something bad. Like you said, the founders/CEOs might be getting out while the getting is good. The commercial market appears extremely overbuilt and now seems to rely on appreciation rather than actual cash flow.
I’ll never forget a friend who, upon noting the Rockefellers were selling Rockefeller Plaza to the Japanese in, what? 1988, said:
When the Rockefellers sell their NY property you KNOW its the peak of the market.
Twas true; I believe the Japanese paid a billion (just as they bought Pebble Beach golf course) and sold it back at a fraction a few years later….Maybe this is what Zell has in mind?
Reminds me of an old Top Ten List bit on Letterman years ago. Top ten things to do on the White House tour. #1 was ask Dan Quayle for two tens for a five and repeat until you’re rich.
Let’s see, we’re still only in November with December still to go….looks like Gary (”15% In the Bag”) Watts might need to do some revision work on his prediction for Orange County. Amazingly, it seems that many here in the OC are suffering from “Etch-A-Sketch Syndrome” (shake your head real hard and your memory goes blank) and think that the big Spring Rebound will save the soft landing. There are sure some real optimists over on Lansner’s blog.
“‘At his confirmation hearing, Ben Bernanke told the Senate Banking Committee: ‘With respect to monetary policy, I will make continuity with the policies and policy strategies of the Greenspan Fed a top priority,’’ Wright said. ‘No doubt Bernanke meant to reassure us. Unfortunately, we never knew what Greenspan’s policy strategy was.’”
Hahahaha……..the blind leading the blind
Determined to stay in real estate, agent John Young makes ends meet by working part time as a waiter.
http://www.signonsandiego.com/news/business/20061119-9999-mz1h19realto.html
Working as a waiter to fulfill his “Quest” his “Higher Calling”. No, not lowly Novelist, Playwright, Rock Star or Actor for this man.
No,… For this man REALTOR™
The tribulations shall be met. The trials overcome.
The pinnacle shall be reached!
posted ” No,… For this man REALTOR™ ”
Man you make me want to break out in ELVIS…. “this time Oh Lord, you gave me a mountian”
Posted ” “The priority is paying bills and eating,” he said with a smile. “It was a live-and-learn experience.”
A born again Democrate.
Poste by the brilliant AE Newman ““It was a live-and-learn experience.”
No, No old bean. It was the old ” In and Out, experience”
I think txchick’s comment about the smart money exiting commercial real estate is spot on. Recall that Dick Ziman, another real estate pro with a demonstrated track record of timing markets correctly, sold Arden Realty to GE\Trizec earlier this year.
There is an argument that the commercial market is somewhat analogous to the residential market in terms of valued being tied to the ease and pricing of financing. Right now, lending standards are lax and money is cheap. The values are simply ridiculous; particularly as commercial players chronically underestimate the capital expenditures necessary to maintain\replace tenancies and maintain the properties. This is similar to the homeowner who thinks optimistically that homes never need a new coat of paint, roof replacement etc.
Time to sell unless you buy the inflation argument and\or “they aren’t making any more land (in Phoenix, Texas, Riverside and San Bernardino, etc)….it’s below replacement cost (based on goofy land values)” arguments that journeymen brokers and acquisitions guys looking for fees pitch with a straight face.
Alan Greenspan is one of the most brilliant men I have ever met. He steered this country through a time of financial and technological innovation, globalization, and political change.
He showed that Fed policy is not dogmatic, but rather, requires flexibility as the economy is a constantly moving target.
Even at his old age, he’s as sharp as a razor though physically he has deteriorated significantly.
He’s a good man, good American, and one helluva Economist.
“I’m forever blowing bubbles”
posted “I’m forever blowing bubbles”
Let me guess in the bathtub, and not with your mouth.
There’s a King of the Hill episode where Hank and the gang decide that they need to help out the groundskeeper keep up the high school football field, otherwise he’ll be fired and lose his pension. The old kook was once good at what he did, but has completely lost it. The first game Arlen High has to forfeit because the field is not in gameday shape because of the groundkeeper’s incompetence. So for the next week at night Hank and company water the field, trim the grass, etc. Get it in tip top shape.
Suddenly the groundskeeper is a local hero, but rather than being grateful for the assistance, he develops a real attitude. To prove that he’s smarter than everyone else, he starts doing crazy things like pouring salt on the grass. Because a cult of personality has developed, no one outside of Hank and the gang questions his crazy policies.
To avert forfeiture of both the final game of the season and the groundskeeper’ pension, Hank arranges for some local hicks to race their trucks over the field, rendering it unplayable. Because the field was impaired due to theft, Arlen doesn’t have to forfeit and the game is played on a neutral field.
I can’t imagine why that little allegory comes to mind whenever someone starts singing the praises of Alan Greenspan….
Get a room.
He also gave birth to the hedge fund bubble. No wonder you are so enamored.
GS post ” He also gave birth to the hedge fund bubble.”
God Man, what is this? The MOAF’s…. the mother of all farts?
You are so wrong. Greenspan never made a difficult decision. His answer has been to point out problems like an over valued stock market or low savings in the USA and to then encourage the opposite behavior. What a hack. His answer has always been to poor on the money supply. He ignored housing prices as a measure of consumer prices allowing him to lower interest rates and allow lending behaviors that are a scandal. By claiming rents were a measure of general price rises and ignoring actual price rises he could play it both ways. Low inflation (a lie) and lets gun the economy.
History will be very harsh with Greensman along the line of John Law.
Paul Volker was a good FED chair. Greenspan is probably a very nice person but his actions are short term kind and long term cruel to our nation.
Be honest, hfa. What you really love about him is the Greenspan Put, right?
Time will tell how Alan Greenspan will go down in history! What is it they say; “Success has a thousand fathers, but failure is an orphan”?
If we go into a protracted recession (or worse) because of the housing bubble collapse, people will not remember kindly AG’s legacy.
Chill…. GWBush will be blamed for everything that goes wrong for the next 50 years. I am an DEM and will admit that is treu but wrong. 25 years would be fair.
“But David Lereah, the Realtors’ chief economist, said he believed the decline in prices in formerly red-hot areas of the country was setting the stage for a rebound next year. ‘With the market in full transition, buyers now have choices and sellers are more willing to negotiate,’ he said. ‘Under these circumstances, it’s no surprise that overall home prices are slightly below a year ago.’”
If someone runs into this anal polyp at the airport or some other public place, could you please bitch-slap him for me?