Bits Bucket And Craigslist Finds For December 19, 2006
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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what a day. don´t know where to start
number one story on houisng is for sure the massive warning from hov. have put up the ugly details.
and on the marco level the 16% stockcrash in thailand after the central banks has implemented controls to fight speculation.
http://immobilienblasen.blogspot.com/
“U.S. building permits down 31.3% year-over-year
U.S. housing starts down 25.5% year-over-year
U.S. Nov. building permits fall to 9-year low.”
I know 31% seems like a shocking reduction. Still, I couldn’t help but focus on how much building was still going on despite the glut of inventory.
we in germany would call it “torschlusspanik”
desperation.
Sounds like torched-house-panic, which would be totally fitting.
Josh
Agree with you 1000%, CarrieAnn. When I was in the Phoenix area in October and November, I was truly AMAZED at the amount of construction. All the while, the papers are full of stories about how the Phoenix real estate market has slowed.
looks like hov is almost back to unchanged……
That’s the damned thing about happy talk suggesting a soft landing next year followed by a resumption of the boom times. This amounts to a verbal version of spiking the punch bowl, just at the point when the drunks can barely stand and are starting to get surly.
Get Stucco, you are good at analogies. You could be a writer…
Bay Area still going strong in construction as well. Builders closed on too much land and have already paid for permits. I’m just thinking they figure those projects are past the point of no return, might as well build them and try to sell. A lot of land options are being dropped though.
Same in Phoenix. Construction going slow, though. No overtime for sure.
Asian contagion, part deux?? Nothing says disaster like a currency crisis.
The homebuilders are about to be beaten by the “invisible hand.”
This graph says it all, IMO. Even with the projected drop in completion rate through mid-year 2007, the new home completion rate will exceed the absorption rate, unless prices drop by a lot (I mean more than 10%-20% that has already occurred, WT_Economist…).
http://photos1.blogger.com/x/blogger/2825/754/1600/764068/StartsEmploy1106.jpg
Here is a good one!
Press Release Source: Center for Responsible Lending, Raleigh, N.C.
Report Reveals 2.2 Million Borrowers Face Foreclosure on Subprime Home Loans
Tuesday December 19, 1:30 pm ET
Billions of Home Ownership Wealth to be Lost by Minority Americans; Chart Contains Detailed MSA-Specific Projections of Home Foreclosure Impacts
WASHINGTON, Dec. 19 /PRNewswire/ — A new Center for Responsible Lending (CRL) study reveals that 2.2 million American households will lose their homes and as much as $164 billion due to foreclosures in the subprime mortgage market. Titled, “Losing Ground: Foreclosures in the Subprime Market and Their Cost to Homeowners,” the CRL study is the first comprehensive, nationwide review of millions of subprime mortgages originated from 1998 through the third quarter of 2006.
CRL’s research suggests that risky lending practices have triggered the worst foreclosure crisis in the modern mortgage market, projecting that one out of five (19.4%) subprime loans issued during 2005-2006 will fail.
“In the subprime sector, the most vulnerable borrowers are sold the most dangerous loans,” said Mike Calhoun, CRL president. “At $164 billion, the losses from foreclosures could pay for the college educations of four million kids. For families who lose their houses because their loans fail, savings and economic security will be way out of reach.”
The report discusses a number of factors that drive subprime foreclosures — in the majority of cases, borrowers receive high-risk loan features, packed into an adjustable rate mortgage with a low start rate, that is approved without considering whether the homeowner can afford to pay the loan after the rate rises.
Adjustable rate mortgages known as 2/28s (or “exploding ARMs”) operate with an initial “teaser” rate for two years, followed by a steep payment increase. And, regardless of a borrower’s credit history, the almost one- quarter of American families who get subprime loans find them crammed with other high-risk terms such as prepayment penalties, limited income documentation, and no escrow for property taxes and hazard insurance.
In recent years, high appreciation in many areas has masked problems in the subprime market. CRL projects that the cooling housing market, will cause failure rates to rise sharply in many major markets. California, Arizona, Nevada, and greater Washington, D.C. will be especially hard hit. See a detailed metropolitan statistical area (MSA) chart at http://www.responsiblelending.org/pdfs/MSA-foreclosure-rates.pdf.
“Foreclosures can be a disaster not only for the family but for the community as well,” said Pat Vredevoogd Combs, president of National Association of Realtors. “When one home forecloses, the surrounding houses lose value, too. By threatening neighborhood stability, foreclosures hurt everyone.”
Trouble in the overall subprime market spells trouble for African American and Latino families across the country. Although white families receive more subprime loans overall, African Americans and Latinos receive a higher proportion of high-cost loans than any other group, a fact consistently verified annually by data lenders submit under the Home Mortgage Disclosure Act (HMDA). “Losing Ground” estimates that 8 to 10 percent of all African American and Latino families who received a home loan in 2005 will be affected by subprime foreclosures.
“Homeownership rates for minorities are up but so, too, is the cost of that homeownership,” said Wade Henderson, executive director of Leadership Conference on Civil Rights. “We need rules to curb predatory lenders, but we also need prime lenders to step up for this expanding market of borrowers.”
Policymakers and regulators can and must act to stem the tide of home failures in the subprime market. To accomplish this CRL recommends that:
* Lenders ensure that every borrower is able to repay his or her loan
without resorting to selling their property or refinancing under
pressure.
* All parties involved operate in good faith and fair dealing to ensure a
successful outcome.
* Lenders, local governments, and community groups implement strong
programs to help troubled borrowers keep their homes.
Homeowners work hard to provide the economic security and benefits of ownership to their families. Changes must be made in the subprime market so that owning a home is fair, affordable and — most important — sustainable.
About the Center for Responsible Lending
The Center for Responsible Lending (http://www.responsiblelending.org) is a nonprofit, nonpartisan research and policy organization dedicated to protecting homeownership and family wealth by working to eliminate abusive financial practices. CRL is affiliated with Self-Help (http://www.self-help.org), one of the nation’s largest community development financial institutions.
——————————————————————————–
Source: Center for Responsible Lending, Raleigh, N.C.
Can we anticipate 2.2m foreclosed homes getting dumped on the already-sizable inventory pyre? In addition to builders continuing to build at higher than the absorption rate for the foreseeable future, and investors who will eventually throw in the towel when negative cash flow and appreciation sinks their prospects for future gains?
Yep — it looks like a soft landing is on the way for 2007…
May have already been posted:
heard on squawk box in my car today that Hovnanian posted a “big loss” (they didn’t elaborate).
Had Ara H. on the show himself. He said:
1) they did post a loss
2) he doesn’t think they’re at bottom yet, but are “near bottom”
3) his weakest markets are SoCal and SoFL
4) his strongest markets are TX and NC
5) he thinks cancellations are going to go up just a bit next quarter, then start improving Q2, 2007
6) he’s had to reduce prices across the board. However, in “some markets” he’s been able to tweak the price “up just a bit”
And then he states:
1) this slowdown is unusual in that GDP is still positive, and that’s never happened before
2) somehow he thinks the above is a GOOD thing
3) he states that he agrees that housing slowdown will subtract 1% from GDP, but then states “however, GDP is still positive, not negative which is good for housing.”
It’s amazing the spin that they have.
That said, the HB’s are starting to post losses. This means that they may not be as able to drop prices as many hope.
“This means that they may not be as able to drop prices as many hope.”
I think you are wrong about this. When the cost of building a house (labor and materials) goes up by 15% and the price of a house goes up by 100% then it means the land, air and aura of that house are what rose dramatically. You can call it “the privilege” of owning.
This means the builders can squeeze the heck out of anybody selling land. They will get land costs cut to the bone. They will squeeze subcontractors until their eyes are ready to pop out. They will play them off against each other. They will also squeeze suppliers (refrigerators, carpeting, granite, tile) until they cry “Uncle”, ala Walmart. Oh, there is a lot of room for builders to drive prices down. Joe 6 Pack and his McMansion are facing a buzz saw in these builders. HOV, TOL, PHM, MDC, MTH, RYL and all the rest have a long way to go before they throw in the towel. It’s Mister and Misses Heloc that will be heading for the exits long before Are Hovnanian.
These companies have brand names and relationships and shareholders demanding decent returns. They aren’t going to stop building for 5 years.
They went from making $.74/share in Q3 to LOSING $1.88/share in Q4. Will They be around in 5 years??
NYboy;…Nice summary…I agree, the builders will win over existing owners….
Maybe on future purchases, but in the last 3 years HBs certianly overpaid on land. The will do better on construction costs, but they are underwater on land costs. And that assumes it’s feasible to even build on the land that they already bought.
finnman: agreed. I was going to say the same. Yes, they will be able to cut land cost going forward, once the sellers come to the realization that they aren’t sitting on a platinum mine. That being said, at least here in the bay area there have been some outrageously large sums of money spent on dirt. I would love to be a fly on the wall at homebuilder offices right now. The land cost may have penciled when you could instantly sell the homes at $500/ft or more, but now? I would think homebuilding execs are having some sleepless nights.
Well the question is: how much current construction is made on land optioned before the bubble versus after the bubble began to inflate land prices? Of course land prices stand to plumet because they’re at least theoreticly based on what a house will sell for at least a year from now minus construction costs.
if they cant charge enough for the house, they wont build, and we see them taking charges to write off the land costs
Now that’s the way the game is going to be played. The sorry little owners with their helocs and their wishing prices are going to get ground into the dust.The big boys are playing hardball.
5) he thinks cancellations are going to go up just a bit next quarter, then start improving Q2, 2007
6) he’s had to reduce prices across the board. However, in “some markets” he’s been able to tweak the price “up just a bit”
Cancelations are going up? From 35%?!?
Sound the dive alarm. There isn’t any pretending they can hold prices if that is the case.
HOV’s profits are losses do not determine the sales price, the market does. If cancellations are that high and expected to go higher… the market is speaking.
Good to see TX and NC are generating a profit. Companies fleeing the bubble markets need to move somewhere… Its certainly not going to be FL or CA.
Neil
Neil: I’m also surprised that it is casually mentioned that these drops have never happened before with this level of GDP. That right there should be sounding the dive alarm and air raid sirens. Of course, things could be different this time!
That’s how Austin got killed in the oil bust despite its economy not being driven by oil. In 1982-83, the builders fled Dallas and Houston for high-tech mecca Austin. A metro area of 500K at the time had 200 builders building by 1984-85 with 30% of the housing stock as investment! We know what happened next…$80K home becomes $45K…$85K lot goes for $26K after five years, etc… The economy was good at the time (1985-90).
Austin is having a record year for foreclosures. Only people buying houses are from CA.
And they just recovered from the 2000-2003 Tech slide. Austinites will never get a break.
I know we have discussed what may happen in the coming years with the housing sector, and yesterday someone posted that there may not be another sector bubble to protect the housing bubble. I have a question or two.
1. What are the prediction of the 2007?
2. What are the sencerios of 2007?
My “soft landing” scenario:
1) Significant housing price declines of 10-20% (showing what has already happened) in bubble markets, perhaps 10% overall.
2) Housing starts decline to a real low level (a bad year is just 1 million starts). So do sales. The current level of construction and sales only looks low compared with bubble levels.
3) Employment increases in export and some other sectors; flat employment and moderate unemployment overall. A profits recession.
Possible disaster scenarios causing inflation:
1) Oil shock.
2) U.S. currency collapse.
Disaster scenarios for employment: demand collapse abroad.
Lower profits under all scenarios. Ie. you can’t pay people less and sell them more if they can’t HELOC their way deeper into the hole anymore.
I would add one thing to a soft landing…
We need the credit to stay very loose. If credit tightens to traditional levels, I don’t see how a soft landing is possible.
I’m not sure we need extra loose credit for my softer scenario, just normal credit. After all, what I call a soft landing is what those not on this blog call a hard landing.
A hard landing on this blog involves canned food, guns and ammo and cabin in the country with a secure water supply.
“A hard landing on this blog involves canned food, guns and ammo and cabin in the country with a secure water supply.”
I’m beginning to consider this option! I think we’ll start seeing the big drops during the second half of ‘07. New construction will probably come to a halt and the builders may start a fire sale in hopes of generating any kind of cash flow. The ripple effect through employment will start to take hold and unemployment will jump a point or two. I’m thinking that parts of the bay area outside of exclusive cities will see drops of 40% before this is through.
“I’m not sure we need extra loose credit for my softer scenario, just normal credit. After all, what I call a soft landing is what those not on this blog call a hard landing.”
I think your mere 10%-20% “showing what has already happened” is pie in the sky. We got this far with most Americans having no clue whatever that anything was amiss in the housing market. Just wait until the credit noose tightens around the market (always has, always will) and freely available liar loans and suicide loans are supplanted by a return to credit underwriting standards and downpayment requirements; then you will realize why, like most others who loudly profess to be economists, you have underestimated the scale of the problem at hand.
I disagree with the currency collapse causing a housing crash. ARMs have caps, and if money gets super worthless, it would be easy to pay off mortgage. A housing bust will be exacerbated by increasing value of dollar - takes selling more crap to raise a buck. Debt servicing more difficult with high cost of raising cash.
I think we will see a very serious bear market in stocks which will probably begin in January, but mabye it will start by the end of this month. This will put more pressure on the housing market. Some areas that have already been doing poorly, such as Florida, will fiind out that 2006 was just the RE bear market warm up, and other places, such as Seattle, where most people think the area is immune to RE downturns are going to start to see that they aren’t as immune as they thought.
Also, I expect that by the end of the year there will have been some articles in major publications that include fraud as one of the causes of the bubble.
Kim: I don’t know as much about the stock market as I should, but I have been expecting a turn down for a couple of months now. Just curious as to how you came up with January. Are you figuring that this is just the end of year rally as money managers try to make good numbers and then after the first of January look out below?
I am using a combination of Elliot wave theory and RSI, plus I do think there is the end of the year effect happening now.
http://www.safehaven.com/article-6547.htm
Stocks won’t go down until the FED HAS TO RAISE INTEREST RATES. Assuming the fed will protect the dollar that is.
Divosta homes lays off another 200+ workers in S. FL. This is after their last round of layoffs in Sept (they let about 100 go then).
Don’t worry, the downturn is almost over, builders are gearing up to build like crazy again!
http://www.palmbeachpost.com/business/content/business/epaper/2006/12/19/m1a_divosta_layoffs_1219.html
sorry if a double post but the first one got lost.
2nd try.
ugly details from the hov warning and the 16% stock market crash in thailand.
http://www.immobilienblasen.blogspot.com/
What is it about Thailand — trouble started in 1997 with their currency devaluation. This ought to be a cautionary tale for those who believe you can print away your woes.
http://www.businessweek.com/1997/30/b35377.htm
Greatest Pump and Dump In Financial History:
http://wallstreetexaminer.com/blogs/winter/?p=208
Loved this link in the article:
http://www.yieldsz.com/
It suggests that generating money to chase assets has a ceiling at some point.
Gekko — for shame that you would be going down this path yet again!
“And the headline $8.4 billion in sales represents the fifth highest sum since the halcyonic reign of Gordon Gekko 19 years ago. The highest: just under $14 billion in March 2000, when the S&P 500 and Nasdaq were enjoying their bubblicious all-time highs. They have yet to revisit those fateful peaks.”
U.S. Housing Starts Rose 6.7% in November to 1.588 Million Pace
“Builders broke ground on new dwellings at an annual rate of 1.588 million units last month, more than expected and 6.7 percent higher than October’s 1.488 million rate, the Commerce Department said today in Washington. Building permits fell 3 percent to a 1.506 million pace, the lowest since December 1997. ”
http://www.bloomberg.com/apps/news?pid=20601087&sid=aeJPHCj.IHME&refer=home
think of all the inventory and the reduced prices on new homes, then think of a million more homes on the way.
Are you crazy? Never think of things like that, you’d become…euforic!
And 100% of the gain was in the northeast and south.
Keep building you Knotheads……. keep building….
the greatest affordable housing project ever sold!
Again, relying on quotes from some of the great posts on this blog, who was it that stated recently something like, “leave it to the market (greedy?) to oversupply when prices skyrocket”.
Remember, a bad year for housing starts is one million, a good year is two. We’re still building at a high rate.
the greatest affordable housing project ever sold!
Or never sold, as the cas may be.
U.S. November Producer Prices Jump 2%; Core Up 1.3% (Update2)
By Shobhana Chandra
Dec. 19 (Bloomberg) — Prices paid to U.S. producers rose in November by the most since 1974, led by rebounds in the costs of energy and light trucks. Prices excluding food and energy increased more than forecast.
The 2 percent gain in the producer price index was more than forecast and followed a 1.6 percent decrease in October, the Labor Department said today in Washington. Excluding food and energy, the so-called core rate rose 1.3 percent last month, the most since July 1980, after falling 0.9 percent.
Can anyone make change for a Weimark?
don’t throw out that old wheelbarrel.
All I got are these Turkish lira.
I’ll trade you a Continental for a Weimark…
My German teacher in HS brought in some hyperinflationary prewar money to show us. ISTR a 5 million mark note that had been overstamped 20million marks in a vain attempt to keep up.
Inflation! I just recieved a 2.5% (retroactive) pay raise and this tops the 5.1% I already recieved a few months ago. My wife says things cost more at the store. If the Fed doesn’t raise rates all of you baby boomers savings are going to be wiped out. What is going on with these Fed idiots?
“Dec. 19 (Bloomberg) — Prices paid to U.S. producers rose in November by the most since 1974, led by rebounds in the costs of energy and light trucks. Prices excluding food and energy increased more than forecast. ”
IN Scal gas prices at the pump have gone up average 15-25 cents per gallon just last two weeks. Was paying as low as $ 2.19 beginning december for reg unleaded: the cheapest now is 2.39 but most stations charging av 2.50 or more. The sudden surge in gas prices may be a temp holiday markup but i do not think so. I think that continuing mideast instablity and volatility is a contributer for the sharp rise in energy prices which were the chief reason for the 2% inflation rise in November.
new from the great Roubini.
The Concerns of Comptroller of the Currency About the Excesses in the Mortgage Market
and the obligatory david lereah quote.
“If you paid your mortgage off, it means you probably did not manage your funds efficiently over the years”
-David Lereah
“If you paid your mortgage off, it means you probably did not manage your funds efficiently over the years”
-David Lereah
What a way to elicit contempt from the bloggers. I’m overwhelmed with the desire to kick this maggot square in the balls after reading that quote again.
Are You Missing the Real Estate Boom?: Why Home Values and Other Real Estate Investments Will Climb Through the End of the Decade — and How to Profit From Them.
“the real estate expansion remains intact.”
He likened the media frenzy about a real estate bubble to “Chicken Little’s ‘the sky is falling’ “
http://www.bobstaples.com/ANM/templates/news.asp?articleid=9&zoneid=1
John, careful with those quotes as one my confuse you with the nosepicking pinnochio himself.
guess I’m stupid- we’ll see when hard money returns
I guess that makes me a moron too. Also stupid for saving up a big downpayment and buying in 1994 rather than 1987.
“Here are some of the alarming statistics that Mr. Duggan has pointed out:
* 5% of mortgage originations in 1994 were sub-prime; that is now up to 20%.
* Interest-only and payment-option ARMS were 2% of loan originations in 2000, they now account for 40%.
* 20% of payment-option ARMs originated in the past two years have loan value greater than home value, a figure that would double to 40% if home prices were to decline another 10%. Thus many mortgage holders have significant negative equity in their homes.
* 50% of the sub-prime market is now made up of ‘stated income’ mortgages where “the borrower pays the lender not to verify the borrower’s stated income on the loan application, making it possible for the borrower to artificially inflate the size of his or her income in order to qualify for a bigger mortgage.”
* A study by the Mortgage Asset Research Institute found that 60% of applications for these ‘stated income’ loans exaggerated income by at least 50%.
* The increase in debt-servicing (”payment shock”) coming from negative ammortization mortgages can be severe: if rates are reset even only by 2 percentage points the payment increase will amount to a near doubling of the amount of the initial monthly payments.”
I sure wish I could explain to my poor sister (who currently has a home under contract) in simple terms what a terrible financial catastrophe in the making is implied by the above information…
CNNfn has the 2007 and 2008 outlooks for the 100 top housing markets with new snazzy graphical rollover maps
http://money.cnn.com/popups/2006/fortune/invguide_realestate/index.html
http://money.cnn.com/2006/12/18/magazines/fortune/worstmarkets.fortune/index.htm
The Top Ten Big Ugly Markets
10 housing markets ready for a fall
Metro area 2007 projected price change 2008 projected price change Median home price
Stockton, Calif. -7.10% -5.30% $427,340.00
Las Vegas -6.60% -8.10% $314,380
Bakersfield, Calif. -5.50% -6.60% $310,820
Santa Ana - Anaheim -5.50% -4.50% $710,810
Los Angeles - Long Beach -5.40% -4.60% $533,740
Miami - Miami Beach -4.90% -7.50% $371,660
Sarasota - Bradenton, Fla. -4.80% -0.80% $312,720
Oakland -4.60% -2.40% $673,800
Fresno -4.60% -4.30% $353,820
Fort Lauderdale -4.30% -4.30% $366,860
sarasota is down over 10% now
rebound 07 - is that what they’re implying here ?
What to all those funny signs (-) next to the projected price increase numbers mean?
These guys are high. Projecting +5% in Albuquerque? Prices are already falling, homes for sale have doubled since last year and there are something like 30,000-100,000 new single family homes slated, depending on whom you believe.
I’m loving this market action. Bring back the bear.
Yeeeeeeeeeeeeeeeeehaaw!!!!
Thailand started the 1997-1998 crash too
The Thai government makes Chicago politicans look straight.
Well, we need to know that Soros or someone else is short the currency now to get the full 1997 experience back
Its different this time (LOL) in 1997 it was the collapse of the Baht in 2006 it is the collapse of the dollar. Thailand doesn’t have the dollar reserves to keep the Baht from rising (as opposed to China which can peg its currency). With the Baht up 10% this year against the dollar, expect increased costs/prices on Thai manufactured products exported to the US - aka: inflation
The Baht is currently ~35 to the dollar; most currency traders think it should be ~20 - 25 to the dollar.
Hey, this will help Pier 1 get back on it’s feet.
After the Thai coup earlier this year, a number of the international students in my MBA program were running around telling folks to buy Baht.
this doesn’t make sense (or I am just need to read more). how can the thai govt not stop their currency from appreciating when they only need to print more baht and buy dollar? i thought the effect of not having enough dollar reserve is to be helpless defending a currency against *depreciation* not appreciation against the dollar.
Merry Xmas, everyone, I’m off to North Carolina for a week. You folks will have to go on stockpiling your concrete bunkers for the next few days without me. Look for the “Made In Thailand” label; I hear their products are about to get real cheap.
Have a great trip & Happy Holidays!
Merry Xmas, passthebubbly, you will be missed…
Hey,
Drink some of the bubbly! Cheers!
Some very funny videos:
http://iamnotfacingforeclosure.blogspot.com/
Hlarious….Too much home buyer, Compulsive buying, and can’t resist a sale…
Hilarious….Too much home buyer, Compulsive buying, and can’t resist a sale…
Nice one. Here’s a gift idea for those struggling with big mortgage payments from SNL (NSFW if your boss is a the sensitive type) http://youtube.com/watch?v=1dmVU08zVpA
Sacramento Mortgage Fraud Update: 12/19/06
This is an unsubstantiated rumor, but I heard it from two different sources. A large “vulture” investor was under contract to buy 30 houses from a very motivated F’d Builder (the newest type of FB), but after 10-days of due diligence they cancelled the deal. The advance finance and valuation team found so much mortgage fraud, back end incentives and property foreclosures, there is no way to arrive at confident valuations. They could not tell if they were getting a good deal or getting hosed. Furthermore, they felt there is no way to forecast what will happen in the neighborhoods where they were looking invest. Some houses may be tied up in court and vacant for years, which creates “valuation holes” in neighborhoods. Section 8 is now being accepted by distressed owners everywhere, rents are dropping, and vacancies are rising. The word is, the market needs another year of “fall out” just to see where the bottom will be located…..
It just keeps getting curioser and curioser…….
Paladin: what part of Sac metro is this? The vulture team researched titles are mortgage docs to find out about all the improprieties?
I know it is just a rumor at this point, so please keep us updated! I would think something like this will find its way to the press.
Lincoln Crossing in Placer County and Anatolia in Rancho Cordova. The appraiser working for the buyer could not get comfy. The houses are selling for $500,000 one day, then the next week the same models sell for $770,000 and $785,000 with 100% (80/20) sub prime financing. Too goosey for the valuation team, and no clear picture of where and when the fallout will end….
Rancho Cordova at $500K? Jesus, that region is prime for a huge smackdown. I lived in Sac for a couple of years in the early 2000s, so I know of where you speak. Two extremes there: Lincoln is full of white yuppies who think they are high rollers due to the housing bubble, and Rancho is a dump. It is literally on the wrong side of the tracks. I can see why the investor bailed out. That just sounds bizarre. Hell, even if the price was $500K, that is 60% too high for Rancho. Any chance the sub prime “buyers” are Russian? That group does alot of shady stuff around Sac.
The contract price was below $500K. I don’t know how much, but it did not make sense, so it does not matter. Carrying cost is $5,000/month PITI (big bonds) and rents are only $2,000/mon. The rents dictate a value of only $240,000. It may get that low, before it is all over. As a smart, cash rich investor just concluded, the fraud and other unknowns are just to overwhelming in Sacramento to determine any intelligent values right now.
I know of a 2400 sq foot home in Rancho sold brand new for $464K, short sell one year later at $418K. I think they got lucky at the $418K. They had offers at $390K, get this all the offers came in at what the buyer qualified for. People we still have loan officers deciding what the market will be on what someone qualifies for versus buyer perception about fair market value.
This crap makes me sick. Literally. I hope the whole market just comes crashing down.
Section 8 is where the gov’t takes money from taxpayers, then lowers their property values by using that money to move in undesirable neighbors.
The typical Joe Soccer Mom deserves such a screwing for supporting the gov’t.
Hey Mark…. I love the govt. Lots of it too. Say…. what area of the country do you hail from?
“Section 8 is where the gov’t takes money from taxpayers, then lowers their property values by using that money to move in undesirable neighbors”
Then their gang-banging offspring do more neighborhood ‘wealth’ transfers via burglaries and robberies!
It’s comments like this one that, as I’ve said before, make me despair for our future as our country. To imply that people who use Section 8 are “undesirable” is beyond the pale. That’s called a safety net Mark and if you should ever need it, I for one hope that it is still there.
Susan: Safety net was the intended idea. Just like welfare, Section 8 is yet another gov. program gone awry. I believe societies need safety nets, I’m not that cold. But, I do believe we should put time limits on these benefits. Welfare and Sec. 8 give too many people little incentive to better themselves. And while “undesirables” may be a stereotype, that stereotype exists because it is largely true. Visit any Sec. 8 neighborhood and you will see it. I would gladly give my vote to any politician that would fight to “clean house” within HUD and welfare. MANY of those using these programs are worthless leaches. And please don’t think I’m calling the poor and downtrodden worthless. The majority of those considered “poor” are honest and hard working people. They aren’t the ones sucking society dry through these hand-outs. I despair for our future because there is too much greed and herd mentality. This housing bubble is proof of that.
…”that stereotype exists because it is largely true.”
There is a little bit of truth in every generalization.
And there is a lot of truth in some generalizations.
Hey, CAL GUY! Forget Sec 8…Yyou must be thrilled that the Republican governor of CAL, the one you voted for, is proposing free medical for every CAL resident, including illegals, with NO NEW TAXES. Where have I heard that one before?
I didn’t vote for this actor, and even my liberal bent, has a hard time with this being jammed down my taxpaying throat. Hope you enjoy this bonehead as the governor
Did not vote for Arnold. Never have in fact. I am no supporter of this harebrained idea. I didn’t even vote yes on the recall of Gray Davis.
Ditto here, CA Guy, and don’t even get me started with the way people vote for laws that require bonds to be issued, please don’t get me started, and I’m a liberal…
Over the summer we sold our place in a nice LA neighborhood with a single house that looked like hell right next door. The long-time sect 8 tenants didn’t bother to water or mow the front yard, their guests would sit on the driveway or street curb with their bags of McDonalds, eat, then just leave the bags, their cups and the rest of the trash out there. Their late-night guests would leave beer cans in our bushes. One day I walked over there, with my toddler, and got cussed out in front of my baby for bringing up the trash issue. When we decided to sell, every morning I’d get up early and clean the street. I put my kid in a pack and took care of their lawn for them.
It made this liberal feminist start to realize that if you subsidize the white trash lifestyle, the lazy slobs of the world will just keep on living that way. I’d bet very few sect 8 people give a crap about their neighbors or neighborhood. It’s like that guy who posted about helping out on a Habitat for Humanity project where the lady getting the help just sat on her a@@ the entire time complaining that her free house wasn’t good enough.
mrquoi said: It made this liberal feminist start to realize that if you subsidize the white trash lifestyle, the lazy slobs of the world will just keep on living that way.
I am pretty liberal when it comes to lifestyles. Smoke pot, own guns, be flamboyantly gay; I don’t care as long as you do not harm others and contribute to society. I guess you could say I’m a libertarian in that area. But I agree with you wholeheartedly. As I said above, the stereotype of undesirable exists because it is largely true. The bleeding hearts will always cry over these people, but the truth of the matter is that most just keep repeating the same mistakes and never learn. And unfortunately our politically correct society seems to beat up those who do make themselves better people and then try to expose the fact that many on these programs are trash.
OK, former landlord weighs in…
I used to own rental properties in working class neighborhoods. Over the course of sixteen or so years, I rented to two Section 8 tenants. The first one was a tenant I had inherited, and I never set foot in her apartment because I was afraid of some microbe attaching to me. When I found out that she was in collusion with my rent collector - (against me and the Feds) - I thought “Great, this is my chance to get rid of her!”. So I drove to the Section 8 administrator’s office, met with him personally, and apprised him of the situation. He looked at me as if I were totally wasting his time and basically blew me off, even though the woman was scamming the System, as well as me.
I went home, fired the rent collector and didn’t keep the building too much longer.
The second Section 8 tenant was a word-of-mouth referral from existing tenant. This woman was disabled, with one son. She kept her place spotless. I never had a problem with her, but the other tenants scorned her because she was Section 8.
I recall that Section 8 landlords had to adhere to strict rules and regulations regarding the condition of their buildings, but that the tenants collecting the benefit also were constrained by rules of behavior and maintenance of property. This was a dozen or so years ago.
I don’t know what has happened in the interim; it sounds as though no one from the bureaucracy is following up on complaints about tenants or properties. I do know that if I were a landlord now I wouldn’t be averse to renting to a Section 8 tenant if I could do a satisfactory pre-screen.
It’s a shame that the disabled folks who benefit from Sec 8 are lumped in with the lowlifes.
Have you ever seen Section 8 housing? Walked down a street of Section 8 houses (without a gun)? Since you say you’re a realtor, have you ever tried to sell a SFR after a section 8 family lived there?. Perhaps you’d like them to move a Section 8 family into a vacant home in your neighborhood?..I doubt you are informed on the subject. Your compassion is expressed at a very safe distance from section 8 housing.
Susan, you are wrong. Read my post below. Section 8 destroyed my parents neighborhood and home values. I know first hand. That is why at age 19 (back in 1978) I decided I am no liberal.
Mark: They call Section 8 a safety net for a good reason and I hope, for one, hope that if you should ever need it someday, it’s still in place. And, for the record, your comments about “undesirable neighbors” is beyond the pale.
Without Section 8 rents would fall. When the government gives money away to a lot of people, the end result is prices rising to this support. eg. the mortgage interest deduction. If this didn’t exist home prices would be 3% less affordable and thus 3% cheaper.
Susan: why does your user name lead to a page for debt consolidation? If you are in that biz and looking for clients, then you may want to try another blog. Perhaps one for all the brilliant RE “investors” we have created in the past 5 years. Or maybe you can hit up a young man in Sacramento named Casey Serin. He has an interesting little blog titled “I am facing foreclosure.” He is the poster boy of this bubble.
I have absolutely nothing to do with debt consolidation. I have no idea what you are talking about. I am a realtor in Wisconsin…period. But I do know three landlords who rent to Section 8 tenants and they tell me that they have found them, with a few exceptions, to be good tenants over the years. So I will continue to defend the program despite the vitriol that regularly emanates from the keyboards of many here. I find it ironic that I am villified for saying something positive and those who do nothing but spew bile–much of it racist–on this blog are heartily endorsed as critical thinkers. So write what you want. I will sleep well tonight.
That’s my neighborhood to a tee. “Section 8″ are very bad words around here.
Section 8 interferes in the market dynamics and is a direct transfer of tax monies to landlords. You should love it.
I do.
All because the REIC was aloowed to ride roughshod over regulations and common sense - just where libertarians want us all to go. feh.
audet,
This is why the libertarian party will never take hold. I like their stances when it comes to letting people live their lives, but we must have regulations, and even more importantly: enforcement. All we have to do is look to Fannie Mae, and the mortgage and realtor industry. Stockbrokers cannot promise returns, so why should a realtor be allowed to? That being said, I still place most of the blame on the moronic buyers that believe these sales people. They will fight the guy at the car dealership over $5K, but they’ll gladly sign up for a half-million dollar death loan because like their realtor said: you can’t lose with RE, it always goes up!
fnm is a gov entity- so much for regulation
also look what regs have done for vaccines and nukes
you misunderstand the LP
“Section 8 is where the gov’t takes money from taxpayers, then lowers their property values by using that money to move in undesirable neighbors.”
Happened to my parents’ neighborhood in 1978. It turned me into a radical capitalist at that time at the age of 19. The 4 acre empty lot across from my folks’ place was turned into roach hotel (apartments). All section 8. Along came shootings, stabbings, drug dealings. One neighbor across the street in those apartments was stabbed repeatedly by his girlfriend. Amazingly he survived, but bled all over the front porch of my dad’s as he asked to use the phone! Another neighbor across the street was shot point blank in the face. This is the result of liberals and their “fairness” and “feel sorry for people who do not work” doctrine of several decades.
Followup: I sold that house in 2000 for $75,000. It’s zillowed now at $250,000. That’s in Fresno, which is way overpriced. You want to kill the middle class, just move section 8 into their neighborhoods and that will destroy their Real Estate Investment fast!
There’s another way to kill the middle class, Bill. Give them some kool aid and a housing bubble, make them all feel rich for a couple of years, then have them wake up as people needing section 8. I am afraid that is going to happen to many people. It’s going to be ugly, really ugly.
how sure are you that this is due to “liberals and the fairness and feel sorry …”?
“how sure are you that this is due to “liberals and the fairness and feel sorry …”?”
I’m sure because only the left was in favor of social welfare in the 1960s and 1970s. Lyndon Johnson’s “War on Poverty” and the “Great Society” and “New Deal” from earlier eras introduced a lot of programs to take money from productive people and give to those who will not work. The problem is not the haves versus have nots, but the wills versus will nots. Which camp do you identify with?
via Curbed
Cool New Thing: NYC Finally Gets Its Bubble Blog
Though we mostly retired our BubbleWatch™ rubric a year ago when the real estate market started its downward march, we’re still delighted to see that New York City is finally worthy of its very own BubbleBlog. Introducing: the straightforwardly named New York City Housing Bubble, written by—well, let’s let author “Stefanie in 11211″ explain:
“I have lived in Brooklyn-North Williamsburg for 10yrs/nyc for 20yrs, and witnessed first-hand the ‘New Bohemia’ known as Billburg blossom out of the affordability range for most who love it and wish to remain. So I decided to start this blog due to the lack of focused material on the NYC housing bubble in the (5) five boroughs and immediate metro area. Most importantly, this is a place to ‘get the big picture’ on socio-economic- political-financial issues worldwide, which will affect this market in the days immediatley ahead.
If there was to be a NYC housing bubble blog, it could only come from our favorite New Bohemia. You can feel it in the air: gonna be a good day.”
· New York City Housing Bubble [nychousingbubble.blogspot.com]
The local news/papers in the Virginia Beach, Va area are mute concerning the local market other than the occasional ” sales have cooled slightly”. Could be because of the normal Holiday slowdown most areas of the country experience Nov - Jan or most likely that no news is good news. I have noticed a number of comments concerning square footage costs from other bloggers and I would appreciate some clarification using a 3000 sq ft home in a good surburban setting: (1) Square footage costs here average $150 to $175 depending on upgrades including the lot. Is this figure Hi/Lo/average? (2) Does the average Sq Ft costs include the lot? Thanks in advance.
While I don’t know what the normal square footage ratio is in Virginia beach, I can say that I watched some properties go from $170K to $340K between 2002 to 2006 time frame. Meanwhile the salaries haven’t gone up much. I think I notice more traffic on the roads. There seems to be an idea that Hampton Roads is loosing population, although the only real article I’ve seen was a debate regarding Norfolk being the #1 shrinking city. If you look at the demographics of the cities it says quite a bit.
On the other hand, do your part! I’m working hard to educate the drooling masses. I was listening to “the crunchman” on 850AM on my way home, and sure enough he mentioned me. He challenged me to go on his show, even. He is all about the mortgages, talking about how the CEO of Atari bought a condo in Manhattan and paid cash… and it was the dumbest move ever. Also how you should always overpay for property so the value is higher on paper. I’m serious. Tony London comes on Thursday @ 5PM on 850AM. I’ve been on there a few times, inflicting the doom and gloom to my audience of people stuck in traffic. It’s hard, they are spin masters. And anyone who owns doesn’t want to believe that things could get flushed down the toilet.
You have pretty much defined the increase in Great Bridge- (my area) 100% over the last 5 years. As far as the Crunchman, he has been advertising his morgage service (he will get you a 53% yearly return on your RE investment!!!) for the last 3-4 years non stop. Hard to believe that he can afford the radio costs. I listened to his show a couple of times and he just hypes his system without any specifics - give him a call and he will make an appointment to meet you. You would have to be a lot past gulible to buy into that act. Just for giggles you should get on his show and Invite a staff member of the Chesapeake and Va Beach law dept as witnesses. Hard to believe that that you can make those claims without having a valid basis/track record.
Anyone interested in a “layoff” job?
The community of Bend, Oregon, continues record-breaking growth. In response to this growth, 12 new positions have been authorized in the City of Bend Building Division
for fiscal year 2006-07. The City of Bend encourages the professional growth of its
employees, offers an excellent benefit package, and has a low level of employee
turnover. Bend is an environmentally sensitive community located on the edge of Central Oregon’s high desert plateau, an area renowned for its livability, natural beauty and recreational opportunities.
Ha! 12 new positions in Bend? Yep, you’ll have that job right up until the point when builders stop pulling permits.
I heard some of these positions are being transistioned to “bus repair technicians’
gov is always timely- and it will be about impossible to get rid of these new clock watchers
Can anyone comment on the downtown San Diego market near the ballpark particularly as it deals with Condo sales and inventory….?? Thanks for any help….
Are we getting closer to the point of decision between defending the dollar’s reserve currency status and propping up the housing market with lower interest rates? (And BTW, I cannot recall a year when economists were so consistently surprised by how far off the mark their forecasts turned out…)
———————————————————————————
ECONOMIC REPORT
U.S. Nov. PPI rises 2% on energy, cars
Core prices rise 1.3%, the most since July 1980
By Robert Schroeder & Rex Nutting, MarketWatch
Last Update: 10:57 AM ET Dec 19, 2006
WASHINGTON (MarketWatch) - Producer prices soared in November at the fastest pace in decades, pushed higher by rebounding energy prices and a quirky gain in car and truck prices.
The November producer price index climbed by 2%, the biggest rise since 1974, the Labor Department reported Tuesday. The PPI had fallen 1.6% in October.
The core PPI, which excludes food and energy prices, rose 1.3%, driven by higher prices for cars and trucks, following a 0.9% decline in October. It’s the biggest gain in the core rate since 1980. Read the full government report.
The big jump in the PPI was in sharp contrast to the November consumer price index, which was unchanged on both the headline and core measures. See archived story.
Fueled by renewed fears of inflation, bond prices initially fell after the report, sending the yield on the 10-year note to 4.60%. Prices later recovered, pegging the benchmark 10-year yield at 4.59%. See Bond Report.
Economists surveyed by MarketWatch were expecting the PPI to rise by 0.7%, although some expected much larger gains. They also forecast a 0.3% rise in the core PPI.
http://tinyurl.com/uf6f2
Something just occurred to me - has anybody checked to see whether a disproportionate number of former arabian horse show officials are being appointed to analyst jobs with the department of labor?
why do we have a dept of labor ?
or DOE or DO ____fill in the blank
Ben
Someone just started a NYC Housing Bubble Blog
http://nychousingbubble.blogspot.com/
Dear all… welcome to this blog. I have lived in Brooklyn-North Williamsburg for 10yrs/nyc for 20yrs, and witnessed first-hand the ‘New Bohemia’ known as Billburg blossom out of the affordability range for most who love it and wish to remain. So I decided to start this blog due to a lack of focused material on the NYC housing bubble - combined with and most importantly, a place to ‘get the big picture’ on socio-economic-political-financial issues worldwide, which will affect this market in the days immediatley ahead. So please contribute to this ‘learning’ resource in a positive way, for those considering a purchase or sell over the next few years.
- brooklynchic11211
Check out the pulsation in today’s volume pattern on Pulte Homes stock purchases. Does the PPT use antilock breaking technology?
http://tinyurl.com/y4h5er
“braking” (my Freudian slip is showing…)
I guess ABS is the strategy for Toll as well. Is there any bid out there today besides the PPT’s?
http://tinyurl.com/8cqwt
PHM, , ) announced that its Board of Directors declared a regular quarterly dividend of $.04 per share on the Company’s common stock payable January 3, 2007, to shareholders of record at the close of business on December 20, 2006.
funny Youtube Williamsburg Greenspoint Gentrification
http://www.youtube.com/watch?v=SiN_XaSo82U
Need some gift ideas? Here’s some inspiration:
http://realtytimes.com/rtcpages/20061218_bookgift.htm
“This year there were a number of books on real estate that hit the market. Here are just a few that would make great gifts and provide information that would benefit a novice or a well-seasoned real estate investor.”
Here are the choices (invest like it’s 1999?):
“Trump The Best Real Estate Advice I Ever Received. 100 Top Experts Share Their Strategies.”
“The Real Guide to Making Millions Through Real Estate.”
“The Complete Idiot’s Guide to Buying Foreclosures”
“2 Years to a Million in Real Estate”
Make sure you read this bimbo’s short review of each book.
Mortgage fraud in Vegas??? Say it ain’t so!
http://www.lvbusinesspress.com/articles/2006/12/18/news/iq_11294989.txt
http://biz.yahoo.com/ap/061218/fannie_mae_executives_sued.html?.v=5
U.S. Charges Ex-Fannie Mae Chief Raines
Monday December 18, 7:24 pm ET
By Marcy Gordon, AP Business Writer
Government Files Civil Charges Against Ex-Fannie Mae Chief Raines, Two Other Executives
WASHINGTON (AP) — The government on Monday filed civil charges against former Fannie Mae chief Franklin Raines and two other top executives, accusing them of misconduct costing shareholders billions of dollars.
ADVERTISEMENT
The Office of Federal Housing Enterprise Oversight announced that it is seeking fines and the return of millions in bonus money. It filed 101 charges against Raines, former chief financial officer Timothy Howard and former controller Leanne Spencer.
Raines and Howard were swept out of office two years ago in the multibillion-dollar accounting debacle at the government-sponsored company, which finances one of every five home loans in the United States. Fannie Mae earlier this month announced a long-awaited restatement for 2001 through June 30, 2004, that erased $6.3 billion in profit.
OFHEO said it is seeking civil fines of $100 million or more against the three former executives and restitution totaling more than $115 million in bonus money tied to an improper accounting scheme.
Attorneys for Raines, Howard and Spencer disputed the regulators’ charges and said they were politically motivated. The lawyer for Raines called OFHEO Director James B. Lockhart “a fatally biased regulator” and asked him in a letter to remove himself “immediately and completely from any further regulatory action affecting Mr. Raines.”
Lockhart’s true motivation in the charges is to get Congress to enact legislation tightening the government reins on Fannie Mae and Freddie Mac, its smaller sibling in the $8 trillion home-mortgage market, said Raines’s attorney, Kevin Downey.
Raines, a prominent Washington figure who was White House budget director in the Clinton administration, led Fannie Mae — with its legendary political clout, generosity in campaign contributions and lobbying savvy — from 1999 until his ouster by the company board in December 2004.
Lockhart said the charges “reveal how the individuals improperly manipulated earnings to maximize their bonuses, while knowingly neglecting accounting systems and internal controls, misapplying over 20 accounting principles, and misleading the regulator and the public.”
“The misconduct cost (Fannie Mae) and shareholders many billions of dollars and damaged the public trust,” Lockhart said in a statement.
OFHEO, the regulator for Fannie Mae and Freddie Mac, last May issued a blistering report alleging a six-year accounting fraud at Washington-based Fannie Mae, the second-largest U.S. financial institution after Citigroup Inc. The regulators said the scheme included manipulations to reach quarterly earnings targets so that company executives could pocket hundreds of millions in bonuses from 1998 to 2004.
Fannie Mae paid a record $400 million civil fine in a settlement with OFHEO and the Securities and Exchange Commission. It also agreed to limit the growth of its multibillion-dollar mortgage holdings, capping them at $727 billion, and to make top-to-bottom changes in its corporate culture, accounting procedures and ways of managing risk.
The notice of charges filed by OFHEO includes allegations that Raines, Howard and Spencer engaged in earnings manipulation and “deliberately misleading” financial reporting, and failed to establish a sound internal-controls system.
The allegations will be heard by an administrative law judge, who will make a recommendation to Lockhart — not a binding decision — on whether the charges should stand. The three would have the right to appeal a final ruling in federal court.
The three executives’ attorneys argued that Fannie Mae’s longtime auditor, KPMG LLP, had pored over the company’s books annually and signed off on the accounting as conforming with standard practices. Fannie Mae sued KPMG last week for $2 billion alleging negligence and breach of contract.
Raines and Howard have taken OFHEO to court to obtain documents created during its annual examinations of the company that they say will bolster their case.
Howard’s attorney, Steven Salky, called the allegations against his client “a politically motivated attempt to rewrite history.”
The charges are “a work of unsubstantiated fiction, starkly at odds with both the actual facts and the conclusions reached by OFHEO during its extensive annual examinations of Fannie Mae,” Salky said. “We are eager for a fair and impartial adjudication of these claims, which will demonstrate the propriety in all respects of Mr. Howard’s conduct.”
Spencer’s lawyer, David Krakoff, said that her annual performance reviews for the six years she was controller “found her work was nothing short of outstanding.”
“We look forward to disproving the politically motivated claims brought by OFHEO,” he said.
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Dow posts 21st record since October
Blue-chip index rises to highest level ever despite sharp increase in wholesale inflation gauge; oil, gold prices climb.
December 19 2006: 4:07 PM EST
NEW YORK (CNNMoney.com) — An afternoon rally pushed the Dow Jones industrial to its highest level ever Tuesday - the 21st record the index has set since October.
The Dow (up 28.36 to 12,469.63, Charts) rose about 0.2 percent to exceed its previous record set on Friday. The blue-chip barometer also scaled a new intraday high of 12,491.91 during the session.
Gekko posts ” Dow posts 21st record since October ”
I am glad Wall Street is doing well, I own stocks. I doubt it will hold up when “Main Street” takes a dump. How do you reconsile the two facts?
-
I can’t predict the short-term future of the markets. That’s why I believe in diversification and dollar-cost-averaging.
“1/3 in land, 1/3 in business, and 1/3 kept liquid.” – The Talmud
….with insider selling at the highest rate in 20 years… In law enforcement, we call this a clue.
-
beware of false “clues”. lots of “clues” existed in 1995, 1996, 1997, 1998, 1999, 2003, 2004, 2005, 2006.
-
“You know my problem with ‘gut’ feelings? Once you have them, the only evidence you see is the evidence that reinforces your gut feeling. Human nature.” - David Breckenridge, “The Sentinel”
My gut feeling made me abandon all logic and capitulate last Thursday. I’m all in, baby. Still got the trigger finger on my double down Profunds pistol. Wasted 4 bullets, still got 2 left.
Report Reveals 2.2 Million Borrowers Face Foreclosure on Subprime Home Loans
http://www.responsiblelending.org/issues/mortgage/reports/page.jsp?itemID=31214551
“2.2 Million Borrowers Face Foreclosure”
AVALANCHE!!!
Damn. Financial crisis coming I fear. Prepare now.
Dear fellow renters of the HBB: Here is a snippet to bring holiday cheer from a Yahoo! finance article by David Bach, i.e., “the automatic millionaire”, called “Five gifts that teach kids about money”:
“3. Monopoly (ages 8 and up)
This classic board game has sold over 200 million copies worldwide over the past 72 years. This was my favorite game growing up — are you surprised? It can change your life when it comes to money, because you can actually learn lessons from playing it.
The most obvious lesson it teaches is that you can’t get rich renting. If you don’t own property when you play Monopoly, you lose. Renting makes the player who owns the property rich and, ultimately, the player who doesn’t own property poor. A lot like real life.
Other real-life lessons that Monopoly players learn is that it’s easier to get rich and win the game by buying less-expensive properties first, because you can build faster and then use the cash flow from these properties to buy the higher-end properties.”
The “most obvious lesson” Monopoly teaches is that it is more fun to drive the little car than the thimble.
You can’t make money by playing the same strategy (buy, buy, buy) no matter what stage of the housing cycle you find yourself in, either.
David Bach is a blind shill in the face of overpriced RE. Maybe he has a bunch of overpriced houses he’s trying to sell to his readers. This decade and perhaps well past 2010, one is better off renting and buying T-bills to save for a house that is properly valued. That will be when it is finally cheaper to buy than to rent.
Most economists have perpetually underestimated the magnitude of the bust throughout 2006, but maybe they will get one right just this once. Because this time certainly will be different than the last seven times since 1955 when residential construction flew off the edge of the cliff to the tune of a 25%+ contraction, with the rest of the macroeconomy soon to follow. And BTW, if Samuelson’s rebalancing scenario comes to pass, the Asians will have fewer dollars coming their way to recycle in our credit (read mortgage) markets, at which point I suppose helicopter drops will be used to keep our bond yields from spiking to housing-demand-crushing heights…
——————————————————————————-
Rebalancing the Economy
Most economists don’t think the real-estate bust will lead to a recession.
By Robert J. Samuelson
Newsweek
Dec. 25, 2006 - Jan. 1, 2007 issue - Consider it a good omen. in October, the U.S. trade deficit dropped unexpectedly to $58.9 billion, about $5.4 billion less than in September. Although the largest cause was lower oil prices, strong American exports—up 14 percent from a year earlier—also contributed significantly. And that’s exactly what the economy needs in 2007: an export surge. It would ward off recession and narrow today’s dangerously large global trade imbalances. We need what economists call a “rebalancing” of our economy and the world’s.
http://www.msnbc.msn.com/id/16240563/site/newsweek/