Ascertaining Home Prices In The Absence Of Speculation
Friday desk clearing time. “Greater Vancouver’s high-flying real estate market saw a 4.1-per-cent decline in sales volume in February compared with the same month a year ago, the first year-over-year decline since last March. Condominium sales showed the biggest drop, falling 8.7 per cent to 1,212 units compared with last February. Sales of single-family homes declined 3.2 per cent to 1,177 compared with February of 2005.”
“‘It may be pointing to the affordability issue,’ David Rishel said.”
“The cheap mortgages that fueled America’s real-estate boom are beginning to hurt the homeowners they once helped. Higher interest rates and the end of honeymoon periods for too-good-to-be-true teaser rates are causing payment shock for those who said “I do” to exotic loans. ‘A lot of people who’ve taken on exotic loans don’t understand them,’ says Scott Hanson. ‘The mortgage industry has sold these loans as a way to buy more house than you’d otherwise afford. Anyone who goes out today and gets an adjustable rate has got to be loony.’”
“You remember that loan, don’t you? Wasn’t it just a couple of years ago when interest rates were nearly sub-zero and you and your very smart loan officer thought it would be a great time to pull out a little equity. But now that fully indexed rates are near 7.50 percent and at least a full percentage point above current fixed rate fare, and going higher, then it makes sense to get into a lower fixed rate doesn’t it?”
“If your loan officer played her cards right, you’re thinking right now about refinancing into a fixed rate loan.”
“D Magazine’s current cover story extols the Dallas real estate market as bulletproof. Unfortunately, that theory ignores an old tenet of economics. Oversupply, the thinking used to go, can prove as harmful to a marketplace as overdemand.”
“That notion has gone the way of the dinosaur, especially as it pertains to condominiums. We’ve got more high-end condos under construction than you can shake a stick at.”
“Moody’s John Lonski commented on the trend: ‘A likely contraction of speculative homebuying will probably soften pricing by enough to encourage a longer period of price search or longer stretches of negotiation over home selling prices. If only to better ascertain the sustainability of home prices in the absence of speculation, home sales will probably be lower than otherwise over the near term.’”
“Mortgage banker PHH said Wednesday that it will not be able to file its annual report in a timely fashion because its auditors are still reviewing the company’s finances. In the regulatory filing, the company also said during the review that it had found a number of ‘control deficiencies” in its internal financial reporting system.”
“Long-term Treasury rates broke out of a month-long range…upward, and today above last November’s two-year high at 4.68 percent. Among the consequences rippling outward: confirmation that a portion of the ‘yield curve inversion’ has been caused by speculative borrowing in low-rate Germany and Japan to buy high-yielding U.S. Treasury bonds. If ECB and BOJ rates are rising, this ‘carry trade’ is no longer a good idea.”
“Consumer confidence fell in February as home-buying attitudes dropped to their lowest level in 15 years, according to the University of Michigan’s Survey.”
“Home sales in Virginia fell for the fifth consecutive month in January. Virginia’s median existing-home price for January was $165,425. January’s median price is down 8.2 percent from December 2005’s median of $180,260.”
“‘Every time I refinance, I use the money to buy another house,’ explained Hector Mata. ‘My goal now is to buy two houses a year.’”
“‘People are looking at their mortgage and equity differently than they used to,’ Lori Garcia in Modesto said. ‘Paying off a mortgage doesn’t make sense anymore. Why have all of your equity sitting in dirt doing nothing for you? You want to put your money to work for you.’”
“Statistics show that Stanislaus County home values fell during nine of the past 24 years, including annually from 1982 through 1984 and from 1991 through 1996. Home sales prices, in fact, dipped in January throughout Stanislaus, San Joaquin and Merced counties.”
“‘I think we’re at the top of the real estate market right now,’ said Mata. He’s said he’s ready to buy more property if prices start falling.”
Another great week of building a bubble consensus. My thanks to those that supported this blog with donations and/or ad clicks. Please check back this weekend for news, market observations, your topics and hopefully, the new photo gallery!
ben have you considered live chat on your blog
Oh no! I prefer people think for at least 10 good seconds before they speak. Chat is for perverts, anyway. The last thing we need is hundreds of horny bubble watchers on here. Any hot babes IM me! ASLIR! That would mean Age, Sex, Location, and Inventory Report.
The mortgage chicks would be all over this site!
I think a full blown message board would be sweet, though. Not that this isn’t already pretty sweet, of course…
Ben, you deserve some kind of an award for sticking with this blog even when the tide was against you. I started reading you about a year ago, and you definitely were a contrarian then. Now, you’re a prophet! Great work.
“‘It may be pointing to the affordability issue,’ David Rishel said.”
Or it may be pointing to the global bubble bursting issue…
Yeah, in Vancouver we’re 8 months behind what’s going on in the US. By June we might start hearing about soft landings. . . .
Heard some more bs on housing today. People are saying we are in for a soft landing because rates are still relatively low and the economy is strong. We all know the reason for the strong economy is housing and once it takes a sh@t we are in for one hell of a ride. If the economy was strong without the absence of artificial housing increases I would feel a lot more confident about buying. Knowing that I’m financing that new hummer for somebody just irks the hell out of me
This is like shooting ducks in a barrel.
OR, even FISH IN A BARREL. Both are fun.
HA! I was going to correct myself, but then I thought na, no one will notice! Shades of Jerry Ford “putting the horse before the cart”!
Next time, remember to get all your fish in a row before you post
I thought you had done it on purpose…
‘Higher interest rates and the end of honeymoon periods for too-good-to-be-true teaser rates are causing payment shock for those who said “I do” to exotic loans.’
The end of honeymoon periods are inevitably painful. Didn’t he mean “toxic” instead of “exotic”?
The honeymoon is almost over. Divorce court is next.
Would have been better off left at the alter
I was at the airport last week in Las Vegas, and walked past a guy on a cellphone- “so let me get this straight, your buyer is in the middle of a DIVORCE?”
Yep, agreed.
I see a lot of giddy smiles leaving faces these days…
The only housing-related smiles I am seeing these days are the smileys on this blog
Yahoo!
Feigned outrage….
You people should be ashamed of yourselves being happy at someone else’s misery.
That sounds silly….I tried to type it and mean it but I just can’t.
People are bleeding from self-inflicted wounds.
“But now that fully indexed rates are near 7.50 percent and at least a full percentage point above current fixed rate fare, and going higher, then it makes sense to get into a lower fixed rate doesn’t it?”
At some point, even the most clueless creditor will have to recognize how risky the subprime tranche of recent buyers in the I/O ARM category have been, and at that point the price of the risk will adjust to fundamental value…
Nice point! The price of risk…
IMO the price of risk is at an alarmingly low rate across most asset classes globally. Equity VIX premium (implied stock index option volatility) is at lifetime lows, as is fixed-income MOVE premium (treasury bond index option volatility). To anyone who doesn’t know and still cares, think of the price of option vol as the price of insurance. Low vol = cheap insurance to hedge your assets. Well, dealers and customers on the Street can’t sell it, that asset insurance, fast enough! Mostly these are kids who couldn’t own enough paper (vol) when the Dow hit 7500 the SECOND time around in late 2002. Anyway, now everyone’s terrified to own paper. “Do you hear that? Yeah, that! It’s my paper decaying!!!!”
Anyway, kinda mind-boggling to me, given where we are in this economic cycle, housing doing what it’s done. In fact, CSFB put out a piece about a month ago showing its global Euphoria/Panic Index at record “euphoria” levels. That only happens when stocks, bonds, and commodities all go verticle. Not good, not sustainable. Just pull up charts of equity indices around the world — they’re all at multi-year highs.
Anyway, the bullet-proof beach bubble that is US equities (it just won’t stay down) is beginning to discount the trouble ahead. It’s taken a while, but I think the big marco funds are beginning to see the consumer rolling over. He’s tapped! Retail and auto sales sucked this week, revolving consumer and mortgage debt is at outrageous levels vis a vis GDP and income levels, yet mutual fund cash positions are at record lows? CAPEX blows, the gov’t is supposedly trying to cut spending, and our major trade partners are all playing a game of USD chicken with each other? Yet: “Hey, what’s your bid? I gotta get this vol (insurance) OFF my sheets!”
This time around I have a feeling there’s gonna be “liquidation.” Liquidation of assets (jobs and cars and houses and whatever) to pay debts. And who’s gonna pay for it all? Rates are going up and prices are gonna come *down* because there’s going to be too much stuff out there for sale and not enough sources of income. And I’ll bet you a nickel that the US Labor Market isn’t nearly as strong right now as it seems. Sure, headline unemployment is 4.7%, but real income hasn’t grown this cycle! There’s no wage pressure, and that just substantiates the data out there showing millions of folks leaving the labor market because they can’t find jobs they want.
Anyway, I agree: the price of risk is too low.
[“‘I think we’re at the top of the real estate market right now,’ said Mata. He’s said he’s ready to buy more property if prices start falling.” ]
LOL! Is this guy for real? A contrarian with a poor sense of timing or a complete dope. Either way he is on a 1-way trip to bankruptcy…
Or maybe he secretly plans on selling and is talking up the market to attract more fools….
No, he’s planning on single-handedly supporting the price of his other 100% financed properties with more 100% loans. Leveraging his way down the tubes. LOL!!!
one reason why bubbles form even when people know prices are overvalued is that nobody seems to be able to force themselves not to buy. it’s almost a compulsion.
Like a bad gambler who can’t leave the table because he *knows* that if he plays just a little longer, he’ll win it all back. A loosers strategy.
It is even worse in this case than at the gambling table. At least in Vegas, although the probability of losing is greater than 50%, it is not steadily increasing…
john Law..with an name like this…I think you have been reading Charels Mackay’s - Extraordinary Popualr Delusions and the Madness of Crowds……. The USFed and their puppetiers will soon own a chapter in this book.
“Oversupply, the thinking used to go, can prove as harmful to a marketplace as overdemand.”
Particularly since speculative overdemand can transform overnight into speculative oversupply…
“Moody’s John Lonski commented on the trend: ‘A likely contraction of speculative homebuying will probably soften pricing by enough to encourage a longer period of price search or longer stretches of negotiation over home selling prices.”
… or longer stretches of renting instead of catching a falling knife.
“‘I think we’re at the top of the real estate market right now,’ said Mata. He’s said he’s ready to buy more property if prices start falling.”
Dips will buy dips…
Good one Plaster man….Dips & Dips…
“Mr. Mata. “I think we are at the top..I am going to buy more when”… MR.Mata has NO concept of Leverage destructiveness. Should any one know this man, please advise him that reading up on the current bankruptcy laws would be prudent before he ventures into another property!
“[PHH] did not offer much of an explanation for the hiring of Clair Raubenstine as its new CFO.”
Huh? You could tell from Ben’s summary that the CFO was toast. The inexplicable thing is why the old CFO is staying on in any capacity. The other inexplicable thing is why is the stock down just $3 ???? Sounds like PHH would make a whopping good short candidate.
Stock prices are hanging sticky above fundamental value these days, making the timing of short plays tricky. But once so many negatives are common knowledge, the stickiness will melt like syrup on a boiler…
“‘People are looking at their mortgage and equity differently than they used to,’ Lori Garcia in Modesto said. ‘Paying off a mortgage doesn’t make sense anymore. Why have all of your equity sitting in dirt doing nothing for you? You want to put your money to work for you.’”
Actually, it’s not your money until you pay off your mortage and or sell! As mentioned on this blog a thousand times, extracting equity is just acquiring more debt. This guy really thinks he’s some kind of f*ing financial genious but he’ll soon find out he doesn’t actually own anything.
yeah, all he discovered is leverage.
Not to mention that your money isn’t “working for you” in the traditional wealth-generating definition of an investment, unless it’s income property with a positive cash flow.
Putting your money “to work” apparently means dumping it into… more dirt.
I’d love to update you all on OC Inventory, but http://www.ocrealestatefinder.com appears to be stuck. I’ve been looking at Inventory growing and growing city by city at http://www.firstteam.com, but ocrealestatefinder isn’t showing the increases. I don’t think it’s updated since last Friday.
Could the March of the Inventory have maxed out the bandwidth, perhaps?
Or is there something else going on here?
Don’t know what to tell you, except this:
The Orange County Inventory Fire is still raging, and climbing ever higher.
Might have to wait until Monday, if they get the system fixed by then, for numbers.
Been seeing a hell of a lot of price reductions, though.
Of course, all of them seem pretty pithy- ten, maybe twenty thousand.
Sellers are still living in LA LA Land.
This might last through August.
Patience.
Yep, I noted the stop in the new listings also. It seemed to stop around the time that OC register article came out about how ‘the surge of inventory is keeping houses on the market…’
Probably coupled to that one that called the 39K decrease in $$.
Later,
JF
ZipRealty was also broken from yesterday until later today.
SD MLS has been screwed up for a couple of days - mass conspiracy to thwart the statisticians?
There could be local efforts underway to throw statistical bloodhounds off the trail, but it will have the unintended consequence of damaging credibility of the data sources that play this game. This brings to mind the Chinese govt’s release of SARS data in the spring of 2003 (oh by the way, we had three hundred additional SARS deaths over the past three months that we just learned about…)
Case in point:
SD ziprealty inventory showed less than 17,100 homes on the market at one point yesterday; now it is showing a more plausible 17,359!
I hope that you noticed OC Register Lansner now has a RE blog.
And he seems to relish pointing out little bullish milestones.
Oversupply, the thinking used to go, can prove as harmful to a marketplace as overdemand.
‘Oversupply’ is simply a signal that the market is not clearing, and so prices are going to fall. It’s a simple matter of economics. The market will clear, but only at lower price levels.
In over-supplied markets, those sellers who wait are mostly going to create a bigger problem for themselves. The levels of inventory in Arizona and some other areas are simply too large to clear for some time yet - possibly, a matter of years.
You Pacific and central time zone bloggers HAVE To watch NBC Nightly News~~
FINALLY a major network reported on the current real declines in housing prices and sales?!?!?! Consumer confidence in housing at 15 year low.
Interview with SHEA builder ADMITTING they are now offering BIG incentives (granite counters various upgrades) and the reporter stating “They are marking down houses like towels and sheets at Bed Bath and Beyond”. Also another blurb on the speculation on condos such as in Vegas and Florida and how flipping real estate for profit is over and investors may be getting out
Of course NAR economist comes back with some mumble about this market now changing to a more “sustainable” market- watch the RE Agents in the next few months start to take credit for the increased affordability in housing VS the any responsibility for declines!!
Great accompanying article http://www.msnbc.msn.com/id/11658208/
Yeah, Campbell Brown introduced the NAR quote by saying “experts were predicting a soft landing.”
Once again, what empirical evidence can they point to that would suggest a soft-landing is waiting around the corner. With the run-up in prices so steep for no rational fundamental reasons, the end of this mania should be horrific.
Thanks for the alert. It was a great piece until the last ten seconds when they concluded with the NAR’s throw away line: “Nothing to worry about, it will be a soft landing”.
The market for condos in and around downtown Dallas has never been all that swift. For the inventory in the works and already built to clear is going to take some major price reductions, and even then, you have to have folks that want to live in condos. Dallas residents on average like to have a yard, so I think it was a major miscalculation or just plain greed that sent all this building in motion. I haven’t seen the huge influx of empty-nesters that these developers think are coming to town - especially not at $400 +/sqft.
We who have been here awhile all know that Dallasites who can afford 400K and up will go to the Park Cities, Preston Hollow or Bluffview. End of story.
I think that’s a good observation. Not a condo guy myself, but I can at least see how people who like the trendy kind of city living gravitating towards a condo in say Miami, NYC, or SD, but Dallas? Gimme a BBQ, a dog, and a place for the slip ‘n’ slide, for gosh sake.
“Everytime I refinance, I buy another house!”
Uhhhhhhh………
Every time I refinance, I dig my grave deeper.
Uuhhhhhhhh yuahhhhhhhhh. HEAD IN SAND. Agreed.
pure comedy
I wrote Danielle last week and asked her to write that column. Thank you Danielle! It takes a lot of guts to crap on the Dallas RE market in the daily rag. I’m surprised they printed it.
Did they print in the Dallas Morning News? This link is for the Belo affiliate in Oregon and SW Washington.
They better have. I just checked and don’t see it in the online version though.
Mata won’t be able to buy any more houses when prices fall because his equity will have already been strapped. There are some people left with the no lose mentality.
When I was checking out at Costco yesterday, the man in front of me was buying four different Kiyosaki books. He looks like a beginner late jumper. Hopefully he will actually read the books to conclude any California property bought now is a liability (rents not covering expenses).
“‘Every time I refinance, I use the money to buy another house,’ explained Hector Mata. ‘My goal now is to buy two houses a year.’”
buutt, butt, buttttt….
“The TV show “FLIPPER” always had a happy ending…” he mumbles as he files for bankruptcy a couple of years down the road
What happened to the good ole days when flipper was a dolphin instead of a douchebag?
Gives a whole new meaning to the phrase ‘underwater on his investments’, though.
Lets see now,
Everyone knows, the king of RE
Ever so keen and happy is he
There he goes, using those refi’s
Needing a price rise, as we shall see
God did not intend for the central valley to be a housing market. it’s farmland for crying out loud.
But Cereal… “they’re not making any more land”
Interesting stuff in the Inman News article on Virginia. I’m not sure how meaningful the statewide stats are, given how different(read:expensive) the Northern Virginia market is compared to the rest of the state. NoVA is where prices are going to fall the hardest, and I think are in the process of doing so as inventory balloons. The Inman article says that prices are rising in Charlottesville and other areas just outside of NoVA. It would seem to me that the bubble is “rippling”. That is, price appreciation started in NoVA, then spread outward. Prices are declining in NoVA, but the outerlying areas are right now-imo-experiencing the last of their price appreciation. Once “investors” in these further out areas become aware of what’s happening in NoVA(soaring inventories, declining prices) they’ll make their own rush for the exits.
Actually, in the Southeastern Virginia area the prices of homes have skyrocketed past the paltry wages of most of the region’s workers. Most of the good paying jobs are gov’t/contractor type positions, and they aren’t that well paying compared to Northern Va, or compared to the garbage that $300K will now buy in the market.
Cheap cost of living was one of the few things the region had going for it (and gov’t jobs), now 1 of 2 is wiped out (for the time being).
I agree with you analysis except for the fact that I these outside areas will fall the hardest because NOVA has some fundamentals supporting it…these outer areas are rising on pure speculation. I expect the same thing in CA….the ripple areas like Phoenix will fall harder then the Bay area and major CA areas.
“Mortgage banker PHH said Wednesday that it will not be able to file its annual report in a timely fashion because its auditors are still reviewing the company’s finances. In the regulatory filing, the company also said during the review that it had found a number of ‘control deficiencies’’ in its internal financial reporting system.”
Is the Fannie Mae affliction contagious?
Now THIS is sad. This dude is selling his whole life! Wonder if the wife is for sale for the right price . . . .
http://dallas.craigslist.org/rfs/138267063.html
I looked at the listing and started following a number of links in the post. Check this one out and scan around different dates. I’ll put some highlights after the link. The story here is unbelievable. These people just got this house a couple of months ago and because of their daughter’s illness, are now trying to sell it.
http://tinyurl.com/mjco3
That actually does look pretty sad to me.
It’s tempting to be judgmental, but bear in mind that these people were in an environment where the whole world was telling them to buy a house, any house, at any price they could get someone to float for them. We all know that there will be sellers who can’t “hold out” and will be absolutely forced to sell. I think we need to be careful not to be smug, particularly when there are children involved, particularly children with pretty tough challenges.
Don’t get me wrong, I’m really looking forward to laughing myself silly at the flippers and overreachers who get squished like bugs. But I do think we need to have some compassion.
I don’t think I was judging these folks. I posted the link because I thought that this was an example of what could happen to a lot of people caught up in this buying craze. You can substitute in “lost job” for their sick daughter and have a similar story being told.
I was actually responding to txchick’s remark “I wonder if the wife is for sale for the right price.” I’m not looking to argue, but that just seemed pretty harsh given the circumstances these folks are in.
I do agree with you that the “lost job” stories are going to be common. Particularly if (when?) this downturn leads to a recession. I’m guessing that a lot of those folks with those newly created jobs in the housing industry bought houses recently too.
I have to believe that TXChic didn’t know of the daughter’s situation. Anyway, this is a bad deal for them. If you read through the update page, they take you through the whole buying process with Centex. The incentives if they use Centex mortgage co. The walk through with the Fox & Jacob rep who assured them the place would have all the little things fixed. A comment about how the place had problems (without listing them), and some comments on how they could have got a better mortgage or how they paid to much in closing costs, etc.
They themselves made a bad decision! I read through the diary. Their daughter has epilepsy and husband has some sort of work related disability. The situation was the same before they bought the house. Why would anyone in that situation buy a house? Ice skating lessons cost a fortune! (read diary) I’m not judging but I do have to make one comment here. My 8 year old neice, Kyleigh, was diagnised with cancer in September and not once did my sister say she was going to buy a house. She rents a trailor in Westminster and she is happy that the doctors caught it early.
This is sounds like the old flipper tactic #7– Break out the violins and tears and we’ll buy the house- I just don’t buy it. They bought in hoping to make a fast buck just like all of them.
I do think we have to have compassion. The bubble will rain down on the good and the bad; the greedy, as well as the poor schlepper who just happened to buy at the wrong time. To the flipper douchebags who helped fuel this market, I think they need to be schooled, but for the poor family who loses everything because daddy’s job was outsourced to India, there but for the grace of God go I.
Whew, tough crowd
If someone’s glad that a family where the husband is disabled, and the daughter has 200 seizures a day is losing their home they have to get their priorities straight. Not every homeowner is a flipper or an enemy.
I feel bad for the poor people who bought at the wrong time. They were mislead by their realtors and lenders. They were led to their slaughter.
This is why there needs to be gov’t regulation of the housing industry. Free markets set aside, these people were screwed. I’m not saying it isn’t their responsibility, but we need the same level of control and enforcement that you see in the securities industry. A stock broker cannot tell you a stock is going to go up. This is why they use the term, “Past performance is not an indicator of future results” or something like that. You get my point.
I’ve always thought a capital gains tax of 100% for any house purchased and resold within 1 or 2 years would be healthy for the housing industry. It would keep the speculators out of the market.
When the government BAILOUT comes, these are the folks they will use as poster children, not the flippers. It’s stories like this that will be used to justify huge tax breaks and write-off for people who lose equity in the upcoming years. I can see it coming.
I need an edit button for my spelling.
OT I received a letter from Lennar homes about a Savannah @ Villages of Columbus. Stated in letter, “Lennar Homes is restricting the sale of Savannah’s homes to NON-CONTINGENT purchasers.” First time I’ve seen this.
Remember “Farm Aid?” “Donate to save the family farms.”
Yeah, right. Most of the dough went to Big Ag, like ADM.
OT, but our “Sitting Pretty Financially” Nina appears to have finally seen the light.
Yea but no comment on her own moronic purchases in Phoenix and Palm Springs and what she plans to do with them.
Found on craigslist.org
http://MotivatedSellersList.com
Don’t know exactly what the list is, but it is saying that SD is heading straight down the toilet drain. Many FBers there.
I guess we will see the rest of CA added there too.
stop posting this site, asshole. it’s a realtor’s site.
Join our “motivated sellers” email list and receive notification of
properties offered by motivated sellers.
For the TX house, where the comment “I wonder if the wife is for sale?”. I saw the first adult femaie, and then noticed it is Michelle Kwan skating with their daughter. I would have compassion for the truly unfortunate. But they bought the house knowing that they had these medical conditions. What did they expect -except hoping for quick money.
Bingo. I don’t have much compassion unfortunately for this type of thing. These hard luck stories are common in Dallas but you don’t hear about them unless the get rich quick scheme doesn’t work out.
But OTOH, I saw a woman on Ebay selling her personal possessions to pay for an expensive surgery that her dog needed to save its life. I emailed her and once I ascertained that the story was true, I gave her the money to pay for the amount she didn’t collect from selling stuff. I am compassionate when it’s really warranted.
What happened with Nina and her Palm Springs house? I don’t see the blog where I offered to buy it from her?
The last post where she talked about it was Feb 9, so it doesn’t look like she sold it yet (or maybe I missed the post where she did).
Here’s the blog Nina
She deleted the part where folks from the housing bubble crowd were making fun of her. It hasn’t sold but has been reduced. MLS #: 21238109 It was re-listed to look like a fresh listing.
List Price: $649,000
This was her comment at the time:
“Nina said…
Thanks! Here’s the break down:
$475,000 purchase price
+ $75,000 improvement costs
= $550,000 total investment
$699,000 listed at
- $550,000 invested
- $40,000 commission, fees, opex
= $109,000 profit
Of course, we’re hit with some hefty capital gains
tax, but all in all a tidy ROI for less than three
months of work.
We are confident that we can sell it in the 699 range
based on current inventory, comps, demand, etc.”
We need to keep track of this one. I’ll bet she makes 10K or less on it, if she can sell it at all.
I don’t see where she has worked interest, insurance and taxes into this equation. Regardless, she will take it in the rear on this one. Nobody is going to go out and borrow half a million to plunk down in a collapsing RE market. Another RE genious at work. hehe.
Speaking of “genious”, how about genius?
The Grand Rapids Association of Realtors today said the average home sales fell nearly twenty percent from this time last year.
There is no bubble in the Midwest. prices cannot go below 20%, never to 60% . That guy in the article can start buying in Michigan now.
There were 180 motivated lisings on Miami craigslist in late January, there are 444 as of today.
150% increase!
“Long-term Treasury rates broke out of a month-long range…upward, and today above last November’s two-year high at 4.68 percent. Among the consequences rippling outward: confirmation that a portion of the ‘yield curve inversion’ has been caused by speculative borrowing in low-rate Germany and Japan to buy high-yielding U.S. Treasury bonds. If ECB and BOJ rates are rising, this ‘carry trade’ is no longer a good idea.”
Re-read the above paragraph carefully! This is it, folks, the end of the conundrum and jet fuel to the fire that is the housing bust.
The BOJ has been printing digital money faster than the Fed for years now, lending it out at practically 0%. Most of that money has gone into U.S. Treasuries. Now that the yen is no longer “free”, the spread is narrowing and the dollar is weakening, these “carry trades” will be unwound.
Don’t forget that the BOJ has also printed money for direct purchase of USD, precisely to hold down the JPY against the USD. Japan’s improving economy has lessened the need for this policy, too.
It’s a bird, it’s a plane…. it’s soaring fixed mortgage rates! (Just in time, as someone earlier noted, to squelch “spring fever”).
Digital money is the best kind to print, as the price of disk storage is so much lower than paper these days. We are talking about seigniorage creation in overdrive!
http://en.wikipedia.org/wiki/Seignorage
I think you are a bit premature in declaring the end of low interest rates.
With the current ECB policy of raising interest rates, it will take several years to get the EU credit rates at a value where it will really stop the housing bubble. Anyway, the ECB will be dismantled by the EU parliament long before this has any chance of happening. As for the BOJ, the jury is still out as well. It’s not just the FED that controls worldwide interest rates.
Europe knows how to hyperinflate. If the people demand it (and of course, 95% of the voters supports negative real rates forever with some encouragement from politics) they will do it again.
Did anyone see the housing piece on NBC News last night? They’re slowly coming around to our point of view. The NAR had some spear catcher on there saying the market is becoming more “healthy.” Steep markdowns on new houses in Dallas. Funny, I thought healthy markets rose in value. Black is white, good is bad, debt = wealth…
http://video.msn.com/v/us/v.htm?g=7742ca44-5ab0-4cf5-8b43-5b6de4f9543e&f=00
“The NAR had some spear catcher on there saying the market is becoming more “healthy.”
HEAR, HEAR…
Let’s nominate NAR as the “BEST SPIN-DOCTORS for 2005″!
errr, ahhh- better put them on the list for 2006 and 2007 too.
(more of this to come, I’m sure…)