Bits Bucket And Craigslist Finds For January 15, 2007
Please post off-topic ideas, links and Craigslist finds here.
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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Home-loan house of cards ready to fall (summary with extra charts, links etc from fleckenstein)
plus
new york and the crystal ball…….
http://www.immobilienblasen.blogspot.com/
here the link for the full fleckenstein piece
http://tinyurl.com/ylsux4
I am truly worried about the aftermath once it is resolved. It truly becomes a vicious cycle. Each time guidelines are pulled back, fewer buyers can buy homes. Thus, lower property values, and more people underwater. The debt piles up on homeowners’ balance sheets, and people consume less.
I have to ask - why is it such a bad thing that fewer people will be able to buy a house? Especially if it opens the door to others like myself? I mean, when responsible people who are currently priced out are able to get in the game because of lower prices and, hey, even tight lending standards (I fully plan on going the conventional route) - why is it so bad? What it will do is weed out are those who were really unprepared to buy in the first place! Yes? No?
Yes.
Agree completely. It’s not a birthright to “own” a home, no more than it’s a birthright to own a fortune-500 company, or be president of the U.S. You have to work for it. Too many people have gotten homes recently that they have not had to work for. (”Own” in quotes since in reality every who has a mortgage is merely borrowing the home from the bank until such time as the mortgage is paid off - that includes me).
Own a home ? It’s just an illusion. With these crazy prices, you own nothing. That’s what is horrible with the whole thing.
Part of Fleck’s stock in trade is painting disaster scenarios that grip the reader’s imagination with fear. I am more with you — affordable housing is good for the nation! (Too bad we can’t get there from here without suffering, though…)
we have affordable housing - it’s called renting. Now, I don’t know how difficult it is for those at the bottom of the economic ladder to transport themselves from a less affordable rent environment (say, SoCal in the last 6 years) to a more affordable one, but it must be a helluva lost easier than the Jodes had it 70 years ago. And maybe we need to stimulate this market for mobility (subsidize Greyhound, etc.) if the costs are indeed prohibitive.
It is bad because I think this will affect a great deal more than just housing. Almost every one I know has expected their houses to be an ever appreciating asset. (I am highly prone to anxiety)
And in the rest of the world the free ride that you enjoyed with the dollar as a currency reserve, is about to end. Da zvidania!
In 2002 a poll showed that 35 percent of Russians trusted the dollar more than the ruble and the euro while 37 percent said they preferred the ruble. About 11 percent of respondents preferred euros.
“Since then the situation has changed dramatically. Today almost two-thirds of respondents — 63 percent — say they trust the ruble most of all, while only 5 percent trust the dollar and 15 percent the euro,” Kertman said.
The data is based on a poll conducted at the end of December in 100 Russian cities with 1,500 respondents.
The bad part is that the economic shock from the hangover after the big orgy might be so bad that some of us might lose our jobs and get sucked into the whirlpool of deflation. How long can we live off our savings if a deep recession hits and we need to find jobs?
What savings ? It’s minus 2%….. You living on the savings from Asia.
It’s pretty clear your position is strong, particularly when you have put your money where your mouth is and disclose you are short New Century (NEW). Wow.
“We had a loan that was FPD (first-payment default) on a home in So Cal. It is a very nice high-end town that had a section of new homes built . . . in the low end of town. Normal homes sold for $1 million in value. In this new seven-home development, (homes) sold for $1.3 million to $1.5 million each. The homes you had to drive through to get to this place were worth $400,000 to $500,000. The market topped out, and now most of the seven homes are vacant — worth no more than $900,000. Thus, all the lenders are sitting on losses of $400,000 to $600,000. This is just one of many that are happening daily.”
Let me guess the area: Foreclosure Ranch? (Aka 4S Ranch)
“It is really getting serious. We had a borrower in So Cal who cut and pasted bank-statement copies of Washington Mutual to make it look like he had $400,000 average balances in his account to buy a $1.7 million home. Something did not seem right. Lo and behold, we checked very closely with the bank. The borrower had only $500 in his account. This is also just one of many examples happening daily.
“This will, and should, take years to play out. (Federal Reserve Chairman Ben) Bernanke will yield to the Lobby and the Street, trying once again to lower rates and allow people to bail themselves out, while in turn allowing the buyout firms of the world to overpay for the companies they buy with easy money. The game is so rigged against honesty, it boggles the mind. I worry about our children having a chance to have a future, at this point.”
Earth to Fed: You cannot sustain the housing market on a foundation of fradulent lending.
fraudulent (my spell check is broken today…)
We understind.
it should be clear by now that the FED doesn’t give a damn about all this fraud; they have known about it for years, could have tightened the screws but preferred to do nothing and let the credit bubble grow (of course, because they make lots of money on all the debt that is magically created by this game). I don’t doubt for a moment that Ben B is going to keep on this track until the bitter end, probably something similar to the Weimar Republic - only difference is that the statistics are far more advanced these days. BOJ and ECB, similar story - there is simply no way back to a honest financial system.
Totally agree with you, nhz!
In 2002 a poll showed that 35 percent of Russians trusted the dollar more than the ruble and the euro while 37 percent said they preferred the ruble. About 11 percent of respondents preferred euros.
“Since then the situation has changed dramatically. Today almost two-thirds of respondents — 63 percent — say they trust the ruble most of all, while only 5 percent trust the dollar and 15 percent the euro,” Kertman said.
The data is based on a poll conducted at the end of December in 100 Russian cities with 1,500 respondents.
PT Barnum was right!!! Still more lambs to fleece. What a country….
Real Estate & Wealth Expo on Saturday and Sunday, March 10th and 11th?
Well, the VIP Section WILL sell out soon! We’re absolutely FILLING the Los Angeles Convention Center with dozens of seminars on real estate, stock trading, debt reduction and wealth building…plus, THOUSANDS of eager investors ……
Let’s not forget Donald Trump, Start Late Finish Rich bestselling author David Bach, mega-entrepreneur and former Heavyweight Champ George Foreman and super-success coach Tony Robbins. They’ll be there too.
Anyone interested in Florida issues should check out the forums at city-data.com. It’s a great place to interact with bulls.
A thread about the bubble:
http://www.city-data.com/forum/florida/36017-so-what-happened-bubble.html
“The Worst of Florida (a lot of housing stuff in there):”
http://www.city-data.com/forum/florida/28532-worst-florida-photos-stories.html
Commercial Real Estate
http://www.city-data.com/forum/florida/36440-commercial-real-estate-florida.html
I almost forgot this gem (click on ‘fleas’ and ‘bubble’ vids):
http://www.timemortgage.com/wednesdaytip.htm
There’s occasionally been comments here about how the UK market did a head fake in 2004, and then started up again.
Maybe not everywhere in the UK. There’s a big difference between the London-Bristol area, and the Midlands which is in some ways similar to the upper MidWest industrial belt in the US.
http://www.housepricecrash.co.uk/forum/index.php?showtopic=40472
Bought for 189,950GBP in early 2005, cash flow negative rental and listing now for 109,950GBP is a heck of a hit.
thanks- is the UK a tale of 2 cities- all we hear is UK going up 9% this year= weird
The BofE just raised interest rates, too. The UK market is like California x2. But that’s nothing compared with Ireland and Spain.
I was talking to an Irish co-worker about two weeks ago about real estate in Ireland. I was left standing there in a cold chill. He said his family members, and many other people he knows back home, are rampantly buying real estate. They aren’t just buying in Ireland. Spain is a favorite target of the speculators.
He went on to talk about the massive influx of immigrants to Ireland, especially the new members of the EU. He explained that they are badly needed since the Irish no longer work, or need to. They are all getting rich on real estate.
I asked him what is going to happen when the first bad times hit and all of those Irishmen want their jobs back. He had not thought of that. The social upheaval at the end of the boom, especially in Europe, could be massive. I am truly frightened of this monster that just keeps growing by the day. And the so-called leaders do nothing but feed it.
NYCBoy:
Are they not working b/c they rent the RE or by pulling equity?
If it’s by pulling equity, it’s even more chilling than when I read your post the first time.
Nova
I got the feeling it was a combination of both, but mostly equity extraction, especially of long held real estate.
I have seen this first hand (lived in Ireland in 1994 and have visited at least once a year since).
Most Irish work, they just don’t do any of the jobs they used to - plumbers, masons, restaurants, etc. All done by Poles and the like. Sort of like Americans and our Southern neighbors.
Is it because the Irish (insert American worker, as well) “don’t want to work”, or is it because wages for those jobs have not even come close to keeping up with inflation.
I think plenty of Irish (and Americans) will do anything for the right price.
Not getting any cold chills here; the bust warms my heart. It’s immoral to let a fool keep his money.
The social upheaval at the end of the boom, especially in Europe, could be massive.
sure, and I think most of the ‘leaders’ know it. That’s why they are desperately working to keep this bubble (pyramid game) growing, and until now they still seem to be perfectly in control unlike their US buddies. For the EU bubble areas (Ireland, UK, Spain, Netherlands at the top), asset appreciation is probably a FAR bigger income source than it was in the US; the EU bubble has been growing for 15 years, and many players use leverage upon leverage. And the really bad thing is that everyone can see that the EU speculators are NOT the ones who are going to pay dearly when the bubble finally pops - the taxpayers will have to pay most of the bills for sure.
Like I said before, the bubble in Spain has a branch in Argentina. Spaniards are buying up all the real estate they can find in the heart of Buenos Aires and pricing out the locals in a big way. If the meltdown gets to Europe, look for another minimeltdown in South America (like they need it).
cassiopeia: yes, to my surprise I read that there is such a building frenzy in Argentina that the governemnt pulled all permits for new construction. Amazing - or maybe not; probably people figured out that their money is safer in real estate than with the big banks.
The good side of all this is that if the EU bubble collapses, people in the poorest regions of Europe and south america will probably get their choice of really affordable housing.
nhz, you wouldnt’ believe how those builders are ruining the city. They are making the ugliest cheapo buildings you can imagine. Traditionally, a square meter in a good area of BA would cost btw. $1,000 and $1,500. Now you hear people talking about 2500 to 3000 per sq.mt. as if that were normal. Bubble mentality is certainly runs across all cultural boundaries. The only good thing is it is very common there to own your property outright because credit is difficult to get, so not that many families have suicide loans (hopefully).
A friend goes down to South America every year and she showed me photos of what $40k will buy in the Lake District of Argentina and you’ll get a 3 bedroom house in a beautiful area…
Yes, but in BA 40K used to get you a small two bed downtown (in BA that means walking distance or short bus ride everywhere) and now that kind of money gets you a decent house 1 1/2 hours from downtown (one train, two buses away)
if it is difficult to get a loan in Argentina that probably means that RE is relatively cheap, for those who have real money available. Just two years ago I was told by a friend from Ecuador that RE in the big cities of Argentina was available at 80-90% discount relative to the pre-crash prices; that included many beautiful historic buildings.
As for the 40K home on the lake, I think prices in some nice and remote parts of Eastern Europe and Turkey are similar - but for the local people, these prices are already extremely high. No doubt they will get much higher before the bubble bursts, in the Netherlands 40K does not even buy you a simple garage for the car (in the bigger cities that costs over 100K). Speculators from Netherlands or UK buy whole villages there instead of just one home …
Argentina and New Zealand are similar in a lot of ways, from a looks standpoint, landwise, but one country has cheap real estate and the other is in the midst of a tremendous bubble…
The house I mentioned in Argentina, would sell for $NZ 600k, (around $US 400k) were it located in a similar place in New Zealand, @ Queenstown or Wanaka~
nhz, that is true, but you have to think of the prices that the local economy can sustain. With the dollar at 3 pesos and the euro at 4, everything seems cheap if you have the right currency and some money to spare. The thing some of those properties have going for them is they are very high quality, especially the older ones, but the newer stuff is really cheap and ugly.
Boy, and I thought it was going to be different this time because the Irish had finally become rich…
also we here uk lenders will go 5x income on a loan
in the old days in US I remember feeling stretched a 3x
maybe 4x when single w no kids
Most of my relatives live in the UK, but I myself am about as far away from there as it’s possible to get.
I try to keep abreast of general RE trends in the UK Midlands, because my mother talks from time to time about moving ‘back’ there.
I have heard about these 5x loans, but haven’t researched them at all (mum could and would pay cash).
Anyone who has cash to pay and cares about their long-term household financial health would be well-advised to wait for the funny-money loans to go away and for the dust to settle, no matter which side of the Atlantic they happen to live on. The key for the present is to maintain a sufficient degree of diversification to preserve insure your cash against any kind of global financial meltdown scenario which might arise. Given the buy-to-let craze in the UK, there should be plenty of rental housing in the UK Midlands if your mother just can’t wait to move there.
My sister was in the same position — had sufficient cash savings to pay for a moveup home in the midwest. She could not bring herself to sit on her hands for six months (I advised her to wait at least until Su 2007) — had to buy now, and had plenty of encouragement to hurry up and buy from the flipper whose place she purchased (at a price tag that provided a tidy $44K flip profit over the span of a few months). Buyer’s regret has already set in within two weeks of closing.
This is the position we are in now. It’s hard, but we keep sitting on our hands. We really could use more space, but we know that our patience will pay off in the long run.
“we keep sitting on our hands. We really could use more space”
Couldn’t you rent a bigger space for less than the monthly cost of buying, and pocket the difference?
(speaking to Kathy)
Don’t know about Kathy, but I can say our rental market is currently tight, as high inventory of vacant SFRs on the SD market has squeezed the supply. But I am reasonably sure that the inventory glut is temporary, and will give way to a combination of lower rents and lower purchase prices, as there is insufficient demand to absorb the glut at current price levels.
GS, I’m looking forward to that too. We have been needing more space for a long time. What scares me is they will be a lot of inexperienced and messed up new landlords around and I don’t know how to deal with that. Our current landlord is old school and we have nothing but good things to say about him. I’m worried that we could end up with a nicer place but a nightmare landlord who would sell the place from under us or raise the rent when he sees fit, or who knows what.
Well, we own right now. We should have sold in 2005, but there isn’t much of a rental market in the town we live in. They were mostly replaced by McMansions. Also, if we have to stay here we can. We just thought we were going to go the traditional route of buying the smallest house in a nice neighborhood, and upgrade when your financial circumstances improve.
Before anyone jumps on my financial acumen, we are comfortable financially, virtually debt-free, and just want a little more space to raise our family in. We’re not looking to bet our future on an over-priced house.
5x, how boring … in the Netherlands even the recently proposed ‘tight’ rules for starters allow 4.5x income (0% down) without any details provided. At the moment, it’s rather easy to get a 10x income loan here, and 6x is probably the norm. The average home now costs EUR 241K (anything decent above EUR 300K) while median income is a little over EUR 30K.
And some go even 7,0x income on a loan.
Picked this up from HousingDoom (thanks John M. & Twist):
“For credit risks, home loans harder to get”
http://tinyurl.com/y6bcmy
Lenders are now beginning to require subprime borrowers to make CASH downpayments. Plus, other crazy new requirements (like cash in reserve, higher FICO scores, etc.). What’s our world coming to?
I remember being hassled about the source of money market funds in the 80’s
they weren’t considered liquid enaough
no piggybacks- no gift letters
The link doesn’t work.
“Personal Responsibility” - this is what society needs a big dose of. Watching from the sidelines it completely amazes me how people have little concern of their own financial well being. I have always been taught that the number one person you can count on…is yourself…period! It seems that the countless stories that Ben has provided just becomes a pathetic case of individuals so blinded by greed and egocentric personalities that being held accountable is a foreign concept. The unfortunate thing is that our society will have to deal with a near fatal economic upheaval to bring back any type of normalcy. The scars of the Great Depression are nearly faded - the 20 -30 something crowd seems to believe that growth and expansion is unstoppable - what other reason justifies why a 20 something friend decides to take on a $500,000 mortgage with little down and car payments / CC debt that could house and feed a family of 10 in most poorer regions in this world for a year and he thinks nothing of it! RESPONSIBILITY - that should be taught once again in grade school so the next generation that moves up the ranks will realize that you reap what you sown! The very fact that some who post there comments here seem to forget that this housing bubble could easily turn into a tidal Wave and no one can get out of its path…I hope my gut feeling is wrong but a I forsee some terrible times ahead that will make the last Depression look like a minor hiccup.
In a sense, growth and expansion is unstoppable. The human mind is incredible! It caused men to go to the moon. It brought nuclear fission energy and will hopefully bring nuclear fusion to the world. It eradicated a lot of diseases and resulted in a doubling of the human life span in 150 years, despite people’s disdain for the creative individual.
But I see your point. In the short run, we are bound to see a severe reckoning, and overdue for another Great Depression. Got 5 acres and water somewhere to grow your own food (northeast, northwest)? Got T-bills, savings bonds, precious metals? BB will inflate us out of a severe depression. A world war against (you name it) will help do that and unite Americans just like WWII.
I highly recommend this book:
Ten Lost Years, by Barry Broadfoot…
An oral history, ala Studs Terkel, but much better, in my opinion.
Written in the early 1970’s, Broadfoot had gone all over Canada, door to door, asking people of the “right” age, their memories
of the Great Depression, in the 1930’s. Most of the stories are a page or 2 long and speak of the desperation of the times and how people made do~ a Remarkable book!
If you like this book, he has another called “Six War Years”, the same concept, with Canadian memories of WW2.
“I highly recommend this book:
Ten Lost Years, by Barry Broadfoot…”
Just bought a used one on Amazon, $0.01 + $3.49 shipping. My daughter will read it too. Thanks!
You will enjoy the book immensely.
For the cost of a latte, a giveaway~
I hope the rest of you do the same.
aladinsane, I think it speaks of the generational disconnect that we have to read a book in order to learn about these things. Whatever happened to listening to what your elders had to say? I’m 41, my father is 80. He remembers the Great Depression and WWII. When I was a kid, the elderly people in my family circle had been in the Spanish Civil War, and there was a family friend who had been in WWI and lost an eye in Caporetto. At family gatherings, they TALKED about these things. I did not need to read a book to know what kind of suffering they had seen or endured. If you think about it, it’s not surprising that a lot of FB’s I know are people who have no interest whatsoever in the past and who in general have very shallow or non existent relationships with their parents. There is a price to pay for the loss of intergenerational contacts.
I’ve been a fan of oral history for a long time, as it gives you the view of ordinary folks, as opposed to what history books like to tell you.
The blogs are similar, in a fashion. We all tell tales that relate to our understanding (or lack of) of what’s happening, our common bond, of sorts. I’ve learned much from the bloggers here, a month ago, somebody involved in the loan industry, really laid out a tale of just how sordid rich people’s finances were, when they were trying to get a home loan. Insider info unavailable elsewhere.
What will be the hardest for most, will be that as a country we are headed for a time of self sufficency and for far too many, this has been bred out of us and we will suffer the consequences…
aladinsane, you’re right, in a way blogs ressemble the kind of learning you get from talking with your family. There are bits of information that stick with you even if you don’t understand exactly what they are talking about. You kind of “store” it in case it might become useful. If that is the case, then long live the blogs.
You have great comments there. My mom was born in 1929 and my dad in 1921 (both deceased now). I do remember how my dad talked about those days. Even in the 1960s and 1970s we were a one car family, one TV, and our vacations were occasional weekend trips by car. My dad got his shoes repaired. He would hardly buy new ones. These days you don’t see many shoe repair shops.
I learned, and how I learned! People laugh at me for my frugality and simple living. But I do indulge on luxury travel every now and then. Even so I’m close to being financially ready for a severe economic collapse.
I remember when my dad took out a loan to buy more land for our farm. He was beside himself with worry, and we had to tighten our belts big time until the loan was paid off. I saw my parents scrimp on everything from food to clothing, but they always had the money for our books and a good education. For that, we were still rich. Enough of a lesson on priorities for a lifetime.
My dad of 1925 vintage was the same. Used his work dress shoes rebuilt when needed for decades. I was one of the first college educated people in our extended family (on either side) and I think all the others were in my generation (third in the US). Due mostly to my parents hard work and a few student loans.
I’m not sure what the FB’s life experiences can teach, other than “watch out for ‘bad luck’ “.
“BB will inflate us out of a severe depression.” Wrong, he will try to do that, but credit contraction will far outweigh any “helicopter drops” attempted by the Fed…I’m not convinced they’ll do that anyway. Deflation here we come.
Rethink the idea that we will have deflation for a moment…BB may not be able to get people to borrow domestically, but we have TRILLIONS of dollars that foreigners will want to get rid of because of our crappy outlook. Repatriation of TRILLIONS of dollars=INFLATION.
Reinflation not likely. Foreign debts will be defaulted on. Even if the FEd is able to drop rates (unlikely due to our debt ladden dollar) few will qualify for a loan due to higher lending standards. In the last depression the Fed cut rates from 6 1/2 to 1 1/2% from 11/29 to 1933 and deflation continued. In those times we were creditors not the worse position of debtors.
I’m still trying to understand the whole inflation vs. deflation debate in this blog (Ben, could it be a weekend topic?). From what I can gather, it looks to me as if they will TRY to inflate us out of this mess, but it’s not written in stone that they’ll succeed.
Agree this would be a good discussion, again.
I believe the underlying current is deflationary, but the PTB are trying to fight it with inflation.
Who wins, and how, is certainly up for a good debate!
Inflation vs Deflation?
Inflation is the cowardly way to go about things, deflation requires some heavy lifting.
We were capable of handling an ipso facto economy via deflationary measures, in the 1970’s. I doubt we have the cojones to do it now.
aladinsane, if inflation is the cowardly way to go, then I just have to look at the kind of courage our leaders have shown in the past few years to bet all my chips on inflation.
“BB will inflate us out of a severe depression.” Wrong, he will try to do that, but credit contraction will far outweigh any “helicopter drops” attempted by the Fed…I’m not convinced they’ll do that anyway. Deflation here we come.
Depression and war won’t unite Americans this time. That’s a recipe for civil disorder. I can’t wait.
At least more war won’t unite them, IMO. WWII was not a sequential follow-on to a protracted, unwinnable conflict, one that is quietly but increasingly unpopular at home. And it wasn’t against pipsqueak nations that are able to dictate the terms of combat. And it wasn’t in the age of the Internet and nearly-unhindered journalists running around in the fighting zones. War “in the sunshine” doesn’t work nearly as well as war with carefully censored reporting.
I think the (often voluntary) censoring in the current Iraq war easily surpasses anything we have seen before. And it’s not just the US/UK, the Dutch are also extremely good at bribing embedded reporters in Afghanistan, or relying on the evening news to quietly drop every uncomfortable fact about the war. Fortunately, we don’t need official journalists these days to hear the news. Apart from that, I agree with your comment.
I am thankful to be old enough to remember seeing the early 1980s recession, and how hard my parents scrimped and saved to make their house payments while between jobs.
The thought that it could come back in my own lifetime, has kept me from overextending myself.
“the 20 -30 something crowd seems to believe that growth and expansion is unstoppable”
EXACTLY the mindset of the 20 - 30 crowd during the tech stock bubble. And when they kept making easy money hand over fist, those that knew better decided to jump on the bandwaggon “before it was too late”. Sound familiar?
Was the 20-30 year old crowd the first to buy tulip bulbs?
“Was the 20-30 year old crowd the first to buy tulip bulbs?”
Maybe - but that was middle age back than.
Anybody here have a link to a youtube video that was referenced a couple of months ago? - It was a guy in a sound studio singing about real estate heros with shots of a couple in over their heads on a house purchase. Also were one or two other videos with the same guy singing about shopping heros or something similar.
search real financial heroes on you tube it should come up
Here’s the link:
Financial Hero’s”
Dude, that’s the funniest thing I have seen in a long time. My day started out REALLY shiatty today and that really hit the spot. Every time I think I have it bad, I think about the poor slobs that have IO mortgages and are HELOC’d beyond the limits of sanity. Of course I feel no sympathy for them whatsoever, but it makes me feel good knowing they’re out there.
I feel like Cartman from south park licking Scott Tenorman’s sweet sweet tears.
“Every time I think I have it bad, I think about the poor slobs that have IO mortgages and are HELOC’d beyond the limits of sanity. ”
Speaking of financial slobs. It’s not just financial. Obesity is so freaking bad, it’s scary. I think food is the new “comfort” drug. When the toxic loan resets, they’ll be like “Sherman” in the movie Nutty Professor, crying and downing massive quantities of cheap, bad food. Eveywhere I go, seems like 90% of the folks I see are overweight. Granted, there’s a genetic factor for SOME, but I still wager the total calories most of these Gordo’s and Gordita’s eat each day would stagger my mind. All the secretaries at work (mine included) are mega-Gorditas. Big bowl of Haloween candy, box of doughnuts, whatever…GONE by lunch.
DOC
I think a lot of the problem with obesity could well be due to increased stress levels.
Everything from increased isolation, lack of well-paying jobs which make one feel he/she “accomplished” something (not pushing paper), stagflation (for decades, IMHO, just not reported), a lack of community and unity in our country (no more working for a common goal), JOB INSECURITY, and social insecurity (increasing acceptance of divorce and infidelity), longer commutes, less space to exercise for free (and more govt regulations restricting what people can do, and where), etc.
There is a very direct correlation between stress homones and obesity.
What should one make of the REIC’s soft landing scenario?
1. They are in denial.
2. They are in CYA mode, and need to convince the world they are doing something about the situation, even though a real estate bust is in the bag.
3. They believe that if they can win the hearts and minds of the American people, a soft landing will be the inevitable outcome.
4. We are missing something important.
If you can trust yourself when all men doubt you
But make allowance for their doubting too,
If you can wait and not be tired by waiting,
Or being lied about, don’t deal in lies,
…
Yours is the Earth and everything that’s in it,
And–which is more–you’ll be a Man, my son!
If by Rudyard Kipling
Fleck raises a similar question:
————————————————————————————————
Goldilocks vs. a few bears
Those who point out that housing is down, retail sales are rocky and the market is shaky are only stating facts. The real question is why so many experts are so optimistic.
http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/GoldilocksVsAFewBears.aspx
Thanks for the link. I like reading his contrarian articles! IMO, a contrarian is very open-minded, while a “goldilocks” (I like to use the term “Pollyanna”), is hardheaded by putting all his money in one investment. A contrarian examines all the alternatives. In ten to fifteen years, real estate will be a contrarian investment.
I do believe in a 40% correction in some areas but am still invested in stocks–value of course not growth. Housing looks bad, but I don’t think like many of you–that the sky will fall. There is a handful of people that have gotten in over their heads and will get hurt, but there are so many others that bought in before the crazy run up. There are folks that will be sheltered from their mistakes through inherentences and unfortuneatly bk. I try to talk to everyone in my area about real estate and most bought before the 100% run up. John Train, the great author and investor states, “Gov. can’t do anything once a fin. bubble occurs, but they can react swiftly to moderate its effects.” Granted the gov did cause this mess, but they will do everything to minimize the impact. IMHO the gov’t may have created this housing boom in the first place to deliberately causea run up in inventory, so that, in the long run, housing will be cheaper for everybody. In this “conspiracy theory” left field opinion–housing remains what it is a commodity and Americans can sustain their level of consumption therefor the economy. Okay maybe not on purpose but someone in the fed had the foresight and it did not matter.
“There is a handful of people that have gotten in over their heads and will get hurt, …”
Have you read Russ Winter’s recent posts on the extent of subprime lending in the past couple of years? Because your assertion that a mere “handful of people” are in over their heads sounds just a bit naive.
There is a handful of people that have gotten in over their heads and will get hurt, but there are so many others that bought in before the crazy run up.
———————————
The ones who bought before the run-up, and stayed put, aren’t the ones who drove prices up. It is exactly the people who bought in the past few years who caused skyrocketing prices, and they shall cause the downfall, as well.
You’re also excluding the fact that those who stayed put likely refinanced thier loans, many are much deeper in debt than one would expect because they “liberated” their equity.
But if by your name, Bakedfield, you live in Bakersfield, I can tell you the housing bubble bypassed Bakersfield (my home town - I live in SF Bay area now and have been watching the RE market for the last 8-10 years) until the last two years - the SF speculators came in, bid up the price of housing a couple years ago then got out last year - it was a wham, bam, thank you ma’am deal. The bubble’s been going on a lot longer than that most other places.
I’d like to think that few people arre really going to be affected by this, but unfortunately, if you also look at the number of people who took out home equity loans and grew to depend on them - i.e. turning the house into a bank, a lot of people who have not even bought or sold now have risky refi loans that could bite them if they lose their job or get ill.
Mourn not the dead that in the cool earth lie, but rather mourn the apathetic throng, the coward and the meek who see the world’s great anguish and its wrong, and dare not speak.
Ralph Chaplin
Great quote, and very true.
Fleck has a nice summary of the 2007 conundrum for the Wall Street bull case:
“While we’re not convinced that the worst is behind us in housing, a belief supported by our tax contacts, or that the economy has enough internal juice to mount a reacceleration later this year, if you believe it does, you can’t also believe that the Fed is likely to ease any time soon.”
FT shows the Euro outpaced the dollar in the bond markets for the second year in a row. Euros are now 45% of the international market as opposed to 37% for the dollar. This comes out to about a trillion more. Wow. http://www.ft.com/cms/s/572b41a6-a414-11db-bec4-0000779e2340.html
“Beggar thy neighbor’s currency.”
http://newyork.craigslist.org/search/rfs?query=BUBBLE
Don’t worry about the bubble
i want to be motovated too
Evidence of global warming: The arbor Day Foundation has updated its Gardening Zone Map using new data from 1990-2006. About half the US has become one gardening zone warmer. http://arborday.org/media/map_change.cfm
The reason I’m posting this is that it will affect where this magical crop of retiring baby boomers eventually settle down. Boomers can be as comfortable in Nashville as in Phoenix. And if the winters are still cool but not unbearably so, those boomers might not move at all. I’m basing this only on the weather and not on the real estate prices or tax laws.
Counter-evidence: It only takes one day like this one out of the entire winter for seniors to face life-and-death situations:
http://news.bbc.co.uk/2/hi/in_pictures/6263399.stm
Global warming may increase the frequency of ice storms in the upper mid-west relative to relatively more benign snow storms, as ice storms occur when the temperature is in the 30-40 degree F range, while precipitation with temperatures much below 30 degrees F results in snow.
Oxide,
interesting map, thanks. Looks like Nevada and Southern Cal is actually getting cooler…am I reading this right? If so, it mirrors today’s weather..50ish in NYC and cold in SoCal.
we have similar issues in Europe, but the EU politicians mostly put a positive spin on it: Netherlands and the Northern German coast will be the future Riviera (think Florida/CA) of Europe, so home prices there can stay on their permanently high plateau or appreciate even more. Leaking dikes will no longer be a problem but a feature that guarantees even higher RE prices. There is a bit less talk about the problems facing Spain and Italy, which could look like the Sahara before the end of this century if the climate doesn’t change its course.
No need for all these North EU pensioners with their super-fat pensions to retire in the South of Europe, they can stay where they are and the weather will catch up (the downside is that the cost is going to be a bit higher than they were thinking).
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/01/14/REGUANHADE1.DTL
a real estate agents dream, qualified buyers
sorry if already posted
it was posted already sorry
i was catching up on the weekend threads and saw this already there. it is classic stuff though
Yeah….what a caring sister that RE agent is to make sure her own brother doesn’t miss out on the next housing boom.
But while people are waiting, real estate is happening, and you never know until you look back whether it was a good time to wait.” Dudum, like many in the business, is doing everything she can to encourage people to buy now.
I say “….while people are waiting, sh!t is happening….”. There is more more evidence RE will depriciate, instead of appreciate. Wait for the bottom. Even if you wait too long and it bounces up 5%, you will be better off than buying now. Sheesh. Don’t listen to a Realtor. They get paid to “F” you over.
Well said, Paladin!
http://www.washingtonpost.com/wp-dyn/content/article/2007/01/13/AR2007011300029.html
nice article from this weekend in the WashPost w/ regional stats on ARMs. as expected, %s were some of the highest in the country.
SynergySteve over at ActiveRain says “Now get out there and find your dream home. The prices are right … For now.” (emphasis added).
Funny how we would agree with him that prices are right FOR NOW, but what he means is that if you don’t buy now, you’ll be priced out forever. Long-term REIC shilling seems to have bent some folks’ minds permanently out of shape.
housing bubble news from the Netherlands:
The union of construction workers just announced that all workers will get a 7.25% income increase this year, please some additional (big) bonuses. At the same time, unemployment is declining in the Netherlands except for the housing construction industry. I guess without the unemployment problems, the union would have asked for a 15% paycheck increase. Official inflation in the Netherlands is 1.1% (of course, just like in the US these numbers are a joke), and average incomes are expected to increase 2% this year.
Seems clear that builders in the Netherlands are still making loads of money.
http://dallas.craigslist.org/rfs/262253826.html
I wonder what the neighbors would think…….plus, if the idea is such a cash cow, why don’t they do it themselves?
Buy a Martha Stewart tract home:
http://tinyurl.com/y7ebor
“What’s more, buyers of these homes are spending more on appliance upgrades and decorator options to ensure their living spaces match Stewart’s vision of picture-perfect domesticity, down to the deep farm-style kitchen sink and Hunter Douglas Provenance woven wooden shades, KB Home Chief Executive Jeffrey T. Mezger said in a recent interview.”
Note to buyers - it often costs MUCH less to add this stuff after you buy the house, if you can put up with the demolition mess and install time. Builders mark up the upgrades sometimes as much as 100%.
This goes deeper than the price. It looks like people are trying “to go home again,” thinking they can BUY their way back to the idyllic 1950’s just by mimicking Stewart. It’s not gonna work.
Can’t buy me love….
South Santa Barbara County
Month Number of Sales Average Sales Price Median Sales Price Number of Sales over $1 Million
December 2006 143 1,473,486$ 940,000$ 63
December 2005 156 1,526,282$ 980,000$ 76
December 2004 197 1,252,142$ 859,000$ 66
December 2003 201 1,031,696$ 749,000$ 67
December 2002 191 1,402,536$ 666,500$ 47
December 2001 146 879,130$ 562,500$ 28
Santa Barbara
Month Number of Sales Average Sales Price Median Sales Price
December 2006 66 1,342,962$ 954,750$
December 2005 78 1,381,076$ 1,100,000$
December 2004 94 1,003,042$ 792,000$
December 2003 89 1,076,179$ 825,000$
December 2002 101 981,277$ 739,000$
December 2001 65 686,284$ 600,000$
Goleta
Month Number of Sales Average Sales Price Median Sales Price
December 2006 30 736,567$ 722,000$
December 2005 41 1,161,280$ 889,000$
December 2004 49 809,867$ 815,000$
December 2003 53 718,122$ 592,500$
December 2002 46 2,361,032$ 507,500$
December 2001 53 543,632$ 449,500$
Carpinteria
Month Number of Sales Average Sales Price Median Sales Price
December 2006 8 1,473,750$ 910,000$
December 2005 14 961,214$ 674,500$
December 2004 22 1,555,818$ 580,000$
December 2003 22 592,175$ 572,000$
December 2002 16 572,687$ 447,500$
December 2001 10 439,750$ 390,000$
Montecito
Month Number of Sales Average Sales Price Median Sales Price
December 2006 26 2,473,173$ 1,975,000$
December 2005 13 2,210,192$ 1,850,000$
December 2004 18 2,897,166$ 2,515,000$
December 2003 30 1,799,839$ 1,550,000$
December 2002 21 2,032,785$ 1,675,000$
December 2001 18 2,807,472$ 1,550,000$
Isla Vista
Month Number of Sales Average Sales Price Median Sales Price
December 2006 6 908,417$ 419,000$
December 2005 0
December 2004 2 1,275,000$ 1,275,000$
December 2003 1 967,500$ 967,500$
December 2002 3 708,000$ 724,000$
December 2001 0
Hope Ranch
Month Number of Sales Average Sales Price Median Sales Price
December 2006 2 3,655,000$ 3,655,000$
December 2005 4 8,234,125$ 3,723,250$
December 2004
December 2003
December 2002
December 2001
Summerland
Month Number of Sales Average Sales Price Median Sales Price
December 2006 3 3,216,667$ 1,350,000$
December 2005 5 1,145,500$ 970,000$
December 2004 10 1,991,300$ 1,597,500$
December 2003 6 923,333$ 885,000$
December 2002 3 1,841,666$ 750,000$
December 2001 0
Rocklin & Roseville Today.
Tuesday, December 12, 2006
Fewer For Sale signs in December
The busy holiday season is packed with so much to do but putting your house on the market does not appear to be one of them. As of December 11, HousingTracker is reporting there has been a one week drop of over 600 available homes in the Sacramento and Roseville area real estate market. This brings the total to 14,208 which is a 21 percent decline from the over 18,000 homes on the market in August. The one month decline is 9.1 percent. Although not unexpected during this time of the year, it remains good news for sellers.
As the inventory declines so too have asking prices. The median asking price as of December 11 was $410,000, down 1.2 percent from last month and off 4.1 percent from three months ago. The good news for sellers here is that the median asking price did not change from the previous week.
A realtor in Sacramento has a blog and writes how inventory is going down this is just an example, I wonder if she will give the same amount of reference when inventory goes back up.
On Mish’s blog, he has been posting dispatches from sonnypage, a realtor in north Atlanta. The sequence chronicles the downturn in prices and the huge downturn in sales volume. But in the latest dispatch, sonnypage bought a second home for himself on Lake Lanier which he considered a bargain. He’s betting that the price drops are just about over.
The smart money is already buying, folks.
Sonnypage is the smart money? LOL
The couple are morons who sacrificed a friendship for a dubious investment.
The smart money is already buying, folks.
You’re kidding, right???
“First time in 11 years, a drop in annual housing prices”
http://www.signonsandiego.com/news/business/20070115-1126-bn15housing.html
“San Diego County housing prices dropped in 2006 for the first time in 11 years, apparently driven by a weak condominium and new-housing market, DataQuick Information Systems reported Monday.
The overall median stood at $490,000 for the year, 0.8 percent below 2005’s $494,000. It was the first time since 1995 there was a year-over-year drop.”
Hmmm… that sounds promising, but then the spin starts:
“But as in the mid-1990s, the 2006 picture was a tale of two markets.
For single-family resales, which comprised just over 50 percent of all transactions last year, overall prices rose slightly, up 0.9 percent from $549,000 in 2005 to $554,000 in 2006.
Condo resales, which saw 8,881 sales last year, turned in a median of $390,000, down $2,000 or 0.5 percent from 2005.
The new-housing category, which saw 11,481 sales, saw a 6.7 percent drop, from $476,000 in 2005 to $444,000 in 2006. Included in this group were numerouslower-priced condo conversions which outweighed higher-priced new construction.
The median represents the halfway point of all transactions, with half above and half below that figure. Individual neighborhoods and properties may vary widely in pricing, depending on size, age, location and other factors.
Overall sales totaled 42,122, down 23.9 percent from 55,366 in 2005, and the lowest since 1997.
DataQuick also issued a report for December housing and, while it mirrored the full year’s figures, it also suggested a recovery in price trends might be in the works.
The December median stood at $483,000, down 6.4 percent from a year ago but $1,000 up from November.
The three components – single-family resales, condo resales and new construction – were all equal to or above their November levels, although still below year-ago figures.
The single-family median was $540,000, down 1.8 percent from December 2005; resale condos was $380,000, down 2.6 percent; and new construction and conversions, were $460,000, down 14.7 percent.
Analysts caution against drawing any conclusions based on one month’s figures, especially in December, when buying and selling generally run at a slower pace that at most times of the year. And the buyers and sellers that do exist are sometimes driven to close escrow for tax reasons before Dec. 31.
However, real estate agents have reported that activity in December seemed to be running at a higher level than usual and that the first half of this month also was experiencing more buyer interest than normal.
A full report on the housing prices will appear in The San Diego Union-Tribune on Tuesday.”
Charlotte, NC
The front page of the Sunday edition of the local paper, the Charlotte Observer, had this article on foreclosures. http://tinyurl.com/vcwoh
The headline in the paper was “Risk of home loss grows.”
One interesting item from the article - it stated that 80% of the foreclosures were on homes priced below $150k.
More bubble-trouble ahead! Houses will become much cheaper and no more construction workers necessary!
http://www.timesonline.co.uk/newspaper/0,,176-2546574,00.html
“The first prototype — a watertight shell of a two-storey house built in 24 hours without a single builder on site — will be erected in California before April.”(2007)
‘The researchers in Los Angeles claim their robot will be able to build the shell of a house in 24 hours. “Compared to a conventional house, the speed of construction will be increased 200-fold and the building costs will be reduced to a fifth of what they are today,” said Khoshnevis.’
But will this robot be able to raze some empty condos first?
Now, that would be awesome!!!