An OK Deal Doesn’t Cut It, Buyers Are Holding Out
It’s desk clearing time for this blogger. “Tom Kunz, chief executive of Century 21, predicted a slight fall in prices this year. ‘Sellers have finally figured out that this is a buyers’ market. For too long they were hung up on the couple down the street that put their house on the market at $300,000 and got $350,000. But that is not going to happen anymore,’ he said.”
“‘You are starting to see some price reductions. It is already happening in overheated markets like Florida, California and Boston,’ said Mr Kunz, who heads one of the country’s largest real estate companies.”
From Ohio. “The number of home construction permits issued in Butler County last year was down for the second year in a row, reflecting a national slowdown in the housing market. ‘I’ve been in the business for a long time and I’ve never seen a market like this,’ said Maronda Homes Cincinnati VP Bill Pucillo. ‘Everything is in place for a boom market, but it’s not.’”
“Terry Sievers, president of the Midwest Region for Drees Homes, said that inventory levels have started to go down, but noted the overage also caused prices to drop. Sievers said, ‘You have to get over the fact that the house you’re selling is going to sell for less than it would have a year ago.’”
From MarketWatch. “Former Fed governor Lyle Gramley says the next move by the Federal Reserve will be to hike interest rates. Gramley: ‘ I would say it is pretty clear that the next move by the Fed is more likely to be up than down.’”
On Spain. “Spain is becoming increasingly vulnerable to a correction in house prices, which have risen sharply in recent years, the OECD said in a report on the Spanish economy. ‘Such an adjustment could occur in an orderly manner. However, a more abrupt adjustment in which prices would plunge cannot be ruled out,’ it said.”
From Australia. “Dan Fritschen, the author of the study, says that the trend towards remodeling is deepening with an increasing cost consciousness. ‘With housing prices falling and interest rates higher than they were a few years ago homeowners are still remodeling. Just a year ago with high home prices many homeowners were influenced by the wealth effect and were remodeling with a blank check attitude.’”
“For the first time in over a decade, the Danish housing market is showing signs of retreating. The slight fall is the first quarter since 1996 that prices have shrunk in the capital. ‘This is a healthier development,’ Steen Bocian, chief economist for Danske Bank, told Berlingske Tidende newspaper.”
“The number of homeloans being approved plunged to its lowest level in almost six years in December, figures published today revealed. The British Bankers’ Association said that during the month a total of 123,518 mortgages were approved, down from 209,669 in November.”
“The figure, regarded as a forward-looking barometer reading on the health of the property market, is also lower than the 140,866 home loans approved during December 2005. The overall figure is the lowest monthly total since January 2001, statistics show.”
The Turkish Daily News. “While the real estate world experienced a lively period between mid-2004 and the first quarter of 2006, a new phase of deep silence has moved across the neighborhood. The stillness of the market and the decrease in prices have created a favorable atmosphere for buyers.”
“Explaining that real estate prices have at least doubled within the past couple of years, Century 21-Uzel General Manager Ahmet Rauf Saatci said the market came to a standstill two months ago. ‘The best time to buy a house is always yesterday,’ he noted.”
From Nebraska. “Real estate agent Jeff Rensch says Omaha has always been insulated from the big price swings that affect the coasts. ‘The problem with the oversaturation is mainly with the new homes and the spec market where there’s an oversupply of new homes,’ says Rensch. He says it’s simply that there are so many new homes out there.”
“Home building has slowed abruptly in the Inland Empire as the building industry seeks to adjust supply to dwindling demand from buyers, according to data released Thursday by the California Building Industry Association.”
“Metrostudy’s Steve Johnson said because there was so much construction already in the pipeline last year, the number of new homes built and unsold more than doubled to 7,542 at the end of 2006.”
“In the Boston area, homes that are overpriced or located on main streets are languishing, says broker Sam Schneiderman. ‘It’s got to be a really good deal,’ he says. ‘An OK deal doesn’t quite cut it. Buyers are holding out.”
“David Lee, who recently moved to Wenham, Mass., has rented a home for his family and says they plan to be ‘quite picky and choosy’ as they look for a home to buy. Dr. Lee doesn’t feel any pressure to decide quickly because he figures prices won’t rise in the near term and could fall further.”
Another big week. My thanks to those who support this blog. Those who expressed an interest in donating by mail can send an email to thehousingbubble@gmail.com.
Please check back this weekend for news, your market observations and topics!
Cash Back Mortgage fraud has reached epidemic proportions in Phoenix/Mesa area. Anyone know who to contact when you discover mortgage fraud??? They are very easy to find as in this down trend market some moron ends up selling his house for 10-20% more money than it was listed and a hell of a lot more money than the last comparable. Most are also 100% financing. I have some crooks that been pulling that scam that I like to see thrown in jail.
“Former Fed governor Lyle Gramley says the next move by the Federal Reserve will be to hike interest rates. Gramley: ‘ I would say it is pretty clear that the next move by the Fed is more likely to be up than down.’”
Gee. Duh, that was a tough one.
The Nebraska market. Where do we start. Other than Detroit or perhaps North Dakota or West Virginia, the most unappealing place I can think of. IF there’s a bubble in Nebraska, man the lifeboats.
Hey, I live in West Virginia (Eastern Panhandle) and I like it. Nice and rural, yet not too far from civilization.
Where do you live that’s so hot?
don’t even go there. people here know where I am and what a hell hole it is. I should have added it to the list.
Where abouts in the panhandle? We have land right outside Berkeley Springs (bought way back pre-bubble @ 2000/acre) and still hope to build a retirement home there. None of that hothouse, gated geezer storage area for us…..
In Kearneysville. We found a nice development that had 3+ acre lots with horses allowed (wifes passion, my financial burden) and built in 2004/2005. It meets our needs nicely, withplenty of kids for my son and ofcourse horses for wife.
Didn’t quite pay $2000 an acre unfortunately.
Sounds like a nice spread. I think the idea of building one’s own house is going to gain more and more traction in the future. Perhaps the builders will get smart and just sell the entitled lots and their building services. Enough with the McMansions/zero lot lines.
Oh No! Someone from West “By God” Virginia!
Chill……it’s an opinion and nothing personal towards you and your tastes. You could pick any state in the union and find SOME area that’s appealing, even North Dakota, although I can’t think of one.
A cousin lives in Fargo, North Dakota. It’s an affordable place to start a career.
Now I remember what it looks like….saw the Cohen brothers’ movie.
I happen to think West Virginia is beautiful. Aside from the summer humidity, I believe I would like it.
Yes, West Virginia is beautiful. I’ve been checking out homes there at some of the online sites. I found a pretty Victorian home that’s almost identical to the one I live in now, except the asking price of the home in West Virginia is around one-sixth the current appraised value of this one in this godforsaken wasteland called Massachusetts. That asking price transformed a pretty house into a gorgeous home. If home prices go up in West Virginia, it’ll become just as repulsive as Massachusetts is now. This state has NOTHING to offer — we just have thousands of brainless wonders who were easily fooled into thinking that 1000 square foot dumps were worth $300,000 and up.
On a coast-to-coast road trip, wife and I reached Omaha around sunset, hoping to find a bustling city and staying overnight. It was DEAD at 6pm. We were so shocked we got the hell out of Omaha and drove over to Lincoln (the U of Neb. town). Lincoln was FAR more alive than Omaha.
I live in Nebraska, and your snobbery is sometimes underwhelming. I see no reason for you to feel superior just because you live in Bushland.
You must be new to the board.
My husband was born and raised in Nebraska and went to undergrad at UNL. All of his family is still there. This is not random snobbery, it is educated snobbery.
“Can’t we….. Can’t we all just get along?”
Haha, txchick is on snobby against one type of person: people who are not her.
I have to say that, due to this bubble, I think a lot of the areas in flyover country are becoming much more appealing in terms of quality of life. I have honestly considered relocating to one of these much more affordable states. Yeah, wages are much less, but so is housing and the cost of living. Consider this. In Seattle, Washington, an 1100 square foot home in Wedgewood just sold for $674,000 last month. That is more than $600 per square foot. It is a turn of the century mouse house on a postage stamp lot (4400 square feet). Not only does that amount to one monstrous monthly payment, but factor in the taxes, utilities, horrific traffic, noise pollution, crime, and overpopulation and it’s just not worth it anymore. Seattle is a nice city, don’t get me wrong. I was born there, and have lived there several years of my life. But it is not worth the premium anymore. The quality of life there has rapidly deteriorated. Wages are decent, but not good enough to support that crap. To live in a decent home and neighborhood, it takes two incomes and luck nowadays. Sure, prices will adjust. But why would one want to wait for 5-7 years to have the life that they really want? I don’t honestly think that we are going to see prices go back to a level of affordability in any of the bubble areas for years. At least 3, possibly more. I am considering a road trip across the US, opening my mind to new areas, ideas, and possibilities.
I moved to flyover country (Ozarks). It’s not so simple. Two of my new friends, one from AZ and one from NV, are moving back after just 3 years and 2 years here. It would be good to have a whole thread on this subject with those of us who actually sold and moved providing our experiences.
I would enjoy a thread on the subject. What are the major obstacles in your experience?
Uh ho, Get out the banjo….
ding ding ding - ding ding – ding ding - ding ding
:-}
Nuttin’ wron wid a lil bluegrass n white lightnin’ shunny boy.
Yet another classic! Thanks imploder.
I’d love to hear more about your experiences.
I honestly think a lot of the hesitancy for Californians to move (and stay there) is simply because they are homesick — I don’t think it’s all snobbery.
As a native Californian, I watched a number of friends move and come right back. Most common reason was they missed their friends/family/familiar places. I know that’s what’s keeping me here. There are some of us who just consider this “home” just because we were born and raised here.
Well if we have a thread on this topic I will be glad to share. I’m a native Californian too and I miss CA.
People ask me “are you born again”
I say,
“naw, God did right the first time”
Same with CAli…. why move?
PS … No matter where you go….. there YOU are….
Ha ha. Two religous zealots actually came to the door today. The usual young clean cut men in suits. I told them to go away because I am an atheist. And I told him they should prepare because the religious world was disappearing and the secular world was taking over. I doubt in all of their attempts to convert in this area that anyone has ever admitted atheism to them. I hope they don’t live in this little town and recognize me in the supermarket or under cover at church.
i don’t go to church. I believe in god.
Another thing about moving to a small place. Rent first so if strange things happen you’re free to leave.
Three people have visited our local board asking what it’s like and saying they wanted to live here.
The town cheerleaders came out in full force. The people with concerns (including this blogger) said nothing. People have already been reprimanded on the discussion board for merely expressing concern about the aggressive nature of several School Board Members, people we vote in. In our supposedly idyllic town, people opposing an expensive capital project were forced to go anonymous with their attempt to rally the troops (mail campaign)
Others who were naive enough to contradict in public were threatened and told they should move out at the town meetings. Towns people actually came over to friends sitting next to them and physically pulled them away because they were “sitting with the enemy”.
In a small town, people are afraid things will backlash against their children. Any negative comments will not be shared until they are quite sure you feel exactly the same. It is interesting that now people come out of the woodwork and tell me how miserable and lonely they are here….people who have been here for 20 to 30 years but due to fear of job change or crime issues for their children stick it out. They put on a nice little mask so the locals don’t freak out and cause them trouble.
One story I have regarding locals vs a newcomer includes a state police trooper showing up at someone’s house and threatening to arrest her in front of her children for dumping her horse manure in the wrong location. (She had misunderstood and thought she was legal….no one had spoken to her, only threatened and stalked…She even pulled out paperwork showing the trooper why she thought she was ok) The trooper not only threatened to arrest but told her she was a sinner!
then there’s the severly autistic child they built a cage for….that no one admits to here but the lawyer who handled the case told me about (other special ed Moms confirm it)
then there was the mayor that head butt his wife in public….with no public outcry. He remained mayor until a financial conflict of interest caused him to step down.
……Do you hear the Twilight Zone time warp music yet?
Ok, that really sounds like a movie I’ve seen…
How large is your town? Ballpark number.
Foreclosure.com states 8000. Locals keep saying 6k
We moved (we parents, 2 boys, dog) from East Bay hills house with view through the Golden Gate to Juneau, Alaska about 1 1/2 years ago. It’s not cheap here, though housing is less than the Bay Area. Today we spent the day skiing–city-owned ski area is 45 minutes from our front door. We took 3 of the neighborhood kids with us. This was arranged at about 8:30pm last night. In the Bay Area, going skiing is something we’d have to plan for months in advance and do once or twice a year at huge expense. Here it’s casual recreation.
Lots of things are different that way here. Competition for resources (the good teachers, sports opportunities, checkout lines at the grocery store) is much less. People are friendly. My kids can walk over to the neighbors’, knock on the door and ask if their kids can come out and play. I don’t worry about them or feel the need to know where they are every minute.
Now there are many things I miss about the Bay Area (including my old salary!). Sunlight is at the top of the list. I was a 4th generation Californian, and grew up there in the 1950s and 60s. I will probably return eventually, even though it has changed so much for the worse in my lifetime. But for now it is much more livable here in many ways, and is certainly much more family-friendly.
Its turning out to be better for my two boys here in Awahtukie Phoenix than Moorpark CA. better schools here.
I guess I’ve told the story about my wife trying to join a Mom’s club in Moorpark and being told that because they had alot of kids in this club, ( ha about 12 ) that all the mothers had large houses >3000 sq ft. And not to join unless you had a big house. This mother was a laywer who married her boss ( he had to get a divorce first ) she braged about that and her 5000 ft POS in Trestie or whatever they call that neighborhood pearched up on the hill over looking the city. Gated. Funny I remember back in 1980 when Moorpark had no gorcery store and was mostly hispanic.
According to many on this board, anyplace outide of NYC, SF or LA is a hellhole. Perhaps all 300 million Americans should cram into those three cities. God forbid anyone should live outside of the big city limits and get some fresh air and space. The concrete jungle is the place to be
As far as LA is concerned you might wanna get in line…. There is 300 million Mexicans, Central Americans and assorted others in front of you…
Land spreading out so far and wide …yu can keep Manhatten ,just give that country side ….or was it countrywide . ……or was it country hide .
“While the real estate world experienced a lively period between mid-2004 and the first quarter of 2006, a new phase of deep silence has moved across the neighborhood. The stillness of the market and the decrease in prices have created a favorable atmosphere for buyers.”
Turkey???!!!
I do like their word choice of “stillness”, “lively”, and “deep silence”….
so Byzantine.
It’s not a nationwide or global bubble … it’s just a few areas of local “froth,” remember? A few areas like Florida, Washington, D.C., Nevada, Arizona, California, Idaho, Massachusetts, New York, France, Spain, the U.K., Dubai, Turkey, etc., etc.
‘Sellers have finally figured out that this is a buyers’ market.
No, no, no…Still not. Sorry.
“‘You are starting to see some price reductions.”
Ok….here ya go. Key word is “starting”.
BayQT~
“seller’s market, buyer’s market”: A real estate spin phrase used to maintain buying activity and keep the commissions rolling in.
I know a couple people who’ve bought recently because they were persuaded by their agent that it’s a “buyer’s market”. Brillant eh?
“Tom Kunz, chief executive of Century 21, predicted a slight fall in prices this year. ‘Sellers have finally figured out that this is a buyers’ market. For too long they were hung up on the couple down the street that put their house on the market at $300,000 and got $350,000. But that is not going to happen anymore,’ he said.”
This will be the year of separation between those who are serious about selling, and those trying to catch lightning in a bottle. The price discrepancies will become blatantly obvious, even to the most naive buyers. Many will be forced to accept reality and cut the price, or take the place off the market and give up the dream.
A little anecdote. An acquaintance of mine recently bought a new house before selling his old one. He planned to rent it out. Well, after investigating rental prices for comparable homes, he changed his mind and decided to sell his house. It’s been on the market for three weeks. MLS #2677475 if anyone needs an overpriced McMansion in Chandler.
Well, what do you know but three days ago his old next-door neighbor put his house up for sale and undercut him by over $100,000. MLS #2689674 if someone needs a slightly less overpriced McMansion.
Oops!
“… next-door neighbor put his house up for sale and undercut him by over $100,000.”
Foul thy neighbor’s nest egg…
Okay, I’ll take it if the seller throws in a side of fries……oh, wait I heard wendy’s has a new combo special for $2.99. Nevermind……
“Foul thy neighbor’s nest egg…”
AE Newman talked about that… Cheeze and leave….
Yes and others had their methods…. “The Uperdecker”
So much for the neighbors “Open House”….
$100,000… Ouch, thats got to hurt. Comps are a B1tch when they go the other way.
Rotfl.
And yet… this has just started.
We really haven’t seen much of the “spring bounce” inventory gain we know is coming. What is this guy going to do when a 2nd neighbor undercuts him by $200,000? Wham!
Somewhere around 20% to 30% of the homes purchased in the last three years will have to be sold due to financial distress. It doesn’t matter if its via REO or the buyer getting out. Add to that relocations (which show every sign of being higher this year out of bubble markets) and you have some rapid price declines as “pre-bubble” sellers step up to the plate.
Got popcorn?
Neil
Yeah, but you gotta cheer the guy who didn’t waste time and just cut 100k. Smart move to sell and get out of Dodge. Besides, who cares about neighbors anymore? If houses are an investment, then it’s just good business.
You have a good point there.
Neil
>>>Smart move to sell and get out of Dodge. Besides, who cares about neighbors anymore?
Especially when your tax bill goes to Roseville, CA. It actually sounds more like a speculator with the California residence and a purchase date of August 2005.
Info on “cheaper” house:
Asking $499,000. Trying to do a 1031 exchange.
Purchased for $510,000 in August ‘05 by current owner.
Purchased new from builder for $289K in October 2002.
Tom Kunz, chief executive of Century 21, predicted a slight fall in prices this year. ‘Sellers have finally figured out that this is a buyers’ market.
…….Sorry, Tom, buyers have figured out the Real estate Salesmen and the NAR economists are Full of S**t, and they ain’t going to take their BS anymore. Yeah, like your BS predicting a slight fall in prices. Any buyer who believes anything out of these sleezeballs
deserves many sleepless nights.
When Century 21-Uzel General Manager Ahmet Rauf Saatci is in the news with the RE line ‘it’s a great time to buy, I give up. Like reading about a Taco Bell in Vientiane.
Vientiane could use a Taco Bell. They have lousy restaurants there and not many of them, the only notable exception being the hotel out toward the airport. Al in all, thoroughly miserable place, IMO — particuarly in rainy season.
What? I LIVE in Vientiane, and we have some damn good restaurants. Where else can you get a three course French lunch for $6.50? WIth homemade sorbet! And Beer Lao, best damn beer in SOuthEast Asia! We have Le Central, La Opera, Nadao, Kop jai Deu, La Silapa, Swedish Pizza, Taj Mahal, all the damn little street vendors…did you just end up at spots for the “Farang Ki Nok”?
It’s not exactly a rocking place, but you have to kind of f@@k it up to eat badly here. Lao food is just a cross between Thai, Chinese, Vietnamese, and Burmese. And you can get just about anything here except…good Mexican.
So yes, we sure could use a Taco Bell. Better yet, a SF Mission style burrito place.
I have 5 staff members for less than the price of my car payment. COuld not have 3 kids and live like I do here in the states unless both wife and I made 500k together.
I grant the rainy season can be annoying. Don’t take tuk-tuks in the rain.
Diplomatbob,,great post..God!! I love the internet!!
‘Everything is in place for a boom market, but it’s not.’
Subprime subsidence? Check.
Burgeoning inventories? Check.
Rising foreclosure rates? Check.
Politicians warning of the risks of subprime loans? Check.
MSM articles warning of the risks of creative financing? Check.
Falling prices in markets formerly known as frothy? Check.
Massive overbuilding of faux-luxury condos and tract homes? Check.
Yup — everything is in place for a ka-boom market…
Nice summation of current events.
I must say that I’m impressed with how consistently past predictions made here are playing out in real time. The final outcome is now obvious, the trolls are silenced, and the flippers are f***ed.
What did ever happen to the many trolls that lurked and jabbed occasionally? They’ve got to be lurking still….perhaps speechless?
I don’t think too many of our former trolls, like LV Landlord, still have fixed addresses or internet hook-ups. They’re lurking, all right…under freeway underpasses or back alleys.
Hal 9000 at the wall street journal blog disapeared 6 months ago when his beloved Carlsbad RE dropped in price and is still dropping.Those idiots are probably drowning their sorrows in cheap ass wine.
You mean as opposed to all of of us who drowned all our sorrows in medium priced wine….
(just cause were all savers…)
Hal 9000 at the wall street journal blog disapeared 6 months ago when his beloved Carlsbad RE dropped in price and is still dropping.
—————————–
Our good friend Hal’s Carlsbad prices have been flat/dropping since fall of 2004. He’s the main reason I left that board and started coming to Ben’s for bubble news/discussions.
It was when the bulls started claiming every renter was a “wife beater” back in early 2005, that I left there permanently.
There’s still some bulls left out there rationalizing themselves silly on economic-oriented blogs. Unfortunately, their last leg is the stock market… once that goes south they’ll disappear, too.
Cracks appearing in the bond market ? Check.
Home builders under SEC investigation? Check
SEC Probe Begins of KB Homes
From MarketWatch. “Former Fed governor Lyle Gramley says the next move by the Federal Reserve will be to hike interest rates. Gramley: ‘ I would say it is pretty clear that the next move by the Fed is more likely to be up than down.’”
They may as well go for it. At this point, the bond market is going to hammer the last nail into the bubble’s coffin if the Fed doesn’t care to do the work. And if they hike, at least they can convince a few more speculators to give the housing market back to those who want a home as a place to live, rather than as an investment, while also firming up the Bernanke Fed’s inflation fighting reputation. Where is the downside?
This is counter to W’s “War on Savers.”
Haven’t you heard? W’s history. They gotta find a new punk now, no doubt a Demo.
I’m with you but there is a serious downside to the economy. The RE market is more leveraged than ever in history and a substantial downward price move could in turn carry through in a vicious cycle, the same thing LTCM went through. I am certain this very scenario is not going unnoticed by the FED.
The FED is in a corner…
“In many parts of economics there is an assumption that a complex system of determinants will tend to lead to a state of equilibrium. When this tendency is absent terms like virtuous circle and vicious circle (or virtuous cycle and vicious cycle) to describe these unstable pattern of events are used. Both circles are complexes of events with no tendency towards equilibrium (at least in the short run). Both systems of events have feedback loops in which each iteration of the cycle reinforces the first (positive feedback). The difference between the two is that a virtuous cycle has favorable results and a vicious cycle has deleterious results. These cycles will continue in the direction of their momentum until an exogenous factor intervenes and stops the cycle”
“The RE market is more leveraged than ever in history and a substantial downward price move could in turn carry through in a vicious cycle, the same thing LTCM went through.”
I meant to address this, but perhaps I was unclear. The long end of the T-bond yield curve acting like a deer in the woods that smells smoke — very jumpy, and about to bolt. If the Fed keeps trying to use cheap talk to quell inflation fears without followup action to back it, long-term bond yields will jump, with mortgage rates soon to follow (these move with near perfect correlation after a short lag). So my point is that higher mortgage rates are in the bag, so the Fed may as well do what it can to preserve the dollar’s reserve status.
“is acting” — sorry, didn’t mean to slip into Ebonics there…
GS- I must complement you even though i dont always agree with your postings. Your comprehensivnes is consistent. Whether it be your insight on financial markets, your astute speling and gram’ar skilz, or your ability to chime in on just about any poster’s subject (ala Cliff Claven). This buds for you! (bud isn’t capitalized because i’m not referring to the beer.
Let’s not forget that, absent of Fed changes, the mortgage market is tightening anyway due to defaults. Underwriting is coming back, albeit slowly.
I’m with you that the FED won’t be able to do much but stall the slide by lowering short end of the curve and giving the MBs a nice ride with more refis.
I am talking about congress stepping in with an “exogenous factor”. RTC and some programs to keep FBs in their homes by giving Fannie/Freddie some lattitude, low int loans and perhaps some penalty-free/tax-free 401k & IRA withdrawls.
They won’t let this runaway train just continue until it runs off the tracks.
You forget that government always responds after the train has run off the tracks.
Americans are the most generous peoples in the world………..
does anyone need a band-aid?
So my point is that higher mortgage rates are in the bag,…
Agreed. I’ve said as much for the past year.
…so the Fed may as well do what it can to preserve the dollar’s reserve status.
The problem here is that the dollar’s health is tied to both interest rates and economic strength, therefore any gain from raising rates will be offset by an accelerated economic decline. Oh, and let’s not forget about worsening deficits due to higher government debt service.
Any wonder why the FFR is stuck? The Fed is limited to jawboning the markets because real moves can’t help but have negative consequences. [Meanwhile, they keep rapidly expanding Fed Credit since that's the grease that's keeping the markets rolling.]
I don’t know that higher rates are in the bag. With housing prices and sales volume declining, demand for mortgages will decline. With prices declining, MEW, will decline.
Assuming the economy is slowing (due to the RE debacle) demand for borrowing will slow and lending guidelines, for all loans, will tighten.
Commodity prices are down. Housing prices are declining. Wages are not increasing. Granted, there’s pressure on the Euro and Yen to raise rates which, in turn, raises expectations for dollar denominated debt.
If the Fed can’t point to wage push, commodity pull, asset bubble or “frothy economy” inflation how is it going to justify another hike in the rates it controls?
I’m not saying the Fed can easily lower their rates but I’m having a problem seeing them rationalizing any increase (assuming we are experiencing a RE driven economic slowdown/recession).
“until an exogenous factor intervenes and stops the cycle”
What “exogenous factor” do the soft landing bulls think will do the trick?
Maybe another Tonkin Gulf.
A very, very distinct possibility. Bush has only one year to salvage something from the ashes of his reign.
“reign” interesting word choice, and unfortunately….accurate.
alan greenspan did a great job for many years.with that said i believe he retired because he knew he painted himself into a corner and at his age he couldnt jump over the wet paint.he did a good job of dancing dodging weaving ducking for a long time but it came to an end.THE ECONOMY IS TOAST!!
Check
Home building has slowed abruptly in the Inland Empire as the building industry seeks to adjust supply to dwindling demand from buyers, according to data released Thursday by the California Building Industry Association.”
“Metrostudy’s Steve Johnson said because there was so much construction already in the pipeline last year, the number of new homes built and unsold more than doubled to 7,542 at the end of 2006.”
All aboard the pain-train in the IE. I was there for exactly this kind of mess in the early 90’s and it wasn’t pretty. The job losses due to this abrupt slowdown will cripple the IE, as well as the rest of the nation due to the fact that it’s not an isolated problem.
So are you arguing there is a soft landing in the works?
Home building slowing? Maybe fewer permits than 2005, but within 8 blocks of my house in Riverside there are three developments building to the south, building to the north, building to the west. It’s going to get ugly when they go up for sale.
You forget that much of the building that we see may be from contracts already signed, permits pulled, hiring completed, materials purchased, etc…they’ve passed the point of no return. I don’t think we should confuse the building that we see to mean that building is not slowing, or that they are not being affected.
What you “can” do, however, is what I have done with a D.R. Horton project going up in Dublin, CA. I began a spreadsheet back when they were building the sales office and had just set up the web site with the prices…more than a year ago. The BIG change that I’m observing is that for almost all of their floor plans that they don’t say “Please Call for more Info”(and they have 15 fl plans), they’ve dropped prices by $100,000! And construction is not finished!
Oh! And wait…their directional signs advertise that the units (condos) are starting in the $400s. NOT! They start in the “upper $300s”.
(Taking a peek at their web site, I see that models are now open. I know what I’m going to do this weekend.
)
So…there is definitely more than the eye can see that’s going on.
BayQT~
http://www.drhorton.com/corp/GetCommunity.do?dv=Y9&pr=41936&start=0
Complete with granite countertops. (not a surprise)
BayQT~
How do granite countertops fair under conditions of intense heat?
http://photos.signonsandiego.com/gallery1.5/070118condofire
“The job losses due to this abrupt slowdown will cripple the IE, as well as the rest of the nation ”
- I work with contractors every day of the work week….there is real weakness out there. These glowing employment reports don’t define what the pay level of these folks have. Many people in the outlaying areas are so over budget with there spending….and how many are tied to construction work?
Don’t forget the mortgage fraud (a billion dollars plus or so, as alleged) in the IE…
It is orders of magnitude higher than one billion.
Just 3 of them you’re at a trillion.
OT. I saw a crawler on T.V. this morning. A new survey states 6 out of 10 Long Islanders are having trouble meeting their monthly expenses and 2% of homes on Long Island are considered affordable.
We’re considering sending the cat to work!
From The Vmaxer’s Wife
Well, tell your cat that’s it a “dog eat dog” out there….so the cat should be CEO of a housebuilder in no time…..
Eat the cat
and 2% of homes on Long Island are considered affordable.
which 2% are they talking about? they must be built on landfills.
I’ve got a loose mouse in the garage.
eat the mouse
on second thought no, if mouse is “loose” as you say you may contract unwanted disorder by eating
What? Loose is correct, not lose. It’s a field mouse that has set up housekeeping in the garage. I put out no kill traps with peanut butter. I hate to take the next step.
“loose morals” “loose mouse”
a joke, ha ha imploder sure is funny
not a comment on your spelling…
I know you’re an animal lover, but have you considered letting one of your cats hang out in the garage for a few days? After all, you may not have spotted his mate and all the new little mouslings. Why not hand the job off to Mother Nature?
“I know you’re an animal lover, but have you considered letting one of your cats hang out in the garage for a few days? After all, you may not have spotted his mate and all the new little mouslings. Why not hand the job off to Mother Nature?”
Reminds me of when, an old friend turned vegan, refused to kill the mice which took up shelter in his house. What seemed to him like a peaceful cohabitation, turned into a trip to the hospital for severe illness. It was only after that experience that he called the exterminator. By then, the population had grown so large that, subsequent to the mass poisonings, his house became unliveable due to the smell of the rotting mice carcasses in the walls and ceilings.
Novasold has only one thing to say:
OH GOD!
Thank God I’m not a vegan.
Gross.
O.k., that’s three things to say.. I lived in NYC for 11 years and never heard of anything that bad. Blechhh.
Maybe, when you sell the house, you can write into the contract that the new owner continue to shelter and feed the mice.
I only have one cat left; she is 17 yrs old and doesn’t have any front claws (she was declawed by her previous owner, not me). She isn’t much of a mouser. I’m renting so I can’t just sell the place and make the next owners take care of the mouse! At least it is only a mouse (I’ve seen it inside the garage and outside too). In CA I had a Norway rat problem for awhile, as did everyone else in our neighborhood. The rats live in the non-native Ivy and palm trees and sneak into the crawl spaces. It took a year to get rid of them. I even mentioned them in the disclosures when I sold the house.
Use the no kill trap. Trap him. Let him go in the woods. If it’s a bitter winter feed him for a few weeks before letting him go.
Cats and dogs work great for mice and rats BTW. I live in the country and never have a problem with either. No one’s catching them - they just dont’ come into houses with four dogs and two cats.
No, you have mice. There ain’t no such thing as a mouse in the house or the garage either.
Wow, you actually said something I can agree with!
“The good news for home sellers is that unemployment remains low in most areas, wages are growing and energy prices have fallen from their recent peaks. What’s more, mortgage interest rates are still low, allowing people with good credit records to obtain 30-year fixed-rate loans at around 6.2 percent”.
Maybe that explains why homes in Portland, ME that languished on the market for the last six months of 2006 despire multiple price cuts have been relisted following a short rest at the original 2006 asking price.
Thats why all the RE types think this slow down is temporary, they think the economy is still good and therefore this slowdown has to be temporary. They can’t seem to understand the prices are way out of line with incomes and that all the exoctic mortgages are are not a way to make a house more affordable. Those of us with a little common sense can see what is actually happening and that is why we are on this blog. The problem with common sense is that isn’t not very common and most people aren’t smart enough to learn from mistakes they made last week let alone the mistakes made by others years ago.
If there is an income cushion, then this sh!t works. When, as now, the savings rate has been nil or negative, it takes real rises in income (not on the horizon) for the realtor BS to work.
If I may add…
It also takes savings! Who, besides those on this blog, has a 20% down payment saved up? From what I can see… not many. When the “trade up” market locks up (and it will), don’t expect much compitition.
Median home in LA takes over 62% of salary vs. 28% five years ago… I’m still having trouble getting past that statistic…
Got popcorn?
Neil
My guess is most people can’t couldn’t come up with a 20% downpayment if we had prices from five years ago. Pretty pathetic. Eassy on them vacations, fancy restaurants, new cars, widescreen TV’s and all the other sh_t you throw your money away on dummies.
Save like your parents and grandparents did slackers.
*Ahem*, us “slackers” are saving quite a lot, thank you. It’s the “spend every dime they’ve got plus their grandkids’” Boomers who are the ones swimming naked –plus, the spendthrift Millenials they spawned.
The term “Prodigal Parents” comes to mind for some reason.
Oh I don’t know. I personally know a good number of boomers who are in pretty good shape. For example a teacher I know who paid $70,000 for his Westchester, NY house in 1978 just got about $900,000 for it. He never made a huge salary by any means, but they just moved to cheap digs in Fla, he’s got a pension and they supposedly have a lot in IRA’s. Now that’s a teacher. Of course who knew in 1978 that the house they bought would appreciate so much. At the time they were told the price was ridiculosuly high.
there are spendthrifts and savers in every generation, and the sooner one recognizes that, the better off one will be
Well put imploder. There are boomers swimming naked as well as slackers. The speculation was far reaching, from teenagers, to diapered dandies. The younger ones will recover. Sadly, the older won’t.
Just for the record, I do know “Generation X” is the most bifucated generation ever for savings. There are a ton of savers (probably all homeowners/debtors by now) but there is also the highest fraction of spenders too.
Or in other words, I’m agreeing with imploder again.
Got popcorn?
Neil
People are not saving because the government is waging a war on savers to turn us into debt slaves.
It sure feels that way. Low low intrest and lax rules for banks make your money less secure plus they devalue your savings faster than you can put them away. M3 kills your savings.
As stated a few days ago on another post, my personal observation as well, imploder.
You guys are all right, but you’re missing the real elephant in the middle of the room. Sure everything is okay as long as employment remains steady. However, how many jobs currently in SoCal are RE driven or related? A lot of them. And a lot of them will be going away soon. So much for steady employment to buouy house prices.
No, everything is not okay as long as employment remains steady. Look at the NODs and foreclosures in California for 4Q06 v. 4Q05. Unemployment was virtually unchanged during that period, but NODs were up 145% and foreclosures were up almost 600%. So many people have mortgages that are resetting, that just keeping their job isn’t enough. They also need either (1) a massive pay increase or (2) appreciation and the ability to refi when the rate resets. Without it, they’re sunk, as evidenced by the surging defaults and foreclosures. This is one of the few differences this time (many, many more people with ARMs - whether I/O, option ARM, or 2/28 ARM - than last time around).
Now, add more people losing their RE related (directly or indirectly) jobs, and it is easy to see that the defaults and foreclosures will continue to skyrocket higher.
I’ve been in the business for a long time and I’ve never seen a market like this,’ said Maronda Homes Cincinnati VP Bill Pucillo. ‘Everything is in place for a boom market, but it’s not.’”
Yep, I think the market is running out of GFs, but other than that, I agree. Everything is in place for a boom market. Geez
“‘Everything is in place for a boom market, but it’s not.’”
Yeah, everything except the main ingredient, a product which is affordable for the average citizen.
Only thing in place is stupid low interest rates. Everything else, demand, value to cost, wages to cost, consumer savings for purchase, ….everything else is “spent”.
In Tucson, it has been very hard to find laborers or truck drivers for the past 4 years. I took what I could get and then had to oversee these guys constantly.
The last three months I have been gotten virtually one phone call a day from people looking for work. My crew now has a lot of experience and talent for such low paying jobs.
This is only the beginning.
A political side note, the minimum wage was raised here in Arizona effective this month. The guys I did pay minimum wage were kids just out of HS or still in HS. They are now gone, replaced by much more experienced men for not much more money. So the ones most hurt by the rise in minimum wage were the inexperienced kids.
looks kinda like a rash.
http://www.emailforeclosures.com/
Thanks for the link
looks kinda like a rash.
try neosporin….
Fascinating to see that the greatest concentration seems to be in the Great Lakes region rather than California or Florida. Even Colorado seems fairly light compared to the Carolinas and Georgia. I wonder if that’s just because some states don’t use the internet to advertise as heavily?
Probably because population is less concentrated in those states that are all blue CA has the highest number of NoD in the country and it won’t be long before they have the highest number of foreclosures… once again.
Now this is a must read……….if only for the laughs
http://www.smartmoney.com/aheadofthecurve/index.cfm?story=20070126
Be sure to read page 2
“It’s because the bursting housing bubble has been an entirely self-contained event that hasn’t in the slightest poisoned the rest of the economy.”
That’s a quote from page 1. Not much different from the schtick printed in the Times of London I posted yesterday. In both cases, the “analysis” is based on “official government numbers”. Good luck with that.
And now from the bear camp:
http://www.financialsense.com/fsu/editorials/2007/0126.html
His analysis is very close to the one I think the Fed is running off of.
I have never thought they would lower rates. I have always assumed they would hold them steady and slowly, ever so gently, strangle the housing market, and massage the numbers to give “appearance” of the soft landing for as long as possible. Eventually, we wind up in the sh#tter with a recession, cause it’s in the cards, but lead the herd in gently, avoid the stampede
It’s been working so well, the MAY start raising rates, (to combat other countries currency positions)
As to the second page, the man is arguing over timing and how much time will it take for a recession to occur, not IF it will. Great, he’s arguing about how many Angels can sit on the head of a needle….
Through all his bluster, he’s saying the Bears will seize the flag… sooner than later.
My comments were to Footie’s post…
imploder
I Agree with everything you say………was just trying to show that the destination is constant, the only difference between Bulls and Bears is the route we take.
Yea, the bulls are hedging their bets now, adding ways out. Like Learah “Crossing his fingers and toes”
Interesting article..
“I have never thought they would lower rates. I have always assumed they would hold them steady and slowly, ever so gently, strangle the housing market, and massage the numbers to give “appearance” of the soft landing for as long as possible.”
Is this what Bernanke meant last May when he said,”"The downturn in the housing market so far appears to be orderly” and “We recognize the risk … and we are watching it very carefully”?
Although the REIC and MSM seemed to interpret these statements to mean that Bernanke was watching the RE Market and would rush in to save it w/lower rates, it seemed to me that he was saying it needed to come down, just in an “orderly” manner and he would try to engineer that by in your words ” hold(ing) them (rates) steady and slowly, ever so gently, strangle the housing market, and massage the numbers to give (the) “appearance” of the soft landing for as long as possible.” Unlike the REIC or MSM, I heard no mention of doing anything to save it.
“Explaining that real estate prices have at least doubled within the past couple of years, Century 21-Uzel General Manager Ahmet Rauf Saatci said the market came to a standstill two months ago. ‘The best time to buy a house is always yesterday,’ he noted.”
Yesterday…
All my troubles seemed so far away.
Now my subprime loan is here to stay,
Oh I believe in yesterday.
That was a good one!!!!
Home buying tale of woe via Salon:
“I Bought a House and Now I’m Crying Every Day
I think I made a big mistake. Home ownership isn’t what I thought it would be.”
http://www.salon.com/mwt/col/tenn/2007/01/26/house/
(You have to watch an ad to read the whole thing — click on “enter salon” at top right when it appears.)
Most hilarious line: “We have no savings and love to spend money.”
Salon…. Oh, Oh…
Uh oh, Hard times come to Hipsterville….
Do you smell something smoldering…. what’s that oder? (sniff, sniff…) 323?
renting is the new owning. rich people renting by choice will be showing up in articles everywhere ‘because its smart’. just watch.
To whom it may concern…………hehehe
savoirfaire
Damn what happened to the discussion on Californians who left for the boonies and wanted to go back? Hell, I only lived in California a few years, left nearly 20 years ago and STILL would go like to go back!
even my Florida buddy is from California (Sacramento) and he wants to go back too!