Post Weekend Topic Suggestions Here!
Also, send in your housing bubble pics to:
hbbphotos@gmail.com
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
About Me
Name:Ben Jones
Location:Northern Arizona, United States
To donate by mail, or to otherwise contact this blogger, please send emails to: thehousingbubble@gmail.com
PayPal is a secure online payment method which accepts ALL major credit cards.
Links
-
November 2024 M T W T F S S « Sep 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Photo Submission: hbbphotos@gmail.com
View the HBB Photo Gallery *updated 4/13/2008
When does a frustrated market morph into panic?
The last couple of weeks in the world
of real estate have sure been interesting.
On this very blog we have all read about new
sub-prime lender problems, tightening credit
standards, doubts about adequate compensation
for lending risk, increased DOM, increased NOD,
rising [for sale] inventory, and
cautious gloom in the MSM.
My question is this:
At what point does market frustration morph into
a full blown panic?
Is it quantifiable? Should we keep an eye
on some key numbers / metrics that can
predict the tipping point?
OR
Is an inevitable panic ephemeral in nature?
In other words, will it just arrive out of
nowhere, without warning, tsunami style?
Denial is very powerful. Especially on Long Island. No set of numbers or talking heads are going to effect the way Mr. and Mrs. Jones spend or sell for that matter. They want what they want and housing bubbles don’t happen here. They happen in places that are building tons of houses without secured buyer and hell, L.I. is all used up…hell, they’re not making any more land here.
Hence, the tsunami.
Soon, please.
Danni
“When does a frustrated market morph into panic?”
I think its about knocking the hamsters off their wheels so they can actually start paying attention and using their noggins. I also believe it’s going to take something that feels cataclysmic for that to occur.
I think the panic will set in when these two things happen. It has to warm up (in areas it is cold) and when that happens more signs will be in the yards. Once the signs are in the yards and people note that nothing is selling, or that the only thing selling is a comp similar to thiers going for 10% less or larger, then panic sets in. I say June.
I’m still surprised during conversations at parties, bars, etc., that many people either a: unaware, b: in denial because “it’s just a media creation being hyped”.
We are constantly bombarded with information; so much so that sometimes, for some of us, it’s difficult to determine what is credible. The people on this board, I think, assume that everyone knows what actually, only we know. And those whose business it is to know, but aren’t telling. I, like many here, have watched this ebb and flow since the 70’s, and this particular asset bubble compelled me to sell and rent in the same area in ‘04. The comparison made here before to a car crash in slow-motion is appropo. Maybe this June, ylekiot1, maybe next, but ultimately unavoidable. In your cross-section of friends, aqaintances, folks you strike up conversations with, what percentage know what you know? Think about it… When the realization sets in, when the perfect storm hits, it may seriously be wholesale panic.
I prefer the continuously zoomed out image of a snail moving toward a buzzsaw accompanied with dramatic music.
I prefer the continuously zoomed out image of a snail moving toward a buzzsaw accompanied with dramatic music.
And wearing sunglasses driving a Hummer!
( I was laughing so hard at mrktMaven Fl’s comment
that my adjacent cubemates here at the office had
to come over to see what was going on! )
Most buyers in the last two years fell for the line that double digit appreciation every year was the norm. They know their truth and won’t be misled by the facts. Only after they try to fefi the loan to find out that the new appraisal is 100K less than they paid for it will they try to find someone to blame for it. Then they’ll pretend to be victims. As they gaze through their paladium windows at the Hummer in the driveway. They may even have to sell the kids’ atv’s.
was just talking to a friend who told me about a guy who bought a 500 k house at the top of bubble 2005 in bakersfield, now does not like it and wants to move but wont sell because he doesnot want to lose money, already refusing an offer (and only offer by the way) 60k below asking. trying to rent it (he moved to fresno) for 1600. no takes, very sad but starting to be more common.
whoever has the popcorn, pass it on .
“Hence, the tsunami.”
The situation on the ground brings to mind the period during the December 24, 2004 tsunami between the earthquake and when the waves started hitting the shores around the Indian Ocean’s perimeter. Meanwhile, government scientists puzzled over whether to worry about what they knew was a large-magnitude earthquake, but which they nontheless severely underestimated. By the time the waves were hitting the beaches, it was too late to issue any warnings.
A tsunami happens way too fast. I believe that a better metaphor would be quicksand. The fear doesn’t start until the sand gets to about waist level. I would guess that for most FB’s, the ones that I now anyway, the level is around mid-thigh at this point. They still believe that someone or something will pull them out.
“A tsunami happens way too fast.”
That does not suffice to invalidate the analogy. One simply needs to rescale the time to see the obvious parallel:
Perhaps 1 subprime-implosion day = 1 tsunami-propagation minute, or something similar.
L.I. is all used up…hell, they’re not making any more land here.
This may be the only part of the country where this is true. I read that 96% of all land is used up in Long island and the other 4% has severe restrictions on it.
Only usuable land left is commerical, so close factories throw people out of work and build a new condos on the property.
I would watch how the tug-of-war plays out between the bleating “soft landing” mantra raining down from on high and the steady stream of MSM (and non-MSM) evidence regarding the magnitude of the subprime implosion; for examples:
http://washingtontimes.com/business/20070215-105533-7042r.htm
http://www.businessweek.com/investor/content/feb2007/pi20070216_809773.htm?chan=top+news_top+news+index_investing
http://www.thestreet.com/_googlen/newsanalysis/investing/10339147.html?cm_ven=GOOGLEN&cm_cat=FREE&cm_ite=NA
Also keep your eye on a growing awareness (trickling up from the blogosphere to MSM sources) that in the absence of massive government intervention, the collapse of subprime implies residential real estate price deflation.
Finally, look for reflation (aka govt intervention) efforts to either never materialize, to result in higher long-term Treasury yields (another stake in the bubble’s heart) or (worst case scenario!) to successfully respike the punchbowl, enabling liquidity-drunk builders to add further to 2.7m vacant homes already for sale.
Panic is not the end…Flow Chart towards desperation
(1) optimism (2) excitement (3) thrill (4) eupyhoria (5) Anxiety
(6) Denial (7) Fear (8) Depression (9) Panic (10) Capitulation (11)
Desperation (12) Hope (13) Relief (14) Optimisim
Home sellers still in Denial, must wait 3 months to the end of spring non-buying season.
GMAC mega loss of 950$ million on real estate sub prime loans. The company is in great difficulty. And what about that piece of junk called General Motors ?
We probably won’t get wholesale panic, nationwide that is obvious. We might get pockets of panic - mainly in heavy investor infested communities. The normal homeowner with 20-40% equity will most likely not panic…some might get nervous or panic and sell (their house is their retirement). Most will just be too focused on making a living and their families.
This will evolve slowly over the next two years into a full fledged meltdown like Austin in the late 1980s. Panic will manifest itself with foreclosures…foreclosures that aren’t selling and get stacked up into some kind of RTC like agency. In 2009 (maybe 08, but more likely 09), we will see large numbers of foreclosures advertised at 50-60c on the 2005 $ in overbuilt bubble markets especially. Some areas will not get hit this hard (most will likely see 20% at least though). This will continue in 2010 which perhaps will be the bottom - thing is in the 50c on the $ areas, even the 20% down payment people will end up having to walk (or stay till 2015+).
The areas that will hold up the best are going to be those that the upper middleclass and wealthy Gen X and Y will want to live in. I work in the computer industry with many of these people and they don’t look for the same things Boomers look for.
High wage inflation that re ignites high home asset inflation would be the only way out before 2015 or so.
First! Go back to sleep JMF and NYCityboy!
Good morning Ben. You are up earlier today than usual.
Foiled!
Sub-primes… A problem, who’d a thunk it!
http://www.investors.com/editorial/IBDArticles.asp?artsec=16&issue=20070125
Yeah and GMAC has lost 950$ million on it ! Great American junk called General Motors. Bankruptcy is for soon.
This article states: “The Center for Responsible Lending predicted last month that one in five subprime mortgages initiated in the past two years will end in foreclosure, kicking 1.1 million homeowners to the curb and costing them a total of $74.6 billion.”
Do y’all think that 1 in 5 is low? Considering how unaffordable these loans really are. Maybe 2 in 5 or 3 in 5?
s
No.
4 in 5 this time !
that would be:
4.4 million loan defaults
2 trillion 984 billion
whew
s
In thinking about that 1 in 5 ratio — People on this board like to assume that every subprime mortgage made in the last year is stated income @ 105% LTV, with cash back on an neg-am amortization loan made by an illegal alien who works as a janitor. Part-time.
I mean, there’s subprime, and then there’s SUBprime - super toxic strength. Anybody have data that dives into the subprime category? I’d really love to get a better handle on this one.
Based on what I’m seeing anecdotally, the Alt-A mortgages are really sub-prime. I wouldn’t lend $50 to some of the folks I’ve seen who can get $500K over and over and over again!
If Alt-As are that bad, I’d hate to see what they consider sub-prime.
I have a question here for the readers. I lived in az from 2001 - 2004, we purchased a house in mc cormick ranch for 235k. It was first purchased for 100k 10 yrs prior. It took 10 to double in value, seems normal right? Subsequently when we sold it to move away 2 yrs later, we got 265k for it. We had an offer of 275k, but was told we could not sell it at that price as it would not appraise for that, so the buyer would have to come up with the cash difference. Now how does that same house, go to 460k 3 yrs later? How is this possible?
Not for nuthin’, but 135k jump in ten years isn’t particularly normal (at least IMHO)
460k? We all know that’s just obcene.Welcome to the wacky world of sub prime mortgages!
Doubling in 10 years is not normal — that means that the home appreciated at a rate of 7.2% every year for 10 years, which is far above the rate of inflation or increase in incomes.
“Now how does that same house, go to 460k 3 yrs later? How is this possible?”
It’s easy when the buyers are borrowing from someone else’s 401k account.
He does raise a good point. How often over these last five years or so did a deal fall thru because the appraisel couldn’t be reconciled with the offer. Probably less that in previous decades I would imagine. A sure sign a dirty appraising and appraisal shopping by realtors.
How about a discussion of historically sound RE practices which have been turned on their head over the past five years?
I have noticed the loose credit environment has replaced the sound practice of buyers saving in order to buy a house with sellers saving in order to sell a house.
That’s a good point.
We bought our first house just before the sub prime explosion and they not only wanted a downpayment, but they wanted to know it was saved by us and not a gift from family, because how would they know if we could pay a house payment higher than our rent if we hadn’t managed to save money?
“I have noticed the loose credit environment has replaced the sound practice of buyers saving in order to buy a house with sellers saving in order to sell a house.”
Interesting point! Given builders’ propensity to give away “free” cars and vacations as purchase incentives, it becomes clear why sellers perceive the need to sweeten the deals in order to compete, necessitating an effort to save or at least invest in their homes in order to make them salable. I still claim that (1) if the builder works out a deal so the buyer finances the “free” car, vacation, whatever, on the loan proceeds, then the buyer actually purchased the goodies, and the deal would not have been possible w/o an inflated appraisal; and (2) aside from low-cost cosmetic improvements, it would generally be less expensive for sellers to cut their prices to levels where the homes would sell in a declining market, rather than to sink gobs of time and money into last-minute deperation home improvement measures. (2) is doubly true in a declining market, where delaying the sale due to time-consuming renovation projects can result in the trend eating up any and all added market value.
Agree with you Get Stucco . In a down maket you don’t really get your money back for those expensive improvements .You might make it so the realtors have a easier job selling the property ,but you don’t usually get all your money back for expensive improvements .A seller might do alot better to lower the price and sell the place as a fixer-upper .Only in a appreciating market do you get overpaid for improvements .
Don’t forget homeowners with negative equity due 100% financing and a declining market who will have to bring a check to the table in order to sell the house. No money is required to buy but money is required to sell!
That is why I suggested above we segment the seller side of the market. Which sellers are willing and able to sell at lower prices — builders (small, medium, large) , REO departments (local, regional, national) , speculators (individuals, investment clubs), auction channel sellers (individual v institutional), others? Last time around, even the government’s Resolution Trust Corporation (RTC) was selling property at deep discounts.
Residential Housing Underperforms Other Assets
http://tinyurl.com/23vscs
I didn’t see this discussed anywhere else, but Fidelity Investments shows us that stocks have way outperformed residential RE since 1963.
Duh. Made that point here a time or two. Problem is, you don’t get the leverage of having no money in the investment like in RE or very little money (3-5%). The RE hucksters really flog that point.
That said, you double or triple your money in a day, sometimes intraday in stock or index option trades.
meant to say “can” double or triple.
I’d just never seen any reports or other type of research to “prove” this point. I’m just tired of hearing that RE is the best long term investment one can make, and it’s nice to have something concrete to back it with.
From an appreciation point of view, a house is a bad investment. But as a house, in a non-bubble market, it is a great investment, for this reason.
You have to save up $400K to invest $400K, and then the proceeds are taxable, so there is less left to pay for rent. And the rent rises with inflation, while the investment returns on the $400K are uncertain if they are to be any good.
In contrast, you can borrow to “invest” $400K in real estate that you then “rent” to yourself. The “rent” on that house — the rent you don’t have to pay — is then a 100% certain return, and tax free. This advantage, the “income” return on owner-occupied housing, as been forgotten in the frenzy over the “capital gain” return.
The problem is that if you pay $800K instead of $400K, not only are you more likely to take a capital loss, but your income return also stinks — the rent you save just isn’t worth it, even though its locked in. Permamently house poor. That’s what the bubble has done to those who just want a place to live.
Exactly, thank you. Homes should be for living in, not for speculating on.
“I didn’t see this discussed anywhere else,…”
I did.
http://www.irrationalexuberance.com/
“I didn’t see this discussed anywhere else, but Fidelity Investments shows us that stocks have way outperformed residential RE since 1963.”
I saw similar facts several years ago. In 2003 or 2004 I posted this on a real estate message board on AOL. Got a bunch of other posters laughing at me. I have not seen those people posting lately. Maybe they are now crying.
“I saw similar facts several years ago. In 2003 or 2004 I posted this on a real estate message board on AOL. Got a bunch of other posters laughing at me.”
Ya see Bill, it goes like this. You just don’t have the savvy for investing that those guys have. See these guys are wizards. Cream of the crop types. They attend RE seminars and listen very closely to what their “RE professionals” are telling them. Therefore, when they hear that RE is always a good investment, will always go up, they can actually GRASP on to that concept and run with it. OK? Understand? THEY GET IT!
You, on the otherhand, are apparently are not sharp enough to grasp the finer points of RE investing and therefore you are going to have to be content with being a loser while the McTrumps clean up. Got it?
Now, get back to renting for a 1/3rd of the cost of owning while packing away thousands a month in treasuries and gold coins with your savings and shut-up, like a good little loser.
a 100 year chart would be nice- keep in mind since the 50’s all kinds of gov subsidies have been applied to housing
hud
fha
community banking bill
500K$ untaxed gain
Flat, I know you sometimes take a little heat for your challenging communication style, but your points are always good ones. Keep it up. You are on target.
It is time for us to seperate the sellers in this market who are not only willing but able to sell at lower prices from those who cannot. No value buyer wants to spend several days of negotiation with a desperate seller like Casey Serin only to find out that his lender will not let him sell short. So, which sellers can realistically lower their prices and where do we find them?
the court house steps or bank reo before they give them to realwhores
I read that you need to be very cautious with courthouses because of undisclosed tax and 2nd mortgage liens and so on.
Precisely what happened to my former landlady. Won a house at auction back in ‘98. Then she had to deal with:
1. Liens on property due to financial mismanagement of previous owner. He was in the property management business.
2. The former owner. Landlady had an angry confrontation with him after the property became hers.
3. Numerous repairs to the two houses on the property. Not to mention the need to catch up on years of deferred maintenance.
So, word to the wise: Those great deals on the courthouse steps can come with a lot of after-the-sale costs.
I heard the same thing from a friend of mine who was house hunting in the 90’s. She said the repo houses were all trashed and the small price reduction didn’t make up for all the trouble and expense.
I want to know who has the “20″ in the 80/20. We know HSBC has some of them. I want to know who else.
To me the “20″ lent to a customer with a good FICO — but with an exploding payment upcoming on the “80″ in a depreciating market — is worse than the “80″ lent to someone who was already sub-prime. If for any reason the holder of an 80/20 has to sell — lost job, divorce, illness, can’t handle exploding payment, etc. — the 20 gets a 100% wipeout for the next few years.
Pension funds and “investment grade” mutual funds probably didn’t invest in the BBB tranch of subprime loans. But they might have done some “20s” to prime customers.
When customers are offered the opportunity to use time-bomb loans to purchase houses they cannot afford, and those who make this choice can outbid those who do not, you can see that prospective subprime status becomes highly endogenous, regardless of credit histories. This is what I call systemic risk at its worst — a situation where changing the rules of the game creates adverse selection which gives the worst-risk borrowers a leg up in the housing market.
I mentioned time-bomb loans in the passage above before I saw this article:
—————————————————————————————–
American mortgages
Bleak houses
Feb 15th 2007 | NEW YORK
From The Economist print edition
America’s riskiest mortgages are set to pop. Where will the shrapnel land?
LAST March, ResMAE, a mortgage lender catering to risky borrowers, cut the ribbon on its new headquarters in Brea, California. The sprawling, 135,000-square-foot building dwarfed the company’s 458 local employees. But it fitted the firm’s outsized ambitions. Less than a year later the company, rather than its ribbon, was facing the chop. This week it said it had filed for bankruptcy and was selling its assets for a diminutive $19m.
ResMAE is one of over 20 casualties among America’s “subprime” mortgage lenders, which serve borrowers with spotty credit histories at higher interest rates. This end of the market took on $605 billion of new mortgages last year, more than a fifth of the total. But as interest rates have climbed, these loans have soured and the shares of bigger subprime lenders, such as Countrywide Financial and IndyMac, have sagged.
Does the rot run deeper? That fear ran down a few spines on February 7th, when HSBC, Europe’s biggest bank, revealed that bad loans at its American subprime mortgage division were 20% higher than expected. The same week New Century, the second-biggest such lender in America, projected a big drop in loans this year because of poor market conditions.
They are not the only ones exposed to America’s home-loan blues. Citigroup peddles mortgages to risky borrowers through CitiFinancial, its consumer-finance arm. Subprime lenders have also been scooped up by investment banks, including Morgan Stanley, Merrill Lynch and Deutsche Bank, in recent months. Notably absent are Fannie Mae and Freddie Mac, America’s government-sponsored mortgage giants. Both were set up for people who dreamt of homeownership, but could not afford it. They also have the best data on borrowers, including those rejected for loans in the past. Perhaps they knew something others did not.
http://economist.com/finance/displaystory.cfm?story_id=8706627
There has been all this concern about Fan and Fred blowing up. What if their government rules — 20% down, mortgage total limits — even if stretched, mean they are the only part of the secondary mortgage market that DOESN’T blow up?
My sister-in-law is a SNR VP for Resmae. Tough times ahead for many of the people in the industry.
Weekend Topic Suggestion-
Tactics to “Pursuade” the County Assessor that your House Really isn’t worth $xxx,xxx.
Maricopa Co (AZ) came out with their assessments for 2008 already! I guess they’re trying to lock in the values before they sink into the abyss.
WSF
That’s a cottage industry in Dallas. The tax appraiser has really been socking people the last two years with absolutely no justification.
“The tax appraiser has really been socking people the last two years with absolutely no justification.”
Especially since if your house was “worth” $100,000 ten years ago and then $250,000 five years ago and $500,000 today you in fact not gotten anything more then you had ten years ago since you still live in the same house and you are still getting the same government services yet they want to charge you more when you have not made a dime off this appreciation. I can see people paying more in sales taxes when they sell at a much higher price but if you have not sold you have not made a dime in profit so why are you paying more for some possible profit later that may not even occur if house prices drop. Under this idea you should charge college students more taxes since they probably will make more money in the future
CNN’s leading business headline.
Stocks set to open lower as investors consider housing sector weakness. (more)
So, how many business magazine covers will be devoted to the housing fall in the next 6 mos, lets start a pool!
They will continue the housing sector weakness Shock and Awe campaign until the marginal effect on ad revenue dwindles to $0.
Time and Newsweek will show houses on the front covers with headlines blaring them as dumb investments - in 5 or 6 years. That is the time you should buy real estate. In 3 years those same magazines will have gold and platinum on the covers. Before those covers hit the stands you better sell most of your PMs.
Topic suggestion - last week I mentioned that here in Greenville/Greer, SC we are seeing a “stunning” amount of out-of-staters, based on FL,CA,AZ,OH,MI,IN,IL,CT,NY license plates all over our roads, looking at houses in this area. A reply asked if this would be the “skunk at the garden party” for bubble watchers as people sell (or at least put their home up for sale) in the bubble markets and look to move to the warmer-climate states with moderate home prices (NC,SC,GA,TN). Anyone else in this region seeing the same trend in their area? Is there a “bubble slide” occuring right now?
And how do the locals view them? There is much hate in NC, WA, and NC if you are a californian right now. They really don’t want you coming into their state. Another example- us Sacramento folks hate the folks coming from the BA. We try to be polite and not take it personal but the locals are getting displaced and there is some hostility brewing.
It’s all about economic pressure and how people adapt. Some do well while others not so well.
Gwynster;…While doing some research this morning a saw 40+ houses in the Sac. region come on the market with some dude from Coldwell Banker…ALL bank foreclosures….
wow
Make those foreclosures in Yolo county (just across the river) and I might be able to convince the DH to stay. We’re looking to get out of CA (been thinking about it for years actually). He thinks the CA economy has it’s hands around the necks of the lower and middle classes and can’t figure out why anyone would want to live here.
Same thing here in Reno Gwyn - we have the same animosity to the people that flooded here from the BA. Our bubble is a direct result of theirs.
You know I was going to add NV but then you have the whole S NV vs N NV thing and I have no clue how the southerns feel.
I lived just outside of Reno back in 1990 between school jumps and the old rancher house we rented was lovely out in the steamboat springs area south on the 395. I can’t imagine what that place would sell for now!
I still have some very dear friends out there but thankfully they all bought in 1996 to 1999 before things were crazy.
So are you getting another “grey wave” like Sac and Reno got in around 1988 or is it a “baby wave”?
Oregon is unfriendly to “equity barons” too. No problem, the pool of them is drying up.
Yep, I knew all about Ore from reading Dinor’s posts for years. My DH loves it up there but I told him y’all would shoot us if we came across the border!
My bad for leaving you off the list. What I’m really interested in is the sociological effects coming out of all this.
To an outsider, it appears the Fed’s post-1998 LTCM bailout strategy works like this:
1) Publicly proclaim the Fed only mops up bubbles after they collapse;
2) Pretend that the economy is doing great no matter what storm clouds loom on the horizon (inverted yield curve; 25%+ recession in homebuilding sector; automotive, construction and lending sector layoffs; falling home prices; subprime lenders going belly-up left and right; ongoing mystery over Fannie Mae’s black-hole balance sheet; etc.);
3) Silently carry out pre-emptive bailouts behind the scene (the kind you officially disclaimed in 1) ).
If you could pick a place to live were would it be? And how far would it have to fall in price for you to move or buy there?
Cactus,
I’d like to second your interest in a “dream location” list. I’d also like people to add their reasons why that location is important to them as I think priorities are different for everyone.
Why, everyone wants to live in California, of course! The reason, you ask? For the weather, of course! And to see all the beautiful people and movie starts swarming our streets!
EVERYBODY wants to live in California!
[sarcasm]
I would like to see a post on US banks. Which banks are most “safe” to put you money in? We all know about Wells Fargo, Washington Mutual etc. Where should you keep your future “home” (not house) down payment safe?
Countrywide is currently at 5.4%, highest money market available. I’m considering it for the short-term; at the first sign of massive defaults, foreclosures, sub-prime belly-ups… oh, wait, ok, , hehheh.
Try this link. http://www.weisswatchdog.com/sw/?i=b
should give you some ideas.
RE employment at peak 9.5% historical is 6%
even Roubini doesn’t mention this- it’s one reversion that seems resonable
Add to this topic:
Where is the RE employment distributed? Will certain areas take it harder than other areas? How much of an impact will RE/brokerage layoffs have in any given region?
For example, Orange County California has, to my understanding, the highest concentration of sub-prime lenders. Thus, one would expect an extra hard recession there due to the slowdown in sales. But is that perception or fact? Does anyone have numbers?
What I would like to know more than anything is the proportion of six figure incomes in an area that are RE based versus the other local industries. Yes, a tough statistic to find, but certainly one worth knowing…
Got popcorn?
Neil
Have the Fed and the Treasury claimed monopoly rights to MSM reports on the economic outlook?
This blog is the best housing blog out there. I have read all of the archives, but it is getting almost too time consuming to keep up with the number of posts. The old time bloggers can sure sniff out a troll.They pull the trigger pretty fast sometimes, however they are much more experienced than me , and I will give them the benifit of the doubt. The only thing I dislike is when someone posts a link, and I go to it and find it has already been flagged(censored)!!!. WHy?… to keep me from seeing the reality in this world? They are even faster on the trigger than the troll guard, and to me obviously a frequent poster . I dont believe we need some HOLIER THAN THOU(reverend HAGGART) to try to limit my internet choices. Is zillow really a child internet site? Is Bens Blog a childs site? My suggestion for the weekend is… Do we need a morality troll guard monitoring this site?
I’ve been lurking on this site for a couple years now and have yet to run across a link that’s not working. Sounds to me like the issue is with your ISP (or maybe IT department is blocking if you’re browsing at work).
kelowna steve… what stage of the housing bubble is Kelowna in? The major cities in sask. are still overbuilding. the developers here are counting on a huge migation from Alberta and also previous retirees returning to more affordable housing with their huge housing windfalls. do you forsee any of this happening? Are the retired now in the Okanogan going to cash in and move to fridged sask?
He’s probably talking about Craigs List postings. the only ones commented on are the ones so cretinous that they are unlikely to last long.
What has the stalled housing market done to rental rates?
Our landlord is trying to up us over 20% on our new lease, almost make me want to buy a home again. I would like to know what rental rates on single family homes are doing in bubble areas (Vegas, CA, Phoenix, Florida etc.)
If you are in a major metro area, craigslist.org is a quick way to get an idea of the rental market .
In our coastal city in San Diego County, rents have been going up rather significantly over the past year or so. They might be plateauing more recently, as the rents are very high already!
Same thing heard here. In fact there were stories of FBs ripping out copper plumbing and taking all of the appliances before they left the keys on the counter.
First of all, THANK YOU, Ben, (txchick, GS, Jas, Neil, OC, lainvestorgirl et al,) so much for this incredibly informative blog. I’ve learned more about economics in the last few months than in my entire academic career, and it’s a genuine hoot to speculate upon the circumstances of you whacky characters whose commentary appears herein.
Okay, here’s one for the tinfoil hatsters amongst us:
Isn’t it entirely possible that the US federal government, lending, and regulatory institutions have– consciously or coincidentally– fomented this bubble to counteract the massive trade imbalance the US has garnered over the last decade? After all, a significant percentage of US mortgage-backed securities is held by China and Japan. If these bonds are rendered worthless by a crash, the actual physical houses will still be here– and will likely be resold back to the middle class for pennies on the dollar via…um, these same federal entities? (Assuming the middle class has any pennies left.)
What are your thoughts as to the ramifications of all this fraud and manipulation being a concerted effort on the part of Our Beloved Leaders and their toadies, er, agents?
ahansen
I’ll echo those sentiments. Thanks much to Ben and all the regular posters at this blog. I have learned more in six months on this site (and others I found through these forums) than I did in years of Econ classes. Amazing. I think that when historians write about the first decade of the 21st century, they will devote many pages to the blog revolution that is afoot.
As far as the question, ahanson, it’s my opinion that the trade imbalance could not possibly have progressed so far without the easy credit of the last decade. (And maybe throw in NAFTA, as well.) So, the two cannot be considered coincidental, which suggests happenstance. Rather, they are inter-related.
As to whether the imbalance is a conscious creation of some nefarious group like the Tri-Lateral Commission or the Stonemasons or some such, well…I don’t believe in that stuff. Why would very rich men knowingly work to destroy the economic system that made them very rich? It violates self-interest and common sense.
Maybe others will say I’m not suspicious enough, but I have always found great truth in the following old saw, “Never ascribe to malice that which can be adequately explained by incompetence.”
“… fomented this bubble to counteract the massive trade imbalance the US has garnered over the last decade?”
Someone already noticed that connection long ago (and called it “symbiosis”):
http://delong.typepad.com/sdj/2005/06/stock_housing_a.html
See what I mean about informative? Thanks so much for the link!
Symbiosis, however, is a mutually beneficial relationship. I would argue that any benefit from this particular scenario would accrue only to those with reserves enough to take advantage of an extreme depreciation of American assets. Who has the money? The Oiligarchy? Water brokers? It sure ain’t Mr. and Mrs. Murka.
It got to the point that the more risk was taken, the LESS risk there was. The more credit given, the faster prices went up, insulating lenders from any failures because of the price appreciation.
Positive feedback accelerating until the explosion.
I have a topc suggestion that may have been covered before, so my apologies if this is so. What is the quality like on the newer construction that has taken place so rapidly in the past few years? Can people site real examples of this? I suspect that the quality will be shoddy, but are there specific builders or problems that have been documented?
Just thought of another topic possibility. I realize that many here suspect that HELOC’s play a large roll in the current housing situation. Is there any data out there that shows what percentage of loans are of this type? Is there any way to determine this information?
Thanks for all you do Ben. I think (no, I KNOW) your blog saved my family from making very poor choices in 2005.
Neil, pass the popcorn,
Stars End
I’m also sorry if this has been brought up but,
What is the difference between “us and them?” How come we can see the bubble as it’s filling with hot air and know it will end and others cannot? How come others can’t see that there are cycles and that RE can also drop in value? I just don’t get the way others are thinking and am curious as to how we developed and how they developed.
Fredrick Pohl wrote a little novel called “The merchant’s war.” In that book, it described how to manipulate the “consumer class.”
It really explains how most people want to go through life ignorant.
Got popcorn?
Neil
Very good question.
In my own experience, I can’t say that “they” fit into any one quantifiable category. For instance, I have heard everyone from my roommate (who watches games shows and Lifetime TV) to professionals who are ace in their field spew the REIC party line.
I’m going to take a shot at this and guess that a) HBBers in general are more grounded and reality-based, and consequently b)less motivated by fear and/or greed.
I’d love to hear other posters’ thoughts on this.
Maybe people on blogs above all desire to be right (not rich). To be that, they have to think more and to resist following the herd.
You’re not properly identifying the Imperial Model for the decline and destruction of a Republic.
If the question is “why are such well-educated people acting so stupidly”, then the answer MUST be “because they were never really educated in the first place”.
The Imperial Model demands that education is replaced by PROPAGANDA. Rational thought and discourse is replaced with patriotism and slogans. (Extreme narrowness of education helps to achieve this.) Loyalty becomes much more valued and rewarded than criticism, law enforcement, auditing, etc. This is why so many people believed in the housing bubble, the Iraq War, Intelligent Design, and all the other outright stupidities extant in America today.
Due to the degradation of American society under the Imperial Model, the USA now has the largest and best “educated” set of morons ever seen in Human history. They buy water at greater-than-gasoline prices, yet each home has a tap that runs highly regulated water for a very nominal cost. They prefer to spend more money on products in order to “save” with discounts. They prefer to use credit when cash suffices in all measures. They prefer to become more dependent upon oil-based energy sources, regardless of all the indicators saying these sources will become much more expensive. Glitz and plastic become their primary item purchases, regardless of the high replacement frequency for these items. Etc.
Well, what else can we say for this people but call them MORONS? They were largely not taught to think, but to OBEY.
They buy water at greater-than-gasoline prices, yet each home has a tap that runs highly regulated water for a very nominal cost.
—–
Oh I agree in general.
Here in TX, however, I just found the trick for cleaning all the crud out of your faucet aerators deposited by the “regulated water” is to soak them overnight in vinegar.
Rich Toscano makes informative graphs; his newest is a good example, under
http://piggington.com/motivated_sellers_abound#comment
Are there similar numbers for other areas? Or is San Diego really ground zero?
Wow — I guess trees do grow to the sky after all…
I must’ve missed something. How can more than 100% of NODs become foreclosures?
If you consider a given time period, then a large number of previous NODs can lead to more foreclosures than NODs in that time period.
I would like to talk about two things,
1. What would your house/property search/purchase ideally look like?
By this I mean would you want to search online and what specific data would be most helpful to you in conducting a successful search to buy property? To me it would be things like actual total days on market in last N years, comparable sales prices for same type of property in the area, price/sq ft, sales history, etc.
2. Banking and lending: I am more than disgusted by the last 5+ years degredation of lending standards and the resultant hypocrisy when compared to how tight standards were in 1997-1998. Though I seriously doubt any changes will be forthcoming for banking/lending I can still hope. What would your hopes be in terms of banking rules/regulation changes? I would like to see lending spelled out plain and simple and regulated so that toxic loans vaporize. Also, in a related topic, what changes would you like to see in credit card regulations?
It chaps my arse to see the default rates credit card jump to for any infraction. And this with money rates at lows. Usury plain and simple.