The Housing Market Has Hit A Major Skid
The Capital Times reports from Wisconsin. “Drive past the luxurious Weston Place condos at 625 Segoe Road after sunset and the 12-story tower is three-quarters dark. That’s because just 35 of the 121 units have been sold since the project opened 15 months ago.”
“‘It’s pretty quiet over there but I had concerns from the beginning whether it was going to be economically feasible,’ said west side Ald. Noel Radomski.”
“Certainly, Weston Place isn’t the only local condominium project facing a soft market. The number of condos for sale in Dane County is at an all-time high. ‘It’s certainly a beautiful building, so I’m not sure why they’re not doing better,’ said John Deininger, executive vice president of the Realtors Association of South Central Wisconsin.”
“So why have sales gone so slowly? (Realtor) Kathy Walch says it’s unfortunate timing. Weston Place opened in October 2005, just as the real estate market here was beginning to slide. She said that robbed Weston Place of the initial momentum needed to create a buzz and a flurry of offers.”
“‘You have to remember we’re coming off a year unlike any other,’ Walch explained.”
“The problem now, experts say, is an oversupply of condominium units. There are some 2,300 condos for sale in Dane County, nearly double the number from a year ago. With the market slow and buyers sitting back, the question all comes down to price, said Barry broker Mirken. ‘The high end stuff is still really struggling,’ Mirken said.”
“Developer Peter Frautschi remains optimistic things will pick up this spring. The project has been refinanced to help provide additional money. ‘Signing a big loan didn’t seem like such a big deal back then, but I guess it does now,’ he said.”
The Record Eagle from Michigan. “The housing market is flat or in decline throughout Michigan, so Dorothy Roush wants to know how Garfield Township’s assessor determined that her home’s value jumped almost $12,000.”
“Then there’s Ray Reamer of East Bay Township, who saw his assessment jump by $41,300. ‘I don’t know where they come up with these figures,’ he said.”
“‘Southeast Michigan is struggling much worse with its values,’ said Robert Reamer, president of IRR-Residential Veri-Tech Appraisal. ‘I haven’t seen the numbers but some appraisers said they have segments that have lost 25 to 30 percent of their value.’”
The Detroit Free Press. “In one of the few good signs in the housing market in some time, sales of single-family houses and condominiums in southeast Michigan increased from January to February by 6.7%, a local MLS reported Thursday.”
“But the troubles afflicting the state’s residential markets are hardly over yet. Median sale prices continue to decline. Median prices stood at $130,047 in February. That was down from $141,000 in February of 2006 and $150,000 in February of 2005.”
“Hudson & Marshall plans to auction 260 foreclosed homes in Detroit worth between $10,000 and $300,000 on March 17-18 in Dearborn.”
“Bank-owned homes more than doubled from December to 6,653 new filings in January. More than 11,500 homes were in foreclosure across Michigan in January.”
From KFVS 12 in Missouri. “It’s the biggest single purchase most of us will ever make. But, the housing market has hit a major skid. Lenders say home loans that don’t require you to put down any money may be partly to blame.”
“‘It’s very common for people not only to want a hundred percent loan but want the seller to pay their closing costs and their prepaid so virtually go from their apartment into their house without spending a dime of their own money,’ Sandy Schooler, a loan officer in Cape Girardeau says.”
“Schooler says some buyers will choose to spend more than they can afford - just because it’s available. ‘I’ve heard people say buy more house than you need you’ll grow into it. You might, and you might not - but make the payment fit,’ she cautions.”
“Schooler says otherwise - you could end up with a foreclosure before you even know it.”
“One homeowner Heartland News spoke with, knows all too well how painful a foreclosure can be. Her home goes for sale on the steps of the Cape Girardeau County Courthouse in late March.”
“But Schooler says there are ways to avoid losing your home. ‘Don’t let yourself get two or three months behind. Call a realtor and put the house on the market and sell it. It will save your credit. If you have to - go back to an apartment.’”
Chicago Business from Illinois. “The glut of downtown condominiums is spilling over into the apartment market, where landlords face increased competition from condo owners who rent out their units.”
“Over the next two years, downtown developers (will) finish building more than 8,000 condos, a record number. Adding to the pressure, the weak condo market has led some investors who planned to flip their units for a quick profit to rent them out instead.”
“‘The financial institutions and equity players are very concerned about it because it does add competition to the rental market,’ says Ron DeVries, vice-president at Appraisal Research Counselors. ‘This is a hot button. Everyone wants to know what’s going on with it.’”
“Though the shadow market is fragmented and hard to quantify, it’s growing according to one key measure: the number of downtown condos rented through the MLS. That figure rose to 2,247 units last year, up 20% from 1,867 in 2005, according to Appraisal Research.”
“Newly built units are driving the growth: The number of condos less than five years old rented through MLS more than doubled to 1,867 last year, from 809 in 2005.”
“And apartment developers are building again: They’ll add 1,976 apartments to the downtown market next year and another 2,568 in the next few years after that, according to Appraisal Research.”
“With condo prices sluggish, many speculators who bought new condos hoping to resell them quickly for a profit are renting out the units while they wait for the market to pick up.”
“‘As these buildings come on line, you’re going to see more (condos) fall into that shadow market,’ Mr. DeVries says.”
The Chicago Tribune. “From slick, cinematic productions touting waterfront castles to underlit, homemade tours of modest condos, real-estate marketers are eyeing online video as the next way to capture that increasingly elusive creature, the home buyer.”
“Dina Davis, an agent in Evanston. made a video of a Rogers Park townhouse listing and stuck it on YouTube. After two months and a paltry 45 viewings, the townhouse is still available.”
“‘I didn’t think we’d get tons of business from it,’ Davis said. ‘I just hoped to pique someone’s interest.’”
“Professional videographer Malachi Leopold found himself being hoisted by a hydraulic lift last year to capture the second-story view that a buyer of an oceanfront lot in Massachusetts would get after building on it.”
“After the video went up on several Web sites, it was spotted by someone in California who bought the property, Leopold said.”
“‘In a time of market flattening and rising inventories [of homes for sale], people need to do whatever they can,’ said Christian Sterner, co-founder of WellcomeMat.”
‘You have to remember we’re coming off a year unlike any other,’ Walch explained.’
Again, a reference to a recent RE boom in the heartland.
I love this:
‘It’s certainly a beautiful building, so I’m not sure why they’re not doing better,’ said John Deininger, executive vice president of the Realtors Association of South Central Wisconsin.”
I’m sure it is beautiful…but probably OVER PRICED!!! Nobody ever said there was a lack of ‘nice’ real estate…there is just a lack of people willing to pay the inflated prices!
That said…I got a new post up yesterday.
BUT stay tuned as I am putting together a truly ‘inside’ look at the subprime mortgage industry. I pulled out all the rate sheets and flyers that I saved from my time in the industry. I will be making the first of several posts on Sunday night. I have rate sheets and loan programs from about 15+ lenders that I will be sharing. I am taking actual photos of the documents and posting big pictures…so people can actually SEE the nonsense that was going on. It will be a real eye opener for some of you…
Stay tuned…
SoCalMtgGuy
http://www.housingbubblecasualty.com
Looking forward to it.
http://chicagobubbleblog.blogspot.com/
yes, can’t wait to see it!
Finally! I’ve been dying for more Chicago info. I know its not among the most-bubbled cities, but there are clearly more overpriced condos in the city than there are buyers. I’d love to buy here, but I’m not paying $300,000 for a one-bedroom when I can rent one for half the cost.
Tell your friends, Pete!
http://chicagobubbleblog.blogspot.com/
I think a better Headline for this article would be
“The Housing Market Has Left a Major Skid Mark”
And by the looks of the rising inventories and the ugly truth just beginning to seep out of the MSM, if I were a bagholder, I’d need a new set of underwear.
This is an interesting point concerning RE inventory glut.
As with most markets, we have tons of flippers who are upside down in their “investments” wanting to rent their one to five 3br/2bath houses. Market rent is at 1,000/mo for this type of house and going down. Well, most need 1500/2000 rent per house, per month to break even.
The new twist is Prop managers are starting to charge these guys, if they rent it or not. If you want to them to try to rent your house for 1500/2000/mo in a 1000/mo market, obviously they’re not going to have a lot of success. The house needs to be advertised, maintained (lawn etc). If someone is going to manage it, the owner pays, if it’s rented or not. Otherwise the prop manager ends up advertising a lot of overpriced rentals on his dime.
More and more people are paying it and it will be adv for their price and for 2 to 3 mos, but they eventually call and lower the rent to market, at least they’re getting something.
I can see rents plummeting along with the price of houses. In this market more and more sellers are understanding that a glut of inventory is driving sale prices down (20-25% from Jan, 2006), and rents. As a result we are seeing a noticeable, though slight (10 to 15%) increase in unit sales and rentals.
I don’t see unit sales setting the world on fire but I do see prices at or below 50% of Jan 2006 levels by the end of the year, beginning of 2008. Prices are going down almost daily.
That’s funny, “skid marks” means something different to everyone.
fially quoting 05 and 06 in reference to 07
the shills have been using 06 as a support
This part of the original post bopped me over the head:
“…renting out the units while they wait for the market to pick up.”
There’s quite a bit of this going on in Tucson. In fact, I can think of, oh, two examples within easy walking distance of my house. And it’s likely that there are many more that I can’t easily think of.
In northern AZ, that’s the story too. Everyone thinks this bubble will right itself and zoom higher, just given time. This is done even considering that most will agree that current prices are unaffordable on real wages and that renting is the better financial move! IMO, when this fuzzy thinking breaks, look out inventory.
Here’s a guy spouting this line:
‘I expect prices and sales to be modestly growing by June in most of the country,’ said David Lereah, the chief economist for the National Association of Realtors and perhaps the most bullish housing economist. ‘But we’ll have to go into 2008, maybe even 2009 before we get even close to the peaks we saw in late 2005 or early 2006.’
Dang this Lereah guy sounds kindas like
Oprahbullshit TV host material!‘I expect prices and sales to be modestly growing by June in most of the country,’ said David Lereah, the chief economist for the National Association of Realtors and perhaps the most bullish housing economist. ‘But we’ll have to go into 2008, maybe even 2009 before we get even close to the peaks we saw in late 2005 or early 2006.’
Or go into 2015 or 2016 before we get even close tothe peaks we saw in late 2005 or early 2006.
How can this guy be taken seriously? He has beed dead wrong for the last 12+ months. He reminds me of those 2 ass-clowns that wrote the book: Dow 36,000. Couldn’t have been more wrong.
“Everyone thinks this bubble will right itself and zoom higher, just given time. This is done even considering that most will agree that current prices are unaffordable on real wages and that renting is the better financial move!”
Indeed, this is so true! With all the available evidence to the contrary, this is like someone saying, “I know the sky is blue, but I just know it will turn yellow given a bit more time.” Totally illogical. Alot of people need mental help.
How about, we’ll have to go into 2018, maybe even 2019, before we get even close to the peaks we saw in late 2005 or early 2006.
Same here, Ben. Classifieds like: “buy while you rent!…we’ll show you how!”
I mean, I’ve NEVER seen so many rentals on the market.
And all kinds of incentives. And all kinds of houses. Several $500K+ for rent.
“buy while you rent!…we’ll show you how!…..”
Isn’t that just another way of saying 100% financing?
Actually they wouldn’t be complete without the the I/O 100% financing…..
It’s probably just a “contract for deed”. Been around for ages. You agree to a sales price and a monthly installment. Once you have paid the total amount the property is yours. You can stop paying whenever you feel like it - you just “forfeit” everything you’ve paid up until then and the seller maintains title.
So in effect, you are renting the property. But if you rent it for long enough it becomes yours.
Here in Illinois you have to have the document recorded when you sign it or it’s not valid. There’s a standard form for it also (any real estate agent would have it, ready for filling in the blanks). A seminar on how to “buy while you rent” is just another scam to tell you something that is public knowledge.
This might get posted twice…
It’s probably just a “contract for deed”. Been around for ages. You agree to a sales price and a monthly installment. Once you have paid the total amount the property is yours. You can stop paying whenever you feel like it - you just “forfeit” everything you’ve paid up until then and the seller maintains title.
So in effect, you are renting the property. But if you rent it for long enough it becomes yours.
Here in Illinois you have to have the document recorded when you sign it or it’s not valid. There’s a standard form for it also (any real estate agent would have it, ready for filling in the blanks). A seminar on how to “buy while you rent” is just another scam to tell you something that is public knowledge.
Circumstancial evidence (circumstancial because there is no real way to track it beyond eyeball) in my ‘hood is that rents are falling. There’s a lot of stuff advertised that is downright comical, like a one-room basement “apartment” with a $1,500 wishing price that is three doors down from an entire house available for $1,800. Oh, and the empty $1,800/mo house often sits next door to an identical house for sale at $600K. This is going to get interesting.
“There’s quite a bit of this going on in Tucson”
There is realtor (and I think property manager) on Broadway with “Can’t Sell, Rent” on his sign. I’m going to go by and periodically pick up lists of available properties. I’m hoping they will show a downward trend in rent prices so I can hammer my landlord at lease renewal time in Sept. Wife and I figure at least Sept. 2008 before we would consider buying
Oh, Tucsonguy, you’re so mean. (Hey, if I were still renting, I’d be doing the same thing.)
The housing market is decent in southern NH. I keep waiting for this big price drop but it ain’t there.
Oddly enough, my wife had a conversation with her boss whose daughter is a RE agent in Nashua. Her daughter made the statement “yes, stuff is selling but the prices are dropping rapidly”. I’m not sure what she meant by rapidly ( I don’t know her) but I do know her livelyhood is not dependent on RE sales as she married into money and does RE in her leisure time.
‘While some areas, like Littleton, are generally not affected by investors just looking to turn a profit, towns like Franconia, Sugar Hill and Bretton Woods typically see investment-related sales. Bethlehem, Franconia and Whitefield all experienced significant drops in price, for overall percentage changes ranging from a 12 to 17 percent decline in pricing.’
Not sure if that’s south, but there are other stories at that link.
They’re not south. Probably the difference is, northern NH is skiing and other recreation, southern NH is tax refugees who work in Boston
Littleton, Franconia, Bretton, Bethlehem and Whitefield are all up north.
Southern NH might be hanging on because many of them are the people who fled higher Mass prices, but kept their Boston-area jobs (higher paying; but can be a hellacious commute).
Maybe they weren’t foolish enough to pay ridiculous MA prices in the first place - and actually bought places in NH that they could afford?
Maybe so Jack but the further out from metro areas, the harder and deeper prices will adjust. In that case, who is the fool?
“the further out from metro areas, the harder and deeper prices will adjust”
******
I don’t know, that’s a generalized statement. That says nothing about median incomes vs. median home prices, etc., to say nothing of other metrics.
Are you saying that, just for an example, that places on the North Shore (say Marblehead) are going to decline greater than Charlestown?
Or for an example out here, that places in southern Marin (say Mill Valley) are going to decline more than in San Bruno (by SF Airport)?
I guess I’m saying that I don’t believe that “rule” works in every instance and that perhaps some areas of southern NH won’t follow it.
Recall I said, “maybe”.
I don’t know that particular area that well and your right I was generalizing. It’s not a hard and fast rule but I believe it’s fair to say that my generalization is typical. As you move from centers of money/power, the weaker things are…… generally speaking.
“But the troubles afflicting the state’s residential markets are hardly over yet. Median sale prices continue to decline. Median prices stood at $130,047 in February. That was down from $141,000 in February of 2006 and $150,000 in February of 2005.”
And in our area 2005 was still lower than 2004 because the “move-up” areas were impacted by the PPT cap. That said, sales volume in our area seemed way up in the first two months - lots of sold signs popping up, some had been sitting over two years. I went into a open house last weekend to check prices and the realtor said volume was up (nothing moved in 2006) but prices were way down. He had sold our house back in 2005 and said we downsized at the right time.
‘Don’t let yourself get two or three months behind. Call a realtor and put the house on the market and sell it. It will save your credit. If you have to - go back to an apartment.’”
This is good advice, once you have bad credit you may not be able to rent as easily since most large apartment and property mangers tend to do credit checks and reject risky applicants.
Mo, I was thinking the same thing. If I were a landlord, and some just-foreclosed prospective tenant approached me, I’d put that prospect through every credit screening I possibly could.
And then say “No.”
But, but, but won’t that then make them BITTER RENTERS???!!! I thought the whole Realtor mantra was “Why rent when you can buy?”
Must have changed that to “Why foreclose when you can sell and rent?”
Must be the NEW economy!!
Most will tell you that they do these credit checks, but this is all a lie. Most of the time, all these people want to do is put bodies into their MT apartments.
I may never go back to renting in an apartment again for this reason. (Having to put up with loud mufflers, loud earth shaking bling bling music, loud TVs, loud mouths, loud everything from these deadbeat neighbors is not fun.) From now on, it’s SFH rentals for me.
You just described my current existence. I stay only because I have moved more than a nomad and I hate moving. And the next move I make better be into a SFH that I buy!
We rent and are prepared to move whenever we want. We downsized everything, sold the extra stuff on ebay and craigslist. Now our whole life is organized so that we can call PODS, stick it easily in a container in a few days, and move without breaking much of sweat. This feels pretty liberating.
It’s also taught us that we really don’t need a whole lot of stuff and space to live luxuriously. The lack of extra crap actually adds to it.
it’s possible to get around it - I live in a 1928 building where the walls are so thick I can’t hear anything. although the top floor is definitely an advantage.
sometimes they do do the checks - used to rent half of an owner-occupied duplex, and they called us after 24 hours to let us know that things looked good because the rejections took 12 hours, but the accepts took 72.
“But Schooler says there are ways to avoid losing your home. ‘Don’t let yourself get two or three months behind. Call a realtor and put the house on the market and sell it. It will save your credit. If you have to - go back to an apartment.’”
What if you have to sell it for less than you owe? What then? Who is going to rent to someone who had to file bankruptcy because they were being sued for a deficiency balance on a foreclosed property? A slumlord, that’s who. Yippity freakin’ do dah. I love these scheister realty agents giving financial advice after they have blood on their hands for selling houses to people who have no business buying them.
There is no way the market will absorb 8,000 new condos in downtown Chicago alone in the next two years.
Your’re starting to see more apartment units being planned in Chicago because they’ve converted so many units to condo over the past three years that there is an apartment shortage. I think you’ll see the pendulem swing the other way. People who can’t flip their condos will rent them and then the new apartments in the works will hit and then we’ll have a glut of apartment units in 2009 and on.
If you want to get a sense of the insane capacity coming on line in Jersey City, NJ, check out the Photoblog at this site . . . link is on the right side. THOUSANDS of highrise units.
http://www.newyorkssixth.com
I love looking at all the construction, and I’ll tell you, it makes me happy to see Jersey City come so far . . . especially when I think of how many acres of farms aren’t being paved over in South/western NJ instead.
But the capacity coming on in JC, Williamsburg, LIC, Hoboken, DUMBO, and even Manhattan and the Bronx . . . is going to pull the legs out from the unsustainable prices here in NYC.
NYC will be among the last to fall, but fall it will.
Here, here.
There’s an old Wall Street adage that is true of real estate and, indeed, all markets.
“The weakest fall first.”
Ken - every year i’ve been saying that the market will never absorb all of the new units that have been constructed since 2000 - and i’ve been wrong for seven years now (does that make me a perma-bear?). One of these days we’re going to be right, and i have a feeling this is the year. In particular, the South Loop and West Loop are toast!
What help absorb most of units was low rates and most importtantly loose lending. Rates are still good (even though the run up in prices has far outstripped the benefits of the rates)…say good bye to the loose lending!
http://chicagobubbleblog.blogspot.com/
I live in the West Loop. The section I’m in (east of the Kennedy and north of Randolph) is where the huge apartment development is.
There’s a brand new condo tower across the street from me. 28 stories. About 300-350 condos. The building is full, and right now there are 3 condos for sale in it. This little section of the West Loop is bucking the trend; I’m curious to see how it plays out. I love it here, and it keeps getting better. My wife and I had been looking to buy within 2-3 blocks of our current apt and couldn’t find much for sale. Damnit.
We looked at the rest of the West Loop - lots of stuff for sale but most of it sucks. Plus it’s not convenient to anything unless you want to drive everywhere. South Loop is similar but has a ton more condos on the market. And it looks like most of the 8000 units coming on line will be in the south loop. Probably toast.
Yet, the towers still rise. Consider this little case:
http://www.jrstransglobal.com/ogden.html
Watching this Chicago condo thing play out has become a bit of a side hobby.
“With condo prices sluggish, many speculators who bought new condos hoping to resell them quickly for a profit are renting out the units while they wait for the market to pick up.”
Hahahaha! With all the changes in subprime, this isn’t going to happen. I hope they have a Plan B.
Plan B is to jump out of the window of any unit higher than the third floor.
http://chicagobubbleblog.blogspot.com/
“…while they wait for the market to pick up.”
Like a pick up is for certain! Strike the word “wait” and replace with “pray.”
Man, I hope they have cast iron stomachs because that burn rate is going to hurt! Like Claudia said, good luck finding a greater fool when subprime is totally obliterated. The music has stopped and these flippers now find themselves without a chair. That means game over for them.
True story: Just up the street from here is a house that had been rented to some Really Bad Tenants. Last month, what did we see on one of the windows but a Writ of Restitution notice? (That’s Arizona legalese for “This tenant didn’t pay rent and is evicted.”)
Any-hoo, that’s when the fun started. On two separate occasions, the police showed up in force at the property. As near as I could tell, they were checking up on the people moving stuff out of the house.
To add to the festivities, the front door to the house had been boarded over. (I guess the Really Bad Tenants had done a number on it.)
And recall that Writ of Restitution. Someone REALLY didn’t like it. The window screen in front of it was busted through so that someone could get at the Writ and tear it off the window. Which was broken as well.
So, let this tale be a warning to anyone who wishes to rent a property until the resale market “improves.”
You may find yourself landlording for a long time. And it’s NOT an easy business to be in, because there are a lot of Really Bad Tenants out there.
Claudia, you typed “Plan B” when you meant “Plan BK” !!!
I think the changes in subprime are going to be the catalyst to take 50% off the top of this “topheavy” market. Once there are no more “liar loans,” no more “125% financing,” no more “negative amortization Option ARMS” — a lot of specuvestors who are barely hanging on will be GONE!
I know of one person who has between 10 - 15 properties, all financed with no down, option ARMS, paying the bare minimum so he can “cashflow” (and claiming all the properties are “owner occupied). Once all these REI Wizards are gone, the market will collapse. These people won’t be able to refinance because they don’t have the money to put down (not even 5%) to refinance these loans. Some of them don’t BELIEVE you should EVER have EQUITY in any property!
Blame it on the get-rich-quick gurus who championed this style of investing in 2000!! Poor screwed specuvestors!
What you’re describing, Claudia, is ARMageddon.
There are a lot of people out there with no equity — not just the specuvestors. I’m sure some product will be invented to allow some of them to refinance, but it’s going to expect them to accrue equity. I think the days of just paying interest (or negative interest) to live in a home are OVER!!
I’m sure that the people who financed these loans aren’t going to be happy to get these properties dropped back in their laps. They thought they had sold these properties. Now they are going to be stuck with boomerang inventory. Who needs that? That would be like Nordstroms or Macy’s allowing women to rent dresses! In the end, who pays?
With all the appreciation we’ve had over these last few years why don’t the Re cheerleaders ask why then we are at 50 year lows for home equity?
http://chicagobubbleblog.blogspot.com/
I heard the same thing. Some people were trying to convince my sister to buy properties using these schemes; they claimed that having equity in houses was stupid; from what I heard they milked their properties for all the value they could through refi’s. Luckly, I managed to scare my sister into not joining those shady characters.
IN NY: it begins. First time I’m seeing prominent references to “investor flippers” and mostly empty building in discussion of one of the shitty new buildings tossed up in the past couple of years:
http://brownstoner.com/brownstoner/archives/2007/03/wtf_is_up_with.php
Only $285k-$829k for a CONDO overlooking beautiful downtown Madison, Wisconsin ? !!!
Major T.J. “King” Kong — Slim Pickins
“Well, I’ve been to one World Faire, a picnic and a rodeo and that’s the stupidest thing I ever heard come over a set of earphones
Well it is the No. 1 town for walking!
http://www.msnbc.msn.com/id/17522269/
Just how FAR do you want to Walk in a whiteout at 22 degrees from your $829k condo inthe snow ?
22 degrees? That’s balmy.
Weston Place has insane prices for its location. SFH’s are mostly not “crazy” overpriced around here, but the condo’s are nuts.
Madison has some crazy “Inclusionary Zoning” ordinances designed to let families who make less than 80% (I think) of the area median wage buy into multi-unit developments. Thing is, those IZ units cost more per square foot than area median priced SFH’s.
So before I was aware of the housing bubble, and before this blog, and perhaps patricknet, I used to read f’ed company. Someone would always post this “troll,” which oddly was very early in the housing bubble. I’m assuming the person was speaking of the California market:
It’s a new paradigm, and everybody who doesn’t buy, now, will be priced out forever. Anybody who does buy will be rewarded with a lifetime of riches, as their property will continue its 30% yearly price increase. Renters, and anybody born in a future generation, will not be able to afford a $10,000,000 starter home in 15 years. They will live in tent cities, and Hondas. This asset bubble is different than all of the others - it will never slow down, or pop. The gains are permanent.
I think a lot of us on the bubble blogs used to be FCers. Casey Serin’s bolg as a few that even use the same or similar usernames.
FC was one of my favorite places to find short ideas.
I was an FC-er until the comments section turned into a big “I posted first! No, I did!” contest.
Should say: “Casey Serin’s blog has a few”
Boy do I remember that from F’ed Company. That troll was there on every thread and people were told to not feed it.
I’m a lurker here and I’m not a troll, but I think there might be some truth to the F-ed Company’s (I used to LOVE that site!) troll, at least with respect to the high end of RE. Out here on the East Coast, they have put up so many McMansions at such ridiculous prices, I just can’t figure out where all the money is coming from. A realtor told us that people around here are buying 2nd-homes in the New Jersey resort areas for CASH. Cash? These places start in the $500Ks for a 1-bedroom. I feel like I’ve been left behind, and I own a house and have reaped (in equity, so far) the benefits of the boom, but I’ll never be able to afford what a lot of people around here can (or at least appear to be able to afford).
Once housing prices fall back to prices people can actually afford on plain old salaries, the better off the entire USA will be.
On plain, old salaries with a saved downpayment and traditional financing, that is.
after the massive recession reverting to a mean price like you suggest
2004 = mild recession -underway
2003 = biggy
2000 fougedaboudit
OT: highly entertaining column today from Pimco:
http://www.pimco.com/LeftNav/Featured+Market+Commentary/FF/2007/GCBF-+March+2007.htm
What a beautiful article. A rather opaque, but insightful, quote from Minsky:
“Three distinct income-debt relations for economic units, which are labeled as hedge, speculative, and Ponzi finance, can be identified. Hedge financing units are those which can fulfill all of their contractual payment obligations by their cash flows: the greater the weight of equity financing in the liability structure, the greater the likelihood that the unit is a hedge financing unit. Speculative finance units are units that can meet their payment commitments on ‘income account’ on their liabilities, even as they cannot repay the principal out of income cash flows. Such units need to ‘roll over’ their liabilities – issue new debt to meet commitments on maturing debt. For Ponzi units, the cash flows from operations are not sufficient to fill either the repayment of principal or the interest on outstanding debts by their cash flows from operations. Such units can sell assets or borrow. Borrowing to pay interest or selling assets to pay interest (and even dividends) on common stocks lowers the equity of a unit, even as it increases liabilities and the prior commitment of future incomes.
The cliff notes version:
Hedge financing = traditional 30-yr fix mortgages
Specualtive financing = I/Os where increases in equity are not refi’d out
Ponzi financing = neg-ams, Housing ATM refis, etc
why would anyone over 40 consider other than a 15 yr ?
““After the video went up on several Web sites, it was spotted by someone in California who bought the property, Leopold said.””
I wonder if reporters check the veracity of Realtor’s statements. I don’t believe a word that comes out of their mouths. I want proof that he really sold it and if this transaction was profitable.
By Alison Vekshin
March 9 (Bloomberg) — U.S. Federal Reserve Governor Susan Bies said regulators are concerned about “payment shock” in mortgage loans made to borrowers with weak credit histories whose payments surge after a low introductory period.
U.S. bank regulators have been watching rising delinquencies in the so-called subprime market since last spring, Bies said at a risk-management forum today in Charlotte, North Carolina.
Bies’s comments reflect growing attention among bank regulators to the turmoil in the subprime mortgage market and its impact on consumers and U.S. lenders.
Just think. One week ago it was not going to be a problem. What will they be saying NEXT Friday?
Maybe they will all have skipped town by then. Isn’t GWB in Latin America? Maybe his last stop will be Paraguay.
The next White House press release datelined from a mountaintop in South America will say - “Me and the leadership teams of the Federal Reserve and Goldman Sucks - oops Sachs, are here on a permanent executive retreat and will have no more comment - See ya!
jobs number question
40% was bigger gov
wonder what % is private contractor headed for Iraq w king HAL etc///////
also how much was RE folks getting mall / burger jobs ?
any thoughts
Here is one. I think I read it some time ago at http://www.vdare.com (an anti-illegal-immigration website).
If you factor out healthcare jobs, there has been a net loss of jobs in the private sector since 2001.
Merrill says NEW bankruptcy “seems imminent”
http://www.thestreet.com/_tscfoc/newsanalysis/banking/10343504.html
Oh, SoCalMtg guy has on his blog that there’s a rumor that New is acquired next week. That’s along the lines of what I was saying. “They’re” not giving up on this subprime thing that easily.
Is Merrill gonna buy them for their outstanding debt (stock price still goes to zero)??
need a new bubble ? follow these guys
http://biz.yahoo.com/ap/070309/china_foreign_reserves.html?.v=10
” I know of one person who has between 10 - 15 properties, all financed with no down, option ARMS, paying the bare minimum so he can “cashflow” (and claiming all the properties are “owner occupied). ”
Claudia……I can’t TELL you how that fraudulent “owner occupied” claim makes me angry. Back in the day, there was a clear %age owner-to-renter requirement for a development before a lender would even consider approving a loan…with good reason. But with the boom, all rules and regulations were ignored or completely thrown out the window. Now, those very people who are cryin’ in their beer because they are in over their heads are looking for help. All your friend needs is one family emergency to bring his Trump-like dynasty down….especially, with the “bare minimum” being paid out so he/she can claim positive cash flow.
An accident waiting to happen.
BayQT~
Forbes has NEW on Edge of BK after it says it’s STOPPED taking Loan Apps.
http://www.forbes.com/2007/03/09/yahoo-walmart-stocks-markets-cx_ms_0309video2.html?partner=yahootix
So what’s the next stock play?
I think its going to be shorting the Homebuilders. KBH, LEN, RYL, HOV, etc.
The funding to first time buyers is being cut off or greatly stiffened, there’s more homes for sale than ever before, foreclosures at all time high, etc. etc.
The builders are already printing red ink and it can only get worse, yet a number of the stocks are still in their 40’s and 50’s.
Seems to me they’ll go back to their pre-2000 price levels even if they don’t go belly up.
Thoughts?
PS: consumer stocks would also be candidates, especially those supplying builders.
The ones holding the most dirt (vacant lots and/or options) and highest fixed costs are the ones with the most to lose. I haven’t researched it (yet), but that’s where I’d look.
anyone else?
Suicide loan FBer’s are Trapped in their shacks..Subprime sharking is Finished as we Knew it for the past few years..Houses rot on the lot. With the vast sums of money envolved, I’m kind of amazd that bodies aren’t stacked up like cordwood as one Hell of a lot of people are BK…and some don’t even know it YET!
The new book Financial Armageddon was mentioned on this blog the other day. Now another one is out: Peter Schiff, Crash Proof. Here’s a review and some quotes:
http://www.financialsense.com/fsu/editorials/nystrom/2007/0309.html
“All bubbles share the same fate, and the US real estate bubble - caused by artificially low interest rates and lax lending standards encouraged by the Fed - is no different. Except for the fact that it is bigger than any bubble in history! When this baby pops, it is going to be bad. From page 140:
The collapse of consumer spending, associated with higher mortgage payments and vanishing home equity will plunge the economy into severe recession, further exacerbating the collapse in real estate prices, worsening the recession and continuing the vicious cycle…the country will be a lot poorer as a result of the unprecedented dissipation of wealth and accumulation of consumer and mortgage debt that occurred during the bubble years. Before real estate prices can return to normal levels, they will first have to get dirt cheap.
A recession is clearly coming, but Schiff only hints at systemic and social collapse by giving advice on how to protect your assets from such a possibility (p.249):
Social unrest caused by deprivation on a massive scale can produce violence and anarchy [but it is beyond the scope of this book to examine all such possibilities]. What extreme measures the federal government might take in the name of national economic necessity is also anyone’s guess, but capital controls and confiscation of assets, combined with legal authority certainly have precedent in other democracies under comparable pressure. Since the US government seems to have no qualms about violating our individual liberties during times of apparent economic prosperity — the US Patriot Act being only one example — imagine how much more draconian will be the measures during the economic collapse that awaits. (emphasis mine)
Ouch. Like I said, he’s not afraid to tell it the way it is. Sometimes the truth is painful. But he has, in my opinion, effectively diagnosed the situation. But better, he goes on to outline a number of proactive financial steps investors can take to protect their hard earned money now, not only from the collapse, but from a potentially repressive government of the future (p.250):
It would be a shame to have successfully avoided bankruptcy or have made a considerable profit following the investment advice in this book, only to have the US government confiscate it from you “for the good of the people” under the pretense of a “national emergency.”
In other words, get your money out of the country while the getting is still good.”
I think I’ll stop at Wallmart on the way home to pick up a couple of shotguns and some ammo. Then off to CostCo for 2000 cans of refried beans.
Yeah, be careful about those refried beans. 3 months in a cool, dry pantry and the Costco size jar of jalapenos I had ate their way through the metal lid!
I don’t think they make cans like they used to, either. Some chef-boy-ar-dee with a 1985 manufacture date turned up at my kids’ school’s food drive (!) - and it looked more pristine than the canned pumpkin from Thanksgiving ‘06 that I sent.
I recall earlier this week some speculation on this blog as to whether the mortgage servicers might get their marching orders to start dawdling on the foreclosure process or offer all sorts of workouts, on the logic that it preserves property value better than leaving the place to go straight to hell. Lots of logical refutations to that one as well, starting with how it might encourage bad behavior/non-payment from other FBers.
So, what happens this summer? Will a rash of foreclosure notices be followed on by a rash of condemnation notices? (Busted pipes and such going unnoticed until too late.) Will lenders just call time out on foreclosures while they scramble to figure it out? And if a mortgage is part of a pool of debts packaged into an investment product, is it even possible to quickly secure the legal ability to change “business as usual” default/foreclosure policy in time to mitigate the loss, or will a certain amount of prudent foot dragging buy time for creditors to come up with a crisis management strategy?
Oh yeah - and will I be able to find a cheaper/better rental house for the family this summer? (On Memphis Craigslist, it’s ever increasing #s of “buy 2own” and “fire yr landlord!” ads written by functional illiterates. Oh my gosh, I can Rent to Own right down the street for just 14% of best-guess current market value per year, and then buy at 135%. If I’m looking at another year here with the speculvestors cycling pigs through continuous makeup sessions — arrgggggh.)
The handwritten “Lease to Own” signs are starting to appear in Tucson. I’ve seen them in the yards of properties offered (for sale) by the Key2Own real estate company. (I wonder if there’s a relationship.)
On the other hand, my husband’s co-worker walked away from a “to-own” situation better off probably than if he had rented straight. (It was a small option deposit.) And I keep reading tales here about renters getting a free ride after the landlord defaults, well into the foreclosure process. (And beyond?) Nice to luck out, but kind of a nail biter for your basic not-so-mobile family.
NOBODY wants to be a landlord, it seems. But someone will have to be. There’s going to be money knocking down the door to rent - maybe cash gotten off the books, but cash nonetheless - and lots of empty real estate, and it just seems like a stalemate would defy what they taught me in HS physics about nature and vacuums.
“Another piece of advice - experts say stay local when you shop around for a loan, and avoid online mortgage companies.
They say while some can be reputable, you’re usually dealing with an anonymous lender who really doesn’t care what happens to you in the long run.”
…and a local lender DOES? It’s business….they don’t, nor should they, care about the borrower. All they care about is being paid, paid in full, and paid on time; just like the contract states. If they want somebody to “care”, call their family.