Dropping In Value Steeper Than The Median Indicates
A report from the Colorodoan. “As subprime lenders close their doors, foreclosure rates increase and home prices dip, the American dream has turned rapidly frightening. ‘The end result is that fewer people will get into homes,’ said Cynthia Torp, founder of The Angel Investment Network in Fort Collins, which helps people qualify for new home loans.”
“‘We have an excess supply of housing,’ regional economist Martin Shields said. ‘Any time there is a tightening of credit and foreclosures, it reduces the demand and foreclosures increase the supply. It has to put more pressure on prices.’”
“Longtime Loveland Realtor Eric Holsapple said the subprime meltdown will affect a certain sector of the population, but overall it will not be a bad thing for Larimer County.”
“‘So many of the loans were adjustable rate mortgages (ARMS) or interest-only loans; they got people in who couldn’t afford it,’ he said. ‘The only way it could work is if the home kept appreciating in value. That’s not the American dream to have a home that’s a risky investment for people and 100 percent financed.’”
“With Colorado leading the nation in foreclosures much of last year, many lenders are taking 5 percent off every appraisal and borrowers have to put up bigger down payments. ‘There will be a whole lot less people who can afford that,’ Torp said.”
“If foreclosures continue on their current pace, Larimer County’s foreclosure rate is expected to increase by about 20 percent by the end of the year.”
“Seventy-five percent of those foreclosures are the result of refinancing, said Kathi Williams, director of the Colorado Division of Housing in Denver.”
The Greeley Tribune. “Colorado came in at No. 2 in the nation for foreclosure rates, recording 16,435 foreclosures from January through March. That represents a 6 percent jump from the same time last year.”
“In Weld County, the first quarter recorded 647 foreclosures through the Public Trustee’s office, a 31.5 percent jump from the same time last year. For the year, there have been 865 foreclosures in Weld.”
The East Valley Tribune from Arizona. “Reports of Arizona mortgage fraud spiked last year, mirroring a nationwide trend, as lenders scrutinized deals more closely and falling home prices unmasked shams.”
“‘The Southwest United States has been an increasing hotbed for mortgage fraud activity,’ said Nick Larson, assistant VP for the Mortgage Asset Research Institute.”
“‘When you have a lot of bidding on properties, it really does strain a lender’s ability to differentiate between a legitimate loan’ and schemes, Larson said.”
“The number of fraud cases reported in Arizona in the first three months of 2006 was 213 percent higher than the same period the year prior, according to the study. The state also saw an increase in the number of fraud cases involving subprime loans, jumping to No. 6 in the nation from No. 19 in 2005.”
“Eric Bowlby, president of Amerifirst Financial in Mesa, said he interviewed more than 150 job applicants in the past three months, hired 11 and fired five. ‘We have too many people in the industry,’ he said. ‘When you have an uneducated sales force, fraud is going to run rampant.’”
“The Valley has seen lenders pushing for false appraisals, misusing stated-income loans, conducting cash-back schemes and more, Mesa loan officer Shailesh Ghimire said. Everybody saw prices going up and tried to make it work, Ghimire said.”
“Now his business is feeling the pinch of tightening lending guidelines resulting from the subprime market crisis. Last year, it would have been possible to qualify someone with a 580 credit score, but now we need a 620 score, he said.”
“‘The last two months, I’ve seen guidelines change completely,’ Ghimire said.”
The Review Journal from Nevada. “Home Builders Research reported another dismal month for housing in Las Vegas in April, home building analyst Dennis Smith said Wednesday.”
“He counted 1,568 recorded new home sales in April, a 40.7 percent decline from the same month a year ago. Existing home sales fell 36.6 percent to 2,353, the second-lowest monthly total in the past six years.”‘
“This correction or slump or slide or dip or whatever you want to call it is deeper and longer than most expected,’ Smith said. ‘It will get better, but until sales and permits improve, it will continue to be very painful for a lot of folks and businesses.’”
“‘We all agree we have limited land supply and we continue to have strong economic growth in Las Vegas, regardless of residential construction. The key for us is residential listings must drop before this market improves. Part of that is owners are not pricing their houses properly and that’s why they’re not selling,’ Pardee Homes Division President Klif Andrews said.”
“Robin Camacho of Direct Access Lending said she can see that the median price isn’t accurately reflecting house values right now, but she can really only make an educated guess as to why.”
“‘Our research does show that the number of homes listed on the MLS for less than $270,000 has increased substantially in the past year,’ she said. ‘This indicates that prices are falling, though people are actually still paying the same but getting more for their money.’”
“Camacho said she can spot when prices are rising or falling earlier than most analysts with her up-to-the-minute data, but she hesitates to give exact figures as she uses a different indicator.”
“‘It is very accurate in terms of direction, sort of like a compass in that I can see the general direction we are traveling,’ she said. ‘And what I definitely see is that houses are dropping in value at a steeper decline than the median price indicates.’”
The Deseret News from Utah. “While states and regions around the country are reporting bursting housing bubbles and slowing job growth, Utah’s economy remains strong, according to a report released Tuesday by the state’s Department of Workforce Services.”
“‘It’s not like we sprinted past Nevada and Arizona. It’s like we stood still and watched them slip past us, going downward,’ said the department’s senior economist, Mark Knold. ‘They’re more vulnerable to the national problem that’s going on right now, which is the housing bust.’”
“Utah didn’t add much air to the current bubble, Knold said. Not much Utah money went into the speculative housing market.”
“All but one of the 11 job categories measured by the department reported year-over growth. Construction led the way, adding 14,000 jobs, followed by the trade, transportation and utilities sector.”
“‘We’re in a growth spurt. We’re riding a high wave right now in the state of Utah,’ he said. ‘It’s very difficult to see anything to be worried about on the horizon, at least the short-term, immediate horizon.’”
“New housing permits issued across Utah in this year’s first quarter continued to tumble, indicating a housing slowdown could be around the corner. For the three months ended March 31, permits issued for new houses, condominiums and apartments in the state fell to 5,267, a 13 percent drop from the same quarter in 2006, according to a report.”
“Many of the state’s strongest housing areas showed double-digit declines. In Draper, housing permits in the first quarter were down 36 percent. Herriman issued 38 percent fewer permits than it did a year ago. South Jordan also showed a 38 percent drop. Lehi saw permits fall by 33 percent. Housing permits in Spanish Fork were down 23 percent, and in St. George, permits decreased 14 percent.”
“Mark Knold, senior economist at the Utah Department of Workforce Services, said housing permits overall this year will be down compared to 2006, marking the second consecutive year of declining housing permits.”
“‘And I anticipate that ‘08 will be lower than ‘07,’ Knold said. ‘But I don’t see the (first quarter) 13 percent drop as being alarming. We knew that was coming. The run-up that started in ‘03, ‘04 and ‘05, we knew that it was going to be high, and we also knew it was going to turn around and come off that peak and go back down.’”
“‘From 1990 to 2000, construction employment grew by 200 percent,’ Knold said. ‘We went from 23,000 people employed (in construction) in January 1990 to 67,500 in January 2000. In January 2007, we project that number at 96,600.’”
“Clint Carter, a building official with Lehi, predicts the city will issue roughly 1,500 housing permits this year, about a 9 percent drop from 1,649 issued in 2006. Yet if the first quarter numbers are any indication, the decline could be more severe.”
“‘We’ve noticed a little bit of dropoff,’ Carter said.”
‘A Virginia company that owes investors in Colorado and elsewhere $151 million and faces a federal inquiry filed for bankruptcy protection this week. The 1031 Tax Group said ‘liquidity issues’ drove it into Chapter 11 on Monday in federal bankruptcy court in New York. The company’s owner borrowed about $132 million from investor funds and invested it in other ventures, according to court documents.’
‘John Walsh of Palm Beach Gardens, Fla., said he is unsure if he will ever see his $60,000. ‘My wife and I sold our first property that we invested in. We deferred paying taxes by placing the money in a 1031 exchange,’ Walsh said. ‘The company sold to Okun and his group. … What happened after that, we’ll have to find out.’
‘A weak condominium market and rising construction costs aren’t stopping the Nichols Partnership from starting its $175 million residential tower downtown. ‘It has been a long haul getting to this point,’ said Randy Nichols, president of the Denver-based development firm.’
‘Unlike most condos, this one had no presales before the groundbreaking. The Spire is targeting buyers 25 to 35 years old, who generally aren’t planning 26 months ahead. ‘If we did presales, we wouldn’t get our buyer. We’d get investors,’ Nichols said.’
A beauty from Reno:
‘The developer of the proposed Wingfield Towers said the high-profile downtown condo project is still a go despite the company filing for Chapter 11 bankruptcy protection on April 25.’
There is also an attorney in Breckenridge who disappeared and now the police are accusing him of running off with most if not all of his client’s 1031 exchange money. They haven’t found him yet but think that he may be in Brazil.
They might check Argentina, I saw a special a couple months back that alot of US corp. heads had bought wine estates there. Climate is much like Nothern Ca. ,and no extradition is my guess. Look for many more rats fleeing the steamer USS Economy…
Bush family has bought a 30k acre estate in Paraguay.
Good Asuncion
Yeah…And…You not only lose the money but you owe the tax on the cap gain ??
“Capitalism inevitably and by virtue of the very logic of its civilization creates, educates and subsidizes a vested interest in social unrest.”
Joseph A. Schumpeter
Clear the Tower!
Comin’ in on a Wingfield and a prayer…
‘The developer of the proposed Wingfield Towers said the high-profile downtown condo project is still a go despite the company filing for Chapter 11 bankruptcy protection on April 25.’
“It is very accurate in terms of direction, sort of like a compass in that I can see the general direction we are traveling,’ she said. ‘And what I definitely see is that houses are dropping in value at a steeper decline than the median price indicates.’
Well, that is certainly apparrent from what I see. They are hideing the true numbers from the people as usual.
From the report in the Coloradan:
Q: Who should be looking at buying now?
A: Everybody who has cash sitting in the bank and looking for an investment needs to look at buying. In 12 to 18 months, things will start going up. Now is the time to buy.
I wonder who is going to soak up all the excess inventory in 12 months. Does anybody else think that in “12-18 months things will start going up”?
Reporters for the Coloradoan often aren’t the sharpest tools in the shed.
It a podunky small town paper.
Yes, now is the time to buy and watch your investment tank before it, PERHAPS, starts rising in 12 to 18 months. What a tool.
Conversely for the sellers, why bother selling now when the price is going up in 12-18 months?
Houses in that area didn’t see the megabubble like a lot of other places and they still have a lot of problems. 12 to 18 months is a dream, unless they start to get in some real businesses, there are quite a few people underemployed in Larimer County.
The other day I sopke with a guy who was “networking” trying to find a job in Larimer county. I told him that its slim pickings as the local economy has not been able to reabsorb all the people who were laid off from places like HP, Agilent, LSI, etc. He is a newcomer so I explained to him that there is a reason why so many people commute from Ft. Collins, Windsor and Loveland to jobs in Denver.
Last year, I was having lunch with a co-worker friend at Whole Foods (we worked in the buildings on the other side of the tracks). At the time they were renovating the outside seating area (building those garage doors they have now) and so we had to sit inside where seating was very limited. We shared a table with a woman who had moved to the area and was looking for a job. She was probably in her mid-40’s and had a lot of sales experiences at resorts and such, though no college degree. We saw her a few months later working at Whole Foods. It was the best job she could find.
I know someone who works at the public library. She tells me that a lot of people must still be moving to the area (based on new library cards issued). Like the lady mentioned above, many of them move here without a job offer in hand.
The thing about Larimer County is that it “looks” quite propserous. This prosperity is an illusion. So unless you have a job at HP, Intel or one of the other few tech firms (that are mostly still in layoff mode) you will find it challenging to make a good living here. Housing costs are below national averages, but when earning menial wages even a 180K house is expensive.
Still, I could imagine someone who might pass through the area thinking: “‘hey, this place looks good (visually), maybe I’ll move here”.
I always thought when library participation goes up, it means people are spending less on movies, cable, Barnes & Noble, etc….. Not necessarily more population growth.
Apparently they are mostly new arrivals. In many cases they still have out of state DL’s.
Interesting. Thx. And the aren’t students? That suprises me, but in a good way. Maybe the whole thing isn’t going to hell in a basket.
Apparently families. Was told they show up with kids in tow, out of state id, and receipt for rent (to prove residency).
Forced commuting happened to our neighbors big time… One got laid off from Agilent, the other quit a job. Now both work in Denver but can’t sell due to the market downturn or rent it for any value, so they stay the week in Denver at a rental and usually stay up here at their house on the weekend. They’re good folks, I feel sorry for them.
“With Colorado leading the nation in foreclosures much of last year,
-many lenders are taking 5 percent off every appraisal and borrowers have to put up bigger down payments.
Buyers with ‘down payment’ = MUCH lower sales.
Wow, this is interesting!
http://www.minyanville.com/articles/CDO-Credit-Debt-Investors/index/a/12869
“Because these losses have been compressed, any re-adjusting of ratings by these agencies are likely to result in a massive repricing of risk”
It gets better…everyday!
That’s a recipe for a time bomb if I ever saw one.
Frank Partnoy has detailed the rating agencies’ conflict of interest (and the general derivatives shenanigans) in in his book F.I.A.S.C.O. - quite an eye-opener. He really breaks it down and it’s surreal. The Japanese corporations’ methods of hiding huge losses with the help of Wall Street are psychedelic (read the chapter titled “MX” in the book).
Thanks to whoever here recommended the book earlier this year.
I have a feeling that Moodys and some of the other agencies are going to get with some RICO or SEC violations in the near future.
That explains it. Serious question.
Is anything on the level in this country? Anything?
Contrast this statement:
“‘We have an excess supply of housing,’ regional economist Martin Shields said. ‘Any time there is a tightening of credit and foreclosures, it reduces the demand and foreclosures increase the supply. It has to put more pressure on prices.’
with this one:
‘The end result is that fewer people will get into homes,’ said Cynthia Torp, founder of The Angel Investment Network in Fort Collins, which helps people qualify for new home loans.”
How can an excess supply of housing be compatible with fewer people getting into homes? I guess a lot of homes will remain vacant forever…
Yeah I was going to post on this.
The reality — those who were getting into homes with negative amortization loans, theoretically becomming ever poorer, will get into homes as renters, becoming no worse off than before, or (if there is a housing bubble “do over” on credit scoring as owners at much lower prices with real positive amortization, getting richer.
—“‘We have an excess supply of housing,’ SNIP , “The end result is that fewer people will get into homes,”, SNIP “How can an excess supply of housing be compatible with fewer people getting into homes? I guess a lot of homes will remain vacant forever…”
Welllll. Yes, no, maybe.
There will be a vacancy issue… transiently. I’ve no doubt that the obvious excess supply– AT current pricing more or less– combined with the demand for 10-20% or more down once again from the bulk of populace that has NO savings and indeed a negative savings rate, WILL cause unoccupied, bank-owned housing to exist.
Then… prices will plummet to allow AFFORDABILITY to return to rational levels, and all those unoccupied houses, as they regress to mean and maybe overshoot old affordability values in a market where common wisdom becomes “who’d wanna buy a house”. When nice housing can be had for 2.25X income and folks have stopped HELOC’ing for Bimmers and save a wee bit of cash, those houses will be reoccupied.
E.D.
“…save a wee bit of cash,…”
Despite disclaimers about the pernicious effects of govt interference in free markets, I suspect the Fed to relentlessly distort behind the scenes to ensure that savings continue working to the saver’s maximum disadvantage.
“expect the Fed” (and suspect they will…)
Unintended consequences, GS? Instead of bailing out FBs, inflation will instead further torpedo prices.
I haven’t seen many vacant houses in Larimer county. Weld/Greeley on the other hand….
Prices are dropping though. I know of one household that is going through a short sale. The short is only 10K however (the house is in the low 200’s). Still a hair cut though.
This mentality is similar:
“With Colorado leading the nation in foreclosures much of last year, many lenders are taking 5 percent off every appraisal and borrowers have to put up bigger down payments. ‘There will be a whole lot less people who can afford that,’ Torp said.”
Yes, few could afford AT THOSE PRICES!. As E.D. points out, affordibility will come…it inevitable. Unfortunately for the current owners of real estate (myself included) the adjustment to equilibrium between price and affordibility will mean erasing about five years and 30-50% of phantom “gains” from the peak.
Affordibility is only a momentary problem….unless an artificial agent (like the government) gets involved. Even then, its merely a matter of time. The laws of supply and demand may take some time to work their “magic” but they are as reliable as the tides.
The thing is: Larimer County prices are unchanged since 2001.
Fewer people will get into homes, until prices crash back to or below historic affordability index levels. Then, more people will get in, until supply matches demand.
Good point….maybe we should just fill up the vacant houses with all of our homeless people and solve two problems at once!
“Utah didn’t add much air to the current bubble, Knold said. Not much Utah money went into the speculative housing market.”
“All but one of the 11 job categories measured by the department reported year-over growth. Construction led the way, adding 14,000 jobs,…”
I guess it is awfully hard to see a gigantic bubble when you are sitting right on top of it…
“‘And I anticipate that ‘08 will be lower than ‘07,’ Knold said. ‘But I don’t see the (first quarter) 13 percent drop as being alarming. We knew that was coming. The run-up that started in ‘03, ‘04 and ‘05, we knew that it was going to be high, and we also knew it was going to turn around and come off that peak and go back down.’”
Is David Lereah’s NAR position open? Because I can recommend a candidate…
The only thing keeping Utah going right now is the very low unemployment rate. We haven’t seen a drop in prices but it looks like building is slowing and inventory is rapidly rising. We are almost double the inventory we were this time last year and have added 25-30% since Febuary. People I talk to are still in denial, they see that prices have risen well beyond what the local economy can support but still don’t think prices are going to fall.
My favorite line was “It’s very difficult to see anything to be worried about on the horizon, at least the short-term, immediate horizon.” Short term here means what, the next week?
One would think the horizon in the mountain states would be pretty far out. I guess not.
Evidently Mark Knold is sitting in a valley surrounded by high mountains that limit the distance to the horizon.
“Seventy-five percent of those foreclosures are the result of refinancing, said Kathi Williams, director of the Colorado Division of Housing in Denver.”
Wow, this means that all these people were probably in decent shape, after their original purchase. An affordable payment, some equity, and likely a manageable budget. So they HELOC or cash-out refi, and they trade all their financial security for a 32″ plasma, Caribbean vacation, 150 diners out, and a bunch of crap in their closets and garage.
Here is an additional explanation: A lot of people in Colorado lost their jobs during the tech/telecom bust 5 years ago. For many, it took a long time to replace the lost job, and they took on debt to survive. Once they found a job they HELOC’d all the credit card debt they took on. So their monthly nut went up and in many cases the replacement job paid less than the old one (this happened to a lot of people). So they took on more debt until they went past the point of no return.
Amen. The bill is due.
Not to worry, I think only 70% of homes buyers in the SF bay area used those kinds of loans in the past few years. I read Sonoma Cty. where they were the highest, has already seen a 100k drop off the median…620k to 519k today. No worries, it’ll probably pick up any day now…now that we’ve gone through the ‘correction’…Ahemm.
LOL. Ahemm indeed. You would have to use one to afford an outhouse sized “condo” in SF. Denver never went California crazy, and we may see serious drop by year end. No statistical data, just despirate RE agents who know I am looking for “the one.”
I’m one of those that lost my Colorado tech job. I managed to hold on for 7 months after worked dried up, but Apr 2002, poof, out of work.
I packed up and moved to AZ for a 10% pay cut. Just this year I got back to the income level I was back them. Not inflation adjusted…
I was laid off in 2001. I was able to find a job in 10 weeks, but it paid 20% less than the old one. I was eventually able to regain the lost ground, but it took some time. Fortunately the kids were old enough for my wife to work, plus we cut back on some things.
You know when the reason for a foreclosure is job loss it makes more sense that you have a foreclosures ,but who was the jerk that gave a refinance to a unemployed person /
That’s the “beauty” of a no doc loan, right?
Yeah, Utah is different (not). We are just trailing the region in our economic up and down. The local newspaper folks and economists love to point out how good our economy is, but the economy (jobs) are great all over the West. We have a lot of immigration, mostly illegals though.
Inventories are the real story for Utah. I’ve been tracking Salt Lake for a while, SFR inventory has gone from 2,536 in July ‘06 to 4,180 in May ‘07 — only a 65% increase (and still climbing). Utah County has gone from 1,762 in Sept 06 to 2,684 in May 07 — only a 52% increase.
I suspect the builders know something is going on with inventories and are belatedly reducing build permits.
Friends in the mortgage business are reporting significant slowdowns as well.
Nope, everything is fine here in Utah. No speculators here, even though there are all the folks on the San Diego investors website with ‘investment homes’ in Utah.
jb
but the economy (jobs) are great all over the West
They say that, but here in Colorado’s Front Range most of the new jobs created were low paying. So for every job lost at Avaya/Lucent/Sun/IBM/HP/Agilent/etc. a new job was created at Best Buy. What a deal.
In Colorado, not to disagree but it seems more like for every 2 jobs lost, 1 was created. I lived in FC from mid-2005 to the end of last year, and I watched new CSU grads end up with part time jobs at bakeries. I had a friend who spent years as a temp for Circuit City, hoping they would give her permanent or at least stable part time work. Some weeks she would work about 3 hours. That area is bad and if they can’t give young people good jobs (who are qualified, responsible, and have experience), I think that it will get a lot worse.
As a Ram Alum, that breaks my heart. Too bad you have to basically live in your car (Denver) to enjoy living in one of the best mid-sized towns in North America. Move to Denver, and watch you cost of living skyrocket.
Except that if you’ve ever lived in the D.C. metro area, New York City, and/or most places in California, perspective tells you that the cost of living in Denver isn’t jack.
Ture. I know this is a generalization, but what makes you $100K in DC, NYC, CA makes you $40K in Denver, if the job exists at all. Under-employment here is a way of life. Get yours somewhere else, THEN move to Colorado for quality of life, here it in my industry all the time. But get a lot of yours. I explain the job market here to new coastal arrivals, they look at me like I am crazy, then go to work at Whole Foods.
“True”… and “hear”…. tough to blog and work at the same time.
And I’m not whining, I’m never leaving CO.
But that type of migration doesn’t help really help us long-term. Unless you move here and open a business with high paying jobs that you would have offered where you came from. I’m done.
I was in CoSpgs. In the 80-90s they lured in a lot of high tech jobs. HP, MCI, Oracle, Unisys, Cray, Digital.
2001 = pop, crash.
Left Colorado in 1984 due to that lousy job market.
“but the economy (jobs) are great all over the West”
Then why doesn’t this show up in median household income? There isn’t THAT much difference between wages from the West to the Midwest. Certainly, not enough to justify the differences in housing costs. In fact, I left the West Coast for MORE pay in the Midwest & the house was half priced.
The weather is much nicer in the West. Doesn’t that make it better?
jb,
“Nope, everything is fine here in Utah. No speculators here, even though there are all the folks on the San Diego investors website with ‘investment homes’ in Utah.”
No kidding. And some of those fine folks on that site are also becoming increasingly nervous about possibly cashing out their UT holdings. Most have moved on to buying properties elsewhere in cheaper fly-over states, saying that it’s becoming too hard to get a property in SLC to cash flow anymore.
Is that even more inventory I hear piling up?
“New housing permits issued across Utah in this year’s first quarter continued to tumble”
As long as I have been on this blog and reading these reports, I still don’t get why people get their boxers in a bunch over a decline in housing permits. So what? As much as we make fun of those who say “They’re not making anymore land”, to an extent that is true, unless of course the oceans start to evaporate, which they might.
Anyway, my point, and I do have one, is that you can’t have a rise in housing permits month after month after month ad infinitum. This would mean that every inch of land everywhere eventually would be occupied by a house, government or commercial real estate or infrastructure. Oh, I guess then we could build vertically and become some sci-fi Blade Runner or Arthur C. Clarke planet.
Oh, and a little excerpt from AP regarding the illegal immigration bill and the destruction of the rule of law in the US:
“The bill also provides for a guest worker program that would allow immigrants to work temporarily in the US although they would still live in their home country. The legislation also would allow the estimated 11 million to 12 million immigrants already in the country to come forward and apply for a probationary “Z visa” that would allow them to stay in the country legally and eventually put them on the path to citizenship.”
That’s the ticket, reward people for breaking the law. And whaddya get? Criminality. We’re done here, folks. The gov has just handed over the US completely to the criminal class. This is all part and parcel of the same savage, vicious attitude that fostered this bubble and the equally disgusting bust now in progress.
“The gov has just handed over the US completely to the criminal class.”
Most of the government these days is the criminal class.
The gov has just handed over the US completely to the criminal class.
- That was the Senate vote ( the folks that have the six year gigs). Funny thing is - The House occasionally has a different view and slaps those slackards down.
And why not? The criminals are running the place.
In case you didnt realize it yet, welcome to the mafia economy.
You scratch my back, Ill scratch yours.
As long as I have been on this blog and reading these reports, I still don’t get why people get their boxers in a bunch over a decline in housing permits.
Because we have an economy that is based on residential and commercial construction.
Anyway, my point, and I do have one, is that you can’t have a rise in housing permits month after month after month ad infinitum. This would mean that every inch of land everywhere eventually would be occupied by a house, government or commercial real estate or infrastructure.
I suppose that eventually we could tear down and rebuild. Or end up like Asimov’s Trantor (think Coruscant). Of course this points to the real underlying problem with our economic model: reliance on never ending population growth. By some projections US population will be 1 billion by 2100 (it almost makes me glad that I will be dead by then). I think that a Bladerunner nightmare scenario isn’t all that far fetched, except that there won’t be any colony worlds to which we can escape.
“Of course this points to the real underlying problem with our economic model: reliance on never ending population growth.”
Testify! That IS indeed the problem, never ending population growth. Under that model, life is cheap and is not valued. Quality of life means nothing. Don’t anyone worry about China. They’ve fouled their nest so bad, you have no idea. I got this from a sibling who does consultation with folks in the clothing manufacturing (outsourced) industry.
Worked in the business during grad school in LA and again briefly in 96-97. I had to go to HK and then the mainland to handle CMT contracts during the take over. HK wasn’t so bad but I came away from China with the impression that life was definately cheap there with the classes extremely stratified. It was really awful.
What’s even worse about the model is that we don’t have never ending population growth (and neither does China). We will continue to have population growth during our lifetimes, but the trend in almost on every spot on the globe is for less fertility.
I keep asking myself - how can a house be thought of as a “long term” investment 30 years from now when all of the world II generation is complete gone and a significant portion of the boomers die off? There are currently 3-4 generations attempting to be in the house market right now and we are overbuilt as it is. What happens to houses and our economy when fewer people replace the older generations? *head shake*
The “experts” say that growth will level off. But in poor countries children are your “retirement plan”. You go and live with them (preferably sons) when you become old and feeble.
There is nothing cheaper than human life in many parts of the world. This did not used to be one of them, but the US has the interesting distinction rather unique, in that we have a diminishing first world country overlaying a rapidly expanding third world country, but occupying the same geographic area. Just look around. I am always astonished at the difference between “professional” pay rates and those of “skilled” labor, which are typically between 3 and 6 times as much for w2 salaried jobs, and it becomes apparent that the real issue is not race or color but education. This in a country which has substantially reduced educational standards over the past 25 years. Most folks do not seem to know that they can take responsibility for thier own education and educate themselves. All it takes are books and a will to learn.
“won’t be any colony worlds to which we can escape”
Read my paper in Proceedings of the National Academy of Sciences, vol. 98, pp. 2154-2157. Keeping Mars warm with new super greenhouse gases. There are still a lot of technical problems to be solved in this project. Get cracking!
I imagine that Mars could be terraformed, but would it be economically viable? I also believe that it could be colonized (again, at a tremendous cost). But mass migration? We are going to need some super powerful and super cheap propulsion systems to do that!
Palmetto,
you and I are on the same page with illegal aliens. Notice the sudden rush to put together an amnesty package…the discussion now is how many family members can the illegals bring across the border.
Reason: now the unemployed illegals are out of a job. Give them amnesty and taxpayers will have to ante up for unemployment benefits, “reeducation” programs, et. al. And they get to empty out more towns and villages in Mexico and dump the costs on the back of
citizens. Another part of the wealth transfer scheme to bust the middle class into serfdom.
And as long as you can terrorize citizens with crime at home and “terror” abroad, you can continue to attack the Constitution and the Bill of Rights without repercussions.
hey, spike, I’m following this thing and it’s like watching a train coming at us, about to run everything down. This is without a doubt the most disgusting piece of legislation I’ve seen since the authorization of the Iraq war. The twist in this legislation is that there are all these requirements for citizenship, but if you’re here illegally right now, you can get a probationary status to live and work here legally. THAT is scamnesty. And in that case, who cares about citizenship? Who’s gonna bother applying when you can live and work here legally on probationary status? It is complete madness and insanity and with the recession/depression coming at us, we’re just sitting ducks for a criminal group who just takes whatever they want.
I agree, they are unleashing terrorists domestically on US citizens.
But they’ve come here to commit acts of terrorism that Americans just won’t do.
Good one, Slim. And if those gangbangers aren’t terrorists, I don’t know who is.
Jas Jain,
I know that 6-8 months ago I gave you a hard time when you posted re the corruption rampant in america, from the pols to wall street to main street,but I am forced to admit that I was wrong. I interpreted your remarks as those of a successful immigrant sneering at the folks who welcomed him, but again, I was wrong. You have been absolutely correct, and I would like to offer my belated apologies. My faith in this country was misplaced.
Citizenship has now been flushed down the toilet, along with the dollar.
We have officially joined the third world. As Americans, we have been gutted like fish.
Again, please accept my apologies.
spike
I’ve said it,and read it here several times..it will happen,no doubt.
12 million? try 20! ,and that’s for the ones here?? Open the flood gates ” we were here before the announcement” ..” Now I want my check” 20 million possible new shoppers/ home buyers. I thought it Tinfoil hat talk, now I’m sure the plan is a flood of cheap labor ,and the new NA currency ‘ The Amero’ …Since the US dollar is now valueless. I really hate to admit it but the kooks were correct..
A. Gore- The richest % will accumulate all the wealth.
H. Perot- Open borders-Giant sucking sound south.
“I really hate to admit it but the kooks were correct..”
When people accuse me of being paranoid, I like to say “There no such thing as paranoia, only heightened awareness”. I forget who the wag was who said that, but I like it.
However, there will never be such a thing as a New World Order or One World Gov. Oh, I have no doubt it will be attempted, or is being attempted. But it’s awful hard to run a global hedge fund if you and everyone else end up being crispy critters because some downtrodden folks somewhere got awful mad.
Really, the best policy for everyone, no matter what you do in life, no matter where you are on the food chain, is to treat people with fairness and civility.
“If you’re not paranoid, you’re not being realistic”
I’m not in Utah, but I used to regularly attend training in SLC. Once, a couple years ago, there was a piece in the Deseret News about Utah leading the nation in bankruptcies - possibly due to residents wanting to keep up appearances. If this is still the case, and there’s been lots of equity draw, then it would seem to me that Utah prices might fall, due to the need to sell, and excess inventories (as JB mentioned, above). Am I out in left field on this?
UT was last to go in the 90’s
last up / last down
they’ll bust this year
Utah, Oregon and Washington State are bringing up the rear. They ramped up a couple of years after CA and now the same thing in reverse. Hard to understand how more folks can’t see this.
The only person I know in Utah who also sees this coming is my wife. I gently, politely start talking about the fundamentals discussed here so often….. blank stares….crickets chirping…..polite smiles you give to people who are obviously insane.
I am sooo ready for this thing to break wide open so I don’t have to keep explaining why it is rational to save money for things like downpayments….and ginormous economic
cluster%!$#s.
We’re down a few spots on bankruptcies, but that has only been a recent development from the last couple of years. Mostly due, in my opinion, to the rapidly rising property values.
Good friend of mine grew up in Utah (we met in school in at Univ. of Wyoming) and she now works there as an engineer. She continues to tell me how the men, who are Mormon, kind of look down on her for working instead of being at home raising children. She continues to wonder how they are able to buy a fairly expensive home and drive new cars while the wife is at home raising 3 or 4 kids. After you talk to her, one isn’t surprised by bankruptcies in Utah.
“She continues to wonder how they are able to buy a fairly expensive home and drive new cars while the wife is at home raising 3 or 4 kids.”
can’t argue with that… There is tremendous pressure to live the “fabulous life” complete with the custom house and monstrous SUV. And that’s just the beginning. Not that there isn’t this pressure anywhere else in the country, but it seems more pronounced in UT since many neighbors attend church services together. Wealth is somehow seen as a result of living a righteous life; the idea that “seeking the kingdom of god first and riches will be added to you” or something like that. Nice idea, misguided in its application.
I’m not LDS (Mormon) but all the Mormons I know are pretty frugal.
This is my problem!!! It makes me insane!
2 years ago, before I was married, I moved in with my mom for the summer while she rented out her boss’ development spec home (she worked for a contractor/lender collaboration).
There wasn’t one home priced under $500k. Stay at home moms in minivans and SUV’s everywhere. LDS wards have allotted church funds for helping out families in times of need–most of them will make a mortgage payment or two if you are getting behind.
One Sunday the bishop announced that the ward would no longer be able to make people’s mortgage payments for them. It made me sick to my stomach.
My aunt, a manic spender who needs rehabilitation…went for the thousandth time to her bishop to bail her out. He turned her down. She was contradicting church counsel of living within her means, and acknowledged that he was only enabling her. I grumble about my church on about every point of doctrine, but this time I was actually impressed with the church leader for enforcing it.
Anyway, I think that’s how everyone’s doing it. It’s similar to taxes. We all pay our tithing faithfully and live within our means, and our contributions ultimately bail out the selfish people who pity us so much for renting and living in apartments. This blog has me really pissed off at my own religion!
we met in school in at Univ. of Wyoming
Do you miss Laramie?
“We all agree we have limited land supply and we continue to have strong economic growth in Las Vegas”
Limited land in the middle of the desert? The next thing you know someone will be proclaiming limited land in the Northwest Terrritories.
I think that what is meant by that remark is that there is a limited supply of “developeable” land, meaning land that isn’t owned by the BLM and that has water rights.
Yes, but every time you turn around the BLM is auctioning off more land!
I love that “strong economic growth” statement, too. Construction is only second to tourism in jobs and income generation, and Russ Winter has data showing that tourism isn’t exactly lighting it up these days either.
OT — but I’d love some input on the SF Chronicle article that came out today.
http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2007/05/17/MNGM6PS7LE88.DTL
I’ve been in a running batte with a friend over Noe Valley RE. “It will never come down”, says he. I would agree with the article that ritzier areas of SF are propping up others, but NEVER coming down? I’ve convinced him of the unsustainability of prices in everywhere but Palo Alto and certain SF neighborhoods. His rationale? There are just too many rich people. Rich fools and their money soon parted? Wot’s the deal here? Please help me crush him!
Comments from the article like, “I feel our market is immune to decreases in value,” he said. “We might slow down a little and just hover, but then it picks up again.” just help to entrench his mindset.
Does anyone have any info on the SF BAy Area hi tech job market?
It’s pretty good, Ozarkian. I’ve seen a good bit of churn in my industry (semiconductor chipmaking and supporting suppliers like AMAT, ASM, KLA-Tencoretc). Churn is an indicator of a decently lubricated market - employers are willing to increase headcount and employees are willing to risk venturing out for a better paying job Some optical companies are hiring. Nothing like 1999 of course, but it’s possible to get a decent job in hi-tech at this time. No idea about software side though.
I should add that it will likely get worse - memory prices have completely collapsed in the last 4-5 months and that always is a good indictor of industry slowdown beginning.
His presumption is that everyone who bought a house in those areas could actually afford a house in those areas. If there is one thing I can tell you about living in both northern and southern California is that there posers in both places. I’m sure there are plenty of $100k engineers who bought $1 million houses. They can not afford it, but hey, I make $100k! I should look like I’ve made it. Sign me up for the BMW and the nice house.
I think it was in 2005 that I found a website put together by a guy and his wife justifying the purchase of a house in the SF bay area (Palo Alto?) for about $1M.
It had charts and graphs to prove the point. I’d really love to find that website again.
The Smiths , weren’t they teachers ?
Oh Hey! Yeah. That sounds familiar.
Hm. Not that that makes it any easier to search for
Thank you. I’ll give it another shot.
“‘When you have a lot of bidding on properties, it really does strain a lender’s ability to differentiate between a legitimate loan’ and schemes, Larson said.”
And it means that even if the good guy “wins”, he still got screwed by the bad guys bidding up the property and is now much less likely to be able to hold the property long-term if anything goes wrong in his life, and much less likely to be in a position to “move up” in the future. So by letting all the bad guys bid up the property for an immediate gain to the seller, not only did we hurt Joe Good Guy, we also hurt the future of the economy for all of us. We ate our seeds.
This guy is full of it , there are alot of ways to tell if a deal is a scheme . For one you look at the last sale and if they turned it around quick at a much higher price ,it could be a cash -back scheme . The criminals go for the low down sub-prime loans of course . You would look to see if the kind of purchase matched up to the borrower or location of property . You would pull a deal where the appreciation was to much in to short a time and you would look for a increase in the listing price in spite of many days on the market .I could go on and on ways to tell .
“Eric Bowlby, president of Amerifirst Financial in Mesa, said he interviewed more than 150 job applicants in the past three months, hired 11 and fired five. ‘We have too many people in the industry,’ he said. ‘When you have an uneducated sales force, fraud is going to run rampant.’”
What a crock! A “lack of education” leads to incompentence and HONEST mistakes. That’s not your industry’s problem. The problem is a lack of ETHICS, which lead to dis-honesty. The level of knowledge was plenty high enough and demonstrated by repeated gaming of the system.
“Seventy-five percent of those foreclosures are the result of refinancing, said Kathi Williams, director of the Colorado Division of Housing in Denver.”
If this statistic holds for the rest of the country, “Housing” is not the problem, bad financial planning and money management are the real reasons for people losing their homes. The fact that they happen to go broke paying a debt that coincidentally happens to be secured by their house has nothing to do with their financial mistakes.
For instance, if a couple owns a house (assuming it’s their only asset) worth $300k and owes $150k on a first mortgage, but also has $200k in personal debts not secured by the house, their “balance sheet” will show a negative net worth of $50k.
If they defaulted on the $200k of personal debt, the creditor (s) would get a judgment, seize the house and sell it for whatever they could get over the first mortgage. All these so-called sub-prime lenders did was skip the judgment step by securing the house up-front.
The house, in and of itself, has zero relationship to the finances of its owners. If one separates the physical building from the debts of the ownership, it’s much easier to see that we have a debt crises, not a housing crises. (IMHO)
agree 100%
Mr. Bubble,
The SF Chron article was maddening, and the fact they put it on the front page even more so. Recent RE articles, which have been pretty bleak, have been burried in the Business section, but this was front and center today.
Median went UP because the upper end of the market is driving sales compared to last year. They make that point mid-way, but then resort to the usual dribble about how special we are, how strong the local economy is, blah, blah.
But sales are still down versus last year, so clearly not many people are rushing out to capitalize on our “immune” market
“‘They’re more vulnerable to the national problem that’s going on right now, which is the housing bust.’”
“Utah didn’t add much air to the current bubble, Knold said. Not much Utah money went into the speculative housing market.”
“All but one of the 11 job categories measured by the department reported year-over growth. Construction led the way, adding 14,000 jobs, followed by the trade, transportation and utilities sector.”
“‘We’re in a growth spurt. We’re riding a high wave right now in the state of Utah,’ he said. ‘It’s very difficult to see anything to be worried about on the horizon, at least the short-term, immediate horizon.’””
What a frickin’ buffoon. The inability of these imbeciles to see the road directly in front of them is astonishing.
Klif been smokin’ a spliff…
“‘We all agree we have limited land supply and we continue to have strong economic growth in Las Vegas, regardless of residential construction. The key for us is residential listings must drop before this market improves. Part of that is owners are not pricing their houses properly and that’s why they’re not selling,’ Pardee Homes Division President Klif Andrews said.”
What bothers me most about the housing boom in and around SLC isn’t the rife speculation: those people will get flushed out sooner or later. Rather, it’s the utter absence of responsible civic planning. I recently visited my in-laws in South Jordan. There, the few remaining horse farms, playgrounds, open fields and mountain vistas are being rezoned out of existence. In their stead: anthills of characterless, featureless adobe abominations. These monuments to greed, sloth, and the SUV will continue making Utah unlivable long after they have stopped making money for developers and speculators.
It’s not the lenders fault that guidelines are being raised, it’s the investors fault for not supplying the capitol. Also the interest rates are not going up. The Fed has kept interest rates the same for nearly a year now, at historically low levels. Why does the MSM keep reporting that the interest rates are going up.
Utah MLS listings top 14,000 (for the first time ever I guess).
Time to liquidate that Utah “investment” property while you can.
When the job losses start the stampede will crush you.
http://www.utahrealestate.com/
Number of Utah MLS listings tops 15,000
About a YOY doubling
Leading Indicator of the Downturn
Many more for sale by builders and for sale by owner
Fox 13 TV just said it’s becoming a buyers market but the prices will keep going up…..huh?