Bits Bucket And Craigslist Finds For May 26, 2007
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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“Last year we were on Mount Everest,” Weathers said. “Now we’re back on Mount McKinley.”
This year it’s more like you will be in the grand canyon buddy!
http://www.tbo.com/news/metro/MGBFT96H52F.html
Very comical story. So, tax assessors in the Tampa Bay area are increasing their assessments and reporting increased “values” even though they know perfectly well that prices paid in actual sales are falling. Ha ha, popcorn time.
The same thing is happening in Pima County(AZ). The asessors are using 2005 values. I live in an area out on the dirt of appoximately 120 homes, probably no two alike. Three different zonings from doublewides to 1M. The talk at the mailbox the other day most assessments rose by 1/3. Our assessment rose 100K(30%). I have a Green Valley ZIP. The mill rate has not been set, but it will not be pretty. I look at Sahuarita,AZ with mostly all new houses on the eastside of I-19, already high assessments going higher, late model SUV for mom and F-series for Dad, mortgage, higher car insurance. tax bill in October. 2008 is not going to be a pleasant year.
Desertfox
Dfox;…Thats exactly why Prop #13 passed in Cali…Tired of Assessor’s writing their own checks….
And because that was the one and only reason as soon as Prop 13 passed all of the property owners who made windfall profits by selling and moving on promptly returned all that money. Hmm, maybe it would be easier and more accurate to just sum the whole mess up as “Greed gone amok…again”.
I prefer the way TABOR works in Colorado.
“A preliminary review of Hillsborough County property values confirms what many people have suspected: The housing market’s boom has slowed considerably.”
My morning is already shot. This article made me angry to read so much misinformation. I like how they can’t say the boom has gone bust. They also talk about how homes are going up at 9% still. That is “taxable value”, of course.
I smell a property tax revolt coming. They can dream about the county having $88 billion worth of real estate. Why not just say $888 billion worth of real estate? It’s all just a number anyway. The only thing that’s real is how much property tax those people are being expected to fork over. Things are still rosy but all of these local governments are worried. That doesn’t compute. Journalism is dead.
I have my musket ready
http://www.fcta.org
pols will skate this year to get re-elected then boom ,drop the hammer
That’s a good letter but I doubt the Teen Center will say, “you are right. We are wasting money. Cut that guy’s property tax.” Money is like crack to these little government programs. Once they taste it they just want more and more and more…..
“Money is like crack to these little government programs. Once they taste it they just want more and more and more…..”
Testify, Brothah NYC! Can I get a witness?
Not an elder and of dubious moral character, but I, Brother Palmetto, shall bear witness.
Amen and thank you, Brothah Sammy!
“I smell a property tax revolt coming.”
Already here, sort of. Which is why there is going to be a special session in Tallahassee next month, though I hope and pray nothing gets done, because the “special session” to deal with insurance made things worse. Governor Crist, despite his happy face, is painfully aware that many working folks and families are leaving the state. They actually showed a clip of him on one news report begging a woman not to leave.
As to Hillsborough County, until the past few years (boom years) Pinellas County used to be more desirable and costly and then this trend all of a sudden reversed. If you cruise Craigslist rentals, for example, there’s quite a noticeable difference in rental prices between the two counties. Hillsborough, like other places in Florida, got too big for its britches. Many parts of Hillsborough that were formerly ignored and not thought of as valuable saw quite a boom and property owners have an unrealistic idea of what their property is worth. Koolaid is still being served.
Hillsborough will get hit very hard if there’s a lot of “voting with your feet”. Taxpaying members of the middle class in Hillsborough are fed up. Due to its agriculture, it has a LOT of illegals who depend very heavily on county services, such as the county health plan (which I use, heh-heh, it’s open to anyone if you are a resident and willing to pay sliding scale and it beats the crap outta Blue Cross, all you need is your own arrangement for catastrophic). Hillsborough is a great county for the poor. That used to be a well-kept secret, now word has gotten out and in my area, we are seeing “re-settlements” to South Hillsborough from places like St. Petersburg in Pinellas. I’ve also seen a couple of modest, formerly pleasant little subdivisions turn into slums in just the past year.
I’m convinced some local governments hate the middle class and would prefer to have Richie Rich residents they can tax and a nice subsidized underclass to serve the Richie Riches and the businesses. However, for the most part, Hillsborough is not attractive enough to attract Richie Riches in any great numbers. So Hillsborough’s excellent health system will probably get eliminated or curtailed drastically. Parks and public places will become “gangouts”.
It’s also getting more expensive to operate section-8 programs, and don’t forget those under-funded defined benefit retirement plans. Grand-standing politicians don’t take pictures holding white babies. Where’s the money supposed to come from if not from the bourgeoisie?
“Where’s the money supposed to come from if not from the bourgeoisie?”
Testify, rms! Makes me wonder if that’s what’s behind the amnesty bill. A whole new bunch of “instant citizens” to tax. I love the “bring ‘em out of the shadows” rhetoric, because I think that’s what’s behind it, taxes. And since Uncle is now helping out Mayheeco with its own wiretap program (who says we don’t have anything to export?), some of those illegals might just learn to be careful of what they wish for.
The Republicrats (the corrupt, venal dualopoly running this country into the ground) are, as usual, thinking only of the next election. In theory, those 12 million amnestied illegals will translate into a bunch of grateful votes for the next election. The Dems will get more social parasites to sign up for entitlement programs [and the jobs and patronage that go with them, and the Wall Street Republicans - is there any other kind left? - will get cheap, disposable, union-busting labor. The so-called criminal justice system can go on a new binge of prison-building and personnel hiring to accomodate all those imported criminals and drunk drivers, while their business partners salivate over all that twelve-cent-an-hour prison labor. It’s all good, as Casey Serin would say. The sheeple might murmur, but the MSM border collies will distract them with more Britney or Anna Nicole, and all will be forgotten. The Republicrats will perpetuate their stranglehold on the levers of power for another few years, and that, friends and neighbors, is all that really matters inside the beltway.
Wouldn’t it be cool if there were some way to get all of those newly legal illegals to sign up for the libertarian party?
The illegals ARE libertarians when it comes to PAYING taxes, they are socialists/communists when it comes to USING taxpayer money.
Bravo Sammy! I agree. You did leave out the one fact though: The politicians are the reflections of the voters. The voters spend more than they take in, are mediocre, and do not care about truth. The politicians cannot help but live according to their nature. they came from the same stock as the voters. Of course, I’m stating generalities. Perhaps 100,000 Americans have principles and morals, and you don’t have to have a religion to be moral.
I’m all for giving illegals a 6-month work permit. We can make sure they pay taxes (can be made a requirement for renewal). Besides, somebody has got to pick the food I eat and cook at the restaraunts where I go out. As far as I can see, no good self-respecting American will do it as long as he can go on welfare and have the same income.
“The Republicrats (the corrupt, venal dualopoly running this country into the ground)”
is there anything worse than saying the democrats and republicans are the same? have you been watching the last 6 years of politics. I can’t even begin to imagine how much better off we’d be if Gore had been elected president.
Maybe an immigration blog would better suit your needs? You talk about “instant citizens”, but the issue being addressed developed over many decades. You point the blame externally, but the US typically takes ten years to process immigration applications in a world that demands six month product release cycles. You speak of your loathing for Mexicans, but Eastern Europeans are not far behind in their numbers and influence. Like most Americans you probably were not able to reach the level of mathematical skill that would result in competition with European immigrants, and of course they are also white, so no threat from there. High end jobs are not interesting to protect, only the low end ditch digger stuff, right?
There may be some real issues around this, but your rhetoric is so rude and off base it really just brings your cause down. Serously, listen to you. Do you realize that large numbers of Mexicans and other immigrants from Central and South America served the US military in WWII and all wars since, many of them earning great honors for their service?
is there anything worse than saying the democrats and republicans are the same?
For the benefit of yahoos, I’ll say it again: Democrats and Republicans are like two hairy ass cheeks surrounding the same stinking bunghole: predatory capitalism. Both parties are on the make and on the take. Both are wholly owned subsidiaries of Wall Street and the financial oligarchy that is the real power in this country, not the sheeple who shamble into the voting booth once every four years to vote for the oligarchy’s hand-selected puppets, Tweedle Dee or Tweedle Dum. Both parties suck, and both are equally to blame for the current state of the country. The sooner the sheeple figure that out, the better.
Go, Sammy, go!
Right on, Sammy!
Mole Man,
If you find the comments about Mexicans offensive, consider why so many people feel the way they do (and it has NOTHING to do with “racism”). If there’s any “ism” involved, it’s class-”ism”, maybe culture-”ism”.
Time we get out from hiding behind the PC rhetoric and begin a constructive dialogue about immigration and how we can
1. Control our borders
2. Help Mexicans sove the problems in **their** country which is what’s driving them over here in the first place.
Yes, the WASPs in America resent their once-safe, nice, quiet and clean neighborhoods turning into slums with overcrowding, high crime, and run-down housing/yards. They also resent paying for services which they (U.S. citizens) are not entitled to while **illegal** immigrants suck the system dry (education, healthcare, legal/prison services, infrastructure, etc.).
The cost savings of $1.00 per head of lettuce does not come close to paying for the loss of quality of life, loss of good (union) jobs, increased crime rate, etc.
If you can’t understand that, it’s **YOU** who has a problem.
Mole Man,
I had to come back to apologize because my post might come across as a personal attack.
I’m not trying to attack you or anyone else who might favor immigrants’ rights. My beef is with the argument that U.S. citizens can’t be anti-immigration without being “racist” (and all that word is meant to imply in today’s PC world). We can be directly decended from immigrants (as I am), or even immigrants ourselves. The difference is how this country is being affected by our immigration policies. So far, the wages are down, cost of living is up (although they might pick strawberries for $2/hr, they are directly competing with citizens for infrastructure, water, living space (housing and available land), food, healthcare, etc. — and they are **DRIVING THOSE COSTS UP!!**
As much as the pro-immigrant groups like to villify us, the concerned U.S. citizens have very many valid points. Until that is publicly recognized and reconciled, the pro and anti-immigrant groups will both become more passionate and defiant — and this will only lead to increased problems.
Sorry for the rant, but this whole immigration thing is a major point of contention for me (as it is for so many people on both sides).
Best wishes to you, though, on a personal level!
Right on Sammy! Such succinct eloquence is a rare fidn these days.
Well, Palmetto, you are close.
It’s a combination of a number of factors.
Remember ZERO POPULATION GROWTH. The crap that was sold to white countries around the world in the 60-70s. We needed to stop having babies so we didn’t strip the planet of its resources.
Well most of America and Europe did drop their birth rates. Only problem is that all the models for SS and Medicare/medicaid / entitlements require a “new generation”. We don’t have it.
So we are going to import it from 3rd world countries. Those are the “New Americans”.
The concept is that they will be our new support system. The problem there is that these are not net contributors, but net benefactors from the entitlement system. We will be sold on the new taxes they will be paying, but it will only crash the system sooner. I’ll stop here so Ben doesn’t drop this comment also.
-D.
“Last year we were on Mount Everest,” Weathers said. “Now we’re back on Mount McKinley.”
I’ll open my checkbook when you get to Death Valley. Or better yet, the Marianas Trench.
Realtors also post ominous signs
By Jeremy W. Peters
NEW YORK TIMES NEWS SERVICE
May 26, 2007
By all measures, April was a bad month for anyone with a “for sale” sign in their front yard.
Sales of previously owned homes declined last month as the supply of unsold properties on the market ballooned and prices declined compared with those a year earlier.
The National Association of Realtors said yesterday that sales of existing homes fell 2.6 percent on an annualized basis, to 6 million, which was the slowest rate in almost four years. At the same time, inventories grew to the largest supply in 15 years – 8.4 months’ worth – and the median price of an existing home fell 0.8 percent to $220,900.
The Realtors association report came one day after a government report on new-home sales showed that prices dropped last month by the largest amount on record. While that report also showed sales posting their biggest monthly increase in 14 years, many economists dismissed the reading as a fluke, noting that new-home sales data can be wildly volatile.
http://www.signonsandiego.com/uniontrib/20070526/news_1b26economy.html
The sidebar graph suggests that existing home sales for 2007 may have peaked in February. I guess we can thank global warming for that? Or should the spontaneous onset of a subprime ice age take the blame?
Stucco, do you ever sleep?
Look at 2006. After April it is all downhill for a while. And 2006 was when the subprime disaster was only in the on-deck circle. This year it’s had its turn at bat and swung for the fences. That should scare any potential sellers with half a brain. That would constitute about 12% of the resale market (the rest ain’t got any brains). Is fear in the hearts of 12% enough to start causing drastic price reductions?
“Is fear in the hearts of 12% enough to start causing drastic price reductions?”
I don’t think the fear factor will suffice. But foreclosures and subsequent REO auctions, coupled with a dearth of buyers who want to try and catch a falling knife or lenders who want to give them the opportunity without the insurance of a 20% downpayment, should do the trick.
This time is different, due to the extreme penetration of high risk lending across all credit rating classes (the problem is not contained to subprime) and fairly widespread absence of household savings (I think we were up to two-straight years of negative national household savings rate, the last time I checked). These extraordinary factors will make it much harder for many folks to hang on through this bust than previous ones. Extraordinarily low affordability coupled with tightening lending standards will also make it much harder for them to find buyers willing to pay anywhere near their wishing prices.
Other than the above factors and a few others I am sure, sellers have nothing to fear but fear itself.
“Other than the above factors and a few others I am sure, sellers have nothing to fear but fear itself.”
How about 191,000 American Soldiers in Iraq not being able to even visit an open house this weekend or qualify for a mortgage. Bring the soldiers home after all wars boosts housing sales. Will it work this time?
Highly unlikely. Most of the soldiers probably already have homes (most already have families)
Yeah, and the soldiers come home between 7 and 18 months at a time. Unlike WWII, where there were over 2 million soldiers and they stayed to the end.
I also predict that there will not be a “boomer” type birthrate explosion when/if the soldiers do come home due to “subprimus interruptus” (disinterest in having sex due to being continually fu*ked by one’s upside down exotic mortgage).
“Bring the soldiers home after all wars boosts housing sales. Will it work this time?”
1) Like most of the rest of America, many of the younger soldiers are living in debt.
2) I believe the Iraq War is being fought on quite a bit smaller scale relative to the national market versus other wars.
3) Many servicemen in the war are already homeowners (and some are investors with multiple properties, which I know living in SD, as almost everyone around here is a real estate investor).
So to summarize, I think not.
Note to those interested in U.S. economic history: Fifteen years ago (1992) was the year immediately following the official end of a nasty recession, and also not long after the onset of the last real estate bust, which continued for four more years in California (until 1996).
Home Prices Could Soften as Sales Decline
By Sudeep Reddy
Word Count: 558
Sales of existing homes slipped in April to their slowest pace since June 2003, and a rising inventory of unsold properties appeared to set the stage for weaker prices.
The 2.6% decline from March, to a seasonally adjusted annual rate of 5.99 million homes, followed a revised 7.9% drop in March. April’s sales rate was down 10.7% from a year earlier, figures from the National Association of Realtors showed.
The number of existing homes for sale jumped 10.4% at the end of April to 4.2 million, equal to 8.4 months’ worth of sales at the current selling rate, up from 7.4 months in March. The unsold properties relative to sales hit a 15-year high.
http://online.wsj.com/article/SB118010161739814689.html?mod=home_whats_news_us
the 2003 number is more robust than I figured
house next to me sold at a low in 1997
these things go on forever
None of these guys bothers mentioning that the last real estate bust went on for seven straight years… I guess it is different this time?
ECONOMISTS REACT
Economists Weigh Homes Data
And When Correction Will End
Existing-home sales retreated in April, dropping to the lowest pace in nearly four years in another negative sign for the slumping housing sector. Home resales fell to a 5.99 million annual rate, a 2.6% decrease from March’s revised pace, the National Association of Realtors said Friday. The median price for a home previously owned was $220,900 in April, down 0.8% from $222,600 in April 2006, but up from $217,400 the month before. Read reactions from economists and others to the data, and how they interpret the numbers in the wake of Thursday’s more upbeat new-homes data.
http://online.wsj.com/article/SB118010453675014729.html?mod=home_whats_news_us
and that was post recession- this time we are approaching one as RE starts down= hmmmmmmmm
This time is shaping up much more like the 1926 Florida Land Boom collapse, after which Wall Street partied on for three more years…
Palmetto,
Instead of “Blame it on the Bossanova”, how about a reworked boomer icon?
(Apologies to The Who)
We’ll be looking through the streets
With the boomers at our feet
And the ATM’s they worshipped will be gone
And the banks that spurred them on
Now that prices have gone wrong
Will foreclose and then the auction sings the song
(Chorus)
I’ll tip my hat to the Realtor confusion
Take a bow for the new revolution
Smile and grin at the change all around
Pick up my guitar and play
Just like yesterday
Then I’ll get on my knees and pray-ay
We don’t get fooled again
The change it had to come
We knew it all along
No bubble lasts for ever, that’s for sure
Now the world looks just the same
Only ownership has changed
‘Cause the flippers they have nothing left at all
(Chorus)
I’ll move myself and my family aside
If we happen to be left half alive
I’ll get through my work and smile at the sky
Though I know the pension poor will never die
Do ya?
Now there’s nothing in the streets
Looks any different to me
And the houses can get financed, bye the bye
With the price way off the peak
And a down of ten percent
Then the payment on the fixed is less than rent
(Chorus)
(Primal scream)
Meet the new wealth
Gone is the old wealth
Wow, that’s awesome! A boomer anthem! You should send it the the CSI TV franchise, they love to use Who songs for their themes.
I hope someone’s keeping a compilation of these gems. Would be a great addition to Ben’s book.
Someone more attuned to the new technology than I (says he, who’s worked in IT all his life ;() could probably mash up something on Youtube or similar . . .
I’ve actually though that quite a few 60’s/70’s songs rather lend themselves to bubble lyrics. That one’s my 3rd or 4th attempt.
“says he, who’s worked in IT all his life”
Back in the day, I worked in video production. (almost 20 years ago) When we still had those 2 inch monster video reels, LOL. The other day, someone asked if I would produce a video for them. I gave them a blank stare.
Good one, ozajh!
Palmetto, I started assembling the ones that I have done over here:
http://therandominium.blogspot.com/
It’s not complete, but some of the good ones are there…
Nice idea sm_landlord, I’m going to shamelessly copy that and put mine on:
http://www.ozajh.blogspot.com
(Might be a while before I get going though; blogger doesn’t seem to recognise the password I just created.)
Ca$h Money Millionaire$$!
The Federal Deposit Insurance Corp. issued the bank a formal cease-and-desist order that outlined corrective action to fend off a financial crisis that began four months ago.
http://www.sptimes.com/2007/05/26/Business/FDIC_ousts_Coast_Bank.shtml
Thanks for that, Muggy. Brandenton Florida’s Coast Bank has been teetering for months over a silly batch of loans to a speculative builder who since collapsed. This is a very important straw in the wind regarding how banks will fare in the downturn. Here’s the reference for that article (and you picked out the key quote).
“FDIC ousts Coast Bank chief: The Bradenton bank is issued a ‘cease-and-desist’ order to fend off a financial crisis”, by James Thorner, Saint Petersburg Times, May 26, 2007.
I put offers in on three houses in Sacramento a couple of weeks ago. They all had quick closes with only inspection contingencies, priced at approximately 60-65% of 2005-06 actual sale values ($600k dropped to $350k). The rental multiples were between 15-16, so they were only a break even cash flow. All the homes were previously purchased with 90-100% financing. Cassiopeia and others wanted me to update the results. Basically, nothing happened. Two deals were short sales. One lender got an offer $15,000 higher than mine (2005 = $587,000 sale price, 2007 accepted offer = $374,000). The other offer fell on def ears and went to NOT sale yesterday. It will come up for sale in a couple of months. The last property was bank owned with a $500k balance, plus default accrual. I offered $375,000. They ignored the offer and listed it at $460,000. This home sold for $635,000 in 2006.
You all told me it was a little too early to buy and you were right. The prices I offered were too high for investments and the lenders are holding out for the spring/summer selling season. I will reenter the market in November with lower offers and see what happens then.
You might not have gotten those houses but I bet after seeing your offers it would have taken a jackhammer to get a push-pin through the buttholes of the guy’s looking at those offers. Good job!
November may be slightly early….Wait until after Thanksgiving….Between the holidays, that bueatiful winter weather in Sac and end of the year accounting you will make a sweet deal in Jan-Feb….
NYCB, you really have a way with words!
Thanks for the update.
Great work, Jingle. Don’t give up now, though, keep on truckin’. You never know if a lowball will get accepted and besides, it’s a public service to Americans everywhere.
Jingle, this squares perfectly with what seems to be going on in Sacramento. Casey Serin (I know, I know, but lurking at his blog is very entertaining!) had an update yesterday on one of his houses where the bank refused an offer they had for a short sale and now the house sold for even less than that. Just hold on to your cash for a while. It will go a much longer way next year.
Casey’s blog is really improving, too, in terms of his ability to draw cash. He’s got his little paid ad sections all integrated to promote them. He’s got his “10 sweet links” section meshed well with his jive-talking theme. He’s given the last 5 people who donate a temporary link to their website. Great work!
Plus the bank story to which you refer is a fantastic blog entry. We may hate the guy because there were quite a few like him driving prices up unsustainably, but he’s got his plusses.
Play Instant Equity!! The rules are simple: see how much instant equity you can come up with from a craigslist listing in your area giving a quick summary and a link. Whoever comes up with the one (1) listing with the most instant equity is the winner. I will go first to demonstrate:
Instant Equity of $700,000!!!
Panama City, Northwest Florida
One acre lot with 3 guest houses
Value of $2.9 million (appraisal with pics available!!)
List price of $2.2 million
Instant equity of $0.7 million!!!
http://pensacola.craigslist.org/rfs/338310910.html
You win: it was offered by “Real Instant Equity Investments, LLC”. Can’t beat that!
Bernanke Warned by Real Estate Analysts:
Housing Collapse Is Much Worse Than You Say
May 22, 2007 (EIRNS)—A real estate investment and analysis firm, John Burns Real Estate Consulting, said on May 21 that it is “going public with our concerns” that the national sales information for both new and existing homes, is misleading and covering up a deep plunge of the housing sector. “The housing market has softened much more than is being reported” by the Fed, and the National Association of Realtors (NAR), says JBREC.
The firm reports that having purchased and compiled actual home sale closing data for 55% of the country, it finds existing-home sales down, not 9% as NAR reports, but: 22% in May 2006-April 2007, compared to May 2005-April 2006; and much more than that on a simple year-to-year comparison of the past couple of months. It found that existing-home sales have fallen every bit as much as the new-home sales of the biggest homebuilders D.R. Horton and Lennar, which are down 37% and 27%. It found that home brokerage transactions by Realogy Corp., the nation’s biggest realtor company which owns Century 21, Coldwell Banker, and ERA, fell 18% from 2005 to 2006. And that mortgage applications for home purchase have fallen 18%, even though many buyers now have to fill out several applications in order to get a mortgage.
Taking the states with the worst housing sales/foreclosures crises, JBREC found Florida home sales down 34%, not 28% as NAR reported; Arizona sales down 38%, not 28%; and California’s down 37%, not 24% as NAR reports. This strong underreporting of the collapse by NAR, the firm says, only dates from the middle of 2006; it doesn’t claim any intentional misrepresentation by NAR.
As for new-home sales, JBREC reports the Census Bureau is continuing not to subtract cancellations from reported sales, giving sales figures which are much rosier than the grim reality, and are reported publicly by the Federal Reserve.
“In summary, we believe that the Fed should know that the housing market correction has been quite steep, and is also not showing signs of bottoming out,” concludes JBREC.
Separately, a Wall Street firm reported May 18 that the foreclosure “shock cone” is widening: While total foreclosures, at all stages, are up 60-70% over last year so far, foreclosure notices—the front end of the process, when a mortgage is typically 90 days delinquent—are 127% higher so far than in 2006. It said that foreclosed homes being resold by banks or lenders, are hitting the housing market with an average price drop of 30% nationally.
THese stats are HUGE!!! Though these guys won’t say it, NAR has been lying out their hind ends. It is just as we suspected though, the rapidly growing inventory numbers just didn’t add up with the NAR reported sales figures.
Do you have a link?
Here is the article although the exerpted remarks are in the second half. WARNING: PDF File!
http://www.frontlinethoughts.com/pdf/mwo052507.pdf
Augur-in,
Here’s the original link requested by Groundhogday [and it's HTML not PDF]:
http://www.larouchepub.com/pr/2007/070522warn_bernanke.html
I think it is important to note that the origin of this report was not Larouche’s organization.
(html link…)
Message to Fed:
Housing is Falling Much Faster than Reported
The housing market has softened much more than is being reported. We have been advising our retainer clients for more than one year about misleading national sales information, both with the Existing Home Sales and New Home Sales data. We are now going public with our concerns because we are concerned that policy makers are relying on national data to conclude that the housing market correction has not been severe.
http://www.realestateconsulting.com/usanalysis/usanalysis200705.html
This is the first housing bust to play out in the internet/blogging era. The REIC (and esp. the NAR) is consequently failing and destined to continue failing miserably in its efforts to hide the actual dimensions of the bust.
“Housing Is Weaker than the Data Suggests
But if the subprime debacle poses no systemic risk (i.e., it will not bring about a collapse or serious contraction of the economic system and credit markets), it does pose a serious economic risk to the growth of the US economy.
Housing accounts for about 23% of the US economy, when taking into account all housing-related purchases of furniture, appliances, and items for new homes, according to the Joint Center for Housing Studies at Harvard University in Cambridge, Massachusetts. So if the housing market is in recession, which it is, it is no small potatoes. Let’s look at a few recent points of data.
The NAR (National Association of Realtors) says that home sales are off 9%. Real estate analyst John Burns
( http://www.realestateconsulting.com/ ) says that “the housing market has softened much more than is being reported” by the Fed and the NAR. Let’s look at some of his research. He gets it from purchasing the actual closing data for 55% of the country. Using this data, home sales are down 22% for the year through April 2007. The largest nationwide real estate brokerage firm reports sales down 18%.”
http://www.marketoracle.co.uk/Article1101.html
From the Burns piece:
“While the Fed has far more to consider than housing, they should know that the housing market could sure use some lower interest rates to help achieve stability soon.”
I’ll bet some of Burns’ clients would love to have lower rates. But the Fed faces a new conundrum, as other countries are raising Central Bank-controlled rates at the same time the Fed is standing pat and the dollar is sliding. Lower rates now and they risk sparking a selloff in l-t Treasuries coupled with a collapse of the dollar.
Thursday they tell us big increase in new home sales and then Friday big drop in existing home sales. Many of these new homes were probably sold to folks that are moving up and since they cannot sell their existing home the new home never actually is bought. Since new home sales are recorded when the buyer signs a contract to buy the house many of these “sales” will not really happen.
Seen an analyst on TV who said the details(increases in the south) were probably due to release of Katrina money which in turn increased contract signings.
Fraud was the rule, not the exception….
http://www.azcentral.com/business/articles/0526fraud0526.html
“Twelve people, suspected of being part of a sophisticated white-collar crime ring led by an ex-convict, have been indicted involving a mortgage-loan scam stretching from Arizona to Nevada to California.
The defendants, including a real estate agent, college students and family members living in the three states are accused of defrauding lenders out of $8 million. Group members led the high life by using phony incomes, Social Security numbers, bank accounts and assets to get loans for upscale homes and luxury cars, according to the 38-count indictment handed up by a federal grand jury in Phoenix.”
I am truly shocked. You can not tell me lenders were stupid enough to lend 150% of the actual purchase price to people who had no jobs and were on probation for felony convictions. AZ must be a special case…..oh wait, I see 21 of the last 25 sales in a Sacramento subdivision just sold for an average of $210,000 over the builder’s advertised price. Hmmm, see NoVa’s post above about market correction. Some prices will need to drop by $200,000 to account for fraud, then the market correction will take effect for 30% to revert to the mean affordability. All these new GF’s think they are buying below the latest comp, but do not know the comp had $200,000 of funny money built into the deal!
Of course, the NAR says we have reached bottom this month (just like they have said for the last 18 months.) We are nowhere near the bottom. Prices are dropping, a new crop of Greater Fools is being converted to F’s Borrowers every day. It is going to get much, much worse. All this information indicates the market correction will probably run thru 2011. Amazing stuff, only on Ben’s blog.
I just saw Steve Forbes on Fox News discussing real estate, that guy is delusional or he’s starting to lose his mental capacity. He actually thinks we are going to see an increase in the last quarter. WTF
Yeah…I saw it also…He thinks the fed is going to cut rates giving some underpinning to the housing market….
I have stopped watching those shows altogether. They are too f—ing stupid and self-serving to serve any value.
Holy crap….
It took a couple weeks for the Maricopa county (Phoenix market) to jump from 52,000 houses to 53,000. Yesteday I noticed that Zip showed houses on the market had jumped 400 in just a couple days. Today, another jump of 162 to 53,572. Looks like we could easily jump 1000 in a week.
Morning news had Realtor on saying that if you’re in an outlying area, and need to sell, contact your lender about a short sell. Builders have slashed prices, killing the resell market in these areas.
Of course, kept that same BS message. If you’re a seller, pateince. If you’re a buyer, NOW IS THE TIME TO BUY, PRETTY, PRETTY, PRETTY PLEASE COME BUY!!!
Cut to the male anchor that comments to the new female anchor (who moved here at least 6 months ago from L.A.), “You’re having this problem with your old haouse in CA, right?” “Yes”, says she, “but it is even worse there. Patience is the key they say, [switch to serious voice] but it is tough making that payment on a house I don’t even live in.”
Patience???? Watch the value slip a few thousands a month, while you drop thousands a month in payments? Why not price it 10% below markket and get out with that much loss before it gets much, much worse?
Why would Realtors tell people to be patient and watch the market fall, instead of telling them to keep dropping prices in big chunks until it sells?
Patience is a HUGE mistake in a falling market. REalwhores are even dumber than I thought, don’t they realize that without a price drop there is no transaction, without a transaction there is no commission. Apparently most have never seen a RE bubble burst before and don’t know what to do.
As mentioned yesterday, they seemed to be focused on buyer psycology.
A quick look at the problem = Too many sellers, too few buyers. Solution: get more buyers. Well, you’re not going to get buyers into the market by telling people that prices are crashing hard!!! You have to “talk people into the market” by trying to convince them the price drops are now complete.
Unfortunatly, at current levels, buyers CAN’T get into the market.
The flapping head Realtor says at the end of the piece… Prices are going to start rising again in the last quarter of this year. Any reason to think that? Nope! Just an unsupported assertion that is accepted as obvious fact by the spokes model/anchors.
‘You have to “talk people into the market” by trying to convince them the price drops are now complete.’
It is hard to do that without inadvertently (or perhaps deliberately) talking more builders into continuing to build more high-end homes for which no end-user demand is forthcoming.
“Any reason to think that?”
Because David Lereah said so. (Of course, that was before he announced he was leaving his post as NAR cheerleader in chief, and for a parting shot at the constituency he misled, announced that we are in a nasty real estate recession for which we all share in the blame.)
Don’t forget that many of these realtwhores have skin in the game as well, as they hold a great number of properties themselves.
Those of us who lived responsibly the last 7 years and have cash are going to be rewarded. Just be patient.
Thoughts from the Frontline - The US Mortgage Market - Overexposed and Overrated / Stock-Markets / Financial Markets
May 26, 2007 - 11:13 AM
By: John_Mauldin
http://www.marketoracle.co.uk/Article1101.html
Excellent!
Fills in a few gaps in my understanding of the RMBS/CDO market. I also liked the new housing sales report explanation and the discretionary sales chart. The article was information packed. I bookmarked it for future reference. Thanks GS!
Some posters have conjectured about what will be the next bubble, and the WSJ writers just may have identified it:
THE WEALTH REPORT
By ROBERT FRANK
Flip That Yacht
Rich Buyers Sell Unfinished Boats, Reaping Millions in Profits
http://online.wsj.com/article/SB118004846052414031.html?mod=at_leisure_main_reviews_days_only
This article is a new-aged shoe shine boy harbinger if there ever was one…
‘Today’s new rich, being entrepreneurial, can’t resist the lure of the deal even when it comes to the multimillion-dollar toys they are buying for their own pleasure. Yacht flippers are the superrich cousins of the real-estate flippers of the housing boom. Just as speculators bought Florida condos only to sell them, often unfinished, months later (which worked fine until prices fell), yacht flippers are banking on rising prices to buoy their investments.
“The risk, I guess, is that the yacht market collapses,” says Billy Smith, a partner in Trinity. “But with all the wealth that’s being created, there are no signs that that will happen.”‘
Man, is that a contrarian signal or what?!
Big news from Fannie.
This is the sound of a tightening noose.
——————————————
new fannie guidelines (PDF!!!)
“Effective for all mortgage loan deliveries made on or after August 1, 2007, MCM pricing will include a loan-level price adjustment of 1.00 percent to be assessed on all MCM loans.
…
Also effective with the release of DU Version 5.7 loans underwritten with DU that receive an EA-II recommendation will no longer be eligible for delivery to Fannie Mae as MCM loans.
…
Area median income (AMI) estimates are calculated by the U.S. Department of Housing and Urban Development (HUD) and provided to Fannie Mae annually. HUD uses the estimated AMIs to determine Fannie Mae’s compliance with its regulatory housing goals.
Because many of the AMI estimates for 2007 are lower than the AMI estimates for 2006, certain mortgage loans underwritten as Community Lending loans using the 2006 income limits may no longer be eligible as Community Lending loans based on the 2007 income limits.
My first trip to Zillow almost made my heart stop. If I hadn’t looked at comp sales I’d of been selling and making the wife move again! Oops, someone at Zillow may be smoking crack or the model is designed to run CA numbers in Kyle TX. Bedroom community to Austin. Nice town ( TX native and home since last year, moved from CA) and huge growth 5K in 2000, 20+K this year and prices all over. Foreclosures up 35% YOY in county (from San Marcos paper, someday I’ll figure out how to link)