A Record Three Million Homes For Sale In The US
Some reports that Wall Street got it wrong yesterday. “Better-than-expected housing start numbers and a tickdown in interest rates appeared to drive homebuilding stocks Thursday. However, some market experts believe investors may be misreading the housing start numbers and caution them on the sector’s outlook.”
“U.S. housing starts fell 7.9% in February from January to a seasonally adjusted rate of 2.12 million starts, which was slightly higher that the 2.04 million starts that economists had been projecting. Although the numbers are higher than economists’ had expected, Barron cautioned investors not to assume the data automatically means housing demand is robust.”
“‘They (housing start and permit numbers) represent supply, not demand,’ said Alex Barron. ‘The data means builders are still building houses, but it doesn’t tell us anything really about demand.’”
“Indeed, he said he’s noticed an increase in speculative building among homebuilders in the last 12 to 18 months. Barron said feverishly-high demand for housing from both homebuyers and speculative buyers (or flippers) over the past few years led to labor shortages, which created long waiting periods for a home to be delivered, in some cases stretching out more 12 months. To combat this, some builders applied for permits and began construction on homes before sales were made.”
“‘The high level of construction may worsen the supply-demand balance,’ concurred Banc of America analyst Daniel Oppenheim. Oppenheim said recent trends show that traffic and pricing are weakening, cancellations are increasing, and the length of time needed to sell a home is increasing. He said inventories of both new and existing single-family homes for sale reached a record 3.03 million units in January.”
“While the slowdown seems sharp, the pace of groundbreaking was well above Wall Street forecasts for a 2.03 million unit pace, and January construction was revised up to show the fastest rate of housing starts in 33 years. Single-family starts were down just 2.3 percent after a 14.3 percent gain in January.”
“‘Doubtless these numbers will be followed by a rash of commentary to the effect that rumors of the death of the housing market are greatly exaggerated. This would be the wrong conclusion to draw,’ said (economist) Ian Shepherdson. ‘It is not possible for sales to trend down and starts to trend up.’”
“‘Housing starts “have been so affected by unusual weather conditions as to make them almost useless as a measure of what is truly happening to housing demand,’ said David Seiders, chief economist at the National Association of Home Builders. ‘It’s likely that in coming months we’ll see a pretty decisive downshift,’ he said. ‘When you see how sales have been going, these are not starts levels that we could sustain.’”
And a mortgage REIT had an announcement last night. “Home loan provider Aames Investment Corp. on Thursday said it will shed its structure as a real estate investment trust to give it more flexibility and bolster its ability to generate more capital.”
“Aames, which doles out family and residential mortgage loans, said it will delay filing its 2005 annual report with the Securities and Exchange Commission due to the pending completion of a corporate cost reduction initiative. The company’s board signed off on a restructuring plan aimed at consolidating wholesale operations in response to ‘current challenging market conditions.’”
“Aames will also introduce a more stringent loan pricing and eliminate loan products that have become unprofitable.”
Off topic, but I wanted to get this link out there one more time for all you blog readers. This is a good article from a very informative site about inflation… The article details why the government is really eliminating the M3
mojo,
What type of inflation hedged investments are you looking into if any…
Just trying to get some ideas about what others on this blog are preparing to or already are doing with their money…
I wish I had an answer for you. I’m a young person (mid 20’s) who over the last year or so has become fascinated with the housing bubble, inflation, and just macroeconomics in general. Like you, I’m interested in learning about ways to beat inflation if, as the author states, we have a return to the 1970’s.
One question I do have is this: While I believe that housing is extremely overvalued and must return to some real type of normalcy, if we do get near double-digit inflation, how could house prices actually drop? They couldn’t could they?
More specifically, what happened to the price of housing when inflation was running rampant throughout the 70’s? Since I wasn’t born then, I have no first-hand perspective.
Mojo,
Have you seen the book “Secrets of the Temple”, by William Greider? It documents the transition at the Fed from the inflationary 1970s to the recessionary 1980s, and provides some hints about how the current round of asset price inflation might play out…
Huge differences with the 70’s:
There was WAGE inflation too back then
Also, people have way way more debt now than they did back then. They would be crushed by the high rates that inflation would bring.
I lived through the 1970’s, and you are correct, Deb. Without wage inflation house prices cannot go up. In the 1970’s, housing was a good way to deal with inflation; you got a fixed rate mortgage and paid it off with cheaper dollars each year. However, the mortgage rates then got out of hand (like, 16%-18%).
Inflation would shrink the REAL value of debt and help to bail out the irresponsible consumer as well as the federal gov. Inflation will lead to higher nominal interest rates not necessarily higher real rates. The losers are people who have assets > liabilities and people whose real wages will be declining.
That’s a simple and clear way to put it. Isn’t capitalism supposed to reward people who work hard and earn assets?
I find it odd that the current leaders in government claim to have ‘high value’s and yet they discourage savings and hard work to acquire assets and they encourage Americans to acquire greater and greater amounts of debt.
During the 70’s housing prices rose. If you want to look at views on inflation/deflation then “Conquer the Crash” by Robert Prechter is a good place to get an understanding of the deflationary arguments. Prechter argues that the most likely scenario for the USA is a deflationary crash as stocks and RE and bonds and some other items deflate, which may or may not be followed by a time of high inflation.
If I remember correctly , the housing boom in the 70’s was triggered by a lumber shortage /price increase ,than it just started feeding on itself . In the late 70’s /early 80″s the credit tighting /sudden high interest rates stopped the frenzy .
“One question I do have is this: While I believe that housing is extremely overvalued and must return to some real type of normalcy, if we do get near double-digit inflation, how could house prices actually drop? They couldn’t could they?”
The double-digit house price inflation of recent years is currently in the process of reversing itself, and the reversal will not stop at a lower rate of home price inflation as the soft landing crowd keeps claiming. This is due to the combination of supply response — a race by homebuilders, flippers, and long-time owners to sell into the all-time high market price — against a backdrop of the Fed taking away the punchbowl (Alan Greenspan and now Ben Bernanke raising the Fed Funds interest rate). Monetary policy has a lagged effect on demand, so no matter what the Fed does at this point, demand will steadily erode for another 9-18 months at least, while the builders race to squeeze the last drops of profit out of this mania. The aftermath will be the ugliest thing to hit the financial markets at the very least since Paul Volcker took over at the Fed in 1979, when back-to-back recessions followed his efforts to get inflation under control.
but the USD is overvalued probably. and we cannot pay our trade deficit back unless we allow the currency to inflate a bit. inflation will bring rising wages and then the income/price ratio of homes will have to readjust. same thing with stocks. in the 1970s stock went froma P/E ratio of 20 down to 5. But that was not because stock prices went down 75%, its because earnings went up 4x over. stocks from 1964-1981 were at the exact same level. why? because of inflation.
I agree that there will be a very hard super–hard landing for the economy, but im affraid housing prices will not go down in nominal terms….
I am fascinated by inflation topic. I haven’t heard anyone say any positive thing about inflation. One thing I have in mind is that inflation should be a good news for those who have a mortgage or mortgages. Because inflation will effectively shrink your debt. In other words, if I owed $100K now and there were 80% inflation tomorrow, my debt of $100K would become almost nothing. My salary would have risen 80%, but my debt would still stay at the same dollar amount. Does anyone agree with my thought?
We have been under inflationary conditions since 2000–gas, housing, food, medical ect. Wages have not increased but have actually decreased! Why would some greedy corporation keep up with the cost of living when they can and have outsourced all their jobs to foreign countries for pennies on the dollar? This did not happen in the 70s
Mojo, nominal house prices were down slightly in the 1st recession in the 70’s and down more in the second recession due to astronomical interest rates. In real-terms house prices were down significantly (thereby helping affordability get back in line).
This go-around, I just don’t see inflation bailing out the homeowner so nominal losses will be much more severe, I think.
Inflation won’t bail out sellers because it always goes back to supply/demand
As a pure trader though, I think as Ive been saying for weeks that better short entries will present themselves for these homebuilding stocks. They can be played long right now for a very brief period for the very nimble.
Hedgefundanalyst,
Wait a minute. Why did you think that inflation won’t bail out home owners? if I owed $100K now and there were 80% inflation tomorrow, my debt of $100K would become almost nothing. My salary would have risen about 80% or even 50% (due to inflation), but my debt would still stay at the same dollar amount. I would think inflation would help home owners who still have mortgages tremendously!! The US government or any governmetnt for that matter uses inflation to help pay off or shrink their debts. Why would inflation not work with home owners?
Don’t kid yourself. Because of stagflation and globalism, there will be no little or no corresponding wage inflation. Your hypothetical debt of $100k would be subject to astronomical interest rates, but your ability to pay will be greatly diminished. You’d be a pauper in short order.
From what I can see from my end i doubt that companies are going to give raises that equal inflation as they have not in the last 5 years. I work for a company that continually has profits every quarter and we are doing strategic layoffs and this puts more fear to those still have jobs.
Betamax is correct. There is very little chance of wage increase here as long as we are outsourcing.
Lot’s of good answers here Mojo - I’d add that, when we invoke the term “bubble,” it means more than just high prices. For the past several years, there’s been huge speculation in the housing markets - everyone’s doing it, everyone’s making money, etc. When you notice everybody and his brother, his barber, his cab driver and the guy behind him in the supermarket checkout line talking about the same “investment” theme, you best start asking very tough questions. Doesn’t matter if it’s houses, stocks, tulip bulbs or gold coins. All that to say, this was not the case in the 1970’s with real estate. Houses were just a place to live back then. My family moved back to New York City from New England in the late ’70s, and I can tell you that real estate was dirt cheap back then - no one wanted it. Donald Trump’s father was running the family business back then and was almost a slum lord.
The final thing to know about the 70’s was that you had to have, get this, a 20% downpayment, to get a mortgage. And you had to wear a tie down to the bank, and explain yourself, sweatty palms and all, to the mean old loan officer.
Inflation may indeed be what finally saves the housing market, but in the interim, there’s a ton of adjustable paper out there (didn’t exist in the 70’s - ARM’s were an “innovation” from the early 80’s, I think). If there is inflation, rates will get cranked hard and, ahem, help add fuel to “for sale” inventory before there’s any overall inflation effect on housing. My two and a half cents.
It depends on what ‘type’ of inflation takes place. We could have “real” inflation- where wages and prices push prices and interest rates higher, or we can have a monetary inflation where ther fed prints up too much money, or a combination of the both.
The seventies inflation started with Nixon removing the backing of gold from the dollar, and price freezes. Then came the oil shock in 73-74. Then came Jimmy Carter and his terrible fiscal policies and the loss of faith in the US.
Remember from 1972 until 1982 the stock market went no where.. It crossed 1000 in 1972 and took ten year to cross it again in 1982. Then like now people moved their money from stocks to bonds, real estate and hard assets.
Just like now wages were stagnant but inflation- mostly houses and hard assets skyrocketed. We had staglfation with interest rates as high as 21% and taxes as high s 80%.
The prices of houses did rise, but the real value after the depreciated dollar and inlfation adjusted value was minimal.
The main difference between then and now is that as a nation we were the largest creditors and now we are the largest debtors. There is no cushion to fall back on and the prices of homes have already doubled prior to the inflationary run up. Either incomes have to catch up with the price of homes or homes need to fall back in line with incomes..
“All that to say, this was not the case in the 1970’s with real estate. Houses were just a place to live back then.”
Maybe in your memory. But Greider’s book suggests otherwise (houses and gold bought on spec as inflation hedges in the 1970s, kinda like last year…)
Yep. I was there too, and real estate was definitely something that would be a “safe place to put your inflating dollars” because it “never goes down.” By 1980 there was a frenzy into investment property even as interest rates skyrocketed. Before our move to Seattle in 1981, I remember hearing one of our house packers talking about his rental and all the money he was making and what a great tax shelter it was…
A contrarian indicator, of course, but I was in my late 20s then, and swallowed it hook, line and sinker. Wonder I didn’t end up losing any more than I did…
Does make you leery of subsequent bubbles, though.
As the dollar gets weaker and Iran will soon change from US currency to the Euro for oil , this will lead to a much higher inflation. Here is a scenario that I was told by credible sources will most likely happen. We all know that the feds can create and dissipate recessions at will (all they have to do is tinker with the interest rates). When a recession sets in many people go to traditional jobs that have some form of a security blanket. Watch as this bubble begins to burst that military enlistment goes up (historical data to prove it). Could this have been planned??? who knows, but there are many ways to manipulate a system when you control it. If everyone owns a house and are in debt up to their eyebrows, then they feel they have the resposibility to keep up with there payments etc…recession sets in and thats leads to taking less risky jobs that wont jepordize their social status and homeownership. The average American does not look at the overall picture until it is too late
I believe that we will experience high inflation in the short term but soon come to a tipping point and slide rapidly into depression. With the extraordinary debt loads throughout our economy, we will have significant deflation. All the foreclosed houses and condos will have to be sold by the banks that own them at the best price they can get. They can’t afford to hold them long. All the repossessed cars, boats and plasma TVs will be sold at fire sale prices. Unemployment will soar and housing prices will plummet. Before it is over, buyers will be able to buy at less than 20% of the peak prices of last year.
Hard to believe, I know, but this country is unbelievably vulnerable to a massive financial crisis and I believe one is inevitable and coming soon.
I have been thinking about this type of scenario lately. I think that Americans (no offense to thinking people on this blog) are dumb, fat and happy (again, generally) and they don’t see a coming economic crisis. That’s the sort of thing that happens to Argentina, not the good ol’ US of A. I don’t know the odds of a NUCULAR (pronounce each syllable like our Shrub in Chief) economic meltdown, but the parallels from our past (see 1929) and from other country’s problems, seem to be surfacing.
I think you are right but it will take 4 or so years to play out … the fed will try to keep down rates to avoid recession but will be forced to raise them due to dollar weakness … we could see a 70-80% haircut in real terms … but if rates average 15% over this time this will be “only” a nominal drop of 47.5 - 65% … I cant see how average rates can possibly go higher than 15% in the next 4 years … so I’m sure we can expect nominal prices to halve … evn if we are optimistic and forseee only a 50% haircut in real terms this still represents a 12.5% nominal drop and thats if rates and inflation average 15% which is unlikely in the short term … after 4 years is when the shit really hits the fan - increasing inflation will save nominal prices then but dont expect a bottom for a further 4 years out … my 2.75c worth
I guess from the macro-economic point of view, the US economy is becoming an empty shell due the the inflow and outflow of the fortune:
1. deficits and debts are hitting record high
2. losing high-skill jobs ( around 30% info tech jobs have been lost since 2000 according to IEEE)
3. declining income with college graduates ( more than 5% drop nationwide since 2000 according to CNN)
The rich, OTOH, are getting richer. They own the big businesses that are aggressively cutting jobs in the US to increase their profit margin. So I expect homes tailored to the super rich will continue to sell, but middle class homes are going to take a big hit. We might not be able to trust the coming medium or average prices when only the super rich are buying homes.
Jimmy Carter also misporonounces it this way, and he has a degree in nuclear engineering, doesn’t he?
Correction: He pronounces it nuke-ee-ur.
Nothing more than a “nice” increase in inventory according to Mr. Learah….. riiiggghhht……
BigDaddy63, you sound very knowledgeable about the So Fl real estate market. I’m currently renting in Fort Lauderdale waiting for condo prices to come down at least 20%. Any thoughts on how long I might have to wait?
Amber,
They already hav but IMHO it is way to early to consider buying.
Condos in South FLorida used to be like herpes- you had it for life. Then we had the housing boom in the last 5 years and the stigma of owing a condo was lost in the mania. With the huge glut of inventory, I would suspect if you wait 6 months to a year you will be very happy.
Aames , if I remember correctly , was always a big second trust deed lender for refiances as well as home purchases . Aames could really be high risk for losses if this market keeps down turning .
“‘They (housing start and permit numbers) represent supply, not demand,’ said Alex Barron. ‘The data means builders are still building houses, but it doesn’t tell us anything really about demand.’”
With steadily rising used home inventories reported from virtually every major urban market across the USA, and increasing numbers of new home order cancellations, the only logical conclusion from the strong report on new homebuilding is that the supply side has gone on autopilot, and not just a little berserk…
For all the talk by builders, the huge speculative demand just swept them away, leading to way too many high-volume projects being pushed into the pipe over the last 12-18 months. They (the builders) are left with a huge investment in land/prep costs to cover, and only by building out what they’ve started can they save the basic expenses. The trouble as I see it is that this process is years in the making and years in the unwinding, and all the while prices will slowly auger in.
YUP……
stagflation is complicated
mm and foriegn div payors are ok
IGD,PID and lots a CASHHHHHHHHHHHH
mm to be paying 5% soon
I still believe the homebuilders have a lot of wiggle room in their profit margins. They can afford to cut prices on the way down. After all, they were reasonably profitable several years ago when houses (in a number of markets) cost half of what they do today. They are going to extract every last drop of honey from this bubble…as they should. Adding supply is the proper economic response to high prices. If Toll Brothers doesn’t do it, someone else will. Despite the beginning of the end for the housing bubble, prices are still astronomical and demand, by historic standards, is still okay.
In many ways, the homebuilders are really our friends. They will keep adding supply, and unlike many private sellers, are realists. They don’t have any emotional attachment to a home or a price point that they feel is “deserved”. They will aggressively cut prices when necessary and undercut the flippers. They will lead the market down. When it no longer becomes profitable to build homes, they will go into land-buying mode.
I agree with you 100% , great points .
Yep…right on the mark!
Any person in their home that needs to sell and has been in it for 5-10yrs can easily undercut a new home builder’s prices. Serious sellers - Divorce, Illness, Job Transfer, Job Loss, Retirement… will begin to undercut the market to make sales. This is like the stock market where ultimately BASIS is to a large degree how initial bottom-line sales prices are rationalized to sellers, “Honey, we only paid $200K so we still make 50% if we decide to sell for $300K”, even in a market that was delivering $400K 3 months earlier.
Then the FBs will be foreclosed and believe me, this will take the builders $$$$$$$ out from under them in a hurry.
I’m gonna short a basket of HB before the end of Mar.
I am not so sure thats going to happen too easily. People are thinking that there most recent house values are what they have for their net worth. If you thought $500k, its still going to feel like you are losing $200K if you now need to sell for $300K.
This adjustment in prices down is at a nails pace, so what is going to be the piviot point?
americaninventorspot.com
A great number of homeowners have already spent their bubble equity with a cash out refi. They won’t be able to cut their price enough to keep them above water. Divorce, job loss, etc. will make FBs out of people who have been in the same house for 5-10 years but refinaced to remodel, buy a car, boat etc. They will have to turn in the keys just like people who bought near the top.
There was an ad on Craig’s list for a Village home in South Riding, VA (NOVA) for $500k. All of the others were listed for $600k. Why so cheap? The owner has lived in the house for 7 years, and had already made a killing on house. Why list it at $600k and have it be on the market for 6 months, when you can list it for $500k and sell it in a week or two? Either way, he made a killing, as I bet it sold for around $225k when it was built 7 years ago.
In comparison, 4br townhouses go for $500k, and 3br for a little less than $450k. Those $450k townhouses sold for $180k when new in 2000, and $240k in 2002. If I lived in one of those and had to move out of the area, I’d list mine for $375k and undercut everyone else — the profits would make a pretty nice downpayment on a house in Indianapolis (or Raleigh, or…).
Wrong !!! The homeowner that has been in their house for 5 or 10 years is not located in the “New Home Builder” tract…People want “New” AND, how is your 10 year homeowner going to compete with the new home builders “Financing Offer” of a fixed rate loan @ (lets say) 4.5% ??
$100K less for a 10 yr old home than for a new one will convince buyers to consider a used home.
That’s just not happening yet but setting up nicely with huge inventory builds. It’s the first step. Now the SERIOUS SELLERS - with 2 mortgages, death, divorce… will need to attract buyers to sign.
You did “NOT” answer the question…How will the 10 year homeowner compete with the new builder offer of (lets say) 4.5% fixed rate financing ??
Where are these magical fixed rates going to come from that a buyer couldn’t get otherwise in the mortgage markets. The HBs don’t print $$$$$ or hold loans - They go to 3rd party lenders. There may be a tiny margin that won’t hold up against a $100K pricing differential.
Underlying land values and building costs were a tiny fraction 10 years ago compared to today. That’s what the HBs face for competition when inventories skyrocket. The BASIS is what ultimately drives the bottom line price once the prices begin to decline.
Now, those with HELOCs, 2nds, 3rds… have a NEW basis that won’t permit the drop, so they will forfeit keys in the long run…
Easliy. In South Riding, townhomes sold new for $180k in 2000. Roughly equivalent new ones (roughly, because they are about 200 sq/ft smaller, but have granite) are listed by Toll Brothers for $440k. The owner who bought at $180k (and has $135k left on their 30-yr fixed) can easily undercut that price.
Some ‘old owners’ can sell for less, but many have already mined the ‘equity’ out of their home and cannot afford to.
Any person in their home that needs to sell and has been in it for 5-10yrs can easily undercut a new home builder’s prices.
There is a big difference between “CAN” and “WILL”. I “can” use an option-arm to purchase an overpriced crackerbox, but I “will” not do it. Sellers are typically slow to realize that market is changing. Psychology also comes into play. Many people truly believe that they are savvy investors who are entitled to same price or more than their neighbors got for their homes 6 months ago. Most people in this country still think home prices are headed up. That this slowdown of late is just normal seasonal slowness exacerbated by the media scaring people about a housing bubble. The home builders, on the other hand, know the score, even if they don’t admit it publicly.
Where are these magical fixed rates going to come from that a buyer couldn’t get otherwise in the mortgage markets.
Easy. Nothing magical. HBs can buy points on your behalf. It’s just another creative way of lowering the price without causing a scare by actually cutting asking prices.
I looked up in foreclosures.com. In my condo development(where I rent) there are atleast 20 /25 in either tax lien or preforeclosure.
I assume all these people WILL sell at some point soon.
Already two condos around mine are in ist round of competitive reduction(though small(15K/490K). Another one listed yesterday at the same price!
Here is a posting elsewhere on this thread about the Tucson market:
“some of those 3,000,000 homes are in tucson. here’s a clip from the san diego investors board.
“Just got back today from Star Valley. Ugh. I looked at four streets near mine. 23 properties for sale and 5 for rent. One offered a lease option and the sale price is 299k. A couple had zero down, I saw one FSBO. I have had mine on the market for about one month and have had zero calls on it. It is on the Tucson MLS. There are more people living in the neighborhood, but the amount of homes for sale is ridiculous. NTM, that isn’t counting the completed homes that are vacant with no signs. I doubt very much I will sell this house by June. In that case, I will get a tenant in there. I am also looking at adding a lease-option. This is most definitely not working out like I had planned. It appears szabo brought a lot of his investors to Star Valley and we all had the same idea-flipping. Ain’t happenin’ folks. Very disappointed in this.”
Seems to me that homebuilders are going to have a tough time selling new spec homes in this environment. I think they are toast in Tucson!
Right on the money…..
My above post was suppose to be below rentinginNJ…
AP
William Lyon CEO Begins Offer for Company
Friday March 17, 9:31 am ET
William Lyon Homes CEO Offers to Buy Outstanding Shares for $93 Apiece; Shares Soar
——————————————
Up 30% today
Private builder will survive. I wonder why he isn’t waiting and buying for 1/2 or less.
Private “Big Builder” will survive…mid size or small builder is toast….
3 words: pump and dump
Reading about the retrenchment in the mortgage banking industry, I recall a political cartoon from the late 1980s: A guy comes up to the window at an S&L and asks “You guys have any more of those loans you don’t have to pay back?”
so funny
I remember that cartoon! Amazing how history does repeat itself again and again. They will be able to reprint that a year from now.
These loans are known in the biz as “forgiveable.” I suspect we will soon learn that many of the subprime I/O 100% financed option ARMs were of this variety…
FWIW, it was reported yesterday that Toll Bros. are coming to Houston. I guess they have run out of places to build McMansions.
They’ve been in Dallas for awhile. Building way way out in the boonies. Who cares.
Houston, yeah, they have a housing shortage there too:
http://globaleconomicanalysis.blogspot.com/2006/03/houston-we-have-problem.html
Interesting. I think I might actually agree with the quote from the NAHB guy, though weather is only one factor. I dont put a lot of weight on housing starts at this point becouse builders could be building early in order to sell at the highest price possible- before things get ugly.
bubble-X
BubbleTrack.blogspot.com
some of those 3,000,000 homes are in tucson. here’s a clip from the san diego investors board.
“Just got back today from Star Valley. Ugh. I looked at four streets near mine. 23 properties for sale and 5 for rent. One offered a lease option and the sale price is 299k. A couple had zero down, I saw one FSBO. I have had mine on the market for about one month and have had zero calls on it. It is on the Tucson MLS. There are more people living in the neighborhood, but the amount of homes for sale is ridiculous. NTM, that isn’t counting the completed homes that are vacant with no signs. I doubt very much I will sell this house by June. In that case, I will get a tenant in there. I am also looking at adding a lease-option. This is most definitely not working out like I had planned. It appears szabo brought a lot of his investors to Star Valley and we all had the same idea-flipping. Ain’t happenin’ folks. Very disappointed in this.”
OT but important news:
William Lyons CEO has made offer for stock of WLS at 93. Last trade I was was at 99. It had been trading in the low to mid 70’s before the offer. Usually management buy-outs are highly leveraged. Kinda wonder what lender is willing to back this offer. It is hard to believe that a lender exists out there who doesn’t know what readers of this blog know.
There is a distinct possiblilty that this offer is for the purpose of “spooking the shorts” and will fade away. I am short WLS and am holding. We shall see what we see.
Man if you can hold your short through something like this, you are The Man indeed. Waking up one day and finding that a short went 25% the wrong way overnight on a takeout offer would kill me. Good luck — I’m with you to a lesser degree on an HOV short which is up 10% two days after an apparently meaningless downgrade by S&P.
I wrote over on Keith’s bubble log that I am starting to think that this rally is the final short-squeeze before the reality of a lousy spring selling season is known. (That said, the post a little higher up that they’re “selling like pancakes” is a real teeth-gnasher.)
“Inflation may indeed be what finally saves the housing market, but in the interim, there’s a ton of adjustable paper out there (didn’t exist in the 70’s - ARM’s were an “innovation” from the early 80’s, I think). If there is inflation, rates will get cranked hard and, ahem, help add fuel to “for sale” inventory before there’s any overall inflation effect on housing.”
Rising costs of construction along with higher rents are positives. However it will only work this next cycle in areas where you can buy at way below replacement cost at a gross rent multiple under nine. Certainly not those often talked bubble markets where prices are $300+ psf and GRM’s are at 25+
Transcript highlights from the “Today Show” this morning between Ann Curry and Jim Kramer of CNBC’s “Mad Money”
AC: Well Jim Kramer with CNBC’s “Mad Money” is here with a little Luck ‘o The Irish money advise…ya know big, big opening day today for stocks, and you say there’s a pot ‘o gold.
JK: I always like to say on my show, that there’s a bull market somewhere. The bull market is right here, right now. First time in six years. Call your broker, sell the real estate, buy the stocks.
Later on
JK: I can not contain my enthusiasm for stocks right now because there’s just too much that’s working. I think real estate’s not working, stocks are. I know the negatives, but the negatives are not enough to stop the bull.
If Jumbo Crames is saying that, I’ll go give all my puts a big hug.
I think the run up in stocks over the last four months may be some rotation out of real estate (Mortgage backed securities etc.)…However, the wild card is Interest rates…If the continue up (7%-8%) then the bull is gored….won’t have high stock prices in a recession…no earnings…
It could be all that burgeoning global liquidity just looking for a home (and remember M3 vanishes soon…)
http://www.financialsense.com/fsn/BP/2006/0311.html
Ironically the stampede into stocks could be dampering those of us who have hedged by shorting homebuilders while our homes are also going down in value. And my long techs and healthcare stuff slides down at the same time. What an ugly week.. Stocks s**ck as does bubble RE IMHO..
You too can be the bank on a liar loan.
http://www.prosper.com/public/lend/listing.aspx?listingID=1471
Good Lord, I hope this is some kind of sick joke. This is just not how it’s done, during any age under the sun.
I would not lend this guy 2 cents at any interest rate….Beggar !!!!
I was going to offer to loan $1. but they want you to register. I hope they lose their A$$es
this march 03 2006 has a big box up at the top showing you the appreciation rates of communities near Detroit, implying things are rosy, even though the article is titled “home taxes up, values flat”, and the ending line from a Detroit area realtor who says he tells his clients straight-up that they should plan on it taking at least 6 months to sell their home and they’d better be prepared to get it in good shape for showings, and said…this was the *are you serious* kicker …that in some areas there is a *3 YEAR SUPPLY* of homes for sale, to get worse this spring when new listings crop up.
How long can people keep values “flat” when there is a 3-year-supply?!
http://www.detnews.com/apps/pbcs.dll/article?AID=/20060303/BIZ03/603030422/1012/BIZ03