A ‘Culture Of Pricing Risk In Home Lending’: MA
The Christian Science Monitor has this report on the housing bubble in Massachusetts. “More than one-quarter of Boston’s mortgage-holders appear to be stretched thin financially, spending at least half their income on housing, according to an analysis of census figures. That’s more than twice the national average and the highest of any major city except Miami.”
“The number of homes sold in Massachusetts dropped a whopping 21 percent in January compared with a year ago, the largest year-to-year decrease in monthly home sales in a decade. As a result, home values have begun to soften. Statewide, they actually fell slightly in January compared with a year ago.”
“Such pressures are forcing a rising number of homeowners to erase their debts by forfeiting their homes. Foreclosure filings in the county that includes Boston nearly doubled in January from a year ago. ‘Homeowners ‘call us and are heartbroken,’” says Robert Pulster, (who) works with Boston residents on the brink of losing their homes. ‘They thought it was their dream.’”
“More trouble lies ahead, some experts warn. ‘I would suspect that as home prices soften, you are probably going to see a ramp-up in defaults, delinquencies, and foreclosures,’ says Nicolas Retsinas of Harvard University. ‘It is not that they were not stretched before, but if you couldn’t make the mortgage payments, you would sell. If the market is softer, it is not as easy to do this.’”
“‘This is the first decade that we have had this culture of pricing risk in home lending,’ says Susan Wachter, professor of real estate at the University of Pennsylvania. ‘What happens if someone loses a job? If you are already spending 50 percent of your income toward a mortgage, there is no cushion.’”
“The number of homeowners with mortgage trouble is rising, says Saul Perlera, who owns a real estate firm in East Boston. Some were scammed by lenders, he says. Others were too quick to buy. ‘A lot of them just do not listen. They want a house,’ he says. ‘I try to advise them: You can get a house, but you might not be able to stay in it.’”
Other experts say not to worry. “‘The air is coming out of the balloon,’ David Lereah said, who argues a balloon is a better metaphor than a bubble to describe a market he characterized as going through a temporary price correction rather than a collapse. ‘The bubble is not bursting. The solid fundamentals in our economy will keep the real estate expansion alive,’ Lereah told about 250 real estate agents at the New England Realtors Conference.”
“Lereah said predictions of a housing bubble are based largely on data showing a widening gap in personal income growth compared with more rapidly rising housing costs. He said such comparisons ignore the fact that interest rates remain historically low despite recent increases, putting monthly mortgage payments within reach of most consumers. ‘You have mortgage rates below 7 percent,’ Lereah said.”
“‘The air is coming out of the balloon,’ David Lereah said, who argues a balloon is a better metaphor than a bubble to describe a market he characterized as going through a temporary price correction rather than a collapse.
Does it seem like the lady doth protest too much?
How about slow motion meltdown?
Simmssays…
AmericanInventorSpot.com
An important question for Mr. Lereah to contemplate: What is the duration of temporary? The popular notion of temporary is probably something like six months. The historical evidence suggests real estate price corrections take six years or so to play out.
I’m not sure a balloon is the metaphor he really wants to use. When I think of the air coming out of a balloon I think about what happens when you blow up a balloon and then let it go - it farts crazily around the room until it is (very quickly) deflated.
Heartbroken about their “dream” my ass. Their “dream” was to have the crackerbox “appreciate” 10-20% per year so they could spend all that free money and then flip it off to the next sucker.
Spare me. Please.
That’s what I was thinking to …..Also a total break down in lending practices.
Couldn’t agree more. Let the greedy ba$tards rot.
Why is it that seemingly mature adults turn into helpless children at the first sign of financial crisis? They confidently blow in and sign everything put in front of them on the front end but when things don’t work out, start whining and looking for someone to bail them out.
Because we’ve become a helpless society. Once upon a time people were allowed to fail. Not anymore. People make foolish and risky investments and purchases because the consequences are not that great anymore. It’s not their fault they didn’t understand the loan, it’s not their fault they lost their job. It’s not their fault the housing market is crumbling. Somebody has to bail them out.
Entitlement Society.
I doubt whether they will learn the lesson.
or the European variant on the dream: buy a 1 million euro home the day you get your first payslip. Why work hard for many years if you can have it all right away, thanks to the ECB? Live now, worry tomorrow.
Well, I sure hope there will be lots of things to worry about for these people in the next 10 years or so …
I have to wonder what makes some posters so bitter. We wanted something bigger we moved to where we could afford it…. If you’re still renting that was your decision to stay in that area. As much as you whine about sellers you make vast assumptions about our reality. If you stayed where people are stupid I guess that’s your reality. But guess what? Smart people left those areas a long time ago..and have not spent the last few years miserable. Go figure!
I don’t sense any bitterness in the above posts - just contempt for the reckless financial behaviors that have been facilitated by low lending standards, cheap money, as well as a sense of entitlement. We will all pay as this shakes out, as the macroeconomic effects will be felt throughout all regions of the country. Even upstate
Well, we’re in cheapville after our MA experience cramming a family of 4 into a 1300′ Cape and making my h drive 90 minutes to work. That home was purchased in 1999. I don’t think its a stretch that some people might want to live in a place of their own. We purchased after I angered my last landlord. At 8 mos pregnant he was upset I got police involved for blocking my driveway. He didn’t see the problem in my parking down the street and walking with groceries and an 18 mos old.
You didn’t read the article, it would appear — these are not flippers, these are working class and immigrant families trying to make it in one of the most overpriced markets in the country.
Sorry this is off topic, but I was checking the Las Vegas Realty Times and I saw this:
“March 2006: Over the past year or so, appreciation had cooled, days-on-market had expanded to all-time high. Listings are being repriced three to four times before selling - all in favor of buyers. This year, however, shoud bring positive change throughout the valley. ”
Translation: Now that 2005 is over I can tell you it stunk, but this year is going to be better…I hope and pray.
Simmssays…
AmericanInventorSpot.com
The perspective of what is positive obviously depends on what side of the issue you are on and makes these kind of comments interesting. Escalating prices are only “positive” to sellers, while declining prices are “positive” to buyers. Since you need a buyer for every seller, house price appreciation (as we all know) should only be mirroring the inflation or cost of living index. That would be positive for everyone. There should be no reason to hype higher prices as a “positive” except for the greed of people involved on the selling side. Why don’t we see some statements like, “This year, however, should bring positive change throughout the valley as prices plunge back to pre-bubble days and more families will once again be able to not only afford a home, but to furnish it and also start saving again for the future”. I think realtors should secretly hope for a crash as it would stimulate sales volume which should make up for any decrease in sale commision related to price.
Excellently put. Realtors are kin to used car salesman(trained monkeys) that are crying for the “24 sale” from a year ago. They will have to face the fact that investors are gone and have to deal with ‘normal buyers’ that won’t pay an outrageous amount just to get their deal done.
“There is no bubble”, says Jedi Lereah.
Interest rates are going to magically stay at 7%?? Strap on the hip boots.
Lereah has been destroying thousands of lives. I just hope he can rest himself at night with blood on his hands.
He is too dumb to worry about moral liabilities…
The only reason he looses any sleep at all is because he’s been counting all of the loot he’s been making off the bubble.
Most of these types of guys don’t lose any sleep. The heads of Enron, Ameriquest, and other questionable firms probably sleep well and are having fun enjoying their big bucks. Too bad for Joe Sixpack though.
RESOLVED: Every person reading this blog thinks David Lereah is an ass.
THEREFOR: Every person posting need not jump on every post containing a David Lereah quote to affirm this fact.
A quarter of Boston mortgage holders are paying more than 50% for housing? That’s insane in light of the strong economy and the huge run up in prices (but not equity) over the last few years.
Learah is the Jack Grubman of the housing bubble. We’ll stipulate to that. Mayhap one day we will see the good Mr. Lerah do a perp walk if he’s been self-dealing out the back door while spouting his little homilies.
They have leveraged their jobs “Big Time”…Very unstable in my opinion…
the how-much-house-can-you-afford calculator on the freddiemac website tells me, without pointing out the %age figure, I can spend 50% of my income on housing, so it must be okay
Robert, this is obviously sarcasm?
If you have to ask then it was a successful obfuscation.
lereah’s balloon has a lot of air…long leak ensues.
Man, this guy drives me crazy — he’s arguing against himself and he doesn’t even know it! Yes, that’s exactly the point, David, low interest rates have enabled people to claw their way into homes they wouldn’t have been able to purchase otherwise, and thus pushed prices up by artificially increasing the pool of buyers. Historically low interest rates are not a “strong fundamental”, they’re an anomaly that had to come to an end sooner or later, and so the affordability process that took place ultimately reverses itself, and prices come down. And his comment about mortgage rates being within reach of most consumers is pure B.S. (except in places like Texoma). A small percentage of the population in CA, FL, DC, MA, NY, NJ, Phoenix, and Las Vegas can afford to buy the median-priced home.
This myth that mortgage lending rates are properly classified as “fundamentals” was propagated by a New York Fed study:
http://www.ny.frb.org/research/epr/04v10n3/0412mcca.html
Unbelievable. They deny that a bubble exists by pointing to the very cause of it.
This is a common Fed tactic, used to absolve themselves from culpability when bad stuff goes down in the macroeconomy. For another example, “These persistently low asset yields are quite a conundrum”…
maybe Lereah should refer to the FED’s printing presses as the ‘economic fundamentals’ that drive real estate appreciation; in that case he has a point.
The deck chairs were re-arranged and the band continued to play as the Titanic went under. That’s all we’re witnessing here. Oddly, the Fed governors & chief, many politicians… all enabled this charade, and continue to go about their business of pumping. It’s a been a conspiratorial set-up of epic proportions, and what’s remarkable is, it’s not over even in the face of overwhelming mounting evidence!
Is there any high ranking official left that’s honest?
AZ_BP,
Well put…
Awesome analysis. Low interest rates are not a fundamental.
Anonymous blog poster to NY Fed: Long-term interest rates are endogenous, and endogenous variables are not fundamental.
Again I say , “Why did Lenders allow these high income to housing cost ratios “. Its a set up to a big fall .
It’s all about the commish– Good old-fashioned greed.
“Lereah said predictions of a housing bubble are based largely on data showing a widening gap in personal income growth compared with more rapidly rising housing costs. He said such comparisons ignore the fact that interest rates remain historically low despite recent increases, putting monthly mortgage payments within reach of most consumers.”
The really scary part about his comment above, is that in places like Los Angeles affordability is actually considerably WORSE than it was at the last peak (with interest rates at 10%), even comparing monthly payments, not home price. Rates fell from over 10% to a low of just over 7% during the course of the bust. This offered a huge cushion on the way down, as affordability increased by way of price decreases as well as dramatic rate decreases. Falling rates also saved anyone holding an ARM.
This time we will have the opposite effect, as affordability increases by way of price decreases, much of that gain could be offset by rate increases. There will also be borrowers stuck in really crappy loans (loans types that didn’t even exist until recently), who will be unable to refi as their loans ratchet higher.
His comment actually points out one of the really scary ways that it is, in fact, “different this time”.
Couldn’t be more right, except, the Fed has been re-loading the chambers with ~15 successive increases. I suppose, they could reverse course and begin cutting again. What’s not really clear is whether their contortions have any impact on the long end of the curve. That seems to be determined by the international appetite for bonds.
But… it still might be enough to prevent a total collapse by allowing some to refi at lower ARM rates? Soft landing???
OT. Jonathan lanser did a very good write -up HERE
correction: JONATHAN LANSNER
““Lereah said predictions of a housing bubble are based largely on data showing a widening gap in personal income growth compared with more rapidly rising housing costs. He said such comparisons ignore the fact that interest rates remain historically low despite recent increases, putting monthly mortgage payments within reach of most consumers. ‘You have mortgage rates below 7 percent,’ Lereah said.”
This arrogant SOB needs to testify before a Senate committee and we will see how air comes out of a bubble!
and you really expect a Senate committee to ask serious questions? They were part of the gang that organised this pyramid game and keeps it going, and they know it.
maybe they will ask some questions in 10 years or so, when the housing bubble has fully deflated and the next elections are around the corner.
“‘Homeowners ‘call us and are heartbroken,’” says Robert Pulster, (who) works with Boston residents on the brink of losing their homes. ‘They thought it was their dream.’”
And who could argue with them? Unfortunately, after dreams end, one must wake up and face reality…
“More trouble lies ahead, some experts warn. ‘I would suspect that as home prices soften, you are probably going to see a ramp-up in defaults, delinquencies, and foreclosures,’ says Nicolas Retsinas of Harvard University. ‘It is not that they were not stretched before, but if you couldn’t make the mortgage payments, you would sell. If the market is softer, it is not as easy to do this.’”
The come-latelies to Nostradamus’ party will later claim they were ahead of the curve…
Ben’s blog archives may be invaluable for dispelling this misleading impression.
Will the Lereah descriptions of the markets move from “cooling” to “medium-low, or low” How about “simmer?” We already had “boiling.”
Good descriptions when one is cooking the books.
“Such pressures are forcing a rising number of homeowners to erase their debts by forfeiting their homes.”
Just exactly how does this “debt erasure” work in light of the new bankruptcy law?
Lender/investor would be entitled to deficiency judgement if its stated in the note they have that recourse .
“deficiency judgment — A judgment against a borrower in favor of the lender in an amount equal to the difference between the funds received from a court sale of property and the balance remaining on a mortgage or other loan.”
I assume when you say “lender/investor”, you are talking in both cases about the individual who provided the loan, not the “real estate investor” who bought the overvalued property?
Wouldn’t anyone who bought the notes have rights to the provisions of the notes.
Yes…
yes, there is personal liability on the note. In other words, the mortgage company can go after all your assets (depending on state law). Also, any debt forgiven is considered ordinary income by the IRS.
in the last downturn, deficiency judgements were bought for pennies on the dollar, much like bad credit card debt. credit collection agencies then went after the borrowers if there was meat on the bone.
One could leave the country, as the flipper on CL posted yesterday. Remindes me of the Jimmy Buffet song about the expat American– Running from the IRS.
In California the lender can only forclose on the Deed of Trust and take the property back “if” it was a purchase money loan…If they refinanced its a different story and the new bankrupcy laws could have further personal consequences…LALAW would know more…
Sorry OT - but when I was in Law School (on the East Coast), any decision coming out of California was immediately dismissed by the Professors as coming from the “Left Coast” and not to be relied upon as precedent.
purchase mortgage only, if a heloc was used, if the property was refinanced, or if it was an “investment property”, then the lender can go after them.
We have a long post on this from a previous thread but scdave is right on point. On purchase money loans, generally no recourse in CA.
There is in Virginia. I am ignorant as to other states.
I am clueless on what this “purchase money” term refers to… Could you please enlighten the non-legally astute readers in the audience?
Here is a link to an ad for a “NEW Low Fixed Rate Fannie Mae No Money Down Program!” wherein the fine print stipulates “Our 103% program is a purchase money only program that allows the borrower to finance 100% of the lesser of the purchase price or appraised value. Up to 3% of the closing costs and prepaids may be financed as well. Qualifying ratios are 33%/41% .”
Does Fannie Mae buy lots of 103% financed paper??? Yegads!
http://www.marylandlowrates.com/103.html
Does anyone else see the seeds of a future problem in giving low-income buyers a 40-year low-interest loan with no downpayment requirements, thereby enabling them to purchase an overpriced home with a loan they have little hope of ever repaying, or is it just me?
http://www.sacbee.com/content/homes/re_news/story/14214351p-15040403c.html
I can only attest to Virginia, but I think “purchase money” is pretty universal. It is the original mortage obtained to buy the property. A refi or a second mortgage(not obtained as part of the initial purchase i.e. 80/10/10 etc.) is not “purchase money” and is treated differently as to personal liability and priority among other creditors.
It sounds more complex than it is. There are certain legal preferences accorded to Mortgages obtained in the initial ACQUISITION of the house vs. 2nds and helocs obtained later.
States vary, however, in the protections/liabilities given. Hope this helps.
How about a 50-year mortgage?
new day same question:
RE employment is 9.8% what was it in 1989
that will tell you where the economy is headed
‘Bout 8%. Be ’bout 6% by 2010.
Flat,
I agree and suggested this as a topic. Not necessarily RE employment - but the whole comparison between 1989 and today. Run-up in prices over past decade, tracking inventory now vs. then, GDP, unemployment, interest rates, inflation, wages, rents etc. In other words, the whole she-bang.
Then we have a basis for comparison and prediction.
We can talk as much as we want here on this blog, but it’s David DiaLereah that gets all the press.
Funny thing is…by continuing to talk like that, he’s starving the very realtors he’s trying to protect.
If he just sat down and realized that the way to get this over with is to ask the homeowners to lower their outrageous prices…
…everything would be fine…
…and we’d truly achieve ‘balance’.
Sounds crazy, sounds simple, but it’s crazy simply true.
He’s just prolonging the agony by talking like that- for his realtors, as well as the rest of us.
Auction Heaven in ‘07,
Keep your powder dry, put on a poker face.
Lereah and others of his ilk would rather keep the party going for a few more rounds than to hasten the onset of the mother of all hangovers…
Looks Ol’ Bagdad David’s standing on top of the bubble telling us everything is fine and the realtors are still in control of the situation, prices are just “stablizing” and “the air is just coming out of the balloon”.
Unfortunately David, few can actually afford homes right now. Its not a question of buyers sitting on the sidelines its more buyers are being benched by lenders and flat or declining pay.
The balloon metaphor he keeps harping on is puzzling. Apparently, he wants everyone to believe that a balloon is not as bad as a bubble (you have to first somehow accept that premise that balloons aren’t prone to popping). However, a popping balloon is much more violent, noisy, messy, and startling than a popping bubble. So I guess I agree with him.
Balloons hiss, bubbles pop, but at the end of the day in both cases, the air is gone.
Maybe it will be a hot air balloon he can float away in when things turn ugly and he looks the fool???
Mark My words this guy will be the poster boy for the coming asset meltdown. Everyone from CNN to grass roots websites will be playing clips of him talking up housing while publishing stories of speculators and flippers loosing everything and ordinary folks who are upside down in their homes.
When this all goes to crap Lereah will point to that second part of his quote — “The solid fundamentals of the economy,” and say “No one saw the overall weakness.” Please, we have a house of cards economy built on debt and wishful thinking. There is nothing sound or fundamental about our economy.
Whenever I hear some jerkazoid say that, I immediately plug my ears and feel safe in knowing that the person talking is lying.
In three to five years go look at all the neighborhoods created urban expansion due to the bubble and see how many will be the slums of the future. Can’t pick up and move a fixed asset. Many here are hoping for a quick turn around but a longer time may work to your advantage in indentifying what neighborhoods will be the best for your dollars.
When $5/gal comes to roost, the suburban McMansion sprawl/commuter lifestyle will become untenable. Old-time oilman, T. Boon Pickens is predicting $100/bbl oil this year as demand exceeds supply for the first time since the oil crisis of the 70s.
BTW, Are you seeing a lot of for sale signs in Salinas these days?
Don’t forget the obligatory Chevy SLOBurban/TaWhore.
Why? Come on repetition is not proof. What is it about $5 gas? Kunstler the Hustler runs on about this as well. Time to put some facts on this strawman. A couple grand a year at the pump is not gonna send the masses scurrying back to 4 story cold water flats in the ghettos.
I agree….
Peak Oil Crisis
Cost is not the only issue- There will be outright shortages. I vividly remember the 2-hour gas lines and rationing (i.e., odd/even days) from 1979. This time it’s the real deal– Get ready.
The only reason for rationing and shortages were price controls in the 70s. Gas was too cheap and people wanted more than would be supplied at the given price. No price controls no shortages. A market clearing price eliminates buyers until they want the same amount that would be sold.
The 70s oil crisis was caused by political reasons, this time around it’s for geological reasons. The result will be the same: Shortages and high prices.
Geological reasons? What about not building a new refinery in the US for over a quarter century? The EIA tracks the geological reasons and continues to say the same thing that there is no peak or evidence of a coming peak. Mexico thinks it just found another 55bn bbls on Monday. That’s in one field more than the wacky peak oilers had claimed could -possibly- -ever- be found. The ankle biting Peakinese have been wrong every year for the last 152 years and demand respect because they feel are “due.”
Robert,
What about the refiners who mothballed refineries in the 90’s?
Why would Big Oil spend billions on a new refinery if they knew the feedstock would peak and decline in 30 years or so? The U.S. peaked in 1971 and has been in decline ever since.
Mexico’s largest field, Cantarell, peaked last year and is in serious decline now. The “new” field of heavy (read: hard to refine) crude recently discvered might hold just 10GB, a tiny fraction of Cantarell.
North Sea oil peaked 2 years ago and is in serious decline. Britain is becoming a net oil importer.
Even Chevron admits the era of cheap oil is over. What more needs to be said?
I agree. There is tons of money here in Northern Virginia. I grew up in Upstate N.Y. Have been here 25 yrs and still can’t get over the $$$$ here. No old rusty cars. All the teens drive nicer cars than my parents did. Can’t find a babysitter because none of them need to work.
I know people who are already buying gas on credit cards. A couple of thousand more dollars a year will hurt. More importantly, I predict $5 gas as the tipping point at which the masses quit shopping for Chinese made crap they don’t really want or need and start pulling in the reins, sending the economy into a slide. Just passing on a couple of meals out a week, or that hot new DVD, will wreck the train in itself. Given the choice between losing a house and shopping most of the urban dwellers will pay the mortgage as long as possible. I live in a rural area and I’ve watched people build houses in areas that were considered uninhabitable ten years ago. Those will be the first to go.
I agree…people will put the gas on credit but stop buying dvds and iced-tea dispensers and gauchos. Please, let 5$ gasoline come, to make people stop buying gauchos. The two co-occur anyway ya know. Gas lines are coming if the espadrilles and peasant blouses are any indication. I think this is “fundamental”. I’m very scared. I lived in the Bronx in the 70s and people stole the gas out my dad’s car, but only on even-numbered days
Uh, I always buy gas on a credit card. I get a 5% rebate when I do. Then again I pay my balance each month. Maybe others are not?
Robert…………..You are so right that a couple of grand a year will not effect anyone on the forum. But some are leveraged so far that it will not take too much to push them over the edge & their toys( big cars & boats) will not be saleable at that point.
IMHO $5 gas is a when not if because of the demand from China & India. The timing? I have no idea. The global resource shortage I believe is real & will be happy to be proven wrong in the future.
You’ve got that right. The marginal areas will get slammed the hardest in a significant downturn. No one will want to live in the inner city next to abandoned houses with boarded up windows where the only activity will be crack transactions and hooking.
The gas prices will have a an overall negative effect but those that feel it most may not even own a car.
Finally someone who gets it. Exactly correct, economic pressures accelerate trends not reverse them. A spike in energy costs is going to send the jobs to the exurbs not the people back to the cenurbs. Transit uses the same energy as POVs but transit costs are rising at rates 3-4 times general inflation. An energy spike or even gradual rise will make transit and therefor the cities even less viable.
Peak oil is real.
Matt Simmons energy investment banker
T Boone Pickens
Richard Rainwater are all dyed in the wool energy capitalists.
Robert Cote’s visceral response to Peak Oil is unrelated to peak oil just the recommended actions by most local governments.
Peak oil is a geological fact. If you want links I have got em.
What people suggest doing about it are what Robert is fighting over.
If you have got enough money and want to spend it on energy to live the energy intensive exurban lifestyle go for it. No one should stop you or bail you out.
The days of the energy-hogging McMansion and SUV are numbered. Runaway Chinese demand and Peak oil will see to that.
With only 4% of the world’s population, Americans consume 25% of the world’s energy produced each day. Gluttony at its worst.
Here here!
Back in the ’70s gas crisis, my dad sold his nice top-of-the line Chevy and bought a Ford Pinto. He was commuting 180 miles a day from Orange County to San Diego. Not only did he lose a lot of money on the Chevy, but he also paid over sticker for the piece of sh*t Pinto. Wosrst car our family ever owned. Noisy and gutless.
Net savings overall not much. Quality of life 3 hours per working day diminished.
When I have visited Europe, the price of gas has always made me realize how cheaply we get it and how small a portion of our total outlay it is. Especially when compared to what we spend on real estate.
Not saying $5 per gallon is fair or warranted, but I don’t think it’s impact is as large as the cost of real estate by any means. Compared to the cost in other countries, it’s much more reasonable here, though still painful. Have to agree with Robert.
Except that demand is not exceeding supply. In fact OPEC is seeing just the opposite.
$5/gal fuel is the best thing that could happen to this country right now.
Why? What good will come of $5 gas? Come on repetition is not evidence. $5 gas in a fast rise will cause dislocations in the economy and probably take out GM putting the taxpayer on the hook for hundreds of billions. $5 gas applied slowly will only manage to make the US economy look like the EU economy. Where’s the “good” in that? These are all the same, there’s an unspoken belief system that somehow the exurban built environment is “bad” and an equally mistaken belief that it is somehow on borrowed time and ultimately unsustainable. Bunk. Time for some facts or drop these notions.
Heres a reality Robert. $5/gal fuel will take the uncertainty out of the markets. There’s an unmet expectation that it will happen soon or later. It will force R&D of alternatives to internal combustion vehicles. And most importantly, it will shift out of this dreaded consumption based lunacy we’ve been living in for how many years? You and I know there is a much needed and long overdue wakeup call coming. What would you prefer it to be? An invasion of another oil producing country so we can continue the never ending unsustainable cycle of hunt/search and squandering of finite natural resources?
$5 gas is good if you believe that we are reaching peak oil time. Then alternatives will become economically advantageous. Some friends of mine just installed solar to heat their house, and a battery backup so that if there are energy problems they will have electricity on cloudy days. This system would have taken 15 years to pay back in saved energy costs in 2001, but today with energy costs even higher, they have about a 5 year payback. Based on what I’ve seen, $5 gas will hurt badly and there will be significant pain, but IF there is an oil peak, and IF there is a public recognition of this fact (BOTH HUGE IFs) then increased energy costs will affect an immediate reduction in energy consumption and provide the impetus for significant reformulation of energy policy.
I’ve never heard of a 5 year ROI for PV solar with batts even with the most aggressive rebates, credits and tax consequences. I’m an engineer in a very favorable region and and generous State with very high electricity rates and I can pencil out 17yrs ROI at best.
There’s nothing about $5 gas that I see as good here. There’s also a little confusion about whether that is the price or the price plus massive new taxes. You won’t get the oil industry to invest if they aren’t seeing the higher prices in the latter.
I still see all the misconceptions that have driven the Peak Oil fantasy for 35 years now.
And you trust oil industry to R&D alternates that would relegate their own industry to the scraphead? Get serious. $5 gas, whether fed. gov creates it or exploding demand, matters not. Nobody is talking about peak oil. We are talking about exploding demand that the current leadership (or lack of it) is too lazy to do anything about. I personally believe they’re beholden to huge money interests, i.e, BigOil.
Robert:
I also did not include that they have two modified Prius automobiles with additional battery capacity that is fed by their home solar array, which increases their fuel efficiency somewhere along the lines of 50%. Since I am not an engineer, I couldn’t say if your calculations are more accurate than theirs. I am only reporting what they’ve told me. I haven’t asked for a breakdown (but I might just ask now).
Your friends are just bragging. Nothing different than in 1975 when people driving Beetles were claiming 50mpg. The Prius idea is kinda strange. I like the idea of modifying them for house current recharge but Think about the PV peak and the Prirui aren’t at home. There’s better uses for stored energy than PV->batt->Car batt. Wasteful and kills all the batts early. And no, it can at best barely theoretically increase Pirui mileage by 50%, more bragging. You’d have to be programming some deep cycling and doing almost all local on batt travel and still 50% doesn’t pencil out.
I use about 100kWh/mo. It would take a 550 sf array to get 90% savings. You need only look at the size of their panels. Have they got something like 1200 sf?
This all runs back to the new reality; energy is fungible.
Check out the 100MPG Prius
Very short term.
Why fight wars over that crap if it’s so cheap and plentiful?
When I went to the UK on holiday for 2 weeks in Sept. the US dollar equivalent for a gallon of gas was $8.50 per gallon.
Soon coming to your local American gasoline station.
This is the real deal folks. If you don’t believe it, just Google “Peak Oil” and draw your own conclusions. The world is peaking in oil and natural gas is soon to follow.
The Complete Idiots Guide to the Oil Wars!
BF-Went to your link…with the Saudi oi reserves @ 261.7b; Iraq @ 113.8b; Kuwait @ 97.6b; and Iran @ 94.5b,
I think it goes without saying what our military is doing in the Mid-East.
Fighting to preserve the “American Way of Life”…
Gluttony and waste.
Could be a realtor hit coming…
They put David inside the Mercedes, in the front seat…
A realtor in the back says…
“David, David, David…How long have we known each other?”
You know the rest.
By the way, the piece moqui referred to up top, written by Jonathan Lansner, was excellant.
Think I’m becoming a fan.
can some one post that piece? I hate to create another id for ocr
Did David Lereah stop getting his kickbacks or something? I mean, last month the bubble was a ship, slowly changing direction, but always going generally straight. Now it’s a balloon?? What kind of stupid metaphor is that for a real estate partisan to use? A balloon is a bubble after all! Balloons either burst or deflate, and the only difference is really one of the speed at which the air comes out. Good work David, you’ve seen the light!
BubbleTrack.blogspot.com
Why are many predicting a 5 to 7 year correction of this market? I favor a quick intense , sharp , market correction of the bubbles so lenders don’t make more purchase loans and refiances based on the bubble prices .
5-7 years seems in line with history. But the internet (e.g. blogs) is a wildcard which may hasten the correction. This time it really is different
You are gonna get both. We see the froth blowing off prices right now but then it’ll take years to clean up the mess. Personally I’m more towards 3-4 years but that’s actually pretty quick for the massive errors to work their way through the system.
Maybe this “bird flu” thing could be the “wild card”. Big talk on the news this AM.
yeah, if a mutated-variant bird-flu pandemic comes during the spring open-house season, it’ll be a quicker correction surely!
lakefront property always had the goosecrap problem, but maybe now it’ll be suddenly undesirable?! prospective buyers asking if you’re on any migratory bird pathways…
or maybe that will end this loveaffair with density and condo-living and people will want to bunker down in the hills as far from the masses as possible…
we are such a strange species!
“Lereah predicted housing prices nationally will grow at about 6 percent this year, compared with 12.5 percent last year.”
Maybe he got that 6% confused with INVENTORY?
Oh wait- oops- that’s already WAY OVER 6%!
Um- how about 12%?
Oh wait- THE INVENTORY IS ALREADY OVER 12%!
Well then…how do you get 12% appreciation…if…inventory…is…high…
I KNOW! IT’S MAGIC!
THE HOUSING BUBBLE WILL MAKE MAGICAL APPRECIATION!
CUZ DAVID’S REALLY A…
MAGICIAN!
Or…
…he has a really, really bad problem with REALITY and NUMBERS.
Yup…it’s gonna have to be a ‘realtor hit’.
OT, but SD’s ziprealty used home inventory just hit another milestone — over 18,000 for the first time so far as I know. As any good Realtor (TM) will tell you, used home inventories always go up…
“12% appreciation for San Diego!”
“From David DaiLereah!”
“With my magic wand doth I wave it!”
(Did he say 18,000?)
“I AM THE GREAT DIALEREAH!”
“I WILL MAKE IT SO!”
(Choke-sputter-gasp-feet kick out windshield-body dumped in river.)
For sale signs and open houses are picking up. Some houses near my sons school have been on the market since September but I suspect the owner bought 15 years ago and is waiting for a ’spring’ market before lowering his price. It’s in the newer housing where things will get fun. Realtor’s have been dishonest and playing it close to the vest but go to realtytimes.com, click on local market (CA, salinas)where a local realtor Wesley Franklin has gone against most of the locals in painting a fairly accurate picture.
I would never have thought that seedy Salinas would be bubble central. I wonder what % of those homes were purcahsed as flips?
Sorry OT again, but the HB pump-and-dump seems to be showing signs of fatigue in light of the reading of Bernanke’s tea leaves:
http://tinyurl.com/c47e9
Could one of you PPT-skeptics kindly explain what fundamental factors keep Fannie Mae’s stock afloat when private firms in the housing sector are experiencing share selloffs?
Perhaps Irwin Kellner’s reading of the Bernanke tea leaves helps explain why those HB stocks look so plungy this morning…
“March madness
Commentary: Bernanke prepares to take interest rates too high”
http://tinyurl.com/fjm57
The Law of Gravity is finally beginning to exert itself on HB stocks. The mortgage group is soon to follow. These groups will be down 50%+ a year from now.
Interesting post from an appraisal company on this blog, on the pressure for “moral flexibility.” http://matrix.millersamuel.com/ The one I am speaking of is the fourth post down.
I’ll bet “moral flexibility” is a financial asset in many fields. We are led (ruled?) by those who have it.
“morally flexible…LMFAO.
EASILY COERCED is the more appropriate terminology..
Hit the number buddy, or no more work…no more work, and you don’t eat.
The evolved appraisal paradigm under the new banking order.
That would explain the conversation w/my realtor this am when I explained we’re planning to rent rather than buy in her area. She didn’t want to hear about any of my info (gathered here thank you)….we’re untouchable here ya know.
A citizen reporter sent in this most bubblicious picture of a bench next to a condo building in Northern Virginia. It is an amazing picture.
David
Bubble Meter Blog
That picture is truly amazing.
Destined to become a classic!
That picture says a thousand words .
Ballon = the Hindenberg?
Okay, that’s it.
New goal for the blog…
We have to get Mr. Magician to come here, and field our questions.
It’s time for the ‘HousingBubbleBlog’ vs. ‘The Great DiaLereah’.
That’s my weekend topic suggestion, a few days ahead of schedule.
The man is clearly out of touch with reality.
“I AM THE GREAT DIALEREAH!”
“A HOUSING BUBBLE BLOG DOTH NOT SCARE ME!”
“I WILL BRING THEM ALL TO THEIR KNEES WITH MY MAGIC APPRECIATION WAND!”
“POOF!”
Only one man is capable of such magic…
…and that man…is Ben Jones.
Ben, can you ask The Great DiaLereah to come to your blog?
Before one of his realtors makes him sleep with da fishes?
We just might be saving a life…
GetStucco- FNM and FRE get a bid because until Shelby et al really get around to passing a GSE reform bill, they have a government subsidy to mint money in the the mortgage market. Combine that with the fact that FNM guidlines for conforming loans are quite strict relative to some of the toxic stuff that subprime guys are churning out.
To me the biggest problem is that we have no way to value these companies, because they haven’t released a 10-k for who knows how long.
When you say “get a bid”, I assume you are talking about private party purchases which prop up the share price. But the $54 floor is too persistent over the past couple of months for that theory to hold water, especially in light of the absent financials you mentioned.
FNM and FRE …have a government subsidy to mint money in the the mortgage market.
THERE IS NO SUBSIDY OR GAURANTEE.
http://exurbannation.blogspot.com/2006/03/fannie-give-it-rest-lets-move-on.html
Boo-hoo for idiot Joe Q. Public Homeowner who overpaid.
As an appraiser I’ve found that instead of being thanked by purchasers for my diligence and professionalism in potentially saving themselves thousands of dollars by overpaying for a property; they pay heed to their real estate agents and mortgage originators who encourage them to threatened legal action because a reported value comes in less than the contract price.
The game is rigged.
I have no empathy for any of these people.
yeah, don’t kill the messenger
most of the current homebuyers have not yet progressed beyond the earliest stages of civilization
Broker’s Open House across the street today. I bet they have good food. And it is just about lunch time on the East Coast. What to do? I’d have to change out of my sweats to go over there - but, I am quite hungry. A conundrum. Lazy vs. hungry? I think I’ll take a nap.
ok how quick will the NAR jump on the side of the buyers to get them excited to low ball the sellers just to get some kind of an offer,,, anyone think this will be the next tactic? After all they only make money when they move product..
also OT but looked at zillow.com today and noticed a couple properties, i’ve been following, stating they have incrested 15K in the last week,,, does anyone know if this goes after active listings?
i have seen a couple ‘rogue realtors’ doing something like this. At an open house for a little cape in a neighborhood of little capes that had been appreciating ridiculously rapidly and also had high turn-over (who the hell wants to spend a long time on little lots with 1100 SF half of which is a low-ceiling converted attic from 1954 if they can afford to get out?), the realtor presiding over the open house said to visitors that she ‘made’ the owners do x y and Z, and lower their asking price, and that she was interested in taking offers. I see sometimes now the codewords for this in the ads, or at the sign-in sheets…”presenting all offers” or some such. Never before had I seen this…clearly *some* realtors are starting to try and convince their stupid greedy sellers that they can’t get their desired price and perhaps they would like to end the madness sooner rather than later…
I had a realtor couple weeks ago say “so, will you please buy this house from me?”. I wonder if I had offered her 40% off asking if she’d have presented it…but I didn’t want it at any price.
cheers!
You know when it all comes down to it, the Real Estate Associations can pretty much say whatever they want or make any prediction they feel like. Unlike the stock market which is heavily regulated, there’s no recourse against real estate “professionals” who make misleading predictions or investment promises.
yes, so very true. Ann Arbor Realtors say that you better move now because the inventory won’t be as high in the weeks to come! It’s mid-march…does that bear any general relationship to midwestern realestate reality anyone’s aware of? These realtors must know something I don’t! After all, they are the ones who get the listings…
They also give me very definitive-sounding interest-rate predictions regularly. They must know, it’s their business.
Comment to Bottomfisherman,
I don’t have a clue but the mailmen that I have talked to have several properties and told me in April of 2004 when we first located here that I was stupid not to buy. Of course they have been here all their lives but can only retire out-of-state. They said that they were going to retire in Las Vegas, Reno or Phoenix. One who was going to retire in Nov. of 2005 and move to NM hasn’t been able to move his house for what he thought it was worth so he still works for the USPS.
At least the USPS pension is good.
The reasoning that David Lereah is some kind of venal, lying greedmonger cynically manipulating the real estate market for his own gratification is what the Italians call “dietrologia,” the art of finding dark, ulterior motives behind the most obvious decisions. Get over it. He’s just a lowly flack who does what he’s told because he gets paid to. What else is he supposed to say? He works for realtors who want to sell houses, not Habitat for Humanity.
No one forced him to write his book. And we’ll villify him as the Antichrist if we feel like it, so get over it.
I think a televised flogging of David Learah would be good. What a lying crumb. This thing is going down quicker than people were thinking. And he will be caught with his pants down when the tide washes out. Actually, he is probably trying to unload is own albatross’ before it implodes completely out of his control.
Bring him down, Ben.