Nothing Less Than One Of The Biggest Bubbles In History
It’s Friday desk clearing time for this blogger. “You’ve likely heard plenty about the problems adjustable rates jumping, foreclosures increasing. Those problems are very real for more and more people and Realtors at the annual New York State Association of Realtors convention in Saratoga Springs admit the Capitol Region is seeing a slowdown.”
“‘I was busy as anything right up through July. Closed more than I did last year. So amazing. And then in August, I wondered if the batteries went dead in my phone. It was so quiet,’ said Realtor Jacquelyn Witbeck.”
“For potential homeowners like Mike and Jody May, the cooling down of the housing market has given them an advantage. ‘It seems like prices have come down a little bit, and with a lot of homes on the market, we can kind of pick and choose and make some requests on our end,’ said Mike May.”
“‘The houses where the price is dropping drastically are the houses that inflated prices initially. If the house has been priced correctly, the prices are not dropping… the value is still there in the homes,’ said Marlene Finger, President Elect of the Vermont Association of Realtors.”
“Their house in Colorado has been on the market for several months, so instead of selling it, they decided to rent it out. Said Mike May: ‘Yeah, we’ll rent it until the market gets better… so who knows how long that will be.’”
“During the first six months of the year, sales were off 6 percent on the Missouri side of the metro area, pushing them back to 2003 levels, said Dennis Norman, president of the St. Louis Association of Realtors. With more homes hitting the market, that’s creating a bit of a glut and a buyer’s market to go with it.”
“‘I don’t mean that in the sense that there are fire sales,’ Norman said. ‘But there are some great values.’”
“‘This is not a one-year problem,’ said Larry Swedroe, a principal of research at Buckingham Asset Management Inc. in Clayton., who sees few incentives for people to buy. ‘You’ve got supply increasing and demand collapsing at the same tim. It doesn’t take a genius to figure out that house prices are going down. The only question is how far.’”
“Amid world fears of a global credit crunch, the small Baltic states are starting to see property prices falling after almost five years of spectacular gains.”
“Though industry players see the price falls as a correction, some analysts see the move down as the start of a long slump, exacerbated by the fact that the economies of Latvia, Lithuania and Estonia are overheated and plagued by high inflation.”
“The availability of cheap loans that has been stoking the construction boom could even increase when Cyprus joins the euro zone in January since the bloc’s interest rates are currently half a percentage point lower than those of Cyprus.”
“‘There is currently a bubble [in the real estate market], comparable to what we had at the stock exchange between 1999 and 2000,’ said Yiannis Telonis from Hellenic Bank.”
“Economist Marios Mavrides said there was a danger that in two or three years, clients would experience difficulties in paying back their debts. ‘The expected decrease in interest rates as a result of euro adoption will not be able to offset the decrease in demand,’ he said.”
“An Associated Press analysis of new census data provides insight into the reasons for the slumping housing market: Since 1990, homeowners have faced a growing gap between their incomes and the price of their homes.”
“‘We had an artificial economy,’ said Brad Geisen, founder of a Web site that lists foreclosure properties. ‘There was all this wealth created in real estate, and it wasn’t really created.’”
“San Antonio home builders still have plans on the books for 14,000 more homes. In one of the most telling signs of the transition to a buyer’s market, I was recently contacted by a builder’s sales representative with a list of entry-level to midrange inventory homes to sell.”
“When I asked if the builder was currently selling to investors, the sales rep said yes–the first time I’ve heard that answer in 3 years.”
“Speeches by U.S. President George Bush and Federal Reserve Chairman Ben Bernanke aimed at calming turbulent stock markets could merely delay what one international economic group is calling ‘nothing less than one of the biggest asset bubbles in history.’”
“The Economist Intelligence Unit, a London-based arm of the group that publishes The Economist magazine, says current falling stock prices, soaring credit costs and roiling currencies ‘trace back to 1997, when the value of housing in the U.S. began to jump.’”
“‘Nine years later, the value of property had surged by $12 trillion. Asset bubbles almost always end in tears, and the U.S. housing market is no exception. Banks and investors are now being punished for ignoring risk, lending recklessly and thinking property prices would always rise.’”
“About a year ago I took an oath to stop whining about Chico’s housing prices. But a new era has dawned, so I no longer have a reason to whine.”
“At the height of the bubble, ordinary, everyday Chico houses were selling for $300,000. That’s just plain madness in a community where $50,000 a year incomes are the norm.”
“Lately, I’ve been noticing that asking prices for houses are dipping down into the high $200,000s. What would constitute a full recovery? I’d like to see the ordinary, everyday Chico house selling for about $200,000 three to five years from now.”
“As Chico housing prices cool, I hope people will stop claiming that alleged no-growth policies were responsible for the high prices. Chico is decades away from having a scarcity of buildable land.”
“Not long ago, lenders were handing out mortgages to anyone with a phone number and a pulse. No money for a down payment? Not a problem! Low credit score? Who cares? Incarcerated? You’ll need a place to live when you get out, right?”
“Those easy-money days are history. The good news: Home prices have fallen in many parts of the country and real estate analysts aren’t expecting a turnaround anytime soon. That means you have time to save up for a down payment, and will probably be able to buy more house for your money.”
“A new report showed August home sales in Southern California fell by 36 percent. What impact does this have on San Diego?”
“The La Boheme Building in North Park will be the site of a condo auction this weekend. The one and two bedroom condos were first offered up between $300- and $500,000. But this Saturday, 35 condos in the building are being auctioned off, with starting bids beginning at $149,000.”
That was an incredible week! My thanks to those who support this blog. Please check back this weekend for news, your market observations and topics.
Ben, Thank you for all that you do! I found your blog about 4 months after you started it and have looked forward to it ever since. Hang in there my friend we need you.
DITTO!
Me three!
Yes it was - I think I need a vacation!
Next week could be the big one.
Can you expound a little for us loiterers?
FED meeting.
Not just the FED meeting. Lots of commercial paper is going to mature in the next week or so, and there are no new buyers to roll it over. We are perilously close to a meltdown. The worldwide credit crisis is going to devolve much faster than those sticky house prices.
The next two weeks see a killer amount of asset backed commercial paper begging for buyers so that they can re-issue the debt. I’m not betting on the meltdown next week… but within a few weeks.
Its scary out there.
Got popcorn?
Neil
Then what?
Dark Ages, baby!
tee hee… umm, that’s not funny.
SUPPORT YOUR LOCAL MILITIA!
ending of movie Fight Club ; ) ?
Isn’t Congress going to vote next week on further bloating the GSE portfolios and raising the conforming loan limit? I am thinking the grocery stores might run out of popcorn this weekend as HBBers stockpile their supplies…
In his book Greenspan says Inflation will get worse because of lower productivity of US workers, higher wages for foriegn workers and big Government deficeits.
“…higher wages for foreign workers…” tee hee! Yeah. That raise from 25 cents an hour to 30 cents an hour for those hard-working, productive Chinese will be the final straw.
On this site, the big meltdown is always a few weeks away…
andrew, things are happening today behind closed doors that you won’t know about until its too late. pray for peace.
Housing starts, PPI, CPI, Fed announcement and stock/bond market response, Housing market index, and a couple investment banks report.
From Forbes: Investors are looking ahead to learn more about how the big banks are planning to combat the credit crunch and subprime mortgage meltdown. Lehman Brothers (nyse: LEH - news - people ) is first up on Tuesday, followed by Morgan Stanley (nyse: MS - news - people ) Wednesday, and then Goldman Sachs (nyse: GS - news - people ) and Bear Stearns (nyse: BSC - news - people ) Thursday.
By the holy Joshua tree,
That’s everyone but Merryl Lynch (and the non-domestic I-banks).
munch munch munch
Got popcorn?
Neil
And the KKR deal, considered the canary in the coalmine for a lot of subsequent deals. They’ve delayed another week over tough bank terms they don’t want to accept.
No, not the dark ages. Some points - people are resilient and creative, many times at their best in adverse situations. House prices will fall, but the biggest concern is inflation. Say what you may, but the Fed understands the importance of savings. Fed governors are ultimately readers of history and know all too well the damaging effects of inflation seen in the early and mid to late 20th C. It will be an interesting week!
The FED understands the importance of Foriegn savings and how important it is to get that money invested here in the USA. I don’t think the FED gives a damn about domestic savings. 1% interest rates a few years ago and why is there no savings ? What was housing inflation running at that time? 10% to 20% a year.
Here we go with this “inflation” thing again. Give me a break. Inflation doesn’t happen during depressions.
Yeah, I hear the economy is really going gangbusters in Zimbabwe.
Zimbabwe has something like 7,000% inflation…ouch baby. People are actually eating dogs…I’m not making this up…now that is when you know it’s bad!
7000%? Yeah, PER MONTH. They are expected to basically have NO currency whatsoever by the end of this year.
They will eat anything they can find at all in Zimbabwe.
18 month ago I started reading your wonderful blog along with Calculated Risk and Mish’s blogs. Reading these blogs opened my eyes to the realities in RE and US economy. It was two month later that I heavily started selling short HB and some mortgage companies (my favorite of course was New Century, god bless his sole). And I have been rewarded very geneiously.
Thanks Ben and best wishes.
I moved to Chandler, AZ which is just outside of Phoenix last month. We are renting for now but just for kicks my wife and I went to look at some model homes.
We went to a semi-custom subdivision with very nice 4000+sq ft homes on 1/3 acre lots selling for $800,000 to $1 million dollars. We both really liked the homes. Much better than your average tract home.
I then came home and looked for the subdivision on the internet. I came across the third model home which is for rent on rentals.com for $7000/month. This is the same model home which they are showing now. The subdivision is maybe halfway completed. Is this normal? Why would a builder decide to rent a model home which they are currently using to show? Is this a sign of major desperation or is this normal?
I’ve never heard of anything like this before.
Finally joining the conversation after a long time lurking, hello from downunder. I have given up trying to find anyone to talk to about housing where I live. The bubble here is even worse than the US, with the median house nationwide about 10x median personal income. Worse yet, it is maybe March 2006 here, housing price increases and sales volumes just starting to slow down.
Said Mike May: ‘Yeah, we’ll rent it until the market gets better… so who knows how long that will be.’”
The world is slam full of retards, do they carry some kind of reality shield? I am not the sharpest knife in the drawer, but I’ve known how this story would end for years now! Damn, can’t the bulk of the masses ever understand what in the heck is going on around them?
wmbz,
“ Damn, can’t the bulk of the masses ever understand what in the heck is going on around them?
apparently not. The first time J6P is going to notice is down at the liquor store when his credit card is refused. Not for non-payment, but for a maximum balance cut that he ignored (for reading paper statements is too much for them).
Folks, considering how dead the credit default swap market is right now… this will probably occur within the next six months. (Probably sooner, but this mania has a life of its own so I refuse to predict earlier.)
Got popcorn?
Neil
I tried to steer one of my oldest friends yet again to this blog. This person is sitting on 1M of overinflated ok, but not stellar RE.
Their response? quote:
‘Dude, you need to stop with this-OK?’
Wow. I wonder how pissed they’ll be 2 years from now, completely upside down. I am only trying to help! sheesh!
I know what you mean I have a close relative with 4 properties purchased in Sept ‘05 with: No money down, neg am, interest only, 2\28 ARM’s. I pointed them to this blog throughout and they bought anyway. This is in Chandler AZ, they are screwed.
Chandler real estate prices continue their slide
http://www.azcentral.com/news/articles/0914cr-realestate0915.html
That’s where the schaenfreude comes in. You can lead a horse to water….
No good deed goes unpunished.
At the grocery store today, the 3 people in line ahead of me had thier credit cards declined. It was a Twlight Zone moment - nobody really understood it. The 70-something year-old lady in front of me started to cry. I slipped her a twenty and you would have thunk I saved a dying child… so sad, so many clueless people.
Wow!
That is beyond a twilight zone moment. I’ve never seen more than one! (A couple of times me… due to credit fraud. Thankfully not one dime out of my pocket. Hence why I carry 3 cards.)
Neil
“Asset bubbles almost always end in tears, and the U.S. housing market is no exception. Banks and investors are now being punished for ignoring risk, lending recklessly and thinking property prices would always rise.’”
A lesson from Econ 101 that the pundits, Lereahs and Kudlows of the world kept denying.
And Greenspan knew but wanted to hand off the problem to his successor, just like his boss.
And…
“‘We had an artificial economy,’ said Brad Geisen, founder of a Web site that lists foreclosure properties. ‘There was all this wealth created in real estate, and it wasn’t really created.’”
…….and we here at the HBB fall to the ground exasperated like the exausted teacher whose student finally gets it.
I had someone ask me what is going to happen to all the people made unemployed by this bubble collapsing. My response wasn’t well liked:
“What the heck do we need all these salespeople for? Its almost like the world decided to ignore the internet post the dot com bust!”
Ok, “ignore the internet” isn’t true. But it put my point across.
Got popcorn?
Neil
EX, lol. Yes! The little problem is that these high school students have five o’clock shadows and nursing children.
“San Antonio home builders still have plans on the books for 14,000 more homes. In one of the most telling signs of the transition to a buyer’s market, I was recently contacted by a builder’s sales representative with a list of entry-level to midrange inventory homes to sell.”
“When I asked if the builder was currently selling to investors, the sales rep said yes–the first time I’ve heard that answer in 3 years.”
they are putting everclear in the kool-aid down San Antonio way.
the kids may agree.. but dad (lenders) will ultimately decide.
Of course they’ve always sold to investors unofficially, but now that they are so desperate they aren’t even trying to keep up the ruse of rejecting speculators.
“At the height of the bubble, ordinary, everyday Chico houses were selling for $300,000. That’s just plain madness in a community where $50,000 a year incomes are the norm.”
If you consider that ‘madness’, then just imagine the situation in CA, where $50K is ALSO the median income yet homes sell for $700K.
Same here in Queens, NY, except median incom is closer to 40k.
Umm dan, last time I checked, Chico WAS in California.
Friday: Time to crack open a Sierra Nevada Pale Ale. Visited Chico in our RV 3 years ago, The Graduate is still one of my favorite bars in the USA. (I’m in my late 30’s)
Also one in AL, MT, NM, OR, TX, WA
I don’t think $50K/year is normal in Chico. It is a small college town, so most “income” is from parents to their kids.
The $200K price tag wish in a few years is far too generous. Like everything else in the Central Valley, $125K will be the norm for ordinary, everyday houses in Chico in a few years.
Not sure I agree. Chico is a nice town. The best in the Central Valley. But it will certainly be cheaper than now.
By the way that article seemed to capture all our feelings in the “diaspora” towns that received equity refugees from the Bay Area. I certainly hope they: 1) stay home; 2) lose that funny money they have used to hose markets Arcata, Ashland, Bend, Chico, Dunsmuir, Eureka……….
Things are looking up in the state of Jefferson!!!
….and I’m on my knees in gratitude. Even oddments on Craigslist show signs of weakening. But denial is still prevalent here in the valley…not to mention points north. Patience. Patience. And gold.
My wife is from Chico, 20+ years, last summer July 2006 we visited and picked up a “Chico Rag” put out by the Chico Chamber of Commerce. The Chamber of Commerce stated that the average HOUSEHOLD income was 36K per year and the then July 2006 average Chico home was at 349K.
My wife noted that the same average 349K Chico home sold for 45K in the mid 1990s. We just scratched our heads and wondered how this math exercise would end.
They could make a TV show about foreclosures in Chico. Call it Chico and THE MAN. (this will only make sense to people who watched TV in the 70s…)
Chico is in California.
I thought Chico was Groucho’s brother.
Again, for all you CA-centrics, there are towns named Chico in at least seven other states.
Yeah, but when somebody says “Manhattan,” most of us don’t think of the home of Kansas State. I’m guessing that Chino, CA is the biggest of the Chinos.
oops, dumbass me meant CHICO, not CHINO.
“The availability of cheap loans that has been stoking the construction boom could even increase when Cyprus joins the euro zone in January since the bloc’s interest rates are currently half a percentage point lower than those of Cyprus.”
Dang…did they have to ruin such a quaint little island? We were there in 90’s and love it–both Greek and Turkish Cyprus (Imagine a tiny little island with a DMZ…we actually giggled).
Greed…..ugh.
Arthur: “Aunt Pearl and Uncle Peter, I would like you to meet Princess Gloria. She’s the princess of a very small country in the West Indies… It’s terribly small… Rhode Island could kick the crap out of it in a war, that’s how small it is… they recently had the whole country carpeted - this is NOT a big place.
”
Panic on the streets of London
panic on the streets of Birmingham
I wonder to myself
could life ever be sane again
http://www.youtube.com/watch?v=9AlH2oYedfk
nice Smiths pull!
yeah, somebody hang the ****in DJ already… No lie, im inthe mercury lounge nyc, and that song just came on. Synchronicity, no doubt.
I think I saw that movie it was called 28 Days Later.
Madame President Elect, you’ve Fingered it…
Today’s Master Of The Obvious (MOTO)
“‘The houses where the price is dropping drastically are the houses that inflated prices initially. If the house has been priced correctly, the prices are not dropping… the value is still there in the homes,’ said Marlene Finger, President Elect of the Vermont Association of Realtors.”
Could this woman be any stupider? Her grammar (even in speaking) reminds me of that of a 7-year-old trying to explain why something valuable has turned up broken. If I were a member of the Vermont Association of Realtors, I would be embarrassed to have her as my president.
I guess they call they call that “trickle down” politics.
Fitting locale, maybe we’re about to see REIC members go by way of consumption?
Horror!…NO FREE PARKING at the Hotel….I wonder how many JSP will this keep away?
Self Parking: 12.00 USDPatrolled garage
Valet Parking: 15.00 USD patrolled garage
Funny how they have to clarify that the payment must be made in USD. I thought that was implied in this country.
yeah. wtf?
Forward thinking. Next year they’ll require yuan or Euros.
…or Ameros
“‘We had an artificial economy,’ said Brad Geisen, founder of a Web site that lists foreclosure properties. ‘There was all this wealth created in real estate, and it wasn’t really created.’”
What’s more, a lot of this imaginary wealth has already been spent.
Somebody is going to be stuck with some very real red figures in their books.
“Somebody is going to be stuck with some very real red figures in their books.”
taxpayers and shareholders.
It was a fun game while it lasted.. then mom came in and upset the Monopoly board, scowling “I told you ten times. Go wash up. It’s time for dinner”.
Mom always said “Don’t play ball in the house.”
Yep. It’s all fun and games until somebody loses an IOU.
An idea to give to all of the politicians supporting a bailout. Before they push it on the unwilling (us), they first agree to donate their entire personal fortunes, and all future earnings to the bailout fund. And all of their family, friends, associates, etc must do the same. For them, a 100% tax. If that were the case, how willing are they to bailout the folks that lost at the housing casino. Don’t take my money to bail out all of these greedy people. Any thoughts?
Politicians are the fishermen. Voters are the fish in the pond. Fish see their friends, one after another, take the bait and disappear forever.
Are fish wise enough to agree to stop taking the bait? Is the fisherman concerned they might? Nope and nope..
A large percentage of the populace spends May through March wanting the government to save them, and April wanting the government off of their backs. The election is in November, so which kind of politicians do YOU think get elected?
An idea to give to all of the politicians supporting a bailout. Before they push it on the unwilling (us), they first agree to donate their entire personal fortunes, and all future earnings to the bailout fund. And all of their family, friends, associates, etc must do the same. For them, a 100% tax. If that were the case, how willing are they to bailout the folks that lost at the housing casino. Don’t take my money to bail out all of these greedy people. Any thoughts?
Classic “theres a problem everywhere else but not here” Real-Turd Speak from the NY article
“But unlike other areas around the country, at this convention, the conventional wisdom is that this area is in for a soft-landing.”
That’s what conventions are for, to dispense conventional wisdom.
I know this is a sad story of a very old man………..but…….
Greenspan’s Britney Moment
http://www.fool.com/investing/general/2007/09/14/greenspans-britney-moment.aspx
I saw King Lear with the Royal Shakespeare Company at the Brooklyn Academy of Music last night.
I’ll look forward to Greenspan on Sunday.
With Ian McKellen?? My wife will kill to get those tickets…
I think Greenspan may just be stupid. His best bet right now at 81 years of age, unless he really needs money, is to shut up and fade away. He continues to step into a spotlight that will do him no good. His legacy is toast. End of story. He should accept that and enjoy gardening or playing bridge.
I apologize if my comment seems ageist or insensitive, but I find his spin to be disgusting (i.e., I don’t really think he is stupid, I think he is a liar). He reaped the benefits of his Wall St. fame and the perks that go with it, he ought to accept the downside of having sold out with some dignity.
agreed
Curmudgeon: good advice!
Maybe we should start retiring people in high positions way before 80 years old . I know alot of 80 year olds ,and I can’t say that the brain is running that well with most of them .
from the Fool link ..I won’t mince words: I find this an incredibly disingenuous, if not cowardly, attempt to weasel out of responsibility for the current economic mess…”
Yes.. It’s quite obvious Greenspan is to blame.
After lowering the fed rate his spirit roamed the world and invaded everyone’s dreams, commanding: “As of this moment it is perfectly OK to lend to crooks and deadbeats.. to borrow far beyond your means to ever repay. Spend every dime you can get your hands on without fear. Whatever you invest in will appreciate forever. Whatever you purchase will cost you nothing. When you awake there will be a new world, into which you will go forth and act really stupid.”
And so they did.
What annoyed me most about Greenspan was his war on savers. Our state has an interest and dividends tax and I didn’t have to pay it for a few years. In the good old days, short-term rates were a lot higher than they are now. Dropping the rates as he did forced savers and the elderly to look for riskier vehicles to earn what they needed. And these are the kind of folks that you don’t want to push into risky investments.
“‘You’ve got supply increasing and demand collapsing at the same time. It doesn’t take a genius to figure out that house prices are going down. The only question is how far.’”
And, for how long?
“‘You’ve got supply increasing and demand collapsing at the same time. It doesn’t take a genius to figure out that house prices are going down. The only question is how far.’”
There are still plenty of people in Eureka, CA that don’t get this yet. My wife has had a few people come into her bank this week wanting jumbo-sized mortgages for investment properties.
And, the equity locusts from SoCal continue, so we’re not there quite yet.
test
An Associated Press analysis of new census data provides insight into the reasons for the slumping housing market: Since 1990, homeowners have faced a growing gap between their incomes and the price of their homes.”
This same census report said that 1 in 5 households now to not speak english at home. So 20% of all households now are fairly recent immigrants. How much lower would housing costs be without this rampant immigration ? How much better would our quality of life be with 20% less people clogging up our roads and using other public services? How much more money would employees command with 20% less competion for jobs? I think this is the untold story in reason we have a shrinking middle class.
I think immigration is encouraged because Americans are not having enough children to finance SSI and medicare for the future . The concept of growth needs population growth to make it work .
I agree with you that our quality of life would be alot better for the reasons you stated ,but America needs more population to expand the way the big business wants expansion .In the meantime the middle and upper middle income Americans are eating it regarding a increase in good paying jobs .
I am watching the America that I have always know and loved change into something that is….well …different .
“But unlike other areas around the country, at this convention, the conventional wisdom is that this area is in for a soft-landing.
‘We have a lot of nano technology people coming in which are well-paying jobs. We have state people that are staying here,’ said Witbeck.”
********
What a bunch of Kool-Aid drinkers in that Saratoga article.
The conventional wisdom for anyone is that their “special” area is in for a soft landing. That’s why it’s conventional.
Those people are so delusional, I’d almost think they’re Californians…
Hey, Jack!
Right on Jack. I’ve never heard such stupidity in my life. Between the “millionares are coming” and “it’s different here”, the locals in upstate NY sound like Bagdad Bob. The pathetic thing about is that the don’t even know it. Completely oblivious.
From the WSJ on Greenspan: “We wanted to shut down the possibility of corrosive deflation,” he writes. “We were willing to chance that by cutting rates we might foster a bubble, an inflationary boom of some sort, which we would subsequently have to address….It was a decision done right.”
He attributes the housing boom to the end of communism, which he says unleashed hundreds of millions of workers on global markets, putting downward pressure on wages and prices, and thus on long-term interest rates.
http://online.wsj.com/article/SB118978549183327730.html?mod=hps_us_whats_news
“We wanted to shut down the possibility of corrosive deflation,”
******
Corrosive deflation?
Yeah, you shut that down at the time.
What was his day job, circus clown?
This is good. The guy is basically recommending high interest rates. He’s totally right, but we’ll see if Bernanke agrees.
“Those easy-money days are history. The good news: Home prices have fallen in many parts of the country and real estate analysts aren’t expecting a turnaround anytime soon. That means you have time to save up for a down payment, and will probably be able to buy more house for your money.”
Just be sure to ‘diversify’ that downpayment so that if the dollar really tanks, your savings still amount to something.
Hi Stucco-Bear or Ben or Athena or..?
A question.
My family and I are heading overseas next year for my work, then we are considering selling our house (2 Br / 1ba; 1000 sf) in Ashland, OR and upgrading to a standard 3/2 ~1700 sf in 2009. I am anomaly, local with steady ~$70k/yr job but little pre-bubble equity.
The main problem with Ashland since we moved here in 2002 is equity locust from LA, SD, and SF Bay Area (usually Marin) blasting the market. Things are so screwed now ~$500k median- $21k per capita income it is silly. Almost no local people (wage earners/first time buyers) have bought here to my knowledge since 2003.
Do you anticipate things will settle down by 2009? Or do you think that will too soon to consider a step up? Or do you think there are enough retiring CA boomers out there to keep prices out of our (locals) reach permanently?
Professor - most on this site are buying in the US, so if the dollar “tanks”, well, will it matter? Now, my wife continues to push me to buy overseas in the UK….that’s another story.
‘…if the dollar “tanks”, well, will it matter?’
It might. For instance, suppose investors from other countries (oil rich nations and countries like CH who invest savings in oil) come in and snap up U.S. residential real estate at fire sale prices in a couple of years. Are you prepared to rent from a Chinese national landlord?
The same hysterics surrounded Japanese investors not long ago. First, real estate cannot be relocated, so the capital is from overseas, so? Secondly, I’m reminded of Alfred Nobel’s brother who sold the Baku oilfields to Rockefeller just before the Russian revolution. Point is…foreign investors have a very difficult time understanding local markets. Besides, who wants to invest in literally, hundreds or thousands of residential properties, deal with the maintenance, taxes, finding qualified renters, etc. Now, commercial properties you have a point. Even then, I say, “so what” we’re in a mobile (worldwide) society when it comes to capital.
Are you prepared to rent from a Chinese national landlord?
The entire US is already mortgaged to China. Why would the Chinese bother buying and managing individual houses with all the hassle that entails, when they can just get Wall Street to extract their tribute from J6P?
You want to be invested in non-USD denominated assets, so when you cash out to buy, you get the currency differential. You want the best return, right?
We’re trying to get together a southbay (LA) HBB meeting on Sunday 9/30/2007. Care to join? Click on my name. I’m keeping an RSVP list on my blog. (Hope you don’t mind Ben).
Neil
Hey Neil, why don’t you pencil me in. I’m a certified cheesecake pig!
Sure thing cereal. 6pm, REDONDO cheesecake factory. (on Harbor, take Beryl and turn right.) We’ll meet in the bar patio and then migrate for the meal (or maybe not). I’m talking the patio visible from the entrance.
Neil
Neil - I’m on for the meetup, but can’t for the life of me get your ‘comments’ section to take my post.
Effing hate Google/Blogger sometimes….
I’m away to Yellowstone on monday (but…we went on holiday by mistake…), so I’d really appreciate a heads-up if plans change.
If they do, could you fire me a quick email? speedingpullet@yahoo.co.uk
Ta very much, and look forward to seeing y’all.
Your on!,
I’ve put you in my comment list.
Will e-mail if there is a change.
Neil
posted
“‘The houses where the price is dropping drastically are the houses that inflated prices initially. If the house has been priced correctly, the prices are not dropping… the value is still there in the homes,’ said Marlene Finger, President Elect of the Vermont Association of Realtors.”
Incredible wisdom. so in areas like San Diego where houses are overpriced by a factor of 2, homes offered at $250K instead of $500K are not dropping. Incredible!
This just in, houses that cost less now, used to cost more.
“The La Boheme Building in North Park will be the site of a condo auction this weekend. The one and two bedroom condos were first offered up between $300- and $500,000. But this Saturday, 35 condos in the building are being auctioned off, with starting bids beginning at $149,000.”
They’ll quickly raise the price to levels they feel more “comfortable” with, by using SHILLS to bid. Or they’ll establish secret “reserve sales prices” which -if not met- would void the sale.
AUCTIONS ARE -for now at least- MOSTLY FRAUDS.
I assume the BOE “aid” does not qualify as a bailout, given BoE Governor Mervyn King’s recent media remarks decrying the practice of bailing out bad actors?
And BTW, the opening line of this LA Times story is eerily reminiscent of a familiar scene from the classic Jimmy Stewart movie, “It’s a Wonderful LIfe.” The problem appears to not be one of a lack of liquidity, but rather the sudden dessication of a far more ephemeral and fragile form of banking-system capital: trust.
Business News
Bank of England aids big mortgage lender
By Kim Murphy, Los Angeles Times Staff Writer
September 15, 2007
LONDON — – Uneasy customers formed lines outside Britain’s fifth-largest mortgage lender Friday after it had to ask the Bank of England for emergency funding because it had been hit hard by the credit crunch tied to the U.S. sub-prime mortgage crisis.
The emergency loan for Northern Rock was the first such action by the central bank since the 1970s, and it came after the northern England bank said it couldn’t arrange short-term loans from other financial institutions amid the international money-market squeeze.
Treasury Chancellor Alistair Darling said the move was an attempt to restore stability to a fiscally responsible mortgage lender caught up in a U.S.-generated crisis, and did not bode ill for Britain’s banking system as a whole.
“The problem here is that there is a lot of money in the system. The banks have got money, but they’re reluctant to lend it to each other at the moment because of the problems in America,” Darling told the BBC. “So when you get a situation like that, in order to create a stable banking system, the Bank of England steps in. . . . Northern Rock will be able to carry on its business.”
http://www.latimes.com/business/la-fi-boe15sep15,1,5411802.story?coll=la-headlines-business
The bubble is huge, yes. But keep in mind that these bubbles are regional. Look at how well places like Austin, Texas are doing. We have never had a national housing collapse except during the Great Depression. Regions like San Diego that have been hit and will fall further will be much higher in the next 10-15 years. A bubble yes, but opportunity awaits.
‘Austin, Texas…We have never had a national housing collapse except during the Great Depression.’
You haven’t been in Austin long, apparently.
Pardon me for doubting your unsubstantiated assertions.
Just why do you think prices will rise to even more unaffordable levels in the next 10-15 years?
How do you rationalize buying housing at what would be greater than 10X annual income now that some semblance of sanity is being restored to lending?
By the way, please pass the kool-aid… it must be great stuff.
…and we just had the first national decline in housing prices since the 30’s. Think tipping point. Only the degree of the bubble can be described as regional. Your great opportunity may be a long time waiting…
A new report showed August home sales in Southern California fell by 36 percent. What impact does this have on San Diego?”
“The La Boheme Building in North Park will be the site of a condo auction this weekend. The one and two bedroom condos were first offered up between $300- and $500,000. But this Saturday, 35 condos in the building are being auctioned off, with starting bids beginning at $149,000.”
Told you we will see a royal reaming on housing. Start expecting this in most areas real soon in a few months.