Getting That Déjà Vu Feeling In Texas
The Dallas Morning News reports from Texas. “North Texas home sales plunged in September. The 19 percent drop in sales of pre-owned homes was the largest such decline in more than seven years. Local real estate agents sold only 6,031 pre-owned homes last month. That’s a big fall-off from August’s 8,480 sales and the lowest monthly total since February.”
“At the end of September, almost 49,000 pre-owned single-family homes were for sale in North Texas - an increase of about 4 percent from a year earlier. The outlook for October sales isn’t promising. At the start of the month, the number of pending home sales in the pipeline was down 17 percent.”
The American Statesman Statesman. “Richard and Andrea Flinchbaugh are building a bigger home in Round Rock and are trying to sell their home in the Forest Creek subdivision. It has been on the market since May, and they’ve dropped the price from $525,000 to $450,000. They’re getting worried that they’ll be saddled with two mortgages, now that their new home is near completion.”
“An investor bought a home in January in Northwest Hills and sank a sizable sum into extensive remodeling before putting it on the market in June. It hasn’t sold, and he’s antsy. He recently cut the price by $45,000 to $930,000 and unfurled a giant banner that declares: ‘Owner says: Bring Me an Offer.’”
“Across Central Texas, the number of homes for sale is growing and sales are slowing as national mortgage troubles begin to spread into the region’s still-healthy market. In August, 9,819 existing homes were for sale, a four-year high, and sales were down 10 percent, the third monthly drop in a row.”
“‘This is just the tip of the iceberg. We would be naive to think that if states like California, Nevada, Florida and Michigan have the flu, or maybe worse, that we couldn’t also catch the flu,’ said Ed Solter, a broker with Presidential Mortgage.”
“‘The overall negative national news is impacting the (local) buyer’s psychology,’ said Eldon Rude, Austin director of the real estate research firm Metrostudy. ‘It makes people more hesitant to buy now.’”
“The Flinchbaughs thought their home would sell quickly. Their new house, in the Lake Forest subdivision across the street, has five bedrooms and 5,600 square feet and will be ready in two weeks.”
“Richard Flinchbaugh said the mortgage situation might be a factor in how long it’s taking his home to sell. But there is also a large supply of new homes in the area, he said, making competition tougher for resales.”
“‘In the last three or four years, people were going nuts with building and buying, and it’s just finally slowing down. It had to slow down sometime,’ said Flinchbaugh.”
“‘Everything right now is sitting,’ said Michelle Perris, the broker…who has the Mesa Drive listing. ‘There’s a nervousness in the market. People may get scared when they hear what’s going on in California or Florida, even though the economy here is strong. People think that the prices are going to go down, so they are waiting.’”
“The reflection of the national picture is glaring in such subdivisions as Briarcreek in the Manor area. Sales have fallen from 25 to 30 a month to about five, developer Dick Rathgeber said. Rathgeber said 70 lots remain in the development’s first phase, which is about a year’s supply at the current sales pace. Before the mortgage crisis, 70 lots would have been about a three-month supply, he said. So Rathgeber has put the next section, with 220 lots, on hold.”
“‘We haven’t gone ahead because of the uncertainty in the market,’ Rathgeber said. ‘All the big builders are hurting.’”
“‘Our industry got spoiled with all the ‘no money down, no income’ thing that consumers, I think, took it for granted, or that down payment and income requirements were a thing of the past,’ said David Reed, president of CD Reed Mortgage Bankers in Austin.”
“‘The foreclosure pace may be slowing in the Austin metro area, but the road is still very long,’ said said George Roddy, president of Foreclosure Listing Service Inc.”
“He noted that most postings for October were on loans originated in mid-2003. ‘So without even considering the subprime factor in this equation, a tremendous amount of financing and refinancing has taken place during the last four years. That’s a strong indicator that we will continue to deal with this fallout for at least three to four more years in the Austin area, if not longer.’”
The El Paso Times. “On the first Tuesday of every month, the county auctions foreclosed properties. On this Tuesday, about 40 people have gathered at the courthouse, hoping to bid on the house of their choice.”
“Rosa Sanchez is able to score the highest bid on a house on the foreclosure list and up for auction. ‘The house is worth $125,000,’ she said of the four-bedroom, two-bath house for which she bid $80,000.”
“From July 2005 to June 2006, Texas led the nation with 36,362 foreclosures, a study by the Texas Department of Housing and Community Affairs shows. In May 2006, Dallas had the highest number of foreclosures with 6,107, while El Paso had 476 foreclosures, about 8 percent of Dallas’ total.”
“In 2005-06, El Paso had one foreclosure a month for every 1,861 mortgages in the county, the study found.”
“Realtor J.R. Fletcher said one reason foreclosures are up in Texas is that many people took out adjustable-rate mortages, for which payments can increase. He said that one client’s mortgage started with a 7 percent interest rate that but after a few years, the rate was 15 percent.”
“‘So after a few years, people think they’re going to have a nice payment of $600 a month. But the adjustable-mortgage rates mature, and guess what happens? Their payments go up from $600 to $1,900 a month,’ Fletcher said.”
“Fletcher said the financial institutions should have made loans more responsibly. ‘Personally, if people barely qualified, they should have never been allowed to have a loan,’ he said.”
“Lately I’ve been getting that déjà vu feeling. If you lived in Texas through the savings-and-loan debacle of the late 1980s, you probably have been, too.”
“What happened to houses in Texas back then may be the template for what happens across the country as the housing bubble pops today.”
“Back then, Texas had been in a long building boom fueled by rising oil prices. Housing prices had risen nicely for years. Many Texans who had started with next to nothing were enjoying a new feeling of wealth as they moved from one appreciating house to another.”
“The savings and loans were encouraged by changed accounting rules to make big development loans, booking unearned profit. Texas homebuyers were advised to put as little down as possible because Texas laws prohibited borrowing equity out of your house. As a result, many put only 5 percent down.”
“Back then, builders marketed houses by ‘buying down’ mortgage interest rates for a year or two. After that, the interest rate and monthly payment rose. Back then, construction employment loomed large in Texas. So did employment in finance and banking.”
“Houston, the first Texas city to fall in the oil bust, had its home price index peak at 108.5 in 1983. It also bottomed early, hitting 81.5 in 1987. But it was a long bottom – the index didn’t recover to its 1983 level until 1997. So recovery from the market top took 14 years.”
“San Antonio peaked in 1984 at 109.7, didn’t bottom out until it hit 82.5 in 1990 and didn’t recover to its old high until 1995, a period of 11 years. Austin peaked in 1986 at 100.1, falling to 72.7 in 1991 and reaching recovery in 1994, about eight years.”
“Dallas also peaked in 1986, at 110.1, bottomed at 94.3 in 1989 and regained its old peak in 1997, a period of 11 years.”
“That’s real history. It’s not hyperventilation from the Chicken Little chorus.”
“You should also know that big-time housing comedowns aren’t unique to Texas. Comedowns also hit other markets. It happened in La-La Land. Los Angeles peaked in 1990, bottomed in 1995 and wasn’t fully recovered until 2000. And it happened in Beantown. Boston peaked in 1988, bottomed in 1992 and hit its recovery number in 1997.”
“He noted that most postings for October were on loans originated in mid-2003. ‘So without even considering the subprime factor in this equation, a tremendous amount of financing and refinancing has taken place during the last four years.
- This dirty dark secret that is ignored by the media is going have a huge spot light shined on it….it is way deeper and way worse than this blog even discusses.
The levels of financial depravity shock me
Shame on you Wall Street
You just flushed our economy down the rathole, for what?
6 years of “glory”
This topic has actually been discussed at great length on this forum. The bottom line: Recent years’ MEW coupled with falling market values has most likely put far more U.S. households into an underwater position on their mortgages than ever before in history.
This underwater position screws up many of the boomer’s retirement plans. Used to be there was no need to save for retirement, forever-increasing home equity would endlessly fund old age financial needs.
Ooops. Now they gotta keep on working than planned and even consider(the horrors) storing away that cash stuff people used to use for money now that borrowing out home equity is no longer possible.
working than planned = working longer than planned
No sympathy here. My 82-year-old father is still working. His father worked until a few months before his death. And his uncle worked until the day he died — at age 80.
Working longer is crappy for the baby boomers in question but not quite so bad for the economy. Bascially, if every boomer had actually saved the money to retire, real inflation would be through the roof as stored money chased goods and services produced by fewer and fewer workers.
What’s bad for the individual might actually be good for us as a whole. Of course the flip side is also that it’s much harder for my generation to move up into the jobs that the boomers hold at the tops of their careers.
Oh, you got that Scott Burns thing. Good. It’s so maddening to read this stuff a good 3 years after I started crabbing about it on the internet as if it’s a new and novel idea. It’s going to happen and then some! This place is going to be as bad as any bubble capital.
I know. Mr Burns and I exchanged a couple of emails in 2005, I believe. I told him the 80’s bust was what motivated me to start this blog. He basically asked me why I was doing a blog on a housing bubble. But, he was there covering the whole mess, so it’s good to see him come around.
Any idea how the condo market is doing in uptown Dallas? Was there last fall and was bewildered at the number of high rise condo projects.
In general, I found the DFW market to be quite strange during my visit as I saw new homes going up all around the metroplex while tens of thousands of resale properties (a good portion bank owned) were listed on the MLS.
Vastly overpriced and overleveraged. Good for 50%+ price declines I would say.
I read this weekend that some Houston developer is planning to build condos in the Design District/Industrial Blvd. area. They’re all banking on this Trinity development thing. I OTOH am backing (with time and money) the Nov. 6 referendum to deep six the toll road which they sneaked in after the 1998 election. That should put a nice kill on all that speculation if it passes.
“Right now I’m having amnesia and deja vu at the same time.”
Steven Wright
My nephew just moved to Dallas a couple months ago from SoCal, where he was flipping. He had grossed $1 million a couple years ago. I heard he has 2 houses in DFW now. He’s 30-ish and has never known a down market. I hope he saved some money, or at least paid his taxes.
Mission Accomplished
“An investor bought a home in January in Northwest Hills and sank a sizable sum into extensive remodeling before putting it on the market in June. It hasn’t sold, and he’s antsy. He recently cut the price by $45,000 to $930,000 and unfurled a giant banner that declares: ‘Owner says: Bring Me an Offer.’”
That’s a good area…either the house is overpriced for its current comps or he re-did it in bad taste or Austin is tanking more than anyone cares to admit.
Ben,
how does it feel right now, compared to the depths of the dead Texas real estate market in the 80’s?
Like it’s on the precipice of a repeat.
The realtors are frantic to keep the “prices will appreciate” and “there’s no bubble in Dallas” garbage in the media, especially the national media where there might be a few stray idjits with money still around. People who have been here any length of time know better.
The homebuilder I’m with right now is down to about 40 sales per month in DFW, which represents about 40% of their target volume (for DFW) and 25% of their total volume (nationally). DFW used to represent about 45% of their volume, as their second largest venue. DFW has been hurting since mid 2005, but the builders have been hanging on by their fingertips. Now their fingernails are starting to bend backwards…
For reference, they used to do a little over 200 home per month in DFW on average.
I know the burbs and exurbs have been hurting for a few years now, it’s finally starting to hit home in the inner city.
Exhibit “A”. “Heavily discounted” yet still overpriced and will not sell. This is in a desirable inner city neighborhood full of teardown McMansions
http://dallas.craigslist.org/rfs/443592692.html
From the link…nice little house, I’d bid 120k max.
“NEW Price is $$299,900 - AS-IS, seller won’t come off this price, already discounted heavily.”
Trust me. I abused that realtor for that one.
They are still in denial here in the San Antonio area. Building, building, building in the north and northwest areas particularly. There are already severe traffic headaches from all the outta control building along the 281. In my ‘hood, the house directly behind us has a “sale pending” (listed at $322K) and a neighbor heard it’s going to be a flip house! We’ll be peekin’ over the fence keepin’ an eye on that one.
Long-time readers may remember I was a real estate major in the Dallas area in the mid-eighties, and got to see that meltdown first hand. It is more worrysome, this time, IMO. That boom was very regional and probably the bust was also. I don’t think anyone can know how big this decline will be, but the wise thing is to be prepared for a bumpy ride.
That said, the thing I remember most was how incredibly cheap land and buildings got for a few years.
Ben I posted something earlier about the St. Joe company after you posted the article. I forgot to add that at the bottom of the depression after the boom of the 20’s they bought land in the depression for 75 cents to 2 dollars per acre. I’m sure I don’t have to tell you what they were hawking that land for per acre up in the panhandle of Florida.
Not only did the duPont Trust make the extraordinary gains on the land, but they also packaged it into a public company JOE and were selling stock at a 50 to 70 multiple of the already astounding gains. Absolutely staggering and a good example of how long term thinking is employed by “old money.”
I only mentioned this story because you were being asked about the bad market in Texas of the 80’s and how it compares today. I think talking about the depression is extreme but I thought some might be interested in that example here in Florida.
And thanks again, Ben,for putting up this blog in fall 2004. I lived through the 80’s in Houston and couldn’t believe that it could happen again, but it has. You’re right about no one knowing “how big this decline will be.” And I’d like more suggestions about how to prepare at this point. Looks like I’ll be hanging out for quite a while on the Big Island waiting to see California turn around.
Having been on the ground in Houston when the oil bust / real estate bust hit, and having been forced to dig into my pocket to sell a house (a lesson well learned at nominal expense in retrospect), the situation now strikes me as national not as regional as it was in Texas and the bubble inflated much more rapidly and substantially in most bubble areas, particularly Florida. There was pain in Texas but in true Texan fashion, they survived. I think that the patient died here and the only difference is that some are either waiting for the resurrection or denying that someone died in spite of the smell.
It’s funny how frequently behavioral patterns repeat themselves.
http://www.wtrg.com/oil_graphs/oilprice1947.gif
I think the main difference now is that there is not yet nearly as much fraud being perpetuated by builders as there was during the late 80’s. Many major banks in Texas got burned on real estate loans for non-existent housing developments. This in turn lead to every major bank in Texas becoming insolvent.
Its not until every bank in your town is shutdown by the Feds, that it gets scary.
It still remains to be seen how well the real estate “investors” can do in the fraud department and whether or not they can exceed the 80’s home builders!
how about el paso? El paso, tx seems to be booming with price appreciation of 60% past five year? Any insights on the god loving town of el paso.
Yeah. Be sure you are current on your vaccinations for all tropical diseases before venturing across the city limits.
Speculators bought there like mad near the end of the rolling boom. It has a military base, don’tcha know.
And military bases always stays open.
Man, are we dumb.
dont know much about El Paso but boy howdy do those huge cow pens north on I-10 between Las Cruces stink to high heaven when you have to drive thru.
doesnt help to roll up the windows; the urine stench just seeps right in.
that smell easily lasts 10-15 minutes. horrific !
LOL
That is the smell of money.
“Rosa Sanchez is able to score the highest bid on a house on the foreclosure list and up for auction. ‘The house is worth $125,000,’ she said of the four-bedroom, two-bath house for which she bid $80,000.”
No No No. The house is now worth 80K. Maybe to you it’s worth 125K. Apparently, it’s not even worth 80K for the people at the auction.
LOL. My thought exactly — it’s worth $80k today for her, but everyone else at the auction apparently thinks it’s worth even less.
These knife catchers remind me of people who bought tech stocks all the way down. They’ll lose their shirts, and deservedly so.
>Their new house, in the Lake Forest subdivision across the street, has five bedrooms and 5,600 square feet
Who the hell needs a house this big?????????
And why is it only five bedrooms? You can fit five beds + three bath + liv + fam + kit 2500 sq ft easy. What do you do with the other 2600 sq ft? Oh wait, maybe they like to “entertain” — twice a year.
My brother and his wife bought a 3200sq house outside Detroit and for me it’s huge. 5600sq sounds like a small baseball diamond to me.
“Who the hell needs a house this big?????????”
They HAD to buy a new house. Their old one was 4700 sq ft and only had 4 bedrooms. Their precious little darlings might have to, God forbid, share a room. This is child abuse, no matter how large the rooms are.
Quote:
######
“Who the hell needs a house this big?????????”
They HAD to buy a new house. Their old one was 4700 sq ft and only had 4 bedrooms. Their precious little darlings might have to, God forbid, share a room. This is child abuse, no matter how large the rooms are.
######
Man, I am from Houston, TX. Been living in Houston since 1979’s. It is story like this that really show the current thinking of the American family. Our family back then was 8 people: Mom, Dad, 5 brothers and 1 sister all living under a 1,600 square feet home with 3 bed rooms, 1 1/2 bath. We had to wait our turn to take a bath. 3 of our brothers share one room. Now these S.O.B have a 4,700 sq ft and they think it is not enough. Damn, I pray fervently to God that may lightning strike these people dead, charred as a chicken barberque !
“Their new house, in the Lake Forest subdivision across the street, has five bedrooms and 5,600 square feet”
That’s no house, thats a bowling alley ! Geez, we have warehouse spaces around here less than that .
I love this story. New house almost finished, old one not sold. Good. Now pay 2 mortgages, 2 property taxes, 2 sets of utility bills, 2 lawncare bills, etc. I sincerely hope they don’t give the old house away. After all, it was ’special’ to your family–hold out for what it’s worth.
Greed on this scale really deserves to be rewarded…and if these folks are stubborn, it will be.
You don’t think he’ll mow his own lawns?
“Back then, Texas had been in a long building boom fueled by rising oil prices. Housing prices had risen nicely for years….”
If you were around the during the last oil boom, you are probably very familiar with the pain of deflating expectations. It’s probably impossible to forget.
Nothing lasts forever. Timing is everything.
It was an oil and RE boom. And remember, what took down the S&Ls was largely property loans, not oil. At one point, Dallas had had the hottest RE market in the world for five straight years.
You remember in about mid-1990 when the entire Dallas skyline was in foreclosure? That big one, Fountain Place, where Jenkens & Gilchrist had their offices was foreclosed twice I think!
Didn’t some newbie “real estate mogul” just pay big dinero for commerical buildings in Dallas?
No doubt. And where was this brain surgeon from? Los Angeles, New York, Toronto or Miami?
I don’t recall…but I think it was one of those large metro areas.
Reminds you of the Japanese investing in our commercial real estate. Of course, with their savings rate and frugality, they could afford to lose it.
Rockefeller Center was the poster child for Japanese excess in buying US commercial properties. Wanted “prestige” properties and paid handsomely for the privilege. Finally, couldn’t afford to carry the costs…
JAPANESE SCRAP $2 BILLION STAKE IN ROCKEFELLER
The Mitsubishi Estate Company of Japan plans to walk away from its almost $2 billion investment in Rockefeller Center, the Hope diamond of world real estate.
Mitsubishi proposed yesterday afternoon that it pass ownership of the Manhattan property to Rockefeller Center Properties Inc., the publicly traded real estate investment trust that holds the $1.3 billion mortgage on the center, according to advisers involved in the negotiations to bring Rockefeller Center out of bankruptcy protection.”
http://query.nytimes.com/gst/fullpage.html?res=990CE1DB113FF931A2575AC0A963958260
I remember the DMN was breaking stories about metro-plex office buildings being flipped over 10 times in one day. That sort of thing was what caused me to worry when I read articles about people buying houses sight unseen and camping out for pre-construction condos. It was a clear sign of a mania.
“It was a clear sign of a mania.”
It was a clear sign to me, too. But I still don’t get how so many couldn’t see it.
They were blinded by the bling.
Timing is everything ??
I will take good timing over good smarts any day….
Anyone else rooting for the Montelongo brothers to get their a$$ handed to them as the market tanks? I don’t make it a practice to wish ill will on anyone, but these guys are truly irritating and their greed and ego are nauseating.
brandon
watching the unbridled greed & flimsy cut-corners-at-any-cost flipper shows has made me come to a realization to NOT buy any home on the market from a seller who has owned it less than a year or more.
Who wants a crappily ” restored” house that has a shaky remodel by temp owners out to make a quick buck by skimping on repair costs?
Good GOD some of the things shown on those shows make me shudder - especially for the buyers of the ” flips ” who probably have to make the real repairs on down the line at higher costs!!
It’s all smoke n mirrors n lipstick on a pig, which as brandon mentioned the flippers flop around in glee at landing some poor trusting sucker to hoodwink by a paint job & new cabinets. Whoopeee !!
Been going on for ever. In the old days it was called”Gingerbreading”.
I don’t have any proof this is just speculation, but when the one Montelongo brother split from the other brother on the show because he wasn’t comfortable with putting his name on some deal they were doing it told me that the state of Texas is going to go after the other brother who is still in the racket (on the show) and they are going to use the other brother who left the show as a witness against him in exchange for immunity. Meaning the other brother left the show on his attorney’s advice and made that statement to try to separate himself from the other brother. This is just speculation on my part but that’s how it looks like it is shaping up to me.
Thanks for the update- i didn’t know they were in hot water.
I think he is getting his own show.
The Cowboys are down 10-7. Love those cheerleaders. hmmmmmmmmmm.
North Dallas Forty, percent off?
50. Maybe 60.
Friday Night Frights.
I have fond memories of growing up in Devine, Texas as a boy … swimming in muddy canals … trying to catch some crawfish … riding bikes on endless miles of roads … finding returnable glass soda-bottles for nickles/dimes for candy money . … paddlings out in the hallway in jr high w/a palm frond!
When I moved to CA it seemed like the schools were out of control in comparison: drinking fountains in the classrooms, sassing back to teachers, and more.
I was shellshocked. People called me “Opie Taylor ” for awhile.
Texas aint so bad - I’ve lived in worse.
“Texas aint so bad - I’ve lived in worse.”
Hear, hear, Aqius. Never lived there myself, but I’ve never met a true Texan (I’m talking about natives, not the carpetbaggers) I didn’t like. I can also say that my experience with Texans in the stuff business is, if they make a deal with you, they’ll keep up their end of the bargain. With courtesy and they appreciate any courtesy you show them in return. Manners and consideration mean something to a true Texan.
Unlike the current occupant of the White House, who was born in Connecticut.
Well, to be fair, he did promise to run this country like a business. Its just nobody knew he meant like Enron.
“At the end of September, almost 49,000 pre-owned single-family homes were for sale in North Texas - an increase of about 4 percent from a year earlier. The outlook for October sales isn’t promising. At the start of the month, the number of pending home sales in the pipeline was down 17 percent.”
What will happen next? Hint: Falling sales have historically been a harbinger of falling prices.
“The Texas template tells us we could be in for a 14 percent to 25 percent decline in home values and an eight- to 14-year wait for recovery.” (from Scott Burns article).
I think this is the reality everyone should prepare for.
“‘The overall negative national news is impacting the (local) buyer’s psychology,’ said Eldon Rude, Austin director of the real estate research firm Metrostudy. ‘It makes people more hesitant to buy now.’”
OK, so its only the bad news that is impacting them? What about the damn prices!?
Their new house, in the Lake Forest subdivision across the street, has five bedrooms and 5,600 square feet and will be ready in two weeks.”
As my wife and I have witnessed, there were a lot of people more concerned with size rather than quality. We much rather buy or build a home that has the special touches that make it a home.
Way too many people get these large homes and stick the cheapest, most standard parts in them. It just makes them just like any other starter home.
Months ago, we went to see a 3600 sq.ft. house (ended up selling at a loss). I walked into the kitchen, and noticed that the dishwasher was the SAME model that I had placed in my 1300 sq.ft. starter home in 1994!
Yeah…gave me good assurance that I was getting a good price in a good home…NOT!
OT, but I thought people might find this builder analysis interesting.
Bubbles, Banks & Builders: Pt.III - “Do or Die, Bed Stuy”
http://reggiemiddleton.typepad.com/reggie_middletons_perpetu/2007/10/there-is-this-s.html
Last time I was in El Paso, I remember being at the edge of town looking across the Rio Grande at the houses on the other side. There were lots of ranch houses with walls made of stacked car tires filled with dirt, the roofs were made of old car hoods overlapping each other like shingles. The older houses with 50s hoods looked bad, but the ones with the big square CHEVY Impala hoods from the 60s looked OK. Roads were packed dirt and well no need for sewer systems, the river was right there. Sure sign me up for a mcmansion with coveted river frontage.
I was in El Paso in 04′ for the first time, and took a walk across to Juarez. I kid you not, the Rio Grande was nothing but a concrete dry-up sewer with a little stream running in the middle so narrow that you can walk across without getting wet (no need to jump).
Cinch
The article gives the times of the peaks and troughs of the Texas market but is there any more detailed information out there? I’d like to buy in a year or so, and I don’t have to buy at the absolute bottom, but I’d like to understand how these things tend to play out so I don’t get burned. In other words, is the first 90% of the drop pretty fast or is the curve closer to a cusp?
I wasn’t here for the bust in the 80’s, but it took *years* to recover. I think that’s typical of real-estate busts.
Why not just rent a nice house for a couple of years?
I’m in Austin, and have to chuckle about that $930,000 house on Mesa Dr. I walked past it every day for months. Guessed correctly that it was a “flip” that isn’t working out so well now.
Austin has a pretty strong job market in tech, but salaries have not been tracking up with home prices. Not supported by fundamentals. Reversion to mean.
Nobody asked me, but I’d say the gains of the past few years will be erased, and a little more, within the next 3 years, due to the overbuilding. And a bloodbath in condos. They’re sprouting up all over the downtown.
“”Inflation is not caused by the actions of private citizens, but by the government: by an artificial expansion of the money supply required to support deficit spending. No private embezzlers or bank robbers in history have ever plundered people’s savings on a scale comparable to the plunder perpetrated by the fiscal policies of statist government.”
Ayn Rand
It is a good thing that the Fed is on the inflation watch.
LOL. Good one.
From BusinessWeek - May 2005
Ask Chuck Dannis about how it feels when a housing bubble bursts and he talks about elevators. A real estate appraiser in Texas for the past 30 years, he well remembers 1986, when crude prices dropped below $10 a barrel, mass layoffs in the oil-dependent economy followed, and the Texas real estate bubble deflated. Home prices across the Southwest fell from 10% to 20%.
“You’d get on an elevator, and it would be quiet,” recalls Dannis, president of appraisal firm Crosson Dannis in Dallas and a lecturer at Southern Methodist University’s Cox School of Business. “No one would talk.” “For sale” signs dotted neighborhoods, with families unable to sell simply mailing their keys to the bank and walking away from homes destined to go into foreclosure.
http://www.businessweek.com/bwdaily/dnflash/may2005/nf20050531_6480_db042.htm
Chuck Dannis is also on KRLD radio every Saturday hawking option ARM mortgages and has been for years.
..well, that just figures, doesn’t it…
From “The Great Crash 1929″, by John Kenneth Galbraith, originally published in 1954. This from his new intro in 1988 where he compares the two crashes Oct 29,1929 and Oct 19,1987. “The most important of the controlling circumstances, powerfully operative before the two Octobers, was, as it must be called, the vested interest in euphoria…Those who dissented or doubted were held not to be abreast of the mood of the times; they did not appreciate the new world of Calvin Coolidge and Herbert Hoover or in these last years, that of the innovative and indomitable Ronald Reagan. The vested interest of euphoria leads men and women, individuals and institutions, to believe that all will be better, that they were meant to be richer, and to dismiss as intellectually deficient what is in conflict with that conviction.”
That “new world” stuff. Isn’t that what Greenspan said about the mortgage markets? Just happen to be weeding the content of our Economics section at the library….
If you want to see what an oil boom looks like, visit Dubai.
Here are some google images. I especially like the one where it’s snowing in Dubai (top right corner).
http://tinyurl.com/334o2t
HERE’s what I’ve been missing!!!!!
http://www.bloomberg.com/apps/news?pid=20601087&sid=aoE.Xr1uGsnM&refer=home
“hedge-fund firm that invests in mortgage securities, suspended client redemptions from two funds because it’s too hard to value their assets.”
Hadn’t seen any of these in WEEKS!
Thanks, Darrell. I always love those reports myself. I’m just wondering when the larger investors will sour on hedge funds. And I’m just waiting for a pension fund or two to receive the shock of its life.
“Setting asset values wouldn’t be “simultaneously fair both to investors redeeming from these funds and to investors remaining in these funds,” Chief Executive Officer Michael Vranos and Vice Chairman Richard Brounstein wrote.”
..and buying into these POS securities was fair to them, while reaping huge incomes, even as you knew these things were worse the the junk bonds of old? Don’t get me wrong, I could care less about hedge fund investors, they deserve what they get. ..BUT to say the securites can’t be valued is fraud. I am sure that there is a bidder out there that would buy them at yard sale prices. Hopefully, stories like this will cause a run on hedge funds.
NFN, but I view hedge funds as collusion like, whereby they rig the game. A few teams playing the you win this time, I win next time, and so on.
If regulated products/entities tried half of what these guys do, the SEC would go nuts.
..and please don’t give me the “it’s Bushes fault” or “it’s Clinton’s fault”. This crap had and will go on forever.
most people don’t understand why house prices increased, and they won’t understand why they will decline.
Are the Texas home price index numbers adjusted for inflation?
“Many Texans who had started with next to nothing were enjoying a new feeling of wealth as they moved from one appreciating house to another”
That’s the problem! You gotta get out and stay out until the aftermath. But people don’t want to step backward and rent. What’s wrong with one step backward and four steps forward?