What Inning Is It?
Readers suggested past housing bubble quotes and what they mean to the timing of the cycle for a topic. “How about a quick link to the retarded quotes we’ve heard over the years from useless turds like Lereah, (fun)Yun, Seiders, etc. There’s a treasure trove of classic $hit out there.”
One proposed, “A permanent Wall of Shame to show these, as they grow each and every day in the MSM.”
Another suggested a grading process, “Great idea. A nominating process would be in order.”
A nomination, “The ‘All contained…’ quip gets my vote for 1st place. So far off the marker, ‘taint a bit funny. Buffoons, all!”
Another, “I like ‘The United States vibrant housing market.’ That gets my vote. It was in Time I think.”
One remembers, “Did anyone ever hear what happened to those plans for ‘retirement barges’ that would float a bunch of retirees up and down the Mississippi River with no fixed address? That’s probably my favorite bubble story of all. It can’t have gone through.”
One looks at the context, “What inning is it? My vote is the third, assuming the game started in summer 2005 as the market peaked.”
Another, “Maybe the question is; Is this going to go extra innings??”
An analogy, “How about the game being called because the only bat (US$) broke, and the other team dosn’t want to play anymore….”
December 20, 2005. “As if to tweak the noses of housing-sector pessimists, the November U.S. housing starts report released on Dec. 20 revealed another stellar performance: a rebound of 5.3% on the month, to a 2.123 million annual pace, from a revised 2.017 million in October (2.014 million previously). Building permits rose 2.5%, to a solid 2.155 million pace, from a 2.103 million rate in October (revised from 2.071 million).”
“The report showed broad-based strength that defied another wet month and made clear that residential construction will enter the new year on a solid footing. As we at Action Economics have previously noted, all major seasonal adjusted data from the housing and real estate sectors remain strong through the fourth quarter — and may actually be gaining steam.”
“This is true despite a small scattering of negative anecdotal evidence and swings in the some of the weekly data that are notorious for both false signals and seasonal fourth-quarter weakness.”
April 18, 2005. “On a recent Monday evening in suburban Philadelphia, two dozen sober-suited executives huddle around a giant conference table for the weekly ‘ops’ meeting inside the nerve center of Toll Brothers, the hottest homebuilder in America.”
“Suddenly co-founder and CEO Bob Toll bursts in and starts firing questions at his brain trust: Are local managers doing enough to deter the buy-and-flip crowd? Are rival builders throwing up houses without signing up buyers first? His lieutenants reassure the boss that their customers are bona fide primary- and vacation-home owners who just keep coming, and that speculative building isn’t widespread.”
“Finally, with his paranoia assuaged, Toll allows himself to do what he loves best: ratchet up prices.”
“On this night he’s so confident that people will keep buying that he lifts the prices on projects in Florida, Las Vegas, and other markets by 1%. That amounts to about $10,000 for each house over the list price from the previous week.”
“It’s nothing new; he’s been hiking prices Monday after Monday. At Toll’s Frenchman’s Reserve community in Palm Beach Gardens, the price of a Florida rococo confection called the Signature has jumped $200,000 just since January, to $1.4 million. That’s an average increase of $15,000 a week.”
“‘People just keep buying anyway,’ Toll marvels. ‘I’ve never seen anything like this in almost 40 years in the business.’”
June 20, 2005. “Within a month of putting her two-bedroom house in San Francisco on the market recently, homeowner Linda Gao had five offers, each one above her asking price of $699,000. So before accepting the most-attractive bid, she threw in an extra condition: If you want to buy my house, you have to feed the squirrels.”
“Two weeks later, she and the buyer hammered out a contract that included feeding the backyard wildlife, which Ms. Gao has done three times a week for the past two years. ‘I don’t think it matters if it’s a buyer’s market or a seller’s market,’ Ms. Gao says. ‘Anyone with a good heart would feed them.’”
May 20, 2005. “Some regions of the U.S. housing market show signs of unsustainable price speculation and ‘froth’ from rapid sales, Federal Reserve Chairman Alan Greenspan said. The surge may ease as homes become less affordable, he said.”
“‘It’s pretty clear that it’s an unsustainable underlying pattern,’ Greenspan said in response to a question after a speech on energy to the Economic Club of New York. ‘People are reaching to be able to pay the prices to be able to move into a home.’”
“‘There are a few things that suggest, at a minimum, there’s a little froth in this market,’ Greenspan said. While ‘we don’t perceive that there is a national bubble,’ he said that ‘it’s hard not to see that there are a lot of local bubbles.’”
“Greenspan’s comments represent some of his strongest language to date on rising home prices. Fed Governor Donald Kohn said in an April 22 speech that rising home prices now ‘raise questions’”
“There’s a risk that consumer consumption may decline if the housing market slows, Greenspan said. ‘If it occurs, and eventually it will, it will reduce the fairly large and still accelerating degree of extraction of equity from existing homes,’ he said. ‘This has been a major force in financing consumption expenditures.’”
“While Greenspan didn’t explain why he expected the surge in home prices to ’simmer down,’ he noted that buyers have to resort to unusual financing techniques, such as interest-only loans, to afford homes now.”
“There is ‘considerable unlikelihood of a major decline’ in prices because that’s ‘very rare’ in the U.S., Greenspan said.”
“‘Even if there are declines in prices, the significant run- up to date has so increased equity in homes that only those who have purchased just before prices literally go down are going to have problems,’ he said.”
“Earlier this week the Fed and other banking regulators warned banks that they should tighten controls on home equity loans that they said are too often offered with no documentation of a borrowers assets.”
“‘That kind of moral suasion approach should probably have been done two years ago,’ said John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina. ‘It is very hard for them to jack up interest rates to deal with this, but they can get tougher on their guidance.’”
“Three metropolitan regions in Florida led the nation in price growth, according to the group. The strongest price increase was in Bradenton, where the first-quarter median price of $275,000 was 46 percent higher than the same period in 2004.”
“In the San Francisco Bay area, the nation’s most expensive region for homes, the median price was $689,200. ‘The housing market doesn’t have a regional problem; it has localized hot spots,’ said Robert Brusca, president of Fact & Opinion Economics in New York.”
“The Standard & Poor’s Supercomposite Homebuilding Index, which rose 64 percent in the past 12 months, fell 0.7 percent today. Shares of builders Meritage Homes Corp., Toll Brothers Inc. and KB Home have all more than doubled in a year.”
get an arm loan 2004″ al, not my fault greenspin
HIVtv should have a new show where 2004 arm holders get to “interact” w greenspin and mort brokers
Whoop that trick
I’d like to see a show where FBs get to mud wrestle the mortgage broker who sold them their loan & the realtwhore who sold them their house.
‘Did anyone ever hear what happened to those plans for ‘retirement barges’ that would float a bunch of retirees up and down the Mississippi River with no fixed address?’
I remember those articles. The floating condos probably did represent the peak of the mania. It was funny because it was taken so seriously.
But you could rent them out, and there were tax advantages…
Hearing drones drone on and on about the tax advantages of homeownership makes me want to kick something in the nuts. Ask one of these mouth-breathers how much tax relief the house will bring if they lose their job. Deer meet headlights. Headlights meet deer.
Very expensive venison because you have to pay for the car.
I once walked into an autoparts store in eastern Nevada and two guys were talking about a dark night with thunder and lightening. Spooked a 1300 pound steer that ran in front of a new truck going 60 mph. It cost $13,000 to fix the truck.
That was perhaps the funniest thing I have read all day, thanks NYC!
Are n’t there cruise ships or plans for ships with very expensive ($500k starting price) condos with same plan ?
I know a lady bought the right to live on the Disney Cruise ships for the restof her life. I heard it was $1 million, but was a larger stateroom.
“retirement barges” on the mississippi ? Hell, that plan is off the boards !
The new and improved plan is to fill the barges with RE agents, loan officer,Fb’s and associated RE riff raff and torpedo them all out in the Gulf.
(ring..ring)
Hello: Acme Products, how may I help you ?
Wilie : Yeah…WiIe E Taxpayer here and I need 28 surplus submarines, 7,000 large flimsey steel barges and a really large assortment of Surekill high explosive contact and proximity fuse Mark ll torpedoes.
Acme sales rep: Sure…by the way, how’s the housing market going over your way Wile E. ?
Wile E: It is going DOWN
Acme salesman : Credit APPROVED and your latest Mercey Killing Order is …on the way. Thank You
LMAO
verry funny mikey
Sounds like Douglas Adams had the right idea with the Golgafrinchan B-Ark…
I agree with whomever said it was bottom of the third. I am simply going by years. There’s that one dude that says RE is an 18+ year cycle, which means we’re 3 years off the peak, bottoming in 2014.
3 years down, 6 to go…
This is one of the most interesting questions in all this, IMO. There are all kinds of ways to look at it. The old ‘RE has a 10 year cycle and people have an 8 year memory’ line.
18 years may be right. I know that the boom has been going on in parts of Texas for much more than 10 years. Posters from Massachusetts have noted price increases from the middle of the 90’s. One thing seems to be sure; this mania was unprecedented, and the duration of the fallout may be also.
“people have an 8 year memory”
Well, I’m sure many of us won’t forget this one. I’ll buy cash in a few years and sell when I retire in the early 2020’s. If you’re my age (31) you were hit hard by the bubble, but also stand to benefit the most (I’m talking normal ownership, not investing).
I am presuming we’ll all be alive in 2022.
My grandparents remembered the GD a lot longer than 8 years.
” I am presuming we’ll all be alive in 2022.”
Uncertain about everyone else here Muggy but I plan to Live Forever..or Die in the Attempt.
Tks J. Heller and Catch-22
I don’t think we’ll see a symmetric bell curve on this one. It was a smooth upswing, but will be a harder crash on the downside, as financing is pretty much gone. There’s nothing holding the industry together anymore except hope, denial, and refusal to capitulate. I think it will all come crashing down pretty fast any day now…
“I think it will all come crashing down pretty fast any day now… ”
I wish I could agree with you, but I was going to lowball a house for $150k and it went for $285 after a week on the market.
I walked by to make sure it wasn’t some fraud nonsense. Nope. Normal peeps already moved in and living. No signs of a flip or fraud. I even looked up the looked up the loan docs and googled the names. Everything made sense.
Condos in Florida my but be butt cheap in a year, but I will not live in one ever again. EVER. One of my worst living experiences was living in a condo…
Still do not understand FL. Even with 40% down on a 3/2, rent would not cover PIMI with the taxes put on investors. That still makes it speculation, not investment.Even as a home $285,000 is $7,000/yr with tax and ins. thats $600/mo. plus $2,000/mo mortgage with 10% down. Figure out what $2,600/mo equals to necessary wages and FL RE makes no sense at all.
You will always have some buyers in the market. A few have saved cash and are simply ready to buy a home. More often from the stories I’ve seen its daddy warbucks financing the down payment to help their kids buy a house or the money is coming from some other windfall i.e unearned inheritance, stock etc. The house buying urge is incredibly strong esp for those that can “afford” it.
So your always going to have a trickle of home buyers all the way down just like Hummer sales will still happen even as gasoline hits 10 bucks a gallon. But the supply of fools with money is a self limiting phenomena by definition.
Kris,
Divide the price of the house by 2. Then your numbers will start to make sense.
People who don’t live here have no idea how expensive it is to carry a home in FL. That’s why the properties here were so “cheap” historically. As you point out (correctly) even with a moderate price, the math still doesn’t even come close to penciling out. 2000/mo rents a 500K+ home in S. FL, not a 285K home. And doesn’t require taxes, insurance, or any of the other problems of homeowership. Prices need to fall much further before the math makes sense, and they will (continue to fall).
Sorry to respond to my own comment, but just saw this in the previous post:
“The house buying urge is incredibly strong esp for those that can “afford” it.”
Although I agree with you, and would like to buy a house myself someday, you have to understand that the people who “have” money, and worked for it themselves have an even stronger urge (then buying a house) to not LOSE all the money they worked for. I agree that the urge to buy is strong, but disagree that it will push many people to the table to buy overpriced homes. These people have been saving for years, most of them are not going to make a mistake and jump into a market that is dropping several percent a month.
I think it will all come crashing down pretty fast any day now…
It’s well on its way. Drive through any of the neighborhoods built in socal withing the last 5 years and you will find a sea of dead lawns, sale signs, and no trespassing notices on houses. People are desperate and panic has set in. Prices are falling fast…even behind the orange curtain
The graph in the SD Union Tribune (pct of median SD County hh income needed to purchase median SD County home) shows a steady increase in this measure of real home purchase price from Q1.2006, followed by a few quarters of plateau (through Q4.2007).
Next phase: Hard landing — near vertical drop in the most recent quarter from 45 pct to 35.6 pct. More details given below (if my lengthy post eventually shows up).
We’re not seeing a smooth downturn at all. Trulia makes it easy to graph any area. Most are coming down faster than they went up!
This is counter to what I predicted two years ago. Apparently this boom is so much worse than previous ones that the downslope gets to be multiples higher than in previous localized bubbles.
Your point on financing is very true. I’m hearing markets that require jumbo loans are seeing an approximate 5% decline in April due to the high down payment requirements…
Not to mention the banks are finally making people qualify. It seems that banks are so afraid of being stuck with Freddie/Fannie loans that even those loans are getting their requirements ratcheted up. (5% higher down payment, lower DTI limit.) Funny thing happens when it takes time to qualify for a loan; people take their time selecting the house!
Bottom of the 3rd is appropriate. I still believe the home team will have to watch their opponents bat around during the 5th inning.
Got Popcorn?
Neil
The 5th inning could easily look like the Rodney King video.
lol
Good one NYCityBoy.
It just might…
Got Popcorn?
Neil
City boy, you`re a scream! Hope you`re enjoying all that cheap sex.
I’ve just been looking at a housing starts graph. I don’t see any “cycle” — the bust we are in now is a reaction to a boom of unprecedented length. [I'm no good at tinyurl, but the chart I'm looking at can be found by googling "housing starts bigpicture 2008"] Long jaggedy decline from 1958 to 1970. Boomlet crashing in 1975. Boomlet crashing harder in 1981. Boom crashing again in 1991. All uphill till late 2005.
isn’t the bottom 110x times rent ?
like most times before
maybe 125 if rates stay under 6%
“18 years may be right.”
The race to the bottom will end long before that, IMO, but we may stay in the basement for 18 years given uncontained multiplier effects.
In some ways, the game analogy doesn’t work, as games have rules the players abide by.
The only rule in this game was “get as much as you can as fast as you can and screw everyone else.”
No rules going up - no rules coming down. This is why this crash will be fast and hard and chaotic. People will run for the exits and trample everyone else, it’s already happening as they begin to figure out what’s going on. You can’t use economic modeling that worked in the past for this one.
This article suggests we are definitely in the middle of the game in SD, but nowhere near the ninth. I predict this game has a good possibility of going into extra innings, at least regarding a return to positive home price appreciation.
DEAN CALBREATH
Silver lining in the midst of more bad housing news
April 20, 2008
Buried beneath all the sour news of rising foreclosures and declining prices last week was a bit of good news for the San Diego County housing market: Prices have finally fallen low enough to achieve some semblance of affordability for potential home buyers.
With the median price down to $385,000 – roughly the same as in summer 2003 – much of the frothiness of the Great San Diego Housing Bubble has melted away.
In its place is a growing glut of unsold homes – including many that have been foreclosed upon – that have almost returned to the historical average for affordability. An additional 5 percent drop and we’ll be there, according to a study released last week by Chapman University in Orange.
Does that mean the housing crisis is over? No. If past experience is any indicator, home prices will probably dip below the historical average before bottoming out. Over the next few months, the housing market’s hurdles will include tight credit, rising foreclosures and growing joblessness, which means fewer potential buyers.
It’s hard to sell a house in those conditions.
On the other hand, a return to affordability does signal that the market is regaining its sanity. And it hints that a bottom could be approaching in the midterm future – perhaps as soon as early 2009, market watchers say.
“What’s going on with San Diego home prices is a great thing, although it might not seem great to people who are trying to sell their homes,” said Stephen Levy, director of the Center for the Continuing Study of the California Economy in Palo Alto.
“Prices are getting affordable,” said Mark Goldman, a real estate lecturer at San Diego State University. “We’re starting to get a reasonable inventory in the $350,000-to-$450,000 price range. There are a tremendous amount of condos for around $200,000.”
:-) 
…
Data from the California Association of Realtors show that a median-priced home in San Diego County is now affordable to 31 percent of first-time home buyers, compared with the low of 21 percent in mid-2006. But there’s still a way to go before we get to the 42 percent affordability rate of early 2003. One caveat about the association’s numbers is that it uses adjustable-rate mortgages, which are almost unattainable these days, so the actual level of affordability may be lower than the numbers suggest.
Once prices hit affordability, though, the decline in the housing market will probably not stop immediately.
“The market always overreacts, so it’s very likely that prices will go below the mean,” Adibi said. “How far down the prices go depends on such things as whether mortgage rates fluctuate, the job market gets worse or the inventory of unsold homes continues to grow.”
Adibi noted that during the housing boom and bust in the late 1980s and early 1990s, home prices declined so low that San Diego buyers could purchase homes using about 23 percent of the median salary – far below the historical average. At that time, the decline lasted six years, and once the market hit bottom, it took two years before it returned to its pre-slump peak.
He hopes that will not happen this time.
Unfortunately the graph which accompanies this outstanding article is not available online, but I will describe its broad contours and suggest its possible implications.
1) The graph shows “Housing Affordability,” defined as the percentage of median family income needed to purchase a median-priced home in San Diego County (sounds more like “Unaffordability” to me, but no matter…).
2) The range of quarterly data extends from (around) Q1.1989 to Q1.2008.
3) Aside from a small dead cat bounce in 1994, the graph can be neatly summarized (with R-squared = 95 pct or so) as a piecewise-linear spline, with the following pieces:
Q1.1989-Q4.1993: Steady decline from 35 pct of median income in 1989 down to 25 pct of median income in late 1993.
Q4.1993-Q4.1998: Flat / range bound between 23 pct to 25 pct of median income with the exception of a dead cat bounce up to 28 pct and back down to 23 pct in 1994-1995.
Q4.1998-Q2.2006: Unprecedented bubble runup in the real price of owner-occupied San Diego housing in terms of the pct of owner’s income stream required to purchase it, from 23 pct to 47 pct of median hh income.
Q2.2006-Q4.2007: San Diego housing appears to have reached a permanently-high plateau.
Q4.2007-Q1.2008: Hard landing underway, as indicated by a drop from 45 pct to 35.6 pct in one quarter. This correction has played out over the most recent quarter at an annualized rate of ((35.6/45)^4-1)*100 = 60.8 pct.
TRY NOT TO CATCH YERSELF A FALLING KNIFE.
Footnote: If the 60.8 annualized return to affordability continues at this pace, the median purchase price will be below 23 pct of SD median hh income in ln(23/35.6)/ln(35.6/45) = 1.86 quarters. A bottoming out of SD home prices by year-end 2008 is not out of the question, provided the correction continues at this rate.
(Note the above are based on visual inspection of the graph, and hence may be off by a quarter or two or by a pct or two here or there.)
Nice analysis but this points out that housing is headed for a crash not seen since before the great depression. So many buyers are now FB’s and Helocs are adding new inventory no way is this going to bottom out that early.
My opinion is that as we head into a deeper recession the key reason why housing will keep going down is that assumptions of a dual income stream will no longer be valid. If you take your numbers and simply assume that on average only one member of a household is working then you get and additional 50% drop in income on average. Other factors such as massive inventory and over selling that depleted the pool of buyers ensure this is not all that aggressive. Uncertainty in the security of a job makes it impossible to buy using that income. You can do it of course but you have a high probability of foreclosure later.
So in my opinion you should assume that incomes have dropped 50% to figure out the next possible bottom.
Increasing food and energy costs will relentlessly push this out along with falling rents which must chase the real wages of people.
“So in my opinion you should assume that incomes have dropped 50% to figure out the next possible bottom.”
In keeping with standard practice of the economics profession, I like to keep my assumptions very conservative. That way, actual experience is likely to turn out worse than expected compared to my predictions.
I loved living in SD and if the cost of living (housing) ever gets back to late 90’s pricing I WILL move back.
In Chicago, 3rd inning: Denial dies hard here… Sales DOWN 61%!
Housing slide picks up speed
Sales of new homes in the Chicago area plunged in the first quarter at the fastest rate since the housing bubble burst in fall 2005, a stark sign that the market has yet to hit bottom.
Builders sold 2,101 homes in the quarter, a 61% drop from the year-earlier period, according to Tracy Cross & Associates Inc., a Schaumburg real estate consultancy.
The decline is more bad news for homebuilders, contractors and real estate agents eager for any indication market conditions are improving.
http://www.chicagobusiness.com/cgi-bin/news.pl?rssFeed=news;id=29064&seenIt=1
Having mapped the region 1999-2002 and seen the early bubble building firsthand, I am utterly convinced that this area won’t need another dwelling built for at least two decades. Unless, of course all those people really aren’t going to move to CA, FL, WA, TX, AZ, NV after all.
Seriously, if inventory was water we would be walking on the sea floor.
Judging by this article, the condo market is well past the first inning. Keep your powder dry through at least the seventh inning stretch if you are thinking of cash investments in condos, though, as it sounds like the best opportunities lie a couple of years out after the devastating effect of the current round of credit tightening snuffs out the hopes of any infesters still in the game.
NATION’S HOUSING KENNETH HARNEY
Purchasing, refinancing a condo just got harder
WASHINGTON – If you own or plan to buy a condominium, an ominous new phase of the mortgage credit squeeze could be looming on your horizon. As a result of underwriting changes by giant investors Fannie Mae and Freddie Mac, plus severe new restrictions by private mortgage insurers, getting a loan on a condo unit – or even refinancing one you already own – could prove tougher than you imagined.
Why would anybody buy a condo? You are still sharing walls. The building can easily turn bad. The HOA will fleece you. It is just so stupid. Buying luxury condos in Minnesota, Florida, Vegas, etc. makes no sense to me.
No one wants to live in these things. They buy them for the appreciation…. duhhh…
Real Estate only goes up in value.
As I posted below, how can people be talking about 3rd inning when many more of these projects are still just breaking ground?
Exactly. I lived in a condo in Boulder, Colorado, for a short period between college and a new job. It was a pretty upscale one, too. It was truly awful. I could hear everything my neighbors were saying or doing. It was like being in jail (or so I would speculate, never having been there). Rules and regs for everything, you couldn’t even cuss.
You’d have to be nuts to actually purchase one of these things.
‘Rules and regs for everything, you couldn’t even cuss.’
Wha…?! The Horror! That’s the terriblest thing I ever heard!
Sometimes simply nothing will do for a situation but a loudly and dramatically rendered multi-linguistic cuss fest and oratory. That’s just all there is to it. Sometimes it seems that those particular situations occur, oh, near about every half hour or so, or even more often if you’re building a little table out of pallets so you can put it in the forest and it will be cute. See these bandaids on my fingers?
Jeeze, even the frogs in the pond by my house are really getting to have potty-mouths, thanks to my educational rants.
Oh, yes, that would be: German, some Spanish, English and Sanskrit. Amazing. I didn’t even know I spoke Sanskrit! But it turns out I do when I’m mad, or get a sliver.
“The Celebrated Cussing Frog of Thurston County” by Olympiagal. rated PG?? or R???
&$@#!! good *&%^post, Olympiagal…
“Why would anybody buy a condo?”
1) As an investment (after the current group of infesters have lost their shirts and then some);
2) As affordable housing for a young family (been there / done that).
3) Affordable low cost single floor living for retirement.
There is demand for the larger units. What I never understood was the one bedroom condo. But for the large two bedroom units with spectacular views (e.g., the ocean), do make sense to me too.
But those are not the majority of the units. The majority are over-furnished apartments. That market drops until its a low cost rent alternative. Cest la vie.
Got Popcorn?
Neil
“2) As affordable housing for a young family (been there / done that).”
Why not just rent an apartment? What the heck is the difference? Plus, if you have a young family you know you want a single family home. Plus, owning has that anchor characteristic that can keep the bread winners in a young family from moving to better opportunities.
Retirees can rent places that are just as nice and not have the risk of depreciation which condos have proven is a very real risk. It takes so little for those developments to turn bad.
I have not been convinced that condos are a good buy, even in Fantasyland.
One difference is a landlord. At least with owning a condo you don’t have to worry that you are subject to the financial situation of your landlord. We all know that will become more and more of an issue in the near future. I’m not suggesting anyone should go out and buy a condo, but there are reasons.
No, but you are subject to the financial stability of the HOA. Look at all the associations out there in panic mode because foreclosed owners stopped paying their dues.
Have a very nice 1-bedroom condo which I’m very happy with. Problem is, if you don’t want a 4000 sq-ft beast around here condos are the only alternative.
(Of course, I lived in Japan for 12 years so my idea of “reasonable living space” is probably different than the average American.)
Very good point. I don’t want a lot of space anymore. Finished with kids. If someone would just build a community of even duplex side by side reasonable units, many would buy. Lots of them out here in the desert and they are perfect for retiree who wants nice space, but doesn’t want all the cleaning and upkeep when many times you only really use 2 or 3 rooms most of the time.
Also, I would add because condos are supposed to cost MUCH less then SFHs. I would buy a condo on the cheap for cash and live in it without a care in the world; however, when the price per sq/ft for a condo is the same (or in many cases, above) the price for a SFH, the economics make no sense at all. Also, condos are a space saving measure; you can put 300 people in the same space as 5-10 SFHs. However, again, in most of this country, that also makes NO sense at all; there are very few areas that really have “space problems”, NYC comes to mind, and perhaps LA/SF, but not many others.
Condos should sell at a serious discount to SFHs; then they start to make sense. In the current environment? No idea why anyone would buy one, especially when you can rent them at 1/2 to 1/4 the cost.
I especially love the NYC discount of $1,200 per square foot. It ain’t apples to apples but then again I don’t see a lot of apple trees in my neighborhood. Jobs are leaving. Companies are bleeding money. The economy is turning down. But prices shouldn’t get hurt.
Michael, you said it here many times before. With FL taxes, ins. and HOA fees, most condos, even at todays discounts, are still worth ZERO. Thats please take it from me as a gift ZERO.
Don’t forget that condos are appraised for tax purposes using the percentage of the grounds and amenities (pool, etc.) that your condo shares. Ergo, much higher taxes than one might expect. My friends had a 1200 sq. ft.condo a few blocks away from my 2000 sq. ft. house with an acre that appraised more than my just as nice house. Basically the same neighborhood.
It depends. If you’re lucky you might get into a good one. Not all are crap boxes.
Not all condos. Some of the very high end luxury condos in LA are amazingly soundproof. In fact, it’s bizarre at some it’s like they’re a ghost town, but they’re not - just lots of old folks.
A condo , is yet another momument, to human stupidity. Not that we needed one.
A condo is, “The Apartment from Hell”.
“What inning is it?”
I have a better question. At what point does the 10 run rule kick in?
Sheesh people..
I just watch baseball for the Sausage Races. Waiting for the Italian Sausage to take a BAT to the RE sausage’s head
“Slaughter Rule” would be the more appropriate term here.
ROTFLMAO
It doesn’t. This isn’t little league.
The fans will just demand more refreshments as the entertainment extends.
Got Popcorn?
Neil
We still have lots of news stories about new condo projects just breaking ground. Thousands of 700 sqft luxury condos priced to move starting at $400K.
I don’t see how we can be in the 3rd inning with so many still drinking the kool-aid.
We have a very long recession to go through. Commodities bubbles to burst. Trillions of losses to be realized. This still needs to spread all around the world.
I think we are still in the first inning.
“There is ‘considerable unlikelihood of a major decline’ in prices because that’s ‘very rare’ in the U.S., Greenspan said.”
Major forecasting error from a man who built his reputation as a forecastser…
Funny that he thinks deflation is unlikely today, because back in 2002 he blathered incessantly about deflation with every FFR cut.
So, why was deflation a concern back then - but is not supoosed to be a concern today?
Check the post — it is from Spring 2005.
I was out walking in Mountain View and Los Altos yesterday. There were many “open house” signs, but I didn’t stop in any of them. Both towns remain ludicrously overpriced and filled for the most part with extremely undistinguished housing sprawled indifferently across miles of real estate that could surely be put to more intensive use given the number of jobs in Silicon Valley.
While walking in Los Altos, I noticed a dead squirrel on one of the rare sidewalks, and of course my thoughts were drawn to that 2005 “you have to feed my squirrels” quote. The metaphor extends rather nicely to 2008: the squirrel died a violent death!
Since we’re reminiscing about old articles, I thought I would re-post this one that I added to the California thread late last evening, where many may not have seen it.
http://findarticles.com/p/articles/mi_m5072/is_/ai_13927682
This is good reading for anyone who doubts that the high-end sections of LA (and elsewhere) will eventually fall, and fall hard. Enlightening excerpt:
“On the first point, high-priced homes are indeed on a much steeper downward slope than homes priced closer to the median.
According to Dataquick, a median-priced home in Beverly Hills (zip code 90210) hit a peak of $1,485,000 in November 1990. But as of February 1993, that figure has slid to $780,000, a 47.5 percent plummet.
In Brentwood, the price as of February 1993 had tumbled by 34.7 percent from its June 1990 peak, and in the Palos Verdes Peninsula, by 31 percent from its June 1990 peak.
Homeowners in higher-priced parts of Los Angeles are acutely aware of the changing real estate markets — which has led to the rash of anecdotal observations about plummeting home prices.
“I bought my home six years ago in Calabasas,” said Roger Pondel, nameplate partner at the public relations firm Pondel, Parsons & Wilkinson. “We saw it about double in value in the next three, but now it is worth just a little bit more than what we paid for it.”
Confirms publisher Karevoll, “The upper price ranges have been under severe pressure. Prices have fallen to below 1988 levels, and we still haven’t hit the bottom.”
But the higher-priced homes do not affect the reported median price for this reason: If large homes in better neighborhoods fall to, say, $350,000 from $650,000, they still are in the upper half of all home prices. The median is the point at which half of homes sell for less, and half for more.”
‘Confirms publisher Karevoll, “The upper price ranges have been under severe pressure. Prices have fallen to below 1988 levels, and we still haven’t hit the bottom.”’
I am expecting to experience deja vu with respect to this remark in three years or so.
“The upper price ranges have been under severe pressure.”
This is just beginning in the Colorado ski areas, but it’s starting. Things are slowing down, according to my structural engineering friend whose company does a good percentage of the homes in the Roaring Fork Valley (Aspen area).
Which reminds me, my flipper friend who nearly ate it buying late in the market sold his house in Glenwood Springs - only lost 20k. I mentioned this before, but I just found out he sold it to… a realtor! It’s still overpriced by a factor of about 300% (sold for 50k in 1985, 120k in 1998, he got 460k).
BWAHAHAHAH!!! These are the “experts.”
It’s happening in my neighborhood now. Three houses full of ’south of the border’ extended families (and their cars and junk) from have vacated!Whooppee!! Let the fun begin.
The leadoff hitter was the homeless dead dude in FL with title to 5 houses. The cleanup hitter was Juan the strawberry picker and his $720,000 mansion and mortgage in highly desirable Hollister CA and his very high salary of under $20K/yr.
First base coach - “In the Bag” Gary Watts, 3rd base coach, LAY, and umpire team, our own esteemed David Lirah and Larry FunYun.
It’s funny that this thread comes up a few days after the 22-inning game in San Diego - in a stadium surrounded by a lot of new condo development !!!
In a similar baseball theme - I went to a game at the Nationals new ballpark in Washington DC a couple weeks back. It was fun to look at the bunch of condos (including one that has already turned to apartments) under constuction right near there. They may even turn into fun places to live for the young and the car-less - near the ballpark, near metro, not far from capitol hill - but DC does not need the extra jolt of inventory that a whole new neighborhood provides, while there is still a lot of other condo construction throught the city (and the close in burbs) that is selling slooooowly or converting to apartments instead.
“It was fun to look at the bunch of condos (including one that has already turned to apartments)”
They are all apartments. When you are dumb enough to buy one you get to call it a fancy name like, “condominium”. I think that is Greek for, “we just shoved a big one in your anal cavity”.
Spot on. With all that inventory coming on line - very few folks who purchase in the next several years (or the preceeding few) can expect to make money on a condo in DC for a good while, I suspect. And yet - I noticed a “rent is a four letter word” and a few other of the old renting-is-dumb for a bunch of new DC condos in the most recent DC City Paper (local free weekly - always chock full of hip-seeming ads for condos in the area). I need to keep copies of those ads — it would be fun to paste them up on a few nearby telephone poles after the subject property decided to go the apartment route, instead.
NYCityBoy,
Actually, I have had very good experience with condo / coops. Can be great places to live. Many really nice buildings do not allow renting. One was small studio UES Manhattan. Coop did not allow rentals. Prewar, high cielings, radiator heat, built like a fort. Could have shot a cannon in next room and would not hear. When I bought the cost was equivilent to rent. The other was in Richmond, VA. New garden style development. Had features not available in older stock. Balconies, dishwasher, washer and dry in the apartment (YEA!), garage parking, central AC, community swimming poo. Again at the time buying was = to rent. But yes prices now are so high relative to rent. Better to wait.
Hmmm… Don’t remember that translation from Greek class. But you are funny.
swimming pool.
Also you might ask why a condo in relatively loss density Richmond ? I traveled a lot, was single. Did not want to mess with a house, even a small managable one.
Ah, the condos around the ballpark thing. Every city has got to try it, impressed perhaps by the prototype: Chicago’s Wrigleyville.
The problem is that Wrigleyville, at least intially, wasn’t manufactured. Its appeal came from a time long before skyboxes and valet parking and $5 cans of beer. It came from a time when the Cubs couldn’t draw 2,000 fans on sunny July weekday, and when one could get “day of game tickets” in the front row on a weekend. (happened to me twice)
The cities trying to recreate this are chasing something that doesn’t even exist anymore and it will end badly. Even the prototype is showing its age, overcrowded and overpriced I often wonder how it will weather a prolonged economic slump. After all, the State of IL recently made overtures to buy Wrigley Field - and that’s a bad omen - because gov’ts usually buy things right before they turn to sh*t.
Yep, Wrigley is much too crowded these days. I remember sitting in the bleachers during September watching a games while studying for my night classes at Roosevelt U. A friend who was a cop got me past the ushers, so it only cost a coke and a hot dog to kill some time studying.
The prototype they are working off of may be more DC specific — the neighborhood surrounding the verizon center(formerly mci center) in DC where the Wizards, Caps and Georgetown play, along w/ the usual concerts, etc.
That area was already growing when the arena was built 10 years ago - it’s not far off of Pennsylvania Ave, which had been redeveloping in the stretch between the white house and capitol since the early 80’s. Some extra condos and restaurants and retail did fill in more quickly when the arena was built — but, this was in a good time for gentrification and infill in this area, anyways. even without the verizon center, this neighborhood was going to get better, just because of its central location and a metro nearby, and the eastward encroachment of the city. people always over-exaggerate the arena’s effect on the area — all it did was make some of it happen quicker, and bring a more bar/restaurant heavy mix to the area than would have been seen.
I think the folks building near the baseball stadium think this is going to translate into similar success in that neighborhood - but the timing simply isn’t the same, and those condos are going to languish or become apartment complexes.
Greedspam threw out the first pitch for the ceremonial game (first lowering 6 yrs ago?) and $h!thead Ben threw it out (the dollar) for the most current game (now). The Tan Man is the clown behind the booth where you throw pies at for a $1 ($3 today due to inflation). The Ameriquest thief is next to him. David Crisp and Robert Cole are the clowns to throw real darts at.
Who is the most absolute hated villian in the historical (and truly sad) event? My vote is Greedscam for starting it all. Although all of the above are worthy candidates. And I am sure plenty more that I can’t think of to mention.
“Who is the most absolute hated villian in the historical (and truly sad) event?”
For me it is the mindless bonehead that I almost punched out on Christmas Eve 2006. There is also the co-worker’s wife that nearly got a faceful of plate at a West Village restaurant in November 2006. Thank you for asking.
I like my anger!
OK, tell us the gory details, don’t leave us hanging…
For me it’s Neo Con @sshole who called me a stupid housewife at my friend’s retirement party. I had to back off the old fart because he turned all red in the face and his neck veins were bulging out. He had a trach and was lugging around oxygen. I seriously thought the old geezer was going to have a heart attack.
Damn that was a long national anthem, wasn’t it?
Anyway, as I said I think the 3rd inning is about right for the national average, but some places are in the middle of the game, and alas we in New York are still in the bottom of the first.
To me the middle innings, innings 4 through 6, are a bad national recession. Obviously given the score, we’re going to change pitchers, and would even if his contract wasn’t up. He’s trying to stay in the game by walking everyone to avoid giving up the long ball, but that’s just going to make it worse when it comes. It could last until 2010 the way things are going.
As we start to pull out of the recession, you get the endgame. Prices stabilize in nominal dollars but continue to drift down. People can now afford to buy, but have trouble getting credit. The sectors that will become the basis for the new U.S. economy begin to have start-ups, but not a lot of jobs.
When the game is over, we’ll be much further behind in the standings than when we started.
It’s well on its way. Drive through any of the neighborhoods built in socal withing the last 5 years and you will find a sea of dead lawns, sale signs, and no trespassing notices on houses. People are desperate and panic has set in. Prices are falling fast…even behind the orange curtain
How can this be? Yesterday we were reading a thread about people buying in a day, multiple offers because it is now so affordable all over Riverside/San Berdo counties. Even though I think most of it is the most hellish place on earth (think Baker and the world’s highest thermometer, and someone’s favorite Trona (might be different county from San Berdo -maybe Kern?)
Question that I posed in yest. Bits Bucket but will repeat cause I’m still wondering…
Anyone ever been a squatter? My LL is maybe doing a jingle keys. The bank won’t be around for a long time, IMO, so what would happen if I just stayed and paid her a greatly reduced rent - as in maybe just taking care of the place (big lawn, nice trees). She doesn’t want to rent it again, she’s done with it, according to the letter she sent me yest. (lives out of state). I don’t have a lease nor a deposit, just month to month. Would this be something I could do and someday tell my grandkids about, kind of like hopping a freight?
Hey, once she sends in the jingle mail, just stop paying and stay until the bank shows up. Instead, perhaps rent yourself a storage trailer so you’ll have somewhere to put your stuff while you live in your car after eviction, and hold on as long as you can.
Perhaps if you are willing to cut the grass on a lot of REOs and not just one, they’ll let you stay for years.
Put most of your stuff in storage and hang out. When the bank comes around see if you can talk to them about house sitting.
This is what I’m inclined to do. I already have all my stuff in storage, the house is furnished. She’ll get her stuff, and all I have to do is get my very nice bed that I miss and a few things out of storage. Wow… never thought the bubble would hit so close to home…
The nearest bank is 60 miles away and I bet she used a big mortgage outfit for her financing. They probably don’t even know my little town exists or how to find it. There’s a sign on the freeway when you leave the nearest town over that says “NO services for 100 miles.”
This is a shocking article. Once again the MSM fails miserably in its duty. You can look at this story and only wonder what games were played regarding housing and “objective” news articles.
This is a must read.
http://www.nytimes.com/2008/04/20/washington/20generals.html?_r=1&hp&oref=slogin
I read the article online this morning. And, in the blogosphere at least, people are reading it.
CNN, in its favour, did a small segment about it on ‘Reliable Sources’ this morning - although of course, no one was willing to take the blame for not vetting the ‘Military Experts’.
C’mon, if you made cable news actually responsible for checking that their Talking Heads were ‘impartial’ and open about their conflicts of interest, where would they be….?
And, of course, exclusive footage of Pope Benedict XVI getting in and out of various vehicles (let alone full coverage of every word he’s uttered since arrival) is much more important to cover….
No offense to Catholics meant. This is a really big deal. My sweet Aunt Gettie in Rochester, MN is literally beside herself with the visit….
The problem is that there’s a Bombshell A Day like this.
Kudos to the NYT for doing such an in-depth piece about it, there for anyone to read if they choose.
But there’s now so many of them, even my little tinfoil-hatted head is spinning like a beanie.
I’m getting ‘Conspiracy Fatigue’….
Whether you find Keith Olbermann funny or obnoxious (the former for me, the latter to a lot of other people), he covers 3 ‘Something-Gate’ pieces A DAY (thats 15 A WEEK), on the various cover-ups promulgated by either the White House or its cronies, in his “Bushed!” section - few of which ever make air-time either on MSNBC or the other cable news channels.
So, yeah, this article is a big deal. But its only one of many ongoing scandals which the media can’t cover, being, as it is, obsessed with “Shiny Objects” like the Pope’s visit, or the latest nuance over Jeremiah Wright’s ‘love of America’.
Big deal. The spinners with an agenda got spun and didn’t realize it.
Who would look the best in the picture of the “BIGGEST BUFFOON in HISTORY” and their ugly face (and accompanying shriveled up A$$) in colorful clown colors. My picture would be Mr. Magoo and his shreviled up ugly ####).
I’d say a generic vegas or SW florida condo-hotel buyer , who has plunked retirement money down, sight unseen, as they wrap up a successful mid-American medical/dental career. They think they’re going to use it a good bit, and then be able to rent it out at other times.
Either that, or someone who bought undeveloped or partially florida land off of ebay - again, sight unseen.
If one believes this won’t stop winding out until the mid 2020s, as I do, car dealer ads are on the scoreboard, people are still bringing beers back to their seats, the organist is just finishing the Nation Anthem.
Yeah that’s why bob was selling stock options at the peak or at least near the peak.
The Japanese have a great sounding word “Bafun” - close enough to buffoon. Means HORSE$H!T.
According to Greedscam, I should go and get an ARM now?
“…increased equity in homes that only those who have purchased just before prices literally go down are going to have problems,’ he said.”
Oh but then I refinanced, and then I refinanced again, and I was rich I tell you. You want to see it? Here, I’ll show you.
Hey honey, I’m looking for all the money we got from the lender–where’d you put the money? Oh that’s okay, we can refinance again. Our house is worth a lot!
My favorite classic story was the San Diego high-rise condos that had been staged with voyeuristic eye candy in an adjacent building. The person chronicling his venture into bubbleland looked out the window of the demo unit and saw a fetching young woman exercising in a sports bra. For those not so inclined, in a next-door unit there was a “beefcake” type reading a book with his shirt off.
I’ll try to find a link, if it’s still out there.
“Why not just rent an apartment?”
1) Rents were higher than owner-occupancy cost for comparable housing. We could have rented a crappy apartment for the monthly cost of condo ownership.
2) If you buy a condo when nobody else is buying, you can make tons of money (this was serendipity in our case, as we just wanted a home to live in, not as an investment).
2) If you buy a condo when nobody else is buying, you can make tons of money (this was serendipity in our case, as we just wanted a home to live in, not as an investment).
We are just so far from this now that I don’t really even think of it. That is like science fiction right now.
Did you see most recent post to your comments about Flip that House from last night?
It was on again this morning…. I watched it to get the exact numbers.
Purchase = $386K
Makeover = $80K
Original List = $579K
Potential profit = $193K.
Do the math!! The $193K is list - puchase, ignoring the renovation costs, carry costs, closing costs, etc.
I figure that using the reduced ask that was intended to cause a bidding war, but hasn’t caused a single offer in a couple weeks, at best she might get $15K. AT BEST!
What a bunch of LIES that show was!
On Property Ladder right now is a 2007 show where 2 gay guys are about to get financially annihilated. They want to sell the house at about 50k higher than the ‘hood it’s in. I’m already cringing for these guys and the show’s not even half over.
I’ve got another one NYC. I live in a cute little house in a nice little neighborhood in Austin (unfortunately currently much hyped by RE tools and being devastated by developers).
I bought my house, a then uninhabitable fixer-upper, in 1992 for cash, for just what Bye FL always says that “you can buy a house in TX for.”
LOL - Blano -I’m watching kitchen remodels on HGTV.
I consider it Housing Pr0n - you know its just soooo wrong, but you just can’t help but looking…..
Amazingly, those guys might, MIGHT have come out of that deal with a few extra bucks in their pocket. Of course, the show didn’t factor in commissions, closing costs etc. but they still turned a small profit. Can’t see that it was worth the stress though.
What inning every one keeps talking about?…the season tickets just went on sale and I got myself a nice seat behind the catcher…we are still in the sprint training …long way for the official game to begin
sprint = spring
I thought it would be useful to plot the Dataquick median sale prices for both SoCal and the Bay Area going back as far as their archives would take me, which is August or September 1994. There are a few missing data points from the 1990s, but still more than enough to get the picture.
I plotted both the nominal sale prices and a half-assed guess at “real” prices (constant 2008 dollars) assuming flat 3% inflation over the past 14+ years.
I think it’s very useful to have this information available as a handy reference, but can never seem to find it in a convenient form when I need it, so I bit the bullet and plotted it myself, and created a new WordPress blog to host it. You can find the charts at
http://housegloating.wordpress.com/2008/04/20/charts/
I don’t guarantee that I made no typos while transcribing the data, but I don’t see any totally unreasonable outliers. In most cases there are two Dataquick articles from which to retrieve a given month’s prices - the month in question, and one year later (where they show the year-over-year change). I preferred when possible to grab them as “year ago” numbers, because they often change a little, apparently as additional sales data for that month trickles in after the initial publication.
I hope others find these useful!
jbunniii -
You found some gems yesterday and today. I wanted to personally Thank You for all your “hunting and gathering”.
Thanks! I really enjoyed putting these graphs together - it was like slowly adding pieces of a puzzle until the whole picture took shape. My Schadenfreude was in overdrive as I worked backward into the 1990s and our possible future.
I really like the inflation-adjusted graphs (constant 2008 dollars) because you can just pick the year you expect prices will fall back to, and read the price in today’s dollars straight off the graph.
I’m confident that we’ll see 1997 prices again, inflation-adjusted, which means OC should be around $275k, LA about $230k, and Riverside $175k, all in 2008 dollars. If the recession is deep enough, the numbers should be even lower. A 50% real drop from today’s prices is certainly not out of the question.
I guess the RE crash is halfway over as far as the big drama goes.
I don’t expect much of a recovery in RE for a very long time in part because the FED plus GOV will have wrecked havoc on the economy trying to reinflate housing to save the banks.