The Housing Bubble Gets A ‘Pink Slip’
The NAR has a press release out this morning. “Existing-home sales are projected to drop 6 percent to 6.65 million this year from a record 7.08 million in 2005, according to the latest annual forecast by the National Association of Realtors. New-home sales, meanwhile, are projected to fall 10.9 percent to 1.14 million. Housing starts are forecast at 2 million in 2006.”
“‘Home sales will move up and down somewhat over the remainder of the year but stay at a high plateau, meaning this will be the third strongest year on record,’ said David Lereah, NAR’s chief economist. ‘Economic growth and job creation are providing a favorable backdrop for the housing market,’ he said.”
The Herald Tribune reports on the jobs front. “The long-lived national economic expansion, largely fueled by the housing boom, has more than likely overpopulated the state and Southwest Florida with real estate-related payroll checks. When residential real estate closings dry up, as they did in the fall and winter, big lenders like Washington Mutual start looking for ways to prop up profits.”
“A month ago, the company began paring its Florida and California loan-processing operations. Less visibly, job vacancies in the mortgage and title field that were hard to fill only last year are now creating nice stacks of resumes.”
“Economic consultant Jack McCabe sees some big employment hits in the offing. ‘We are liable to see Florida job losses in the 15 to 20 percent range for construction workers, title companies, appraisal companies and other real estate-related businesses.’”
“You can take just about any set of multi-year statistics and see that the real estate slump has arrived. Last week, the Florida Association of Realtors reported that February sales of existing homes fell 20 percent from a year ago.”
“Longtime Sarasota mortgage broker Marta Grande thinks there will be some broad pain in the short term. ‘Those mortgage people and anybody in real estate who didn’t sock their money away, they’re going to be in deep doo-doo until next year.’”
“At the request of the Herald-Tribune, Joseph Kalish ran some numbers for Florida, finding that from November 2001 to November 2005, the state’s private-sector work force has grown by 705,000 to 6,855,000. Out of that 705,000, 210,700, or nearly 30 percent, were related to housing. ‘Residential housing has played a very big role,’ said ‘Kalish. ‘If housing slowed down, what would replace housing as a growth driver?’”
“(Appraiser) Tom Ponrich gets a bird’s-eye view of the lower prices every day as he tries to figure out what a fair price would be for a given house. The bulge in the inventory of Southwest Florida homes for sale is easy to see when you drive around. ‘As the bubble bursts, so to speak, inventory rises,’ Ponrich said. ‘You just drive down the road and count the for-sale signs on your street.’”
“In his own neighborhood in south Venice, Ponrich estimates that during most of the past five years, there were five or six homes for sale at any one time. ‘All of a sudden in the last couple of months, it is 15 to 20 homes. The inventory rises, it becomes a buyer’s market, and what generally sells are the ones that are the most attractively priced.’”
“As long as transactions don’t come to a standstill, Ponrich figures his appraiser’s job is safe. ‘It is just a matter of what price they buy it at. It doesn’t matter to us whether they buy it for half a million or $300,000, somebody is still going to have to do the appraisal.’”
Lereah: Economic growth and job creation are providing a favorable backdrop for the housing market
And Freedom is Slavery, Ignorance is Strength, and Debt is Wealth.
It’s scary isn’t it? What’s going to shake us out of this stupor? It’s like the whole nation is living that commercial for some HELOC granting entity…I forget who…the guy’s riding his mower, talking about his lawn, do you like his new SUV, he just joined the golf club, he’s smiling and saying “help me. I’m in debt up to my eyeballs. I can barely make my minimum payments.” and his saviour is his heloc/debt-consolidation loan officer…
I don’t like the feel of this all…it’s getting more like a nasty pimple than a flight-y soapy bubble. blood and puss is starting to ooze and the cake make-up makes it look worse…won’t somebody get the guts to pop it already? I’m preferring the idea of a scar to the make-up over the ginormous zit..blech.
Don’t worry, Kudlow says we’re doing fine.
I’m not sure whether to admire your metaphor or to be thoroughly grossed out by it. Either way, it’s apt. Nice one, shel.
Lets see home sales will be DOWN 10.9% to 1.14 million {annual rate}….BUT home construction {”starts”} are forecast @ 2.0 million {annual rate}
Ok so, the NAR is saying that despite the downward slide in new home sales, “WE are planning to build MORE than we can sell you!” Another 860,000 more homes {annual rate} in fact! sell..
“Blowing bubbles, tiny bubbles”….are you kidding me!
And nothing is wrong with this picture! economy is good, jobs picture good, stocks up, money in the bank all good! Who ? Me worry ? Be Happy!
‘Home sales will move up and down somewhat over the remainder of the year but stay at a high plateau, meaning this will be the third strongest year on record,’ said David Lereah, NAR’s chief economist.
“Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months.”
- Irving Fisher, Ph.D. in economics, Oct. 17, 1929
LOL. You’d think anybody in the business of pumping and dumping would know the simplest economic history. But I guess it cannot be helped. In a way we (collectively) are almost preprogrammed to repeat the errors of the past.
and next year he will say it is the 4th strongest year on record, and the year after that he will say the 5th and he will keep shoveling this shat until FB’s are running after him in the streets with pitchforks.
Betamax:
Is there is no housing bubble blog yours?
The lead off posting is/was classic!
It’s a brilliant blog, but it’s not mine; I just alluded to it.
“As long as transactions don’t come to a standstill, (Tom) Ponrich figures his appraiser’s job is safe. ‘It is just a matter of what price they buy it at. It doesn’t matter to us whether they buy it for half a million or $300,000, somebody is still going to have to do the appraisal.’”
Yes Tom… and it’s a darned good thing that the number of appraisers hasn’t increased over the past few years…
LOL
Everyone in the real estate game thinks that THEIR job will be safe.
“Somebody’s still going to have to build ‘em / sell ‘em / appraise ‘em/ mortgage ‘em.
LOL
Let’s see, volume down 20%+ YOY. Yep, my appraisal job (which is directly tied to RE market volume) is completely safe.
They’re gonna be in deep doo-doo a lot longer than next year, Marta.
Why do realtors always have such weird names? I think they make them up.
Sounds like Marta Grande just means “Big Martha”
yeah, some big fat smelly bitch!!
drove by a house in mountainside new jersey with for sale sign, realtor’s name posted underneath was ..”LINDA LIES”.. I should have taken a picture…too funny
I like the one around here that says: “Martin Fuchs”
I am sorry, but that is just begging for a name change.
Here in Phoenix we got a guy named “Gary Swallows”
“Longtime Sarasota mortgage broker Marta Grande thinks there will be some broad pain in the short term. ‘Those mortgage people and anybody in real estate who didn’t sock their money away, they’re going to be in deep doo-doo until next year.’”
I’d say a 1-yr downturn is short sighted given the size of this bubble.
“Longtime Sarasota mortgage broker Marta Grande thinks there will be some broad pain in the short term. ‘Those mortgage people and anybody in real estate who didn’t sock their money away, they’re going to be in deep doo-doo until next year.’”
Uh, way to optmistic Marta. The old saying goes “If you took a 5 mile walk into the woods, it’s going to take 5 miles to get back out.” Our correction back to “mean” is going to take a lot longer than 12 months. But, even if you were correct, dear Marta, most in our industry don’t have a 2 month reserve, let alone 12 months. I predict 30% of our industry falls by the wayside in the next 12 months, with more to follow.
200,000 employed in the profession in 2001, 540,000 employed in the business at the end of 2005. my impression, forecasts on volume are wildly optimistic, we will need less than 200,000 by the end of the year. that’s a more significant gaffe, imho.
…they’re going to be in deep doo-doo until next year
You know, once in awhile I have a real soap opera moment of the soul: “V1m, says I, really now. Shouldn’t you stop enjoying what’s happening to these Realtor(tm) parasites, financial fraudsters and speculating ghouls? What happened to the nice fella who helped little old ladies across streets, steered turtles toward the creek, cleaned up spills on the counter, etc.”
Then I think about the social catastrophe inflicted on America by the happy-go-lucky, I-got-mine bubbleers and their perma-profit minds. And of the ruin to the environment and our dependency on foreign oil and foreign oil wars to fulfill their unsustainable lusts.
And thus I conclude: Bring on the deep doo-doo! And mother of pearl, pile it deep.
LAST ONE OUT OF FLORIDA, TURN OFF THE LIGHTS.
“goodnite Gracey”
pain will be felt across the board, but economically strong areas will not be hurt as badly as those areas without a strong local jobs base, i.e the dc market. For dc and its suburbs the rule of thumb will be the further you travel from the region’s core, the greater the percentage decline.
http://www.dcbubble.blogspot.
Once again, thanks for the weekly DC is different comments. Did you see DC was down YOY (adjusted for inflation) on David’s website?
DC Bubble,
Where do you get this “rule of thumb” as you put it. One could just as easily argue that DC has overshot it’s “catch-up” appreciation. The historical urban blight of DC was caused by the long and steady stream of clueless administrators playing politics with the city’s finances and services for years, what leads you to believe that these conditions will never return, considering the demographics of the city. DC is still a long way from having a sustainable middle class, and I sold and got out of there with the knowledge that the political and economic backlash to gentrification in that city is overwhelmingly populist, meaning already high taxes will be increased on those who pay, causing a general flight of more productive members of society who would prefer to keep their lives and property intact, despite the “charm” of such areas as Logan Circle and Adam’s Morgan which are still just a hair’s breadth away from plunging back into the darkness that used to prevail there. I think the up cycle is definitely nearing its end for DC.
You just have to ignore the “long emergency,” “peak oil,” “sustainable cities,” pro urbanist spin. The only reason the preautomotive cities saw any recovery was because of the bubble. No more bubble, no more reason to reurbanize.
I’ll offer that he’s not talking DC-specific. Almost as a matter of definition, houses built later in the bubble are further out from whatever city the builder has already filled up, and are aimed at the most marginal buyer. Typically the only reason to live in one of those houses is to trade away the higher price for a longer commute. There’s nothing else in the new house-farm except the usual strip malls.
When the bubble bursts and prices start going down, the most marginal buyers are blown out first and in the biggest volume. If you’re a new buyer to the area, you might very well qualify for a house closer to the city for the same money as the ones way out were going for just a couple of months previously.
We are seeing it in Sacramento, CA for sure — rummage around for a “Yuba City” post for some jaw-dropping numbers.
I don’t disagree completely with your premise regarding the distance from city center, etc. BUT…I would offer in response, when evaluating the prospect for a decline, I would start where increases have been most pronounced and rapid as good candidates for a rapid decrease. Also, you take as a matter of faith that the attractiveness of the city remains static through a decline. My point is that financial collapse (which I anticipate) is a pre-cursor to social and economic collapse, which means that the attractiveness of the city will decrease as a place to live because of a higher incidence of violent crime.
Additionally, if you have visited DC you might notice that there are very few life-sustaining amenities and grocery stores, making it EXTREMELY expensive to live in the city. Don’t even get me started on the state of the city services, to include the schools. Basically, while there are high-priced houses, there is not an infrastructure to support middle-class life as the majority defines it.
The exurbs, which I believe you are describing, are relatively self-sufficient and there will be fewer reasons for people to vacate their homes, despite the fact that they will be upside down on their mortgages.
I agree that the most marginal buyers will be blown out first, but I think your conclusion requires the assumption that geographically marginal=financially marginal, and that does not wash.
One thing Shiller points out in his housing chapter in his book, Irrational Exuberance, is that new business centers are always being created. The argument that DC proper and the inner suburbs will hold their value because that is were the jobs are ignores the fact that business center has been shifting to Tysons Corner and the Dulles corridor. Even many Federal agencies have been moving their operations out of the city.
Yes we can always count on DCBUBBLE telling us “its different in DC”… Do you really believe what you’re telling everybody? I live in Northern VA and it is truly perplexing that a family with an income significantly above the median is priced out of the market unless they want to take on a suicide loan. When will people wake up and realize that $500k townhomes are not “starter homes” for the middle class. I for one will not take on an I/O loan, nor will I take on a fixed 30-year loan with $3000 per month payments + taxes + insurance to buy a townhome.
And let us not even get started on the price of a decent SFH in a respectable area.
‘ECC Capital Corporation, a mortgage finance real estate investment trust headquartered in Irvine, Calif. that originates and invests in residential mortgage loans, today announced that as part of its initiatives to reduce its cost structure, improve operating efficiencies and achieve profitability, it will be reducing its workforce by approximately 170 people..ECC has announced that four senior executives have offered to take significant reductions in compensation to help the mortgage finance REIT cut costs.’
Didn’t they just shit-can a few hundred people in January? Not looking good for them.
And put on the plywood on the windows in anticipation of the next big hurricane. Don’t forget the hip waders to avoid the ensuing “deep doo-doo” after these people get done &*&##)) their pants.
Actually, appraisers & title companies should be pretty safe in a severe housing downturn. Lenders need to do a lot of appraisals, & often, as prices decline on their mounting returned inventory. Titles still need to be guaranteed even if a property sells @ $0.40, or less, on the dollar.
The only possible difference might be zillow competing against appraisers, although I hardly think zillow could be sufficiently dynamic and accurate, given property physical conditions and a potential rapid decline in values…
It is true! Those appraisers who don’t go to jail will be very busy. I plan on being free to keep appraising as i did not kite any numbers. Of course I did not make much money compared to those who “play ball”.
I agree with you on the safety of the industry, but most current realtors, mortgage brokers or Bank LO’s do not have 12 months reserves which (IMHO) Marta seems to refer to. With a 30% washout in the industry, survivors will be in excellent shape whether the housing market recovers in 5 years or 25 years. Somebody always has to sell, somebody always has to buy and people die -
Do banks appraise their REO property? Could be alot of business there.
Depends on the bank depends on the property. Also depends on how far the Feds are up their behind
I have a friend that, among other things, does appraisals. He tells me that during the RTC fiasco he was turning down lender requests to do appraisals becuase he couldn’t keep up. Many properties needed to be appraised many times before the lender was able to shift them…
I think we’re a long way off from Zillow being used to determine a property’s value for the purpose of a purchase/refinance. Don’t forget that most lenders have some sort of database they can use to check comps. Sometimes they are used when obtaining secondary financing (HELOCs, Fixed rate seconds) because it is more cost effective.
Zillow gives no pictures of the property’s front, rear or interior. Most lenders require a picture to determine how the property measures up against the comps to see if the appraised value is “fair”.
betamax
your ‘And Freedom is Slavery, Ignorance is Strength, and Debt is Wealth’
Seems the Lereah and the other cheerleaders are using Orwell 1984 to maintain power and their dirty little theocracy. Funny nonethless- but still dangerous that this type of propaganda is used without Conscious.
Seems like we need changes in this country-
I just went to an open house this weekend. The RE agent in the house was all optimistic about things. Her husband was the broker, and she had been in the biz for 5 years.
I decided it was a good time to “shake the cage.”
“How many RE agents are on Bainbridge Island?” 250 for 7500 residences. Exasperated look.
“How many of those have been in the market less than 3 years?” Most. Fatigued look.
She said that the PNW is “immune” from the nationwide property bubble crash. Why? 100,000 new jobs are coming to Western Washington each year for the next 15 years.
“How do we know?”
“What jobs are these?”
“Did you know that 56% of new jobs created in the PNW since ‘01 are RE related?” No.
“The bulk of the remainder are in retail, and that is because of all the HELOC money.” Big eyed look.
“What happens when interest rates hit double digits?”
“What happens when the $1.5T in ARM money adjusts in the next 18 months?”
“How can you justify selling this house (3 bd, .19 ac, 1993 construction, 1800sf, landlocked) for $400K?” (whispering) It already has multiple offers above asking…
She asked about my situation. “I sold and am now renting. I’ll be interested when houses like this go under $200K.” (giggling) It will never happen. Property values have never gone down on Bainbridge. We offer something you can’t find anywhere else.
(thinking to myself)…”Yeah, a bunch of builders, RE agents, and appraisers that will be unemployed when this bubble blows.”
“
she had been in the biz for 5 years
Like many other new realtors, she’s never seen anything but a boom market. The down market is going to be quite an education for them.
“Existing-home sales are projected to drop 6 percent”
I wonder how these boneheads came up with this figure? So far it’s looking as though sales volumes are off 20% or so. Are they expecting the rest of the year to be flat with last year to make up the difference, since the 6% is already lost!
‘If housing slowed down, what would replace housing as a growth driver?’”We could sell eachother tulips…
Selling pencils.
I’ve got some swampland in FL (I guess we don’t learn our lessons from history!)
‘‘Home sales will move up and down somewhat over the remainder of the year but stay at a high plateau, meaning this will be the third strongest year on record,’ said David Lereah, NAR’s chief economist.’
I have seen Liareah’s “high plateau” comment in print about eighteen times now. He must either be embarassingly ignorant of economic history, or else believes his intended audience is so. The discussion below on Wikipedia.org is interesting in part for the mention of Fisher’s “debt deflation theory,” which I believe is in for the Mother of all Tests in the next few years.
—————————————————————–
‘The stock market crash of 1929 and the subsequent Great Depression cost Fisher a great deal of his personal wealth and academic reputation. Fisher famously predicted, a few days before the Stock Market Crash of 1929, “Stock prices have reached what looks like a permanently high plateau.” For months after the crash he continued to assure investors that a recovery was just around the corner. Once the Great Depression was in full force, he turned around and warned of the economic dangers of deflation. The price level remained central to his thinking but his debt-deflation theory emphasised that when the price level fell the real burden of debt increased as people tried to pay off their debt. The analysis failed to convince and people looking for new ideas in macroeconomics looked instead to Keynes. Fisher’s debt-deflation scenario has made something of a comeback since 1980 or so.’
http://en.wikipedia.org/wiki/Irving_Fisher
It is unfortunate that Fisher was wrong at precisely the worst time, because he did a lot of impressive work, for an economist. He is right - in a deflation, debt will feel increasingly heavy as the values drop on what one is trying to pay off. When inflation lies ahead, it makes sense to finance something and pay the debt off with cheaper dollars.
GetStucco:
I.Fisher, Who did he work for and how much was he paid !??
{i don’t beleive the “cost him his wealth comments” not one bit!}
So this time around…when you hear a TOP notch economist spin a yarn per above…Your response will be?
For example, Bernake is he the Princeton dupe this time around…aka Woodrow Wilson…?.
Double down on those SHORTS!
Given the immigration debate, perhaps we could employ the failed realtors/lenders/appraisers as border patrol?
or AG workers?
Online Home Price Poll in Bruce Springsteen’s Backyard.
I ‘m going to vote now - thumbs down!
Home prices headed up, down at Shore?
Posted by the Asbury Park Press on 04/11/06
What will happen to home prices in Monmouth and Ocean counties this year?
That’s this week’s online business poll question.
Have prices peaked or do they still have room to grow? If the do, by how much? Conversely, if you think prices are headed down, will they fall slowly or will the real estate “bubble” burst?
To record your answer, go to http://www.app.com and click on the Business section. Readers are invited to e-mail us their comments as well.
http://www.app.com/apps/pbcs.dll/article?AID=/20060411/BUSINESS/604110317/1003
I just voted in the aforementioned Monmouth County poll. The direct link is:
http://www.app.com/apps/pbcs.dll/section?Category=BUSINESS and the poll was on the right hand side of the page.
At 12:49 PM, there were 70 votes and the % of -10 to -15% was 17.1%.
This is hilarious, I’ll bet the person who put this poll online didn’t expect to see such a weighted number towards a 10-15% decline. Keep voting people !!!
7 PM eastern time and there have been 216 votes of which 46.8% say 10-15% decline.
P.S. Thanks for the link, Portland Mainer!!!
My aunt is a real estate agent in Florida (Sarasota actually). She’s also a retired school teacher waiting for her pension to kick in. I think that there are tons of fair weather realtors who will just meander over to the next low barrier to entry profession when things slow down. The real problems will happen when all the debt that was issued based on the temporary income comes due.
Forget about overpaying for homes, most people will have problems even paying for health care.
NYT: “For our generation, in their 40’s and younger, health care is going to be a big piece of our expenses.”
That’s a good point. It just isn’t wise to allocate your next 30 years worth of disposable income to a house when you may need the money a lot more for something even more valuable - your health.
My daughter has asthma. It’s boosted our out of pocket expenses quite a bit. The medicine is expensive, but it works and she is able to live a healthy active life. I bet she appreciates that more than having a bigger bedroom or a large screen TV.
climber
I know how expensive asthma medication is. Have you considered ordering the medicine from Canada? I use an online pharmacy. They are fast and you can save a hell of a lot of money. I pay $134 for 3 of the 125 mcg Flovent inhalers including shipping. My cat has asthma and well, the only reason he’s still around is because I order his meds from Canada.
http://www.smartchoicepharmacy.com/
I have ordered medications from Canada, too, and I think it is great. But I would like to mention here, since someone else has already gone off topic, that my husband has asthma, and Vitamin C, 2-4 grams plus niacinamide 500mg, controls his symptoms. It only takes a couple of hours to work. I have given it to the 8 year old son of a friend for a grass allergy and he went from sitting there trying to get his breath to playing with the other kids (on the same newly cut grassy field) in about 1 hour, but I gave him about 1.5 grams of C and 200mg of niacinamide. Some people need more niacinamide for good control. It doesn’t hurt to try and it can be taken 3 times a day to avoid episodes. You have to take both or it doesn’t work.
Goleta;….Read it and forwarded it to all three of my kids…Thanks…
Thanks, NY Times, for parroting the same irresponsible nonsense my clueless boomer parents spoon-fed me. Those of us who bucked the hyperconsumption trend and saved through our 20s have found ourselves in our 30s with six-digit nest eggs deflated into worthlessness, and priced out of the housing market to boot. Kiyosaki had it right in his recent Yahoo Finance column titled “Savers Are Losers”. Furthermore, people who funnel large percentages of their income into 401k accounts offset the gains of deferred taxes with LOSSES courtesy of limited crappy pre-selected mutual funds. Heck, the most conservative “money market funds” paying 4% are often loaded with MBS’s. At best, you can expect nominal gains that lag REAL inflation. Sadly, with everything meaningful backed out of the CPI, and rampant inflation now thus invisible, Gen X has lost our money BY saving. And we’ll never get any honest dialogue going about this conundrum, because the NIMBY, master-of-the-universe boomers will just insist we blew the money on Hummers and $6 soy lattes rather than address the realities of hyperinflation, where our money actually went.
yes, it’s all very depressing…
but doesn’t any article entitled “savers are losers” reek of the same orwellian double-speak Betamax refers to at the top of the page? all the down is up and up is down stuff seems applicable in this strange landscape right now, but for how long is the question…for how long will it make sense to pretend debt is ownership and spending is creating and so on…
I sure wish I knew the answer to that question!
Just a quick clarification, deflation would be a huge boon to savers (it means your dollars are rising in value and prices are declining) inflation is a reduction in value. They are backwards because they refer to prices rather than dollars.
The key to capital is cash flow (shoot for cash flow of 15% or inflation +10%) but realize that a portion of that is return on your own capital. Savings accounts provide protection but have essentialy never kept up with inflation. If you have ever switched jobs use that as an opportunity to consolidate your 401(k)s into a single traditional IRA account, which will let you invest in cheap index or ETFs (depending on the size of your retirement account one will be cheaper). Saver’s aren’t loosers and Kiyosaki is mostly a jealous idiot who figured out how to cash in writing books (never trust people who write books but haven’t lived what they wrote). The Richest man in Babylon is a much older and better guide to saving and investing (and it’s a fun read too).
I said our savings had been deflated. The cost of goods has inflated. Therein lies the problem. I moved to a (rental) house in 2000 that was worth $192k. Since 2000, I have saved more than $192k. But in 2005, $192k would not even have been a sufficient down payment (for a family with a household income of $90k) to buy that same house. Sorry to disappoint you, but this is an economic environment that not even a genius boomer could have survived in.
And TRUE inflation is probably between 8% to 10%.
“(shoot for cash flow of 15% or inflation +10%)”
Gosh, is it that easy? 10% plus inflation is 18%-20%. Since you did such a great job of clarifying exactly what we need, I’ll just buy a couple condos in Phoenix and that ought to get me right where I need to be! God knows there enough of them.
And I’ll just have my employer add the “Super High Yield Fund” to our basket of available funds in the plan! In case you hadn’t noticed, all of the general market indices, within the adult life of any Gen Y or Gen Xer, have been stagnant.
OCMax, I can relate to *some* (but not all) of what you’re saying. I’m boomer generation myself, but I never did fall for the boomer lifestyle (if there is such a thing).
I agree that there have been very few decent savings vehicles in the US in the last decade. I have steered clear of the US stock market and bond market since 1995 or so - when it became quite apparent that prices were getting disconnected from fundamentals.
But there’s always a good opportunity somewhere.. and at market bottoms, you’re never to going to find it “convenient” (as in: available widely in 401k’s, IRA’s etc) to buy seriously undervalued stuff. Physical gold and silver were great buys for several years - I’ve been loading up since the early 90’s, with some serious purchases near the recent bottom (gold below $300). Did you? Now they’re coming out with ETF’s, the touts on radio are talking about putting gold coins in your IRA, and basically these markets are awash with liquidity. My instinct says: the metals are no longer a compelling buy, now that the spotlight is on them.
Perhaps you were too young to pick up residential real estate in the mid-90’s. I wasn’t, and I did.
Just bide your time and hang on to your cash - and have a significant hedge against the US dollar, just in case. US$ cash is paying better these days - 4.80% FDIC-insured at HSBC. Don’t lock up too much money in retirement accounts. Nothing beats having ready access to cash when the bottom falls out of some market. In my case, I save no more than 3% in my 401(k), and that’s only to pick up the employer match. Even with this measly amount, I do not care for even the safest fund choices in the 401(k) - a money market fund and a GIC, neither Government-insured. Pretty sure something’s going to blow up in one or both, the next time we have a little “crisis”. Hopefully the damage will not exceed my employer’s match! So - I’d rather pay my fine aka “taxes” -now-, and have unfettered access to what’s left.
Here is what I have collected on the foreclosure list in the OC… going up
ALL Counties (3442) * 3/3
orange county (994)
northwest riverside (900)
southwest riverside (265)
east riverside (405)
san bernardino border (170)
san diego border (117)
los angeles border (591)
ALL Counties (3366) * 3/18/06
orange county (944)
northwest riverside (932)
southwest riverside (269)
east riverside (395)
san bernardino border (169)
san diego border (127)
los angeles border (530)
ALL Counties (3584) 4/11/06
orange county (1008)
northwest riverside (971)
southwest riverside (308)
east riverside (430)
san bernardino border (178)
san diego border (132)
los angeles border (557)
Are these NOD, NOT, or actual TS’s. Or a combination of all 3. If it’s just NOD’s that can somewhat be misleading. And for what time period. If that’s a daily total by summer we’ll be swimming in blood.
DOGTURDS FOR EVERYONE!!
Just signed a new 12 month lease- been waiting over a year and half for this bubble to play out. While there are strong signs of slowing sales & higher inventory here in MA, prices have remained flat for anything halfway decent and do not appear to be falling significantly except maybe off 10% for the less desirable properties. A trusted real estate friend of mine says so far this slowdown is not playing out like the MA 90’s bust when prices dropped hard and fast.
I came across this article this morning. Could this be why? Ben- how about a topic on the validity to this argument? Or if it’s already been covered could someone point me to the thread? I have a lot invested in waiting for the market to correct but I don’t want to keep my head in the sand either. Thanks!
Richard Russell snippet
Dow Theory Letters
April 11, 2006
Extracted from the April 10, 2006 edition of Richard’s Remarks
My opinion on housing — The Fed knows that housing MUST hold up — a housing collapse would be a disaster, Housing has been the KEY to the US economy. To hold up housing, the Fed must keep the nation floating on liquidity. We don’t know what the broad M-3 money supply is now, because the Government has taken away the figures. But I believe the precious metals are giving us the answer — the answer is that liquidity is HUGE. The country is floating on money, and that’s the way the Fed wants it.
The cover-up to this Fed-created inflation is those mini-boosts in Fed funds. The little boosts give the false impression that the Fed is “fighting inflation.” But inflation is a product of too much money chasing too few goods. Without M-3 we can’t prove it, but gold is telling us that the Fed is creating huge amounts of liquidity. Above everything else, the Fed is intent on keeping housing UP.
In my opinion, the housing bubble is still intact! If nothing else, I see it in the action of the home building stocks.
you give your fellow americans too much credit. your basic fb is going to hang his hat on evening news stories and radio talk. if the trend feels like it’s turning then that’s all most people need to know.
OK. I will set aside my disbelief for a moment.
But what information do the buyers
of gold have that we don’t??
Why the disbelief?
I don’t have any “inside” information on gold/silver. Perhaps there are such people.. I do have trust in gold - and silver - as a means for long-term capital preservation, and as a hedge against all unbacked paper currencies.
I do not think that you will see a replay of the bust of the early 90’s based on a simple fact: The housing bubble is much bigger this time, and the discounting that you have seen is just the tip of the iceberg. People are confident that their properties will sell. People are confident that the spring will come and save them. I also live in MA, and we are further ahead of the curve here. We were the first with YOY declines in median pricing, even though the inventory is through the roof.
What is completely amazing is that they are building now more than ever where I live. They are building classless, gutless, mcmansions, that are impossible to heat, and ugly to boot.
The people buying these are mostly buying due to appreciation.
I think that you will see significant panic, and discounting come the late summer, early fall. Then buyers will have realized that they have to pay heating on those overpriced POS, and will truly panic. It will be a mantra of sell now, or forever be priced into your property.
Look at deep discounts by the new builders to get inventory moving, and whatever you do, do not bite. They will discount untill they have sold everything, even if it is at a loss for them. They will have made their money on the first couple of idiots who bought expecting to flip!
As far as being in a sea of liquidity, it can be tightened down pretty quick these days, just by the press of a button, or a raise in taxes. I propose a 50% tax on flipping based on Net, not gross amounts!
I subscribe to Richard Russell and AGREE with him. The bubble is still intact. All of us post the signs of a top, but there has been no big break yet. I think we are on the right shoulder of a bell shaped curve, with a big break coming this year. I sold at the top in my area last summer and just signed a one year lease, so I agre with this blog.
RR is right that the Fed will try to keep this thing afloat, but there is just tooooo much debt and not enough income to support it as the “tipping point” arrives.
The bubble IS still intact for the most part. What we are seeing is the normal first phase of a RE bubble deflation. You can’t expect home prices to drop significantly without inventory building up first. This is the turning point where the momentum changes fairly gradually from up to down, and not every location is reaching the turn at the same time. We are still quite bubbly here in Western Washington State, but eventually every area will turn down.
“The people buying these are mostly buying due to appreciation.”
Yep. We are observing the exact same mind set that existed
during the PETS.COM craze. “You better buy now or you will
never be able to afford a new economy company”.
Significant difference: You couldn’t buy stock with nearly infinite
leverage and a stock certificate does not require a new coat of paint.
I have no idea when this monster is going to blow, but when it
does (and it will), we will chart new territory into the unknown.
When the dotcom market crashed, the Fed might have tried to save it with lower interest rates, but it didn’t exactly work. It created a different bubble. The M3 pump might be able to keep housing “level” (2003-2004 prices) at best, but signs point down because of basic affordability issues and consumer momentum.
New home sales projected to be down 10.9% to 1.14MM in 2006. Housing starts are projected to be 2MM in 2006. Does anyone else see a problem here?
That could be accounted for with inventory
-X
BubbleTrack.blogspot.com
uh, wait, flip that… you’re correct, sir, it makes no sense
unfortunately, this isn’t bad enough to faze a lot of people…
and only when prices start showing serious declines will the trainwreck really begin I think, at least in places where most people can pretend the economy is filled to brimming with those ‘jobs’ I hear about. i think they might have something to do with selling i-pod accessories, digital downloads, and coffee.
This has baffled me for a number of months. If one goes back two years, this kind of discrepancy exists every single month. Nearly 100,000 houses extra per month. Are there more than 3 million homes in the country (based on two years of start-minus-sales) or 4, or 5, that are built but not sold? And will there be a million more by the end of 2006? It just can’t be possible that the numbers can be interpreted that way.
I grew up in a housing start that was never a new house sale. We built it ourselves. I’m not sure if custom built homes are included in new housing sales (since technically you are hiring the general to do a project not buying a home from them).
Many rented at what’s expected to be a short-term loss more than offset by huge appreciation?
Yes. That is a problem–especially when you factor in the number of 1-2 year old homes that are going to come on the market from investors who can’t afford their ARMs anymore.
It and a every other word from NAR and builders makes no sense. They are without a doubt qualified to be government statisticians. Since when do you go to the fox to count chickens?
but they still think prices are going to rise… we’ll see about that..
-x
BubbleTrack.blogspot.com
I notice that D. R. Horton reported that orders were up significantly over last year.
http://tinyurl.com/jqvxg
This seems a surprise to me, since a number of other builders had been reporting slowing orders. Anyone got a theory as to why they have been able to buck the trend?
They say orders grew in every market except the midwest.
Regarding the article about savings that says they may reduce benefits for those affluent. Why should those of us that are thrifty and saving in our working years get reduced benefits because of the FBers and other morons out spending more than they earn. It should be “caveat emptor”. Don’t penalize me for the stupidity of someone else. If I choose to help them, let that be my choice, not forced by the government.
Hey, Need 2,
No good deed goes unpunished. Keep living within your means and when you are older, you will be looked at as the “evil rich”.
Would you object if Bill Gates, Warren Buffet, just about any american CEO was excluded from collecting Social Security ? I know Lou Gertsner walked away from IBM with over $500 million in pay plus pension. Should he collect Social Security ?
That won’t solve a thing. There are so few CEOs, that you might increase each citizen’s SS payout by a few cents a month.
How about 2 ideas:
1. Make it a requirement that Congressmen need to pay into and get Social Security–they currently do not, because they have opted themselves out of the plan;
2. Make it a requirement that Congressmen need to do their own taxes. That ought to simplify things a bit.
>>There are so few CEOs, that you might increase each citizen’s SS payout by a few cents a month.
Like I once posted, the Cape Cod Times tallied sometime before we moved out (2002) that it would take $60,000 for a family of four to own a basic home, own 2 cars, pay for food and clothing and health insurance. There wouldn’t be much left for anything else after that. The article discussed how the government’s poverty levels were a complete joke. My gosh, to do a 30,000 mile check up on my minivan costs me $400! That’ll dent the average family budget. Some people pay thousands in healthcare costs/year beyond insurance costs as discussed earlier on this thread. So why are you angry at these people for not saving?
Longtime Sarasota mortgage broker Marta Grande thinks there will be some broad pain in the short term. ‘Those mortgage people and anybody in real estate who didn’t sock their money away, they’re going to be in deep doo-doo until next year.
Real estate sales people-ever the optimists…
…why don’t ya try a DECADE, Marta.
For your reading enjoyment, More coments on the Century 21 harpy
http://forums.fark.com/cgi/fark/comments.pl?IDLink=2007947
SIMPLE MATH
Housing Starts = 2 million
New Home Sales = 1.1 million
Conclusion = Housing Price Meltdown On Horizon.
You gotta love the mind-numbing stupidity of the RE spokesman who cites these numbers and then says prices will remain at a high plateau.
I’m ignorant…what was the ’spread’ between housing starts and projected sales last year, for example?
I just don’t think that this disparity is even noticed by most people…the only thing they attend to is price, even if sales are down a little, no biggie, longer DOM maybe, but as long as *price* can be projected to run at least like 5% most potential buyers won’t freak out, and people like my dear hubby will say…see…see…see…if we wait to buy, we’re just screwing ourselves because all that will change is interest rates.
sucks though that might, this is how people will interpret these NAR ‘predictions’ unless either price or inventory and preferably price is *clearly* shown to be a problem for the RE bulls…
cheers!
Ben & Readers-
I have not been terribly post happy lately, but being that kids are home this week for Spring Break allows me time to browse more on the PC. I really don’t feel like painting the shed. This morning I’m just reading and reading these posts. The comments regarding the loan officers not preparing for a rainy day, hit my “post a comment” button.
Over the last year or so we’ve had a couple requests to broaden our wings and open an additional escrow office. Some of the offers have been tempting and I nearly did a deal, but my inner “bubble” brain took over and I refrained. The kicker–the meteoric rise of this Mortgage firm asking us to partner was run by a couple folks with less than 4 yrs of overall market seasoning. They haven’t been through a shift. They don’t know “what’s coming”… my mind kept saying. They are all about money and I hear nothing about how they will better serve the customer…ie, my other red flag.
The views from the 70th floor of the building in downtown Seattle would have been cool. So my wife come home from work last evening…says, guess what?…when she say’s this I always think “who else is consolidating or closing”….
Sure enough, that mortage firm’s partnership imploded. The company essentially folded yesterday, with staff out of work, moving to other firms or starting their own. I just smiled and said, what did I tell you? It’s just the beginning.
Question? Would any of this Blog’s readership pay us a small fee if we set up a web cam in our escrow office so you could watch live customers continue to do 100% loans? Or, listen to consumers say, ’so glad I’m out of debt.’ …… Huh? What? We just paid off 6 of your credit cards totaling $60K and you just shifted your debt to your home. You are not out of debt, you just bought more time to think about who to list your home with in 6 mos.
Everytime I see a reality show, I can’t help myself think that we should do a program called “Extreme Escrow.”
“Extreme Escrow” …..hilarious… yet sad.
Yes.
Let’s see “Extreme Escrow!”
I see it in the bank files sent to me and it is incredibly depressing to see a young couple with a 6.5% IO 10 year ARM cashout to pay credit card debt (that were managed) and end up at 8.5% with a 2 year prepay that is now going into foreclosure.
The Fed must keep interest rates attractive or else it faces a run on the US Dollar. Countries with enormous current account deficits do not have the luxury of keeping interest rates low - just ask Iceland or New Zealand who have recently been hit by an unwinding Yen carry trade.
The moment the US stops raising rates, there will be a run on the dollar, which will require further rate hikes and curve inversion to stop.
A hard landing versus soft landing of the global housing bubble rests on how skillfully the Fed can maneuver US policy.
‘Residential housing has played a very big role,’ said Kalish. ‘If housing slowed down, what would replace housing as a growth driver?’
Heh. One guess, buddy boy.
This ain’t no socialist paradise, as the bubbleers have long been wont to say, and our oil is still mysteriously buried over there.
Happily for our masters, the same unquestioning souls so useful for rubber-stamping ARMs will turn out to be rather well-suited for, well, arms.
Cue scratchy 78rpm mono recording, and meet your new “growth-driver”:
We’re in the Army now.
We’re not behind a plow.
We’ll never get rich diggin’ a ditch.
We’re in the Army now.
Jim, thanks for the comment. I wish I were some rich CEO like Gates. But alas, just an average guy with a family and wanting to provide for them. Glad that I earn more than spend. But if we saved money, it shouldn’t be taken away to give to FBers that pissed away their money and credit on Hummers, plasma TVs, vacations, McMansions, designer clothes, gourmet meals, etc. If they earned them, fine
I was a Realtor for 10 years back in the late ’80s- late ’90’s. My partner convinced me to go into mortgage lending because he felt a refi boom was around the corner. He was right and we made a killing. I went back into real estate at the first of this year.
The easy money was over and I had a bad habit of telling borrowers that they were crazy to keep sucking the equity out of their homes and buying cars and boats, etc.
Bad timing to go back to becoming a Realtor? Not really, because the other agents will soon drop like flies. I also want to say that I could not have made it during the last few years in real estate. I DON’T write offers on homes with a dozen other offers coming in.
I have been flipping properties for the last 15 years and I am closing on my last one next Friday. I lost money for the first time in my career. 13-1 is my record since ‘03, so I can’t complain.
I have kicked butt since I got back in r.e. sales. My niche? I sell properties to flippers. I have a knack for foraging around and finding deals, as well as several systems in place that bring occasional calls.
Of course if they were REAL deals these guys would never hear about it because I would buy it. But they are happy to get houses without competing and I NEVER tell them what I think it will be worth after they rehab it.
As for regular buyers, if they ask me if it’s a good time to buy I tell them no, unless they are rolling over a lot of equity and just moving up.
The real money in real estate for the next 5-7 years will be the reo’s.
Anywhoo, I found this site and it’s interesting to read everyone’s perspectives. Good luck to all.
What is going to happen to all those mortgage company babes - 20 something year olds?
Hugh Heffner’s greatest achievement ever. A 5000 page issue “20 something Babes formerly of the mortgage industry”. A phone book size issue of disgruntled cuties with curt smiles that look like they want to strap a large neg am or I/O on you…
A phone book size issue of disgruntled cuties with curt smiles that look like they want to strap a large neg am or I/O on you…
LOL! Nice one.
Those 20’s babes will be back at their evening work as exotic dancers for gentlemen’s clubs. Break out those $1 bills. They will need them to pay for their flopping mistakes.
The 20’s dudes are FUCKED. No other profession to fall back on - unless they pick lettuce with the illegal immigrants.
The babes will go back to stripping. Break out the $1 bills.
The dudes will be F&CKED, or out picking lettuce with the illegal immigrants.