‘Obviously There’s A Housing Bubble, Of Course There Is’
Let’s clear off the desk and get ready for the weekend! “The trend is becoming clear across the state, where the number of building permits and home starts has been outpacing the number of households since 2002, Orlando-based economist Hank Fishkind told the crowd of about 240. ‘Obviously there’s a housing bubble in Florida. Come on, of course there is,’ he said.”
The Arizona Republic. “Median resale housing prices kept falling through most of the Southeast Valley in March, mainly because there are so many more homes on the market. Jay Butler said most homes sold these days are by investors who flooded the market over the past two years.”
“The main exception was Ahwatukee Foothills, where prices jumped 6 percent from February to March, to $364,250. But that is still below its December median of $386,250. Median home prices from February to March fell 5 percent in Gilbert to $322,500, and almost 4 percent in Tempe to $288,400.”
“America’s biggest mortgage lenders are fighting a federal proposal they say may stifle the market for some popular loans such as interest-only mortgages. Interest-only loans that don’t reduce the outstanding balance on a mortgage ‘delay the day of reckoning’ for consumers once principal payments come due, Comptroller of the Currency John Dugan said.”
“In the Bay Area, 53.2 percent of purchasers and 35.3 percent of refinancers chose interest-only loans last year, while 22.5 percent of purchasers and 33.9 percent of refinancers chose option ARMs. Bob Visini says he has ‘no explanation’ for why so many refinancers, who already own a house they presumably can afford, are choosing these alternative loans. ‘I’d be willing to bet the vast majority are cash-out refis,’ and that people are taking alternative loans so they can take out more cash.”
“Between 1987 and 1991, Congress phased out the tax deduction on consumer loans, but not on home mortgage interest. As a result, many people today use their homes to finance cars, college tuitions, home improvements and other purchases. ‘The government almost forced people to do this when they took away the deduction for interest other than mortgage,’ Visini says.”
“Interest-only and option adjustable-rate mortgages accounted for close to the 61 percent of the non-prime mortgages sold during the first 11 months of 2005 in Nevada. Research that indicates that as many as 40 percent of the consumers holding aggressive mortgage products are unaware of the implications of the loan.”
“The number of foreclosures in Clark County, NV increased by 36 percent in the first quarter of 2006. Researchers say during the housing shortage, a lot of investors bought up properties using adjustable interest rate loans hoping to cash in as the property values went up. Now, a lot of those investors who bought homes they couldn’t afford are stuck with overpriced houses because the demand is down.”
“South County home sales jumped again in March, but the housing market is considerably cooler than it was one year ago. ‘We’re seeing price reductions because of the market we just came out of,’ said (realtor) Susan Jacobsen. Michael Giluso said he recently sold a $650,000 Gilroy home only after the price was cut three times.”
Another great week, folks! My thanks to those who support this blog with donations and/or ads. Please check back this weekend for news, your topics and observations, along with a slideshow update.
Looks like my source was on the money on this one - Per National Mortage news:
Acoustic Home Loans, a nonprime wholesale lender based in Orange, Calif., has gone out of business
Per their website:
As of 4/14/2006 Acoustic Home Loans is no longer in business. Acoustic will not accept new loan submissions after 4/13/2006; however, we will continue to process loans that are in approved status or better. Applications received after 4/13/2006 and loans that are not in approved status or better will be returned to the broker. If you are a broker with a loan in process, a borrower who has a loan with Acoustic, or the media please call our main number at 866.226.8784 and you will be directed to the appropriate person.
Wow didn’t see that coming.
http://biz.yahoo.com/prnews/060413/lath070.html?.v=51
Looks like another one is in the process of biting the dust
Man, and they are actually in talks after filing a Chapter 11 to borrow another 100 million. What’s wrong with that picture.
The shite’s only starting to hit the fan.
foreclosures in Clark County, NV increased by 36 percent
LV Landlord;….What-say-you….??
Really? You want me to comment? Okay here goes. Foreclosures numbers here were miniscule to begin with. It has been nearly impossible to find a foreclosed property for the past few years. If the number goes up 36%, it’s still a really small number.
Think about why houses get foreclosed. There are plenty of transients in Las Vegas. Lots of gamblers, low-lifes, divorces, and and all kinds of hard-luck stories. Lots of ways to lose a house. But usually it doesn’t get to the point of foreclosure, because some speculator will offer a deal and pay off the debts and walk away with the property. It only gets to foreclosure when the owner doesn’t make a deal. Usually, that means the owner is gone. Some people just walk away. Those people tend to be low-life losers.
The foreclosures I’ve looked at have been in really poor shape. Big chunks of floors and walls missing. Former crack houses, sold at auction, and in the end costing more than the comps in the neighborhood. That’s the irony of foreclosures. No matter how crappy they are, they get bid up by hopeful investors who don’t know the market and don’t really know what they’re doing.
What you are looking for is middle class citizens over-extended on I/O loans and unable to meet their obligations on well-loved and well-tended homes, that you can acquire without compition for under market price. I’m not seeing that happening. Not around here, anyway.
A big surge in foreclosures on F@cked Borrowers is going to be the last play in a very long end game, which we’re just now starting. It took 6-7 years to get to this point (depending on where you date the start of HB), so there’s no reason to think it’ll take less time to hit bottom.
I agree with LVLandlord about foreclosure auctions, though. If you don’t know what you’re doing, the pros, crooks & clueless specuvestors can rip your face off.
I’m convinced it’s still far too early to expect any deals at auction… supply & demand - Supply too low and demand too high. I disagree however with your assessment of how long it will take to reverse, in a big way. First we need to see a lot of FBs default… 2 years and a flood will be coming down. By then the anxious buyers will have already exhausted their means to bid. Then, as the defaults mount and sentiment sours… another year, it’ll be an open pit gold mine out there.
Save your gunpowder. The one that fires the last shots wins…
You and DCBUBBLE are both nice poster, however, at least once acknowledge the facts. Any negative news on LV is quickly dismissed and covered up with some useless information on how LV is “different”.
Crispy,
LV Landlord is just a SPIN DOCTOR. Usually SPin Doctors have an agenda, and I believe that LV is probably up to his eyeballs in over zealous “investments” that are now slowly beginning to look like liabilities.
Hey, but if he can spin… and get anyone to believe the BS he slings- it makes him feel better at night. “I think I can, I think I can, I think I can…” probably just one of his mantras he chants every morning when he has to get out of bed and face the day.
Hey LV, did I stir your mud yet???
SBBubbleBeliever — You are not wrong, I have an agenda, but it’s not quite the way you described it. Las Vegas is the fastest growing city in the world. As long as it keeps growing, I keep making money. The more people come, the more demand for real estate. And since by now I am holding a substantial quantity, it is in my best interest to be a booster for the city.
A lot of what is said about Las Vegas in this blog and other places is simply untrue. So I try to tell the other side of it. It goes like this: The economy here is thriving. The tax situation is sweet. Many parts of the city are quite beautiful. And there is a marvelous energy here, a feeling of confidence and optimism that I haven’t found in other places I have lived.
The bubble here is not currently popping, although the market has changed. Low-end properties are still going up. High-end properties spend more days on the market, but eventually sell. There is very little affordable housing left.
There are still a lot of ways to make money in Las Vegas. It’s one of the greatest places in the world for that. Las Vegas is a relocation destination for approximately 8,000 people per month, and has been for years.
As for being a spin doctor - hey, I’m good at it. Somebody should pay me for doing this.
LVLandlord, what types of rentals do you own and what is your strategy?
Are you at all concerned about the bubble? I am short the HBs and I continue to buy rentals in DFW, so I am either really clever or really dumb. As far as I am concerned, there is nothing necessarily inconsistent about believing there is a housing bubble caused by loose lending standards and novice “investors,” on the one hand, and believing that there are always good opportunties to invest in certain areas, on the other.
A lot of what is said about Las Vegas in this blog and other places is simply untrue. So I try to tell the other side of it. It goes like this: The economy here is thriving. The tax situation is sweet. Many parts of the city are quite beautiful. And there is a marvelous energy here, a feeling of confidence and optimism that I haven’t found in other places I have lived.
Wait until the water runs out eom.
LV is right however. +36% on almost nill is still almost nill…
The inventory numbers are a far more interesting figure, and I don’t think you will see significant foreclosures unless and until +1 year after long term rates go up 200 basis points (2%) or more.
lv landlord half of las vegas is low life ghetto crack houses.ever watch the show cops when they do las vegas.alot of las vegas is as bad as compton.dont let the bright lights fool you las vegas is a ghetto waiting to happen.
LVLandlord is right the numbers are so low that an increase of 36% still results in a small number. However there still is a massive bubble. And the 36% increase is the trend for what is coming.
Personally, I welcome LVLandlord’s perspective and insights. Just as most of us in here are contrarians of a sort, it’s not a bad thing to have among us some counter-contrarians to keep us open minded and aware of the other side of the argument. LVLandlord seems like a reasonable enough fellow who is simply telling it like he sees it. Time will tell the validity of his point of views, which he should feel welcome to present in here.
Sammy
OT — I can not get the photo gallery to work on my 7.1 Netscape default browser for some reason. It however works just fine on both Firefox and Explorer ( right pic side click to forward and left pic side to go back to last pic)…
I’ve felt for a year now that this was coming, but I must admit to being surprised at how sentiment turned on a dime and is already starting to pull prices along. I’m assuming this means that people are closer to bled-out than I figured… These folks don’t have the cash in the bank (or breathing space month-to-month) to give the market any type of “mass” to resist the downward acceleration.
A couple of months ago I would have guessed that I’d be waiting 5 to 7 years for prices to unwind, but it’s beginning to look like things might unspool a hell of a lot quicker.
“Median home prices from February to March fell 5 percent in Gilbert to $322,500, and almost 4 percent in Tempe to $288,400.”
Hmmm, these newbe happy homeowners got 4-5% off! Wonderful that they were in such a rush to jump in and catch the falling chainsaw. Gonna get slaughtered, option-ARM and all…
Bring it ON.
Let’s get ready to RRRUUUUUUUMMMMMMMMBBBLLLLEEEEEEEEE!!!!!!!!!!!!!!
Heey Nowwwww.
Mortgage brokers in the Chicago area are getting squeezed by the higher rates.
http://www.chicagotribune.com/business/chi-0604140164apr14,1,2688964.story?coll=chi-business-hed
These poor saps! Sending out cards to former clients you F-d over with a option arm at 1% that has rest to 10% will not generate any new business. They can do all the marketing they want and they are still going to go out of business. This industry will lose 80% of its employees.
I did a few mortgage audits in the 90’s and remeber this exact same cycle playing out. The weak ones will start dropping like flies! Then the mass layoffs will play out at the large players. Then all these “rocket scientists” will wonder why their pay went from $20k per month to $0.00 per month and finally realize they were simply in the right place at the right time and will have to go back to Taco Bell or McDonalds. They will be the only burrito maker with a Patek Phillpe watch driving a BMW!
Wanting to raise the standards in the industry, CAR (Ca Assoc of Realtors) is raising the education requirements for CEU’s. Kinda late guys. What should happen is the Brokers License requirements, should be the agent requirements. That would help emensely. Those additional 8 classes would have filtered the hopeless. It use to be just any Degree would qualify you to take the Brokers Exam. Then they changed that to add the additional 8 solid R E classes (3 units each). None are fluff.
“…with a Patek Phillpe watch driving a BMW”
Well, at least he will be able to pick up chicks for at least another year or two…
“Well, at least he will be able to pick up chicks for at least another year or two… ”
Of course, most of those chicks will be homeless. Which isn’t all bad, because after the date he can drop ‘em off anywhere….
They will be the only burrito maker with a Patek Phillpe watch driving a BMW! That cracked me up good job!
Asking prices here in DC dropping fast. Last April when I sold my NV house, could not find a one bedroom condo in DC for under $400K - NO I did not buy. Now there are more then a potential FB could ever look at for $300K and even less. (Still shockingly high.) A few studios are under $200K. Been several years since those prices. And in the suburbs, million dollar houses are a dime a dozen. Think this bubble will unwind in 2 years, three max.
million dollars houses are a dime a dozen. Prices not that cheap yet.
Unsold million dollar houses for sale are a dime a dozen.
My agent friend confessed to me her clients were difficult about prices and she’s frustrated. Her Prince William county McMansion is on the market in the 9’s and it’s too high. She said the owners bought all new expensive cherry furniture to show the home, and will sell it with the new furniture. They’ll do anything except lower the price.
Great reading.
Then all these “rocket scientists” will wonder why their pay went from $20k per month to $0.00 per month
I always got my mortgage and re-fi dough (3 re-fi’s from a 14.25% rate in ‘81) from the little assistant manager at my local savings bank who was probably makin’ maybe $40/45k a year.
Who are these f*ckin’ chucks to be doin’ $20k a month with probably lower skill levels.
Guess there’s a big premium paid in the indie mortgage biz for clippin’ the ignorant.
Sleazebags…
Ummmm don’t be fooled banks pay commission for those loans you probably paid him and the bank more than a mortgage broker who has to disclose fees.You probably boosted his base of 40 to 45k by about $2,500 bucks. He’s probably laughing his ass off at all you “f*ckin chucks” who think your beating the system.
“the median Gilroy home price has reached $720,000, 9 percent more than a year ago”
That is mind-boggling. Gilroy’s claim to fame are garlic and factory outlets.
I agree Mad Tiger… I’ve driven through Gilroy, and their ain’t Jack ______ , there.
The draw is that Gilroy is one of the last places in south Silicon Valley where there is still plenty of open space left to plant McMansions that are not 2″ away from one another….
Doesn’t make it worth the $ though… the traffic is killer into San Jose.
I can’t imagine making that haul up and down 101 between Gilroy and SV every day. That’s got to be a 90-min commute at least.
I’d sooner move to the Midwest than live in Gilroy, Sacramento, Bakersfield, etc. The people who buy in these areas are paying CA prices for areas that don’t even compare to the Midwest, let alone the CA “lifestyle.” Oh, I forgot, it’s all about the nice “weather” here. Yeah, whatever.
Actually it’s not that hot in Gilroy. Well, OK, it is hot but it’s a dry heat. And there are wonderful natural places around it — the Pinnacles, the beach, Coe State Park, etc. The hills are chaparral and oak woodland very beautiful. If you don’t have to commute to Silicon Valley for work and you speak Spanish fluently it’s a good place (I’m not being sarcastic). You can even eat garlic ice cream!
Gilroy also gets hot in the summer so at the high utility rates figure in air conditioning costs too. Anyone who paid $650,000 got a $200,000, if that, box house.
Will Rogers quote: “Gilroy is the only town in America where you can marinate a steak by hanging it on the clothesline.”
Yep…you’re right. I know someone who bought in Gilroy in the late 90’s in the $200s range. And they’ve just recently (in the last couple of years) widened hwy 101 out there. For a nice stretch it was only 2 lanes in each direction, which made that commute into San Jose unbearable.
But, no way are those houses really worth $750K. They are very nice, though….not that nice.
BayQT~
A must read:
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1/2 Ton garbage disposal.
Wow, think what you could grind up with that baby!
LMAO! We could grind up all the Realtors (r) that have annoyed us with their poor spelling and grammar!
Yo Downturn…
1/2 hp upgraded to 1/2 ton… Cool!
Yeah, just another sign of how realtors will stretch the truth to get a paycheck these days. In Gilroy, they’ll start putting lipstick on the neighbor’s pet pig…
There is an InNOut Burger in Gilroy. That is worth paying a gazillion dollars to be next to. Or to get stuck in garlic festival traffic. No sinus problems, garlic stink will clean that out.
I wish I was within 2000 miles of an InNOut Burger…
That will help the new resident there obtain the fat ass and clogged arteries. And rotten teeth
geez, don’t pick on the guy who actually makes money for his company, unlike some of those other CEO clowns.
http://abcnews.go.com/GMA/story?id=1841989&page=1
Hank Fishkind is a very expensive hired gun for the developers. He can put a happy face on anything and justify any project.
If he says that there’s trouble, then there must be something awful about to happen.
I was recently interviewed by the local newspaper and I told them what I thought….simply….we are gonna be a smokin’ hole in the gorund when this plays out. Well, their columnist was all over me for 2 weeks and asking tons of questions….then he disappeared. I was confused. Then one Sunday I picked up the paper and it weighed 40 lbs. As i began to pick through it, there it was…..my answer. 30 lbs of real estate ads. This same guy interviewed Fishkind the week before. Guess what? He adamantly stated “there is no bubble.” Then as an aside he winked at the interviewer. He is a data ho. Pay him and he will say anything. He is just trying to maintain some credibility at this point and he has had none in professional circles for years and years. Nothing more than a bean counter with a penchant for dealing from the bottom. Florida hold em’.
To this so called “lv landlord”, I was in Vegas this week and one of the biggest news stories was that the concencus was that Vegas homes values would decline 13% in the next 2 years, now you know 13% will not be the end of it, you know 13 will get you 25-30 once prople start running for the exits.
Hey people, is it just me or has any body else noticed a big jump in inventories this week, along with alot more people starting to believe that there is a bubble. As I said, it may just be me but lately it seems general emotion about real estate has turned more negative than just a few weeks ago. Could this be the start of the bust?
Crazy,
The bust has already started, we are now at the can-not-be denied 34D stage. These babys are on their way to the 38DDD level with the next shipment of silicon ready for delivery. MAN THE SYRINGES! This will truly be a bust of historic proportions.
I thought I’d try my hand at a song remake like the other guy who posts them occasionally. I liked his Gilligan’s Island best.
I will Borrow…
(to the tune of U2’s I will Follow…)
I was just renter when you said
You said you could help me
I was doing basic math
I was blind, I could not see
A man tries hard to earn his ‘dough
His lender takes him by his balls
If he stops to think he starts to cry
Oh why
If you ARM, IO, NEGAM,
I ARM, IO, NEGAM…I will Borrow
If you ARM, IO, NEGAM,
I ARM, IO, NEGAM…I will Borrow
I was a homeowner
When they reset to the LIBOR
I had my payment double
I’m buried, underground
ARM, IO, NEGAM
ARM, IO, NEGAM…I can’t borrow
If you ARM, IO, NEGAM
I ARM, IO, NEGAM…I can’t borrow
I can’t borrow
Your lies make the sale
I cry when I go to my home
Your lies, your lies
If you ARM, IO, NEGAM
I ARM, IO, NEGAM…I won’t borrow
If you ARM, IO, NEGAM
I ARM, IO, NEGAM…I won’t borrow
I won’t borrow
I won’t borrow…
Nice.
Rainman18 certainly has talent. I managed a new version of The Beatles’ “Yesterday”, but wasn’t in the same class as Flipagain’s island.
2 songs (both from the 60’s, I’m afraid) I am trying to think up new lyrics for are “The Times they are a-changin” and “The House of the Rising Sun”. Both of them seem to fit the general theme :cool:.
Hmmmm, I’ve just thought of a weekend topic suggestion :D.
How about “The Rates They Are A-Changin’” and “The House with the Rising ARM”.
“Mommas, Don’t Let Your Babies Grow Up To Be Realtors”, ho ho I could go on all day
“Research that indicates that as many as 40 percent of the consumers holding aggressive mortgage products are unaware of the implications of the loan.”
How can it be that almost half of the people with these loans not realize what they got themselves into. Almost half? How is that possible?
Simmsays…
http://www.AmericanInventorSpot.com
AmericanInventorSpot.com
WTF…These I/O ARM mortgage products are designed by the some azzholes who play the derivatives game.
You expect a population with 75% of the people having a high school diploma or less to understand the financial fine print?
All the poor buyer wants to do is sign the papers and get his nagging wife to shut the f*ck up.
However, in this situation, ignorance is not bliss.
All the poor buyer wants to do is sign the papers and get his nagging wife to shut the f*ck up.
“;-)” Funny and oh so true.
in WAPO they used a 2004-2005 comparison and there’s a big sencodn homes are groovy article- the advertisers are calling the shots folks
Nightline last night had a great peice about Americans and debt — including folks in over their heads on homes. One interesting part dealt with a credit-counseling office who said they’ve never been busier, and have started to increasingly see professional people who got in over their heads.
Still looking for transcript/link on their site.
I just wrote an analysis of the recent studies on why there is no housing bubble on my blog. Clearly there is and these authors general research methodology is wrong.
Add to your analysis the effect of leverage. Consider that leverage is a two-edge sword. People that purchased with the belief that real estate always goes up in value are in for a rude awakening. The panic will be evident very quickly. An analogy to the current impending real estate crash: Buying 100% Nasdaq QQQQ in January 2000 on full margin. OUCH!
Yes leverage can help move prices to equilibrium faster by forcing sales.