‘Gratefully, The Unsustainable Sellers Market Is Finished’
Some housing bubble news from California. “Placer County’s home were 23 percent slower than March 2005, according to the county’s realtors. The association also reported more than 2,210 homes were on the market, more than double the figure in March 2005. The county has the most homes on the market since January 1997, the oldest historical data released, and the fourth month to top 2,000 homes in the past seven months.”
“The service reported 389 existing homes sold last month in the county, far from the 507 in March 2005, and the slowest for that month in three years.”
“The median price paid for a Southern California home passed $500,000 for the first time last month as sales continued to decline. Sales have declined on a year-over-year basis the last 21 months and are currently at 2001 levels.”
“‘We still expect the annual increase in median to go down into the single digits sometime this summer. San Diego County is still the market furthest along in this cycle. Price increases there have been below ten percent the last eleven months,’ said Marshall Prentice.”
“Financing with adjustable-rate mortgages has dropped significantly during the last three months. Foreclosure activity is edging up from its bottom.”
“A total of 29,509 new and resale Southland homes were sold last month. That was down 17.4 percent from 32,674 for March last year. The typical monthly mortgage payment that Southland buyers committed themselves to paying was $2,383 last month, up from $2,037 for March a year ago. Adjusted for inflation, current payments are about 8.4 percent above typical payments in the spring of 1989, the peak of the prior real estate cycle.”
“Housing resale prices in the Santa Clarita Valley rebounded slightly in March as the median for a single-family home hit $600,000. It’s an improvement from February’s median price of $590,000, the result of a 4.8 percent drop from the record $620,000 set in January. Listings in March soared 216 percent, to 1,704.”
“The Van Nuys-based Southland Regional Association of Realtors said San Fernando Valley sales continued declining and inventory ballooned by more than 100 percent, further proof that sellers no longer control the market.”
“‘Gratefully, the overheated, unsustainable seller’s market of years past is finished,’ association President Steve White said. The swelling inventory, up an annual 124.9 percent for houses and 212.1 percent for condominiums, seems to support that view.”
“As expected, home sales throughout the Valley during March were slower than the record-setting pace of the last several years. Sales of existing single-family homes fell 14.7 percent compared to a year ago March. It was the lowest total for the month since March 1997 and the first time in eight years that it fell below 1,000 sales. Likewise, condo sales fell 26.8 percent from the March 2005 tally.”
“Pending esrows, a measure of future sales activity, (were) down 12.9 percent from 12 months ago. The inventory of homes listed for sale increased a whopping 143.0 percent from a year ago. ‘Simply tacking on 20 percent above similar homes is unrealistic,’ said Jim Link, the Association’s executive vice president. ‘We’re back to a market where real research is needed before setting the list price of home..if you want to alert the most likely buyers.’”
“‘Over-priced properties will sit on the market,’ said Link. ‘Hoping to sell $100,000 above comparable recent sales is not going to happen anymore.’”
The trend of the median price nudging upward as inventory builds is fairly well established by now. In some Arizona towns the median jumped up recently, even as very little sells and inventory is at record levels. In case you missed this from the earlier post.
‘During the current quarter, certain segments of the California residential real estate market began to show signs of slower sales and flattening home values on a sequential month basis. In addition, increased usage of negative amortization associated with option ARM loans may result in certain borrowers reaching their limit of negative amortization permitted under the terms of their loan, thereby resulting in an increase in their minimum monthly loan payments and the potential for higher delinquencies.’
‘As time goes on, sellers are realizing that the days of multiple offers and setting list prices higher than normal are gone,’ Link said. ‘Wise sellers now realize they have to price according to the most recent comparable sales, that buyers have more choices, and that they must be open to substantive negotiations.’
‘Sales of existing single-family homes in the Santa Clarita Valley fell 40.8 percent last month from a year ago to 229 closed escrows, the lowest total for the month since March 2000 when 172 homes sold.’
Realtors in the Sacramento area keep pointing to the median price being steady or increasing slightly as proof of a soft landing. However, Price/ sq. foot has been steadily declining along with sales. Money goes alot farther this year compared to last. We are well into the crash but the dam realtors are being extremely selective in the way they release data and of course the media looks to the realtors as the experts.
No stopping it now though.
Where can price per square foot be tracked?
I would like to know that too. It’s the only way you can get some feel for “apples to apples”.
I’ve been following the area where I’d like to buy at the Zip Realty web site. I check homes I’m interested in with recent sales. The price per sq ft is in the comps.
ziprealty.com
dqnews.com
Thomas and LA renter,
You’ve been around for awhile, you must know that Price/ sq. ft. is the key indicator. Your not following that trend?
DQnews.com is the best source in my opinion. They should update with monthly stats, shortly, They cover most of Cal.Another source for Sac, although slow, is Golyon.com.
I’ve long wanted to compare prices/sq. ft. I just don’t know where to find it. Thanks for the links.
Where on the dqnews.com site can I find price/sq.ft?
For LA a great source is the LA county assessor. One can get price, square footage, and rooms of houses within 1 mile of a given address, for the previous two years. I analize the data with a simple program. I am tracking Pasadena, Altadena and La Canada. The decrease in sales since december is scary (for homeowners needing to sell). In particular, the situation in La Canada is terrible.
for so cal sq foot this is a good source dqnews.com/ziplat.shtm
What about areas other than California, such as Oregon?
An expert is nothing more than a DRIP UNDER PRESSURE!
“An expert is nothing more than a DRIP UNDER PRESSURE!”
Or the last drip observing the next
Or someone who who;s experienced similar pressure
Or someone with an understanding of fluid dynamics.
In any case the pressure is building
this is an omen for greater los angeles.
‘Sales of existing single-family homes in the Santa Clarita Valley fell 40.8 percent last month from a year ago to 229 closed escrows, the lowest total for the month since March 2000 when 172 homes sold.’
Absolutely agree, and a great point. Santa Clarita will be LA’s canary in the coalmine. This outlying building and commuter community will suffer first, and then the declines will move inward, IMHO.
Yes agreed LA LAWYER … I can tell you for a fact that houses I tract have been sitting for 5to 6 months . The higher priced houses are selling , but you get more sq. footage for the dollar than last year . The selling of the higher priced houses has raised the median price in that location. Inventory is rising because the bulk of the sellers are waiting for the selling season ,(which should begin about now ).
A litlle more LA housing info: At a meeting this morning, the discussion turned to the housing market and prices. A woman from Inglewood and another person from somewhere in the Valley said that “Price Reduced” signs were everywhere. The woman from Inglewood was particularly emphatic, she said that the signs are everywhere.
what does IMHO stand for?
Google is your friend:
http://www.google.com/search?hl=en&q=IMHO+&btnG=Google+Search
Would hate to be a commissioned realtor in this area. Looks like we might see realtors at Costco buying all the Top Ramen!
I hear the price of Ramen never goes down.
On the bright note they’re still making more of it.
What? You mean paralegals and plumbers can’t handle 600,000 for a crappy home 2 hours from their jobs? Go figure!
The interesting flip-side is that while buyers now are getting higher quality for their money… SELLERS up until now have been getting good money for less quality.
This masked the fact that the rise in median prices at the endgame in 2005 was even HIGHER than it appeared… a necessary factor at the end of a bubble speculation.
He says 5 months supply????
1704 listings / 229 closings = 7.44 months supply.
I’m sure he is using an average sales, but the current trend is not his friend
Ok so here is Las Vegas land speculation in a NUT SHELL.{Reveiw Journal 4/18/06
The crazy nuts (3,600 of them) that invested in TD’s at 12-14% for 1 year called HARD MONEY lenders, are getting a taste of why the debtors call such borrowing “hard money”and banks are forbidden to make these loans!
Yesterday in Bankruptcy court for USA Capital, it was disclosed that:
1) $900 million of Loan assets were brokered by the USA Group, $127 million in Q1 of 2006.
2) Investors/ lenders had been OVER PAID interest and that this $50 million is NOWa principal asset of the bankrupt company. {Investors/ lenders now must pay to the court $50 million of unearned income. {While the $900 million in assets above (their principal) are eroded by bankruptcy forces.)
3) A very large percentage (%) of the $900 million in loans are NON-PERFORMING!!!!!!
4) For example in March only $4.2 million in interest income was received by USA while it funded the investors/ lenders with $9million in interest payments.
{In #3 above this computes to only 46% of the loans are paying interest.}
{Item #2 $50 million could have been overpaid over the last 10 months (50/(9-4.2))= 10.42 months.
5) 3,600 investors must now wait for; current appraisals (Liquidation methodology), finanical management fees @ $620-90 per hour, lawyers, court costs, operational costs for USA Capital, & 10% selling commish,to see IF and how much of their investment will be returned!
6) The judge states it probably will not be clear how much investors will revcover..until appraisers sort through the loans to determine who is still paying” (and my editorial - if their is documentation for the loans…..
XXX - 24 months seems a reasonable period? If the $1.2 billion ($900 million land / real estate Collateral @75%, can be sold?
———
Now since USA Captial has been around for 15 years or more where will their borrowers FIND that Hard money now”?
The music has stopped but,
The House of Blues are just beginning!
Grab your coats boys and girls the BIG Real Estate Land CHILL has just arrived in Vegas!
So an S&L screwed up on some loans overpaid some investors, and is facing bankruptcy. That doesn’t mean anything about land in Las Vegas. We’re still running out of it.
Corrupt practices in Las Vegas should come as a surprise to anybody. This bank thing is small potatoes. Not nearly as interesting as the strip club operator who somehow managed to bribe nearly EVERY government official in our fair city.
http://www.klas-tv.com/Global/story.asp?S=4780906
…land in Las Vegas. We’re still running out of it.
This is sarcasm right? Apologies if I missed the joke but some people seriously think Las Vegas is short of land because so much surrounding it is owned by the BLM.
No, it is not sarcasm. I’m tired of explaining this. There is not that much BLM land. Enough for about 3 more auctions, then it is all gone.
Las Vegas will likely run out of water before they run out of land (now, that, they really aren’t making any more of). When that happens, the land won’t be worth much.
Hard money lenders are around every corner Inspired this particular companies failure had nothing to do with the bubble it’s a mere coincidence of the timing of it’s failure it was all mismanagement. Everday borrowers typically never see a lender of this ilk.
Thank you Ben, for this update regarding California. I can confirm that sales are slower here, and price reductions are taking place (albeit from inflated listing prices). Hopefully you’ll have more bad news for us in the coming months
Thanks for your excellent site Ben…sure do enjoy the truth of content….FWIW…Helicopter Ben ins’t fooling anyone buy his remarks…nothing changes the truth…..and ultimately we all seek it..and prosper thur it…Grace and Peace
The smart realtors are now getting behind the buyers.
Smart. I guess they finally figured out that realtors have to eat.
Either that, or they’re trying to position themselves in a place where they can attempt to tell the public it’s time to buy now, since prices are flat, or down 10%.
I truly hope, if that’s what they’re after, that they understand it won’t work.
I want 50% off, and I ain’t budging from my very nice beachside rental until I get it. The waves look very nice from here, and I ain’t going nowhere until everything’s half off.
Auction,
Great to see you back. Must have taken a week off to grab some waves during last week’s warm spell?
Anyway if I have to read one more comment from an expert about median pricing as an indicator of a stable market, I’m gonna curl up and weep….. It always has been and always will be about inventory and rent vs. mortgage ratio. Enuff with median pricing already!
Good to see you, too. Yes, I have been doing some surfing. The waves haven’t been the greatest, but hey, any day in the ocean is a good day…especially with a waterproof iPod.
The median price rising reflects discounting.
I’ve seen homes listed for $1.6 that actually sold for $900,000.
The median price rises, but actual price declines are happening.
This is going to keep happening until mid-September.
ALL HELL BREAKS LOOSE IN SEPTEMBER.
I have to go now. My wetsuit is calling.
Hey Auction:
Keep the posts coming over at OCR.
Typically where do you surf?
This week evening sessions should be OK if we get any swell.
My boss is out of town for the rest of the week so I have some freedom.
I will keep an eye out for an Ipod wearing surfer around the pier.
Generally I surf 2nd or 3rd peak out from the HB pier. Southside or Northside depending on the prevailing swell.
I’m more interested in the Waterproof IPOD! How about a shameful cheap plug for the Mnfctr. and info on it!
“‘Gratefully, the overheated, unsustainable seller’s market of years past is finished,’ association President Steve White said.”
Hahahahahha…right, he’s grateful for the crash in housing. His nose is so long, its touching Jamaica.
Simmssays…
http://www.AmericanInventorSpot.com
AmericanInventorSpot.com
I don’t understand why people are so willing to pay $500k+ for what’s is most likely a 50 year old + 1200 sq ft POS in an earthquake zone. You can’t even insure it for loss in an earthquake, and those old POS do not have the safety features to reduce/prevent damage in a quake.
What am I missing here? Plus the people who live in bubble zones don’t make 2 to 3 times the median income for a comparable neighborhood in a non bubble area to justify the huge pricing discrepancy.
Because houses make more money than people ever could. It’s like having an invisible roommate who makes a six digit salary and signs it over to you. If you think of it that way, you can’t afford NOT to buy an overpriced starter home.
Up is down and down is up — it’s Alice in Wonderland!
ah, but soon that invisible roommate will have a personality change, quit his job, start eating all your food from the fridge, drinking all your beer, and raiding your wallet
he he - thats too funny
FREDDIE MAC and creative financing have created this housing disaster and surfing till prices drop 50% is not the worst idea I have heard.
Funny thing — I’m just a lowly renter, and I already have a roommate who does all those things — his name is “Inflation”.
People are justifying their behaviour by watching their neighbors. If their neighbors can buy a million dollar house then they can too, dammit! There is a reassuring feeling of safety in numbers until the group charges off a cliff.
Yesterday I saw a house for 630K and the front lawn was brown. They must be kidding me! Last year any number of fools would have happily offered the seller 700K.
Zip Realty for my area shows homes on the market up to 120 days on the market with the average being about 54 days. What I love about Zip is that it tells me how long the home has been on the market and when and how many times it has been reduced. I’m seeing an average of 20K reduction but I am also seeing up to 100K reductions in the high end market. Here in Florida, it is ridiculous. A neighbor just bought a house that originally listed at 900K. It has been on the market three days. They offered the owner what they paid for it last year, a 75K reduction off the asking price. Still very overpriced. She’s happy with the small savings and confided she went for a set ten year I/O loan. I am renting until I can buy the house next to her for 2002 market value which thanks to zillow, I know is about 330K.
Many of us that actually “live” in the bubble areas don’t understand it. We’re just sittin’ in the middle of the three-ring circus watching the elephants go wild and sh@ttin’ all over themselves.
I was wondering what that terrible odor was. At first I thought it was greed. Then I figured it was just the smell of too many lies. Next I thought it had to be the scent of crazed realtors or the quickening of flippers. And now I know it is the madness of the circus rings. Wait till all of those Adjustables and I/O’s reset. That will be a very very bad stink, when the something that has been rotting for the past 5 years lets loose.
The following looks like some Realtors trying to pathetically pollute the Blogosphere.
“RealBlogging was created to fill the need of a national blog for the real estate industry where many of the industry’s most respected visionaries, authors, speakers and leaders come together to share what is happening to the industry”.
They should only sample the truly rarefied air of this corner of the Blogosphere.
http://www.realblogging.com/
I want to write on their blog, “There is no national real estate market, and there should be no national Realtor(R) blog, either. Go away! Bubblebelievers to Ben Jones’ Blog!”
ah, realtor blogs. another sign of the bubble? in my town, two new realtor blogs appeared this year. previously, there were none.
There is a large subprime lender above me. They have every SUV you can think of in the parking lot. What is really funny is that in the past week I have seen 3 Hummers, a Lincoln Navigator, and 2 Escalades with For Sale signs on them
Maybe I should call and give them a lowball offer to take that thing off their hands or I could just let it go back to the bank.
I did the math recently and figured the average SUV owner who gets 8 mpg pays close to $9,000 a year in gas. They might as well drive those things with giant dunce caps on the roof.
They should have sold them months ago when gas prices were down, and happy gasoline addicts rushed back to buying the biggest SUVs.
to all commodity watchers:
may be discard the paper in favor of “metal”. Lots of it:)
dollar may be trash but pennies/nickels/dimes sure are a play on commodities
——————————
Pennies Not Worth The Zinc/Copper They’re Printed On?
An interesting study published last week from Kevin Morrison of The Australian. In examining the rapidly rising value of copper and zinc — the two primary “ingredients” in a U.S. penny — Morrison notes that pennies may be soon be worth more than their face value.
According to Morrison, 160 pennies ($1.60) weigh one pound. He also reports that the recipe for pennies is 97.5% zinc, 2.5% copper. Based on current metal prices, the value of the same pound of pennies to investors is $1.36.
If Zinc climbs another 19% to $3,500 per ton, pennies will be worth more as scrap metal than as U.S. currency. I am not sure exactly what the Treasury Department would do if this happens, but I am sure that Citizens for Retiring the Penny would be thrilled.
Older pennies (pre-1982 ones with more copper) are already past break-even, I think. And a pre-1964 silver dime is now worth about a buck, by the metal value alone.
Personally, I’d retire the penny AND the nickel. When some of those insanely priced condos in CA go for $1 mill (like one I just saw in the photo gallery, I LOVE that gallery!), even the buck has little value, to say nothing of spare change.
WAY past breakeven. Holy crap, batman…Copper today at $3.00/lb. Breakeven is 1.62 ish for pre-’82’s. Time to sort thru the sock drawer.
I’m already hearing about copper thefts, and I’m sure we’ll hear more. Years back when the price spiked before, all sorts things happening. Construction sites where thieves pull out the wiring on framing. Rural areas where thieves climb power poles, cut the lines, and steal em. you name it.
I have a question - where can I take my pennies to exchange for $$? I have a small piggy bank, so I will change pennies into $$, then get more pennies, get more $$, then get even more pennies, etc.
According to the latest FDIC findings, 61.3% of Nevadans have an exotic mortgage that will put them at risk of foreclosure in the event of a housing market crash.
Just found this info on Yahoo and discovered that Las Vegas residents are having a convention on how to keep their homes and save their equity. SAVE THEIR EQUITY!!! How do you hold up a market?
I’m sure LV Landlord will tell us how it’s all nonsense and that ludicrous market is just revving for new highs. LOL
Las Vegas Homeowners Fight Back’
Tuesday April 18, 8:58 pm ET
LAS VEGAS, April 18 /PRNewswire/ — The threat of a HOUSING MARKET CRASH in Las Vegas is so real that on March 23, 2006, over 30 people gathered to discuss how they could help avert this crisis. Present at the gathering were insurance agents, a chef, a former U.S. Attorney, parents, realtors, loan officers, escrow agents and other Las Vegas residents. The host of the gathering, Rob Rozzen, owner of Sin City Sweets and one of Nevada’s top realtors, said, “We have a moral responsibility to tell homeowners the TRUTH about this impending crisis.” The consensus among the attendees was to educate Las Vegas residents.
According to the latest FDIC findings, 61.3% of Nevadans have an exotic mortgage that will put them at risk of foreclosure in the event of a housing market crash.
Channel 8 KLAS CBS affiliate reported Friday April 14, 2006 that foreclosures are up 99% from January to February 2006.
Attending was Mr. Harj Gill, M.Ed., founder and CEO of American Mortgage Educators, a mortgage reduction expert and the international best selling author of “How To Own Your Home Years Sooner.”
Mr. Gill pioneered a radical mortgage reduction program back in 1997 in his native Australia that helped over 500,000 people. As of today, 80% of Australian homeowners currently use Mr. Gill’s system, which helped revolutionize the entire banking industry in that country. The U.K. and New Zealand soon followed suit. For the past few years, American banking has been his target.
“What I am about to reveal could save you from losing your home in the coming housing market crash,” said Gill. “There are two critical things that borrowers need to do. First, is to make sure you get the right mortgage. Second, learn how to take control of that mortgage to build real equity.”
Mr. Gill is being sponsored by citizens of Las Vegas to speak at Bally’s Event Center, Saturday April 29, 2006 at 1:00pm.
“We are extremely fortunate to have a superstar, the ultimate consumer advocate to educate us,” said Paul Wommer, Esq.
“We have asked Las Vegas news channels 3,5,8,13 and the LV Review Journal for help in getting the word out. As of today, there has been no response. Sad but true,” said Tiffany, Homemaker.
Despite the lack of interest from the media, volunteers have hit the streets door-to-door informing homeowners about this AMAZING FREE educational seminar.
Anybody have any insight into this guys “system”?
Yeah, he’s probably using the same mtg product that I offer. It’s powerful and has its benefits… for the right borrower; in the right hands. Of course, the way our govt is inflating the hell out of the dollar, I’ll probably have to retire the thing when rates go over 8%. Cool idea; bad timing.
Or these guys are pushing some cheesy bi-weekly payment program that they charge you to set up! Most lenders will set this up for a nominal fee. Or just make 13 payments in a year instead of 12; get the same, earlier payoff. Course you don’t get the 1/12 incremental gain of reduced principal (and corresponding interest savings).
**Sigh** Been looking forward to the shakeout for too long… can’t wait till all the dinktard dipshit yahoos get out of real estate and mtgs and move on to their next abomination. Real estate is a fun and rewarding field, but in the last 4 yrs it’s become such a goddamned parody. All these idiots running around like little wannabe Trumps; acting real estate is a new concept and they are the first to discover it?!?
The Simpsons episode where Marge becomes a real estate agent? Priceless!! Absolutely classic and so spot-on!
Finnington, hand me my gold jacket!
Well I’m Australian and I never heard of the guy!!
Almost certainly a ‘pay half the monthly each fortnight’ system as billygoat says; that is actually a very popular technique in Oz, and it can indeed do dramatic things to a loan term.
By the way, the statement that 80% of Australian homeowners currently use Mr. Gill’s system couldn’t possibly be true. The 1999 Australian Housing Survey http://tinyurl.com/lazhw shows more than 50% of owners with no mortgage at all, and the numbers won’t have changed that much since then.
AJH,
I really enjoyed looking at the chart’s breakdown. Is that info available in the U.S. Ben?
No Problem. Since I see there are RE agents present at this meeting, I’m sure they’ll assure everyone that there is no possibility of equity loss due to the fact that home prices never go down. Meeting adjourned. OT: “Just like thay must be telling the feds in reference to reversing the rate hikes. No need to stop rate hikes! Everything is WONDERFUL!”
This isn’t news, it’s a press release. Nothing but an advertisement with enough make-up slathered on in an attempt to resemble something ‘newsworthy’.
grim
About 5 years too late.
I’ve seen two price reductions on homes my parents weren’t looking at, just sort of watching. one was a 10% reduction($30,000) and the other one was a 20% reduction($145,000).
GREAT article.
Echoes of 1990?
http://www.financialsense.com/editorials/rubino/2006/0418.html
Great read John. Things definitely aren’t there yet, I just saw a bank-owned foreclosure property listed and sold via a realtor for fairly close to market value ($1.4M).
Things are already starting to get ugly now, and we’ll see how things look in July, when it’s too late for buyers to register the kids for school, and sellers enter deep panic.
Hey OC Kurt:
About 6 months ago we were posting on the 4 new units on PCH in Sunset Beach.
At the time I lived there. They took a long time to sell and I finally saw the new “owners” move in.
They were in their mid-30’s dual income no kids with newer luxury cars. Not exactly the demographic that can typically afford 1.5M beach houses.
Guess what….The teaser rate adjusted.
6 months later the first one came up for sale.
It is not on Ziprealty yet. I will watch it as it is on my way home. But I think that I have found a bagholder.
Equal opportunity offender:
Salon.com has an article on credit derivatives and the housing bubble.
It also talks of growing risk premiums for sub-prime arm pools credit default swaps.
http://www.salon.com/tech/htww/
Very interesting. From the article:
“In mid-September, an investor seeking insurance on $10 million in mortgage securities with the lowest investment-grade rating of triple-B-minus, for example, could have bought a credit-default swap by agreeing to pay an annual premium of about $170,000 a year. Now, with hedge funds and others piling in to buy insurance as the housing market shows weakness, the premium on the same swap has risen to about $320,000, allowing the investor to sell the insurance at the new, higher price and pocket the difference.”
Now let me lick the tip of my freshly sharpened pencil… hmmm… yessss… uh huh….
OK - here’s what I come up with on the back of the napkin (or a few little keystrokes on my XP calculator). Let’s say an investor holding $10 million in this triple B-minus paper (that was originated about 1+ yrs ago) is collecting about 7% (due to the fact that subprime is often sold as a 2/28 ARM; I like to refer to the initial fixed period as the “honeymoon”). That’s a gross yield of $700,000 on that pool (keeping it simple; no allowance for servicing fees, etc.) while the paper is yielding 7%. So if that investor is now paying $320,000 annually for that insurance, that’s almost half the yield. Hmmmm….
The other interesting facet is - what happens when all this paper “re-sets”? A positive feedback loop of negative consequences. The defaults begin to happen. This obviously will push those premiums higher and higher. But the ultimate is the same question raised by the article - will the whole derivative model melt down??
This scenario will probably destroy the derivative market - it will simply unavailable, as the premiums will overcorrect.
This is what the free Greenspan money did to the financial sector.
For what it’s worth…
Just a quick, actual scenario from the trenches in Oakland, CA.
- Condo for sale, 2bd 2ba 946sqft built in ‘66 (basically a 60s apt unit)
- Originally listed for $449,00 back in Nov 2005
- Reduced to $435,000 in Jan 2006
- Reduced to $415,000 in Feb
- Accepted offer and closed @ $405,000 in March
- Sold @ 90% of asking…. and it’s STILL a flaming piece of shit!!
This exact “condo” sold just 7yrs ago for less than $100k.
Falling knives indeed.
Great point billygoat. We are no where near a crash. All we’re experiencing is 05 spring pricing.
Cover story in the May issue of Harper’s…
“The New Road to Serfdom: An Illustrated guide to the Coming Real Estate Collapse,” by Michael Hudson.
Good piece!
I’m sure it is but why is it so late? I give credit to “The Economist”, they were talking about a housing bubble in the summer of 2002 (2003?). Either way, they were way ahead of everyone else.
True enough, Fishbone, re the Economist.
But they’re different beasts: a conservative UK economics mag and a left cultural mag (oldest in the US, btw). And you won’t catch the Economist making the argument, as Harper’s does, that the present bubble has been engineered by elites in order to entrap a massive number of Americans in a new form of serfdom.
Per question re posting the article–sorry, it isn’t online. You may be able to get more details here: http://www.harpers.org
Is it possible to post that article?
Front/top page article in OC Register today about new median high, but 22% drop in vol. Separate Lansner piece about buyers balking, longer time on market, etc.
Holy cow!! I’ve been tracking SFV houses/condos for about 2 months now. The actives have steadily increased on an average of about 75-80 per week. Per Zip Realty, the SFV added 100 actives today alone!! I love it!!
Sold @ 90% of asking…. and it’s STILL a flaming piece of shit!!
This exact “condo” sold just 7yrs ago for less than $100k.
Could we put some real flames on that condo. It will probably go up like tinder.