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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
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Been reading this blog for a while, first time post! Any thoughts on what might happen in those areas of the country where there hasn’t been a lot of investor/flipper activity? For example, I live in Cincinnati. Not a whole lot of appreciation here the last couple years, but it still seems like an awful lot of people are stretching to buy huge houses, and I know a lot have ARMS, IO’s and HELOC’s. So we probably have a credit bubble here too. And Ohio for some reason seems to have a high foreclosure rate too.
Would like your opinions on what to expect in this area and others like it? Flat? 20% drop?
I am originally from Indiana and I am curious about there like you in Ohio. Obviously, Indiana hasn’t been over run by speculation. I do wonder if there is a bit of a credit bubble with the financing for homes. If I remeber, wasn’t Indianapolis one of the few undervalued areas?
Also, do we have the sales/inventory/median price figures for March 2006 for Palm Beach County, FL? I got some bets with some people. Thanks.
Notorious — a web site I had been using to track Greater WPB figures is put out by Illustrated Properties, one of the brokers in this area. They hadn’t updated it with the February numbers, but all of a sudden, it has both Feb. and March numbers. I can’t make out exactly what the YOY sales decline is because the numbers in the chart are so small, but it looks like a 30+% YOY decline in transactions, coupled with a 192% YOY increase in properties for sale.
Here’s the link:
http://www.ipre.com/trendg/images/palsld.png
Note: The main page allows you to click through to other “pricing trend” graphs. You can find days on market, average price of listings, sales, etc. Looks like median prices are still up YOY, but not by much (4.3%), and at 290,000, were well below the peak of 319,000 last June. Unless there’s some heavy lifting right around the corner, we could go negative on YOY pricing soon. Also worth noting: The average price of homes FOR SALE are plunging (even though the average SALES prices of SOLD homes are still climbing). That graph can be found here:
http://www.ipre.com/trendg/images/palsvs.png
I have similar questions about northern Vermont, where I’m thinking about relocating. Will prices be flat or down in places off the beaten track?
If it’s truly out in the boonies, away from a ski area, you should try to buy land at “farmer’s prices”, not out of stater prices. Sometimes you find this two tiered rate card. If you shop carefully, you could do well. And you might be able to get a very large amount of acreage for about the same price you’d pay for a developed lot in with a lot of McMansions. Check it out. You are better off grabbing the 100 acres, building a modest abode which you can always expand and put the land in tree growth to get a break on your property bill. If you then do unto others, most of the locals will embrace you and you’ll be doing your part in stopping sprawl. Don’t post your land - let the locals hunt.
As for ski area prices, beware. The realtors will show you 90% of the lots are sold. That’s a Clintonesque technicality as they’ve been sold alright - to developers!
You might want to read a series of articles at iTulip about the housing bubble. A very recent late March article is about how the implosion is working its way from the boonies inward toward the denser areas - because the price of gas has climbed so much and people can no longer afford to commute.
If you can’t navigate to the articles easily there, you can find links to them on my housing bubble page.
Tom….. please don’t. Northern Kingdom is no place for one who has never experienced a tough winter here. Aside from that, the price pressure here is mostly from out of state speculators and retiring/retired baby boomer fantasyland dreamers. I don’t see anything relieving that pressure, outside of monetary/economic crises, unless fuel prices continue to explode making the commute from ParasiteLand(NJ/CT/NYC) to VT cost prohibitive. Weekends here are still like a bastardized version of Halloween for adults….. Creepy people with attitudes on the road and buying overpriced garbage in stores. Pricing on anything here is 2x overvalued and any 50% reduction is a long ways off.
During the 60s till 1974 (recession) we lived in Swanton,VT. (13 mi south of the Canadian border off Lake Champlain) My Dad worked for a spin-off of a NH employer.
Before the recession hit, he’d been given the advice that things were going to get nasty and that he’d do better taking a job directly with the parent company. We moved almost immediately.
I’d asked him several times in my life because I’d loved VT if he was glad we left and he always gave me an overwhelming yes.
From Dad’s perspective it all came down to the job market.
Exactly. I have to leave here during the week to earn a living. (a lucrative one at the moment). I think the average wage here is no more than 10$/hr and that is considered a good one. I haven’t worked for that in 15 years and I won’t given a choice to earn 20x that on the road.
I went to college in Ohio and I still have family there (I’m in CA now). I visited them last summer. EVERYONE wanted to talk about real estate while I was back there. There is tons of new construction in the Dayton area. People told me that, “No one wants to buy used houses.” And they also wondered who was going to buy all the news houses since there were so many.
I visited the CEO of the company where I used to work. He went on and on about the I/O loan problem and about how his employees were taking out loans they couldn’t afford (always respected this man, and I do now more than ever). He thinks OH is in for a world of hurt - especially when you add the problems with GM and Delphi.
My husband and I REALLY want to move back to OH. But we’re waiting 2-3 years for various reasons. I can’t see staying in CA unless we can find a decent house for $500k in the Bay Area eventually. Best of luck to you in the Buckeye State!
I believe that the housing prices will fall in all areas before the bottom is reached, even in areas that have not had such high increases in prices. Since the economy is so dependent on the bubble for jobs (in construction and jobs related to selling and buying) and refinance spending money, when the bubble goes, the economy will suffer a nation wide recession, probably more like a depression, and this will affect the housing prices in the “non-bubble” areas as well as the extreme bubble areas. Another factor that will help to cause the recession/depression is the coming high amount of default which will affect the finances of many people, even those who are unaware that their investments are tied up to some degree in the secondary mortgage market, and also the banks and other institutions which will be in trouble from the defaults. It will be like dominoes knocking each other over.
I suspect that all regions of the US will be impacted by a popped real-estate bubble. The entire economy has been propped up by housing, so almost everyone will be hurt if we go into a recession. Also, my pet theory right now is that the degree of pain a given region will feel from a housing crash will correlate to the number of new “exotic” loans that have been issued in the last few years. Regions that had high numbers of option arms and 100% interest loans would see the biggest price declines.
What’s scary about this theory is that even some of the supposedly “non-bubble” regions have seen the use of these new loans balloon as well. When credit dries up (with tighter standards, etc), and the people who could only afford homes with these types of loans exit the market, what will happen to prices?
What would be really fascinating is to see a break-down, by region, of the percent of sales using these “exotic” loans.
It is likely that many of the areas where prices were flat over the past few years would have experienced declines if not for the easy credit. Thus, even the markets that have not increased at all are still potentially at risk.
The exotic lending will cause housing prices to decline nationwide, even in those areas that didn’t get a runup.
There’s a great write-up on it that:
http://piggington.com/housing_burst_will_cause_national_recession
JH in Ohio,
I have a thought to share with you. Syracuse was recently cited as one of the least “bubbled” areas in the country. Lest I get too lulled into any sense of security, I just call to mind the prices when we first scouted this area in 1998. Prices were about 40% lower then. I see no reason w/the financial situation coming why we couldn’t return to 1998. Or worse. In fact the local news reported 3 manufacturers shutting down in the local area just this week.
Illegal immigration is on my mind. It makes me mad as hell that we are letting this ruin our country. Either stop it or shape it into an optimally constructive force - but set limits. Enough is enough. I read some of the comments yesterday and I believe the majority on this blog are mad as hell too, e.g.:
2006-04-20 13:48:26
“i do find it a paradox that mexico has sealed their southern border and treats harshly those that enter illegally”
2006-04-20 19:39:57
“1)Put the Army on the border2) Build the wall 3) No health care or education for their spawn. No English as a second language 4) No automatic citizenship for children of illegals”
2006-04-20 13:22:42
“My first response didn’t show. Anyways, the Newt Gingrich proposal that requires businesses to validate”
It’s a communist conspiracy !!
http://www.financialsense.com/stormwatch/geo/analysis.htm
Thanks for the link. It is most disturbing.
I would not dismiss this readily. A lot of forces in the world would take us down through any means they can. It’s like a pack of wolves gnawing on the achilles tendons of a moose. They can only do it as a group of cowards.
We will prevail.
appears the links has changed. Try this one
http://www.libertypost.org/cgi-bin/readart.cgi?ArtNum=137167
My husband is from Cincy and I drool at what $300K will still get you there…but the McMansion mindset has set in there as well? Don’t really understand why one would take such a huge risk with an ARM or I/O without the dangling temptation of rampant appreciation as a potential bailout. Maybe you guys are ahead of the curve and indicating that even if prices moderate or decline in areas of past rapid appreciation, wage increases (or lackthereof) will still not enable people to get a traditional loan, and that overleveraging will continue to be the new “norm” until we lose our obsession with “bigger is better”.
Or builders revert to building 2000 sq ft “normal” homes that are actually (more) affordable to the average wage earner…oh wait, that will never happen.
I’m thinking the only way that happens is if the LOT prices drop. Given land price growth has outpaced the growth in costs of construction materials and labor, the way the traditional 3:1 ratio of total selling price to land cost is by building bigger houses.
Land prices are a big problem. Partly because, at least in our area, the local government tacks on many thousands of dollars when land is divided and also because everyone who has land to sell is increasing the asking price beyond belief. I think we will see a drop in land prices that will be even greater than the percentage drop in housing prices as “investors” who have divided properties for resale have to get out when no one wants to buy after they realize they can’t make any money building because there has already been too much building and housing prices are dropping.
Yes, land prices would be a good topic!
Nikki
I was wondering what the waiting renter’s target home was. Bet its much larger and well appointed from what mine was in the early 90s when I was a renter. Somehow I think that many renters waiting to pounce will go for the same dream they’re dissing others for. They’ll get it for a lower price and more wisely financed but it will be a castle compared to what our boomer parents had for entry level homes.
A few times Housing Bubble blog readers have adamantly expressed their opinion about no government bailouts when this mess collapses. I would love to see - dare I say it ? - more discussion about how we can get that message to Congress in an organized and systematic way.
Good idea.
This needs to be talked about now. Not after the fact, when various and sundry plans are already being drawn up to prop the bubble.
The hardest thing in democracy is attempting to stop transfer of wealth from the politically powerless to the politically powerful. That is why the bubble happened in the first place. Homeowners, builders, realtors, mortgage holders and banks will demand a bailout. These are all politically very powerful groups who make huge donations to all political candidates, and who receive in return for their donations laws that grant their wishes. Congress and Presidents ignore everything except raw political power and cash.
The only way to fight back is organize a web campaign, and slowly and steadily build organized support. This blog is a good example of how things build on the web over time.
Politics being what they are, the government will probably bail all the politically connected until their borrowing power is exhausted. The USA is already borrowing a fairly huge portion of the savings of the entire world. When we hit 100% the real trouble begins.
I’m just incredulous that the Fed is even hinting at stopping at 5% or 5.25%–prop up the HB anyone? If I’m not mistaken, a fed gov said several months back that their policymaking would not be guided by sustaining asset valuations. Well, there is no other reason to stop raising rates right now, so they lied (I’m shocked). But the simple fact they’re so worried about the HB leads me to believe that the Fed knows our economy would suffer much more than policymakers will admit if the housing market stagnates or declines, and they’re freaked out. How can they ignore the hedging in metals and commodites and the recurring records of oil with no end in sight? As I wrote elsewhere, policymakers don’t seem to mind if we have to pay $3-$4 a gallon for gas as longa s we can borrow against our house to pay for it. I think the Fed is praying for a drop in crude prices and gas back down to $2–as soon as that happens, all bets are off.
Beware the Illuminati!
I don’t think anything can save housing, especially when the herd psyche changes. If the FED keeps tightening, obviously, rates go up across the board. If the FED pauses soon, the 10 year yield will spike due to lack of demand (see Asian Central Banks). Mortgage rates are teid to the 10 year. Either way housing is screwed. I think the 30 year fixed will be 7.25-7.5% the end of this year.
Speaking of Yellen, this is from Marketwatch today:
“San Francisco Fed President Janet Yellen, whose dovish comments this week raised hopes that the Fed would soon end its nearly two-year campaign to raise interest rates, warned in a CNBC interview yesterday that the bulge in the core consumer-price index in March might have been a sign that “we are seeing some pass-through of high energy and commodity prices … into core inflation.”
David Kotok, Chairman and chief investment officer at Cumberland Advisors, a Vineland, N.J., money-management firm overseeing about $800 million in assets, has a close eye on the price of gold. That classic inflation hedge is still near its recent 25-year high of more than $630 an ounce, encouraging Mr. Kotok to recently repeat his long-standing recommendation to treat bonds as if they were radioactive, in the belief that interest rates will soon be rising more, pushing bond prices — which move in the opposite direction — lower.”
The Fed should and I think will stop when they think inflation is under control. They shouldn’t and don’t want to overcorrect and cause a recession, especially when one is likely to come about as a result of the normal business cycle anyway.
I think pausing at 5 or 5.25 to see what happens if inflation appears to be under control wouldn’t be a bad thing. If inflation appears to be rampant, then keep raising.
Also, they have to take the dollar into account. If it’s still weak, keep raising, if it’s strengthening, that’s another reason to consider a pause.
Rates are already high enough that liquidity is shrinking and many FBers are already Fd.
Not really. If the Fed begins to loosen credit, it will be because it thinks inflationary pressures have subsided. The Fed has two primary, linked responsibilities: macroeconomic growth with price stability. Everything else, including asset valuations, is secondary.
Can the Fed save the housing market (and stock market as well) by stopping now? Or will rising long-term bond yields do the dirty work of cutting the legs from under the credit bubble in the form of a higher inflation risk premium? Can the Fed have its cake and eat it too, in the form of stopping its tightening phase at the point where the long bond yield has reached a permanently (relatively) high plateau?
Well, seeing how the “conundrum” took forever to begin to unwind, maybe long term rates have some catching up to do. But my guess is they will do everything in their power to keep the HB from deflating, despite their proclamations to the contrary and the fact that it’s NOT THEIR JOB to support unsustainable financial behaviors. Whether it will be enough is another question, but they’re already trying to talk it down, IMO.
No, the Fed can’t save housing by stopping now. Maybe if they went back to essentially free borrowing, but I don’t think that’s going to happen, and it would be disasterous for other reasons.
You can’t just stop a locamotive on a dime, and there are other important considerations. I think BB is doing his best to shed the “Helicopter” label, and I think he realized he can try to save the dollar and a fundamentally strong economony OR he can attempt to prop up overvalued market sectors. He can’t do both. He’ll choose the former, not the latter.
“Can the Fed save the housing market (and stock market as well) by stopping now? ”
The housing market is doomed. How will stopping the tightening keep people with sub prime loans from defaulting? Even if interest rates had not gone up at all many of them would have defaulted when their loans reset. How will institutions be able to keep offering sub prime loans at low interest when the secondary market gets burned and refuses to buy? What will happen when the market loses all the new home buyers that we have had in the last few years that normally would not have qualified to get a loan back when the standards were kept at a safe level? How will stopping the tightening make homes more affordable in areas where the median price can only be paid by very few and rentals only cover half of the price of owning?
The Fed passed the point of no return many years ago. I believe that the basic problem is that the money system as they have created it is dependant on continued increasing levels of debt and as the years go buy the debt level gets to the point where it cannot be supported and the system collapses. The last time the system collapsed was in 1929-1933 and they have juggled it so far since then that we are coming to the point of collapse again. They learned enough from their first mistakes to prolong the period of increasing debt, but they didn’t learn that the real problem was the system itself.
“The power of taxation by currency depreciation is one which has been inherent in the State since Rome discovered it.”
Keynes
“The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution.”
Thomas Jefferson
I got this shocking email from a colleague this morning who plans to sell his coop on Long Island:
“I am wanting to sell because the just raised my maintenance fee again by 19% on top of 9% on January 1. And, there is an additional “assessment” of nearly $100 per month for special projects. So overall, my cost of living has gone up by $4000 and none of that is tax deductible. I now pay more than $2300 per month or about $30,000 per year to live here, which is more than 60% of my takehome pay. That is way out of line and is beginning to eat into my savings. I fear that if the maintenance fee continues to rise rapidly, I may never be able to sell the place so I feel it is better to bail out now, even I don’t recoup all my investment. At this point, paying $1000 -1200 per month for rent seems like a desirable option and should allow me to return to a better lifestyle without having to worry about whether or not I can buy wine to have with dinner.”
But I thought renting is throwing your money away! LOL
I have visited Houston, Fort Worth, Atlanta and Seattle each two or three times (and Chicago once) this winter and spring and no one seems worried about a bubble, nor are there excesses of for sale or for rent signs in good areas. Yet prices are way too high to be supported by current rents or income. Does anyone in these cities see any real changes? In Hawaii, on the other hand, land prices peaked summer 2005 and have fallen back to winter 2005 levels, a loss of 20%, and land and house inventory is soaring.
I live in Chicago and rent.
In the past six or seven months rents have really popped here, on the order of 10-15%. For example, last summer you could find 1BRs in Lincoln Park for under $900/month, but now it’s nearly impossible to find anything under $1000. In the Gold Coast count on at least $1100, probably more.
I don’t know why this happened all of a sudden. Rents were flat or down from 2001-03, then crept up for a year or two before this pop. Only explanation I can think of is we’ve had a lot of condo conversions and many rentals have come off the market, at least in the immediate term.
It’s one reason I’ve planning to leave. (It doesn’t help that I’m kind of sick of being here in general.) The economy is decent but not gangbusters. House prices aren’t the joke they are on the coast but are clearly overvalued relative to rents. We’ve had a warm winter and spring this year — in fact this is the first year in the 10 I’ve lived here where we’ve actually had a season called “spring” — but don’t let that fool ya. It’s a nice city and all, but if you don’t need to be here there are better places to live.
Just thought of another possible reason — assessment/maintenance fees have gone berzerk in the past couple years. Most of this is insurance and heating costs. (Most apts in Chicago include heat in the rent and many include cable TV, although the latter is advertised less often.) Some is higher tax assessments due to the bubble. It’s finally working its way into rents.
The bidding wars are, for all intents and purposes, over in Seattle. What used to be common is now few and far between.
Asking prices are still very high, but most homes sell under Asking (like 85-90%). The original AP is still very inflated so don’t expect a bargain even going under Asking.
There is no way to know about this development , however,unless you check the county records 1-2 months after sale. So the market still appears bustling on the surface.
hmmm…here’s another interesting development: inventory here had been going up and down, up and down on a daily basis, for months. So there was a steady amount of buying.
But since April 14, in the zips that check, it has been going UP only. So far, only one week of that so can’t call it a trend yet.
The next couple weeks could be interesting, inventory-wise.
blame the illegals for the hosuing bubble- that’s a new one. anything else you can pin on them??
Get real.
I think it’s fair to say that any immigration, legal or illegal, will have an effect. It’s simple supply and demand. Is illegal immigration the primary cause? Not by a longshot. Is it a contributing factor? Of course, it increases demand.
MS13? we price out the cops, teachers, EMTs and firemen, but somehow machete wielding vatos can afford to live here.
Actually, the Chicago broker said that high end is slow, anything at $700k or under is selling great.
i was in chicago in februrary. condo for sale signs everywhere.
and that was february. nobody in chicago moves in february.
I’d be curious to discuss the n phases of a housing bubble. By this I mean the media coverage and ergo the general public’s perception of our situation. In my mind, when the public’s perception changes, this will be the beginning of the end. So far I think people aren’t buying because they can’t, not because they think it’s wise. I think we’re marching through the phases of the HB pretty quick here the last 6 months…
Media & Public Phases of a HB:
1) Real estate is wonderful (July 05)
2) There is no bubble (Fall 05)
3) Let’s ask NAR if there’s a bubble - nope, no bubble, just soft landing (Jan 06)
4) Media actually prints pessimistic articles while also mentioning NAR babble (March 06)
5) Public poll shows people acknowledge bubble, but not in their area (classic denial phase!)
6) WHAT’S NEXT?
(Just realized when David rah-rah from NAR said soft landing he was telling the truth… “this is your captain speaking, we’ve been cruising at 40,000 feet and will begin our soft landing shortly. This will take place over a long period of time and see a major decline. Please note that the fasten your seatbelt light is on. Thank you and enjoy you flight.”
Add this to your timeline:
- David Seiders, Chief Economist of the National Association of Home Builders, July 2002
“Public poll shows people acknowledge bubble, but not in their area (classic denial phase!)”
This is so true. I was talking with a friend who said that homes in his area have gone up because of the Seattle bubble, he lives 45 minutes south of Seattle, but he says Seattle prices will go down again, but the prices in his area won’t!
Hi. Newbie here again. I am curious about how to find sales and inventory numbers for different areas. I was kind of wondering about Boulder. Maybe a quick tutorial on where and how to find the numbers? Thank you very much. I have learned quite a bit reading this blog and have had my eyes opened.
Here is my housing bubble resource page. Check the link to Ben Engebreth’s housing tracker, which does weekly inventory updates for cities around the country. Not Boulder, though. It does have Denver.
Realty Times has updates on current market conditions in many cities, including Boulder. The problem, the updates are written by realtors who frequently manage to paint a rosy picture on things. Perhaps one of them has a link to MLS listings in Boulder.
Boulder is a nice place! Just spent 8 days out there at the end of March, taking a cooking class.
http://www.silverfernrealty.com/
These lovely realtors have a blog with some Boulder Data. Please do not consider this post a recommendation.
Thank you both very much. I have mentioned some of the stuff I have learned on this blog at other places I post and some of them have been asking me where to find the numbers.
I hope you dont mind but I am going to pass the links along. The more information everyone is exposed to the better to prepare for the shock of the bubblepop.
I personally am not an owner but I might have gulped the kool-aid myself if my credit had not already been bad. Actually reading about some of the lending practices I am glad I just assumed I couldnt buy or I too might be dreading an I/O reset. Thanks again everyone.
I think an interesting topic would be compiling a list all of the various reports that realtor associations used to publish until very recently, but that they have suddenly stopped publishing. E.g., the Santa Barbara realtors recently stopped sharing information with the media. The California Association of Realtors (CAR) have supposedly switched from a monthly report of housing affordability numbers to a quarterly one, although they haven’t put one out yet so we’ll see; in addition it seems as though the CAR has stopped reporting on the income gap between what a household should make to afford the median priced home and what the actual median household makes. Are there any more out there? These might be all of them, but if there are more it would be nice to compile them all.
Topic suggestion: Overseas updates? UK, Spain, Australia?
How to get good deals when the bubble bursts. LA is already having problems: This bubble is really becoming more and more interesting. It is a long ride, but I’ll patiently wait and see how it turns out. Remember, 04 and 05 have provided record sales, and since most buyers opted for ARM loans, you already know foreclosures will be massive, especially if interest rates only keep going up, and up it will. LA is already having issues - http://rismedia.com/index.php/article/articleview/14221/1/1/
Ben,
How about the effect in rising energy (mainly gasoline) to the housing market??
oops.. energy costs $$$
Some of us think you had it right the first time.
Next week’s home sales reports. I’m wondering if the dam is cracking or we will continue in this holding pattern for a few more weeks or months.
I’d like to discuss how people leaving the main bubble cities are so trigger-happy to purchase homes in their new location.
Maybe it’s just me, but if I moved across the country to a brand new city where I had never lived before, I would want to spend at least a year or so renting and exploring and figuring out if I really liked it there. You can’t get that kind of knowledge with just a few visits.
Exactly! I moved from CA to the Ozarks and am renting until I get settled in and decide I want to stay. And believe it or not but there is a mini-housing bubble here too and even McMansions and McFarmsions. I cannot figure out who is buying these places since the wages here are some of the lowest in the country.
Perhaps some Californians who monetized their bubble gains from their ex-bubbleminiums in California and were able to plunk it down toward a home elsewhere.
How about a housing hall of shame to expose all of the dirty tricks of the trade, and how dumb realtors get cought. I.E. relisting a house, and not deleting the old listing, showing pictures of a newly listed property in june-july with snow on the ground, or leaves in December. I got a call last year from a realtor telling me that a property had 2 offers. Property is listed again with the builder as the owner.
A fun weekend activity might be to look up properties for sale on craigslist in bubble areas. If they list an address, look it up in Zillow, and see what the current owner paid. Most of the listings on craigslist are from desperate flippers, so it is entertaining to send them an email asking if they would consider an offer 25% less than they paid.
I found one property today in boston where they bought it in 3/05 and are now asking nearly twice as much. I may send them an email and ask them why they think their house has doubled in price during a housing meltdown.
This can be pretty entertaining.
I found a laughable flipper property here in San Diego last night. Small 1960’s house that the flipper had purchased for 700K in October 05. They painted, redid the flooring, added a few vinyl replacement windows and some cheap tilework on the kitchen counters. It’s still nothing great and has just the remains of some old neglected lansdcaping. They have been trying to unload it since February for almost a million dollars in a non-million dollar neighborhood. Good luck to them with that 3 month /300K flip that will be turning into 6 months soon.
There is no housing bubble because it’s impossible to have housing bubbles and real estate never goes down and everyone needs to live somewhere and look at all the immigrants coming in and they’re not making any more land and the baby boomers are all buying second homes and we have entered an entirely new valuation model and this is the ownership society and there are all kinds of innovative financing methods that let people buy houses and renting is throwing money away and people who don’t buy now will be priced out forever so therefore there is no housing bubble. And even if there is a housing bubble it will pop in other places but not where my house is because where my house is is the absolutely perfect place to live.
Repeat until you believe it.
Factual accountability and disclosure by listing services, agents and brokers.
It is my opinion that the truth has been something sorely lacking in much of this bubble run up. I suspect that many of the bidding wars have had phantom opposition, that many agent representatives are investors as well and that listing facts are anything but factual.
How many cases have there been where a property has been taken off the list and then magically appears as a new listing a few weeks or months later.
What about a property described as reduced twice when no one can remember seeing it listed at the first price? And of course we have people who are being paid a hefty percentage of the transaction for their expertise who are investors in the commodity they are advising for. No greater harm has been seen that that of believing that the RE and Mortgage industry can self govern. Self profit yes, self govern no. The foxes have been managing the henhouse for far too long and for some unexplicable reason we have been buying regular eggs from them at Fabrege prices
KBTC interrupts this blog to bring you the following educational program.
Howdy boys and girls! It’s me Bubbles the Clown back for more zany fun! Hey kids, Bubbles was so happy to see all of you at the Bubbles the Clown Convention at the Budget Inn in Phoenix last week. And a special thanks to all of you that plunked down ten bucks of your allowance to get your picture taken with Bubbles! And to you kids that wrote in to complain about Bubbles leaving early, shame on you, Bubbles can’t help it if the only tee time he could get was in the middle of the show! Anyhoo, are you ready for some craziness! Great, let’s go!.
Now when Bubbles was driving around Phoenix last week he saw so many houses for sale that it made his red nose honk all by itself. Bubbles was so freaked out that he had to write a song about it…would you like to hear it? Yea! Sing along kids!
“Make it Sleazy”
Well, I’m a runnin’ down the road
tryin’ to loosen my load.
I’ve got seven Realtors on my mind.
Four that try to phone me.
Two that tried to bone me.
One says she sees no decline.
Make it sleazy, make me queasy
She tried to hound me into deals,
that would squeeze me.
Wizen up while you still can,
Don’t let ‘em cry “There’s no more land!”
It’s time we all just take a stand.
It’s so easy.
Well I’m a standin’ on a corner
in Phoenix, Arizona.
Such a scary sight to see.
It’s a house, my Lord,
to add to the horde!
Don’t expect to get a dime from me.
She said, “Pay me, don’t say maybe.”
You oughta know that your neat lies
ain’t gonna sway me.”
You will lose, you’ll never win,
If you start to buy the Realtor spin
So smarten up and save your skin
Make it easy.
Well I’m a runnin’ down the road
tryin’ to choose an abode.
Got a Realtor right on my behind.
Startin’ to discover why she likes to hover,
her sales have all declined.
It’s not easy, it’s not easy,
if you let the sound of her home squeals
make you hazy.
Dream on, Baby, not even maybe
You gotta know that your cheap tries,
will never cave me.
Oh ooo oh Oh ooo oh.
Oh they’ve gotten sleazy
They make me feel uneasy.
Yippee! I hope you liked today’s song! Bubbles doesn’t know how the Realtors in Phoenix are gonna sell all those houses! Maybe they should do something totally zany like lower the asking price! Nah! What do I know, I’m just a washed up clown hosting a stupid kids show for community service!
Okay boys and girls, that’s all the time we have for today! Bubbles can just make the 7th race if he hurries! So until our next show remember: Bubbles the Clown is fun, Housing bubbles are icky.
A rainman18production 2006 copyright
BTC#5
Sweeeet! Put an audio file up! Better yet make a video and you have competition with the UK house price crash animation
Rainman, you have quite a talent. Thanks for the laugh!
Bubbles, you have simply out done yourself!!!
Nicely done Rainman.
Another topic is the role of crooked appraisers in this run up. They are the ones who validated all these hige price jumps, and I’mwondering where the justification was these past few years for a house to be truly worth $55K more than the one 3 doors down that sold for 6 months prior.
how about we talk about the effect of high oil prices on the housing market? especially if you bought a larger home or your commute is longer because you had buy a house a long ways from your work.
My brother bought his first house a few years ago in SC. He bought a preconstruction vacation home about 6 months ago in Arizona. A few weeks ago he discovered his boat would not fit in the garage so he promply signed papers for a bigger house and garage. I’m in pain! Do I have some responsiblity here?
Six months ago was pretty much the top of the prices here in Phoenix. You can only do so much to talk sense into people. The person I have been telling that now is not the time to buy, is still feeling anxious about the market. The only reason she has not bought is becase she can’t aford to.
Rainman - great work. Love it.
“A fun weekend activity might be to look up properties for sale on craigslist in bubble areas. If they list an address, look it up in Zillow, and see what the current owner paid. Most of the listings on craigslist are from desperate flippers, so it is entertaining to send them an email asking if they would consider an offer 25% less than they paid.”
I have posted a number of these on SoCalMtgGuy’s site - http://www.housingbubblecasualty.com - mostly for the Bay area. Some really FB and greedy A$$holes. take a gander at them. In the forum section, craigslist part.
Okay, I have a question. Suppose — just suppose!– home prices don’t come down more than a few dollars. Suppose they stay flat for a while, and inflation goes up, and eventually wages and rents catch up to where houses were reasonably priced again.
How much would your salary have to go up before you would be willing to buy?
I think that’s a very valid question and good topic. Basically, it would require hyperinflation (and for that to flow into wages) if you want results in just a few short years.
For me, wages would have to approximately double for us to be willing to buy a house.
Topic suggestion: Is there any point at which bubble adherents will acknowledge that there has been no bubble?
To me, a bubble implies a period of rapidly increasing (say the last five years with real estate, in many areas), immediately followed by a period of rapidly decreasing prices (a burst of the bubble). If prices are virtually the same 2, 3, or 5 years from now, will folks concede that there was no bubble? Or even if prices decrease somewhat, say 10 to 20 percent, is that a bursting of a bubble considering that in many areas prices have risen 150 percent over the last 5-6 years? Up 150, then down 20, doesn’t seem like a bubble phenomenon to me.
Here in Cali, I think latter scenario is the most likely–prices will decline 10-20 percent over, say, the next 5 years, with the market stable or rising will inflation for a significant period after that. The precipitous drops that some people expect simply aren’t going to happen here, imho. There’s just too much demand for housing in this state relative to rate at which the housing supply can be increased.
The disconnect between rent and price is enough to prove that we’re in a bubble. The fraction of people who can only afford their mortgage because of low teaser rates is enough to prove that we’re in a bubble.
This remains true even if Ben Bernanke manages to find some black magic that keeps prices elevated.
Yes. To me, it’s not about prices but about available credit. When credit conditions return to historically “normal” standards, and the housing market has shaken out the excess, then there will be no bubble.
That’s because this is a credit bubble as much as it is a housing bubble.
Having said that, I’ve been getting a very definite feeling of hyperinflation these past few months. Are we (the U.S.) in such bad shape that the govt is actually willing to debase our currency? Is it possible that they see no other way out? I think it’s possible. Tighten up on the front (short-term interest rates) and monetize on the back (could be done through off-shore hedge funds which have money “printed” into their accounts which they could then direct wherever they wanted or by buying long-term debt or ???).
Anyone else thinking things aren’t what they appear to be lately?
I’d like to hear real stories about where Boomers, Gen-Xers, and GenY-ers are in the RE market. Maybe we are very different, maybe not. Motives appear to be the same. (not?)
How’s the OC after losing (not loosing!) a lot of RE-related jobs?
If you could live in any city in the US, which one and why?
OK Ben. We talked about yeilds on the ten year. How about the FED FUNDS RATE. How high will the Fed funds rate go and at what rate will it really crash housing sales?