Will The Bubble Burst? Watch The Developers
One realtor has this in a letter to the editor. “I’ve noticed the nightly news running this same story for what seems like an eternity: ‘Real Estate: Will the bubble burst soon?’ It’s a self-fulfilling prophecy that many media outlets have latched on to.”
“But one only has to look at the countless housing developments in progress to think otherwise about the future of real estate. For example, Standard Pacific Homes, a publicly traded company and the nation’s 11th largest developer will soon complete a 250-home development with prices upwards of $600,000. Toll Brothers is following suit with a 60-home development with prices starting in the $700’s.”
“It doesn’t look like they’re too worried about a ‘bubble.’ If large-scale developers such as Standard Pacific, Centex, and Toll Brothers, with multimillion dollar budgets and a finger to the pulse of the economy in a way that the media doesn’t, what do they know that the media doesn’t?. When it comes to predicting real estate trends, watch the developers, not the nightly news.”
“Home-builder stocks pulled back Thursday as investors reacted to a string of earnings reports littered with order declines, missed expectations and lowered outlooks. A trio of the largest companies in the sector released quarterly results before the markets opened Thursday, and the disappointing results sent the group into a tailspin.”
“Centex Corp. started the trouble shortly after Wednesday’s closing bell when the company said that it took a 14 cents a share tax write-off on land that has fallen in value. The company’s backlog of homes awaiting construction dropped 6% and orders tumbled 11%.”
“‘The deterioration in home-building trends is materializing more rapidly than many had anticipated, including ourselves, and is likely to continue to put pressure on earnings expectations for the sector,’ wrote Raymond James analyst Rick Murray.”
“Pulte Homes Inc. also released quarterly earnings after the closing bell Wednesday, saying profit rose 20% from the previous year. Yet new-home orders, which analysts closely monitor to predict revenue, fell 11% from the year-ago quarter to 10,725 homes. Orders fell in the company’s Northeast, Southeast, Midwest and West markets.”
“More bad news hit the home-building sector Thursday morning after Beazer Homes USA Inc. trotted out its quarterly numbers. The company lowered its 2006 earnings forecast as the builder sees sales and prices slowing in several of its housing markets. ‘In a number of markets across the country, we have seen the pace of sales decline and price appreciation moderate relative to that experienced over the past several years, as evidenced by the lower net orders this quarter,’ said Ian McCarthy, Beazer chief executive.”
“Orders fell 19% on a unit basis and the company’s chief executive said sales are slowing and price appreciation is moderating. Cancellation rates also moved up from the year-earlier quarter and Beazer lowered its 2006 profit forecast.”
“Orders for homes, were off 46.3 percent in the West. Sacramento, California, was particularly hard hit, as orders fell and cancellation rates rose.”
“Pulte Homes (posted) a drop in new home orders. New orders fell 4% to $3.8 billion. The company’s backlog of sold homes stood at $7.1 billion at the end of the quarter, up from $6.5 billion a year earlier. Orders fell 29% in the Northeast, 15% in the West, 13% in the Midwest and 9% in the Southeast.”
“In the company’s conference call Thursday, Pulte management attributed the large drop in Northeast orders to declining demand in the New York metro region and the New England area. In Arizona, sales have been slower because of..competition from the growing inventory of existing homes. Buyers have been much more cautious in Arizona of late, the company said.”
“Pulte said the competition from the growing amount of existing homes for sale is a national issue, but it is most pronounced in Orlando and Phoenix, where builders are exacerbating the situation by adding more inventory to the market. ‘The investors that were buyers two to three years ago have been sellers today … and that’s presenting some inventory issues in certain markets,’ management said.”
I’m hearing a lot of people shifting from saying there’s no bubble to saying we’re going to have a soft landing. Seems like that’s giving some ground.
It’s hard for me to imagine a soft landing, though, because once the investors see a flat line, I think they’ll all want to get out.
It’s not our fault it’s the media.
Look there are other people doing what I am doing so I must be smart.
“the crash…never comes gently. It is always accompanied by a desperate and largely unsuccessful effort to get out.” - JK Galbraith
If there really is so much demand, wouldn’t it be impossible for the media to “manufacture” a crash, because the fundamentals would just support any price weakness?
Maybe, just maybe, the demand just isn’t there. Pish posh, we all know that every one wants to live here in (insert name of your hometown). All the boomers, immigrants, rich oil barrons, drug lords, they all want to live in (insert name of your home town).
Uh… OK.
Realtors aren’t the only ones who put blind faith in the big homebuilderss and their ‘multi-million dollar budgets.’ I’ve spoken with business reporters that couldn’t get their head around the idea that these corporations were over building.
Why do these companies overbuild? Do they not realize it, are they in denial? Is it better to over build and get the land off their balance sheets? You then have to sell the houses. I can’t imagine empty homes on a balance sheet is better. Are their profit margins so big that they can “fire sale” inventory and not get burned? Don’t many of the builders think they can take market share during the downturn? Sorry for the questions, just curious. They are still building like mad in FL and the entire state is for sale.
‘Beazer Homes lowered its 2006 earnings forecast as the company sees sales and prices slowing in several of its housing markets. The company noted cancellation rates were higher than the previous year as sales fell in Arizona, California and Nevada.
Additionally, ‘lower new home orders in some Florida markets resulted primarily from moderating demand relative to extremely high levels experienced during the previous year,’ Beazer said.’
yes, clear break (yesterday) of the very well defined uptrend of the last 1.5 years. With BZH as one of the bellweathers of the builders, that spells trouble …
In their conference call, a rep. for Beazer stated that Sacramento is “probably the toughest market at the moment” and they are thinking of “backing off” the market for greener pastures in Fresno! They also mentioned that they prefer “quiet discounts.”
Beazer Homes: Sacramento “Probably is the Toughest Market at the Moment”
Why do these companies overbuild?
Sometimes you build with the knowledge you wont’t make any money because you have other reasons; e.g., maybe you want to keep your staff intact.
1. For example, demand can cease and you can fire everytbody. In the future, business picks up and now you have to rebuild/retrain a new staff.
2. Demand can cease and you fell it is a temporary lull. You keep your staff employed and busy. You may not make any money on the current projects, but once demand picks up your staff is already present and trained.
I have seen this happen many times in a number of different industries.
These builders were selling McMansions for 250-300K 6 years ago. I assume they were able to make a profit then. I know building materials and labor are more expensive, but it seems to me there would still be profit if prices dropped and they had to sell these houses in the 400-500 range.
Wouldn’t look too good for all the sheeple who bought houses in the same area for over 700K, but the builders will do what they have to to keep business going.
I agree, the overall profits over time may still be high. They can also use tax strategies to work in their favor. Business is business wether it’s widgets or homes.
Nobody should fool themselves, declining marginal returns makes people build MORE, not LESS.
Assume for a moment… you make 100K by selling 1000 widgets for $200 with $100 profit and $100 cost. How many widgets would you be willing to sell if the price dropped to $150? It’s simple math; you would need to sell 2000 widgets with a 25% price drop with a 50% margin. National home builders would continue to build and slash prices until they are making exactly .01 per home and selling millions if they could. This is exactly what happened in the last Cali bust except that builders were the speculators. That will put faster downward price pressure on builders because they will be competing with their former customers for sales. They have a lot more pricing power than their former customers do.
StJoe — I think that is a huge part of it. Creative Accounting probably allows a lot of numbers “massaging.” Couple that with the ability to cut profits to zip and undercut used-homes sales and these folks might be able to stay afloat for quite sometime, meanwhile causing comps to slide ever downward.
One or more of our regular posters is a CPA — if any of those (or an analyst) understand construction-company bookkeeping and can shed light on the margin these builders have to work in, I ‘d like to know more.
DAP;…The land has been purchased, the infrastuctrue is in and the money has been borrowed….They are 6 months pregnant and need to carry the deal to term…They will do “Whatever” they need to do to sell them, leaving in their wake, all the flippers and unfortunate common home buyer that may need to sell…
Often more than 6 months pregnant. Some of the projects take years to move through. They can’t just turn off the tap and leave these things half built.
In 12 months, there will be little new residential construction.
Don’t watch the developers, watch their architects….when they are not busy on new projects, the cliff is not far away.
Backstage;….Your correct on the Architects but hard for the ordinary person to track….Watch for the earth moving equipment (pre-infrastructure)….Once they stop, you know the end is near…
Backstage, you really hit on it. My mother worked for an architectual firm in the 1980s.
By 1989 she realized that a lot of people were waiting around the office for the next “big project” to be landed. It was getting hard to fill out the project-time-allocated worksheets… you can only spend so much time a day cleaning your pens…
By mid 1990 the recession was finally being discussed in the mainstream media. (Which blamed it all on the Iraqi invasion of Kuwait).
scdave: perfecto — “builders were six months pregnant”.
Buliding to all those ‘new home sale deposits. Then the deposit cancells began to overwelm the new depositors. Builders being “6mo. pregnant”t with land and construction loans blazed through their current open projects in Q1 (recall the construction numbers), crossed their fingers for a spring rally…so far since it hasn’t shown up they are reducing commitments aka - Centrix and Toll….
Most interesting is each builder comments for their different areas of the country are “their” SLOWEST. NY, CA, FLA,TX —-now that takes in some large populations…
Competitive pressures will lead companies to overbuild. This is no different from any other industry; everything is based on the premise that growth can continue indefinitely and infinitely. When business is good, there is a high incentive to invest in more capacity because otherwise your competitor will grab the market share. When the market slows, they are overcommitted and end up with excess inventory. The semiconductor industry is a classic example of this
I saw a post on this blog that explained the continued building as the last chance to sell at the highest prices the builders expect to see in many years. The margin for builders is much larger than for Joe sixpack, especially recent individual buyers, so even if HBs discount the profit is potentially larger now and in the near term at the peak and as prices roll off of the top than it may be at the bottom. We are already seeing new home prices drop and new home sales increase or at least higher than existing homes. This seems to support this theory.
Home builders will lead the parade to lower prices. They are in the business and flippers think they are in the business. The difference is HB’s negotiate everything to get the best economies of scale and work with bigger margins. You heard how new home sales are up 13%, but you don’t hear how it’s directly correlated to big discounts and buyer incentives. I agree with your theory oc-ed.
Meditate on who is deciding to overbuild, and you will get your answer. Your Bob Tolls of the world can sell their company stock shares for millions of dollars more if the rest of the world is bullish on the homebuilding sector than if they are pessimistic. The minute HBs stop overbuilding, anybody paying attention will infer that the sector is slowing down and future profit margins will become leaner, resulting in a drop in the share price, and millions of dollars of lost value for stock sales by corporate insiders.
Q: why do these companies overbuild?
A: They’re not perfect.
My BIL in Bakersfield yesterday told me about about someone in Salinas buying a SFH in Visalia (which they’ve never visited) off the internet because the price of the new home was $280,000 and it’d cost them around $800,000 in Salinas. They only had to put $10,000 down and have a payment of $2800/mo.They game continues folks. They plan to rent it out. Add another $200 a month for summer cooling cost and the only thing they are going to be is way, way under water. God bless these useful idiots who help with the redistribution of wealth.
I know one time-share salesman who bought 4 preconstruction houses in Cornville, AZ because they were ‘only $5 thousand each and you don’t have to make payments until their finished.’ Last time I saw him, he was borrowing HELOC money on his primary home to cover the 2 that are finished and empty.
Sonny’s just looking for clients.
Here in Salinas there has been a lot of NIMBY crap going on. The locals want to limit building so that they can sell their properties at super high levels. That’s why I had to laugh at last nights news that some property owners in older neighborhoods, those with large lot size ranch style homes , are up in arms because someone bought up some of these houses, tore them down and is putting up two to three two story houses on what was a one house lot. Gee, the city said it makes sense to them to restructure within the city and leave the farm land alone, besides the advantage is to collect those higher property taxes. I wish I’d have been to the meeting to suggest that they also throw affordable housing into the mix.
Berhanke just said something along the lines of “with rising rates we generally slow down the rate of money creation.” This was not supported by M3 numbers when the data were published. Was it?
I think Bernanke signaled today that he will let the dollar drop (which probably means more helicopter money to support the housing bubble).
Gold is acting very nervous today, there are some changes in the air.
one of the ironies is, contrarion gets into the play…even though FED does not appear finished…if they need more time to ascertain, i guess that ain’t a bad thing..i would still not jump the gun.
Now if market assumes rate ending, i think that’s a negative for assets +market…contrary to what would appear normal…
negative for stocks probably, but not negative for housing - especially if Bernanke starts the black helicopters he has been talking about.
If Bernanke doesn’t somewhat protect the value of the dollar the market will do it for him.
He clearly is not interested in protecting the value of the dollar. In the past he has advocated managing the yield curve on both ends, so he probably thinks he can have the dollar and interest rates drop together to solve the US deficits (and have foreigners pay for it, so they finally get rid of their savings glut as well). In that scenario, the housing bubble would continue for a while longer, probably at least until the midterm elections.
I’m not sure he’ll openly let the dollar drop. Doing so invites more upward pressure on oil/gas prices … which is starting to get the attention of the politicians lately. The further the dollar goes down the more expensive a barrel of oil becomes. (oil is paid for on almost all international markets with dollars).
The only way to characterize money creation in the Greenspan era and the just-started Bernake area is somewhere between “unconscionably reckless” and “ruinously reckless”.
Helicopter Ben will do whatever it takes to keep the markets up, to keep the housing bubble (i.e. homebuilder stocks) from collapsing, to make sure the bankers are never on the hook, and to make sure the little guy is the only one paying the piper.
Look for more inflation, less “dollar strength”, and more jawboning for the housing market.
So Helicopter Ben it is, then?
Ok lets all buy into Helciopter Ben’s false theory {greenback kool-aide}.
When he wrote that thesis, that earned him the job as “Fed Chair”, he believed that the US dictated global monetary policy….maybe that is still so!???
But last time I checked deeply in debt debtors take instructions from their benefactors…..Japan & China! or maybe its the “BIS” - my candidate for Alpha dog!
I still bet that M3 will drop like a rock …Fed must have someone borrow the funds …
That’s it! ;>) home loans and credit cards with negative interest rates, & discounted monthly repayment plans….Borrow $1 pay back 85 cents….That will return M3 velocity back to positive territory. Maybe?
Heck even I might borrow under these terms.
The Realtor letter shows why we are in trouble. No sense of history or the mental ability to read the numbers that keep coming. This is the greatest bubble in history.
Mr Ber-henke just said something along the lines of “with rising rates we generally slow down the rate of money creation.” This was not supported by M3 numbers when the data were published. Was it?
I meant Mr Ber-hankey
For all those people running off to invest in Texas and Florida in light of a person dying of lighting in Florida yesterday I’d like to pass on the following fact:Florida has more lightning-related deaths than any other state. According to the National Lightning Safety Institute, there were 126 deaths between 1990-2003.
The next highest ranked was Texas, with 52 deaths during that time frame.
How many were realtors?
As in; “This house will appreciate 17% forever or may lightning strike me dead?”
How many were realtors?
Not enough, apparently.
that is shocking
truly a striking statistic
Genuinely enlight(e)ning.
Wonder if Leno’s writers ever scan this blog. Lots of good wit here.
Mr. BB also noted the slow down in RE. This means that they are going to stop the upward rise in interest to see what happens in SFH market. Unfortunately, that means that the greater fooooools will be out in numbers for a while as the Feds want the housing ATM to run through the November elections before the next shoe falls on the housing industry. I don’t think the Feds get how deep the hole is yet.
Comment by salinasron
2006-04-27 07:39:20
the Feds want the housing ATM to run through the November elections before the next shoe falls on the housing industry.
_____________________________________________________
The current band of criminals in congress will do ANYTHING to hold on to power. Money grubbing bastards. To bad it won’t work for them this time.
lingus - your logic through your different posts is amazing. It ranges from the GOP is a group bumbling bozos who couldn’t engineer their way out of a box to an illuminati like group with a reach into every decision making orginization in the world that can orchestrate market manipulations and political levearge at will for their own corrupt ends. It can’t be both ways. Maybe you should polish your tinfoil hat a little more
Gee death_spiral, yesterdays was a home owner so that’s another house going up for sale. Had he been a Realtor(tm) it would have added humor to a sad situation.
The bubble is bursting for individual investors, but really has just begun for the builders. Sure prices are now declining and sales volume is leveling off or dropping, but the house building machine has just gotten up to speed, and prices are still so high that builders can go on cutting prices and reap huge profits for months or years to come.
The flip side is that those sales are going to increasingly come out of existing home sales, and the individual investors are going to get destroyed when they find they can’t begin to compete on price with the big boys. So a lot of the investor-owned inventory is going to get “locked out” by falling prices (since homeowners can’t sell below the amount they owe on the mortgage) essentially creating a pool of dead inventory the builders don’t have to compete with.
Right on the money Freeloader….
“(since homeowners can’t sell below the amount they owe on the mortgage)”
If the seller wants out, he’ll simply need to bring his own $$$ to the closing. Just speaking w/friend this a.m. who sold home here during last downturn. Although she was not one…sellers bringing cash was pretty common, I was told.
Does in fact happen upstater;…People that value their credit rateing and have the cash may choose to do this…
Just saw this on the Freakonomics blog:
Realtors Get a Blog
By Stephen J. Dubner on General
The National Association of Realtors has started a blog. The lead item today is headlined “The Cost of Selling without a REALTOR®: $31,800.” Pretty scary, huh? Here’s the lead: “Real estate professionals do more for sellers than make the transaction easier. They make them money. In fact, the average seller who uses a real estate professional makes 16 percent more on the sale of their home than do sellers who go it alone. That’s an average of $31,800 per home.” Unfortunately, there’s no supporting data. So it could be that a Realtor actually brings in, on average, $31,800 more per home sale. Or it could be that a few dozen, or few hundred, or few thousand Realtor-sold multimillion-dollar homes skews the average very high compared to FSBO’s, which tend to be cheaper. Or it could be a few dozen other factors.
yeah, right
I purchased my first home for 35% below purchase price while two realtors told me there was no way I would get a discount from the seller.
And when I sold the property, I discovered just in time that my realtor was pushing me to sell way below value (apparently, they made a deal with the buyers realtor to lower the price). I decided to do the sale myself and got 65% more than the sales price that my realtor had suggested, that was nearly $ 300K difference.
The Cost of Selling with a REALTOR®: $300,000
When will technology create a disruptive technology that totally eliminates the need for a realtor? I believe it’s possible, but will it be accepted by sellers and buyers. Imagine if someone was in the middle of every purchase you wanted to make in life. A world without realtors is possible. We just need to change the attitudes and traditions of how people sell or buy a home. That shouldn’t be too difficult since the attitudes and traditions of how much someone is willing to pay for a home is these days has changed at hyper speeds.
Not eliminate the need for an agent who can do the leg work that busy homeowners can’t. But it will forever change the nature of the job.
It the MLS ever get opened up widley, that will be the death of the RE biz as we know it
Ben this might be a good weekedn discussion topic.
Really, right now in the San Diego area I think going w/o a broker, or with a discount flat fee broker is the only way you can squeak out of a property with gains similar to what you would have got a year ago. By that I mean that buyers with any brains smell blood in the water and expect good deals now. For a seller, the best fat to excise from a deal first is the 5-6% agent commission, or at least half of it. So, the strategy would be to use a flat fee broker to put it in the mls at 2-3% to buyer agent, price it 2-3% lower than you otherwise would have (since you are not paying a seller agent), and advertise hard to find a buyer yourself and thereby even avoid the buyer agent commission. You may screw your (former) neighbors with the comp you leave behind, but you might still be able to squeak out a net proceed similar to last summer after ctually landing a buyer, while other agent represented properties sit.
JJ — in my area, you’d best price it at 10-15% lower than you otherwise would have, if you hope to move it.
I’m really hoping that the bursting of this bubble will thoroughly disabuse the populace of the notion that “industry knows best.” Pets.com did not know what was best; neither does Toll Brothers.
From the update:
‘Pulte Homes (posted) a drop in new home orders. New orders fell 4% to $3.8 billion. The company’s backlog of sold homes stood at $7.1 billion at the end of the quarter, up from $6.5 billion a year earlier. Orders fell 29% in the Northeast, 15% in the West, 13% in the Midwest and 9% in the Southeast.’
‘In the company’s conference call Thursday, Pulte management attributed the large drop in Northeast orders to declining demand in the New York metro region and the New England area. In Arizona, sales have been slower because of..competition from the growing inventory of existing homes. Buyers have been much more cautious in Arizona of late, the company said.’
‘Pulte said the competition from the growing amount of existing homes for sale is a national issue, but it is most pronounced in Orlando and Phoenix, where builders are exacerbating the situation by adding more inventory to the market. ‘The investors that were buyers two to three years ago have been sellers today … and that’s presenting some inventory issues in certain markets,’ management said.’
KB homes has droped their asking price! My husband and I looked at Ravenna at Monte Sereno in Reno. I would guess about 6 weeks ago (we couldn’t look at the models they were not finished). Our price list says affective Febuary 17 2006. According to said price list they houses start at $380K. I know from their website they went up to Oh…385 or 386K. But I see today they start at $365K. & they have droped the asking on all the houses buy 10-15K (still too high to buy today, but a step in the right derection).
The painter that I have painting my house right now said his contractor friends are making 100 to 150K per home right now , where 5 years ago that were willing to get 20 to 30K profit .These are smaller sq. footage homes hes talking about . There is more of a profit margin in the 3000 plus square footage homes .
Your friend is correct Wizard;…Most competent contractors that I know would not touch a house for less than a buck and a half….
I don’t doubt that is true. The homes I talked about range in size from 2,046-3,000 SF. Maybe we will make a low ball offer after the ‘prime buying season’ is over.
I have a builder friend in South Carolina. He says the same thing.
Well I have no argument saying the media is unreliable. The headline and the content of the story often say two different things. And I think builders as a group have reacted more quickly to the bubble bursting by being quicker to pull out the incentives bag of tricks and lower prices if necessary, than existing homeowners, so I give builders credit for that.
But making a general statement that developers have their pulse on the real estate market could be compared to saying that Enron had its pulse on the energy markets. Sure, maybe they do and maybe Enron did. But how well the business is managed and how well cash flow and debt are handled, including accounting for a earthquake shift in market psychology, is what will keep a developer operating after many of his cohorts have gone bankrupt. In the case of big construction projects, which often have such long lead times, what will a builder do if he’s already made a substantial investment on a big project but the market is softening? Spend more money on the project to finish it, or take a loss on what he started? Taking a loss quickly before it gets bigger keeps the builder (or trader!) in the game, yet it goes very much against most people’s natures. It’s the same psychology that prevents a homeowner who wants to sell from lowering his asking price further, that compels some of them to even throw money at the house to fix it up so they will get their own perceived price. That’s why I think most builders would opt to throw more money at the project and finish it in the hopes of a market rebound. What they will end up doing is flood a wounded market with even more inventory and exacerbate the downturn.
The smartest people in the business are prepared for the cyclic downturns - and this one is shaping up to be more “down” than most are prepared for. To blindly follow what developers could end up being a case of following the faster lemmings off the cliff.
It’s human nature for people to look out for their own personal self-interest. It’s also human nature for people to grab a short term gain while turning a blind eye to long term risks.
How does this apply to developers who overbuild? Executive compensation is based highly on short term benchmarks. The people who run large corporations will do literally anything to “hit the numbers” and earn a big bonus. Look a Enron. All the cooked books and front companies were just a means to get the stated profit up which generated big cash for the top dogs.
No executive ever got rich by defensively downsizing his business. The culture is to plow ahead. Growth at any cost. So they just keep building. What else are they going to do?
Nor will they get rich at a nothing but growth strategy. If they get blindsided by Wall Street expectations of meeting quarterly growth numbers then they will go bust.
On the other hand, if the goal of a business is to stay in business and stay operating and in the black, they can downsize and scale back and mothball future projects for that purpose. I was under the impression that certain cyclic industries, such as mineral exploration, have done that very thing.
Clearly, the most profitable investment in the Real Estate sector will (for the next 8-10 years) be Bankruptcy Trustees, Credit Counselors, Auctioneers, Baliffs, Court Agents and related. I would suggest a national franchise along the lines of “Real Estate Clean UP - We Clean Up Your Financial/ Real Estate Mess by Assisting You in the Credit Re-Alignment Process So You Can Sleep At Night (in your new cardboard box home behind Wal-Mart)”
Note to stock-pickers and shorts: given what we’ve seen today (HB’s down 4-5% at the open now down barely 1-2% for no reason whatsoever), and the weekly housing-specific FOMC market manipulation via speeches &c, the phrase “too big to fail” comes to mind. Their attempts to shake us out of our shorts is now a nearly daily event. That said, I’m lightening up sometime Friday in preparation for the predictable first-of-the-month goose to all stocks and indices from 401K money.
I covered on Monday, damnit. But I’ve learned also to take decent profits and reload later. I have faith the buybacks will come. I didn’t trust the homebuilders not to rally on the SLIGHTEST shred of good news and I knew March would look better than Febuary.
Watch the developers? Are you kidding me? What an @*?&#. AND, he has the guts to say that the idea of a bubble burst is a self-fulfilling prophecy that the media outlets have latched on to while he himself is hoping to use the media to promote a self-fulfilling prophecy of his own and keep the bubble expanding.
That kind of disingenuous tactic might sell a few more over-priced properties for his brokerage (and therefore pay him some overpriced commissions) over the short term, but it won’t stop the inevitable. You can’t just keep creating money out of thin air with no value to back it up without eventually undermining “full faith and credit” of the dollar.
He’s right about the self-fulfilling prophecy, though. A speculative bubble is almost a textbook definition of self-fulfilling prophecy, both during the boom phase and the bust phase.
Annata
I have to respectfully disagree with you on that point. History has shown that bubbles continue until they can’t. They eat up every opportunity until the only out is to collapse… and then they do.
I recommend anyone reading “the tipping point”.
so there are no economic reasons for a bubble bursting? It really is no problem when people can’t afford the property prices that rise way out of line with salaries and they have to take out resetting I/O and NegAm mortgages to do it?
There are no potential pitfalls to giving someone with $50k income a half a million dollars worth of debt?
Really? I’d say the RE industry manufactured the fault line they teeter upon themselves. magical thinking doesn’t turn debt into wealth no matter how many time they click their heels.
Can anyone explain what is keeping this stock chart locked in at 825?
http://www.marketwatch.com/tools/quotes/quotes.asp?symb=DJ_HOM&siteid=mktw
Stock buybacks by the company? Seems to be a common thread.
Fed’s PPT?
It really, really sucks that I can’t tell all of you what I do for a living.
I talked to a MAJOR homebuilder today.
I’ve got a direct quote:
“We didn’t really know how much of the market were speculators. We didn’t know how much of the market were homeowners. Speculators lie, sometimes. They say they’re going to actually be living there.”
Direct quote from _________ Homes.
I’m not here to cause lawsuits.
Don’t give a rats ass about that.
But ladies and gentlemen…that is what I was told today.
I said this a long time ago…
…and I will say it again until the message is recieved…
“ALL HELL BREAKS LOOSE IN SEPTEMBER.”
At some point between now, and then…
…I may have to do ’something else.’.
But please don’t forget I said that.
It may end up becoming one of the most tellling quotes of this entire stupid bubble.
I really do have to do ’something else’ though.
Too much stupidity creates an opposite and opposing reaction, sometimes.
Maybe we should all go on a cruise together…and come back in October…
…when I suggested in February that we go looking at ‘Open Houses’.
Christ, I hate Red Tide.
Why can’t we filtrate our water BEFORE it gets to the ocean?
(Great idea, far too many years ahead of its time.)