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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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Good morning! Let me ask the group a couple of questions. We know we are headed for the deck. How will this affect you and your job? Your housing plans? Your life for the next 5-10 years. Curious.
I was forced to liquidate a $210k cost home in 2001 which I constructed in 1998 due to a divorce.
Subsequently I totally missed the 3-year triple digit valuation run-up, which easily cost me a six-figure addition to my net worth. Psychologically it has been very difficult to absorb-although as an appraiser I know that the run-up has been based on hocus-pocus financing.
My equity split and income decline has not been enough for me to re-enter the New England housing market. Given today’s reliance on dual incomes, and a projected 50% divorce rate, I am at a loss to understand how people are keeping a roof over their heads.
Personally, I’m a pessimist relative to what will happen in 5/10 years. Government entitlement programs and associated debt at all levels is too massive for the system to sustain. I also believe there is an enormous intergrity crisis in our society.
Absolutely, nothing seems to work in this country anymore. It’s like everyday I’m talking to someone in Pakistan in order to address some sort of billing screw-up.
I look for it all to collapse in 2-3 years.
I live day to day, and don’t see myself owning propery again in my lifetime-or at least not in this country.
I had a similiar situation living in Florida I sold my house of six years in early 2001 in Tampa due to relocation and a condo in 2001 Naples because the job didn’t work out. Both tripled in value by 2004 when I was living in Upstate New York (no bubble there) due to the fact I needed a job. That job tanked also, now I’m in New Mexico making a third less than I did two years ago and buying a house here is just not affordable based on my salary, so I happily rent and wait. I believe housing will fall just as sharply as it increased, only then would I step back into buying.
Realtors are still saying there is no problem in Naples/
http://realtytimes.com/rtcpages/20050801_naplesflorida.htm
Does anyone believe this?
You got suckered by the false date on the page when you viewed it. Look at the date in the URL - Aug. 1, 2005. Then, in the article, someone says, “we’re in the middle of 2005.”
Unlike many on this board, I’m an optimist on our economy, although I think housing has become overextended and will pull back.
People have all the stuff they need (and much more). A DVD recorder cost $115! Computers cheaper all the time. Little tiny cell phones. If people are broke, why do they have two cars? Being “poor” certainly means something different than when I was a kid. College graduates expect to get jobs–another change from my era.
Look at the food we can get in the grocery store–amazing organic food from all over the world. Do you remember what fruit looked like in the winter when you were a kid? Ick!
We cure more diseases all the time.
Honestly, when I read this board for housing news, I roll my eyes at all the rest of this downerism. It’s like a cult. What a bunch of whiners.
You all think everything is going to fall down. Malthusians! There have always been people that thought that.
You must be my age. Do you remember “Plunk the magic twanger froggie”? Overall, I agree with you. When I graduated from college I took a Laborer job at a construction sight to make ends meet.
The problem is nobody can afford what they’re buying, yet they continue to do so anyway and simply incur staggering amounts of debt without a second thought as to what they would do in case of a finanical emergency. When real wages are falling when adjusted for the gov’t fake lie inflation rates, imagine what they are when you take into account “real” inflation as well as energy costs! And despite falling income and rising prices, people continue to spend more than they earn and save absolutely nothing at all just to buy cheap imported crap. It’s obvious American consumers would rather dip into their savings to maintain their current piggish lifestyles that cut back a bit here and there and just break even or (gasp) save a little. This has been going on even as we hear about SS and Medicare going insolvent. How many boomers do you know with very little in 401K’s etc but hell, they’ve got a huge house? There has been zero penalty for not saving and disgustingly overconsuming and hoping for easy $, and that cannot continue forever. Someday you’ll have to work again for $, not just sleep in a house for 18 months and then make a withdrawl from the housing ATM.
I tend to agree with you on most points. However, I will add one word to your post - in two spots, “… although I think housing has become b>WAYoverextended and will pull WAYback…”
IMO housing just flat-out sucks right now. Even rentals. All of it is for double incomes or much-better-than-average single salaries. What I want to see is enough correction so that average single salaries can once again afford to buy at least a condo, townhouse, and/or small SFH - without the b.s. financing. I’m even all for it only being able to occur with very traditional 20% down, 30-year fixed rate mortgages. But the way things are now, it ’s downright depressing to me.
I doubt traditional (3/2 sfh) will be affordable on one median salary until we understand that women in the workplace has the same effect on wages that illegal immigration has (flame away, all!).
That being said, I am female, and don’t suggest we really keep women from working. And advocate strongly for equal wages for equal work. It’s just that supply/demand thing. More workers = lower wages. As well as being a drag on wages, it is inflationary WRT costs because more money is chasing the same goods/services (although family income does not come close to “doubling” when both work).
If people are married, they really should run the numbers. It’s surprising how little that second income adds up when you take away taxes (taxed at higher rate), commuting costs, daycare, eating out & other spending which occurs because “we deserve it” since we both work.
Just MHO.
I don’t know if I like the implicit assumption that the woman’s salary is the “second income.” Some of us really do make good salaries– many of us make more than our husbands.
I’m speaking from an historical perspective. Womens’ (wives) wages are traditionally an addition to the husbands’ wages.
Of course, there are many women who make more than their husbands, but it is more likely that the man makes more. Not because women are less able (I tend to believe the opposite), but because women often have to take time out if they want to have children (pregnancy & bedrest, maternity leave, and it’s usually the woman who leaves early to p/u the kids or take care of them when they’re sick). It’s understandable, though not legal, that when hiring an employee for an important position, that the employer wants that person to be able to dedicate long hours and lots of energy to the job. As well, it’s a justifiable worry that if hiring a childless woman in her fertile years, the employer is never sure if she will leave when she gets pregnant/has children, and would be wary of giving her a job which requires a big commitment on the employer’s part.
This is one of those issues we’re not allowed to discuss because it implies we **just might** be different. Again, I don’t think it’s a better/worse thing, but we can’t fix problems if we’re not allowed to address them honestly.
In MY opinion, MOST women - as in the vast majority (I don’t give a rat’s batooty if you believe me or not) - find men less attractive as a mate if he makes less money than she. Could that POSSIBLY be one of the reasons why you see the income disparity in couples? (Not talking about unequal pay for same work, mind you)
We Rent,
Absolutely true, IMHO! Know why? Because most women understand that if they are to have children, they might not be able/want to commit themselves to an income-earning job, as they might want to raise their children full-time instead.
Additionally, being poor is NEVER good for a marriage (neither is being extremelhy wealthy, IMHO). It’s also biologically-driven, IMHO, as women are trying to establish a safe, secure environment (in our culture, that means money) in which to raise their children.
I don’t know, we rent! I made about 30% more than my husband when we married. But he looked hot so I didn’t ask for his W2 …LOL
Funny, as a woman who makes a pretty decent salary, when I was dating I found that if a guy realized I made more than him, it was the kiss of death for the relationship. Most men, no matter what they say, do not want a wife who earns significantly more than they do. Of course, they want a woman who is not dissatisfied with their income, but they still want to be the major breadwinner. Either it’s a rare man who is comfortable with his wife making 2-3x his salary, or I was just meeting the wrong people.
SAS
Answer: B
I agree with you. Even though homebuilder stocks have pulled back as much as 50%, the rest of the stock market is up a good 10% or more in the last year. The market’s invisible hand is telling us that the rest of the economy is not ready to follow housing into the dumper. Yet, anyway.
What is the market’s visible hand telling you?
It’s like a cult. What a bunch of whiners.
Nice to be on top, Mike…Unfortunately, $54 trillion of FED obligations will take you down too.
BTW-TB; herpes simplex; Bird Flu; AIDS; Ebola; etc., etc.,…WTF disease cures are you talkin’ about????????
Gonna be great to live to be 100, and long as somebody else pays for that 50 year retirement and health care bill.
You are not old enough to know Polio!
FWIW, in general, I don’t think things will be nearly as bad here in Cali as some people believe. I’d don’t think nominal prices will decline much more than, say, 20% in the down portion of the cycle, although the real decline (considering the change in cost of living) will be somewhat greater. Some areas and property types will also get hit harder (e.g., condos in San Diego).
We’re just growing too fast. Although we have problems, California continues to be an economic machine. Ongoing population growth ( in absolute numbers, not so much in percentages) is amazing.
I don’t even think that the word “bubble” really applies here. We’re seen a run-up in nominal prices of about 150% over the past 6 years, and if that is followed with a 20% decline I would hardly call that a bursting of the bubble.
I could, of course, be totally off base, but I just don’t see a big decline happening here, across the board.
Mike - I humbly disagree with you. I do not believe most people are whiners on this blog. I think they look at the dollar deficit, the net savings rate in the US, the trade imbalance, the average per person income, the ease of credit to substandard borrowers and the unreasonable escalation of housing. That I happened to be a lot younger when I got on the escalator - I fail to believe that my first house that I bought in 1973 for $90,000 Zillow says is now worth $4,500,000 - not to me. When a real estate investor talks about how great their investment is, they forget the most important part of any investment - Getting out. If the Investors who blog on this site asked themselves the greatest investment question ever, “If you did not have a position in this property (stock, whatever) would you buy at this level?” If you cannot answer “yes” then you should SELL! There has never been an asset bubble this large fueled by ridiculous hopes for further appreciation. When most people believe it can only go up, I want to be on the opposite side.
hoz, well said.
I’m an optimist by nature, but I’m not optimistic about the economy - everything is over-extended now because of unsustainably cheap credit.
Undue pessimism is an error, but mindless Pollyanaism is equally erroneous.
Exactly the question I posed to my bro (”Would YOU buy YOUR house at this price?”). It wasn’t just the “no” he said - it was dejected manner in which he said it.
Malthus will be proven correct by history. It takes human population bubbles even longer to correct than housing bubbles.
good one- why is there so much glee here ?
if you don’t work for the fed gov your going to take a hit-period
keep telling yourself that.
It’s “you’re,” goddamnit!
The wife has been asking me when we will buy a home, and if she keeps pushing, I will eventually ask her to carefully account for the costs of owning versus renting. I will not be pushed into an act of stupidity by someone who has not read Ben’s blog and watched all the predictions we have collectively made here turn out to be remarkably accurate and six or more months ahead of mainstream media reports.
Meanwhile, I will continue to watch and wait…
I agree with Getstucco — I’ve been amazed at the accuracy of the collective forecasts in Ben’s blog, sifted through the minds of many bright and skilled posters. About the only thing we collectively underestimated, in the early stages, was the top in the Fed rate. As I recall, the average forecast a year ago was for a top of 4.5%, maybe 4.75%.
I did the rent vs own calculation with my wife back then and we became renters for the first time ever. Now she loves it, because she calculates the savings each month.
Good suggestion, Chip. The next time my wife brings up the question of “when are we going to buy a home”, I am going to have her help me work out the savings.
(Of course, if BB inflates away the $, this will look like small consolation.
Note to self: Need to buy some currency devaluation insurance, and soon!)
Kind of a flip side, but similar to some of the others. In 2001 I had finally cleaned up debt my then spouse had accumulated (52k!!!) and had cashed in ISO’s to have a down to buy. I was out looking, got pre-approved for a loan, and ….. BAM! The ex says “I’m leaving, met someone on the web and fell in love ….” Nice … Oh well, so I missed out getting in before the last run up and have been rebuilding my finances since. I was able to keep my FICO high (though of late that is worth about as much as spit in the wind the way they are lending these days) and my debt low and start saving. I’ve a small cash savings (
Ben,
Do you have another job besides running this blog? I know you spend a lot of time w/ this so was just curious. Thanks for the great work.
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An absolute bargain, at that.
Have we finally passed the denial stage in the unwinding of this bubble?
Hey, I was thinking the same thing. I guess great minds think alike. My take has been that lately I have noticed the media as well as “experts” who have been bubble doubters(or deny-ers) in the past have been jumping on the band wagon. The latest of course is the CNN-Money article declaring “the bubble is over”. How many of these past naysayers will jump on this band wagon, and say they knew it was a bubble all along as this thing unfolds?
Ah, memories of the tech bust, can you say Jim Cramer?
Anybody going to use their profits shorting the housing complex to buy a house when the time comes? Now that would be funny if profit from the bubble burst would enable someone to get in at the bottom of the next cycle.
Short on builders, long on gold
Ditto!
The St. Joe story is obviously a big one and hasn’t been discussed much here.
I shorted that POS last summer at 82. Got 20+ points on it but oh how I wish it would rally so it could be wacked again.
txchick
Can you explain how you buy “puts” and how you go about shorting a stock? What exactly is a “put”?
Options investing is a not-very-complex process which can become massively complex in reality.
Please don’t do this yet! If you have to ask what a put is, you should probably NOT do one yet (not a slam, a suggestion!). There are a lot of good books at the library about doing this.
The hard part about options trading is that it has a certain lingo. (I am not an options trader, and have never bought a call or put in my life, but I’m starting to research this myself)
But basically:
A call option is the RIGHT to buy shares of something (often 100 shares of stock) at a certain price by a certain time period.
As example, you could buy the RIGHT to purchase 100 shares of CEF by January 1, 2007 at $10/share.
In doing so, you are betting/hoping that the price of CEF goes up to MORE than $10/share BEFORE Jan 1, 2007.
If it does, your option becomes worth more. Let’s say CEF goes to $15 on August 2006. Well you make money, because you could purchase the CEF at $10 (using your call option), and then sell it right away for $15!!! Most people don’t actually do this, they often will sell the call option itself to someone else…
However, once January 1 2007 comes along, your call option is WORTHLESS> that is your risk… the TIMING of the call option. Obviously, the closer it comes to the timing out period on your option, the less the option tends to be worth.
A put option is the opposite. You are buying the RIGHT to SELL a certain thing (usually 100 shares of stock) by a certain time period for a certain price. Here, you’re betting/hoping that the price will go DOWN.
As example, let’s say Clouseau Homes stock is at $100/share. If you buy a put option, it may be for the RIGHT to SELL Clouseau Homes for $90/share by Jan 1, 2007. Let’s say Clouseau Homes then falls to $50/share in Sept 2006. You could then sell Clouseau for $90/share when everyone else is selling for $50/share. (and again, often people really sell the option to someone else, instead of actually EXERCISING the option above).
Hope that helped…
Basically:
call option: you buy the right to BUY a certain stock at a certain price by a certain time period. You pay to do this. After the time period, the option is worth NOTHING.
put option: you buy the RIGHT to sell a certain stock at a certain price by a certain time period.
txchick,, how’s the short inventory right now for these HBs? I heard from my trading colleague that some brokerages restirct the retail traders from shorting the HBs on certain days,, is this true??
Yes, if you’re a retail investor. But if you’re willing to pay extra, you can short anything, if ya know what I mean . . . lol
How about: Housing bubble vigilantism! What can we, as individuals, do about the housing bubble?
For example, once in a while I’ll google bubble-related phrases such as “preconstruction san diego condos” or “florida condo conversions” or “stated income mortgage”, then click on the sponsored links. This costs the advertisers money (and makes Google richer; you’ll have to decide whether that’s a palatable tradeoff). I think Google only counts one clickthrough per month per IP address, so don’t make it part of your daily routine or anything.
Another idea I’ve had is to take a Sharpie the next time I’m walking around town and “reduce” the prices on all the “For Sale” signs.
Anyone have any other ideas? Also, am I going to hell for this?
I post on the OCR RE blog to try to reach a wider audience.
Everyone I know is aware of my bearish sentiniment on housing.
Believe I’d pass on the Sharpie idea — fair debate is far different from sabotage. On your basic point, I don’t think we need to do anything at all but be patient — the bubble is imploding quite nicely on its own and when the ARMs re-set, prices will tumble.
That is funny! (The marker thing might be risky)
You could make bumper stickers that say something menacing, and pass them out to your friends.
Now… what could they say?
“hope that overpriced condo was worth it, sucker” or
“your ARM just adjusted…pop!”
I thought about making large red F stickers to affix to for sale signs I knew to be flipper properties. Then I thought it through and saw it was a bad idea.
I agree with Chip, just sit back and watch at this point. If you really need to express your anger how about the bumper sticker idea or make a large bet with someone in RE. I bet an agent that prices will go down in OC. No time limit, no amount or percentage, just go down. I can’t believe he took that bet, but at some point I will be a smidge richer as a result.
“Reuters reports that the layoffs in the mortgage business may just be starting. “The decision by the parent of Ameriquest Mortgage Co. to fire one-third of its employees may be the most sweeping recent overhaul by a mortgage lender as rates rise and borrowers retreat. It may not be the last.””
The coming changes in the job market and when will the aha moment that this is having a negative impact on jobs in American would be an interesting topic.
Simmssays…
http://www.americaninventorspot.com
How about discussing what happened with housing prices during the last period of high inflation?
Yes. Also, not many numbers from the last runup and decline. How do we put together a comprehensive comparison of numbers for some of the major markets: Inventory numbers, price chances etc of now vs. 1989?
How about stories about people who still don’t get it. For example brother in law that’s getting an IO mortgage to buy a 700k crackerbox.
Or an uncle that wants 500k for a house who’s closest comp was 400k last Fall, and inventory doubled since then.
I like the vigilane idea. Another would be to print up your own fake FSBO signs and find some McMansion compex where all the houses are the same an dmany are vacant, and put up signs all round one that actually si for sale with a price $100,000 less. They wouldn;t stay up long….
t-bone/passthebubbly–
get a life.
It’ll happen on it’s own.
It was just a friggin’ joke..
How about, which type of housing will lose more value, and which will hold up better?:
1) Condos in established urban centers (NY, SF, Chic, Phil, Boston)?
2) Condos in recreated urban centers (LA, Milwaukee)?
3) Exurban McMansions in developing areas far from the urban core?
4) Older suburban houses in communities reaching 50 years old?
5) Suburban or vacation area condos (Las Vegas, Miami, Glendale)?
Believe it or not, based on demographics, I have the most hope for condos in recovering urban areas. They aren’t overpriced, and the demographics are in their favor. Demographics are in favor of condos in established markets as well, but the prices there spiked too high.
Perhaps it’s Brooklyn bias, but I’m more worried about the suburbs. People aren’t going to choose suburban condos when the real thing is available. The exurban areas, too, will not be attractive when there is value closer in. And the older burbs are reaching the age when city neighborhoods suffered blockbusting, subdivision, and the beginnings of abandonment. I’d say if you want to live in the burbs, you have to go with the blue chip towns — those with good schools, good quality homes, and rail stations in regions that have them. When the bubble is over, that’s what the market will contract to.
I think the price of gas may come into play here. If condos become somewhat reasonable in urban centers, that market will hold up better as people will choose them for commuting purposes.
My husband, an architect with a great interest in urban planning, has said for years that the suburbs will eventually be the ghettos. I think with the rising gas prices and the tendency here in CA for multiple/hugely extended families to live in one home (creating density where it was not designed to exist), he may be right sooner than we think.
I agree with your husband and have felt that way for years. In Chicago the Cabrini Green housing development is 1 mile from the Oak St Beach, 1 mile from the Board of Trade and the loop. It has always been to valuable a location with quick and easy public transportation to be kept as a public housing facility. In Chicago they have already moved a lot of tenants to Schaumburg, Round Lake etc.
that’s a great point. they WERE the ghettos in Houston and Dallas in the aftermath of the 89s bust. some of them still are.
MHO is its going to depend on the state of individual city. Basically if the cities are clean and have a lot to offer, upper income groups will go back. We’ve already read how many retirees are already heading back to some urban areas. Still other cities are too much in a state of deterioration and probably won’t be getting a lot of investment in the near future.
1989 vs 2006
what’s different this time
Lots of realtor spin in this ABC News article about flipping property, though not as much as we would have seen a month ago. I suspect some of you here could have a lot of fun with this one.
http://abcnews.go.com/2020/story?id=1923550&page=1
People seem to be calling the bubble, but I don’t see it yet where I live. How about a thread where people can post actual listings showing price reductions, motivated sellers, etc., so we can see that this thing is finally, actually unfolding.
We are down 5-10% here in Northern Virginia / DC Area suburbs. I have friends selling a townhouse in Ashburn asking 400k when similar comps from fall of 2005 were 430-450k. Who knows what the closing price will actually be? It has been on the market for about 6 weeks.
We will see a much better downward trend in a few months because it takes awhile for the comps to be updated. I use zillow to pull up sales history.
New homes are also starting to be reduced to similar to the asking prices on existing homes on MLS. A few more price reductions and we will see new home pricing undercutting the existing inventory. This is more pronounced for the exurbs where lots of huge developments are underway and inventory is piling up.
lainvestorgirl, I know you are looking in the LA area, but what area specifically? Depending on the area, I’ve seen (smaller) price increases, stagnant prices, and price decreases. How much of a price drop are you looking for right now? Just curious; it seems like this whole thing only started to “turn” last fall, and is only now starting to pick up steam. How quickly and how much were you expecting (hoping) prices to fall in LA?
I was buying properties at 6 time annual gross back in 2000; now they’re 12-14 times annual gross. I need to find a building under 8 before I will make another purchase. I was really hoping to see 8 times gross, by 2007, maybe that’s unrealistic.
We are cash fat right now, but I fear currency inflation is just around the corner. We are very comfortable in a new house in a rural area that is roughly 6% over priced, and the region’s economy is expanding slowly but steadily, so we aren’t going to lose on the house. However, I’d like to see our cash pile move lock step with the anticipated inflation without being tied up long term. Any ideas? Thanks!
swz, mf,sgf,igd
try these
Robert Prechter argues deflation
From his book:
Conquer the Crash: You Can Survive and Prosper in a Deflationary Depression, Expanded and Updated Edition.
Can buy right now on Amazon used for about $7.
I think it should be mandatory reading for everyone
who cares about their finances. Some of his notions
are very unpopular right now, but he lays out some
very well researched arguments.
Just the charts are worth the price of the book.
The best 10 bucks I spent in a long time!
What would deflation do to gold bugs and peak oil zealots?
dunno, but peak oil is a geological fact, not an ideology.
And demand destruction can’t have much effect when North American business and city planning are predicated on cheap oil.
I wrote hastily & erroneously above. To clarify:
Oil reserves are finite. The first half of oil to be extracted from reserves is comparatively easily and cheaply refined, the latter half is not. Ergo, oil will become increasingly more expensive. The only point of debate is when.
North American cities were planned with cheap oil in mind. As prices increase, people are forced to pay higher prices because they still need to commute for everything - work, shopping, leisure, etc. Some demand is discretionary; however, much is not. Significant demand destruction will therefore not take place until oil/gas are prohibitively expensive. Of course, when it does happen, the economic fallout will be severe.
It won’t be ‘Mad Max’ time, so you’re right to disparage the Peak Oil lunatic fringe which publishes too easily on the internet. But it won’t be business as usual, either.
I just finished Prechter’s book.
I didn’t realize it was going to be technical analaysis. I’m still not sure I buy into technical analysis.
Overall, an interesting book I guess… the first half more than the second…
I’ve heard so much about the book I guess I was expecting a little more than “look, there’s 5 waves here and 5 waves there, and this wave means this and this wave means that… unless it doesn’t”
You could squash it all down to:
“buy gold”
clouseau
Oh, you better get with the program dude. TA is the road map for those who don’t have the insider info.
Betamax,
I don’t know what you mean when you say “peak oil is a geological fact, not an ideology.” Is that something like saying “peak whale oil is a biological fact, not an ideology?”
Yes we are facing a current shortage of oil on world markets, especially against a backdrop of large developing countries (China/India) adopting the oil consumption habit, political unrest in oil production zones and stupid govt policies like substituting ethanol for oil (guess how much oil it takes to grow an acre of corn). That said, every other time in the past 100+ years since the dawn of the oil age that it looked like we were about to run out, market response (on both the supply and demand side) eventually led to a price crash. But maybe this time we are truly running out of oil (not just under that illusion again), and the resulting price squeeze will turn all the peak oil true-believers into millionaires…
GetStucco-
How many gallons I had some prime farm land I was getting ready to turn into a corn field and find the nearest co-op for the coming E85 craze.
Your saying it’s stupid why?? Damn I love this blog you may just keep me from stepping on myself
Again. Y.O.U.R. spells “your” - get it?
Don’t go blaming YOUR high school teachers. They NEVER told you to write it that way.
I sitll vote for a discussion on what will happen to rental rates in a real-estate bust. Will rents go up as more people decide to rent rather than buy, or will they go down as the number of vacant homes balloons and investors resort to renting to get some sort of return?
It is really a no-brainer. A record number of vacant homes in the USA (still increasing due to the final death throes of the HB construction bubble blowout) will put downward pressure on both rents and for-sale prices over the next 10-20 years, as the housing market adjusts to fundamental economic reality. Any short-term deviations from this trend will be mere blips. The only wildcard is whether BB will turn into Heliben…
Ahhhh, if it were only this simple we could all be rich. Rents track inflation and not housing prices? Well that depends. The CPI uses equivalent imputed rent and has thus missed counting the housing price run up as inflationary since rents have not followed. Self fullfiling prophecy? As home prices crash why should rents follow if they haven’t been following in the pst? Think musical chairs. The music stops everyone sits down. Except this time the music doesn’t ever start up again. And more people are still joining the game. And they aren’t adding any more chairs. It doesn’t matter how much the owner paid for the chair, he’s asking you to pay more and all you can see is all the other chairs taken and a bunch of people waiting for the next open seat. Household formation is going to overwhelm any glut of available units in short order. Now locally this will be a very messy process. Luxury $4000/mo rents in Orange County will crater to $2500. Feel better? Help your situation? Rents will eventually go way up even as prices come way down, there’s no contradiction in that.
“Rents will eventually go way up even as prices come way down, there’s no contradiction in that.”
For as long as I can remember and I’ve been in the business for quite sometime in my area (Los Angeles) there has been at least a 15 yr shortage in Ca. based on permits taken out for rental housing. With that being said during the last downturn there was an average of 30% drop in rents. I don’t see a significant or any increase in rents in the near or present future.
This time is different, though
I can tell you rents are way up here in LA. Simple fact is, there are jobs here, and not enough housing. Also, all these so-called investors who’ve been bidding up tear down 1920’s era 6- and 8- unit buildings for 1.3 million CANNOT rent the units out for less than the very high rents they’re asking, or they will have a serious negative cash flow situation.
I like you stucco, but you got your butt into a hornets nest with Cote on this one….
I like Robert Cote, and generally enjoy his posts, but some (like this one) are devoid of economics. If you are into that kind of thing (conjecture without reasoning), then enjoy…
Who does Cote think will be able to pay higher rents? Are we not (mostly) predicting the end of this latest, ehem, “correction” in the near future? We can’t simply project our personal situation on the broader population’s willingness or ability to pay higher rents.
I am not confident, either way, of predicting the future of the rental market; but, one thing’s certain: Cote seems awfully sure of himself.
Can’t you just imagine Robert Cote as Buzz Lightyear, with Stucco being Woody? Both seem to be nice fellas, but sometimes you notice a difference.
I have been checking my local rental listings (north Florida) for three years now and last week there was suddenly a FLOOD of new rentals (especially in new construction condos and subdivisions).
Also, a lot of Realty companies who used to focus on vacation rentals and sales are opening up their long-term rental sections (or is it departments?) again. The overall prices of these rentals are again matching 2003 prices it seems.
In my area, Carlsbad-San Diego, rents have most definitely gone up in the past two years. In summer of 2004, we had LLs and prop managers begging us to rent from them (like a 5/3, blocks from the beach for $2,100 or our current house a few miles from the beach, 4/2 for $2,000). Currently, houses like ours are being rented for $2,500+ and the market is tightening. I think that is because people who can afford $2,000 rent are bubble-sitters who have enough money to be comfortable while waiting. As more people sell and rent, the better areas will likely see increased rental demand and higher rents. The lower end may well see prices fall, as that’s were a lot of active flippers still hold plenty of empty homes which will revert to rentals.
In the long run, though, the empty houses will come onto the market and will likely depress rents, IMHO.
Basically, I think rents will rise for the short-term (already are), but fall in the long-term. IMHO.
Speaking of rents, what do people think about possible different futures of SFH rental prices versus those of apartments???
“I sitll vote for a discussion on what will happen to rental rates in a real-estate bust.”
The housing bust will drag the economy downward, wages will fall as layed off workers take anything with a paycheck, and rents will follow the economy. In other words, don’t buy that duplex as an investment unless it’s going for a song.
“The housing bust will drag the economy downward, wages will fall as layed off workers take anything with a paycheck, and rents will follow the economy”
I’d expect this to be true overall. But I’d like to juxtapose that thought with that recent FDIC report linked here just a few days ago. The report stated the population will economically “bifurcate”, that while many would grow poorer there would be a portion of the economy that actually get richer. That portion of our society will also impact rents, values too. Remember photos of the super cars the well off were buying during the 30s? Super cars and soup lines I believe the caption read.
How about discussing the declining dollar and how that affects the housing market?
David
http://bubblemeter.blogspot.com
Military industrial complex
if HIC jobs were 30+% of growth since 2001 what were the MIC jobs ?
I swear, I just heard on the morning news in Bay Area, a house for sale burned!!! LOL
Not surprising. A rising tide floats all boats, but a sinking one causes bankruptcy, arson, and various other criminal acts.
Yes, I mentioned “bankruptcy” and “criminal acts” in the same breath. No, I don’t believe we should go back to debtor’s prisons, but consider this: if you steal an item, say, a pair of $250.00 sunglasses or a leather jacket, whatever, that’s a felony, and you go to jail. On the other hand, if you live in an apartment for a couple of months at $900.00 / mo. rent (number from a hat, yes), racking up $1,800.00 in back rent, then you file for Ch. 7 bankruptcy, the debt gets discharged, becomes uncollectible and the landlord never gets paid. You’ve taken $1,800.00 in use and occupancy of the property from the landlord and you’ll never repay it, but you don’t go to jail. On the contrary, you’re given a “fresh start” to take advantage of more suckers.
Speaking of which, you can expect that as the market declines, a) rentals will soar (would be interesting to check those numbers as a leading indicator of sales or foreclosures), b) the unsophisticated or foolish (or just plain desperate) who bought to flip and now must rent the properties out to avoid total catastrophe will not be careful, will not check credit, will not check references or employment and will not have any clue what hit them when their renters bail out or file bankruptcy; and c) this will compound the situation as it is replayed again and again. All landlords, commercial and residential, should be very, very careful right now.
On the contrary, you’re given a “fresh start” to take advantage of more suckers.
Your credit record will exhibit the bankruptcy for 7 to 10 years. Only a foolish or desperate landlord (or, more likely, slumlord) would rent to someone with such a black mark. This is why we have credit reporting agencies in the first place.
I disagree with that and I’m not a slumlord nor am I foolish by any means some of my best and long term tenants have had bk’s and forclosure’s on their record.
I’ve had one for over 10 years and she has never missed a beat and at $1,750.00 per month the rent is by no means cheap it’s not market for what I can get for the unit because of rent control which agitates me but it’s not cheap. I requested an extra deposit from her when she first started renting from me to cover any extra expense that I may incur if she flakes out. But too her credit she’s always on time.
But she’s been a better tenant then some I’ve had with high fico scores.
I am copying a post made last night (and a reply) because I feel this is very important. Will possibly post again later. I couldn’t sleep last night, it was so disturbing.
_______________________________
Comment by CA renter
2006-05-05 00:27:04
If you look at graphs in the SD Union Tribune article, it appears that the housing market tanked just before/at the same time unemployment went up. Don’t know how accurate that was, but IIRC, these things happened concurrently. The poor job market DID NOT cause the housing bubble to collapse; it exacerbated it, IMHO. I believe this will happen again.
******************
Speaking of jobs…
My family and I went to a local mall (North County Fair in Escondido) tonight. There were closed stores EVERYWHERE. We go there maybe once or twice a month for dinner, and I have noticed more and more stores being closed each time over the last one or two months. I was thinking that it was just my mind seeing things selectively, bearish bias that I have…but tonight was ABSOLUTELY STUNNING! I’m not one for hyperbole, so when I say this, I mean SOMETHING IS UP!!! Talking three (or more) restaurants in the food court, and **at least** 15 to 20 stores have closed that were open just a month or two ago, from what I can tell. In one mall.
I also have noticed the same pattern (but lagging) at another outdoor mall (Carlsbad). Haven’t been there in a while, so will check back this week or so.
Guys, I don’t know if this is just a local thing, so I am sending the request out to “Ben’s army.” Please go to your local malls and see if you notice changes in foot traffic, store closures, etc. and report back here. Perhaps Ben could post this for the weekend.
If what I saw tonight is more than an isolated incident, the consummer/consumption pullback will kick the hell out of our economy. I did not expect to see things move so quickly and drastically. I have NEVER seen a mall like this, even during the depths of the last recession.
Also, heard from more than a few people in the last three weeks (in LA and SD) that traffic seems lighter. Anyone else seeing the same?
Sorry so long. I will also repost this tomorrow. My apologies in advance…
Reply to this comment
Comment by pinch a penny
2006-05-05 06:50:58
Nope, It is happening around here in SE MA as well. The two malls closest to me have multiple stores that are empty, including some pretty big spots. One of them is an outlet that had over several years worth of waiting lists to get in.
The other one had a whole bunch of small stands in the middle selling junk like cell phone covers or stuffed slippers, and they are mostly gone.
The biggest impact are in stores that provide junk clothes for teeny boppers. Remember that they are the lowest rung in the employment food chain, and are being driven out by inmigrants taking low wage jobs from them, and downsized white collar workers that need a temp job to pay bills.
See today’s jobs report: Retail lost 43,000 (I think). I’ve noticed less traffic in Phoenix. Also, a bit of anectodal evidence: my neighbor is part owner of a large mortgage company in Phoenix, and they’ve dropped from 70 to 50 MB’s since the beginning of the year. I also know guy that quit his bartending job early last year to become a MB. Bet he’s back at the bar. He did mention that a lot of ARM refi’s are starting to appear, and he’s seeing payment increases of 25% or more (e.g. $1500 to $2200 per month).
One thing to keep in mind with many of the malls in San Diego is that they are owned by the same group (Westfield.) Rents have been pushed up agressively in the past couple of years from everything I’ve heard. Many of the smaller, unique local stores have been pushed out by larger chain prestige brand stores coming in who can pay higher rents and have much deeper pockets. When even these places start folding, it’s definite that people’s spending habits are switching gears.
I haven’t seen many closures (Robinsons-May obviously) at UTC, Mission Valley Center, nor Fashon Valley in the past few months. However, I was wandering around North County Fair a couple of weeks ago and what I saw there did make me curious. I think that mall may give a better representation of where Average Joe San Diego’s spending is heading than UTC or FV. (too touristy) I’ll be keeping my eyes open there.
OT but made me wonder about declining sales:
The Gap employees have been murderously following me around while I’m shopping to tell me about their new pants or sales lately. It is really quite frightening! Then they go into these robotic corporate monologues about opening a Gap credit card if I actually do buy anything.
This is kind of tied to the current RE scene. While members here are sitting on sideline for the RE bubble to bust..what is everyone doing with their savings. Since RE is not a good investment what is everyone’s opinion about where to invest?
We have some very good financial minds on this forum so this will be an interesting and timely topic in my opinion
How about discussing the investment opportunities presented by the bursting bubble. Certainly selling HBs short and buying puts on HBs are ways to profit from the bursting bubble. How about shorting sub prime lenders? Mortgage brokers? What are the best short candidates? It seems to me that the HBs are sinking and more people realize that. Isn’t this the time to act? Which ones are the best opportunity for shorting and put buying?
Will this housing market imposion be the spark that lights the powder under this nation? Will the explosion ignite before or after the mid-term elections? Will it eventually oust Bush before his term is over?
Or how about people’s most overblown conspiracy theories linking housing to Haliburton, etc.?
Yes. That and the new bankruptcy laws. I predict they will become the central issue of the ‘08 presidential campaign. Not this Iraq BS. Nobody cares about that.
I’d throw this out to anybody on the blog who may work at mainstream media news organizations in print, television, radio, etc.
Is there a resistance on the part of the editors to suppress bubble indicators in the local market as they own property there? Or because the ad departments feel the heat from the RE brokerage advertisers when the truth gets told?
Many on the blog feel the media, particularly the local media try to positively influence home prices. But what is it actually like at the new organization? Who says what to who? How does the order come down? Are there any unwritten rules that thou shall not trash home prices?
What kinds of complaints come in from the RE brokerages to the ad sales staffs? Do they make threats? Do they carry these out?
Posted at indexcalls.com:
IRS Limits Home Down-Payment Gifts
By MICHAEL CORKERY
May 5, 2006; Page A3
The Internal Revenue Service dealt a serious blow to organizations that provide down-payment assistance to home buyers in a ruling that could curtail the ability of lower-income U.S. citizens to purchase homes.
In the past eight years or so, a number of large nonprofit organizations — including Nehemiah Corp. of America, of Sacramento, Calif., and AmeriDream Inc., of Gaithersburg, Md. — have doled out hundreds of millions of dollars of cash down-payment assistance to mostly low- and moderate-income home buyers. According to industry estimates, as many as 625,000 people were assisted by such groups with their down payments between 2000-05. The programs have been widely viewed as helping to increase the nation’s homeownership rates, which rose to 69% last year from 67% in 1999.
The programs have been contentious because, in an effort to increase sales in some cases, the money for the down-payment assistance came mainly from large home builders and individuals selling their homes
Source: Wall Street Journal
That’s going to hurt a few folks I hate to see that. The Nehemiah program particularly.
How do these charitable downpayment assistance programs work?
- Folks (e.g. HBs) who sell homes at inflated prices provide nonprofits with $ for downpayer assistance.
- Low-income, low-educated buyers take money and buy more house than they can afford; in fact, they only qualify because of the downpayment assistance, and the availability of suicide loans.
- HBs pocket a large multiple of their tax-deductible contributions to these nonprofits by selling overpriced McMansions to po’ folks.
- Po’ folks learn there is more to buying a home than coming up with a downpayment of $0, and end up walking away when they cannot keep their heads above water.
- Somebody gets left holding the bag, and I suspect it is neither the HBs nor the nonprofits who ran the downpayment assistance programs.
P.S. Downpayment assistance = adverse selection for the worst possible credit risk borrowers. In general, those who cannot afford to save up for a downpayment are not likely to be able to manage their finances well enough to buy a home. Why is it a good thing to destroy the natural screening mechanism of a downpayment requirement by giving away money to people who do not have the means or discipline to save? This is muddle-headed bleeding heart liberal policy at its worst — intended to help the needy, it instead ends up wrapping the albatross of an unaffordable home around their necks.
“According to industry estimates, as many as 625,000 people were assisted by such groups with their down payments between 2000-05.”
I would love to have data on what percent of these assisteds end up losing their homes. Don’t get me wrong — I don’t enjoy seeing families get hurt. But I think these policies are very destructive by encouraging those who cannot afford mania prices to buy at the all-time peak of housing prices. The situation becomes especially egregious when home builders are funding the programs, thereby lining their own profits with the artificial and temporary stimulus to demand.
Short answer your way off base and wrong in your assumptions.
I don’t know where the funding comes for this program. When I had it presented to me and asked that very question I got a weird why should you care look and at the point I just dropped the question.
The default rate is very low compared to people who are left to their own devices. Their underwiting guidlines are very strict and most have to go thru a screening process, budgeting and homeowner classes. A portion of these classes include putting away the amount of money for the house payments into an account for 6 mo’s. If they don’t complete the classes and can’t show the six months or have dipped into the money then they don’t qualify. They do verify bank accounts and statement balances.
It’s a very strict program and the appraisers they use for this program are beasts.
Ex: I owned a multifamily that I was selling a couple who had qualified on one of these programs. They sent a contractor out and hit me for over 10k worth of repairs. Then when the appraiser came out he cut my price by about 60k. After that I wasn’t going to sell it. Because on the open market I could have gotten my price and sold it as is. But I relented and sold because the couple were good folks and their kids were good kids and they were really disappointed when I intially said f*** that and plus I had bought it from a bank for pennies so I wasn’t really losing and I had my 1031 set.
With that being said those program are solid. I reccommend them to a lot of folks who are having trouble getting into homeownership but pride is a crazy thing.
“I don’t know where the funding comes for this program. When I had it presented to me and asked that very question I got a weird why should you care look and at the point I just dropped the question.”
Don’t ask — don’t tell.
I guess since you are involved with these programs, you have an unbiased opinion about them that is not at all “way off base and wrong in your assumptions?” Did you consider that these programs increase the ability of otherwise unqualified low-income buyers to purchase homes at mania price levels? Or is that one of my wrong assumptions?
“The default rate is very low compared to people who are left to their own devices.”
Have these programs been around long enough to say what the default rate will look like through the deflation phase of the housing market cycle? I doubt it.
GetStucco-
I’m not / nor have I ever been involved in these programs. The people who were doing the mechanics of these loans worked for the non-profit organizations. The bank who provided the underwiting and funding for the buyers of my property was Citibank. From my understanding they were 30 yr fixed rate loans priced 1 point below market ie: if the market was 6% they received 5%. There was no stated income or adjustable nonsense. They were only allowed to buy a certain amount of property between 1-5 units and they were not allowed to exceed certain price points.
Based on verified W-2 income and a couple yrs of employment. In other words unless they got up one morning and decided to never work again there was no way they defaulted on these loans.
Simply put Oprah and Bill Gates would be penniless and sharing a tent under the freeway before these people defaulted.
Stucco, I applaud you for overlooking his “YOUR” vs. “YOU’RE” problem. I just can’t bring myself to take these people seriously. Once again, folks, I’m not bagging on typos or spelling errors. This is ignorance.
The funding comes from the homebuilders.
DC Area bloggers - Maryann Haggerty’s having another real estate chat in a few minutes. Anyone want to confuse her with actual real estate questions?
http://www.washingtonpost.com/wp-dyn/content/discussion/2006/04/21/DI2006042101165.html
I submitted a response to a guy last week who said he “wins” for buying a 300K property (I’m going to assume condo) when his friend is renting for 1,200 a month, even if prices should decline 50K on said condo. He said friend was “throwing away” 57K over 4 years. I pointed out that he would be “throwing away” over 70K in Interest, Taxes, and Condo fees. She didn’t even blink when she read the original post last week - just said “have a nice day”.
That blog actuall has some pretty funny stuff…one good series of exchanges:
—-
The Lovely Penn Quarter, D.C.: My friends and I came up with the idea last year that we could make a living by buying condos, living in them for two years, selling for a big profit and repeating. The appreciation would be more than we could make by working and the profits would be tax free. What could be better, right?
So I bought my first condo in Penn Quarter at the end of last summer. Now all my friends have decided to hold off. They say that they aren’t sure real estate is “it” anymore. But I’m counting on my condo to appreciate significantly over the next two years to help me pay down some credit card debt I’ve been carrying for a while.
My condo hasn’t really gone up in value since last summer, but I’m thinking the market is just taking a healthy breather before skyrocketing again. Should I be getting worried at this point or are my friends just being chicken littles during the market’s pause in appreciation? I don’t want to own my place if its not going to increase in value soon. Help!
—-
Maryann Haggerty: You, my dear, are a real estate speculator. In a normal market, no one would expect that owning a home for just two years would provide enough appreciation to cover the cost of selling, let alone to live on. But I’m assuming that you have a very high tolerance for risk, and that’s why you decided to take this gamble. And it was a gamble, not an investment, right? You knew that?
—-
Springfield, Va.: The poster from The Lovely Penn Quarter, D.C. is the essence of the real estate problem in this area and across the country — people who want to magically make loads of money without working for it.
Is it wrong to grin at the delicious irony that he/she is now suffering from the same condition that he/she has pushed upon the rest of us?
Nothing like a little schadenfreude to end the week.
—-
Maryann Haggerty: It was so perfect that I have a hard time believing it could be real, but…
—-
The Lovely Penn Quarter, D.C.: Its me again. In response to the other poster, I certainly didn’t think I was gambling or speculating when I bought my condo last year. Just the opposite in fact. All my friends were telling me that if I didn’t buy I’d risk being priced out forever.
Why do people think this is funny? When I told one of my co-workers about my reasons for buying, she said I shouldn’t be worried about being priced out forever but that I should be worried about being “priced in” forever. What the heck does that mean?
—-
Maryann Haggerty: Penn Quarter speaks…
By “priced in” she probably means “stuck if it turns out you bought at the top of the market.”
http://tinyurl.com/jo3yr
This may not contend with the island of rocks or the 1mil crack house in Pahrump, NV for the ridiculous house of the year award, but where I live in North San Diego County, this is our version. Check out the lush backyard and “chef’s kitchen” with ajacent “cozy breakfast nook”; all for a mere half mil. Oh and the “third bedroom” isn’t permited but I think the small child and wheelbarrow in the pictures come with the house. This listing makes me want to call Child Protective Services for some reason…
Rainman, you are fricken hlarious…..
Rainman,
That is bad, except that it IS in Encinitas, and that particular area isn’t good, but it’s not the worst. Amazingly, there are homes in bad areas in Oceanside and Vista that look even worse…and are priced higher…and people are actually buying them.
Help! We’ve lost our sanity!
Rainman - Just out of curiosity are you EJ?
A theory is entertained on this blog from time-to-time that the Plunge Protection Team is intervening to support sagging HB stock prices, Fannie Mae, etc. Next comes the backlash of naysayers who claim that stock price movements against common sense (e.g., Toll Bros orders decline by 29% and the share price goes up by 2%) are due to some combination of:
- short covering
- corporate share buyouts
- “sell on the rumor, buy on the news”
- bulls buying the dips
- hedge funds and other big Wall Street players goosing the prices in
order to tempt sheep to buy
- other?
So my question is very simple:
Is there any data (or any govt types who know of such data) which might be used to test the hypothesis that the govt intervenes to support stock prices in the housing sector?
(Please refrain from offering opinion unsupported by data; we have already wasted too much blog space on unfounded opinion.)
A couple of more alternative hypotheses to think about to contrast with the PPT theory:
1) HB stocks are part of institutional & hedge fund portfolios, many of which use automatic strategies to try to milk as much dough as possible out of the market. The collective action of these automatons results in a very high level of correlation across all stocks. So on a day like today, when the broad market is rallying, HBs get swept right along, no matter how bad the news.
2) The markets are developing a conviction that BB will turn out to be an inflationist (he said he would pause, right?), which would be bullish for the nominal price of real assets (the $ price of companies, housing, or commodities), much to the detriment of paper assets ($US denominated currency, bonds, or other debt instruments).
Pinch a Penny said:”Guys, I don’t know if this is just a local thing, so I am sending the request out to “Ben’s army.” Please go to your local malls and see if you notice changes in foot traffic, store closures, etc. and report back here. Perhaps Ben could post this for the weekend”.
I am glad you posted this observation P.P. Last Sunday I went to a very nice mall here in Reno called Meadowwood. I was there at noontime and it was absolutely dead! Even the Starbucks stand which always has a long line at any given time, day or night, no one waiting, you could just walk up! This is unimagineable. The mall was pretty much empty-hardly any foot traffic at all. I thought it was rather odd, but because the weather was so beautiful I assumed everyone was doing the outdoor thing. Also, in the local paper there are now 21 collector cars for sale, in the past, you would be luckly to find maybe 5 listed at a time. Also noticed a couple more homes for sale, and a “reduction” in my neighborhood by a flipper who bought it in January, who wants a quick 100 grand. The tide is starting to turn, all the signs are there. Interest rates are going up another 1/4% on May 10th. Must be scary for a lot of people right now.
An observation made by a reader of this blog
about a year ago was to monitor your local
neighborhoods garage sales to gage move in /
move out activity.
I have always liked this indicator becuase it
is easy to monitor and pretty near ‘real time’.
Nowadays, it might also indicate a need to
raise immediate cash to pay for a mortage
or gasoline.
I also would like to suggest that another indicator
would be to monitor the number and activity
of paycheck advance outlets. I saw one recently
in San Clemente, Ca. which really surprised
me because San Clemente is supposed to
be a ‘wealthy’ area.
have seen quite a few upscale cars, and also boats, for sale in my area (central Ohio). Passed an older Porsche 911 on the way to the park the other day, parked by the road with a tacky homemade FOR SALE sign on it.
I have always thought that the situation is getting
really ‘iffy’ when I finally see a FOR SALE sign inside
a hummer in the Ralphs (Grocery) parking lot.
I live in Irvine, Ca. (Orange County) and of course
the parking lots are filled with hummers, Beemer’s, etc.
Have we finally passed the denial stage in the unwinding of this bubble?
Alas, not. A very good friend of mine just informed me she bought a condo in Lafayette,CA on Sunday! I was so shocked, I couldnt say much. Hasnt even listed her home yet. Plans on getting a bridge loan or equity loan to buy this condo. I know this will not turn out good for her, but what can I do? Whats worse, is she cant transfer her prop 13 tax base, and now she will have HOA dues. She has a grown daughter who owns her own business that actually took her “looking” for places - obviously she isnt as smart as I had thought. Oh well, I will just keep my mouth shut from now on.
And no, sheeple are still buying homes- God only knows why.
We moved to RI 6 years ago. Then I lost my job in 02, we started looking for house but couldn’t didn’t find anything good at our price range, so fast forward to 06, price is so high now, my husband’s salary is up a little. we now really need a place for out growing family. The only good thing is market is finally softening and my husband’s job is secured.
That is good for you, I also lost my job in 02, and it is untill now that I am getting back on my feet. Of course the last thing on my mind for about 2 years was getting a house. More important was getting food!. When I started looking I was surprised at the amount that housing had gone up since I had last looked. Houses that were 100K in 200, now are above 300K. Nice houses start in the mid 400 K range. Absolute Insanity!. Now I am seeing a whole bunch of houses for sale for long periods of time. Some even drop their prices!. Condos that were hiped to no tomorrow have all their windows dark on saturday night at around 8:00 pm. I do not believe the hipe, and I believe that those houses that where 100K in 2000 are going to be 90K in 2008, but that is just me…. It has happened before around here.
We have a friend who bought a house in 00 at 340K, now it’s around 580K. market is at standstill, but not going down yet, I really can’t wait another 2 years in our 800 sq ft apartment. Will try lowball several properties and see what happens.
Ben - I’m curious… Do you get hate mail? If so, have you noticed any increases lately?
Yeah, I would like a best hits of hatemail that Ben/Rich Toscano, etc. receive.
Kind of like what John T. Reed has on the Kiyosaki page of his website.
I second (or third) that!
I still find way too many contributors here to be overly optimistic about the future. Consequently, I’m going to start accumulating all the scary statistics I’ve read these past few years in order to better illustrate why I’m so bearish. In that vein, here’s my suggestion for a weekend topic:
JUST THE FACTS! NAME YOUR FAVORITE BUBBLE STATISTIC.
Current account deficit.
Hoz,
Yes, that’s one, but I’m hoping people will supply the actual numbers, too.
There’s rather good article in the NY Times today about waht drives California RE prices. It talks about reasons wht California is indeed different, such as Proposition 13.
That said, I recommend a question called “Is it different in California”?
Here’s the link to the article: http://www.nytimes.com/2006/05/07/realestate/07california.html?_r=1&oref=slogin
It is and it isn’t. It is, in the fact that prices are generally higher overall. It isn’t, in the fact that what goes up still comes down, the early 90’s being the prime example.