The Housing Bubble Is ‘Pretty Intense’
As usual, the news on a Friday can get overwhelming. So let’s clean-off the desk. First, you guys are burning up the bandwidth and I had to up the ante again this morning. As some have offered to help with the hosting fees and other additions to this blog, we put up a Paypal icon in the sidebar.
“The real estate investment trust AmeriVest Properties Inc. has approved a plan to liquidate the company. Charles Knight, president and CEO, said the company’s board of directors believes the plan will ‘maximize stockholder value,’ and that the decision came after a ‘long and thoughtful process’ by the board.”
“The $14 billion in new 30-year bonds auctioned on Thursday are now yielding 4.55 percent; about 14 basis points lower than what two-year notes are yielding. A flat or inverted yield curve also squeezes banks’ profits and makes them less willing to lend, dampening growth. ‘There had been concerns about what the inverted curve means. It was getting attention before, now it’s getting even more,’ said Mary Ann Hurley.”
This Washington, DC area site reports a 100% increase in Montgomery County inventory and a 26% decrease in sales.
“The median price of an existing single-family home in Denver last month edged up 4.2 percent over January last year to $245,000 but was flat compared with December, continuing to signal a shift to a buyers’ market. Dave Miley said he has noticed a number of home sales brochures advertising that contracts are subject to the acceptance of a ’short payoff’ from the lender. That’s a sale where a lender allows the property securing a mortgage to be sold for less than the existing loan balance.”
“For example, if the mortgage on a $300,000 home is $290,000, the expense of selling it would surpass the home’s value. ‘The commission itself would be something like $15,000,’ Miley said. “Sometimes, the lenders will cooperate and accept less than their $290,000 balance. If they can do it for $285,000, it’s easier than foreclosing.’”
“The median price of a single-family home dropped by $2,500 in January from the previous month, the Greater Las Vegas Association of Realtors reported. Home sales dropped to 1,778 in January, down 27 percent from December and 10.4 percent from a year ago. The number of homes available for sale on the MLS grew 23.3 percent to 16,493.”
“Linda Rheinberger, president of the GLVAR said David Lereah, chief economist for the NAR, told her to look for an investment property for him in Las Vegas.”
From California. “Palomar Builders pulled 66 single-family home permits in January, a one-month record for Palomar and three-quarters of the total the city’s permit center issued. But while Palomar Builders is busy building homes, it’s also working harder at encouraging consumers to buy into a cooling housing market.”
“Consumers are promised guaranteed interest rates with low loan fees if they buy a home in Autumn Glen, where prices start around $350,000. Jeb Allen, owner of Palomar Builders, said the incentives are a preferred strategy over cutting prices. ‘We’re not going to get stuck in a big price reduction,’ Allen said.”
“‘If you go to Sacramento and some other areas of the state, you have seen a real noticeable drop-off’ in real estate, (inspector Bill) Nagel said. ‘Typically, what happens in the Bay Area is followed in Redding a couple of years later and what happens in Sacramento, happens in Redding a year or so later.’”
“The percentage of Inland Empire households able to afford a home slipped from November to December. In December 2005, that number had dropped to 17 percent. However, much of the housing boom that made affordability so tough for Californians may be ebbing, said Jack Kyser. ‘The frenzy has definitely gone out of the market. The situation is still pretty intense,’ Kyser said. ‘The market has definitely peaked. Homes are remaining on the market longer.’”
“‘We’re hearing more new home buyers saying they’re going to wait,’ (realtor) Jeanette Young in Chino said, adding that a market cool-down might be good for homebuyers to get more value for their home. ‘It’s not as gratifying now when you sell someone a home you think isn’t worth it,’ Young said. “
Another great week! A special thanks to David at Agent Pixel and to all of those who donate to keep this blog alive. If anyone has questions about sizeable donations, email me at:
thehousingbubble@gmail.com
Check back this weekend for news, market observations and your topics!
This should be a valuable tracking site. Anybody use it?
http://www.zillow.com/howto/HowTo.z
Zillow will only add confusion to the heard. Zillow will have a 3-6 month delay. Refi’s, HELOC’s, and home sellers will put more confidence in a machine calculation of value over a licensed appraisers value, surely to be lower than zillows in this climate. Banks and lenders will only use the licensed value, leaving even more people angry at the establishment and in disbelief and shock why their home sits on the market forever while it loses value.
Zillow will falsely lead people to trust in a machines value, vs. a true market value (what is someone willing to pay)
I did some Zillow checks in some neighborhoods I’m familar with, and it shows prices are rolling over in manner we might except.
It may be valuable in the future, right now it’s not very good. They have my purchase price off by a factor of X10, and my “current” value is off by ~+20%. That’s not trivial. What’s even more funny is that for all that overvaluation my house is listed at 1/2 the actual size (must be one heck of a lot premium). Meanwhile “larger” houses next door are valued way less.
Also, my county has in the price history for houses the price of the entire subdivision acerage. So you’ll see a 5 million price, a 9 million price and then a 350k price - with the 350k being the first time the property sold with a house on it (but on a tiny little lot). I’d guess there are a lot of quirks they are going to have to iron out.
In a similar vein we were looking at houses in a 350k-450k subdivision and one house had a valuation of 100k. The county had left off a zero on the improvements (house) value, so it was the lot value plus a little bit for the house - obvious to a human it’s a typo, but maybe not to a robot.
Zillow seems to be pretty accurate in my zip codes (93401, 93405), at least for the properties I know something about. Clearly, because the “zestimates” are based on area trends, they will tend to lag in a rapidly changing market.
Most of the information I’ve seen on Zillow seems to be reasonable but it definitely still has some significant bugs (as you would expect with beta version software). It shows my current house as being worth 100K less than what the same model across the street (on a much smaller lot) sold for about a month ago. I was playing around with the data for my house and found that by specifying the number of stories as 2 (it’s not specified in the original data) the estimated value increased by almost 100K.
I noticed the same problems: several houses in a subdivision, each listed at the price of the land for the entire area, plus one house with an extra “1″ in front of it ($1.2mil instead of 200K), and valuations way off! The only useful part is you can see the last recorded sale price.
How do you know your “current” value until you’ve sold it?
For a stable market, recent comps provide a useful guide. If inventory has gone up by a factor of three since last July (a la Phoenix), then all you know is that the recent comp price is higher than you will be able to sell for, especially if nothing is selling because of a standoff between buyers and sellers.
Oh Dear God, Please Hear This Prayer:
“God, please let David Lareah buy an investment property in Las Vegas. Please, please, please. Let him buy one soon, so all of the good people on Ben’s Blog can have free entertainment all year long, watching the value of his house drop 50%. Please God, this would be the ultimate lesson teacher, and we really need some prime entertainment right now. After all, none of us are attending open houses- what’s the point until October- and looking at the same stale houses pile up on top of each other like dead animal carcasses can get to smelling revolting.”
“Plear Dear God, let David Lareah buy a second, third, fourth and fifth home in Las Vegas.”
“I promise I’ll never say a bad word about him again if you let this happen.”
“I also promise to be very good, and help charities around the world in the fight against hunger and AIDS.”
“Wait a minute. Maybe that’s a bit over the top.”
“I’ll just promise to be good.”
“Please Dear God: Please let David Lareah buy a house in Las Vegas.”
:LOL:!
You crack me up, AuctionHeaven!
He thinks his loss on that property is a small price to pay to keep his gig going. He’s saying to the world, “Look, I am buying investment property. I am the chief economist for all the realtors, and since I am buying investment homes, it must be a good idea, and you all should do it too.”
“Please Dear God: Please let David Lareah buy a house in Las Vegas.”
Lareah not that dumb!
“Oops. I think I spelled his name wrong.”
“Rhymes with dia…”
“dia…Lereah.”
“Of the mouth?”
“Sorry God. Just couldn’t help maself.”
“I’ll send a check to Angelina and Brad now for adopting all them kids.”
“Or- maybe I’ll go get a fat, succulent Steakhouse Beef Dip sub at Quiznos, with my ‘buy one get one free coupon’”.
“Thinkin’ the sub’s gonna win, God. Sorry.”
“Please let David DiaLereah buy a house in Las Vegas, God?”
“Gotta go now, I’m freakin’ hungry.”
“Amen.”
Southern California forclosure stats
ALL Counties (2474) * dated 8/1/05
orange county (745)
northwest riverside (628)
southwest riverside (160)
east riverside (287)
san bernardino border (116)
san diego border (90)
los angeles border (448)
8/12/2005
orange county (798)
northwest riverside (680)
southwest riverside (178)
east riverside (319)
san bernardino border (116)
san diego border (97)
los angeles border (482)
ALL Counties (2704) 9/12/05
orange county (724)
northwest riverside (779)
southwest riverside (190)
east riverside (338)
san bernardino border (129)
san diego border (82)
los angeles border (462)
ALL Counties (2704) * 9/19/05
orange county (724)
northwest riverside (779)
southwest riverside (190)
east riverside (338)
san bernardino border (129)
san diego border (82)
los angeles border (462)
ALL Counties (2905) * 10/10/05
orange county (760)
northwest riverside (838)
southwest riverside (233)
east riverside (372)
san bernardino border (140)
san diego border (84)
los angeles border (478)
ALL Counties (2732) * 10/20
orange county (705)
northwest riverside (805)
southwest riverside (240)
east riverside (351)
san bernardino border (139)
san diego border (80)
los angeles border (412)
ALL Counties (2962) * 11/1
orange county (750)
northwest riverside (878)
southwest riverside (260)
east riverside (387)
san bernardino border (154)
san diego border (82)
los angeles border (451)
ALL Counties (3101) * 11/11
orange county (783)
northwest riverside (919)
southwest riverside (263)
east riverside (414)
san bernardino border (157)
san diego border (83)
los angeles border (482)
ALL Counties (2990) * 11/18
orange county (764)
northwest riverside (884)
southwest riverside (251)
east riverside (390)
san bernardino border (151)
san diego border (85)
los angeles border (465)
ALL Counties (2885) * 11/30
orange county (750)
northwest riverside (841)
southwest riverside (240)
east riverside (372)
san bernardino border (151)
san diego border (85)
los angeles border (446)
ALL Counties (2914) * 12/15
orange county (794)
northwest riverside (813)
southwest riverside (248)
east riverside (366)
san bernardino border (147)
san diego border (94)
los angeles border (452)
ALL Counties (2917) * 12/30
orange county (824)
northwest riverside (795)
southwest riverside (238)
east riverside (361)
san bernardino border (141)
san diego border (91)
los angeles border (467)
ALL Counties (3087) * 1/11/06
orange county (882)
northwest riverside (849)
southwest riverside (234)
east riverside (351)
san bernardino border (163)
san diego border (96)
los angeles border (512)
ALL Counties (3100) * 1/20/06
orange county (879)
northwest riverside (853)
southwest riverside (229)
east riverside (360)
san bernardino border (159)
san diego border (96)
los angeles border (524)
ALL Counties (2950) * 1/30/06
orange county (821)
northwest riverside (804)
southwest riverside (218)
east riverside (353)
san bernardino border (154)
san diego border (90)
los angeles border (510)
ALL Counties (3278) * 2/10/06
orange county (910)
northwest riverside (877)
southwest riverside (243)
east riverside (364)
san bernardino border (176)
san diego border (110)
los angeles border (598)
This is the highest yet
hey melody, it looks like it’s creeping up.
I Like this donation feature. Just made a small $ donation….the rest I am keeping for downpayment
Just kidding. Thank you Ben.
Err, David, whats the delay. There are +16,000 properties for sale right now. Now remember, you told us there is no bubble and it’s always a good time to buy so have your agent throw a dart at the listings and get that contract drawn up ! Now since you inferred you were going to buy and were quoted on it we’ll all be watching your actions carefully.
Frankly I doubt the weasle ever buys an “investment” property but it sure would be nice to see him squirm if reporters started asking him when he is closing on his Las Vegas property.
He probably said, “Hey, Linda, when the bottom falls out of the LV market, look for an investment property for me in Las Vegas. I know that my talk will keep it up for a little while, but there will be some great values in a few years.”
I love that last quote, ‘It’s not as gratifying now when you sell someone a home you think isn’t worth it,’ Young said.
I guess it used to be more gratifying, especially when the commission was higher…
Good job Ben,
I will send you some rehabilitation funds.
Be cautious on what you all wish for! This could get bad and it will effect us all.
‘It’s not as gratifying now when you sell someone a home you think isn’t worth it,’ Young said.
Is that maybe because they know that it’s not worth it……Before you could just fool them.
Like the donation feature…just made a small $donation. Thank you Ben.
(did not see my last post, this can be a double posting…)
This article is from one of my favorite writers- Mogambo. He can go on and on. This is his take on housing.
“The housing market is, of course, not rising any longer, as we gather from reading the Whiskey & Gunpowder newsletter. They write “Many economic experts are predicting that mortgage delinquencies will rise up to 15% in 2006 among homeowners with higher-cost or ’subprime’ loans. About 19% of all U.S. home loans are now subprime, in contrast to just 5% 10 years ago.”
As if to prove the W&G newsletter correct, The Star Telegram newspaper reports that “Home foreclosures continue to climb. The number of homes slated for foreclosure continues to rise in Tarrant County, with 1,101 headed to auction next month. That is a 17-year high, according to Foreclosure Listing Service. That total is up 27.6 percent from a year ago. ”
Then we go to Dallas, where we read, in the Dallas News, about a “Housing Divide”, meaning that smaller mortgages are falling into foreclosures, even as sales of high-end houses continue to “climb.” All in all, they conclude; “In a healthy local housing market, a sign of trouble has appeared: More people are losing their homes to foreclosure than at any time since the Texas real estate bust of the 1980s. Residential foreclosures jumped 30 percent from a year ago in North Texas.”
As Dallas is in Texas, and Texas is where George Bush comes from, I am feeling scared and paranoid, and hastily beat it over to NewsZap, which is reporting a six-fold increase in sheriff’s sales in Delaware. They report “When Kent County Sheriff James A. Higdon took office 11 years ago, the usual number of sheriff sales was five or six a month. And now it’s not unusual to have over 30.”
The mere mention of a sheriff being involved has me moving again, this time across the damned ocean. But things are no better there, according to a story on the BBC about the Department of Trade and Industry (DTI) reporting that “Nearly 70,000 people became insolvent in 2005, the highest since records began.”
There were also “a record 20,461 insolvencies in England & Wales during the final quarter of 2005, a 57% annual rise.” Fifty-seven percent! More than half again!
In the UK housing market, the BBC reports “The figures show the total number of homeowners being taken to court during the final three months of 2005 by lenders pursuing mortgage debt rose 50% year on year to 31,018.” Again that 50% thing! I’m getting scared here, too!
They also said “The number of companies going bust is also on the rise. In the third quarter of this year 3,187 firms in England & Wales went into liquidation”, which “was 8.5% more than during the same period last year.” My God! This is terrible news! Not only are people losing their houses, but their jobs, too!
I am standing there holding my head in my hands, moaning at the horror of it all, when up walks Ned Schmidt of The Value View Gold Report, who increases my pain by saying “The real estate bubble around the world is starting to show some serious signs of strain. First from Shanghai, the epicenter of the Chinese economic miracle and now the home of the upside-down mortgage, once one of the hottest markets in the world, sales of homes have virtually halted in some areas of Shanghai, prompting developers to slash prices and real estate brokerages to shutter thousands of offices.”
Horrified, I jump on an airplane and fly to Las Vegas, thinking that having scads of scantily-clad beautiful women parading around might take my mind off of this incipient housing collapse. But before I can borrow some money to make, you know, an obscene proposition to any of them and really get into this delicious yet salacious Mogambo distraction technique (DYSMDT), I hear Lisa M report that she heard that in Las Vegas “58% of the investor-owned condos on the market are empty, and 45% of the houses on the market are also empty.”
“For the first time,” she writes “homeowners here are learning what it means to have an upside-down mortgage - when the value of a home falls below the amount of debt on the property.”
For those that think that a housing market collapse signals deflation and lower prices, think again, as we quote Gary North, of Reality Check newsletter, who writes about Japan’s recession, which they have suffered since 1992. The popular theory is that the Japanese suffered a deflation because “Real estate collapsed; the stock market collapsed”, which means, of course, that prices of those things went down. The interesting part is when he continues “but consumer prices remained flat. We hear about the great Japanese deflation. There was none.”
The one thing that doesn’t make sense to me in the above is the last part about, if I read it right, in Japan the market went flat but that prices didn’t fall.
This may be true, but if, as we suspect, a large number of people bought over their real ability to afford the payment in the long run, hoping prices would escalate and they would make a big profit, I don’t see how prices can remain flat in the US. It would indicate that people would walk away from unaffordable mortgages and turn around and get into another unaffordable mortgage.
I guess we will see.
Ben,
Get verified brother! I only use a secured credit card on paypal. No direct bank links. Not because of PayPal but because Bank of SCarica tried to rip me off. Padding their bottom line I suppose.
Harry P.
Ben,
If you can, would you please post the following link up.
It’s a compilation of articles that appeared in the New York Times during the collapse of the 1980s real estate bubble in the New York Metro area. The compilation took me about 7 hours this afternoon. Once I was done with the compilation, I read through it start to finish, chills went down my spine.
It’s no different this time, it’s worse.
Home Prices Do Collapse
Grim
Excellent job, Grim. It’s hard to read, as we were young, newly married, and yes, fell for the “buy now, you won’t be able afford a home if you wait” mantra in MAY 1990. Neither one of us remembers reading anything about a housing bubble at that time. Obviously there was. But, hey, we learned, and we didn’t fall for it again! Thanks for all your hard work!
Anyone remember the film Wall Street? Set right around the top of the 80s bubble. Charlie Sheen’s character buys an apartment, but when his career is headed south, goes back to the broker that sold it to him to put it on the market. That same broker earlier in the movie was hyping the market, and when he goes to sell, she tells of how the market is dead, heading south.
I always thought this movie did a good job of capturing both the stock market and real estate mania of the 80s…
OT- Anyone know if there is a graph that compares money supply with house prices?
grim: link no worky
http://nnjbubble.blogspot.com/2006/02/home-prices-do-fall-look-at-collapse.html
A $1-Billion Public Land Sale Proposed
From the LA Times. Maybe the gov’t. knows the bubble is bursting and it’s time to sell? Ha ha.
http://tinyurl.com/8g59h
Ben:
Your web server doesn’t seem to support gzip compression, which the Blogspot servers do support. It would cut your HTML traffic by about 60% to 70% if you had it enabled. Here is some background on it, but the hosting company should be able to take care of it however they do.
http://www.mozilla.org/projects/apache/gzip/
Zillow is the biggest joke, at least for utah. It says the townhouse I rent is worth $623k. They go for $130k-150k. It shows SFHs in my neighborhood for $750k-1mil that go for 175-225k.
here’s the latest on the inverted curve now from BONDTALK
U.S. Treasury Bonds
Maturity Yield Yesterday Last Week Last Month Price Yield Chg Price Chg
3 Month 4.33 4.31 4.26 4.10 98.964 0.02 0.006
6 Month 4.48 4.44 4.41 4.23 97.795 0.03 -.005
2 Year 4.67 4.64 4.56 4.41 99.450 0.04 -.086
5 Year 4.58 4.53 4.47 4.38 98.551 0.05 -.242
10 Year 4.58 4.54 4.51 4.44 99.333 0.06 -.515
30 Year 4.55 4.64 4.62 4.62 99.161 0.07 -1.187
http://www.bondtalk.com/global.cfm?S=charts&SS=treasury_yield_curve
Zillow is the biggest joke…..
Zillow says the house I live in is worth $7k. Give or take $200k it’s right on. Can you trust something like this?
with all the talk of zillow for dc it does not work well.
the data is old tax records and it hard to read in multi-unit structures.
(This Washington, DC area site reports a 100% increase in Montgomery County inventory and a 26% decrease in sales.)
and so it begins.
saw a commentator tonight on Nightly Business Report (on PBS) who said that investors should keep 75% of their money in cash until the end of the year. he said he will be looking to move into bonds after the carnage. pretty dire prediction for such a mainstream show
Anyone know the trick to using a visa on the Bens paypal account?
I’ve tried a visa cc and debit card w/ varying amounts and I still get the message that I cannot use this card for the transaction (something like that)
• I don’t have a paypal account and don’t want one.
• I did pay my cc bill.
• And yes, I have been drinking so please be kind
Moqui,
I won’t have this account verified for those transactions for 2-3 days. Please try back. Thanks!
Inventory is growing in DC for condos, coops and single family houses.
Here is the link:
Inventory of condos, coops and single family houses is growing in dc.
here are the stats:
2006-02-10 20:19:08
Inventory of condos, coops and single family houses is growing in dc.
here are the stats: http://dcbubble.blogspot.com/2006/02/proof-positive-that-housing-inventory.html
I think we should start a campaign where we each call our local, most obnoxious realtor, pretending to be David Lereah looking for an investment property.
Just made a small donation this evening. Just want to thank you for a great site. You have made a GIANT contribution to this market.
OT:
Housing Bubble penetration alert!
Surfer Magazine has an article about how a waiter/airline steward bought a Carlsbad, CA condo back in 2001. He was struggling with the mortgage payment, realized he had 200K in equity.
Cashed out, bought a cruising sailboat and is cruising the world looking for surf right now.
Good for him!
For a select few a bubble can be a boon but you have got to be OK in taking someone else’s “lunch money”. After all in a bubble environment it is a zero sum game.
NY Times:
Buying a home is an act of feminism for sigle women. Single men do not buy homes because they are afraid of commitment. More goofy left-wing politics applied to the real estate bubble.
http://www.nytimes.com/2006/02/12/realestate/12cov.html
That’s nothing new. We women used to be fed this crap years ago. The real estate whores are looking for any niche, any small group of people they haven’t already shoehorned into this ridiculous market and they appear to use any psychological tactic they can think of. This one is very lame, along the lines of how renting is throwing money away. LOL
Agree txchic! These are just desperate RE wolves in left-wing clothing. A couple months back, while the market was flattening, the Times did a bizaare piece blaming buyers for being too timid to purchase (panned very nicely on this blog thank you), and the Times’s latest spewing is just a subtle attempt to guilt men and pander women into buying.
So they betray both sexes and journalistic ethics in an effort to push people into a down market. Heckuva job, Times.
The problem is, for most areas as it stands now, a single woman with an average salary (by that I mean using the average salary in any given area) CAN’T AFFORD A HOUSE ON A SINGLE PERSON’S INCLOME!!
What crap.
Single-woman in the DC Metro area, novasold