Weakest April Sales In Six Years For Greater Phoenix
The Arizona numbers for April are out. “The Valley housing market slowed in April, registering the lowest sales total for that month in six years, the Arizona Real Estate Center announced Thursday. The resale market slowed last month to 5,980 sales, a decrease from the 7,264 sales for March 2006 and well below last April’s 8,735 sales.”
“The report found that April 2006 was the weakest April since 2000, when only 4,870 resales were recorded. So far in 2006, there have been 23,960 recorded sales, while the 2005 year-to-date total stood at 36,060 sales at this point in 2005.”
“Jay Butler, director of center, said the Valley resale market is returning to a more normal pace, following several years of unprecedented growth. ‘And some slowing is good for the market, except for individuals trying to sell their homes right now, they would not agree,’ said Butler.”
“As for resale home prices, the median home price jumped from $194,000 in January 2005 to $260,000 in December 2005. However, since the record of $263,000 was set in September, the growth rate had been disappearing.”
“In Phoenix, resales fell from 2,490 sales to 1,890 sales. The Scottsdale resale home market declined from 695 to 460 recorded sales. The Mesa resale housing market declined from 1,070 to 660 sales. Chandler’s resale market slowed from 595 to 405 recorded sales.”
“When purchasing a home for investment or occupancy, the rapid growth in price that has been so evident in the last year is somewhat soothing to the uncertainty of the buying decision, according to Butler.”
“‘However, if home prices continue to be stable or even decline in some areas, potential buyers may be increasingly reluctant to make the purchasing decision, because future appreciation is much more uncertain,’ said Butler. ‘Further, current owners, especially investors, may want to bring homes to a good market, in order to lock any current appreciation.’”
From the Tucson realtors. “In a Real Estate market that is in the middle of a correction, it’s interesting to note that the unique nature of Tucson real estate does not follow the average up and down cycle seen in many other communities. People chose to live in Tucson because they want to. Tucson real estate retains value,’ said Paul Olson, 2006 TAR President.”
“New listings continue to appear, however this is simply giving the buyer more choice in the marketplace. Our market remains healthy,’ Olson said.”
“Pending Contracts Decreased 15.62% from 2,285 in April, 2005, to 1,928 in April, 2006. Active Listings: Increased 123.38% from 3,640 in April, 2005, to 8,131 in April, 2006.”
“New Listings: Increased 36.42% from the 2,120 listings added in April, 2005, to the 2,892 listings added during April, 2006.”
This is a repost from earlier today. It fits very well under this story.
Actual ad from Craigslist….
I’ve got 9homes in foreclosure, offering them all for a steal….
Reply to: hous-158541949@craigslist.org
Date: 2006-05-07, 7:27PM MST
***update: have had literally hundreds of respones today (all sorts) but nobody with cash money yet, so I will post again**
ok here’s the deal:
I am a real estate investor and I have 9 properties that are in foreclosure right now. The auction date for all is June 6 or 9th. there are 1st and 2nds position lenders on all of them. both lenders are somewhat flexible. the 2nd appears to have no interest in curing the 1st lein default. they are both mainly trying to capture their principle investment back, not too concerned about the interest that has accrued or legal fees. I am growing tired of the literally 100s of letters, cards, emails, and phone calls, voicemails with people that “think they can solve my problems” and “want to help” or “just want a meeting” or “want to list my house with them”. I am a Realtor, and a creative investor myself. I am in this situation due to partnership issues/problems, not because Im an idiot or because I didnt know what I was doing. Frankly Im just looking to pick up a few bucks here to move on to to the next project with, and get on with my life. simply put, time is very, very short. at this point I would like to give one person, an investor that can actually follow thru, QUITCLAIM DEEDS to all of these properties along with addresses and lender phone numbers and they can have a blast with it. all properties to one person, maybe all of these work out for them, maybe only a few do. I am sure they can profit to the tune of 30-50,000 on at least one of these, let alone make something on all of the rest of them. In exchange I would like $2,500 CASH per property, $22,500 cash total, at the time I hand over or file a quitclaim. there is equity in all of these properties, some more than others. several are brand new, never been lived in. what-do-ya-say????
here’s how this would work: you email me your interest, I email you back a list of the properties, you do your own research and due diligence i.e. public records, driveby the properties, comp them out, whatever you need to do, then you email me back a “yes” or “no”. we meet, we trade $$cash money$$ for notarized quitclaims to these properties. I am not open to cherry picking only the good deals, showing any of these properties, meetings, assignments, long escrows, phone calls, a thousand questions, listing agreements, etc. I am offering quitclaim deeds to all of these properties for $$$CASH$$$. THATS MY DEAL!
thanks for reading my post and good luck to you
Yes, I saw this one. He doesn’t want any phone calls, and he’s not willing to even show the properties. Like those aren’t two monsterous red flags!!??
BillF
Is this a scam? lol
This is so obviously a scam…
Its not a scam. According to the tax roles he is the owner of 9 houses in central phoenix.
I think hes just a speculator trying to dump his lossing properties on a “greater fool”.
why is he doing this schill on this blog?
got it……a joke
The 9 properties checked out? Doesn’t mean this isn’t a scam. The guy found some out of town owner with 9 properties and just pretends to be him. Tells people to check the data, find one that’s more gullible and greedy than others. Then we meet, we trade [untraceable] $$cash money$$for fake notarized quitclaims to these properties.
And someone is 22.5K lighter.
To make that con even more believable, the con artist could break into one of the unoccupied home of the out-of-towner and pretend to live here. Then have the buyer meet him here with the 22.5K. That way the address would check out.
Actually, the quit-claim isn’t even fake. All it says is that you’re giving up your interest in the property. It doesn’t say that that interest is greater than zero! (Why lawyers strongly recommend you only use them with highly trusted parties such as close friends or relatives.)
“Comment by saywhat?
why is he doing this schill on this blog?”
This is not a “schill” it is a ad I found on Craigslist which is one of the funniest I have ever seen. I copied it and posted it here because the ad was pulled from Craigslist so i couldn’t link to it.
This is a speculator that is lossing his A$$. He is loosing 9 houses that he bought.
I think the funniest part is how smug he is about it. He wants you to take his 9 houses that he overpaid for and he wont even take the time to show them to you or anwser questions.
The guy dosn’t even relize how Fu#$ed he is.
My personal favorite part of the listing is:
“I am a Realtor, and a creative investor myself. I am in this situation due to partnership issues/problems, not because Im an idiot or because I didnt know what I was doing.”
LMAO!
Sorry,
This has got to be a scam, or one of the most uninformed RE agents out there. The quitclaim only absolves your interest in the title, not the underlying notes. Truth is, you could walk away with title and leave him with the notes if that is true. Look it up, it’s a legal matter and the exact reason why you only do quitclaims with someone you know and/or can find later. Anyway, he never required the properties to be refi’d which is a dead giveaway that these are falsified quitclaims.
Desperate.
And no, to rescue you, you don’t get $2,500 per listing, you give up $2,500 for whichever fool or idiot is willing to take on this load in a tanking market. Pick another profession besides real estate.
What a pathetic display of financial incompetence. One house I could understand…nine is a bloody joke.
Subkommander Dred
Smells like a scam to me, too. Looking for the next sucker. Maybe this is how those people who nail signs to telephone poles try to make their money — get into negotiation with an FB and then try to flip this way — via, effectively, a no-cost option the property.
Real estate version of the Nigerian email scam. Next, he’ll just need your bank account number or an advance of money to pay some mysterious fees before the property can be released…
No Gene;…this is whats going to happen;…
You want someone to buy all nine right ?? ANYONE, who has the capabilities to buy all nine is not going to do it for your assumed pittance of 30-50 grand (5500. per house)….Find individual buyers pal or the FICA score goes in the toilet….
This is not my ad. I found it on Craigs list and posted it becuase I thought it was one of the funniest things I have ever read. I especially like the part…
“not because Im an idiot or because I didnt know what I was doing.”
Sorry….
“I am in this situation due to partnership issues/problems, not because Im an idiot or because I didnt know what I was doing.”
PRICELESS!!! This is great stuff. Keep it coming.
Currently renting in San Luis Obispo, CA. Just broke 300 MLS listings today. Was less than 100 back in January. Nothing is selling. Average 3 bedroom was about 650K. Now more than a dozen in mid 500’s and still not selling. Still avoid talking to friends, family, and coworkers about RE bubble. People are still in denial. Wife still thinks I’m a bubble head but would love to see that I’m right. She gets uncomfortable if I talk about the housing bubble in front of friends. Love this blog. Finally have people that think the way I do.
Once the Californians left Phoenix and headed eastward (towards Texas, where they will soon get a generous dose of the financial equivalent of prison sex), this guy lost any chance of finding assclowns dumb enough to buy these 9 “investments”. The real shame is going to be that we won’t get to see this story’s ending. To watch this greedbag crash and burn, I’d happily pay $100 for orchestra level seats.
There is something wrong with the picture here. I’d hold out and wait for the bank to auction off the properties and save the $2500. Better yet, wait a couple of years and buy at 50% off!
There is going to hundreds of Ads just like this in the next couple years.
Its just the start.
“People chose to live in Tucson because they want to. Tucson real estate retains value”
I can’t believe realtors are still getting away with saying such stupid things.
“Tucson’s different”!
Tucson is unique. Just like Miami, Tampa, LA, the Bay Area, Boston, Minneapolis, Pittsburg, etc….
Will the cliches ever end? It’s FREAKIN” TUCSON!
It’s FREAKIN” TUCSON!
Hey now….
OK, I say the same thing all the time! It *is* freakin’ Tucson! And a small adobe shouldn’t cost $250/foot! Meanwhile, I rent a sweet house with so much space I have rooms I don’t even use, and it costs about 1/3 the cost of buying it, and saving like a madman.
Tucson will get crushed, people are just slow here. Check back in six months.
It’s my choice after looking around for months. Really nice place.
changing your name to azChick?
I was thining XTXchick
Perhaps. If you look back at the price action during the RTC days, when PHX got clobbered, Tucson barely got nicked.
Just the same, I see some downside in TUC, since it too is overbuilt this time and the runup was phenominal. I still think PHX will see a deeper plunge, but TUC gets hit too, since this time IS different…
Tucson schools are great and the attached garages on all the homes are really big. Suzanne researched Tucson.
I’m starting to see some downward adjustment in Tucson. A friend is a home inspector. He was able to pick up a deal using his insider knowledge, something that rents with decent cash flow. But it was because it’s a fixer that was overpriced and the seller got desperate.
“New listings continue to appear, however this is simply giving the buyer more choice in the marketplace. Our market remains healthy,’ Olson said.”
Healthy? Man, I’d hate to see his sick!
Speaking of sick, the Prescott area MLS (this is in northcentral AZ…population pushing 200K, and I’m over estimating…) has over 2000 residential listings…then another almost 1800 vacant land listings. This is a serious train wreck.
“Healthy” market??? NO, the most optimistic thing you could note about Arizona market would be there is NO market. A market takes both buyers and sellers, not just sellers….”to give the buyer more choices”. What a ‘tard.
wow, i didn’t know prescott had grown so crowded. i guess they’re all pushing down the valley?
it’s a nice place to live i suppose
I had someone contact me from Prescott when I was looking in the Sedona area. What’s it like there? It looked nice but I did not have time to get down there.
“When purchasing a home for investment or occupancy, the rapid growth in price that has been so evident in the last year is somewhat soothing to the uncertainty of the buying decision, according to Butler.”
I love that. So rising prices make you feel good about buying. The fact that your POS house costs 50% more this year than last…you feel good about that. Only fools could be happy about paying 50% more for a house than they could have last year.
This is the housing bubble in a nutshell. People assume “gee it goes up 50% every year (or 20%) like it did last year and the year before”. So the price means nothing. The more you pay the more the last guy made so the more you will make in the future (by virtue of it being a better investment b/c it was a better investment in teh past).
The more you pay, the more you make. It’s the Nasdaq all over again. I love it.
Buddy, it’s like the Nasdaq, except it’s not going to crash. A correction (10-15%) probably, but no crash. In a nutshell, that’s the beauty of real estate.
In normal real estate markets maybe, up 400% in 5-6 years is unprecedented. So there’s no way you can say it follows the same rules.
Skip -
Hello …….is anybody home?
For those who put 10-15% down, they are out ALL of their investment and then some (carrying costs, commissions, etc, etc, etc.)
Yeah,….that’s the “beauty” of real estate alright.
Yeah, cause nasdaq was full of over-margined speculators and daytraders. This market is NOTHING like that.
Yes, with REAL estate, the collateral is real so 100+% loans are very safe. Much safer than paper [stock] collaterals which only margined 50% or 60%, no?
Real estate never goes down. We’re different here. Everyone wants to move here. It’s the new economy! And Fed hasn’t said the “E” (Exuberance) word. [yet]
You can sell your stocks at the click of a button. That’s the beauty of the stock market.
You know, Skip could be right, if the government starts sticking their nose in it. Imagine increasing the tax savings, bailout plans, other homeowner subsidies, who knows? If we’re faced with housing collapse / total economic collapse or just bailing out the homeowners at the expense of the people with financial sense, which would you choose?
AGREED - That’s my greatest fear. The govt’s in deep already and they’ll be bailing their darlings, Fanny&Freddy IN A FLASH.
The banks will be saved (that’s the reason the fed exists in the first place), homeowners will have to pay.
You falsely assume the government has the means to save anyone.
Once the magic perpetual appreciation machine breaks, the specuvestors get spooked and run for the hills.
Believing that fundamentals are sufficiently skewed to require a correction but one limited to 10-15% is nonsensical.
Great Fortune article summing up this mess: (sorry I don’t know how to link)
http://money.cnn.com/magazines/fortune/fortune_archive/2006/05/15/8376866/index.htm?source=yahoo_quote
Ahhh… the media is starting to begrudgingly let the truth slip past.. To Quote:
“And speculators who bought overpriced condos in hope of a quick killing are going to get hosed.”
They still haven’t given up on holding out hope for some sort of soft landing though… but their cries are getting softer.
poor Gene, poor poor Gene!
Best of luck but, on this post many of us here believe this is bottom of the first, bases loaded, 1 run scored and no outs, in the NEW BEAR BRAWL!
What was that pitch again, a screw ball? or a SINKER?
Its called the Tucson “Heater”….
nice strike -scdave wished I thought of it!
screwed ball
I think you are mistaken.
I just found the ad on Craigslist and posted it here because it was one of the funniest examples of a Speculator going down.
They guy is loosing 9 houses and is smug about it. He wont even take his time to show any of the properties or answer questions.
The guy dosn’t know how Fu%*ed he his.
LMAO
This whole thing is crazy here in Phx. Half the people I know own more than one home right now. I just was arguing with a guy at work the yesterday, he insisted I was a fool for not going out right now and buying a house. He was like its a buyers market man get out there and save some dough. When I told him I thought prices were going to fall he scoffed. He thinks it is normal for prices to appreciate 12% in 03, 25% in 04, and 50% in 05(those numbers are rough est. but close). He was kind of talking down to me because he thinks he is so smart. Some how he feels that he is responsible for his house appreciating 50% last year. Everyone here thinks they are a financial genius now around these parts. We now have a bet as to the value of his house by the end of the year. This one I am afraid is a lock.
I’m like you. I’m so sick of listening to home owners talk about how much money they have made and how smart they are. Although I do hear less these days. I have two friends at work that bought investment property. One is trying to sell a new home in Bakersfield CA and he also put a down deposit on one in AZ. The other is trying to sell a new home in AZ. They are really stressed out. Must be the double payments. I wouldn’t know how that feels because I’m RENTING!!!!
HA! HA! (Nelson)
DOE!! (Homer)
Going to the INDY 500 at the end of MAY. Going to have a great time.
“Tucson is different”
hahahahaha…
at best, it’s “market” is just spillover from the past Phoenix mania.
Just like Yuma, where my relatives bought “investment” homes last year (rentals). They claim 100% profit so far. hahahahahaha
Okay, maybe their right. Afterall, only people who WANT to live in Yuma live there.
hahahahaha…we get the first laughs AND the last laughs…stay tuned. Gravity is ‘ON’
I knew there would be another Arizona post so I waited to Vent.
A freind bought a house in PHX to live in roughly 2-3 years ago and then had to go overseas on assigment a few months later. Fast forward to today, her latest job is in another state and she wants to build a place there so she now wants to sell. I have been informing her of the bubble for well over a year and had been begging her to sell but no. She sent me the REMAX 3 month contract she signed to look over and I choked at the price. This small 3 bedroom 2 bath in a shitty location was zillow estimated at $230K which I informed her was too high, well the nice REMAX agent listed it at $250K !. I told her the price was way too high and please get my very experienced honest agents opinion, 43K of inventory, 83 houses priced at $250K, etc . Well, it turns out that despite the fact I follow the market quite closely that I am dead wrong ! The agent has her convinced that based on his comps the house will sell for ~$250K in about 7 days ! I gave up at that point, I am clearly an idiot who knows nothing about real estate and I swear I will never give advice again. My guess is it sits for 3 months while she complains about the agent not doing his job. Meanwhile the tenant painted the interior in some bizzare shade of adobe style paint and has two dogs that piss all over the small lawn leaving brown spots.Oh yeah, the big selling point, it has a pool !.
MM -
Advice is good, but like sex, if little positive response from your amore, just move on. Diamonds before swine and so forth.
BTW, that pool must be quite the spa if its anything like the rest of the place.
Don’t waste your time. People are so emotional about their investment property. I was renting my mother-in-law’s condo in Redlands CA for two years. I move out last October and I begged her to sell. She wouldn’t listen and she wanting to rent it out. Today she’s trying to evict her tenant because he doesn’t pay the frikin rent. By the time she gets the bum out the condo will be worth the same as what she bought it for back in 2004. My mother-in-law even went to that Trump Convention in Vegas. She insisted that RE is still strong - you can still make money - Trump told her so. What a joke.
Didn’t Trump declare bankruptcy a few years ago? Did he ever repay all his lenders who got hosed by trusting him when he became a millionaire/billionaire after recovering? And doesn’t he have a bit of vested interest in keeping the bubble going so he can sell his overpriced (but gold plated) Trump Tower condos? Yep. That’s a reliable source.
Ahh, the Donald. Made his money the old fashioned way by being born into the right family. Best self-promoter on the planet, though.
Trump is actually a genius — he figured out that if he borrowed enough, the banks could no longer allow him to fall down.
Remember kids, in the New Economy, borrowing is the new saving!
People are emotional about any investment. They unfortunately invest their ego and pride, not just their money. Which is why most will ride down the market just like folks did with Enron and DOTbomb stocks….
Bernanke is going to keep hiking on and off, swinging between inflation concerns and sinking housing/economy. This is not going to help either. Inflation will be high and the economy is going to the toilet. At the same time, prime rate will shoot towards 9%.
The worse of both worlds. The question is how ugly it will get.
One good thing: The conundrum will end, as Fed Chairman uncertainty will drive the risk premium sky high. This might actually be his intention, though he reap lots of flack from Wall Street for not giving the clear signals his predecessor gave. Let’s hope he is strong…
This is a good point. It’s certainly bearish for long bonds.
Someone get Jimmy Carter on the phone.
Something makes me think that BB won’t last too long. He’s going to be the guy that gets the blame.
That’s right. Nobody will be happy with him. He is the fall guy for the Maestro.
“‘However, if home prices continue to be stable or even decline in some areas, potential buyers may be increasingly reluctant to make the purchasing decision, because future appreciation is much more uncertain,’ said Butler. ‘Further, current owners, especially investors, may want to bring homes to a good market, in order to lock any current appreciation.’”
This advice (”Get out while the gettin’s good”) is starting to sound very familiar. If it is widely heeded, the price crash caused by those wise enough to follow this recommendation will be deafening — a veritable sonic boom as the asked (list price) distribution collapses onto the bid distribution.
What is amazing to me is that there were 5,980 sold properties. I mean, who the F#$#K are these 5,980 fools?
There’s no fool like an old fool. How about another Tuscan house to go with your other three. It’s an “investment” strategy called “pyramiding”
I work with three of them. All have masters degrees in business or acccounting. Either stupidity has no bounds, or masters degrees just ain’t what they used to be.
It’s one fool buying 5980 properties.
Which reminds me, where are the “first time buyer” statistics.
Here’s a video giving the best explanation I’ve see of the causes of the bubble.
Oh and here is googles stats on who’s searching for “real estate bubble”
http://google.com/trends?q=housing+bubble&ctab=0&date=all&geo=all
Looks like a spike in the last few weeks.
Come on, we all know it’s just you several hundred thousand times. Admit it.
Wow. What a great video. Almost an hour but worth it. Filmed 2/16/06 it certainly predicts everything that is happening. I am wondering if he (Thornberg) thought it would happen this fast?
wow; that video is incredible! A definite must-see.
I guess I am a bit more bearish than him.
He says that prices will not drop because there will not be the job loss that is needed. But what about all the construction and real estate related jobs that will be lost?
It just seemed like he was more optimistic than I am given the data that he presented.
Maybe he was just “playing it down” to keep from getting more hate mail.
Gene
Kirk:
Nice find.
I particularly liked the quote about OC is really different this time.
We are going to get hammered according to Chris Thornberg.
I posted the link in a current thread to get more views.
check out this post from a realtor on myspace - I guess it is a good time to buy..
http://forum.myspace.com/index.cfm?fuseaction=messageboard.viewThread&entryID=16843268&categoryID=0&IsSticky=0&groupID=100024827&Mytoken=C797E995-2A99-4E89-888737FF103ADDDE574595000
….by M. Reddick
As I have watched hundreds buy property through our network, I have been so impressed with the incredibly powerful effect it has on people & their families. 1. Buy now while interest rates are still low they will only get higher. 2. Buy now while prices are still affordable: $115,000 - $200,000 3. Buy now while there are still affordable second-home and retirement properties. Soon they will be unaffordable. 4. Buy now while the rental market is good & getting stronger in many areas. 5. Buy now to assure 30-year fixed rates & lock your future in now. 6. Buy now while it is still easy to qualify (much harder in the past and probably the future). Its never been easier to qualify for multiple properties. 7. Buy now while there is so much available money and financing (in 1978-80, there was no money available). 8. Buy now while down payments are still low (used to be 20 percent down for investment property and may be more in the future). Now its 0 down & 5%. 9. Buy now while appreciation is the highest ever it may not happen again in your lifetime. Its 14% now, normally its 7%. 10. Buy now for your kids they will not be able to afford a residence or 2nd home in a few years in places like NY, San Francisco, Hong Kong or Japan.
Is it Time You Created a More Prosperous Life?
For those of you who have not purchased investment property yet, perhaps this is the best time. We may never in our lifetimes have such great prices (40 cities under $150,000), high appreciation rates (25 cities over 20%; 14% nationwide average) and very low interest rates (we still have a 30-year, fixed-rate for 5% down at low 7% (call First Guaranty at 888-296-7000). Anyone who reads Robert Kiyosakis book Rich Dad, Poor Dad realizes that you will never become wealthy through your job and conventional retirement systems, or the stock market. Perhaps you should overcome your fear or skepticism enough to just try one property. It only takes about $12,000 for an average property with 5% down (you can also go 0 down for $7,500.
My favorite reason to “buy now” is # 10:
“Buy now while appreciation is the highest ever, it may not happen again in your lifetime”.
Now THAT’S twisted logic.
OHMYGOD. Not this friggin clown! He’s been a huge promoter of this thing. I went to one of his meetings about 2 years ago here in Irvine. Literally hundreds, and a huge percentage of them had bought before. They were going out on buying trips to FLA, PHX, LV, etc. to new developments, then would arrange the purchase, financing, rental management, everything.
I know someone at the office that bought 5! Never even seen more than a pic/brochure on 3 of em. Family income probbly $95k?
I see a whole lotta hurtin in the future.
Krazy-canuck …Thanks for your post …I finally see how they have been promoting real estate investment .I’m telling you the builder/developer must be in on the whole thing . I wondered how these traveling groups of investors were deciding on where to invest . Classic “urgency “sale pitches that have no merit .
San Diego County ziprealty inventory just passed the big 20K milestone tonight, 20,073.
Yoohoo!!!
San Diego Condos for Everyone!
I just want to *sniff* thank everyone for the opportunity *sniff*.
Ben, *sniff*, my parents, *sniff*, GetStucco, even *double-sniff* Mr Lingus. We couldn’t have done it without you. It’s been a real team effort and it’s *sniffffffff* a true privilege to be here.
OT From International Forecaster / Robert Chapman:
“So far this year monthly house and condo sales have fallen 11% to 25% in Miami, Boston, Northern Virginia and San Diego. Phoenix is off 30% and Sacramento 57%. The affordability gap is driving buyers to the sidelines, replacing the frenzy with a growing void as buyers wait for prices to drop. The bubble has become a dead zone. Right now the ratio of home values to incomes in the bubble zones is about 40% above its historical average. It is of great interest that this housing slowdown is coming in a recovery period. Can you imagine how it will be when the economy slows in the second half of the year? The hot zones are going to fall 40%, so get ready for it. “
It’s the debt bubble that is threatening home prices and the global economy. The unprecedented expansion of the world-wide money supply is the source of the nominal price increases in real estate in the US, UK, the EU and Asia (as well as the run-up of commodity and share prices). I anticipate the prospect of the coming correction to be global due to the ubiquitous presence of the dollar worldwide.
As central bankers are forced to continue to raise fiat currency benchmark rates (to cool overheated growth, forestall resource and commodity inflation, or to attract investors for refunding the expiring debt of currencies that are losing their purchasing power) marginal debtors with floating rate loans will be forced to sell shares to service debt.
Later in the cycle, some of these debtors will default. Keep in mind the quadrupling of adjustable loans as a percentage of total loan volume over the past few years, and that most foreclosures occur in years three through five of loan servicing. There will follow a cascading reduction of housing prices as REO assets are auctioned to restore capital reserve ratios of banks with troubled loan portfolios (not all loans reside in the secondary market). This possibility has been foreshadowed by the Japanese experience of the past 16 years.
This is a very simplified explanation. It does not include the concomitant effects of a FED (and other central bankers’) policy that will add liquidity to avoid deflation, protectionism to support domestic markets, and the further reduction in consumers’ confidence that may precede additional declines in spending that will further reduce production and incomes. The prospect of a decade or two of “wringing out” the excess liquidity is probably in order. Think: “Like 1929 to 1942, only several orders of magnitude greater. I think the gold market is reflecting this more than the explanations of uncertainty over Iran or uninformed speculation.
Any thoughts on flaws in this scenario?
What happened to gold from 29 to 42? I don’t know myself. I think it did OK as it was desired for holding wealth, but I don’t know.
Gold was made illegal to own in 1934. You were required to have a Treasury agent present when opening safe deposit boxes. No, I’m not kidding.
It did not become legal to possess gold again until 1964.
You may draw your own conclusions.
You know, it’s sad how little we know as a nation about these things. I had to learn this independently of my high-school “economics” class as well.
Gold wasn’t legal to own until 1975 (pres Ford) after Nixon defaulted on our debt in 1971 by taking the dollar off of the gold standard (international only at that time). That is why it is so hard to get a handle on past valuation models for gold. IMO.
Yeah, I should have said TRADE, not OWN. But the markets started opening back up for it in 1965 from what I read. Then not fully until 10 years later.
Gold was made illegal for US citizens in 1933 and FDR fixed the price on it at 33 or $35 when the market price was only about $27, and devalued the dollar and then the Treasury paid back its gold bonds in devalued paper dollars. Since FDR fixed the price of gold above market value assets in gold did well, but this information does not tell us what gold will do in a free market if there is deflation.
The price of gold was fixed until the 70’s when the dollar was cut completely free of the gold standard and they made it legal to own again.
Just a quibble: FDR fixed the price at $35/troy oz., and the market price was
(somehow the previous post got truncated…)
Just a quibble: FDR fixed the price at $35/troy oz., and the market price was less than $20.67 (based on the 0.9675 oz. content of the $20 gold piece). Gold was made legal for US citizens to own again on Dec 31, 1974. In a complete about-face, the gov’t then began striking bullion gold coins (the new Eagles) in 1986, to compete with the Maple Leaf and Krugerrand. 1-oz Eagles have a face value of $50, which puts a floor under the gold price if you’re worried about it crashing. (I think swine aviators are more likely, but that’s me…)
I am right there with you in your scenario. I do believe the FED will come in to save us from any deflation. That will be after all the bagholders have had to sell at fire-sale prices and so are left double-destitute when the inflation sets in.
SImplified yes, but otherwise pretty much right on. There are just so many more aggravating factors…
One thing I am doing is that even though we hold a fair amount of “hard goods” — diamonds/gold, and I have not bought any gold for awhile, I have started to buy tiny chunks of it again — 10 grams here, 2 1/2 grams there. I think that if inflation really sets in, gold is really gonna climb. I could be wrong, but oh well, we already have a lot of savings, and almost no debt except for one mortgage. Not a scary one, either. I am buying the gold out of current earnings, not savings….
I wouldn’t count diamonds as an investment. Otherwise, sounds good, especially because inflation has already set in.
I dunno. Had a very rich, depression experienced man ask me which I would perfer to lug around and keep safe in really tough times. Bars of gold? Or a handful of diamonds?
Diamonds are not very scarce at all. They are controlled by DeBeers, but the market can easily be flooded very quickly if they so chose. Also, buying them and selling them entails HUGE transactional costs, and it is difficult to ensure their worth. (how many people get their jewel appraised and find out it’s crap? how do you think they always have “50% off” sales on diamonds?)
It would also be quite difficult to make any transaction in diamonds. Worth too much per weight. (gold has the same problem) which is why many are advocating silver as well. (costs less per ounce, so could theoretically be more “usable” if our currency was severely devalued)
That said, I was recently reading an article about the worth of Gold in Argentina when their currency crashed. Interestingly, nobody would accept it- so it was NOT a useful substitute for currency. but at least it held it’s value relative to other currencies so if you had a lot of it you could sell it on international markets etc. I’ll try to dig up the article, it was interesting.
clouseau
Some diamonds are rare: Red & pink diamonds, blue diamonds, etc. Rare diamonds will hold/increase in value but you really have to know what you are doing. It’s not something that every investor should get into.
There are other items that are good investments too, but again, you have to know what you are doing. Gold and metals are not the only things people can invest in.
If hyperinflation sets in, that guy from craigslist with nine homes will be set because of all the assets he’ll be holding!!!!! Somebody quick send that post again!!!!!!!!!!
You aren’t going to be “lugging” a bunch of HEAVY gold bars around anywhere unless you have at least several hundred thousand dollars (and climbing) invested in gold. Stick with gold coins and worry about the size/weight when you get to a million dollars worth!
OT: RE bubble recognized in India:
http://www.gulfnews.com/business/Real_Estate_Property/10039300.html
Here’s a bit that I chuckled over: “California Public Employees’ Retirement System (CalPERS) ploughed $100 million into an Indian realty fund last month, while American International Group has launched a real estate investment division in India.”
I posted Jay Somaney’s comments on that last month where he said Calpers was in the wrong place in India. He kindly spelled out the right places to make money there but I doubt they were reading this blog.
O/T: but something I’ve been warning about regarding shorting lenders. Hat-tip to Sunsetbeachguy’s post yesterday which made me research more. (BTW, SSBG, congrats on the little one!)
“Merrill seeks to buy mortgage lender -report”
Last Update: 1:17 PM ET May 11, 2006
“Other big lenders and frequently mentioned potential targets include Washington Mutual Inc. (WM), Countrywide Financial Corp. (CFC), IndyMac Bancorp Inc. (NDE) and Downey Financial Corp. (DSL).”
http://tinyurl.com/jwoql
I know a lot of us are short-sellers here, so heads-up.
Thanks, a newborn is a lot of work.
desperate,
i have a pile of cash. I am a bubble sitter in maui from the mainland. I could do your deal. but since the 2nd positions are not going to defend their lien positions, why not just buy the houses a year from now at 30% off when the bank is dumping them after that area has 70k listings? once the banks start dumping houses they repo the fun is really going to begin.
regardless of scam or pathetic post, this belongs in the comics section of a newspaper
From Zillow:
last 30 days
85205 zip (East Mesa) up 1.8%
Mesa as a whole up 1.2%
Maricopa: 0.8%
AZ: -0.3
It’s amazing how prices have held strong given the record stock of inventory.
That’s because nothing is selling which results in the inventory to escalate. The price figure increase you show paints a picture that is as clear as mud in reflecting what is actually happening. A few nice higher priced homes that may actually have been discounted could skew the mean upwards.
That’s right. It should be presented in the context of total transaction $$$$$ by month… which is sinking rapidly.
“New listings continue to appear, however this is simply giving the buyer more choice in the marketplace. Our market remains healthy,’ Olson said.”
Shades of Kevin Bacon as the ROTC cadet in “Animal House”: DO NOT PANIC…! just before he gets stampeded.
I just Have to laough at this clown Jay Butler. He basically says people are more comfortable buying when prices are going up and are afraid when prices are pulling back. That may be true, but it tells us what a bunch of sheep the general public are. I wonder how comfortable those people who bought last summer(when prices were going up) feel now. Ha Ha
wow nice adobes at $250 a square foot in tucson! a bargain!!! in oakland you pay well over $500 a suare foot for ghetto property in bad shape…eveyone wants to live there too!
I just love hearing about the possible bubble burst there. I have been looking to move back to the valley after an absence of 16 years (in the Mid-west now), however, the prices there have prevented me from even considering it. What I have never been able to understand during the whole bubble period is how a state with one of the lowest per capita income levels in the U.S. has now acheived some of the highest home prices in the country? AZ shares income levels with states like KY, LA, AL, etc. Try to find similar average home prices in any of those states. It all looks like a lot of speculation and cheap money has created a fake market.
More condos coming:
Hotel to give way for ‘affordable’ condos on Central
Glen Creno
The Arizona Republic
May. 12, 2006 12:00 AM
A hotel on North Central Avenue in Phoenix will be knocked down to make way for condominiums in the increasingly competitive midtown market.
The Holiday Inn at 4321 N. Central will be razed to clear a spot for three five-story condo buildings to be developed by Cresleigh Homes Arizona. Cresleigh Vice President Wade Kempton said demolition of the hotel begins in July. He expects residents to begin moving into the planned 257 condos late next year.
Kempton declined to project prices for the condos, which he said would run from 600-square-foot studios to three-bedroom units of 1,400 square feet. He said they would be “affordable” and be within the price range of college students and people who work for the city