Foreign Buyers ‘Talking About A Real Estate Bubble’
A pair of reports from Inman News on the housing bubble. “Globalization appears to be in full swing for the real estate industry, with foreign buyers playing a significant role in some U.S. markets. While prices continue to escalate in Florida, sales have been sliding. In March, sales were down 22 percent compared to March 2005, the Florida Association of Realtors reported.”
“Foreign buyers, just like domestic buyers, are concerned about the sustainability of price increases in Florida, (broker) Alex Shay said. ‘Foreign buyers are just like everybody else, everybody is talking about a real estate bubble.’”
“Real estate speculators, both domestic and international buyers, have a lot to do with the current slowdown in the real estate market, said (consultant) Jack McCabe. ‘Speculators were just rampant down here,’ he said, and particularly with luxury condo projects in South Florida.”
“‘Speculators and speculative development and speculative lending created an oversupply in multi-family units, many of these are luxury. A lot of these purchases, both internationally as well as U.S., were done over the phone through brokers. Now a lot of properties are getting cancelled,’ McCabe said.”
“But as speculators have left the market, the timing is good for serious foreign buyers who are purchasing a second home, McCabe said. ‘It has become more of a buyer’s market for them. Sellers are now willing to negotiate. We’ve seen sales velocities in a lot of markets come to a standstill, with inventories two and three times what they were 12 months ago.’”
“Lewis M. Goodkin, a real estate and financial industries consultant in Miami, said that international buyers got caught up in the fever of the U.S. housing boom just like domestic buyers. ‘The level of speculation had been at a record high. It just dwarfed anything we’ve had in the past.’”
“During the most heated days of the housing boom in Florida, it was common for new projects to sell out long before ground had been broken at the development site, and foreign buyers were among the participants in these sight-unseen purchases, he said. ‘It was the first time in all the years I’ve been in business that residential developers were outbidding commercial developers for a site.’”
And this on standing inventory. “In January, we commented on how rapidly rising home sales have masked the fact that there are more than 500,000 unsold new homes under construction. Now, 128,000 unsold homes are completed and ready for immediate move-in. This is the highest level in history, and an increase of 22 percent from one year ago.”
“Annualized new-home sales rebounded in March to 1.21 million units following a dreadful February. Still, sales are down more than 7 percent from one year ago. The median new-home price fell to $224,200. The Housing Market Index continues to decrease, reaching 50 in April, its lowest value since November 2001.”
Sorry OT, but today’s WSJ has a very good article on the bubble status quo in the Money & Investing Section (”What if Housing Hare Becomes a Tortoise” by Jesse Eisinger).
This piece features level-headed perspective which is lacking in many main-stream press accounts. The last line sounds vaguely familiar:
“As housing goes, so goes the US economy — and the stock market.”
(Historical version: “As GM goes, so goes the nation.”)
GS - IMO it is still GM - When was the last time the WSJ had it right?
Investment Outlook
Bill Gross | May 2006
As GM Goes, So Goes the Nation:
…But as an entropic symbol of U.S. manufacturing aside, I think it important to recognize that General Motors is a canary in this country’s economic coal mine; a forerunner for what’s to come for the broader economy. Their mistakes have resembled this nation’s mistakes; their problems will be our future problems.
PIMCO BOND
http://tinyurl.com/fjrrq
I completely agree with this view (in fact, I independently suggested it here a few months back).
Bill Gross puts out an investment outlook column on the Pimco website every month, and it is published early in the month. I strongly recommend bookmarking the website and reading it on a regular basis.
“Miami and the other cities cited as the worst for road rage were Phoenix, New York, Los Angeles and Boston.”
Anyone think that there is a correlation between road rage and the financial crunch that people in these areas are feeling?
Coincidence, or rather association not causation. Congestion causes road rage. The TTI RCI from TAMU has been running thee numbers for several years. Failure of regions to provide adequate roads, rapid growth and density are what cause congestion.
People that drive with road rage generally are irrational thinkers, based upon the fact that you are basically going to get to the same location in the same amount of time no matter how you drive. Are these road ragers the same contributers to the irrational exuberance in the housing market? Possibly.
Absolutely, this weekend I thought about it when I saw two guys get out of their vehicles and start slapping at each other in New Tampa,FL. I have never seen this even in NY, ofcourse I thought about the correlation but shook it off for being always on this bubble and its effects on everyhthing… For real, they just parked their cars in the middle of the road and went for it.
Let the road rage continue. The fact that public transportation options have not been addressed as this White House and been bribed by big oil and the Detroit 3 didn’t seem to phase anyone until fuel prices began to explode.
You don’t have to like $5/gal fuel. Just accept it. So long as it changes the public’s outrageous behavior, then it’s a good thing.
Give it up. It has NOTHING to do with the White House or public transport. You are so fixated, you’re a fanatic. If somebody mentions chocolate, do you immediate start yapping about George Bush and his possible connection to the Godiva company?
I live in a city with skinny roads and lots of congestion, and our entiry city council is made up of liberals, and this has been the case for decades. They’ve allowed the overbuilding because it brings in more tax revenues, and because so many of them are involved in businesses that benefit from increased population. Some of them flip properties themselves.
You and your stupid 5$ oil. You probably drive a Beetle or ride a three-wheeler. Newsflash: 1968 came and went 38 years ago.
RC is still enraged. [lmao]
[Incredulous, ignore the laughingstock]
We know with absolute certainty what causes congestion and it has direct links to the current housing situation. I’m sure people from the Bay Area and LA will contribute with stories of traffic before and after the housing bubble circa 1990 and the dotbomb of 2000. Traffic is a function of economic activity. Congestion is a failure of public will to address traffic. Traffic is generated by new housing as well. The recent urban built environment patterns have exacerbated the underlying failure of public policy. Southern California has built one new freeway in the last 30 years despite millions of new residents. They also have half as many centerline freeway miles per person as the average urban area. The LAMTA, responsible for all transportation spending in greater LA dedicates either 84 or 87% of its budget to transit that serves 3% of all transport. The lightbulbs should be blinking on about now. “Ohhhhh, that’s why LA is th most congested place in the nation; they have too much transit and not enough roads.” Your skinny roads and liberal council combintion is one Ihear quite often unfortunately they deliberatly conceal the causes of the problems opting instead to try social engineering to advance their progressive agendas.
It’s a communist conspiracy!!!! Get your guns!!!!!! bwahahahahah
I just heard that the murder rate in san diego is up tremendously compared to last year…possibly due to economic conditions?
Rdub,
There is a clear historical correlation between depressed economic times and crime rates.
Real Estate Values Correlate to Commuting Costs
One result of our oil-based transportation system is cities with concentrated populations surrounded by far-flung suburbs, all connected by highways. The highways are used by autos propelled by highly inefficient gasoline engines, and trucks with slightly more efficient diesel engines. This population and real estate distribution is predicated on an oil transportation and combustion infrastructure that has evolved over the past century.
Our transportation infrastructure depends on the availability of large quantities of an inexpensive combustible fluid that packs a lot of Btu’s into a small space. Oil is a unique, high power density fluid. It can be pumped right out of the ground, refined, conveyed through pipes and into tanks, and then be burned in engines.
Conclusion
We are not running out of oil. We are running out of cheap oil. Alternatives are several times more expensive than oil, even at $70 per barrel. The last oil price crisis resulted from an increase of $16 to $100/bbl (in 2006 dollars) over six years. Imagine an era—over the next 20 years or so—during which oil prices increase by a factor of five to ten or more, leading to prices of $350 to $700/bbl or higher. That’s the reality of oil economics. ….
May 17, 2006 ITULIP
http://tinyurl.com/ncp64
Peal Oil theory makes the current housing discussion seems kinda lightweight, doesn’t it?
“We are running out of cheap oil.”
Hence the reason for exploding fuel prices. $5/gal fuel is no more than 24 months away.
“leading to prices of $350 to $700/bbl or higher.”
What does that put fuel at…..$20-$40/gallon? I’d say that’s quite fair and accurate. And the sooner we get there, the less painful it will be in the long run. Schleps and slimers are already dumping their overgrown SUV’s better known as SLOBurbans, albeit at a huge loss. But then again, losses are what you reap when you believe everything you hear on Fox News.
iTulip has no clue. That’s why they cite no facts to support their unspoken advocacy of a return to the ghetto. Their very title; “Real Estate Values Correlate to Commuting Costs” would earn them a Nobel in Economics could they prove it. They just make this “stuff” up to generate hits.
Robert, real estate values do correlate to commuting costs everywhere except in the US. The US is unique among industrialized countries in that the inner cities are populated by poor minorities that people with money want to avoid. Take a look at Toronto - the closer you get to downtown, the more expensive RE is. The poor black people in Toronto live in the suburbs.
Yogurt, I think you mean “Robert, real estate values do correlate to commuting PRICES everywhere except in the US.” That’s because we don’t distort costs with price controls to any extent other places do.
What do you mean “price controls?”. Subsidies to public transit? Public transit is more heavily subsidized in the US than in Canada, and in many European countries.
At any rate subsidies of or taxes on a good or service don’t change the direction of correlation. What I’m saying is that if the taxes on gasoline in the UK (which are very substantial) were dropped, the premium on living in the centre London might be reduced, but it would still be there. And if subsidies to public transit (which are rather small in the UK, larger elsewhere in Europe) were eliminated, the premium on living in the centre would be even higher.
I reiterate that suburban areas in the US are more expensive than inner cities because the white people (who have higher incomes on average) don’t want to live near the black and Hispanic people. Just read what people on this board are saying. A few places like NYC and SF are exceptions.
How bout the soccer Mom that shot the other Mom on I-95 heading to Providence? That was years ago. Then there was the guy with the crossbow. Just crazies off their meds.
I have to fight the urge to perform the PIT maneuver anytime I see a vehicle one of those magnetic Realtor signs….so I admit it, I have the rage…I’ll try and get some help
House Office of Urban Demographics said the expectation is there will be 193 million immigrants coming into this country in the next 20 years.
Where TF they are gonna put them on the antiquated road systems in the Northeast is beyond me.
And not only is the sytem unable to handle volume, it’s crumbling because the maintenance isn’t bein’ done.
FEDS have totally lost control of the system. Too many do-nothings only worried about collecting their pensions.
Things will only get worse.
Reckon you skipped a decimal point somewhere. Immigration is roughly 1M/year.
I can speak for Boston…they’re always like that! Only place I had not one but 2 people (in the 90s) TRY to run me off the road, and another try to ram me from behind because going 75mph in the pouring rain w/a 16 wheeler beside me wasn’t fast enough. She was probably a realtor.
“But as speculators have left the market, the timing is good for serious foreign buyers who are purchasing a second home, McCabe said. ‘It has become more of a buyer’s market for them. Sellers are now willing to negotiate. We’ve seen sales velocities in a lot of markets come to a standstill, with inventories two and three times what they were 12 months ago.’”
I assume that not too many of these foreign greater fools are Japanese, as they learned their lesson the hard way at the end of the last US real estate bubble.
This is not good news for Americans hoping for more affordable, reasonable house prices. Foreigners using depreciated dollars to purchase our domestic housing supply is one way our deficit spending can come back and bite us in the @ssets (and a possible countervailing force to a house price crash).
I don’t think that foreign investors will find it appealing to purchase dollar denominated assets (including housing) as the dollar value falls. Imagine buying a 500k condo in Miami and having it depreciate 25% due to the housing bubble. Then imagine the dollar depreciates by 15% against your currency. Ouch now that would be a big hit to the wallet.
Well if you’re a foreigner stuck with deprerciating $$$$, actual “stuff” is probably better than treasury bonds.
Why not invest in their own country or another, stronger country’s assets?
They already get the dollars from sales of either consumer goods or oil. You can sell the dollars for your currency (driving the value of your remaining dollars down–unpalatable to the Chinese) or buy assets that sell for dollars (houses, businesses, treasury bonds).
safe_as_apartments:
for many EU buyers, homeprices are still a bargain in most of the US (e.g. in Florida).
And of course, the EU still has extremely low mortgage rates (like effectively 2% for a 30-year fixed in the Netherlands). EU homeowners have tons of equity in their homes and unlike in the VS, it has not been all spent on plasma TV’s and Hummers - they use this equity to finance extra ‘investment’ homes, usually in foreign countries.
Yes, well for most Californians, home prices are still a bargain in Fargo, North Dakota.
What do relative prices to your own country have to do with anything? It’s return on investment that matters, and ROI in US bubble markets is dismal. And in any case I think dumb EU RE investors would be more inclined to put their money closer to home, in the new/future EU states, as they are already doing.
hmmm …
what do you think ROI for all those emerging EU real estate markets is? EU investors ‘know’ that ROI is totally irrelevant, they have been enjoying negative ROI for 10-15 years as it is a sure sign that the capital appreciation will be huge (yes, this is even a well-known investment strategy for ‘vacation properties’).
Do you think anyone is living there all year long? In 90% of these locations, RE is the only game in town (well, maybe there are some local farmers as well who make thousand dollars a year, if they are very lucky).
You are lucky if you can find a renter for 1-2 months per year for these properties, so most investors don’t bother at all.
Interesting comment. Apparently sellers aren’t too willing to negotiate, what with ’sales velocities’ … a standstill. And where in the hell do these yahoos find these terms? Must be the
School of Ex-Used Car Salemen.
If 15% of sales were 22% higher than the median due to buying by foreigners 2004-05 then something like 4% of the median price rise was due to these buyers. Let’s see, 15% attributed to foriegners, 40% to specufloppers and some other percentage as second homes. All those numbers at the low end of the honesty scale. Did anyone buy a home in Florida last year to live in?
>>>Did anyone buy a home in Florida last year to live in?
Most Floridians who actually work for a living have long since been priced out of the housing market.
If your numbers are accurate Robert, it is absolutely DOOMSDAY for RE in Florida. If demand is withdrawn by foreigners as well as specufloppers and 2nd home purchases to any great extent then we could see 50-75% less demand right away (perhaps that is what we are already witnessing?). As folks wake up to the crash this number will get even larger.
How long does demand have to be extremely depressed before we see wholesale price drops of a large magnitude? I suspect not long but we shall see.
Whether related to this thread, coincidental or seasonal, it seems like buyers in east Central Florida are down the 50-75% Auger-inn noted. It is dead around here.
A friend bought a 800 sq ft, 1-bedroom apartment-to-condo coversion in NE Tampa for US$121K this month. Used a 0% down payment ARM and is expecting the value to appreciate. Couldn’t talk him out of it, I think his wife was the main motivator.
All wives are in cahoots with Suzanne. “We can do this!”
All wives are in cahoots with Suzanne. “We can do this!”
Yeah, right! That’s why this wife reads Ben’s blog while my husband takes my word for it. He’s in a deep depression because I told him we need to rent after selling. (if it’s not too late)
‘Real estate speculators, both domestic and international buyers, have a lot to do with the current slowdown in the real estate market, said Jack McCabe. Speculators and speculative development and speculative lending created an oversupply in multi-family units, many of these are luxury. But as speculators have left the market, the timing is good for serious foreign buyers who are purchasing a second home, McCabe said.’
So the foreigners were speculating, but now is a good time for non-speculative foreign buyers to step in, even though prices have only come off a few percent?
‘The Realtor association’s report found that the Miami-Fort Lauderdale area was most popular with foreign buyers, with 30.4 percent of purchases by foreign buyers occurring in that area.’
The same old trick; what percentage of total sales went to foreigners? And the currency thing again; the devalued dollar will save Florida! Come on Inman. It is much cheaper and less risky to rent at a resort. The whole idea of buying a ‘vacation home’ in Florida was a cover for the speculation.
And on the record new home inventory numbers (see chart, second link) is from March. There is much more supply today.
“And on the record new home inventory numbers (see chart, second link) is from March. There is much more supply today.”
*********************************************************************
Let’s see here. 128,000 spec homes on the market in March and obviously more now.
128,000…Is that a lot?
Ben,
The whole notion of “foreign” buyers salvaging that mess sounds silly. Why don’t we just say “mystery” buyer. Yeah, that’s the ticket! We can some how jump start sales locally by claiming that a “mystery” buyer (with deep pockets) is plotting a major move down here. Your observation is correct, and it wasn’t just FL where the idea of 2nd homes were a cover for speculation. FL realtors rather than admit they have a problem and take sober steps to address it are “clutching at straws” to keep the party going. Btw, they can not divulge the identity of the “mystery” buyer!
we don’t need a mystery buyer, buyers from the Carribean will be more than enough to solve the problem. They also solved the Treasury problems, so why not do the same for the housing market?
The whole idea of buying a ‘vacation home’ in Florida was a cover for the speculation.
Amen. There seems to be one excuse after another for the hot Florida market.
We haven’t even discussed how buying a vacation house 2000 miles from home is a stupid move on many fronts.
This morning am news now says that the Feds are looking a possible inflation due to rent increases as more people are starting to rent….come on, they know they looked the other way when housing inflated and now they need to rectify the situation and need an excuse to raise interest rates higher…viola, rental rates….we are headed to 5.5% before any pause….
Rent is a part of the definition of the CPI, asset prices are not ( CPI = consumer price index - as hollow the CPI may be as many claim here). They have made the rules and should now stick to it and increase the interest rate, if necessary to dampen the CPI.
5.5% on the TYN. Someone posted the other day that there has been little correlation between the prices and interest rates. There may have been a little disconnect when the momentum was building, but MAKE NO MISTAKE, in areas where affordability was already abysmal and prices exceed $800K for marginal housing, these blips up in rates are HUGE!!
That $800K 30Y Fixed at 5% payment is the same as a $1M payment at 7% - A 25% drop in maxed out affordability and in most bubble areas people MAXED OUT. Anyone wondering why sales are falling off a cliff?
Add HELOC and ARM resets to the mix… this will crush a lot of dopes.
“That $800K 30Y Fixed at 5% payment is the same as a $1M payment at 7%”
Uhhhh… correction - the point was, to buy an $800K home today a payment is equal to a payment on a $1M home a couple of interest rate points ago- 25% more house… or 25% decrease.
$1M @5% = $5370
$800K @7% = $5330
In Florida, there are many, many empty speculator homes. Most will either be rented out, due to failure to sell, or be occupied by a lowballer who no longer is a renter. I see no upward pressure on rents at all, save possibly tiny pockets of trendy housing that is a short walk to the downtown office.
OT: Market is in free fall. The dollar sell-off continues.
Just on CNBC -Realty Check, , Illegals are buying homes in Vegas ,and Socal..Just need a ITAN ,a Tax ID for illegals. …Yes this is legal. Wells Fargo is the biggest player with other banks waiting to see whether they can unload to Fannie,Freddie. 60B worth of mortgages sold this year to Illegals..
Good, maybe Fannie can collect from these people once they slip back to Mexico. LOL.
this wouldn’t be one of the reasons socal housing prices have gotten so high, would it?
This wouldn’t be one of the reasons neither party seems too eager to stop illegal immigration, would it?
I know a lot of illegal aliens, because I’m in the RE business, and I can confirm many of them have bought homes this past couple of years. What type of financing they got, I have no idea, but I know they only put maybe 3 percent down. Houses that were 80 or 90 thousand in S. Central are now over 400K. Now my handyman, also illegal, is getting kicked out of his rental because it’s being sold, and says he’d rather buy a house than rent because his payment would be the same, even with very little money down. I can’t argue with him, really.
It is cheaper to buy than to rent with all the exotic loans that are out there now. Not only that, if they are using phony papers, it’s someone else’s credit they are destroying if they walk away from the mess.
Last Dec., when I still went to open houses they were overrun by hispanic people who seemed intent on seriously considering a purchase. These were low end SFR. 5-600K. In mostly spanish speaking neighborhoods of LA. I guess they’d fit in better than I!!! I was amazed that they could afford a house and I couldn’t! Iwould have never moved my family to those questionable neighborhoods anyway.
And I wouldn’t underestimate the illegals’ ability to hold onto their properties: they work very hard, and have no problem with renting out space to raise $$.
And I wouldn’t underestimate the illegals’ ability to hold onto their properties: they work very hard, and have no problem with renting out space to raise $
Well of course they can hold on…
No SS levy or state income taxes off the top…all underground money.
Multiple that times the 30 livin’ in the house, and payin’ the note’s a cinch.
And if hard time’s come, they just stop payin’ and dare the idiot MSB holder’s to get them out.
Beats livin’ in some Tiajuana shitbox.
This little subset of the fallout from the housing bubble is rarely addressed. Illegals are frequently buying homes by pooling several families earnings and all living in the same house. The CNN program said because of the higher risk these loans charge a higher interest.
If your average dual income families making let’s say up to $30K-$50K is going to be financially devestated from the crash then we can only guess the impact to 2-4 families in a single house who have to pool all their incomes to make that same $30K - $50K per year. Their interest on the suicide loan was higher to begin with now ARMs reset while many will be laid off in the construction industry and because of the slowdown in consumer spending in general.
Nice jump in inflation numbers out today. Looks like BB will have to make some more rate hikes. Watch out IO/ARM holders!
I mean IO/ARM borrowers.
The current volitility in the treasuries market is something else. Each new ‘number’ causing a spasmotic jerk up or down - says to me should a true negative come along, say a core rate at 2.5%+ this market will completely crater.
Up 3.6%. Hadn’t read the report. Down we go.
Home Depot To Stop Reporting Quarterly Sales
http://money.cnn.com/2006/05/16/news/companies/compsales_analysis/index.htm
Seems that drop in housing starts/projects is hitting them harder than they want you to know…
The home depot execs can sell while they are not reporting numberss.
David
http://bubblemeter.blogspot.com
Well, this foreign buyer says Скажи Нет мыльному пузырю недвижимости!
Kak vui peesats po russkee alphabet?
Control Panel -> Language & Regional Settings -> Input Locales / Languages -> Click Add Language -> Select “Russian”.
Then, using Alt+Shift you can switch between languages.
Ochen spaceebo.
Na zdorovie!
Isvaniti projousta, ya ne grevvario pa ruski!
Eat my shorts?
LOL
>Скажи Нет мыльному пузырю недвижимости!
Say ‘no’ to the real estate bubble!
Wow, babelfish.altavista.com actually pooped out a good translation for once…
OT but I justed checked and Queen Creek, AZ has now passed 2,700 houses. 2719 to be exact. I over heard someone in the hallway at work talking about two houses he bought in Queen Creek and can’t sell. Ha Ha Ha
>>>Did anyone buy a home in Florida last year to live in?
Most Floridians who actually work for a living have long since been priced out of the housing market
__________________________________________________________
So true, they’re having a hardtime hiring for the Marco Island Fire Dept. An average fireman’s/policeman’s salary mean you need to commute at least 60 miles to work if you want afforable housing. There’s plenty of guys on the dept that live in Miami and commute to Marco (90 miles). $45k is not going to comfortably afford you a $300k+ house even in Golden Gate in Naples. This is the first instance of wage inflation I know of. They actually pushed for higher wages recently for the fireman and policeman. Even so, I think they’re NEW starting salary is $45k, up from $40k. Not enough to live around there. The only guys that are doing ok have lived in that area for years and bought when prices were at least reasonable (160k for a house on Marco).
Colorado still leader in foreclosures-many short sales
http://www.denverpost.com/business/ci_3830835
what’s a short sale in the housing market?
I think a short sell is where the bank will take less than is owed on the house rather than have it go into foreclosure.
When the sales prices is not enough to cover outstanding value of the mortgage. Either the seller has to bring cash to close, or if they are insolvent, bank eats it
They send a letter to the IRS and you pay income tax on the forgiven amt!
Hi Guys:
This an excellent speech about economy and the bubble. It is 59 min long and it worth every minute of it. This guy is great.
Just copy and paste the address, I don’t know how to make a link.
http://video.google.com/videoplay?docid=-2640239019877885520&q=housing+bubble
Question: I know you guys have talked about this before but now I’m finally listening. We have about 100k in a diversified stock acct. We had planned to help it grown and eventually use a portion for a downpayment on a house in the OC in several years. (after some serious popping of course.) We’ve been getting pummeled in the last few days. Is this bubble related? I don’t know. But I’m willing to look at other options..
Where do you put your $ to wait out the bubble?
ING Direct offers 5.25% right now on one year CDs
Might not seem like much, but remember Warren Buffets First Rule of Investing :Don’t Lose Money
sell in May and go away…
The stock market was due for a correction and the inflationary data sprung the sell-off. The market had priced in a move to a 5% Fed Fund Rate, but nothing higher. Now a move to 5.5% is possible so the market has to digest it. The market will remain volitile this year moving on interest rate news and energy market news. I liked 1390 on the S&P 500 by the end of the year, however, if there is no rate pause or oil prices head higher all bets are off. A pause at the next meeting could send stocks screaming higher, however, commodity prices and the 10 year yield will go with it. Overall, I am still optimistic about 2006 but not optimistic past this year. I see a recession starting sometime in 2007. Like you, I am saving for a downpayment. I am using a money market that pays 4.2% so I can keep it liquid and the principal relatively safe. As for my equity positions, I’ll probably shift more conservative as we move into 2007. Hope this helps.
when housing falls, stocks generally do evey worse according to an IMF asset bubble study.
Take a look at KYN. Good dividend, closed end mutual fund that invests in pipelines. Dividend is taxed at 15% unlike if you own the MLP outright. Should only be a part of your portfolio however. Always diversify!
I don’t see the point in stocks - for 2005 S&P return was around 5%, and that is on relatively volatile asset. At the same time you could get benchmark bonds and cash returning about the same.
Right now, in the rising/uncertain rate environment I avoid long bonds too, and go for cash or short-term CDs. If there was a way to go multi-currency money market I would go for it, unfortunately I can’t find how to do it cheap enough.
That was my take.
“Where do you put your $ to wait out the bubble?”
Somewhat related….at least for those closer to retirement, did anyone catch PBS’s Frontline report on 401ks vs pension funds? Basically they were saying the system can’t work for the middle class…especially since it was designed to be supplemental income, not replacement. Apparently across the board the returns for middle income workers has been severely lower than for the upper income worker who might have a market background.
Another interesting concept: One benefits analyst said to a CEO he was visiting when a 25 year old brought water into their meeting, What would your confidence be in having that guy making all the financial decisions for your company? When the CEO gasped at the thought, the analyst would respond: So why do you force him to do it for himself.
If you are hedging inflation risk get ready for a wild ride. U.S. Global Investors Gold Fund USERX
the goldstocks are plunging at record speed lately, and it looks like there is still more downside to come.
nowhere to hide…
LIE OF THE WEEK AWARD:
Meritage Homes Corp. (MTH : meritage homes corp com
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11:13am 05/17/2006
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MTH58.77, -1.58, -2.6%) Chief Executive Steven Hilton on Wednesday said in spite of slowing housing markets, the home builder will meet its 2006 profit forecast between $11.25 and $11.50 a share, up from $8.88 a share in 2005. Speaking at the company’s annual investor conference, Hilton said the company expects to offset lower orders by expanding its community count. Despite some markets softening, he noted the long-term outlook for home builders is positive, citing immigration, retiree migration, job-income growth, more baby boomers purchasing vacation homes, and supply constraints due to entitlement delays and no-growth attitudes in some neighborhoods
“he noted the long-term outlook for home builders is positive”
In the long-term, we are all dead…
Despite some markets softening, he noted the long-term outlook for home builders is positive, citing immigration, retiree migration, job-income growth, more baby boomers purchasing vacation homes, and supply constraints due to entitlement delays and no-growth attitudes in some neighborhoods
I have a site on the same street I live on , all the workers where let go and illegals are doing the work at less then half the pay, job-income growth for mexico is what he is saying,
“Rates exact big toll
Blue chips poised for 2006’s second-worst dive
Consumer prices rise 0.6%, and 0.3% at the core, and inflation concern outweighs improved tech view.”
Speaking of Toll, they are trying so, so hard to use share buybacks to buck the crash on the broad market today. Too bad most floodwalls are not sufficiently high to hold back a tsunami…
http://tinyurl.com/zo7ps
Wow.
BHS
Brookfield Homes Corporation
37.89 -1.62 (-4.10%)
GM
General Motors Corporation
24.30 -1.23 (-4.82%)
Old CW: “As GM goes, so goes the nation.”
New CW: “As GM goes, so goes the housing market.”
To my untrained eye, it looks like Toll Bros stock price has to drop by another 80% to revert to historic trend. Any thoughts on how long it will take for this to play out?
http://tinyurl.com/rv5ed
A couple more bucks and this thing is at multi year lows. Good thing Bob Troll got out at the top.
He’s still by far the largest shareholder (he owns 12.2% of the company). That hardly qualifies as “out”.
Agree. I should have said he cashed out to the tune of many millions.
His market timing is amazing now that I think of it.
Almost like a self-fulfilling prophecy, neh?
Look here http://biz.yahoo.com/t/11/1190.html
No market acquisitions since at least 11-Aug-04! Only sales. To whom? To market suckers of course.
I guess this pattern of insider avoidance of market acquisitions of stock coupled with corporate share buybacks is part of the new business model which is going to help them weather this downturn better than the last one?
Check out this commentary http://tinyurl.com/ns6rz
Why would a company that is dramatically different than 15 even 10 years ago return to a price trand that followed that old company? Looking at anything prior to 1998-99 for guidance is irellevant to the company you are tracking in 2006.
The sudden six-fold rally starting right about 2001 has nothing to do with the bubble, right?
Companies like TOL are a lot like mining stocks, their share prices reflect the current value of the inventory, in this case - land. Tell me what the land is worth, and I’ll tell you how much TOL is.
I don’t recall seeing the glut of brand new McMansion tract homes stretched out to the horizon every day on my drive to work fifteen years ago that I see today. Is that the difference you are talking about?
If it is dramatically different, then the difference works in a direction which will make the mean reversion overshoot on the downside.
Robert, I’m replying to year earlier post concerning congestion, because I couldn’t attach a reply directly to it.
You sound like one of the smartest people on this blog. The poor lingus guy is obsessed with alleged right-wing conspiracies (he must have been crushed by the new Pentagon jet crash videos out yesterday), but I shouldn’t snap at him.
Our city council is retarded, and gushes with joy over all the overbuilding and crowding, and inflated property values.
I remember that idiot Jimmy Carter and his policies to stick it to the big guys, and how everybody ended paying more for gas, waiting in lines, and in general being miserable. Social engineering doesn’t work, but they keep trying.
The above is for Robert Coté.
Incredulus is a great handle. Unable to believe the facts on the ground is the giveaway. Your Fox News approved talking points won’t get any farther here than some of Lingus’ more eccentric posts.
Incredulous,
What policies of Carter are you talking about? Paying more for gas of course had nothing to do with the Arab oil embargo, Iranian crisis, and the break-up of the Bretton Woods financial system.
The bloggers here absolutely adore him and his strange paranoia and Bush obsession. If you snap at him, they’ll tell you to knock it off, so be careful. I’ve been here a year, and still haven’t always been able to predict how my colleagues here will respond to things. Thankfully, insightful commentary by veterans Robert and Getstucco, and newcomers like Inspector HC make wading through the bizarro partisan nonsense worthwhile.
In the end, every group ends up with one political fanatic who always tries to reroute the topic to party politics. Always one at every family gathering, and in every office environment. The universe gets whacked out of balance if there isn’t one.
Yes yes folks. Cowardice, treachery is alive and well here on this blog.
How cowardly it is to hide behind an alternate user name and blame Jimmy Carter for the complete and utter series of failures brought to you by Shrub. The desperation of the shrinking minority knows no bounds.
get a room.
Case in point.
Amen brother.
What a riot. Jimmy Carter gave us gas rationing, which was disaster. His Crude Oil Windfall Profits Tax was more like knock the wind out of the sails tax. The worst president prior to Bush, who now rivals him as the inept idiot of the century. However, Carter keeps opening his fat mouth when he shouldn’t by the classic rules of presidential diplomacy. But, then, of course, given his white trash family, I shouldn’t be surprised. Incidentally, he pronounced nuclear “nukeyer,” and was a nuclear engineer. Go figure.
What’s cowardly about using the name “Incredulous,” when you’re using a pseudonym, too? I’m incredulous about the state of the world, not the reality of the housing bubble, and I have no idea what Fox News “talking points” weinerdog43 is referring to. Since weinerdog is a redundancy, does this suggest something?
People stuck in the 60s and early 70s are depressing, especially those who weren’t born till the late 70s or later. Having bongs around the house is not attractive at any age, but for anyone over 16, it’s downright pitiful.
This letter is for the_lingus.
Postings on this site are too hard to keep in order, and many seem to disappear.
The above is for Robert Coté.
My reply won’t show up. sorry.
new try with wording changes:
Smart Growth took hold in several places and has made things much worse. There isn’t room to debunk SmUG here but the kind of zoning and public acommodations it requires serve to restrict supply, run up costs and dampen both preference and long term viability. In (re)creating the utopian urban mixed use built environment SmUG has encumbered municipalities with higher costs of the very services most likely to inflate in price. Add to that the inflexibility of responding to demographic shifts and you’ve got slow motion disasters like Portland. Portland is having a massive schools dislocation crisis because their anti-family policies are driving out traditional 2 parent plus kids and substituting alternative units. If homeowners are going to be shown swimming without clothing when the tide goes out then on the macro scale cities like Portland and Denver and Boston will do the same.
The compliment way above is for Robert Cote, the letter directly above is for the_lingus.
with the US dollar falling, I’m sure it’s even better for foreigners to wait it out than americans.
Keep talking to yourself….. boy.
From the Patrick.net site.
M.I.R.A.G.E.
Moneyed Immigrants, Rich Ancestors, Generous Expatriates are what the housing bubble has been based on.
The realt-whores in FL are getting desperate when they begin to attempt to sell to these imaginary groups.
Granted there are a tiny slice of the home buying populace but not enough to save the nationwide housing bubble.
Lingus, sorry if I offended. Type in haste; regret at leisure.
No problem. But the balloon floaters hate to face reality. Be careful.
Slightly off-topic, but this rash of alligator attacks in Florida (
http://tinyurl.com/olq4r) is making waterfront (i.e swampfront) homes look a lot less desireable. Typically builders have been able to sell new homes on small lakes, canals, and with “preserve views” at a substantial premium in my area (Palm Beach County). These stories would certainly make me think twice about buying on water or preserve in the western part of the county.
Especially if you’ve got little kids!
The alligator attacks are a harbinger of things to come in FL. Symbolic of the coming attacks on higher payments, resetting ARMS, hurricanes, declining home prices, etc. They probably built so many McMansions in the areas where the alligators are, that we have inhabited their territory. Cavaet emptor.
you forgot the fires !
Alligators gotta eat too! And with the overflow of Mchumans and their Mcmansions being built where they don’t belong, a couple less people might be a good thing.
On the other hand, I just was advised that my renters insurance policy now excludes dog bite coverage. I guess next year they will add in removal of gator bite coverage for the home too.
“Yes yes folks. Cowardice, treachery is alive and well here on this blog.
How cowardly it is to hide behind an alternate user name and blame Jimmy Carter for the complete and utter series of failures brought to you by Shrub. The desperation of the shrinking minority knows no bounds. ”
Damn, Lingus! I had no idea that the conspiracy was so insidious. Why don’t you pull your tin-foil hat down a little tighter on your pin-head and contact the MOTHERSHIP to beam you out of this mess?
Perhaps the mothership opted for a coathanger.
that’s the best line ever