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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
About Me
Name:Ben Jones
Location:Northern Arizona, United States
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N.H. shooter is found dead
GREENLAND – The man who shot five police officers, including this small town’s police chief, was found dead inside his home early today along with a woman who was inside the building when the officers tried to execute a drug warrant only to be met by a barrage of gunfire.
Killed in the shootings was Police Chief Michael Maloney, 48, who was one week from his retirement after 12 years on the force, Delaney said.
NH Pension bill may spur many police, fire retirements
Among these is Senate Bill 3, which raises the retirement age for police and firefighters. Anyone who is at least 45 and has 20 years of service can currently retire and receive full pension. But the legislation increases the retirement age to 50 and the years of eligibility to 25.
http://www.eagletribune.com/latestnews/x977556586/NH-Pension-bill-may-spur-many-police-fire-retirements
CONCORD - Former police officers, from sergeants to police chiefs, dominate the top 500 public pension earners, according to a state list released Tuesday.
http://www.nashuatelegraph.com/newsstatenewengland/939363-227/top-retirement-earners-include-4-ex-nashua-cops.html
Too soon. Greenland kids went to school w/us in my hometown. I was up on Facebook last night w/threads where people were in their basements as advised by police after hearing bullet shots. For one woman, the action was across the street. The community is in real pain from the loss of this man who was known as being a great guy. There were seven other officers and detectives also hurt in the shooting spree.
Disconcerting for the PE parasites.
NEW YORK, April 11 (Reuters) - Oaktree Capital Management , a private equity firm focused on debt investments, sold fewer shares than expected in an initial public offering that priced at the bottom of an expected range on Wednesday, an underwriter said.
The tepid response to the IPO raised concerns that investors have become wary of private equity manager flotations, including the upcoming offering from Carlyle Group LP, which boasts $147 billion in assets under management.
http://www.reuters.com/article/2012/04/12/oaktree-ipo-idUSL2E8FBNY220120412
Found in the US media in the past week:
‘buy now while you can’
‘prices are still way below where they ought to be’
‘new homes’ prices are bound to go up, too’
‘we’re paying money toward something we own instead of throwing it away on renting’
‘Buyers feel a sense of urgency to get into this market.’
‘History says prices are likely to rise. By not acting now, certain buyers run the risk of being priced out down the road’
‘This is diamonds in the rough …neighborhoods that will skyrocket in value’
Did you ever notice that at some points in a river, around the edges, water appears to run uphill?
Did you ever notice that at some points in a river, around the edges, water appears to run uphill ??
Back eddy….Some of the best spots for flyfishing particularly for steelhead…They rest in those spots…
Steelhead….another name for “FB round two ‘!
So I’m not imagining this new campaign by the Housing Crime Syndicate and their media proxies no?
It’s the trickle-down grifter economy. Starts at the top, in gubbomin and finance, makes its way down to mortgage brokers, realturds, employers and the general public. People WANT to be fooled. I don’t know why, but there are plenty willing to oblige, to volunteer to be victims. Personally I couldn’t handle the stress.
And why do they so badly want to believe in the easy money? It would seem it’s because earning the old fashioned way has become nearly impossible for most people.
Cargo cult
“It would seem it’s because earning the old fashioned way has become nearly impossible for most people.”
As someone who sort of straddles the self-employed and employee statuses, I think you’re very right about this. I’ve seen the grifting mentality take over in formerly decent companies. People are very freaked out about it, both employees and management alike, all very uncertain and mistrustful of each other. I was recently “hired” by a company, except they couldn’t quite tell me how I was going to be compensated. (Maybe we’ll do it this way, maybe that way) And then they handed me paperwork from an employee leasing company that was so poorly written, I just couldn’t sign it. So I walked. Probably a good thing anyway, way too much uncertainty.
And why do they so badly want to believe in the easy money?
Because they have been taught (and observed as well) that only fools actually work for wages. The real money is in getting cuts from productive people’s labor and making deals.
The housing bubble investment mentality rages on!
What will the shadow inventory look like, say 3-5 years from now? There seems to be an unspoken assumption here that 3-5 years from now, there will still be a stock of foreclosed but well-kept homes, just in time for an HBBer to snap it up at 70% off peak. Hence talk like “why buy to today when you can buy tomorrow for 65% less.” But is that a valid assumption? Will the shadow inventory quality really hold steady down to the bottom, or will the absolute bottom be almost all dregs?
Of course it’s possible to get lucky and find something good on the last day of the sale. But anecdotal evidence does not bear this out. Better quality is already selling at 40% off peak (I am an example), and anyone who possesses quality will see those sales and put their stuff up for sale. Is that inventory going to last to 70% off peak? Heck, some of the houses themselves may not live to see 70% off peak.
In past well documented cycles, house prices bottomed years after foreclosures peaked. Maybe 3 or 5 years later, depending on where it was. The lowest price isn’t realized when foreclosures are most prevalent. The shadow inventory, govt programs have only served to muddle the picture.
“Of course it’s possible to get lucky and find something good on the last day of the sale.”
Housing and tomatoes are a lot different.
“But anecdotal evidence does not bear this out.”
I don’t go on anecdotal evidence. But I can say the unprecedented level of intervention (known as “extend-and-pretend”) has prolonged the duration of the housing bust from its normal four-or-so-years from peak to trough, to an extended duration of unknowable length. The median time from peak-to-trough in housing busts that occurred over the past several decades in Western countries has been about four years.
Given that this was by far the most massive bubble on record, I am guessing this one will take far longer than the median time to reach a price trough, especially in light of extend-and-pretend policies that are dragging out the episode.
International Monetary Fund: World Economic Outlook 2003
WHEN BUBBLES BURST
REAL AND FINANCIAL EFFECTS OF BURSTING ASSET PRICE BUBBLES
…
To qualify as a bust, a housing price contraction
had to exceed 14 percent, compared with
37 percent for equities. Housing price busts
were slightly less frequent than equity price
crashes. In 14 countries with real residential
housing prices between 1970:Q1 and 2002:Q3,
20 housing price crashes were recorded (compared
with 25 equity price crashes). This corresponds
to roughly one bust a country every 20
years. Most housing price busts clustered around
1980–82 and 1989–92, while equity price busts
were more evenly distributed across time (see
Appendix 2.1).
Housing price crashes differ from equity price
busts also in three other important dimensions.
First, the price corrections during housing price
busts averaged 30 percent, reflecting the lower
volatility of housing prices and the lower liquidity
in housing markets. Second, housing price
crashes lasted about four years, about 1.5 years
longer than equity price busts. Third, the association
between booms and busts was stronger for
housing than for equity prices. The implied
probability of a housing price boom being followed
by a bust in the sample is about 40 percent.
Housing and equity price busts have,
however, one important feature in common.
During the 1970s to the 1990s, they generally
coincided or overlapped with recessions.
…
Is QE3 “in the bag” now after last week’s week employment number?
Joe Stiglitz on quantitative easing FAIL, highly critical of the Fed
There is something patently disturbing about the camera work on that interview…
Quantitative Easing Revisited
So far as I can tell, the Ruppert Murdochs of the world don’t have much control over what shows up on YouTube.
Quantitative Easing is destroying UK economy and savers (09Deb12)
I can’t recall the Fed discussing the redistributive impacts of quantitative easing, but lots of others are freely discussing them.
Printing Poverty
Squeezing the poor - Quantitative easing hits the poorest most of all.
The exchange on QE is a couple of minutes into the clip, but well worth the wait. The Brits pull no punches when they debate the pros and cons of untested policies.
Market Snapshot
Dow 12,911.40 -75.19 -0.58%
S&P 500 1,375.61 -11.96 -0.86%
Nasdaq 3,020.66 -34.89 -1.14%
U.S. Stocks Post Biggest Two-Day Advance in 2012 on Fed
By Rita Nazareth - Apr 12, 2012 1:58 PM PT
U.S. stocks rose, giving the Standard & Poor’s 500 Index its biggest two-day rally in 2012, on policymakers’ signals that interest rates will remain low.
Commodity shares gained the most among 10 S&P 500 (SPXL1) groups. The Dow Jones Transportation Average, a proxy for the economy, added 2.2 percent. Hewlett-Packard Co. (HPQ) surged 7.2 percent, the biggest advance since 2009, after Gartner Inc. said the global personal-computer industry grew in the first quarter as the company remained a market leader. Google Inc. (GOOG) added 1.8 percent at 4:54 p.m. New York time as profit beat estimates.
The S&P 500 advanced 1.4 percent to 1,387.57 at 4 p.m. New York time, rising 2.1 percent in two days. The Dow Jones Industrial Average climbed 181.19 points, or 1.4 percent, to 12,986.58. About 6.3 billion shares changed hands on U.S. exchanges today, or 8 percent below the three-month average.
“We have the ingredients for a better tone to the market,” said Keith Wirtz, who oversees $15 billion as chief investment officer for Fifth Third Asset Management in Cincinnati. “The bar was set low, we might have a good earnings season and a couple of Fed officials are providing some rhetoric. If there’s an erosion of economic conditions, it’s likely that we’re going to see action by the Fed.”
Equities rose today as Federal Reserve Vice Chairman Janet Yellen and New York Fed President William C. Dudley endorsed the central bank’s view that borrowing costs are likely to stay low through 2014. Those comments overshadowed investors’ disappointment after a report showed that more Americans than forecast filed claims for jobless benefits last week.
…
It’s funny how no posters here have any comments on the topic of QE3, given how critical it is to the future direction of the U.S. economy. Am I really the only HBB regular who finds this subject endlessly fascinating?
I’m so frustrated by it that there’s nothing to say. I don’t like it. It’ll happen anyway. The rich will get richer and the poor will get screwed. Again. What is there to discuss?
“What is there to discuss?”
…
“The rich will get richer and the poor will get screwed.”
Great start! The Fed isn’t very good at recognizing the redistributive consequences of their policy decisions; perhaps we ought to help them out a bit?
Has the Chinese growth slowdown bottomed out, with a soft landing on the way?
And does frequently saying ’soft landing’ increase the chances of one occurring?
The Associated Press April 13, 2012, 08:18AM ET
China’s economic growth falls to nearly 3-year low
By JOE McDONALD
BEIJING
China’s declining economic growth fell to its lowest level in nearly three years in the first quarter, but analysts said it should rebound in coming months.
The world’s second-biggest economy grew by a still-robust 8.1 percent in the three months ending in March, down from the previous quarter’s 8.9 percent, data showed Friday. It was the weakest expansion since the second quarter of 2009 but above the government’s 7.5 percent target for the year.
China’s rapid growth has fallen steadily since 2010 as a slump in global demand battered its exporters and Beijing tightened lending and investment curbs to cool an overheated economy and surging inflation.
An uncontrolled slump could have global repercussions, hurting demand for oil, industrial components and consumer goods at a time when U.S. and European growth are weak. It also might fuel political tensions in China as the ruling Communist Party prepares for a sensitive, once-a-decade handover of power to younger leaders.
“This quarter’s growth was pretty weak,” said IHS Global Insight analyst Xianfang Ren. “Starting from next quarter, growth should strengthen.”
The World Bank and private sector analysts expect China to achieve a “soft landing,” with growth rebounding later this year. But some worry the slowdown might be too sharp, raising the risk of job losses.
The World Bank and International Monetary Fund expect 8.2 percent growth for China this year — below 2010’s explosive 10.4 percent expansion but ahead of low single-digit forecasts for the United States, Japan and Europe.
Last year’s unexpectedly steep plunge in demand for China’s exports due to U.S. and European economic woes prompted communist leaders to reverse course and ease controls on bank lending to help struggling manufacturers.
“The `soft landing’ scenario is very likely,” said Frances Cheung, senior strategist for Credit Agricole CIB in Hong Kong.
Still, Cheung said financial markets might react badly to the latest data, because a recent rally in prices was based on expectations Chinese growth would be stronger.
Chinese leaders are trying to reduce reliance on exports and investment and shift to growth based on domestic consumption. In line with that, they reduced their annual growth target through 2015 to 7.5 percent from the 8 percent level of recent years.
On Friday, the Cabinet issued a statement pledging to press ahead with reforms intended to increase domestic consumption but announced no major policy changes, suggesting Communist leaders are satisfied with the latest economic performance.
The statement cautioned that China still faces difficult economic conditions due to uncertainty in key export markets and possible pressure for prices to rise. It called on the public to remain diligent and calm.
In a possible sign of gathering economic strength, Chinese factory activity, retail sales and exports accelerated over the course of the first quarter.
Industrial production rose 11.9 percent over a year earlier in March, up 0.5 percentage points from the January-February period. Growth in retail sales rose by a similar margin to 15.2 percent. Export growth rose two percentage points to 8.9 percent, though that was well below China’s double-digit rates in recent years.
“China’s economy is stabilizing,” said Sheng Laiyun, a spokesman for the National Bureau of Statistics, at a news conference.
IHS Global Insight’s Ren said China also should benefit from an improved outlook for the U.S. economy, which would help exporters, and recent growth in real estate sales.
Data released Thursday showed bank lending in March soared to just over 1 trillion yuan ($160 billion), well above analysts’ forecasts.
On Thursday, the World Bank trimmed its growth forecast for China this year from 8.4 percent but said it should avoid an abrupt downturn. It said growth next year should rebound to 8.6 percent.
“The near-term challenge we see is maintaining this `soft landing‘ that we see under way,” the bank’s lead China economist, Ardo Hansson, told reporters.
…
I remain mildly annoyed that Manhattan rental prices hit an all time high this month.
I have to assume nobody is putting a gun to your head and forcing you to rent in Manhattan?
—I have to assume nobody is putting a gun to your head and forcing you to rent in Manhattan?—
Straw Man. Irrelevant. This is a blog to discuss elements of the housing bubble.
Yo EvilDoc is back!
But now no longer evil… just Mc.
Fascinating… no on then has ability and/or willingness to address the bubble issue, here… the apparent violation of da rules of da game by the town o’ Manhattan.
I’m patient. I save. I’m not starving. Just bought a monster car (used, no worries). Good job. Happy income. Renting still a bargain vs mortgaging in Manhattan, but rents keep going… up. Higher than 2010. Higher than 2008. Higher than 2006.
Guess no one here has the answer either.
Here’s just one article. Wish I were making it up
http://www.dnainfo.com/20120412/upper-east-side/manhattan-rents-reach-all-time-high-report-says
“Just bought a monster car…”
Been noticing a lot of posts around here to that effect. How many HBB regulars recently chucked some of their saved-up downpayment money at a car purchase?
Just bought a monster car (used, no worries).
I’ve heard of monster trucks…is it something like that?
I have to assume nobody is putting a gun to your head and forcing you to rent in Manhattan?
Everyone has their own personal reasons for choosing to live in a particular place. I find it irritating when folks just assume that moving to another city is simply a financial decision.
People who are able to pick up and relocate are often those without family and/or a close-knit community of friends. I’d rather be surrounded by people I care about and have less money than move someplace totally foreign and not have friends and family nearby.
To each their own…
People who are able to pick up and relocate are often those without family and/or a close-knit community of friends. I’d rather be surrounded by people I care about and have less money than move someplace totally foreign and not have friends and family nearby.
My family and friends are what keep me living in Tucson and making trips to places like PA and VT.
And ya know what? I recently found another branch of the family. Well, actually, they reached out to me. Some of them live in France - how cool is that?
To each their own indeed…including for the privilege of living in Manhattan at prices some of us think don’t justify the many advantages.
How silly of you.
I didn’t post and didn’t ask for input regarding the *choice* involved in spending what’s needed to live in a given town. Such has little do with bubble economics and analysis.
Rather, I’d hoped that on a big blog dedicated to the housing bubble, which we seem to feel started the *pop* (or at least the slow leak) around 2005-6, we’d get some comments as to why NYC seems to be taking its sweet time in honoring the principles we’ve invoked here. And, yeah, I have some ideas.
‘we’d get some comments as to why…’
We’ve covered it. You can use the search function on the right, but with over 7000 posts here (and this is my 3rd HBB blog), it may take a while.
“People who are able to pick up and relocate…”
They have a name: RENTERS.
“…input regarding the *choice* involved in spending what’s needed to live in a given town. Such has little do with bubble economics and analysis.”
You ought to take an undergraduate microeconomics course, especially before lecturing me on what economics is.
Tradeoffs among choices are a big part of the story.
I promise in turn not to lecture you on medicine.
—You ought to take an undergraduate microeconomics course, especially before lecturing me on what economics is.—
My econ experience at Princeton was engaging. And, really, I don’t need you lecturing me on what I can choose to lecture you on.
Tradeoffs are irrelevant. I’m exploring the NY housing situation in the context of a housing bubble.
Straw Man. Irrelevant. This is a blog to discuss elements of the housing bubble.
This is why I held off admitting that I had bought until about a month after the fact. I was afraid of this.
—This is why I held off admitting that I had bought until about a month after the fact. I was afraid of this.—
You mean because some guy here quacks the same catch phrase five times a day, and once he gets into discussion with anyone, he uses ad hom insults and mutates their board names, instead of engaging in issues-oriented discussion?
Nah, I don’t mind that. Says more about him
Only golf claps for buyers, please.
How ’bout those moneychangers doc…..
I luvvv changing’ money. Used to collect coins. Traded ‘em in on another collectable… and a heluva new old Jaguar.
Oh sorry… here’s the Jag.
Year 2000 XKR Coupe. British Racing Green (the only color, really, for a Jag). 18,000 miles (really). As-mint condition. My dream car since 1997 (as XK8). But, won’t park it in NYC where the attendants park by braille. So it goes.
http://i44.tinypic.com/axea8z.jpg
Oh sorry, I take back all I said above. If you own a Jag and live in Manhattan, you definitely know more about economics than I do.
Not if he bought a used 2000 XKR, he doesn’t.
ahansen is correct… more or less
While the Ford-owned Jags largely obviated the old “You gotta own 2 Jags, one for driving and the other for the repairman’s garage”, indeed maintenance can be a bit of a bear. Having done the proper research, i knew that even with this near-mint car, I’d need a $1200 chain tensioner replacement and a couple other prophylactic tweaks, but then I tell my patients to spend $600 on prophylactic colonoscopies, so I have healthy respect for preventative medicine.
But, buying a car like this ( albeit at >75% discount from original– when new– price) is not an excercise in economic efficiencies in transportation.
Rather it is an economic act of love and passion… one that actually is legal
And, the depreciation should be substantially less than that of a McMansion
Not if he bought a used 2000 XKR, he doesn’t.
ahansen, I think that’s the funniest post I’ve ever seen from you.
The Associated Press April 13, 2012, 12:21PM ET
Weak Chinese data weighs on markets
By COLLEEN BARRY
U.S. and European stocks slipped Friday on weak Chinese economic data and persistent tensions in eurozone debt markets, while Asian markets were buoyed by a botched North Korean missile test.
Concerns about the prospects for global growth remained the market focus after official data in China showed its economy grew at an 8.1 percent pace in January-March, its slowest in nearly three years.
Although Asian investors brushed off the news on hopes the country would provide more economic stimulus, European markets gave it more weight. As the world’s largest exporter, China is a bellwhether for global economic growth, which European countries desperately need to heal their public finances.
France’s CAC-40 closed down 2.47 percent to 3,189, while Germany’s DAX shed 2.36 percent to 6,583. The FTSE 100 index of leading British shares fell 1.03 percent to 5,651. Meanwhile, Spain’s IBEX lost 3.58 percent to 7,250 on news that the country’s banks had borrowed (EURO)316 billion from the European Central Bank in March.
U.S. stocks also fell on opening, with the Dow Jones industrial average down 70 points at 12,916. The broader Standard & Poor’s 500 index was down 10 points, at 1,377.
“Unimpressive macro newsflow continued, which has kept concerns about global economic prospects at the forefront of the market’s mindset,” Credit Agricole analysts said.
…
—CIBT: Oh sorry, I take back all I said above. If you own a Jag and live in Manhattan, you definitely know more about economics than I do.—
Fascinating. Hostility and Straw Man all in one post. As I never compared our knowledge of economics, I wonder why you feel put upon enough to snark about it. Feeling insecure? Or just cranky.
Per Ben: “‘we’d get some comments as to why…’
We’ve covered it. You can use the search function on the right, but with over 7000 posts here (and this is my 3rd HBB blog), it may take a while.
”
I have no doubt.
However, if we never touched upon subjects that had ever been covered here before, the daily post count presumably would be a tad smaller