The Housing Bubble

Kirstin Downey of the Washington Post had an online chat today:

http://www.washingtonpost.com/wp-dyn/content/discussion/2006/05/05/DI2006050501222.html

Topic:
Now we’re taking this topic straight to the readers — are high prices starting to affect your budget? Are you worried about your mortgage payment rising when your adjustable-rate mortgage resets? How are you handling the expenses? Or is the real issue whether or not consumers are spending beyond their means?

Two of the homes I put on my blogs as Flips of the Day” showed up on Craig’s list (mine is dated 5/19, the first on this link , and I’m referring to the two directly underneath it), so I went and put my own 0.02 in…we’ll see how long it stays up.

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Two of the homes I put on my blogs as Flips of the Day” showed up on Craig’s list (mine is dated 5/19, the first on this link , and I’m referring to the two directly underneath it), so I went and put my own 0.02 in…we’ll see if it stays up or gets pulled.

Check out this page on the Baltimore craigslist…the top FLIP ALERT is my post. the two houses immediately below mine (for $779K and $799K) are two homes I put on my blog this past Sunday as “Flips of the Day”, and then I find them on craigslist! I couldn’t help myself…hehe. I wonder how long it will stay up there?

I came across this article on a road rage study, it turns out that the cities with the most road rage are:
— Miami
— Phoenix
— New York
— Los Angeles
— Boston

These arealso the most “frothy” cities when it comes to the housingbubble. Causation or correlation?

http://biz.yahoo.com/prnews/060516/nytu183.html?.v=38

-Peter

Two interesting points in the most recent Mortgage News (at http://www.mortgagenewsdaily.com/5192006_Housing_Bubble_Expansion.asp ):
1) They actually acknowledge that there is a bubble and that it is no longer expanding;
2) They ponder whether builders “are now being propelled along a trajectory they are unable to moderate.” This would be an interesting topic.

Other significant numbers:

“In figures released on May 16, the joint survey revealed that building permits in April fell 5.4 percent from the revised March rate of 2,097,000 to an estimated total of 1,984,000. This is an 8 percent drop from the April 2005 estimate of 2,156,000 and 10.8 percent lower than the recent high-water mark of 2,221,000 permits issued in September 2005. Preliminary March figures (which were subsequently upgraded slightly from 2,059,000 to 2,097,000) had initially been reported as running 5.5 percent below the revised figures for February. Single family home applications make up the bulk of permits and these were issued at a rate of 1,502,000 in April, a drop of 4 percent since March and down from 1,654,000 permits (9 percent) issued one year earlier. Actual housing starts in April were at a seasonally adjusted estimated rate of 1,849,000, a drop of 7.4 percent from the revised March estimate of 1,996,000.”

OMG Ben please remove my multiple repeated posts! Sorry, was blogger having issues?

The realtor/broker in Nikki’s post looks like a mafia king. Would you trust Vito?

another bellweather i’ve started watching is the total homes for sale on zip. it seems to be growing by a thousand everytime i log on. it’s at 793k right now, and was 791 this morning, and 78x something just last night.

I came across this article on a road rage study, it turns out that the cities with the most road rage are:
— Miami
— Phoenix
— New York
— Los Angeles
— Boston
——————————————————————-
Glad to see I wasn’t the only one who thought there would be a correlation between “Psycho” drivers and the housing bubble. Here in the OC, I see alot of very unhappy people driving around these days.

Okay, perhaps this is off topic, perhaps not. I stumbled upon this recent Craigslist posting. It shows signs of a mania that has passed by:

http://norfolk.craigslist.org/clt/160176289.html

Key in on the “I put over $50K into this set” ..

A few months back some on this blog suggested a “celebration” of sorts at a local hotel or restaurant in the LA/OC area. The idea floated around a few of the threads but no plan was ever solidified.
Given all the recent evidence of the predictions on this blog, I would suggest that now may be a good time to claim a small victory. I would be more than willing to buy Ben the libations of his choosing, considering the peace of mind and entertainment he (an others) have provided on this blog.
I don’t remember the original bloggers who suggested this (was it Deb??), but I would like to participate and hope we could arrange quite a turnout.
Anyone else?????

Cramer on Mad Money warning that Nagasaki Ben is going to raise the Fed Funds rate to ,,,,GET THIS 6.5%!!!!!!!!!!!!

OH MY!!!!!

I’ll give the Beanie Baby fool about $10 for his $50K ‘investment’. What a crock of $HIT. My child can then play with them. And the neighborhood dog might drag one around. LOL

Can anybody can enlighten me how Seouls finance minster can be so confident he can keep his country’s r/e bubble from bursting?

http://joongangdaily.joins.com/200605/18/200605182220360539900090509052.html

Snuck into an “open house” to play dumb and see what ploys are being used to lure in the suckers. The obligatory “success” car (BMW) was parked in front of the property to add “curb appeal”.A pretty young blond all of 24 or so opens the door. Big teeth, big hair, high heels and nice legs. Could have been worse….

The business card is in my hand before I could even open my mouth.

“Hi, I’m Missy, thank you for coming to our “showing”. “Let me show you around the estate”. Estate? This was a 3b/2b 1200 Ft2 home in a “just ok” neighborhood for $475K. Wayyyy overpriced.

I listened while she chirped up the “advantages of home ownership”. Yawn… When I asked her about a utility easement her eyes glazed over and I could tell she had no idea about what I was talking about. Strike one.

More chatter… “The market is so hot here, she pulls up that Money Rah-rah article about Seattle on her PC and tells me “the house will be a good investment”. And comes the infamous “You know Microsoft is going to hire 10,000 people and there will be no more inventory”. Strike two.

I know several MS managers and they say the story is way overblown and that the actual number is about 2,000 and some of these are not even in Seattle (Bangalore).

We are almost done and she senses my disinterest. One last desperate attempt…”the seller is willing to throw in a carpet allowance”. I think…hmmm, if MS is hiring 10,000 people and Money is predicting continued price increases then why a seller concession? I wonder if it would be too much to up the ante and ask for latte every Sunday at Starbucks for 1 year? I mean this is Seattle and coffee is a “commodity” up here.

Finally I can no longer contain myself and mention the “B” word. She looks at me like she is struggling to remember something and then the sales coaching kicks in…”You know, YOY prices are higher than they were a year ago so how could there be a bubble?” Strike 3.

Makes you wonder why anybody is willing to pay a girl 6% to do something you could probably do better yourself.

What a crummy job. Just a glorified transaction parasite. During the last few years all one of these “professionals” had to do was just stand there to make thousands of dollars. No selling experience/ability required. So what good is a RE agent?

During the “mania” of last summer many RE agents wouldn’t even put their listings out, instead they would whisper “I have the good stuff on my PC”.

When did the RE “professionals” adopt the tactics of Colombian drug lords?

It truly is a great time to be renting.

Just putting it out there.

http://www.itulip.com/blancheevans1.html

More to chew on

http://bigpicture.typepad.com/comments/2006/05/hypocrites_infl.html

any thoughts on people who bought properties that wound up having toxic waste in it. some homeowners could be stuck with properties that they can’t do anything with.

“A few months back some on this blog suggested a “celebration” of sorts at a local hotel or restaurant in the LA/OC area. The idea floated around a few of the threads but no plan was ever solidified.”

A party to celebrate the comming depression? No thanks.

Listings are going through the roof here in No Va.

Sounds like realtor Missy might be needing another job dancing in some questionable club near Hollywood or City of Industry.

Or wherever those type of clubs are in Seattle. Maybe she will move to Hollywierd. She will fit right in.

Or wherever those type of clubs are in Seattle. Maybe she will move to Hollywierd. She will fit right in What a laugh. …… LOL

How about the bubble in hybrid cars?

Resale Prius are selling for more than new cars.

http://biz.yahoo.com/cnnm/060517/051106_used_hybrids.html?.v=1

“Don’t you want to live in a town where the postman, your kids teacher andthe grocery clerk can hope to someday own their own place?( Allbeit a SMALL place.)”

I already live there. In a rural midwest state, where $100K will still get you the best house in town.

Jim Puplava has a nice piece at Financial Sense on how inflation is grossly understated:
http://www.financialsense.com/stormwatch/2005/0624.html

I am seeing lots of entries in the DFW Craigslist for investor properties in Gilbert, AZ:

http://dallas.craigslist.org/rfs/162889695.html

This guy is barking up the wrong tree — no way would a TX investor want a buy and hold property for 440k with a tenant paying $1,350 in rent. For under 140k, one can find a tenant right here that will pay the same rent.

I didn’t see this article posted yet http://www.trueblueliberal.com/2006/05/19/coming-down-to-earth/ ? “It’s an article called Coming Down to Hearth” by NY Times OpEd Paul Krugman. Here’s some good stuff:

As I summarized it awhile back, we became a nation in which people make a living by selling one another houses, and they pay for the houses with money borrowed from China.

doesn’t anyone remember the Plaza Accord? from the NYT editorial page.

Gambling on a Weaker Dollar
Published: May 20, 2006

For some time now, shortsighted lawmakers in Congress have been threatening China with tariffs for what they call its unfair currency practices. The Bush administration, to its credit, has generally resisted the protectionist rant, most notably by refusing to brand China a “currency manipulator” in an official report to Congress last week.

China responded to the administration’s responsible policy and diplomatic courtesy this week when it loosened, a bit, the tether that binds the Chinese currency, the yuan, to the dollar. A stronger yuan implies a weaker dollar, as does the general strengthening so far this year of the euro and the yen. By making foreign goods sold here more expensive and American goods sold abroad cheaper, a weaker dollar would, in theory, eventually help reduce the United States’ huge trade gap.

The problem is this: unless a falling dollar is paired with reductions in the federal budget deficit, it could do more harm than good by driving up interest rates, perhaps sharply. That’s because the foreign investors who finance the administration’s “borrow as you go” budget are likely to demand higher returns to invest in a depreciating dollar.

But if budget deficits declined over the long run, the government’s reduced need to borrow would help keep interest rates low as the dollar depreciated. Then, after a lag, the falling dollar would shrink the trade deficit without risking big increases in interest rates in the process.

Unfortunately, the incessant tax cutting of the past five years precludes any serious attempt to reduce the budget deficit. So to keep interest rates in check as the dollar falls, the administration would have to persuade investors not to believe what they see: a dollar that is declining even as the United States does nothing to curb its borrowing.

That would be a difficult trick even for a Treasury Department that commanded respect. It will be especially difficult for Mr. Bush’s Treasury team, which has suffered a diminution of esteem and credibility.

The Bush tax cuts also make it harder for Americans as a nation to bail themselves out of the trade deficit by saving more. Higher personal savings would allow the government to finance its budget deficit without outsized foreign borrowing — another safe route to a cheaper dollar and a smaller trade gap. But the Republicans who control Congress let a tax credit for low-income savers expire this year to free up room in the budget for nearly $70 billion in additional tax cuts for high-income Americans over the near term.

That tax cut bill, signed into law this week by President Bush, also commits an estimated $53 billion through the middle of the century to help those same high earners shift their existing savings into tax shelters. This adds not one cent of new savings and presages big deficits far into the future.

A weakening dollar, on top of intractable budget deficits and a chronic savings shortfall, is a recipe for recession. The question now is whether the country will change direction in time. The portents are not good.

Have to admit this is pretty nice for the price. Bet this would be 400K plus in San Diego.

http://www.davidgriffin.com/index.aspx?List=2830&Agent=101&Area=1&id=ctrl/Detail.ascx

The Washington Post says suburban growth unsustainable from energy perspecitve.

http://dcbubble.blogspot.com/2006/05/wapo-scolds-its-suburban-readership.html

Home flippers’ investments flop
Passarelli made out well last year, grossing about $100,000 on a home he flipped in St. Lucie West and an additional $50,000 from his mortgage and real estate business. But this year is emerging quite differently. “The end result is it may have to all be given back,” he said.

(I’ll hold my tears for now…)

Was out driving in Central Florida today and saw the first “Generators - 1/2 Price!” sign. The weather’s changing in many respects.

Does Ben Bernanke have superhuman piloting skills which can save the housing market from a crash, and bring it down for a soft landing? Allan Sloan believes so. What do you think?
—————————————————————————————————
Getting Clobbered?
Interest rates just went up yet again. Whether you’re helped or hurt depends on whether you’re a borrower or a saver. Just don’t swim with the sharks.

By Allan Sloan
Newsweek
http://msnbc.msn.com/id/12875611/site/newsweek/
May 29, 2006 issue - One of Wall Street’s favorite sayings is that you don’t know who’s swimming naked until the tide goes out. Now, thanks to Alan Greenspan and Ben Bernanke, we’re starting to see some exposed butt. That’s because the present and former chairmen of the Federal Reserve Board have boosted short-term interest rates by a whopping four points in the past two years, revealing body parts of folks ranging from financially stressed homeowners to zillionaire hedge-fund managers.
…
I expect house prices to drift down—but not to crash. Here’s why. The Greenspans and Bernankes of the world don’t care what happens to you or me as individuals if we choke on too much housing debt. But they don’t want millions of us to default on our mortgages en masse, because that could shock the financial system—and the Fed’s job is to protect that system. Regulators can do what they did in the early 1990s to avoid having to close giant banks that were underwater: use their discretion. I think even if rates keep rising, we’ll muddle through, avoid anything resembling a foreclosure crisis and end up with a soft landing.

Surveyed the Hoboken, NJ open house scene yesterday. Inventory is out of control and listing prices still high, but 1-3% price reductions everywhere and being worn like a badge of honor (reduced, really! please come see my condo!). You can smell the fear, and I bet sales prices (those sales that do occur) are comfortably below listing, but agents are mum. Funny thing is, even if you really really want to live in Hoboken and really want to buy a place NOW (i.e., will overpay), prices are still $100,000 overpriced - the 2003-2004 overpriced prices seem damn reasonable. I predict a tumble back to 2003-2004 prices next year, followed by a possible dead cat bounce and then long protracted slide. But who knows, maybe the whole thing will collapse in the next 2-3 years.

Another lagging indicator that the bubble is toast: Parade Magazine weighs in big-time this weekend.
http://www.parade.com/contents.jsp?tempDate=tempDate
———————————————————————————————
-Where America Lives: How To Save on Your Mortgage
How will the new reality of higher interest rates affect you? We offer a few common scenarios and how to deal with them.
http://www.parade.com/articles/editions/2006/edition_05-21-2006/ARising_Rates
————————————————————————————————
-Where America Lives: Is It Time To Buy or Sell?
Learn what’s happening in the real-estate market in different regions of the country, and why.
http://www.parade.com/articles/editions/2006/edition_05-21-2006/Buy-Sell
————————————————————————————————-
-Where America Lives: Is Your Home Disaster-Proof?
Get tips from the experts on how to safeguard your home from whatever Mother Nature throws at it—be it fire, flood, wind or cold.
http://www.parade.com/articles/editions/2006/edition_05-21-2006/Disaster
———————————————————————————————-
-Where America Lives: Four Reasons To Downsize
Bigger isn’t necessarily better when it comes to where you lay your head.
(Interpretation: The McMansion Craze is So-o-o-o 2005)
http://www.parade.com/articles/editions/2006/edition_05-21-2006/Downsizing

Herb Greenberg thinks there are some other shoes to drop for housing sector stocks, besides the recent demise of the big Wall Street HBs. If any of you are looking for new short candidates, his suggestions might be worth consideration.
———————————————————————————————–
HERB GREENBERG
Housing disconnect
Commentary: Also, was the Sears quarter really that good?
By Herb Greenberg, MarketWatch
Last Update: 6:00 AM ET May 22, 2006
http://tinyurl.com/mp82d
SAN DIEGO (MarketWatch) — While housing stocks have been humbled, the shares of many lenders and title insurance companies are exhibiting remarkably strong hubris. Investor enthusiasm? Short covering? No idea, but the stocks of such companies as Countrywide (CFC : Last: 38.34-0.87-2.22% 10:21am 05/22/2006) and Accredited Home Lenders (LEND :Last: 52.07-0.68-1.29% 10:26am 05/22/2006) , First American (FAF:
Last: 40.53-0.17-0.42% 10:21am 05/22/2006) and LandAmerica Financial (LFG:last: 64.61-0.39-0.60% 10:21am 05/22/2006) as hovering at or near all-time highs.