‘The Plane Is Going To Land’ In Massachusetts
The head of the Massachusetts realtors did a Q&A. “The red hot housing market in 2005 has begun to cool down this year. But David Wluka, owner of Wluka Real Estate in Sharon, says the market is returning to normal and not crashing. He said the roughly 20 percent decline in sales volume from January 2005 to January 2006 is a sign that prices are stabilizing.”
“Why did the housing market cool down this year? Well, you just can’t maintain an overheated market forever. It’s a natural thing, (housing) markets go up and they go down.”
“Expectations are different. People up until 2000 were looking at houses as an investment (where they would) retire and pay off the mortgage. The cycle of appreciation started and they started looking at it as a source of income.”
“So (the housing market) is cooling down, but the plane is not crashing. It’s going to land. Maybe a bump or two on the way down, but the plane is going to land.”
“How does a cooled-off housing market affect the seller, and on the other side of that, the buyer?”
“We’ve had a major problem educating ourselves as to the realities of the marketplace. And again, this is the short horizon versus the long horizon. All they see is what the neighbor sold their house for last month. For the sellers, even though it’s a short horizon and it’s money they’ve never really had, it’s money they saw come and go.”
“For example, they say, ‘I could have sold the house for $600,000 three months ago and now it’s only worth $550,000, I’ve lost $50,000.’ No, they didn’t and its difficult to (educate them) to overcome that thought in their head.”
“The buyers need education also (because) they were afraid of the (housing) bubble. I must say that I spent most of my last six months talking about the bubble, for which there’s no statistical proof.”
“What kind of role will interest rates play in the housing market over the next year? The (Federal Reserve) is continuing to try to cool a market that’s heating up for non-housing-related issues. People become potential victims of getting into financial trouble. Because you have an expectation, the rates have gone up and there is a great temptation to take a mortgage vehicle that would let you still have (an expensive) house, but become dangerous on such things as zero-interest mortgages.”
“Will we see more foreclosures because people can’t afford to pay their mortgage payments anymore? People who are on the margin and couldn’t afford conventional financing and probably shouldn’t have bought a house or should have reduced their expectations, which is more the case, those kinds of loans are going to be in trouble.”
“It’s important to get the buyers to understand that just because the bank said they can afford it, doesn’t necessarily mean that they can.”
The Lowell Sun. “Until this spring, Northern Middlesex County had managed to buck the statewide trend of increased foreclosure filings. That has now changed in a big way, according to Middlesex North Register of Deeds Richard Howe Jr.”
“In March, the foreclosure process was started on 48 homes in the region, double the number from last year in that month. In April, 58 homes were threatened with foreclosure, up 76 percent from 2005. And during the first 30 days of May, 71 properties were hit with foreclosure filings, a startling 294 percent year-over-year increase.’
“‘It was like a gas pump going up,’ Howe said of tracking the foreclosure numbers this month. Howe suggested that because the housing boom was late in coming to the region, the wave of foreclosures may also have lagged.”
“The conventional wisdom is that buyers, seduced by the booming residential real-estate market of recent times, entered into risky and unconventional mortgages that became huge liabilities when the market cooled.”
“ForeclosuresMass reported that there were 1,227 foreclosure filings in the state in April, 44 percent higher than last year and almost 90 percent more than in 2004. Jeremy Shapiro, president and co-founder of ForeclosuresMass, said things are getting worse.”
“Lowell Realtor Brian McMahon of ERA Morrison said that most properties being targeted for foreclosure belong to first-time homebuyers who do not have the resources to weather a fiscal crisis. ‘They’re used to paying $800 to $1,000 a month for rent, and now they’re paying $1,500 to $2,000 a month,’ said McMahon.”
“Consumers who entered into ‘interest-only’ mortgages will not be affected until five years after signing the agreement, Howe said. Interest-only loans require that buyers pay only the interest on their home for five years, then they start paying off the principal and monthly payments skyrocket.”
“‘The interest-only phenomenon is kind of a ticking time bomb,’ Howe said. ‘The real crisis will hit in 2008 when all of those … loans convert and people start defaulting in massive numbers.’”
‘People up until 2000 were looking at houses as an investment (where they would) retire and pay off the mortgage. The cycle of appreciation started and they started looking at it as a source of income’
‘there were 1,227 foreclosure filings in the state in April, 44 percent higher than last year and almost 90 percent more than in 2004.’
And nobody ever said ‘buy now or be priced out forever’ in Mass?
I have owned 6 houses since 1970, not once did I ever think of them as investments or as assets. They were places to live. Home ownership is a liability - it does not generate cash income, it requires maintenance and real cash expenditure. There is something wrong when a realtor regards housing as an investment and sells to prospective purchasers that it is an investment and not just a place to live.
“‘The interest-only phenomenon is kind of a ticking time bomb,’ Howe said. ‘The real crisis will hit in 2008 when all of those … loans convert and people start defaulting in massive numbers.’”
_________________________________________________
We are still waiting for the 1st inning to begin. The pitcher is on #3 (he gets 8 warm-up tosses) and soon the ump will announce “PLAY BALL”. Then the ROUT will begin!
All this baseball talk of late has me wanting to try the same analogy.
Assume one year per inning. This game started in 1998. The first inning showed the bulls potential. The next couple of innings showed the bulls were for real. They really put the hurt on the bears for several innings.
Just when their starting pitcher was fading in the 5th inning, 2003, they brought in someone even better. By 2005, the 7th inning, they were up 10 to 1 and predicting never ending winning seasons.
In the bottom of the 7th, however, (Fall 2005), the bears got some traction. They got some solid base hits, got some RBI’s, but no home runs yet. Call it 11 to 3.
Now we’re in the top of the 8th (Spring 2006). The bulls are supposed to deliver (traditional Spring buying season) but they are falling apart; they’re choking. The bears bullpen has suddenly started to deliver results. Still 11 to 3.
The bottom of the eight starts this fall. The bears have the sweetspot of their rotation on deck, and these hitters aren’t juiced up like the Barry Bonds and Mark McGwires and David Lereah’s of the bulls team. They are the real deal.
I predict in the bottom of the eighth, this fall, the bears will score 8 runs to actually tie the bulls 11 to 11. Panic will ensue.
In the top of the ninth the bears will strike out all three of the first bull batters on 2 and 0 counts. Zip, zap, done.
In fall 2007, the bottom of the ninth, the bears will…
“Baseball been berry berry good to me”
sell high buy low in SLO,
Absolutely perfect! Starting in 1998 shows (me anyway) that have your “slider” working for you. Nothing grinds more than when I talk with someone that bought “way back in 2002″. That was the 4th inning already! I’m O.K with the Fall of 2007, works for me.
there will be plenty of pain for everyone ,whether you bought this bs or not you are affected.lots of jobs coming up for bill collectors,bk and divorce lawyers,foreclosure experts and appraisers(all those foreclosures have to be appraised)
I can’t remember where I read it… but awhile back on the blog a research article was quoted to say that the majority of the ARM’s on the market where of the short variety… ie, less than 3 year fixed period…
Anyway… Like most have said on this blog the pain of resets will be in full force in ‘07.
OT…
Inflation concerns dominate FOMC May 10 meeting: minutes
By Greg Robb
Last Update: 2:00 PM ET May 31, 2006
WASHINGTON (MarketWatch) — At their policy meeting earlier this month, Federal Reserve officials appear very worried about rising prices and expectations among consumers that prices will rise further, according to a summary of their meeting released Wednesday. At its May 10 meeting the FOMC voted to raise its target for the federal-funds rate to 5.0% from 4.75%. It was the 16th consecutive quarter-point increase since June 2004. According to the summary, Fed officials even debated whether to increase the funds rate by 50 basis points at the meeting, although there was also discussion about leaving policy unchanged. But recent price developments clearly had the central bankers’ attention. FOMC members expressed “some concern” about recent price developments, with core consumer inflation rising a little higher than they expected.
2:04PM 5/31/2006
A 50 basis points increase in June should not be out of the question. Less than likely, but not impossible in view of the last cpi and sold houses data. Although we are biased, I think that a tough stand on BB’s part is more logical than a BB move driven by having to show that he does not give in to Wall Street reporters. The latter would be suicidal imho.
As usual, the Fed is responding to yet another asset bubble (it largely created in the first place) with too little too late. What they should be doing is aggressively hiking rates by 50-100 bps, to pop the bubble and let all the bad debt wash out of the system quickly. No way they’re gonna do that, what with all the NAR/mortgage Co.-owned Congressmen and political appointees they must answer to. End result will be a long painful drawn-out, slow-motion crash, with wave after wave of ARM resets, defaults, foreclosures and reluctant FBs desperately clinging to their underwater condos until the bitter end. Personally, I like to take my lumps/medicine quickly, recover and get back on my feet. Unfotunately that’s not the way this Fed operates.
Would one of you PPT skeptics explain what holds headline stock indexes aloft when the Fed meeting minutes clearly indicate they are contemplating 50bps rate hikes? Because without intervention, the stock market would crash on this kind of news, especially when Wall Street did such a great job of convincing itself into believing that Bernanke would be the reincarnation of G. William Miller…
Lets see what happens between now and 1:00 - I will go on a limb and say the market goes RED!
And I will go out on a limb and suggest our new Treasury Sectretary (and Plunge Protection Team leader) will bring a few Wall Street tricks to bear in order to ensure that a bad month ends on an up tick…
Looks like I am going to be wrong. $hit!
Maybe you were wrong, but maybe not. Check out the interesting divergence between the headline-grabbing DJIA and some less conspicuous bubble stocks…
http://tinyurl.com/ptq6o
“Final-day deception
While traders seek to divine message of Fed minutes, markets close May with an uncharacteristic gain.”
The Marketwatch commentators are certainly accurate in referring to the last-minute gain as a deception…
You assume that because the market did not go down because of what you interpret to be really bearish news, there must be a PPT. That’s like saying that the Super Bowl must have been fixed based solely on the fact that you thought Seattle should have won.
One more question, Oh, All-Knowing One: just how much should the stock market have gone down based on the FED minutes? 2%, 5%, 25% ????
I am not all-knowing. But if you and I were less lazy, either of us could identify a time in fairly recent history where a surprise release of information that the Fed was contemplating the prospect of tightening by more than the markets had anticipated would have resulted in a substantial drop in the stock market, not a mysterious and significant gain on what objectively qualifies as a negative shock to expectations.
Suerbowl was fixed. Wasn’t it obvious? Professional sports have been fixed before. Remember Alex Karras? The Black Sox?
http://app.ny.frb.org/markets/omo/dmm/temp.cfm?SHOWMORE=TRUE
Why relevant?
The Fed can manage by controlling short-term interest rates and controlling liquididy via short-term repo operations along with a few other tools. When they are raising interest rates while dumping cash out the liquidity spigot, then they are talking tough publically but cushioning the blow out the back door.
100% True. The “conundrum” was a con!!
Beware, your money is worth less and less every day now!
“The (Federal Reserve) is continuing to try to cool a market that’s heating up for non-housing-related issues.”
Sorry David, Fed is absolutely targeting housing.
I agree. Many people say the Fed will do this or that to try and maintain home prices, but IMO they are attempting to bring them down with as little damage as possible.
FOMC May Minutes:
http://www.federalreserve.gov/fomc/minutes/20060510.htm
David
http://bubblemeter.blogspot.com
“So (the housing market) is cooling down, but the plane is not crashing. It’s going to land. Maybe a bump or two on the way down, but the plane is going to land.”
Am I the only one totally sick of these stupid metaphors? Now the bubble isn’t a bubble but a plane? I guess that’s supposed to work with the equally stupid and annoying “soft landing” phrase. Ugh. Enough already.
Maybe a bump or two? Yes, the plane is going to land, but the gear is broken, sparks fly as the nose touches the ground, and a bunch of vehicles with light bars are going to be required to cary off the casualties.
Oh, I think the plane will stay on the runway. But after this is over, buy a new one. The old one will be recycled into beer cans.
Now the feds will ensure the airport will keep running and a full compliment of takeoffs and landings will occur on the other runways. But until the investigation is complete and the mess is cleaned up, the primary runway is shut down.
I like this analogy. Its one of the few that’s accurate.
Neil
I loved this quote too.
“This looks like we’re touching down for the soft landing we’ve been expecting,” said NAR Chief Economist David Lereah in a March 6, 2006 press release.
Too bad that Liereah’s housing jet analogy has no landing gear either. Gotta hate gravity and running out of gas.
David….Honey… that foam on the runway is not there to cushion your landing… it is there simply to keep the flames isolated to your crash and burn. It won’t matter if the fire gets put out quickly… your aircraft is toast.
hit the link above
I think the flaps (interest rates) on this plane (housing bubble) are stuck in the “up” position and one of the engines (speculators) is conked out. The other engine (builders) is working twice as hard and will burn out very soon. Many of the buyers of houses in ‘04 & ‘05 had not the intention or the ability to hold on through an extended downturn. Most never even had the thought occur to them. We (me and wifey) aren’t even going to step foot into an open house until spring of ‘08. By then most of the dummies will have been flushed out of the system.
Oh Mort!……Open houses are fun. The more you go to the more you see the changes in the market.
I’ve been going to open houses on a pretty regular basis since ‘04. It’s been informative to watch the traffic dry up.
Besides, you don’t have to buy.
I watch the real estate section every weekend for years now and we drive around town sometimes. Any more than that and I’m afraid I might find something I really, really like and be tempted to try to swing the deal before we’re ready to go. I wouldn’t mind looking at some of the new townhouses just for funsies though.
Can we further this analogy and say that the buyers are the fuel, which is now contaminated, and the pilot, Ben Bernanke, and co-pilot David Lereah are drunk in the cockpit? Meanwhile, the ARM resets in 08 is the looming mountain dead ahead. . .
It may take a while after that. No doubt there will be a river of tears in ‘08 and beyond!
http://www.tigersweat.com/images/air00.jpg
Oh, and the pilot (the NAR) is delusional & flying erratically while the stewardesses (lenders) are serving up toxic koolaide to the passengers (unqualified buyers). Meanwhile the Air Marshalls (federal banking regulators) are waiting on the ground to arrest anyone who survives the coming “soft landing” & has forged papers (no doc/stated income loans applications) in their possession and throw them in the pokie.
Poetry still lives-beautiful!
Think I’ll take the train.
Of all the landings a plane can make, I believe this will be of the scorched corn field varitety.
Unfortunately, the flaming pieces of wreckage will rain down on a crowded urban area, taking out many McMansions in the process.
I like these plane comparisons much better than the baseball ones.
Nice addition to the landing analogy.
I agree with Mort that the flaps are stuck and the booze is flowing in the cabin *and* the cockpit. What no one has noticed is that the port engine (real buyers) has flamed out. While there is fuel for the starboard engine (easy credit) there just isn’t enough left to get this puppy on target. And don’t pay attention to the fact that none of the overhead bins has a working lock (overstretched HELOCs coming home to roost on the economy).
Folks, this flight is going to be the lead story on CNN for a while.
Neil
Lereah had at least two speeches saying there was no bubble, but a balloon and the ballon can expand and contract. Maybe he is right, the last 6 years of expansion might take 6 years of contracting as opposed to a down right popping. I’m hoping for a pop myself.
Agreed! But I’m afraid it’s only going to get worse as people search for scape goats and differ the blame!
OT folks, but interesting nevertheless…
Earlier today, the minutes of the previous Fed meeting were released. Inflation was a major concern - so major that the Fed even explored raising rates by 0.5%.
At the same time, look at the “official” inflation figures from the US Treasury. This makes up a (significant) component of I-bond returns. According to the treasury, the semiannual inflation rate for the period Nov05-May06 was 0.5%! Can believe that?
We have one arm of the government basically stating that there is no inflation, and another arm (yeah we can debate whether the Fed’s government or not) worrying about high & rising inflation rates. Why the doublespeak?
Because the Fed looks at inflation going forward rather than looking back. Also you seem to be forgetting that i-bonds inflation component was up almost 3% in the previous adjustment period, total for the year was 4% which is well above the fed’s desired 1-2% range. Welcome to the big leagues, i-bonds aren’t quite what you were expecting them to be 6 months ago are they?
No I got burnt with I-bonds several years ago and decided I would never look that way again (well at least until the fixed rates were high enough). I don’t trust the CPI figures.
The Fed minutes very much discussed past inflation in addition to making predictions about the future. I see a disconnect between the wording in the minutes and the CPI.
The Dallas Morning News has an excellent interview today concerning foreclosures, creative lending, and how this current RE shakeout compares to the 1980s crisis:
George Roddy is no stranger to real estate cycles. The president of Addison-based Foreclosure Listing Service Inc. has been collecting data on the industry for 36 years.
As local foreclosure rates approach the heights of the savings-and-loan scandals of the 1980s, Mr. Roddy’s depth of experience enables him to draw parallels – and distinctions – between yesterday and today.
The most recent figures on foreclosures per capita place Dallas-Fort Worth behind only Indianapolis and Atlanta among U.S. metro areas. Mr. Roddy recently sat down with The Dallas Morning News to discuss the current state of the local market and its future as the biggest real estate boom in U.S. history winds down.
…OK, but unemployment has fallen back to about 5 percent. Based on what happened back in the 1980s, shouldn’t we be starting to see foreclosures tapering off?
We thought we had seen foreclosures peak in September 2005 but as things turn out, it looks like we might still be early in the cycle. For one thing, in 1989 we had a whole heck of a lot less inventory of homes on the market than we do today.
If you go back to the years of 1985 through 1989, we saw total building permits of 12,000 for the area. But between 2001 and 2005, we’ve seen a total of 51,900 permits. Permits are running 328 percent higher.
So it’s an oversupply issue?
No, it’s more than that. The change in the bankruptcy law has impacted more people than we’d anticipated, making it even harder for people to keep their homes.
Another problem is we are seeing interest rates going up. That’s going to impact a lot of people who took out these crazy loans. Each tick-up is going to mean more and more money going out the door.
Have you seen the impact of this creative lending play out in any way?
In 2005, we saw 934 home equity loans posted for foreclosure, and that number continues to rise. In the first five months of 2005, there were 356 home equity postings. Over the same period in 2006, there were 429; that’s an increase of 20 percent.
So with overall foreclosures, we’re only about 75 percent of the way to 1989 levels. Obviously something is better this time around?
Back then we saw meaningful degradations of value, in some cases 25 to 30 percent declines. But we haven’t seen that today. If you look at months’ supply figures from 1989, inventories were running at 13 months, while today we’re just at about seven months, so we’re not at that point yet.
When you do start seeing values affected, it just adds fuel to the fire. But if you look at this from the positive side, this could just be an adjustment.
What’s the biggest unknown as you look to the future?
When you add in all of the other cost-of-living increases we’ve seen in the last two years, it’s a wonder we haven’t had more foreclosures.
The scary part is, what happens if we don’t start to see some modification in borrowing habits? We’re not yet seeing a slowdown in the foreclosure figures; in fact, we’re seeing higher numbers. Where’s this going to take us? We could be in for a long haul.
Full article at
http://www.dallasnews.com/sharedcontent/dws/bus/stories/DN-OneOnOne_31bus.ART.State.Edition1.1878e6fd.html
That’s a good article. That reporter has no clue. After reading that article if I were in Texas I would be very afraid. It is going to get very very ugly there.
It is going to be a lot more ugly in the hyper-bubbly coastal than in TX. TX RE has only had modest increases during the duration of the bubble. I sold my TX home 9/05 and did well by TX standards but my “profit” pales in comparison with the type of money made by folks who sold on the coasts in the last year or so.
Looking back it all makes sense. I lived in a small town and back in 2003 some CA “developers” (a 20-something couple) bought a bunch of land within the city limits and subdivided it. Everyone in town was pissed as this was the first “subdivision” and we (I was on the city council) had to pass a bunch of architectural controls to “limit the damage”. The only people in town who supported the development was…you guessed it…the local RE company who the CA folks annointed to sell their 3 acre parcels. Those RE agents would sell local children to the devil if they could make a $$$. Everyone despised them.
At the time I thought it odd that people from CA targeted our little town for investment. I had no idea that this was part of nation-wide pattern of speculation. With the help of this blog and 20-20 hindsight, I know those CA folks were land flippers. The wife was from India.
During the last downturn the pecking order was this as far as real estate
1- Hell
2-California
3-Texas
From reading that article and reading between the lines. It really will be different this time. The pecking order wil go like this.
1 - Arizona
2 - Nevada
3 - California
4 - Hell
5 - Texas
There are lots of ways to land a plane, like this, or like this.
“The buyers need education also (because) they were afraid of the (housing) bubble. I must say that I spent most of my last six months talking about the bubble, for which there’s no statistical proof.”
Let’s see
5% per year interest
1% per year taxes
2% per year insurance/maintenance
8% per year carrrying cost.
Renting in most of these places brings in only 1/2 the carrying cost.
So (8% / 2 = ) 4% per year minimum appreciation to break even.
And thats without taking into account inflation or selling costs, or depreciation.
Less than 4 to 5% per year appreciation, and many “investors” are toast. I’m talking about people who took 30 yr fixed loans at 5% here.
As for those who took 1%/1 yr ARMs, if housing appreciates 4-5% per/year and renting covers their expenses (interest, taxes and insurance/maintenance), then they break even after a year, if appeciation of 5% is there to cover their selling costs.
After that, it’s a wash, when the ARM adjusts.
Maybe there will be enough owners willing to flush money down the toilet. They will hang on to the house, waiting for pigs to fly.
But it is those owners who overpaid and sellers, who need an education; not buyers.
From your analysis, I guess we can conclude that Santa Barbara investors are toast. Because as a recent data release showed, their prices are already falling…
I spent most of my last six months talking about the bubble, for which there’s no statistical proof.”
He’d like us to rely on statistics as a substitute for common sense. Absence of proof is not proof of absence. If I told you that there are no statistics to back up the notion that inhaling water causes drowning, that wouldn’t make it a good idea to attempt to breathe underwater.
“It’s important to get the buyers to understand that just because the bank said they can afford it, doesn’t necessarily mean that they can.”
Now the realtor associations are concerned about people buying a home that’s beyond their means? What a joke.
“So (the housing market) is cooling down, but the plane is not crashing. It’s going to land. Maybe a bump or two on the way down, but the plane is going to land.”
Did someone point out that when they plane LANDs it is a drop of 40000 ft!!
Both the house and house price will be soon at Same level! I am happy for one :-))
LOL ! I love your analogy.
It’s going to land. Maybe a bump or two on the way down, but the plane is going to land. It’s going to land. Maybe a bump or two on the way down, but the plane is going to land. It’s going to land. Maybe a bump or two on the way down, but the plane is going to land. It’s going to land. Maybe a bump or two on the way down, but the plane is going to land…….
Repeat it 100 times and maybe you can get ONE person to believe you, sucker….
OT - Something VERY weird is going on with the blogs. Marin Real Estate Bubble blog just went *white*….I was there for a moment, clicked on another link, then went back….NOTHING. Came back over to Ben’s blog and click the Marin link again…NOTHING.
This is NOT good. Ben? Have you checked into this yet? I don’t want anything to happen to your blog. You’d best look into what’s happening. Quickly.
BayQT~
There has been a rash of bubble blogs getting hijacked.
All bubble bloggers watch your passwords and anti-virus, anti-spyware software.
Or just get a Mac.
The first thing you “take out” during a war is the enemies communication. The RE industry is at war with RE bubble blogs and have hired hackers to take them out.
And meanwhile their ads continue to run stressing their “ethics”.
As the market “cools” the tactics of the “transaction parasites” will become even more desperate.
I suspect they will hijack a plane and fly it into NAR headquarters …and then we will be under “emergency RE law”. Everything will be kept secret and only those with a “need to know” will be allowed access to any RE data.
Any thoughts on this report from Last Month.
I haven’t seen it on any of the bubble blogs.
http://www.nber.org/papers/w11643
If I recal correctly Todd Sinai is a bit of an RE Industrial Complex apologist.
I would appreciate people’s opinions here.
Bloomberg did a story on it.
http://www.ocregister.com/ocregister/money/housing/article_1161620.php
Never, mind it was blogged and OCR is just beating an old story.
They are getting desperate.
OT - My apologies if someone has already posted this article from Fox News.
http://www.foxnews.com/story/0,2933,187831,00.html
It doesn’t say anything that hasn’t already been said before. But considering the “average Joe” audience of Fox, it may open a lot of eyes.
Whoa! From Kathy’s FoxNews article:
The shocker? I just learned we live in a metro area that could see a devastating 55.8% decline in home prices in the next five years. Worse yet, most of the real estate north and south of us — from San Francisco to San Diego — is predicted to decline 50% in the next five years. Ouch!
I’ve never seen THAT in print before. Not a *sales* decline of 55.8% but a *home price* decline. Well, well, well…..the plot thickens
BayQT~
I saw that article at least a month or two ago. I has been published although not so conspicuously…
Yea,
The poor person (I’ll charitably forget their name), who predicted that we would see a 125% drop in values down to 2000 levels, made me bust out my calculator.
Lessee..
If a 220k house in 2000 now goes for ~125% more now, that would be:
220 + (1.25*220)= 275k) = 495k
If we pull that appreciation away as a percentage of the current cost we get: -275k/475k* 100= -57.9%
So the rewind to 2000 is not too off the mark according to the Fox article.
That is an oustanding article. Very blunt. The tide is turning, dramatically and now quickly. The press is starting to get the point.
Ask any pilot and they will tell you:
A landing is just a controlled crash.
I had to laugh at the fed soothsayers: WASHINGTON - Worried about the potential for inflation to get worse, Federal Reserve policy-makers at their May meeting considered raising a key interest rate by half a percentage point before opting for a quarter-point increase.
They considered. That’s some world-class pontification. Don’t you feel more secure in the powers of consideration of our Fed chairman?
First they foist this mess on us. Now they are thinking how to clean it up, I think Greenspan quit because he did not want the clean up job. He is more like a monkey that pooed all over the floor and now we have ben bernake with his skates on.
I guess you plan to continue working long past the day you reach the age of 79?
“Will we see more foreclosures because people can’t afford to pay their mortgage payments anymore? People who are on the margin and couldn’t afford conventional financing and probably shouldn’t have bought a house or should have reduced their expectations, which is more the case, those kinds of loans are going to be in trouble.”
A realtor said this. It isn’t a logical leap, or even a step, to ask the next question, how many buyers in the past 4 years is this? At least in San Diego, this is a high percentage. So I guess I agree with a realtor? We used to be annoyed with what they say, now what they aren’t, and finally what they used to say!
This might be old, but Barrons says we have a real estate GLUT.
http://online.barrons.com/public/article/SB114868496819064730-4JadzA4hIPO_MSVKyYzDHvt_cXc_20060627.html?mod=9_0002_b_free_features
According to them, Barnstable MA is 46% over valued.
Should make for an interesting landing.
BTW: Ask a pilot what happens when you stall a plane while CLIMBING. He’ll tell you that it goes into a stall whereby it must go into a steep dive to get the air speed back up. You lose lots of altitude. Very appropriate for this environment. Somehow the magical housing airplane goes from a steep climb to leveling out without losing any altitude. Hmmm… defying physics, anyone ?
There’s a difference between a power-on stall (too high angle = bubble) and a power-off stall (high interest rates and no more GFs to add fuel).
Which is it? Both, I think.
“Will we see more foreclosures because people can’t afford to pay their mortgage payments anymore? People who are on the margin and couldn’t afford conventional financing and probably shouldn’t have bought a house or should have reduced their expectations, which is more the case, those kinds of loans are going to be in trouble.”
How about the real estate agent advising them against making an offer because she didn’t think that they could really afford it?
Someone posted this to the NH Craigslist. Why would you want to spend $2800 per month for a condo in MA if you’re looking for something in NH which will most likely cost much less?
(apartments for rent) $2800 / 2br - CHARLESTOWN MA. HOUSE FOR RENT (THOMPSON SQ.)
NEWLY RENOVATED. 2 BEDROOM 1 1/2 BATH.2 OFF STREET PARKING SPOTS.
FULL BASEMENT WASHER AND DRYER. 2 DECKS AND YARD.
MIN TO ROUTES 93&1.. WALK TO DOWNTOWN BOSTON, MBTA,STORES AND RESTURANTS.
JIM 617 391 1382
http://nh.craigslist.org/apa/166602016.html
Michael, how about the RE agent who talked them out of buying a house saying that it was toooo expensive and then trying to sell them one of their flips instead.
“The buyers need education also (because) they were afraid of the (housing) bubble. I must say that I spent most of my last six months talking about the bubble, for which there’s no statistical proof.”
That’s rich. What do call 400 - 500% increases in inventory? What do you call soaring foreclosure numbers? What do you call $2 trillion in I/O and neg-am loans resetting in the next 18 months (and even more after that)? If anyone wants proof of a bursting bubble, they certainly don’t have to look too hard.
WSJ was good today. 1st column about ‘fake cities’.
Jonathan Clements was right on about financial planners (mentioned in a recent thread).
I think the Massachusetts plane is going to break the sound barrier on the way down, have parts of it streaming-off as they get torn off by windshear, make all sorts of those plummetting plane noises like in the WWII movies, and then hit the ground nose first, leaving nothing but a charred crater as evidence that it ever existed at all.
Thank you for flying the friendly skies.