‘Deepest Sympathies’ To Buyers Of ‘Overvalued’ Homes
US News and World Report has this on the nations housing markets. “Contrary to popular belief, the housing market hasn’t cooled off that much. In fact, residential real estate prices continue to soar in a number of key metropolitan areas, according to a new study released this week.”
“That’s a good thing, right? Actually, no–because the froth building in housing prices raises the distinct possibility of significant corrections to come in many of those regions.”
“In the first quarter, home prices nationwide rose an additional 7.3 percent, according to a joint study by the financial services firm National City Corp. and the research firm Global Insight. As a result, there are now 71 metropolitan areas–representing nearly 40 percent of all single-family homes–that can be classified as ‘extremely overvalued.’”
“‘The fact that this number of metro areas, representing such a large percent of the total single family market–is extremely overvalued should be a cause for concern,’ said Richard DeKaser, chief economist for National City.”
“Real estate prices eventually correct themselves. And unfortunately for homeowners, it often takes years before home prices start to rise again, especially after a big run up. ‘ the average duration of these adjustments is 3.5 years,’ says DeKaser.”
“So what about families who recently bought into one of these ‘extremely overvalued’ markets in hopes of turning a fast buck? ‘I extend them my deepest sympathies,’ says DeKaser.”
“The frothiest region in the country, according to the study, is Naples, Fla., where home prices are said to be 103 percent overvalued.”
The Naples News. “WCI isn’t the only company dealing with the cooling down of the red-hot housing market by delaying the introduction of new homes and condominiums. Officials with The Ronto Group said Monday they will delay their two communities planned for East Bonita Beach Road from early 2007 to late in the year.”
“Robin Driskill, the company’s director of sales and marketing, said the high inventory of housing stock in Southwest Florida prompted the delay. ‘It wasn’t so much we didn’t want to move forward with (the communities); it is that there is so much investor product diluting what’s available,’ Driskill said.”
“In Southwest Florida, both Lee and Collier counties have more than a year’s supply of homes already on the market. That makes it a smart time to slow things down, even at the cost of a temporary impact on profit, Driskill said.”
“‘It does affect our bottom line. You have something out there that you want to put to work for you, but you are also not dumping money into the ground,’ Driskill said. ‘We have to do that or we dilute the value of our product, and everyone needs to look at it like that. It is just not wise.’”
“Kitty Green, VP for the Bonita Bay Group, said everyone is feeling some effect from a housing market that has seen astronomical increases in value in recent years, at least some of which were fueled by real estate speculators. ‘Our Sandoval community in Cape Coral is a primary buyer community, but they have to be able to sell their existing home to buy the next one, and with all the resales on the market, many are having trouble selling their homes,’ she said.”
“One worrisome sign is that not only have sales dropped, the amount of inquiries have too, Green said. ‘The decline in both is worrisome for different reasons,’ Green said. ‘Traffic is prospective buyers and is essential for future sales.’”
“The cutback in new homes was inevitable, given the percentage of speculative investment in the market during the course of the last year, said Mike Reitmann, executive VP of the Lee Building Industry Association. ‘Don’t know to what extent each one will do that, but each one is going to be evaluating the situation and doing what is prudent,’ Reitmann said.”
“Equally inevitable was the downward revision of profits and earnings for builders like WCI, Toll Brothers and Pulte Homes seen in recent weeks, said Brad Hunter of a Palm Beach-based analysis firm. Construction, insurance and labor costs have risen, interest rates are continuing their climb and the ability of builders to pass those costs to consumers has gone down, Hunter said.”
“‘That’s going to have a negative impact on earnings,’ he said. ‘Plus, sales are off drastically and traffic is down. I expect to see similar reports from other builders as the summer goes on.’”
We know for a fact that apples to apples houses are not increasing in certain bubble markets. We know this by anecdotal examples. For examples condos that I am tracking in Tysons Corner, VA are selling for 27% less than during the summer 2005 peak.
This is more valuable information for the individual seller/buyer than statistics for a median house. The median house might be a lot larger in these markets that show this behavior.
I wonder if $/sq.ft. would properly reflect the shift downward?
Even better would be a nationwide index that tracks SAME house sales, similar to what Robert Shiller did for Irrational Exuberance. That way, you’re not comparing apples to oranges (condos to McMansions), or skewing the numbers by overweighting either new or resold houses. You would be comparing what the exact same house sold for in 19xx or 200x to what it sold for today.
With the amount of flipper-driven turn-over these days (same houses being churned several times a year), it should not be too hard to collect enough same-house data to make a statistically valid index, with a reasonably low margin for error.
I recall hearing how someone was doing this a couple of years ago–but unfortunately, can’t recall the name . . . my sense is that data paints a fairly unflattering picture on the way down due to the factors that you mention–NAR won’t dream of ever quoting such an index.
http://www.ofheo.gov/HPI.asp
The OFHEO house price index is a same house index, but it is skewed by refinancing which is included in the index. They did a graph at one point in one of their reports showing how much the refinance data distorted the index. I can’t remember how much it was but it was an upward bias (probably why they decided to leave the refinance data in the reports).
The national (but not local) numbers without appraisals are available from the downloadable data link on OFHEO’s website. Including appraisals made the index more volatile over the last 5 years. A Fannie economist, using Fannie data, recently indicated that appraisals are most overstated in falling markets.
I can’t remember how much it was but it was an upward bias (probably why they decided to leave the refinance data in the reports).
But the OFHEO is a government regulatory body designed to protect us from evil corporations! They could never become involved in promoting the very problem they are designed to prevent!
I say we need a regulatory agency for the regulatory agency! That’ll, err… regulate things right up.
The other problem that I see with the OFHEO data is that it only cover homes with “conforming” mortages. The cutoff for a conforming mortage is $414k. This emiminates most homes from consideration in the most expensive markets.
Too bad they can’t eliminate “non-conforming” PRICES from my neighborhood. Those evil “non-conformist” sellers!
Could not such an index be constructed from
publicly available data by a neutral 3rd party?
This is currently being done and it is publicly available. The Case-Schiller (yes, THAT Schiller) Index is the basis for the housing futures contracts traded on the CME. The indices are published for ten metropolitan U.S areas and one U.S. composite index. The numbers are published on the last Tuesday of each month and are based on same-house resales only. The numbers are published monthly, but there are only ever four quarterly contracts traded at one time. I believe they also do some common statistical massaging like throwing out outliers that may be due to abandoned properties or complete remodels. It sounds like a pretty well-reasoned endeavor. Anyway, check it out on the Chicago Mercantile Exchange web site. The numbers are compiled by a company called MacroMarkets LLC.
Speaking of square foot. Was retold a comment from a realtor who claimed that she would add a half foot or so to each measurement of a house’s footprint to inflate the selling price.
What, don’t the walls count!?
I think when you buy a condo the walls do count.
“Was retold a comment from a realtor who claimed that she would add a half foot or so to each measurement of a house’s footprint to inflate the selling price.”
Fortunately that is why, in many or most areas, there is a requirement for, or customarily done, a notation as to how the square footage was arrived at, the two most common being “agent measure” and “Tax records” or similar. Me, I’d go to the tax records — if the agent measure is higher, I’d discount the difference in my (already lowball) offer.
More buyers need to sue realtors ( ok ,sorry you have to use a lawyer) when they don’t measure sq. ft. correctly. In Bakersfield you have to warrent the sq. ft.? How bout that Crispy?
In many areas of the country, square footage is not even quoted due to these reasons (you’ll never see square footage quoted in the Georgia market for example).
No sympathy from this dude. They made a stupid decision and they must pay for the greed. I have made mistakes myself and lost serious money. I never blamed anyone but myself and learned from the mistake. I am a better investor because of past mistakes and learning from the mistakes of others.
I’m all for just sueing the hell out of anyone who proclaimed the market would continue to grow and simultaniously profitted.
Wouldn’t that be the entire community in which you live in? It would be in my case. Including family members, friends, and coworkers.
“In the first quarter, home prices nationwide rose an additional 7.3 percent”
So much for this being a localized problem. Its pretty clear the coasts have been depreciating for several months now with houses well off of their August ‘05 peaks. Therefore, this must mean that the bubble has moved inland in a major way. Of course, they could just mean YOY again in which case 7% isn’t all that amazing.
They said yesterday the nations’ home prices went up the fastest on record. No nationwide bubble?
they mean 7.3% annualized, not 7.3% in one quarter
This could also mean that they are building bigger and bigger houses also. A whole lot of 2500 - 5000+ sq. ft. houses going up.
‘The cutback in new homes was inevitable, given the percentage of speculative investment in the market during the course of the last year, said Mike Reitmann, executive VP of the Lee Building Industry Association. ‘Don’t know to what extent each one will do that, but each one is going to be evaluating the situation and doing what is prudent,’ Reitmann said’
I’m sure all the construction/development guys have been wisely saving every penny and can afford to wait a couple of years for the excess supply to go away.
Sympathy? The buyers of overvalued homes have reduced national wealth, weakened international financial markets, raised everyonesw’ property taxes, on and on. Might as well feel sad for the drunk driver that sideswipes your car as they crash over the cliff and then mobilize a half million dollars of resuce efforts and then racks up millions in the hospital with no insurance only to go to jail at public expense where millions in public defender appeals tie up the courts for years. Sympathy? Their family should get the bill for the bullet.
Amen!! Post of the day award.
There need to be at least some sales (hence some buyers), for otherwise there are no prices, and if there are no prices, then prices can’t decline. I, for one, am grateful to today’s buyers. They are truly taking one for the team.
Foreclosures? REO-property?
Great post. I agree with you brother.
Robert — glad to “see” you. I was afraid that you might have gone away, a la Professor Bear. I’m also glad that I haven’t seen much of the provocateur in recent days, the one whose juvenile vocabulary was generally limited to “boo hoo.”
>Might as well feel sad for the drunk driver that sideswipes your car
Am I the only one that finds this a bit harsh? I would guess that most are people who just want to buy a house and raise a family in. Clueless driver, yes.
I’ve no problem with people “wanting” to buy a house. People have wanted to own a house for centuries or longer. These people are not teenagers being handed the keys to the Ferrari. These are people who are lying and cheating and then stealing joyrides. They are signing documents they know to be false. Bank fraud costs me money. These people are distorting the markets causing overbulding and congestion and municipal expenditures. Those cost me time and money. It is a long list and these are not victimless crimes, never were. In the next few quarters we will see victims. Some complicit at first but more and more the innocent bystanders. Imagine your HOA fees skyrocketing in Thousand Oaks (the safest city in the US) because the board is carrying so many pre-foreclosures on former Countrywide employees and also defending itself from legal attacks as these same people get desperate.
No, $7-$9 trillion in asset valuation is evaporating because of this nonsense. These people deserve no more sympathy breaking into these houses because of their need to own than would a drunk breaking into a liquor store because he needed a drink. Neither could feed their addiction through legal means and they don’t care who they hurt.
Excellent comment.
These people are not teenagers being handed the keys to the Ferrari.
The only people I know who are buying right now are kids. All under 25, and all getting help from thair parents. Not that far off from teenagers being handed the keys to a Ferrari
Picture the three classic monkeys. Cute at first, even funny. If temporary behavior not involving major financial decisions. If the behavior does involve this, then the monkeys are screwed.
Ever hear or see a pissed-off monkey scream? Not pleasant to the ears, the eyes, and soon the economy.
Three stages of denial? I don’t want to see it, I don’t want to hear about it, and I certainly don’t want to talk about it .
It’s here folks! Microwave your popcorn, grab your beverage of choice, and enjoy the ride. Be sure to cover your keyboard first, of course!
Just in case though I’m putting some plastic sheeting up in front of me like at a “Gallagher” performance. I don’t want to get any of the icky stuff on me.
Gotta love Gallagher!
No, $7-$9 trillion in asset valuation is evaporating because of this nonsense.
Yup-All them crooked L/O’s leanin’ on the appraiser’s to punch the number they’re told to do, under the threat of withholding work definitely has some real negative ramifications.
MAI-”Made As Instructed”
The damage done to families in one year by the Enrons and Fannie Mae’s and mortgage industry is far worse in terms of pain and suffering that what drunk driving causes in 10 -yrs in this country. Dreams evaporate, health care disappears, debt piles up, homes are lost. Can you even calculate the damage in terms of alcoholism, spousal abuse, loss of family time due to getting that second or third job, humiliation, etc. I find the whole thing tragic, and I think if anything your comparison UNDERSTATES the crisis we’re facing.
It really angers me when all these industry figures act as though somehow this is just something they’re dealing with… not that they were the prime people responsible for creating a carnival-like atmosphere.
Got that right, Spunkmeyer! I can still remember when the liability crisis began as Reagan’s second term got underway. The talking heads acted like it was a uncontrollable hurricane making landfall, but they were going to guide us all the way; nothing but thieves lining their pockets, IMHO.
“Contrary to popular belief, the housing market hasn’t cooled off that much”
It hasn’t? Tell that to the 30,000 people in Minneapolis who are trying to sell their homes. Or the 4x,000 people in Phoenix, or the 23,000 people in San Diego, and so on.
Inventory doesn’t explode like this (many areas up 200-300% and even more in just a few months) in a hot market.
The market is thus CLEARLY cooling. It is true that it has not crashed.
yet.
It’s like a corpse. It starts out at about 98.6 degrees, and then slowly cools. By the time it’s cold, it’s super dead.
clouseau
Perhaps it is only “mostly dead”, my six-fingered friend.
He’s just blaving.
If only I had a cloak for the coming financial Holacost, that would be something.
I think you all may be forgetting that the corpse was, in fact, not left-handed.
OT More on the Plunge Protection Team:
http://www.nypost.com/business/a_plan_for_a_plunge_business_john_crudele.htm
“hasn’t cooled off that much”
You keep using those words…I doona think they mean what you think they mean…
Hello! My name is Inigo Montoya, you killed my economy, prepare to die!
“The market is thus CLEARLY cooling. It is true that it has not crashed. yet.”
This was my interpretation of the point of this story: that we really ain’t seen nothin’ yet.
agreed, a counterargument to the idiots who are claiming “we’ve had our correction, it’s up from here”.
Its more than that. Your only take into account that one person lives per a home. 50,000 X 4 people per a home = 200,000 people trying to move somewhere around or out of the Phoenix. Man that is an exodus of biblical proportions.
Those homes are not empty?
No sympathy from me for a bunch of idiots. Let the banks extend their sympathy by reducing the balance owing to the true value of the home. Yeah right. :LOL:
(But DeKaser notes that new homes are sold by developers, not families. And developers generally don’t have the luxury that regular families do of living in their homes for several more years to wait out attractive offers.)
yeah, if they need to sell for whatever reason they can’t compete with the builders.
Per a well connected individual I just spoke with - Standard Pacific is cancelling (non=refundable deposits) all of their land purchases in Bakerfield. They realized they over-payed. LOL. They were the last major HB to come to town and bought all their land at the top. They have one development in progress that they can’t unload the homes on.
I think I made this point yesterday–smart move by StanPac. That overvalued land won’t be on their books, it’ll be on someone else’s. The person left holding the bag on that land will be the developer who got the parcels mapped.
Aside from not being 100% dumb (by not buying the land), they will still probably lose several hundred thousand dollars to about a million dollars (or more) in option payments per contract by walking away.
“…they will still probably lose several hundred thousand dollars to about a million dollars (or more) in option payments per contract by walking away.”
Y’all are far more knowledgeable about this stuff than I, but I thought that was precisely the value of an option — to be able to walk away at a known fixed amount of loss.
I think the known fixed amount of loss is what RW is speaking of.. (As opposed to the billions and billions of profit from taking the land, developing, and selling… teehee…)
C&C,
Good ole Bakersfield! I remember reading the Bakersfield Californian one day last November about a twenty-something who dropped out of school and was delivering pizzas. He found his niche in Bakersfield real estate circa 2002, and had initially done quite well for himself (at least, that was the jist of the article): cruising around Buck Owens Drive with a new $500K Lamborghini, talking about how he had made $20 million on houses in 5 years and that the business kept getting better with each passing month. This, of course, while Bakersfield home inventory was already going through the roof.
I’m still amazed by how many people want to believe that it is not over…I think the Central Valley is one place where that should be quite obvious by now.
They had another article on that kid in Sundays paper. He is going to build Two 31 story condo towers on the CSUB campus. The cost is $450 million. He claims our local market is still very very strong. He also purchased the local NBA minor league franchise. I think he might crash and burn?
You are the 2nd person to ask me - I posted the two stories below.
Heh, I wonder when the “local boy done good” will become the “village idiot”.
I remember that aticle. My understanding is he planned to start a finance company. That is a whole other world. This bubble is like a nice clear lake and then the dam bursts and you see all the jagged rocks. When prices fall we are going to see some very nasty rocks. There is going to be a lot of people going to jail. 31 stories in Bakersfield, that is tall. Really tall. Hell maybe CalPers will finance that one too.
Don’t ask me how I know, but never ever going to happen (CSUB).
Only at the big So Cal bubble celebration party after many drinks.
Will DO!!! LMAO!
Bakersfield? High rise condos? W-w-w-w-w-whyyyyyyyyy?
What’s next? High rises next to the Bun Boy in Baker?
My wife and I always joked about how “Bun Boy” and the “worlds largest thermometer” were right next to eachother.
Get it? “Bun” Boy + thermometer…o.k. it’s juvenille but it seemed funny when we were coming back from Vegas.
This article misquotes the report. Home prices didn’t rise 7.3% in the first quarter, they rose at an annual rate of 7.3% (i.e. 1.9%). Additionally there are reasons to believe that figure is less accurate than the NARs figure of -3.3% (it excludes homes above certain values, for example).
An annual 7.3% rise (if those figures are accurate — which I doubt) barely kept even with inflation.
Appreciation of 7 percent, given the leverage usually taken with real estate, translates into a 28 percent annual return on equity (assuming 20 % down). Still not so bad.
Before you calculate an RTI, you have to back out the rest of the costs and benefits of the home, like rent, etc. If the interest rate is 8% and you have 80% of the value of the home mortgaged, you are paying 6.4% of the home value in interest. So the actual gain on the investment after interest is 0.6%.
Of course you have to add rent in but subtract out taxes, upkeep, insurance, transaction fees, etc.
By the time all is said and done it is a pretty darn poor return on hundreds of thousands of dollars.
Don’t for get the opportunity cost of paying rent in your ROI calculation (unless your only choices are own home/sleep under highway overpass).
It is incorrect to count only the cash deposit. You have to count in the debt service cost as well, because an alternative would be to put the equivalent of montly mortgage payment somewhere else.
But I thought if I didn’t buy now, I’d be priced out forever.
They aren’t makin anymore buyers!
“So what about families who recently bought into one of these ‘extremely overvalued’ markets in hopes of turning a fast buck? ‘I extend them my deepest sympathies,’ says DeKaser.”
Cry me a river…
Here’s a good career move-TV anchor moves to being Realtor:
http://tinyurl.com/gfpmj
Also, realtor and his associates sent to federal prison for fraudulently filing a bunch of loan applications for illegal immigrants
http://tinyurl.com/l24kz
“He said that while it could be possible that someone such as Mendez can give honest and ethical Hispanic Realtors a “black eye,” the vast majority of the Realtors do not violate their ethics codes.
“We urge all Realtors to re-read their code of ethics,” as well as take advantage of classes and programs that address issues of ethics and discrimination, he said.
good to see the feds kicking mendez and his ilk to the curb.
“We urge all Realtors to re-read their code of ethics,” as well as take advantage of classes and programs that address issues of ethics and discrimination, he said.
Ahhh..yeah, riggghhhttt. Let’s review the mission statement for NAR:
“The core purpose of the NATIONAL ASSOCIATION OF REALTORS® is to help its members become more profitable and successful.”
Profitable and successful.
Are those two words compatible with ethics? Sometimes, I’m sure it can be, but this is what gripes me most about the bleating from Lereah and the rest…they are NOT unbiased, they clearly have NO business advising anyone…their primary job is to show homes, write contracts, and baby-sit escrows. They aren’t a sub-set of the Fed, or does their supposed “code of ethics” keep their members in line.
This is a trade group with a very specific goal…profitability.
And don’t forget holding the line on 6% comissions and excluding FSBO from any clients represented by a Realtor, and also for making all kinds of paperwork and silly rules that only a Realtor has time to deal with…
“…and excluding FSBO from any clients represented by a Realtor…”
This may be a small point, but whenver I’ve looked for properties, I’ve told the agent that I would pay him or her a 3% commission on any FSBO they find/show me, if I buy it. Of course, I would deduct that from my offer on the property, but it helps get me access to properties that I wouldn’t have otherwise, given that I’m using the agent to save myself time and hassle.
How about all the bloggers meet at the NAR headquarters and have cocktails?
Realtors’ Code of Ethics - a blank piece of paper.
That’s par for the course, in the land of illegal aliens. Unfortunately they haven’t even made a dent. Those guys were small potatoes. Wasn’t even worth reporting compared to how severe the problem is with illegals purchasing homes like that
The new houses in the town of Greenfield, Ca were sold to illegals who couldn’t speak or read English. Most of the loans were stated income,2 yr I/O and ARMs. It’s my understanding that Countrywide did most of the deals in mid ‘05.The ‘buyers’ didn’t understand what property taxes were, Duh. The had to use mexican speaking closers to get the loan forms signed. Watch the foreclosures in Greenfield over the next few years. LMAO
“We urge all Realtors to re-read their code of ethics,”
Bubbles the Clown once did an outstanding reading of the code of ethics. Man that post was funny but I think alot of people missed it because it was on a thread that didn’t get many hits.
The Code of Ethics defense is how the NAR plans to get out of lawsuits when it is sued for luring buyers into this Ponzi scheme. Too bad their own spokesman, David Lereah is already on record encouraging further purchases in a bubble market. Let them try to claim it was only opinion, that no one should have relied on him, or that they weren’t responsible for what he said. HA HA
the vast majority of the Realtors do not violate their ethics codes.
Propoganda in the finest tradition of Joseph Gobbels.
http://biz.yahoo.com/ap/060613/mortgage_giants.html?.v=2
Administration Starting Special Reviews of Fannie Mae, Freddie Mac
WASHINGTON (AP) — The Bush administration is starting special reviews of the financial operations of mortgage giants Fannie Mae and Freddie Mac.
The two government-sponsored companies, both of which have been roiled by accounting scandals in recent years, already have been under pressure from lawmakers and regulators who want their combined multitrillion-dollar mortgage holdings to be reduced. The administration has long been critical of the two companies, and officials have pointed to the accounting scandals to bolster their case that the massive mortgage portfolios are improperly managed and pose a risk to the financial system.
Hmmm. Selling mortgages will drive down the price and drive up the yield, no?
Should make for interesting times.
The market behind and ahead of him
BY MISTY WILLIAMS, Californian staff writer
e-mail: mwilliams@bakersfield.com | Saturday, Jun 10 2006 9:40 PM
Last Updated: Saturday, Jun 10 2006 9:44 PM
The blistering housing market that helped Crisp & Cole Real Estate amass hundreds of millions of dollars in sales has slowed drastically since last summer.
But partners David Crisp, 26, and Carl Cole, 58, remain optimistic about the future.
“Is the market strong? Yes,” Crisp said. “I think it’s kind of leveling just a little bit, but it’s still increasing.”
In May, the company was averaging nearly three sales a day, Crisp said. Sales hit $250 million in 2005 and could reach $400 million this year, according to company estimates.
People do need experienced agents now to sell their houses, he said. “You need the best.”
While many agents have done well in the boom, Crisp’s success has seemed to surpass them all.
He seized the moment, said Chuck Dawson of Dawson Realty.
“He was the right guy in the right place in the right market, and it happened,” Dawson said.
This business is about image, he said, and people want to deal with agents who are successful.
Crisp’s speedy rise has fostered some jealousy among the ranks of Bakersfield agents. This industry is like a soap opera, Dawson said.
Some wonder how he was able to make so much money in such a short amount of time.
It’s tough to hear the rumors about himself, but it comes with the territory, Crisp said.
The young businessman recognizes he’s been compared to Family Motors owner Jose Arredondo, who runs a slew of Kern County businesses.
Arredondo acquired most of his businesses in a whirlwind buying spree in the 1990s. Like Crisp, he had a high profile in the community. Rumors about Arredondo, back then, were rampant, including rumors of drug involvement, none of which proved true.
Crisp said he’s constantly making sure things at his company are being done by the book.
“The people that really truly know me are really happy for me,” he said.
Crisp’s reason for success can be summed up in one word — drive, said Bakersfield Association of Realtors president Don Cohen.
Cohen worked with Crisp briefly at McMillin Realty, formerly Kyle Carter Real Estate, before the younger agent left with Cole to start their own company.
“He’s a dynamo,” said Cohen, who manages the McMillin office.
Crisp is dedicated and highly focused, he said.
A good agent must be highly motivated and have a passion for putting deals together, said Joe Newton, who heads up the real estate education program at Bakersfield College.
Newton, a 35-year real estate veteran, said he’s never seen anyone rise as quickly as Crisp.
“David would do well in any kind of sales,” he said. “He just knows his product, and he knows how to market it.”
The Crisp and Cole team have ridden the wave of growth in Bakersfield, a once “sleepy little town,” Newton said. Interest rates were low, development had taken off, plus there was plenty of money and interested buyers, he said.
The sky’s the limit for Bakersfield, said Cole, Crisp’s partner.
Cal State Bakersfield is making big moves to grow, new businesses are coming to town and the airport has expanded, Cole said.
“There’s so much potential for Bakersfield if we just all jump on the bandwagon,” he said.
Crisp and Cole plan to play a role in that transformation.
As the housing market slows, the real estate firms that survive will be those that adapt, Newton said. Agents have to be armed with up-to-the-minute market data, he said.
Many agents tend to cling to the same strategies that gave them success in the past, said Delores Conway, director of the Casden Real Estate Economics Forecast at the University of Southern California.
“If the market turns down, they tend to disappear quickly,” Conway said.
Even major players like Donald Trump can take major financial hits, she said. Agents have to be ready to be flexible and change approaches, Conway said.
“In an up market, everyone looks like a genius,” she said. “And in a down market everyone looks like an idiot.”
Even major players like Donald Trump can take major financial hits, she said
No kidding. I saw Trump eating from a dumpster on TV.
Young mogul
BY MISTY WILLIAMS, Californian staff writer
e-mail: mwilliams@bakersfield.com | Saturday, Jun 10 2006 9:40 PM
Last Updated: Saturday, Jun 10 2006 9:44 PM
It’s tough not to notice Bakersfield’s youngest real estate mogul when he’s out in public — at least when one of his four black-suited bodyguards happens to be in tow. Or when he zips around town in his $560,000 Mercedes-Benz sports car, one of a small fleet of exotic autos he owns or leases.
Photos:
Photo by Tim Kupsick
Crisp family, from left, Jennifer, David, Aiden and Taylor, sit in front of their home near West Ming Avenue Saturday afternoon. David, Bakersfield’s youngest real estate mogul, takes the weekends to unwind from the hectic work life he tackles Monday through Friday/
Photo by Casey Christie
David Crisp, President/Realtor of Crisp & Cole Real Estate works at the front desk of the office at Platinum Investments on California Avenue.
Photo by Henry A. Barrios
David Crisp stands next to a chartered Gulf Stream jet before boarding with his staff for a convention in Las Vegas. The 26-year-old Bakersfield millionaire has made a fortune in Bakersfields housing boom.
Video:
Check out Crisp & Cole’s “Apprentice” style commercial (:29)
Audio:
On Location: The secrets of 26-year-old real estate mogul David Crisp (6:30)
A millionaire at 26, David Crisp isn’t shy about his good fortune.
Five years ago, the Stockdale High grad was waiting tables at a now-defunct Mexican restaurant and loading UPS trucks.
Today, he’s a partner in a local real estate agency that’s on course to garner roughly $400 million in sales this year.
Crisp & Cole Real Estate is just one of five companies he runs with partner Carl Cole, a 58-year-old former high school principal from North Carolina. Together they oversee about 60 staffers.
Hundreds of young agents have joined the real estate ranks in recent years to capitalize on Bakersfield’s unprecedented housing boom, but none has matched Crisp’s meteoric rise.
His recipe for success?
A mix of good marketing, unending drive and a lot of risk-taking.
Some good timing and a little luck didn’t hurt either.
Risky business
It wasn’t yet 11 a.m. on a recent Wednesday, and roughly 100 text messages had already come and gone from Crisp’s cell phone inbox.
The first call typically comes around 7:52 a.m., explained the fresh-faced entrepreneur, sporting black slacks, a blue-striped shirt and gold tie on his 6-foot frame.
“It’s always someone trying to beat the 8 o’clock rush,” he said.
Crisp’s days are a whirlwind, full of rushed visits to the bank and zig-zagging trips across town to check on contracts and building projects.
His energy seems to rub off on Crisp & Cole’s 25 agents, a few of whom are younger than Crisp was when he broke into the business at 21.
When he joined Kyle Carter Real Estate five years ago, Crisp quickly realized the 2000 Mitsubishi Galant he drove wasn’t going to cut it.
Nobody took him seriously.
So, the fledgling agent bought a Corvette that he couldn’t afford and hired an assistant he didn’t need.
“Did I fake it till I made it?” he said. “Yeah. I’m not going to lie.”
Now, he owns or leases 12 or so cars — Mercedes, Ferraris, BMWs.
He whisks investors and agents to business meetings in Las Vegas via private jet, a prepaid service that costs the company up to $2 million a year.
Crisp’s $50,000 Chanel watch glitters with hundreds of diamonds.
He bought his first suit on sale at Robinsons-May for $155 but now slips into suits by Armani, Louis Vuitton, Valentino and other top designers, some with price tags of up to $10,000. His agents are encouraged to do the same.
He’s also building a mansion worth more than $5 million in Seven Oaks, complete with an escalator and NBA-size basketball court. It’s perfect for hosting clients, charity events and Bible studies, he said.
It’s all about marketing, he said.Even the mints that sit in dishes at the plush offices of Platinum Investments, one of the partners’ companies, bear the Crisp & Cole logo on silver and gold wrappers.
If you look successful, people assume that you’re doing really well, he said. Then you have to put in the hours.
“After you get your foot in the door, you can’t be a joke,” he said. “You’ve got to make sure you get everything done.”
He keeps tight tabs on the local market, studying house sale listings late into the night after the phones have stopped ringing and the house becomes quiet. Most nights he’s up until 2 a.m.
Crisp expects as much of the people he does business with as he does of himself.
At his office on a recent afternoon, Crisp talked to local homebuilder Charlie Bailey about a potential contractor he was looking to hire for a building project.
Crisp asked if the contractor could finish everything in the four months he was promising.
“I want him to know, basically, that there is a penalty on it if he doesn’t get done on time,” he said.
He’s meticulous about checking the credentials of outside agents that work with his company. He’s also demanding of his own agents.
The company started a hot line that lets callers reach an agent after business hours. Calls are forwarded to agents’ cell phones on a rotating basis.
If an agent doesn’t return calls promptly, he or she can lose their privilege to answer the hot line, which often provides valuable leads on properties.
Building a name
Crisp & Cole’s next big endeavor promises to be its most-ambitious yet.
The company is proposing to build two 31-story skyscrapers on the Cal State Bakersfield campus, a $370-million project that would include condominiums and a hotel.
With his visionary attitude and flashy style, Crisp is building a name for himself in town.
He turned heads at a recent fundraiser for the American Heart Association where two bodyguards accompanied him and his wife.
The security team is a new addition to Crisp’s life that’s taken some getting used to for his family. He also has two German shepherds in training and a Range Rover with a license plate that reads “CCRE K9.”
Crisp said he doesn’t feel threatened but also doesn’t want to take a risk with his family.
He describes himself as an “up-and-coming mogul” much like Las Vegas casino tycoon Steve Wynn, whose daughter was kidnapped in the 1990s.
“They’re there for protection,” Crisp said of the guards.
Rumors float around town about how he made his millions in such a short amount of time. He knows it.
“It comes with the territory,” he said.
As long as you continue to give great service to your customers, you’ll be successful, he said.
For partner Carl Cole, Crisp’s ideas can sometimes seem crazy.
“He likes to make waves,” Cole said. “He likes for people to say, ‘What the heck is that? He’s driving what? He took a plane where? He’s got a plane?’”
Cole might not make those financial decisions “in a million years,” but he trusts the brazen young man, whom he has come to consider his best friend.
He loaned Crisp a couple thousand dollars when he was just getting started and has been repaid many times over, Cole said.
The company has invested heavily in itself, and “everybody knows us,” he said.
The partners started their own video production company in fall 2004 to create the 30-minute TV commercials that showcase Crisp & Cole properties daily on the major networks.
The company also keeps its agents looking sharp by giving them money to buy designer duds or helping them buy new cars.
“We’ve made it our business to live up to that marketing,” Cole said.
A friendship forms
Cole first met his future business partner about a decade ago, while selling Crisp’s mother a house.
A teenage Crisp was talking to a builder for his mom, a Vietnamese immigrant who struggled with English.
The 16-year-old was demanding and assertive, Cole recalled on a recent afternoon.
“I remember going home and telling my wife I was really impressed with this kid, who was really standing up for his mom,” he said.
Five years later, Crisp walked into the Kyle Carter real estate office that Cole, a successful agent in his own right, had recently joined.
“I thought he was a little over the top and very confident, right on the edge of being cocky,” Cole said.
In that self-assurance, the older man saw the makings of one of the best agents he’d ever seen.
A friendly competition formed between the two, and in 2002 they partnered up while still working at Kyle Carter, posting $15 million in sales that year alone.
They took on more agents and by 2004 sales had soared to more than $91 million.Then in March 2005, the two split from McMillin Realty, which bought out Kyle Carter, to form their own company.
In an industry dominated by older agents sticking to the same methods, the partners decided the younger, dynamic Crisp should be out in front, Cole said.
“He’s the zip and go. He’s the flash guy,” said Cole, who describes himself as the details man who brings Crisp’s ideas to life. “I sit in here and grind it out.”
The relationship is kind of like a marriage, Crisp said.
They’ve been known to create a scene now and then with their arguments and door slamming.
“We’re determined to make it work even if he does tick me off twice a day,” Cole said, chuckling.
A number of agents have left other companies to join the successful team, which Crisp describes as “not a typical real estate company.”
The bustling California Avenue office is full of young agents with pin-striped suits, gelled hair and hands attached to ringing cell phones.
Integrity, trust, success and other motivational words stand out in large black lettering along the walls. A white board at the front of the room lists dozens of properties for sale.
“People chase this job down,” said Crisp, who demands much from these aspiring professionals.
He chides them to walk straighter, cut their hair and avoid slang.
If someone can’t afford the designer suits, he asks, “How much do you need?”
It’s a risky but worthwhile investment that’s paid off, he said. Like Crisp, many drive BMWs or Mercedes — cars the company will front them the money for if needed.
For agent Jonathan Gainor, there’s no comparing the ambition, marketing and teamwork at Crisp & Cole to the company where he used to work.
“Crisp and Cole is like the New York Yankees,” Gainor said. “You either love ‘em or hate them, and if you can’t beat them, join them.”
Where the money’s made
While one of the most aggressive and top producing agents for his first real estate office, Crisp didn’t make his fortune solely by selling houses for other people.
He took advantage of skyrocketing housing prices by buying and selling investment properties.
The first was a $130,000 house in the northwest’s San Lauren neighborhood. A Modesto-area investor offered to buy the house for $175,000 before it closed escrow, so he didn’t have to take out a loan.
With that profit, he bought a $487,000 house in Seven Oaks that quickly jumped in value to nearly $1 million. He pulled roughly $300,000 in equity from that house to buy other properties and grow his business.
It took off from there, one investment property after another, he said. Every dollar Crisp made, he pumped back into the business.
Crisp wouldn’t reveal how many investment properties he’s personally dealt with, but said the company typically has anywhere between 45 and 60 at any given time.
He also wouldn’t say how much he makes in a year.
According to a statement made by Crisp in court filings during a child custody hearing last year, his gross income was about $10,000 in 2001. By 2004 his income had jumped to more than $160,000, which included his share of corporation profits.
He also brought in about $220,000 that year from buying and selling investment properties with his second wife and business partner, according to the statement.
Turning point
Crisp wasn’t always this driven.
As a teenager, he was better known for troublemaking than dealmaking.
The middle of seven siblings, he grew up in a four-bedroom house in Campus Park.
“He was a feisty, smart-mouthed little kid,” who, along with his brothers, got into his share of fights, said older sister Kym Crisp.
The family struggled as their dad, a once-successful entrepreneur, hit bottom financially. Once, when they couldn’t pay the electricity bill, the family stayed at his pizza parlor — Fast Lane Pizza — for a couple weeks.
The boys liked to sleep in the game room, underneath the basketball machine, she said.
In high school, Crisp called the police on his dad, whom the siblings say stole checks, a credit card and other belongings from the teens.
While a checkbook belonging to Kym was found in his bag, their father, Dan Crisp, said he feels there was a rush to judgment.
The senior Crisp, who spent nearly 14 months in jail for passing bad checks, said he never used anyone else’s checks or took a credit card. The father said he has no ill feelings about his son calling the police and wishes him the best of luck.
“We’ve had our ups and downs,” he said. “I’m proud of David. He’s a very hard worker.”
At 18, Crisp’s life took a drastic turn.
In 1998, he married his high school girlfriend, who gave birth to their daughter, Taylor in December of that year. She’s now 7.
“(Taylor’s) the one who lit my fire,” Crisp said.
He began working multiple jobs and ultimately got his real estate license after taking night classes at Bakersfield College.
“Most teenagers went off partying. He just stopped,” his sister said.
Crisp and his first wife separated after about 21/2 years of marriage.
Taylor loves him to death, said ex-wife, Tiffany Crisp-Molina.
They go shopping, and he takes her to Hawaii every summer, Crisp-Molina said.
“He’s always made sure his family was taken care of,” she said.
In fall 2003, Crisp’s now wife of two years, Jennifer, gave birth to their son, Aiden. The couple married soon after.
“They keep me grounded,” Crisp said of his two children.
Family life
A flashy business bigwig in the public eye, Crisp is also a down-to-earth dad. He once dressed up like Batman to Aiden’s delight.
That stunt earned him the nickname “Bat-daddy” from the blond-haired little boy.
A photo of the pair at the family’s Seven Oaks home shows Aiden happily sitting in the driver’s seat of his dad’s gleaming silver Mercedes-Benz McLaren.
“(Aiden’s) like nonstop, too,” said the 24-year-old mother. “It’s like I have two Davids in the house.”
At home, he’s a different person after he unwinds from the work day, his sister said. He likes to clown around.
The Crisps’ spacious house sits on a quiet cul-de-sac and is a popular hangout for friends and family.
Crisp wants to make everyone happy, his wife said. They take family vacations and have barbecues.
“When he comes home, he’s David to us,” she said. “He’s a dad. He’s a husband. He cleans.”
The two met when she was still in junior high but split after they went to separate high schools.
They reunited just as Crisp was entering real estate and working long hours, she said.
The young mother is quick to voice her opinions of his more outrageous ideas.
“I go, ‘David, are you kidding me?’” she said. “I’m pretty tough on him.”
But, ultimately, she trusts him.
“We know we’re blessed to have each other, to have our family,” she said.
With Crisp’s help, his wife and sister Kym plan to open a baby boutique this fall. Crisp Kids will be part of a shopping center in the works on the corner of Brimhall Road and Calloway Drive in the northwest.
Crisp is quick to take care of his family members. Last winter, he bought his father a 2006 Toyota Tacoma truck.
His parents are divorced now, but his mother, Tu Crisp, encouraged him to help out his father and others in need.
He listened.
“I appreciated the fact that David would do that for me,” Dan Crisp said. “It was out of his own heart.”
Crisp and Cole have donated hundreds of thousands of dollars to Cal State Bakersfield, the American Heart Association and other local charities.
Crisp recently auctioned off a car lease worth about $28,000 at a heart association fundraiser, which raised $8,000 for the charity.
He also helped send six students in a virtual business class at his alma mater Stockdale High on a trip to New York City this spring for a competition.
He came to talk to the class last fall about his experiences in real estate, said teacher Terry Millsap.
The students seemed encouraged by his success, Millsap said.
“I think they thought, I can do this, too,” she said.
The group later wrote him to ask if he could help with their fundraising efforts to attend the competition. He offered to pay the remaining balance of $1,800, Millsap said.
“That really meant a lot,” she said. “It just made me feel like crying because we worked so hard.”
The future
Crisp’s mother worries about her son’s workload as he continues to climb the ladder of success.
“I say, ‘Son, slow down,’” she said.
But Crisp shows no signs of putting on the brakes.
Fresh off a record-breaking residential real estate market, he’s barreling full speed into the commercial world.
His next mission: build a pair of 31-story skyscrapers on the Cal State Bakersfield campus, a project of the huge proportions more common to the Los Angeles cityscape.
For starters, the twin towers would include 524 luxury condos, a four-star hotel with 115 rooms, health club, day spa and 75,000 square feet of commercial office space.
Crisp plans to make it all happen by his 30th birthday.
“There’s nothing I’ve said that I’ve not done,” he said.
The project is probably one of the largest mixed-use development of its kind ever proposed in Bakersfield, said Anthony Olivieri, a local commercial real estate broker.
The success of such a project would depend on many factors, including how fast the developer plans to lease or sell the spaces, the kind of amenities the property is offering compared to competitors, the city’s growth and others, Olivieri said.
Bakersfield’s current commercial market is strong with rents increasing and vacancy rates dropping, he said.
An enthusiastic Crisp has delivered at least two presentations on the towers project to Cal State committees, bringing an architect, attorney and other experts with him, said Michael Neal, the university’s vice president of business and administrative services.
“I think (Crisp is) an energetic person that has a lot of vision in terms of what he’d like to do,” Neal said.
The university has yet to develop detailed backgrounds of the local businesses, developers and organizations that submitted proposals in response to a call for public-private partnerships, he said.
Many questions still need to be answered to determine if the projects, including Crisp’s, are financially feasible, Neal said.
Regardless of the Cal State project, the Crisp idea machine continues to churn.
Another of his life goals is to build a church.
Crisp recently became the newest member of a group of local business entrepreneurs that owns the Bakersfield Jam, a minor league basketball team that will start up its first season this fall.
He’d like to buy a local news station someday, too.
Construction is under way on offices along Stockdale Highway, which will house the Crisp and Cole companies.
The young real estate heavyweight admits he’s still learning. It’s about trial and error, he said.
If a company he’s hired isn’t getting the job done, he’ll know better next time.
He plans to be a billionaire at 35.
“The odds say I won’t,” he said. “That’s why I like those odds.”
All I have to say is it sounds like smoke and mirrors. See ZZZZ Best.
he does remind me of Barry Minklow if thats what you meant
Yup, that’s him
http://www.barryminkow.com/
oh my god! this kid couldn’t be the spawn of the legendary Tom Wu of the 1980s, could he?
Yes!! Barry’s name has been mentioned many many times!
I think he will make it. Everything looks just fine. I am just curious, why is Bakersfield so in need of a huge commercial center. Is there a large amount of investmet going into the area and if so what is the investment. I have driven through that City a few times a short while ago and saw nothing that took me as this is the place to build a huge commercial complex. Maybe I am wrong, but I think that this individual will be in a lot more papers in the future other than the local Bakersfield paper. Really is there a huge need for a corporate center in Bakersfield. I mean anything that Bakersfield can claim to fame about. Well there is heavy steam regenerated crude oil there that is difficult to process. Oh yeah there is farms, yes that is true. Corporate farms could need such a complex I guess. Or maybe it is. Hmm I am just not sure. Is there a huge R&D facility near by, with thousands of highly educated workers. Maybe Bakersfield will become a huge financial center for the West Coast. Not sure, but whatever it is a must be big. However, it makes wonder why that City has so many homes for sell if Bakersfield is going to need a huge commercial center. Why would you want to move. Employment opportunties are endless. Unemployment in Bakersfield is 9%, way above the national average.
“Genius is an up market” - Galbraith
Fingerpointing is a down market…
(A close approximation to Galbraith)
Clowns like this really piss me off because they created a business based on an aberrational market. Try running a real business like manufacturing and we would see what young Mr Crisp is really made of. My guess…he wouldn’t one week.
Out of curiousity, I’m asking because I see this here all the time what is so different between what he is doing and a real business like manufactoring at the end of the day it’s still about selling the most product. No buyers for the widgets no manufactoring business, no?
You are really showing your ignorance. If you have to ask that question, then you have never worked in a real business.
I disagree, at the end of the day it’s about making products fly off the shelves. Do different businesses have different profit points and systems of course. But at the end of the day it’s all about the sales. Gov’t is the only business that doesn’t depend on sales, so again what’s the difference. What makes manufactoring such a real business versus what this guy is doing. Don’t let the fact that I’m a Realtor cloud your answer forget that for a moment and tell me what is the difference. At the end of the day both need a product how that product is obtained or created is irrelevant if it doesn’t sell.
The simplest way to answer your question is this. In a manufacturing business, you can make all the sales goals possible, but…if there is no profit margin to speak then the business is not viable. It’s in managing those costs relative to sales of the actual product that the true purpose of the business is managed and realized. In manufacturing and some services, managing those costs is extremely complex and requires a lot of discipline. This is the reason why most CEO’s in these kinds of business are NOT career sales people.
I agree. Running a bubble business is not the same as running a business. Now, some smart people will run a bubble business and know it, but that is certainly not most people, and definitely not Crisp.
Yes, some smart people are running bubble businesses because they know it and are getting out. Crisp, however, is too young and inexperienced to recognize this. Hell, he’s not even old enough to remember the dot.com implosion.
Crispy — great satire, and apparently a lot of work. Thanks.
FYI: It’s not satire… Crisyp&cole has taken his moniker from this guy…. who is real.
I really hope he is setting something aside. This sounds too much like the dot-bomb boom where 24 year olds were flying jets all over the country closing deals and by 2002 were working as a wal mart people greeter at the brink of bankruptcy.
Comparing him to Steve Wynn is a very big stretch. This story goes to show image can be bought.
Absolutely.
On the way up, it’s luck.
You really see the mettle of a person on the way down. I’ve seen many fail and few succeed, but if he gets it right, why not.
PS - No idea whether he really is religous, but from a European perspective, I thought the “i need a 5,000 sq ft house…for Bible Study” was laying it on a bit thick.
Regards,
Loafer
So who is our beloved blogger Crispy & Cole?
Donald Trump!
I don’t know if this timetable is right but if so at 16 this kid was probably watching “Boiler Room” repeatedly….
name one county thats up since jan 06
= 0
For you Saved By The Bell fans, it looks like Screetch is asking for donations to help save his house from foreclosure.
http://www.getdshirts.com/the_story.html
Is that for real?
Not worth finding out, IMO.
Can’t spell Geraldo?
OT: could I pose a question for the good minds that frequent this blog………..
Will falling real estate prices and the tanking of the world stock markets have the effect of draining off the excess liquidity that has been sloshing around the world?
Thank you
That’s the plan. Won’t go into it, but, yup.
It will contribute, yes.
There are other factors, too. Inflation increasing and little savings (especially in the US) will result in the real value of assets declining.
The fall in the value of the US dollar will also make a big difference globally in terms of purchasing power.
Regards,
Loafer
Where will the global liquidity move to? What country has higher rates and less (perceived for now) risk?
It’s not so much a question of where it moves to, it’s a question of destruction of capital, so there is not so much liquidity in the market.
Regards,
Loafer
Sorry for the long post- I was trying to post the link. UGH!
Crispy — I hope some naive journo-lurker picks it up and runs with it.
My mother would be Burmese - O Tu Crisp.
Or Chinese - Wae Tu Crisp.
While channel flipping tonight I went past Cramer’s show. All I heard Cramer say was “DR Horton is too cheap to throw out” as I changed to the next channel. Is Cramer still a believer?
I notice that his stock picks usually go down. When the show first came out, he would recomend a stock, and that stock would go up after hours and into the next day. Now, when he mentions a stock, I make sure that I don’t own it.
This is an obvious sign of things to come. When some one like Cramer who has made 100 million begins to pick loosers after loosers (stocks) we are in for a ride.
Cramer’s always been a good, reliable contrarian indicator. OTOH, even if he really believed the overall market were going down and knew the timing, he couldn’t say it on the air. You won’t keep your job as a cable t.v. stock “analyst” for long by constantly preaching doom.
how ’bout crisp & cole & cereal?
i’ll bring the potato chips
LOL!
Is Coleman a publicly traded company? I’m seriously thinking about it ,you know: tents, sleeping bags, lanterns etc…could be good sellers over the next year or so.
Come to mind, maybe whoever produces baked beans, top ramen, hot dogs, etc….I remember when my dad was laid off from Boeing in early 80’s (you remember the billboard…”whoever leaves Seattle last, please turn out the lights”) our family diet changed. Looking back, it really sucked. I think people are going to start changing their diet. Maybe more will hang out at Costco.
Looks like the FED is not done:
U.S. core inflation increased 0.3% for the third month in a row in May, putting pressure on the Federal Reserve to keep raising interest rates. The consumer price index increased 0.4% in May, the Labor Department said Wednesday, led by higher energy and shelter costs. The increase matched expectations. Core prices - which exclude volatile food and energy costs - increased 0.3%, ahead of the 0.2% gain expected by economists surveyed by MarketWatch. The core rate was boosted by a 0.6% gain in owners’ equivalent rent, which accounts for nearly one-fourth of the CPI. In the past year, the CPI has risen 4.2%. The core CPI has risen 2.4%, the fastest year-over-year growth since February 2005
Please let this be the sign BB cannot ignore!
If he raises rates in June I think the confetti falls and we break out the party hats and noisemakers like at the headquarters of a politician after all the votes have been counted and our candidate won! The fallout will be ugly but It’ll be a major victory for the bears.
Closer,
I agree with you, people are going to tighten their belts.
#1: they will cut back to cheaper restaurants.
#2: They will then switch back to cooking at home.
Only then will they break out the Ramen.
Neil
The Bloomberg article specifically mentions rising rents as a source of the gain. Since the CPI uses rents as a proxy for housing prices, it has a large effect. Some say that, therefore, inflation isn’t as high as it seems, because for-sale housing prices and leveling off and going down.
But what about the opposite argument? The FED believed inflation was contained prior to this year because sluggish rents were keeping the CPI down, even as for-sale housing prices soared.
And how core is the core? Energy is removed because it tends to move rapidly up and down. But due to long term structural shifts, the oil price now seems to be fluctuating between $40 and $80 per barrell, not $15 and $30. Remember when OPEC said it’s target was around $25 per barrell? That was just a few years ago! Anyone expect to see oil prices at that level anytime soon, given a government that has sworn off conservation for the past 15 years as Americans locked themselves into a lifestyle (exurban sprawl) and capital stock (McMansions, SUVs) that eats fuel? I don’t think so.
A) Wow, that Crisp bit really takes the cake… half that aritcle reminded me of the read-through on John T. Reed’s warning signs website.
B) and more importantly…
So, for about 2 years I was the oracle of my friends and work place regarding the housing bubble. Originally I believe I had things thrown at me. Managed to successfully talk several people out of purchases by providing data, etc. So, in some cases by dumb luck I did the people a favor (lost job, etc), in some cases the townhouse/condo development signficantly dropped their prices a month later… well, there’s still bigger idiots out there. One guy, who I must admit I don’t quite respect the intelligence of, asked me to research some items for him… created probably my best work - spreadsheets comparing rents and tax savings and opportunity costs all for his own situation and purchase basically showing his prospective purchase would require an appreciation rate of something like 20 percent for 10 years straight to make financial sense and that he would have an excess 1700 gain in equity per month by not buying and pocketing the difference in rent versus buy (he owns a house already and was planning to upgrade to something much bigger). As I know what he makes, he’s barely in a position to buy his current house let alone this next one… Well, WITHOUT SELLING HIS CURRENT HOUSE - he freaking bought it anyway. Several hours of my time wasted at home polishing up a spreadsheet and such for him. Well, I’ll just keep my fingers crossed the govt doesn’t bail anyone out as that’s the only way I think this guy can gain a clue.
Ben-
1,140 mortgage jobs in O.C. cut since March
Layoffs prompt companies to put up huge blocks of local office space for lease.
By MATHEW PADILLA
The Orange County Register
MORE VACANCIES: ACC Capital, owner of Orange-based Ameriquest, is marketing 600,000 square feet in 10 buildings. Most of the recent job cuts from Ameriquest’s parent firm were in Orange, Anaheim and Irvine.
JEBB HARRIS, THE ORANGE COUNTY REGISTER
COMPETING FOR SPACE
Newport Beach-based The Irvine Co. has four towers in the works in Irvine, including one in the planning stages. At its Jamboree Center complex in Irvine, ACC is marketing about 175,000 square feet.
In such cases, a landlord might end up competing with its own tenant. That happens when a building owner is trying to fill space in a building where a mortgage company is seeking a tenant to sublease space.
No one knows if this market condition will exist when these towers are completed.
Mortgage companies cut 1,140 jobs in Orange County in the last three months, and now some are putting up huge blocks of office space for lease.
It is interesting that OCR used the conservative definition of jobs.
I take that to mean employees as opposed to contractors.
There is no way that 1,140 jobs is equal to 600K SF.
A LOT of independent contractors were dumped out on the street!
YES!! Maybe they all had 526 sq ft offices?? LOL
Lest we forget that next year’s Bird Flu pandemic will kill millions and further increase the supply of housing. Point is there are so many unknowns in the “Bubble Pop” equation that it could be much worse than imagined.
SeattleMoose, you’re probably right but that comment about the bird flu reminded me of “Debbie Downer” on SNL. Her comments are usually followed by a trombone going waaa-waaa (like uh-oh).
Hey can someone tell me if this one is overvalued? It has such a friendly, open-air look:
http://realtor.com/FindHome/HomeListing.asp?snum=17&locallnk=yes&frm=byzip&mnbed=0&mnbath=0&mnprice=175000&mxprice=225000&js=off&pgnum=2&fid=so&stype=&mnsqft=&mls=xmls&areaid=43016&poe=realtor&zp=43016&sbint=&vtsort=&sorttype=&typ=1&x=57&y=9&sid=06C762B73110C&snumxlid=1059310626&lnksrc=00001
It seems fairly priced in todays market. I’d jump on it if I were you!
Naaah … I’d offer $60/sq.ft., max.
I would love to see the “virtual tour”. It looks like an “owner builder “straw bale house.