Following The Market Down In Las Vegas
The Review Journal has this slightly mixed- up report on the housing bubble in Las Vegas. “The opportunity to become a homeowner in Las Vegas has widened greatly, observers say, as investors bail out of a cooling market, leaving inventory at a record high and forcing sellers to lower prices by as much as $50,000 in some neighborhoods.”
“It’s a new game in a changing market, and old rules no longer apply, said Jason Braford, district director for ZIP Realty in Las Vegas. ‘Just because you’re seeing stories about homes sitting on the market for months or years, if the house you like is..a special property, all the old rules still apply,’ he said. ‘In other words, multiple offers and the need to move fast.’”
“First-time buyer Alaina Brox, 26, recognizes that Las Vegas has become a buyer’s market but thinks prices will continue to rise. She was looking at a four-bedroom, 1,230-square-foot home near Lorenzi Park listed at $235,000. ‘I’ve got two kids, so I need something big. I like the big yard. I don’t know if I have enough money to fix it up,’ she said.”
“(Researcher) Dennis Smith said Las Vegas is very much a buyer’s market for long-term investment. Smith is traveling to Boston and New York later this week to meet with hedge fund investors and analysts. With home builders’ stocks taking a beating, they want to know what’s on the horizon for housing, he said.”
“Based on Thursday’s closing prices, KB Homes stock is down 40.4 percent for 2006; Pulte Homes stock is down 31.4 percent; MDC Holdings, which does business as Richmond American Homes, is down 19.7 percent; and D.R. Horton is down 32.6 percent.”
“‘Most of the large institutional investors all think the long-term outlook for Las Vegas is excellent,’ Smith said. ‘It’s going to take a year or two for the inventory to shake out from all the investors.’”
“With rising inflation and interest rates, the pin that could pop the hyped real estate bubble is the poor credit of potential buyers, said (mortgage broker) Tom Piecenski in Columbus, Ohio. A consumer survey by the mortgage company showed that 63 percent of renters in Las Vegas plan to buy a home within the next few years, but they’re hesitant about buying because of credit and financing concerns, Piecenski said.”
“A majority of those surveyed in Las Vegas said they lack the financial knowledge to take the plunge into home ownership, Piecenski said. More than one-fourth admit to having little or no understanding of mortgage fees, and almost 40 percent don’t understand how points affect mortgage and closing costs.”
“On the other side, sellers need to update their thinking, Braford of ZIP Realty said. Many of them are setting their list price based on information six months to nine months old. They tend to underprice their home in a rising market and overprice in a falling one.”
“‘Owners typically don’t seriously consider a wide enough range of potential housing market outcomes, including the possibility of a steep decline. That leads people to take more risks than they should,’ he said. ‘Don’t follow the market down. If you follow the market down, you may never manage to sell because the price is always just a little too high. Price your home according to the changing market.’”
“Braford said it really comes down to what a buyer is trying to accomplish. ‘Do what’s best for you, not your neighbor,’ he said. ‘Potential buyers sometimes feel safety in numbers and think that millions of buyers can’t all be wrong. This herd behavior is what lured a lot of people into overpriced houses in the first place.’”
‘Most of the large institutional investors all think the long-term outlook for Las Vegas is excellent,’ Smith said. ‘It’s going to take a year or two for the inventory to shake out from all the investors.’
I guess Wall Street doesn’t mind funding these multi-billion inventories until this ’shake-out’ is over?
This is why the “institutional investors” are going to lose a lot of money for people who trusted them eventually.
“trust” is such a funny word. The mob vs the wall street mafia, this could get good.
LAS VEGAS INVENTORY HITS ANOTHER ALL TIME HIGH!!! INVENTORY UP ANOTHER 2.69% FOR THE WEEK!!!!
ANOTHER ALL TIME HIGH FOR PHOENIX INVENTORY!! 49504!!!!
Phoenix should be over 50,000 by end of June (originally thought that the 50K number would not be hit till August.).
That is simply insanity….
Yeah he speaks for all the large institutional investors. All 10,000 analysts that work on this crap. He knows one or two and he is speaking out of his ass. His so full of it makes me sick.
This is a straight out LIE and this reporter should be sent to the wood shed or fired. The Stock Report for Standard and Poor’s from June 10 on the Homebuilding Sub Industry Outlokk “Our fundamental outlook for the homebuilding group is negative”
William mack, CFA
This is part of an 8 page stock market analysis report written to brokers from Standard and Poor’s. This is what the guys see before their put out their Press Releases. Distribution of this report is prohibited, but as good reporter can spend a few dollars and get the report.
The LONG-TERM outlook for many housing markets is probably, in many ways, good. Short-term is terrible. But boomers, in which camp I belong, and we are many, aren’t quite like our parents. The Greatest Generation were, by and large, content with the neighborhood in which they raised their family. We, on the other hand, seem more inclined to roam and escape rotten weather.
Unfortunately, too many folks who were either making too little in other investments, or whose prospects for a comfortable life were otherwise nil, jumped on this bandwagon too soon. And now you see the result.
But I have little doubt. In 5 years or so, or perhaps a bit sooner, real estate will once again be smart. There are probably many institutional investors, with time horizons that expand at least this long, who believe this and find homebuilder stocks as smart long-term plays. Of course, the trick is to avoid those that may actually go bankrupt. (WCI, anybody?) Those that survive should prosper.
I read a post on one of the Yahoo message boards, from a big-time florida housing bear, mentioning that John Hussman was (is) buying shares in the national homebuilders. John Hussman is somebody whose opinion I deeply respect. Of course, his position is probably fully hedged, and his time-line is longer than I currently have the patience for, but this tells me that, sometime within the next 12 months, the homebuilder sector is something at which I should be looking.
The LONG-TERM outlook for many housing markets is probably, in many ways, good.
Demographics would argue otherwise.
Wait. Mr. Smith, an investor, wants to shake out the investors. Okay, I guess I get that one . . . loser.
And this one cracks me up. Some 26 year old thinks the market is going to continue up. And what are her qualifications to make such a statement for publication? 2 kids and it doesn’t sound like there’s a husband. Doesn’t sound too smart to me. Next.
“First-time buyer Alaina Brox, 26, recognizes that Las Vegas has become a buyer’s market but thinks prices will continue to rise. She was looking at a four-bedroom, 1,230-square-foot home near Lorenzi Park listed at $235,000. ‘I’ve got two kids, so I need something big. I like the big yard. I don’t know if I have enough money to fix it up,’ she said.”
I think it’s sad that neither friends nor family seem to have talked to her about renting. With all the speculator-owned properties out there, there must be some great deals on rentals. IMO, single moms need to do what’s best for the kids and that probably doesn’t currently include a slice of the American Dream.
I agree. There is a huge knowledge gap about housing rentals. A majority think renting = apartments. I enjoy my house rental for a fraction of a mortgage. My premium is close to $0 compared to a similar sized apartment.
Sadly, her kids are going to pay dearly for her stupidity. On the other hand, they will probably learn some hard lessons that will serve them well in later life.
Yup. I was right. Alania is definitely someone whose market calls we should be paying close attention to.
http://www.reviewjournal.com/lvrj_home/2006/Jun-16-Fri-2006/photos/buyer.jpg
LOL. A stripper wannabe.
You would think the realtor could at least get the chips off the table when showing the house; and the newspapers taking pictures, no less.
Chips off the table in Las Vegas. I’m sure you intended all puns in that statement!
Wonder if the occupant is a renter.
I hope the tenants at least remembered to “flush” and spray some room freshener before the RE agent came over.
It sounds gross but my wife and I actually viewed a house for sale once with number 2 still floating in the toilet bowl.
She is we all know it.
Nothing says “savvy real estate investor” like a see-through blouse.
Perhaps if she ups the number of lap dances she performs each week, she can afford to buy in Vegas, baby.
I like the fire estinguisher on teh door panel
That’s in case the meth lab explodes.
She’s gotta be an entertainer of some sort for sure. Definitely need a stated loan.
classy comment there tx, appreciate your input
Is it me or does Jason Braford sound like he’s flip-flopping in the same article?
“It’s a new game in a changing market, and old rules no longer apply,” said Jason Braford, district director for ZIP Realty in Las Vegas. “…if the house you like is in a coveted neighborhood or is a special property within an area with scarce supply, all the old rules still apply,”
You know the funny things is the “old rules” are only two/three years old. And the “new rules” have been in use for centuries.
“First-time buyer Alaina Brox, 26, recognizes that Las Vegas has become a buyer’s market but thinks prices will continue to rise. She was looking at a four-bedroom, 1,230-square-foot home near Lorenzi Park listed at $235,000. ‘I’ve got two kids, so I need something big. I like the big yard. I don’t know if I have enough money to fix it up,’ she said.”
- Don’t do it Alaina. Don’t do that dumb mistake. Rent a house for you and your kids instead. If I had the power to change her mind from afar, I would use it.
I’ll use mind power from here: buy two, buy two, buy two… Real estate always goes up, buy as much house as you can afford on a neg-am…
Let the idiots buy and go into foreclosure. Its better for us in the long run.
The two kids don’t have a say in the matter. Have a heart, will ya?
Where in the hell is there father? Oh yeah past reports on the blog said prices will rise because the divorce rate is 50% and split couples will have to buy two homes.
Funny thing is, I remember divorce rates being near 50% for the past 15 to 20 years…
Oh well, “everyone wants to live here”, “this is the place that baby boomer retirees will retire to”, “this place will be the next Manhattan/Santa Barbara/Malibu/Microsoft”, “they aren’t making any more land”, “the population is increasing, those people will have to live somewhere”, “this place has been ‘discovered’”, “rich immigrants from Brazil/Europe/Somalia are buying here”, yadda, yadda, yadda…
Nevada has the highest divorce rate.
http://www.divorcestatistics.org/
That is less of a comment on our population than the nature of our divorce laws.
Almost $200/sf for that dump. It would probably rent for $1000/mo max.
“Just because you’re seeing stories about homes sitting on the market for months or years, if the house you like is in a coveted neighborhood or is a special property within an area with scarce supply, all the old rules still apply,” he said. “In other words, multiple offers and the need to move fast.”"
That’s bad spin right there, too much inventory and sales are to slow. I don’t care what neighborhood. 1999 sales price starting bid. If you just have to be out there buying a house. I’ve been watching a house down the street from me since Nov. that a flipper dude gutted rehabbed and put back on the market. The grass is starting to die and grow up, the gardner hasn’t been there for at least a month. I’d start him off at 1999 in a heartbeat.
“I’d start him off at 1999 in a heartbeat.”
And you still might be paying too much. Prices could very well overshoot on the way down. I don’t know what area you are in, but if it’s one that has seen a lot of new construction, you could be seeing a flashback to 1995.
True prices could overshoot and probably will for some places,the Inland Empire IMO is the perfect candidate for that scenario. I vividly remember 3&2’s there for 25k a piece and no one buying. The South Bay where I am there hasn’t really been a whole lot of new construction. But there will be very severe pain nonetheless. Ex: There’s one custom built in PVE that a guy was asking 3.3m on a lot that calling it a postage stamp would be generous, It’s now at 2.6 been on the market at least a year and a half. I personally don’t see that going for anymore than 1.6 at the most and thats because it has 2 elevators in it. I’m suggesting 1999 prices for people who just can’t help themselves and have to buy now. In a perfect world everybody would just sit on their hands. No matter the market though everybody figures they are brighter than the rest. So if you must start a bid at 1999. 1995 prices may not get you any response If I remember the pricing correct for that year.
So what would that Palos Verdes home go for at 1999 prices?
Probably 1.2 to 1.5. The views are exceptional. The only thing thats really killing it is the lot size way to small on a hillside. I would venture to guess a couple good rainy seasons and annual sand bagging would be in your future
And PV is sooo geologically stable…not.
In the 30’s, house prices dropped 90%. That’s right. During the depression, houses could be bought for 10 cents on the dollar.
We are soon to realize that we are again in a depression. We can only hope that it is no worse than the 30’s.
90% off in most areas would put the pricing right at roughly 93-94 prices. The only exception to this would probably be traditionally high end area’s like Beverly Hills, Hollywood Hills places like that. If thats the case then so be it. But in order to get to that level mass layoffs, a national disaster, and rates plus 8 would have to be the order of the day IMO.
“90% off in most areas would put the pricing right at roughly 93-94 prices.”
Horsehockey.
Lou-
You either have a short memory or know nothing about the Southern California market. My specialty has been multi-family property. During 93-94 here are some examples of things I dealt with. Downtown Los Angeles a master metered brick building could be had all day for 10k per door during the peak last year they were selling in excess of 100k per door. South Central same thing I know of a guy who bought 33 units for 300k. He sold them for 3.5 early last year or later in the year before that. Moreno Valley 60 units all 2 bedrooms was hard pressed to get 600k for them. You couldn’t touch that now for less than 8 million. Tri-level in Silverlake sold for 70k you’d be lucky if they let you sniff the grass for less than 900k. Whole blocks in Watts and Moreno Valley going for 35k. Those same houses now sell for 300-400k. Bel-Air 2 beds / 2 baths with views 475k try getting in that now for less than 3 to 4 million dollars. Those same mansions you see advertised in the paper going for 8-10 million could be had all day long for 800k to 1.5. Do the research look it up forclosures ruled the day and if you didn’t compete with them you didn’t sell.
Horsehockey, not even close
mrincomestream,
I’ve no doubt you’re right about multi-family, but certainly not SFH. 1995/96 was the bottom for SFH, and even then it would only be off 50-65%. 90% off would have to take us back at least to the early 80s.
Still, not at all out of the question…
TJ-
I sold a lot of foreclosures during that time. I did enough BPO’s for banks all through Southern California to know. From todays prices to 93-94 for SFH was roughly 85 to 90%. I wish I had my files here instead of storage. I’d give you you a couple of real world examples to research on zillow. I just cant remember any addresses right now.
No need; I’ll concede on foreclosures, especially after the quake. I was speaking based upon strictly personal observations of the overall LA housing market over the past 18 years. [I've got tons of examples ranging across the finer subdivisions of LA, too.]
I moved to LA in 88 and started actively househunting shortly thereafter. Almost pulled the trigger at the top, then waited the market back down to 96. Unfortunately, by then a failed personal enterprise inhibited my ability to purchase afterwards. Of course, by the time I got my finances in order the whole damn market goes crazy again. Oh well.
Nope looks like I may have been a little off. I did a little digging on zillow. I did a lot of work in Moreno Valley so I did a little ad-hoc research in the area. After some averaging it seems we were both right about the years. For the sake of discussion it appears on average you could buy a 3&2 for roughly 50-60k although I do remember some bank foreclosures and hud property for 25 to 35k but I couldn’t find them so for this discussion it’s a mute point. Right now those house are ranging between 385-425k so average them out at 405k average what they sold for between 94-96 the average comes out to about 55k which means to go back to those prices, todays prices would have to drop by 87 to 88% so 90% is not out of the realm of possibilities. During that time in that area the base had closed and you had a lot of inner city folks moving out there because of the prices, when they moved in the locals moved out white flight if you will. A lot of banks had a lot of money down there seemed I was down there 2-3 days every week looking at something.
I wouldn’t worry too much about the market going crazy after that little bit of research I’m convinced moreso now than ever that reality will be back in this market sooner than later.
We are soon to realize that we are again in a depression. We can only hope that it is no worse than the 30’s.
It could get much, much worse than the 30s. Then, people were much more self-sufficient in terms of growing their own food and providing for their own needs. We didn’t have the massive entitlement mentality that has permeated all sectors of society (thank you, Baby Boomer scum). In addition we still had a solid manufacturing base (i.e. wealth-creation capability) which has now been transferred wholesale to India, Mexico, etc. (Thank you, Globalist Republicrats and the sheeple who voted for them).
In addition, I think it’s safe to say (though politically incorrect to acknowledge) that we have far more fissures and conflicts percolating under the surface in terms of class and ethnic tensions that could easily boil over in a depression scenario.
Put it all together and it’s not a pretty picture.
I don’t think we are in 1930’s territory at this time. I think it is a possible outcome if several factors converge. For everyone’s sake I hope that does not happen.
I don’t think we are in 1930’s territory at this time.
Why would you say that? Fundamentals are worse, not better. God knows we’re not any smarter…
A consumer survey by the mortgage company showed that 63 percent of renters in Las Vegas plan to buy a home within the next few years, but they’re hesitant about buying because of credit and financing concerns, Piecenski said.”
and of those 63% who completed survey 88% believe Aliens and Santa Clause. Those in remaining 12% used money they were paid to complete survey to buy beer and feed a slot machine.
“63 percent of renters in Las Vegas plan to buy a home within the next few years”
Those girls are going to have to spend a lot more time on their backs over the next few years in order to afford those prices…
Those girls are going to have to spend a lot more time on their backs over the next few years in order to afford those prices
Skuse me?????
How offensive can you be, sir?
Funny… isn’t “diceman” the nickname for Andrew “Dice” Clay, one of the most offensive comedians out there???
Offensive warning for the following:
True story: My friend and I go to Vegas each year. A few years ago he orders up a stripper, and during her routine she mentioned she was going to invest in RE. My friend paid her a lot that night after he ask me to leave them alone.The more this is unfolding, the more I am of the opinion (and it is only that, an opinion) that 1999-2000 prices are within reason in true bubble areas, eventually.
The BIG thing is though, those prices will only be gotten from people who bought before 1999, and did not take out huge HELOCs, and can therefore still take some money away from the table at those 1999-2000 prices rather than bring money to the table. And banks of course. But that will be a long time coming.
This is going to take a while to play out. I’m convinced of that much.
That view, 1999-200 prices, has a lot of consensus on the blog. But there is less consensus, I think, on the matter of taking money away from the table here. Many here, myself included, think that an awful lot of FBs are either going to have to bring a check to the table or to get out via foreclosure. Tough as it may sound, take the example of any given flipped house — the guy who is bringing a check to the table is, essentially, paying the money the successful flipper pocketed. As for FBs who borrowed what they cannot pay and at a price at the top, the mortgage broker made a decent cut on the deal and the seller, whether builder or owner, did, too. For every loser there is or was a winner — it just sucks if you’re the loser.
I completely agree, and hence my point, “and the banks”. Those flippers will go BK, the house will be taken from them, and the banks will sell them. But that will take a long time to work out. If you had the choice between a huge haircut, and foreclosure, what would you do?
Too many fools, including some who have posted regularly here, think the Fed’s only option is to inflate like crazy. The prevalence of this view has single-handedly forced Bernanke’s hand; his choice is to either inflate from the get-go, earn the Helicopter Ben label, and crash the dollar as our foreign creditors lose the faith, or else to fulfill the Fed mandate of price stability, prove his reputation as an inflation hawk, and protect the foreign reserve status of the US currency, at the unfortunate cost of sinking a few hedge funds, housing flippers, and other gamblers who bet that a Princeton academic would not have the cojones to stand up to Wall Street pressure to keep spiking the punch bowl. The choice he faces seems clear cut from where I stand, and the data since May 11 makes clear that he is looking out for the national interest, regardless of pressure from the speculator community to do otherwise…
When there is no “lender of last resort”, things can get very hairy.
In that sense, maintaining the dollar is far more important than maintaining house prices, IMO.
Well, if Bernanke inflates away and therefore kills the USD…everyone will point to him. However, if he (seemingly)gallantly saves the USD and fight inflation…he can point at multiple other causes when housing slides down the tubes. Loose lending standards, Fannie Mae, corrupt appraisers, fraud, etc. That’s a buck he can pass…so to speak!
That’s a very good point actually. The housing bubble has no shortage of excuses for its demise that BB can point to as a cause for deflation of housing prices.
Very well put, stucco. I think that the market may have misjudged BB. I didn’t see him rushing to soothe Wall St. with reassuring words when the markets were tanking last week. Maybe — just maybe — we have a Fed chairman who understands that the serial bubble-blowing lunacy has got to end, even at the expense of some economic pain.
You are all talking like BB actually has some influence over what long term interest rates do.
Correct. The fact that so many people on this blog believe that Bernanke is in contol indicates the Fed disinformation campaign is working. Reality is very different. Bernanke has to choose between inflation and deflation. He is on record as saying that Great Depression-style deflation is unacceptable. Bernanke WILL inflate, not by cutting rates but by printing money. The Fed will purchase assets with fresh money to prevent asset prices from adjusting in relation to goods prices. Deflation would destroy the banking system which has the majority of its assets in direct ownership of mortgages and MBSs. Deflation would wipe out the equity in the banking system. This would be unacceptable to every politician in the country.
Great points. I would add that hyper-inflation would also be totally unacceptable to every politician and hyper-inflation would also destroy the banking system after the currency collapses and then deflation sets in anyway. So far, the Fed has gotten lucky with this retarded Bretton Woods II, and cooked CPI notwithstanding, has had to deal with inflation mostly in the form of assets bubbles. Now we’ve got the commodity cycle in full swing and inflation is no longer contained to assets. Like I said the other day, Gold and Oil were getting out of control and BB wants to pause really bad. He would rather have skyrocketing oil and gold starting from a lower level and a falling dollar starting at a higher level. So he shook out the commodity market a little with all of this tough talk, and maybe we’ll get one more raise and then a pause.
The question is: can BB print a lot and raise a little (and maybe cook CPI even worse), and engineer an orderly decline of the USD? I guess its possible, but I’m only giving him a 10% chance of pulling it off without some kind of an accident. And while I’d like to say that BB will grow a set and stand up to Wall St., I’m a little too cynical to get too carried away with the hawkishness of it all. I guess it’s all academic for purposes of a housing bubble discussion. RE is toast regardless of what the Fed does.
Charming. As one of those ‘fools’ I will be sure to remind you of your comment if and when Mr. Bernanke folds his cards, and attempts to inflate his way out of his mess. In fact, I disagree with you on almost everything from Peak Oil to economics. The fact that I agree with you on the housing bubble makes me doubt my own position.
Too many fools, including some who have posted regularly here, think the Fed’s only option is to inflate like crazy.
Does it really matter? BB’s options only allow for accelerating or delaying the inevitable, not preventing it. A depression is coming, and with it the ultimate destruction of the USD.
Others may be fools, but you would surely qualify as the “greater fool” if you think the fallout will be limited to “…a few hedge funds, housing flippers and other gamblers”.
I think it’s dangerous to assume the USD will eventually be destroyed. So what if BB pauses or lowers? In what other currency can the world trust? The euro? The RMD? The Krona? (har — just kidding). Unless your argument is that ALL world currencies will collapse (and ain’t no way that will EVER be allowed to happen), the money has to go somewhere. If push comes to shove, you can bet the safe haven will STILL be U.S. treasuries. BB may have more room to inflate than many believe, at least in terms of “protecting” the dollar.
I think it’s dangerous to assume the USD will eventually be destroyed.
I think it’s dangerously naive to assume it won’t. Just like the British Pound failed, the USD will fail and then rise again in a slightly different form.
…ain’t no way that will EVER be allowed to happen…
Always love that statement. Who would not allow it? The geniuses that got us here??
The US is already a bankrupt FB; the rest of the world is just scared to call the loan. Once this FB stumbles into depression, all bets are off.
FYI, BB has no interest in fighting inflation, per se, just “managing inflation expectations”. To wit…
Things are getting back to normal. By the alarm bells ringing in the Mogambo Stinking Hole Of Fear (MSHOF) in the backyard, I know that the Federal Reserve is back increasing Total Fed Credit. Sure enough, I quickly find out that they created another $4.1 billion last week. This was at the same time as the U.S. Treasury printed up, in actual cash, another $4.3 billion, which is fourteen bucks for every man, woman and child in America.
For good measure (I suppose), the Fed bought up $2 billion in government debt last week, too, blatantly committing the ultimate fraud: creating money to buy government debt for itself, which is then (supposedly) turned over to the U.S. Treasury.
Remember too, BB is supposedly the foremost expert on the Great Depression, therefore under no circumstances does he dare hasten upon us the next one. That’s exactly what Volckeresque rate hikes would do, given the current public and private sector debt levels.
With all the BS at FNM etc., wouldn’t it be nice if someone worried about the National Interest. In other words, you and me.
It is the opinion of some analysts that the latest TIC data confirms the inflation argument. Seems that U.S. debt instruments are being purchased by countries (Great Britain, Carribean) that are either running deficits themselves (hence no logical reason to be buying our debt) or are fronts for either hedge funds or the FED (Carribean nations that don’t have two coconuts to rub together). Hence the belief that the FED is monetizing debt already either through said hedge funds or through Bank of England.
I’m leaning towards the inflation camp although I’ll readily admit that there are too many moving parts for me to call it any more than a guess.
My follow on comment would be just to point out that
1). The housing market is going to crash regardless of anything BB does. That this crash is going to be a hugh deflationary impulse because of the defaults/debt write downs. How BB reacts is the point of discussion here.
2). The fractional reserve system of banking can ONLY exist with INCREASING money supply to pay the ever increasing interest payments on the ever increasing national debt. So, while I don’t have any idea whether we are looking at hyper-inflation followed by deflation or we go right into a deflationary depression, I do know that the folks saying it will deflate immediately going forward are essentially saying that the present system will have to be totally revamped or discarded sooner rather than later. Something I imagine the FED and the gov’t would like to postpone (lending credence to the hyper-inflation theory). And yes, I’m saying the system won’t survive because it is based on ever increasing debt. Since the U.S. gov’t can’t service it’s national debt with any sort of recession/depression, something dramatic is in the offing regardless of the above.
Excellent post. The deflation crowd has a great basis for their thesis. I’m in total agreement that we will have deflation eventually. But before that happens, BB will put up one hell of a fight (= inflation) before letting the US slip into all out deflation.
auger,
Every time I try to make a point you seem to do it better. Keep it up!
FYI, BB has no interest in fighting inflation, per se, just “managing inflation expectations”.
Things are getting back to normal. By the alarm bells ringing in the Mogambo Stinking Hole Of Fear (MSHOF) in the backyard, I know that the Federal Reserve is back increasing Total Fed Credit. Sure enough, I quickly find out that they created another $4.1 billion last week. This was at the same time as the U.S. Treasury printed up, in actual cash, another $4.3 billion, which is fourteen bucks for every man, woman and child in America.
For good measure (I suppose), the Fed bought up $2 billion in government debt last week, too, blatantly committing the ultimate fraud: creating money to buy government debt for itself, which is then (supposedly) turned over to the U.S. Treasury.
Remember too, BB is supposedly the foremost expert on the Great Depression, therefore under no circumstances does he dare hasten upon us the next one. That’s exactly what Volckeresque rate hikes would do.
(Sorry for the double-post.)
“Braford said it really comes down to what a buyer is trying to accomplish. ‘Do what’s best for you, not your neighbor,’ he said. ‘Potential buyers sometimes feel safety in numbers and think that millions of buyers can’t all be wrong. This herd behavior is what lured a lot of people into overpriced houses in the first place.’”
——————————————————————
How could millions of buyers be wrong? We all know prices have been going up since the beginning of time. Thanks to Ray Rodriguez, Modesto Realtor, for reminding us of this eternal truth.
Gee, how’d we miss this one? Has Suzanne researched it yet?
http://news.yahoo.com/s/afp/20060617/lf_afp/lebanoneconomyproperty_060617220618
What will be the incentives there. A years supply of ammo, 2 AK’s and a kevlar reinforced Humvee.
a whole lotta virgins
The Gulf arabs, loosely defined as the arabs with money, always want to have a welcoming, discreet watering hole. Cairo is one; Bahrain sorta’, but much less discreet because of its tiny size. Dubai is being marketed to too many foreigners. The arabs may be worried about finding themselves more fenced in as to where they go to do their drinking, gambling and “socializing.” Beirut is their Vegas, so I think it is logical that they pour money into it. It has always been possible to live well in Beirut, if you are willing to pay enough money for the security you need. And, I might add, if you go up into the hills way outside Beirut, there are some a lot of drop-deap gorgeous women looking for a man — high-maintenance, but there’s plenty of money in that part of the world.
“It’s a new game in a changing market, and old rules no longer apply, said Jason Braford, district director for ZIP Realty in Las Vegas. ‘Just because you’re seeing stories about homes sitting on the market for months or years, if the house you like is..a special property, all the old rules still apply,’ he said. ‘In other words, multiple offers and the need to move fast.’”
Realtorspeak (TM) at its worst…
‘”This time, it’s different” are the four most expensive words in the English Language.’
-Ludwig von Mises-
“‘Most of the large institutional investors all think the long-term outlook for Las Vegas is excellent,’ Smith said. ‘It’s going to take a year or two for the inventory to shake out from all the investors.’”
Most of the institutional investors are stupid sheep who will not personally reap the bitter harvest of their collective folly, provided they tacitly collude as a unified herd.
stupid ugly bitch probably has .1% to put down on it and wont even qualify.
It’ll be awful hard for her not to qualify
You have to qualify???
OT but ZipRealty is showing 49,503 active listing for the Phoenix metro area….Unbelievable…. I’m in Chandler, AZ and the agents are having open houses during the week now! They just don’t get it. Lower the price idiots!!! And not 5%!!! Let’s see a 30% haircut!!!
And according to blogger Flip, Phoenix was at 7K inventory just last April 2005. I think the Phx run-up in inventory is unprecedented for any market? I don’t even think Florida with all the condos compares. Anybody know if this sort of increase in inventory ever happened anywhere before?
Michael Albrecht, a real estate agent with Century 21 Barrett, said the buyer’s market does not apply at the entry level because not much is available for less than $250,000.
That is exactly the problem. Root rot.
These realtor guys are sharks. You go inside the cage, cage goes in the water, you go in the water, shark’s in the water … our shark. Farewell and adieu to you fair Spanish ladies . . .”
“She was looking at a four-bedroom, 1,230-square-foot home”
How does that work? Are the bedrooms 8×8?
LOL.
No requirement for that, just move your standards away from McMansion room dimensions.
The first house I owned was a 3/1 with less than 1,000 square feet and all the bedrooms were 10×10 or bigger.
Now if you want small bedrooms, I’ve seen advertisements for 3-bedroom houses in the UK where the third bedroom is 6′6″x5′9″ :o.
Sounds like an average hotel room in London.
Our old house was 4bd/2ba, and 1338sf. When it was just hubby and me it was fine, but it got smaller with each kid. I would tell people we needed more space, and then they would “don’t you have 4 bedrooms” Why yes we did, but I didn’t say we needed more bedrooms did I?
Whoa! My old Cobblestone house was 1338sqft with 4bd/2.5ba too. (Sonoma County) The master was the size of a normal bedroom (maybe 12×14) and the rest were 10×10 (legally smallest possible?). I lived there alone and felt cramped. Having an actual family … I can’t imagine.
I believe 8×9 is the smallest bedroom possible under normal building permits. I suppose a builder could still *make* a smaller room, and a family might choose to stick a baby’s crib in it… but for underwriting or appraisal guidelines it’s not a bedroom and cannot be valued as one.
“First-time buyer Alaina Brox, 26, recognizes that Las Vegas has become a buyer’s market but thinks prices will continue to rise. She was looking at a four-bedroom, 1,230-square-foot home near Lorenzi Park listed at $235,000. ‘I’ve got two kids, so I need something big. I like the big yard. I don’t know if I have enough money to fix it up,’ she said.”
Ya that size is a huge upgrade lol. Well she could always do some hooking to make ends meet or fix up the house.
Listen all RE Agents. You people do not get it. Who are you afraid of? The poor seller who won’t list because they are not hearing the right listing price. Well, you people have to eat and pay the bills soon or seek a new living. Get with the program and find the market. When the Ask price and Sell price are aout of line nothing will happen. Sellers do not need to make 100% on their properties when no business can do the same in the 2 to 3 years they have held the property for doing nothing. There is not any productivity gains in the RE game because this equity was produced out ot THIN Air.
I think the real area of influence for brokers is to target folks who bought houses years ago and have a cushion of profit in selling. Just bang those sellers down and create new prices, and the rest of the sellers will have to follow.
simmssays…Video Camera for the Lazy and Forgetful
http://www.americaninventorspot.com/node/1236
PS - There is no such thing as a “special property” in Las Vegas: each house is the same as the next–the only difference is that the “special” ones are more monstrous on less land with more unusable space like enoormous closets, long useless hallways, humongous unusable bathrooms and gigiantic garages. These special properties are just as prefab and boring as the rest and will be susceptible to decrease just like the rest. That statement is another example of realtors trying to rationalize the market.
She is not a stripper… but close… She is a “Sales Associate” for the local Las Vegas Century 21 RE Office.
http://www.century21.com/meet/office_detail_staff.aspx?office_key=10012820