Facing An ‘Unruly Throng’ In The Housing Bubble
The Friday desk clearing starts with some international reports. “A real estate frenzy grips China’s urban areas, and one recent day saleswoman Xu Shuang faced an unruly throng when units at her luxury housing project went on the block. ‘You should have seen it. More than 1,000 people gathered outside,’ Xu said.”
“Amid flying elbows and chaos, many signed purchase agreements for anything put before them. ‘It was kind of chaotic,’ Xu said. ‘People selected their apartments in a great hurry. They didn’t give much thought to the floor or the location.’”
“The frothy market generates passions, which worry Chinese officials. Last month, the government shut down the Web site of an activist who launched a ‘Don’t Buy a House’ petition drive. Activist Zou Tao claims that urban dwellers are turning into ‘mortgage slaves’ yoked to debts for decades.”
“Buyers retain bulletproof optimism that values will only go up. ‘It’s impossible for them to go down,” said Lu Ting, a saleswoman at a massive housing complex in southwest Beijing.”
From Korea. “Banks yesterday virtually closed the door for new mortgage loan seekers after financial regulators ordered them to lower the ceiling for housing loans.”
“‘The government has increased property taxes to ease the property bubble, but that appears to have failed to stabilize the market. It is now taking stronger steps to rein in the market,’ said Ham Young-jin, a real estate consultant in Seoul.”
From California. “The status of Solano County real estate was the topic du jour Thursday. Current market conditions can be characterized by ’seven I’s,’ according to Lennar Homes VP Peter Beucke: rising interest rates, increased inventory, increased order cancellations, enhanced incentives, increased construction costs, investors selling their properties, and intense cost reduction initiatives by home builders.”
“Despite all that, Beucke said, ‘We really view Solano County as a great opportunity down the road’ it’s ideal for home buyers and businesses.’”
From Memphis. “As interest rates incline, the local home sales market still could take a beating, particularly certain segments. The question for the local housing market is this: Which will end first the home sales boom or the building boom? If its the former, the latter could find itself in darker waters than its seen in a while.”
“Developers still rapidly creating lots and just as rapidly building spec homes, might one day soon have a tougher time finding buyers. Currently, homeowners in the areas move-up market are leaving existing neighborhoods en masse, opting for empty-nester homes or larger family homes in the glut of new subdivisions still popping up throughout Shelby County and beyond.”
Inman News. “Author Steven D. Levitt shared a personal story about a home he was interested in buying in the suburban Chicago area. ‘I said to (the realtor), can you just tell me the absolute lowest price at which the homeowner is willing to sell this house for?’”
“Her response, ‘You should be ashamed of yourself. That would be a complete violation of my client relationship.’ Later, as the phone call came to an end, Levitt said the agent volunteered some information: ‘Let me just tell you one last thing. The owner of this home is willing to sell this house for less than you can possibly imagine.’”
“‘Basically, in order for that agent to put an extra $20,000 or $30,000 back in her pocket she basically stole $50,000 from her client.’”
From Realty Times. “Newspaper advertising doesn’t work, according to many Realtors, so they’ve been putting their advertising dollars elsewhere. Could falling revenues be behind recent large-scale newspaper editorial attacks on the real estate industry?”
“In recent months, the number of negative stories against the real estate industry has been staggering. Some believe it could be a power play to get more agents and/or for-sale-by-owners to buy ads. Says Denver, Colorado, broker Judith Clausen, ‘I stopped advertising in newspapers about two years ago. I figured they were after us.’”
“‘Our local papers, (Florida Today) are running articles that ‘homes are selling for too much money!,’ says Pat Argo, a Titusville, Florida broker. ‘She says, ‘I believe the papers are deliberately trying to make it harder for us, so we will consider going back to more newspaper ads, and to scare the sellers into taking less so they can say they made a difference.’”
I want to express my gratitude to those who support this blog. I suppose we can also be glad that blogs like this one can’t be shut down and that we can all express our opinions, even if some out there don’t like it. This was a big week, but next week will be even bigger, with all the data coming out. You can be sure this blogger will be on it.
It’s not too late to send in your photos. Be sure and check back this weekend for your market observations and topics.
Way to go Ben. I bought a condo in `93. I had no idea the market was bull or bear or whatever, but was amazed my offer was accepted. There was no way to know back then for an inexperienced first-time buyer. Welcome to internet age.
I’m curious, have you had any hate mail or threats ? I’m guessing yes.
Not really.
Remionds me of what a less-than-scrupulous acquaintance told me once, in reference to my predictable candor: “The nice thing about telling the truth is that you don’t have to remember what you said.”
Your acquaintance was quoting Mark Twain.
BREAKING NEWS: As of 5:12pm today Friday Jun 23, Phoenix (Maricopa+Pinal counties) are OVER THE 50,000 inventory mark!!! To be exact: 50,141!!!!!!
Courtesy of Ziprealty.com
This is why you should stay in school kids, the real world won’t reach this school for years,
http://finance.move.com/homefinance/realestatenews/general/rejo_softlanding.asp?gate=aolreaestate&source=a11461&poe=homestore
Huh? The blogs allow the “Wisdom of the Crowds” to do its magic, far better than any school, no matter how famous.
So skip the schools and keep reading the net: it’s far cheaper.
In fact, you can even get free or very low cost courses online from various colleges, like Harvard at Home!
“Climbing interest rates and cooling speculative demand is putting pressure on the housing boom, but as long as jobs continue to be created and… “”builders curb production”",… the sector will experience a soft landing, according to Harvard’s Joint Center for Housing Studies”.
Is this research? Harvard should be ashamed for putting their name to this crap. The sell out to the real estate industry is appalling. BOO! HARVARD!!!
Yup. Did job salaries doubled in the last 4 years? Cause certainly housing prices did. In fact when adjusting for inflation, salaries DROPPED 6.2%!!!!!
http://money.cnn.com/2006/02/23/pf/consumer_fedsurvey/index.htm
“A decline in wages also helped account for the slow growth in net worth. While the median income rose 1.6 percent, to $43,200, after adjusting for inflation, median wages fell 6.2 percent between 2001 and 2004.”
So salaries fell 6.2% but housing costs rose 100% and so did household debt. Anyone who thinks that because someone has a crappy job that can’t even keep up with inflation and pays 6.2% LESS money and can afford 100% more house has their heads so far up their butt that it has cut all circulation to their brains. The Harvard writter should be ashamed for writting that BS. IMHO, most likely he has a house on the market and just wants top dollar.
Wow - funny stuff. I think her PhD is from Have-At, not Hahvard. Or maybe, HaveNot. Anyway, wisdom she haveth not.
Oops - I mean HIS PhD. Oh well, I can readeth not, but at least I saveth my money, because I can feel which way the wind bloweth. Which is more than this semi-remarkable ( in a Fools’ Paradise kind of way ) Harvard gentleman can.
Houses ARE NOT moving in my neighborhood in Chandler AZ. Just sitting with more and more coming on the market. I talked with a mortgage broker and she said it’s pathetic. No one wants to buy at the top, he psychology has changed from ‘no where but up’ to ‘no where but down’. I think we have officially run out of idiots!! I’m suprised it lasted as long as it did.
Yeah, why buy a house that is topped out when you can buy a 3 month T-Bill at 5.2%?. Apartment living in Phoenix is much better. You can find some great luxury ones with attached garages. One even has “valet trash removal,” whatever that is. Buy T-Bills and gold!
How do you buy T-Bils?
You have helped many folks see thru all the lies and hype and have literally “saved them” from making a huge mistake.
Lots of good karma for you Ben…..
Ben, hopefully, will get his long-overdue reward when the bust is in full bloom and he is in hot demand on the talk-show/interview circuit. His spiritual reward might include the gratitude, bordering on hero-worship, of untold numbers of readers of his blog. I often poop out just trying to read everything in it, day to day. Imagine having to moderate all that, after coming up with the threads to begin with, and he has done this 7 days a week since the start.
I like the suggestion of a poster some time ago, a bumper sticker that says, “Ben Jones for President.” His countless readers would understand and get a good grin from it.
From what I understand, bloggers can make very good money doing this. I’m sure he’s not doing it for free.
I’m a blogger, and I do it for free. Some time ago I decided that my blog should be advertisement free. I feel it makes me a more credible source, as well as eliminates potential conflict of interest.
Caveat Emptor!
Grim
Northern NJ Real Estate Bubble
I knew that these prices did not make any sense, but this blog really helped me to see how this happened and how serious it is. Thanks.
My name is Earl, I mean Ben!!!
I wish you could accept video for bubble pictures. The ride around the lake is getting very bubbly but the lots are too spread out to capture in a single frame.
Thanks for all you do Ben. This newshound really does believe you deserve a Newsweek cover.
San Jose Mercury News has been always been biased about housing creating a panic among buyers that if they don’t buy now it’ll be too late. They have never mentioned house price to rental ratio in Bay Area is worst in nation. Any negative housing news is either given positive spin or just skipped and positive housing news is on front page. All because of homebuilder’s Ad revenue. Potential buyer’s should boycott San Jose Mercury News and the home builders advertising in it. As such its full of crap.
I hope this cycle shows us how worthless newspapers have become with the Internet. I’d say you can add the San Francisco Chronicle to the list of worthless newspapers, but probably everybody can say the same thing about their local paper with the occasional exception.
Add the LA Times real estate section to the list. It’s happy news or no news.
Speaking of the Mercury News, they now have a real estate blog. Go to http://www.mercurynews.com if you’d like to make some comments
Here’s what they have to say about bubble blogs, including this site:
What, you may ask, is a bubble blog?
It’s the real estate industry’s answer to the political slugfest we see from the likes of Daily Kos and Power Line. They’re blogs that stake out a point of view about the real estate market, and round up evidence trying to prove they’re right.
The best example might be a gem of a blog called (what else?) The Housing Bubble.
On this blog, a guy named Ben Jones, who says he’s in Northern Arizona, chronicles tales of woe in cities where the prices have gone too far. It irks me that he routinely copies and pastes huge chunks of news stories and plops them onto his blog without permission, but let’s put that aside for a moment.
Boy, is this blog entertaining reading.
Homebuyers in Connecticut are waiting for the sky to fall. San Diego home prices are in the drink. Mortgage industry fundamentals are falling apart.
It’s all so … scary. After reading for a few minutes, you fully expect the four horsemen of the real estate apocalypse to gallop across your screen.
I wonder, though, whether it’s a little too entertaining. Is this providing a realistic picture of the housing market? Are we looking at a national real estate bubble? A few regional bubbles? A handful of soft markets?
We at Square Feet will watch the data and try to get a sense of what’s really going on. For the record: No sign yet of a national real estate bubble. A slowing market, sure, but no bubble. Not even close.
Check out my reply before it gets deleted.
Thanks Robert. Did you see his lame reply back to you? I posted my own comment under the name of Joe Sixpack.
I posted under my name on this blog, also.
Your comments are still there, RC and JS. But the topic on which you offered discussion (”ink on dead trees outmoded media..” LMAO) is now in the archive and I don’t imagine it gets much traffic. In fact, out of all of John Forte’s current blog topics, I see ONE active comment. Total. That’s it! Talk about a sleepy blog.
http://www.mercextra.com/blogs/realestate/2006/06/17/blowing_real_estate_bubbles/#comments
Incidentally, Fortt’s comments are hysterical, and worth reading to see how insulated people can be when thier livelihood depends on a zooming, good news RE market.
His reply was hilarious in the level of venom and defensivness. The guy that writes he’s looked at the data and we are not even close to a bubble chastises me for being cocksure!
I think suzanne works for him. I am sure she looked at the data.
Robert– if your comment gets deleted, then surely the comment I just posted to the site will get deleted as well.
What we’re dealing with here is a two-bit hack writer who desperately wants to impress his employer that they’re still relevant in this new publishing world. Then he goes and tries to slag people he doesn’t agree with, even going to far as to make veiled threats.
Wow, good find. I hadn’t read anything on that blog - just noticed it in passing the other day. I suggest others here follow Robert Cote’s example.
posted my reply just now!
Hmmm that’s interesting
Sh!theads like this can only personally attack. He offers nothing up of substance to support his view. All of us “chicken littles” are well informed, well educated people or have major experience in RE.
Read that for entertainment only. And I am concerned that sheople put lots of credence on “Harvard” studies. They are not aware that these people are in the bag - along with most media. They all have HIDDEN AGENDAS. Not a good day dawning in America.
Just read that Mercury News link.
That just made me angry. That was a good old fashioned American knee jerk reaction void of an open and honest consideration of facts.
I posted there and I’m sure you’ll recognise me. I had fun writing that one. Thanks Ben. Before getting on this blog, I wouldn’t have known what any of that information.
Here is my comment posted at site, in case it gets deleted, here it is:
Where to start? Jon F, serious question, do you work for NAR? If not, you should be their national spokeperson because you’re doing a better job at PR.
NOBODY gives a damn except the NAR whether there is national housing bubble!! WHo cares??? People want to know about their city and state. You keep citing examples about non-bubble cities like the Bay area. If you actually read Ben’s blog you would realize that there is nobody claiming there is a bubble there. Interest rates are the key to this bubble. The Economist (June 2005 I believe) and Barrons from a few months back detailed the ticking ARMs that will cause 1 trillion in mortgages to adjust over the next three years. The CEO of Countrywide loans stated in Businessweek (~Feb 2006) that certain markets would probably fall 25%. Homebuilders slashing prices certainly will have an effect on the resale market; it will drag down all prices. I will be happy to look it up, but I assume you have access to Dow Jones, Factiva, Lexis-Nexus, etc. While I agree that most of the comments on Ben’s site comes from people who missed out on the tripling of prices in last 9 years in many cities and are very depressed, there is a sizable minority who are home-owneres who have advanced degrees in engineering, finance etc or who are realtors, loan brokers, appraisers, etc. Once again, no disrepect meant but since you dont seem to understand a simple concept, NOBODY cares if there is national bubble, just a local bubble. Take care.
The SJ Merc is a total rag. Silicon Valley is full of smart people — but we have idiots writing our newspaper. Judging from their ads, I bet they take in plenty from the Realtor(TM) dumbasses.
The number of very educated RE people that have dropped in here for a couple of months, posted a couple of times and moved on is quite high.
This clown is just trying to pull a Jon Lansner.
Ben maybe this is an interesting topic of sorts — the press’s lame counterblogs that:
1. come to issues too late, with too little info
2. manipulatively attepmt to gain traffic by slamming already-credible and established blogs
3. Have a corporate slant
4. Fail to understand that the real value of blogs is precisely what they are criticizing — the best blogs (like this one) are very much like scientific peer review–they gather data (in the form of reports, historic analyses and, yes, news clips), then offer their data up for criticism/corroborration. The fact that blog responders can comment without fear of reprisal makes them an excellent crucible through which this information passes — it’s far more pure than what you’d get in one hastily written news article from an advertiser-dependent publication.
Early on, Ben’s blog had quite a number of strenuous bubble-doubters, but I could easily weigh their arguments against bubble belieivers, and found quickly that the believers had more historic supporting data and more rational arguments for their position. This is something I never could have gleaned in the simplistic one quote he-said she-said world of the print media.
are the bubble-doubters now converted and still posting here? Raise hand, if so!
“Despite all that, Beucke said, ‘We really view Solano County as a great opportunity down the road’ it’s ideal for home buyers and businesses.’”
One could guess that these guys could fall into a septic tank and still see it as a great oppertunity down the road.
What Mr. Beuke conveniently leaves out, is how long that road really is. It is a very, very long road, and he knows it. But saying that the price of a Lennar home will be lower on Tuesday will not sell a Lennar home today. Down the road, indeed Mr. Beuke.
Try way down the road. Neighboring Yolo County just suffered a YOY -11% decline in median price in May, according to newly released numbers at dqnews (total sales including sfhs, condos, and new homes). That’s right - double-digit depreciation in California. Sacramento just hit 0.00% YOY (as did San Diego). Not looking too good for the housing perma-optimists.
Sacramento Land(ed) at 0.00%, Yolo Pops: Double-Digit Depreciation Era Begins?
By the way, is Blanche Evans always so shrill? She should become a blogger!
“I believe the papers are deliberately trying to make it harder for us, so we will consider going back to more newspaper ads, and to scare the sellers into taking less so they can say they made a difference.”
This is asinine paranoia.
BTW, did Blanche get a makeover?
Yeah, I was saying it’s time for the Realtor crowd to get the tinfoil hats out to myself as I read this. Nothing like a falling market to set off the conspiracy theories !
Speaking of tinfoil hats. Check out this short video on the subject. It’s pretty funny.
http://eclectech.co.uk/mindcontrol.php
If realtors put all the real estate ads of their listings in the paper it would be 5 inches thick ,( certainly in Florida ).Realtors want to spend very little on advertising right now until the sellers come down in price . Real Estate offices have hundreds of over-priced listings.
Yes, and guess what the newspaper will do then. They will start to spin the other way around.
I can’t wait to see the local Fish Wrap U-T pump out ‘RE is bad!’ articles.
It will help me launch my Repo biz!
“BTW, did Blanche get a makeover?”
Isn’t that her yearbook photo?
The last Realty times link kinda blows a hole in the denials that we hear from Jon Lansner of the OCR on this very blog here.
http://thehousingbubbleblog.com/?p=248
http://thehousingbubbleblog.com/?p=277
I am a bit dismayed that other MSM reporters haven’t stepped up to the plate.
Let’s pick one and call them out to get some interaction.
I took my comments from another post. Someone mentioned selling
Selling off Magic Mountain? Now, I have an idea. Let’s have all of the business’ sell off all of their land to developers. Let’s build endless McShitBoxes from Santa Monica to Lancaster. Then, sell them to people for obscene prices. And then there will be no place for people to work, and they won’t have any income. No activities because all stores, schools, parks, offices, etc were sold, so nothing to do but sit in the McShitboxes. What a grand concept.
MSB’s… I like it.
You can still work from home. Like many Realtors.
i was reading the paper last weekend and notice how much thinner the house ads section was. the ads are drying up. the realtors should be smarter about getting the sellers to lower the price; don’t waste time and money advertising against the time and herd mentality.
When I read that China story, I am thinking at $0.10 per hour how do they afford such a thing. Me thinks the USA is not trading freely.
As for judith’s rediculous comment about “negative ads to sell more newspaper spots…well it was only 2 months ago or so that the “negative news {sugar sweetened truth} was hurting the news paper fellas.!
Which is it? One thing for sure it has nothing to do with a market that 45% of all residential home buyers (in 2004-5) were not planning to live in themselves.
This is not a free mkt - these things are pretty cheap. And I recall reading a story that ppl were getting divorced because then they could get 2 residences. I wish I knew where I read this. Anyone else recall?
MBA,
Here you go. This story was really depressing to me.
http://tinyurl.com/k7z67
‘It’s impossible for them to go down,” said Lu Ting, a saleswoman at a massive housing complex in southwest Beijing.”
Gee, where have I heard this before? D’oh!!!
She is a super secret NAR counter intelligence officer tasked with bringing american-style real estate practices to those “backwards” Chinese . . . ha ha ha . . . who says that America isn’t exporting anything of value any more.
I had this link to a story out of Lebanon, where a guy says ‘they have a bubble in (some unpronounceable town) but not here in (another similarly named town). Unfortunately, the website is down.
But honey, Lu researched this!!! You guys can do this!!!
OR should I call this spade a spade!
PARANOIA has set in!
“an extreme and unreasonable suspicion of Negative Real estate News and their motives”
Is panic next?
Just wrapped up a little gift for everybody to start your weekend…
enjoy! Click on the top image.
http://www.putfile.com/damonbots
The book cover is awesome! Good job!
Thanks Operation! Check out the reviews for his book on Amazon for a little extra entertainment.
That is freakin awesome. Everyone needs to click this and check it out:
http://putfile.com/pic.php?pic=6/17318293494.jpg&s=x2
Very funny Lereah spoof! At least the little girl managed to escape. But what happened to Mom and Dad? Did they escape stage-right or did they get caught under the weight of that albatross-of-a-house? I think I know the answer!
Dad was cranking away on a spreadsheet trying to calculate the exact moment that double digit YOY appreciation would lift the value of his homevestment into the seven figure range, when unfortunately the ceiling collapsed on top of him.
Mom was in the kitchen putting a tray of cinnamon rolls in the oven, which she heard could increase offers by 10%-20%. The last thing she saw was her SubZero refrigerator hurtling toward her head…
I thought about letting the wife escape, until I remembered that Century 21 commercial.
The real estate section of Long Islands “Newsday” isn’t getting any thinner. It’s the thickest I’ve seen in years. It was the thinnest when there was a lot less inventory available. Lot’s of reducded banners on the ads. Prices are still fantasy land though. By next year these sellers are going to wish they made a deal with someone.
“The frothy market generates passions, which worry Chinese officials. Last month, the government shut down the Web site of an activist who launched a ‘Don’t Buy a House’ petition drive. Activist Zou Tao claims that urban dwellers are turning into ‘mortgage slaves’ yoked to debts for decades.”
God Bless America…
http://www.boycotthousing.com/home.aspx
And, of course, this site.
This has got me wondering… what’s the Chinese word for “Sheople”?
cadres
Gaijin (or is that Japanese? :))
Not sure if this is going to come out or not…
herd = 牧群
sheep = 绵羊
investor = 投资者
idiot = 蠢货
house price can never decrease = 房价可能从未减少
famous last words = 著名前个词
foreclosure = 回赎权的取消
You gotta love Babelfish. http://babelfish.altavista.com/
“i was reading the paper last weekend and notice how much thinner the house ads section was. the ads are drying up. the realtors should be smarter about getting the sellers to lower the price; don’t waste time and money advertising against the time and herd mentality.”
The ad section is thinner because there’s a conspiracy among newspapers to refuse to accept most real estate ads in order to get even with realtors who were criticizing newspapers for all the negative RE news.
Well the San Francisco Chronicle certainly hasn’t gone there yet. Nonetheless, if true, this will be a downward spin cycle that the real estate industry cannot possibly win.
I’ve said in previous months that southwest Charlotte was weathering the bubble OK. The market was slow, but relatively normal.
Now I’m not quite so sure. The “standoff” seems to have settled in among my 3 favorite neighborhoods to track. A few homes have gone pending, but it’s like watching the hour hand on a clock. I’ve seen a few reductions on investor-owned properties. Occupant sellers aren’t budging yet.
It could just be a pause. Sales are not always linear, and sometimes a surt of activity can show up.
and here’s our weekly “cry me a river” report from the sdcia forum:
“I purchased a home in south Tucson (Vail) through Chris Szabo and closed on it 1 month ago. The market is flat and there is now competition and plenty of homes for sale in my neighborhood. I had planned to flip this right away but I have had NO offers and very FEW lookers. I’m feeling seriously burned and need out!
Here are the numbers:
Payments (all inclusive): $2500/mo first payment due 7/1
Loans (100% financing): $299k
Lowest competitor on mkt priced at $298k and not sold.
If I COULD sell it at $299 I would lose the RE commissions and closing costs estimated to be about $14K. Of course, the longer I hold it that $2500/mo starts to really add up. I want to prevent getting even deeper into this.
I need to either dump this asap and take a sickening loss or…? Should I contact the lender and tell them I can’t make payments? What would foreclosure/ short payoff/ deed in lieu do to my credit? Given the way the market is going(looks flat) is it worth it to try and lease option? Can you think of any other options?
I acknowledge I have made a huge mistake so please no flames. I know there are great minds on this board so any help would be greatly appreciated. ”
(down phuck, no boy - bad dog, don’t do it….)
What was this guy thinking? Do they not give a thought to the debt that they are signing up for?
It will be interesting to see at what price he bails out of this house. It will be less than 250K, IMO.
I’ll lend him my .45
Cents or Caliber?
That’s kind of you Moose, but I think this guy needs a .44 Magnum. Little hole in front, BIG hole in back.
Quite interesting. Here is the link if anyone wants to read the responses to the very FBs cry for help:
http://www.websitetoolbox.com/tool/post/sdcia/vpost?id=1205179
I suspect that there are many, many more where this FB came from.
Wow. The panic starts…
Did anyone notice the content of that link?
http://www.websitetoolbox.com/tool/post/…
OMFG: Look at this advice the FB got:
“However, if you ARE NOT personally responsible for the loan, I�d suggest the following approach. Deed the property over to somebody who does not care about their credit report. Perhaps a minor, a derelict, a very elderly person who never buys on credit, somebody else who does not care. Make sure that you �sales agreement� makes you responsible for the ownership expenses so you will be able to deduct them from your taxes. Then rent out the property for as much rent as you can. After a few months, stop paying the mortgage and let the property go to foreclosure. Later you have �credible deniability� for the loan. That is, you can explain to credit granters that you were not responsible for the new owner�s having defaulted on the loan.”
This is the way out? WTF have we come to?
I was going to post that too! UFB!
What is most striking (and revealing) is that only ONE of the other posters in the thread expressed moral or legal qualms about the “advice” of Ron Starr:
Maybe my memory is frazzled here but the usually excellent Ron Starr just suggested to commit pre-meditated lender fraud, a felony.
Talk about a cesspool of the morally bankrupt. If there’s any justice in life, all of these scumbags will end up living in cardboard boxes or penal institutions.
One of the respondents has proposed fraud IMHO; no if’s no but’s :o.
Dear Sir,
Please inform me of the bank that was retarded enough to give you a loan. I am from the THBBIC (The housing bubble blog investor’s club) and I’m going to short their stock. Thanks, I’m sure you understand as you are, too, a savvy investor.
how about renting it to 3 illegal alien families for $800/family? Furnish it with plenty of bunkbeds and yur good to go.
South Tucson is essentially Nogales. Why did this GF buy Mexican real estate for $299k?!?
Whoa — the Korean government raised property taxes strictly “to ease the property bubble.”
I’m thinking I should write a song about that, an adaptation of the 60’s hit, “Gloria.”
“‘Basically, in order for that agent to put an extra $20,000 or $30,000 back in her pocket she basically stole $50,000 from her client.’”
Meh… if that was all the markdown there was on a 20-30k commission, she probably saved her clients ass.
Marc Vitner, Wachovia Senior Economist, said on Bloomberg TV today that in California cancellation rates are way up, so the higher housing start numbers recently reported are actually a lot lower because they don’t take cancellation rates into consideration on that number. He said he just got back from California and the builders there told him they had 50% higher cancellation rates compared to previous years. I’m paraphrasing of course, if I can find the direct quote I will post it.
Sounds like a great time to ride into California and buy up GoldenWest.
Dolts. (Friends I know with Wachovia stock are still PO’d about that deal.)
And people who were short GDW are also PO’d about that deal.
My one-year anniversary just passed when I sold my house in the OC and I’m reminded of how different the RE articles and news reports were just one short year ago compared to today. In June 05 it was inconceivable to the RE crowd that a bubble even existed. Today, the nature of RE news is very different. Makes me wonder what it’s going to be like next year at this time?
My anniversary is “on deck.” Since everything that was generally agreed on Ben’s blog, back then, has come to pass, I suspect that everything we see predicted now will too come to pass. I think this is an awesome departure from mass media. The averaged-out predictions here have been spot-on correct, IMO. I have great confidence that they will continue to be correct into the future and have pretty much bet the farm on that. No risk, no reward — I consider Ben’s blog the greatest insurance against failure in my housing decisions, that exists.
me to, i sold in so. cal in aug 2005. to a flipper, he is still trying to sell for $10,000 more than he paid. 10 months on the market now with a $1600.00 payment.
damn China’s not building anymore land also huh… Damn
Can someone please give me some inside information about my parents house? I had mentioned months back that my parents bought a new house in Riverside during the last bubble. They were underwater for years. The only thing that saved them was they were able to make the payments. As they aged and my Dad lost his business, he was never a very good business man, they were forced to sell and buy in a less expensive place, Lake Havasu. They sold their house in Riverside in July 05. Address: 5194 College Avenue , Riverside, CA 92505. The neighbors dropped my parents a post card last week and said the house went into foreclosure and someone else was fixing up the place to move in. I’m not sure what really happened. The whole thing seemed like a big scam to me because the appraiser and loan officer were the purchasers cousins. I did see it back up for sale in December for 50k more, so I’m not sure if it actually was foreclosed on or just resold. Zillow isn’t showing anything yet.
Check out the Riverside County assessor’s website:
http://riverside.asrclkrec.com/
According to them, the last document recorded on that parcel was in 1989. Either Riverside is slow with the info, or there was something fishy about the sale.
I see the sale in June 2005 ($559K), but do not see anything since then. Ask in a month or so, and I will check again if you’d like.
I hate to say it because I despise them, but RE agents are going to actually become our “allies” by expediting the popping of the bubble.
They gotta eat and realize now that to eat prices have to come down in order to “seal the deal”.
So my new hero is Liarreah? well…not quite
Seattle Moose I completely agree with you on the idea that Realtors will help us move down the market prices. Realtors want to turn over houses, they don’t want to wait many months or years to recognize income. They want to sell or (if a buyers agent) buy the house as fast as possible, even if that means 30%-50% lower commissions. Since some commissions on many properies is a whole lot better than alot of potential commission on a few properties.
That is, *after* they unload their own properties. You’ll know that the realtors are out when they start really pushing sellers down.
It’s already happening.
A close friend of ours whose local RE firm is now actively dropping clients who refuse to move their prices south. Our friend just dropped an apt. conversion off her list. It had been sitting for 12 months and the owner refused to budge.
ARE MORTGAGE BORROWERS RATIONAL?
“$2.7 trillion of adjustable-rate mortgages are expected to reset in the next 18 months with payments increasing on average 45%”
45%???
Not good.
An ….average… of 45%.
Can anyone give information about the housing market and neighborhoods in Vallejo area?
Thanks
I will borrow from a radio show.
The ENTIRE state of California is in a bubble. Don’t ask me about one part of the state.
(Asks again)
Do you understand words in English, don’t ask me about one part of the CA RE bubble. The ENTIRE state of California is in a RE bubble.
Just ask Robert Shiller.
Interesting tidbit out of Phoenix: One of the national builders with headquarters here has consolidated two of their divisions. Basically laid off a whole division, from VP’s all the way down. Happened over a week ago, but funny enough, the local media (AZ Republic) hasn’t picked up the story. What a surprise.
http://www.ghosttowns.com/states/az/az.html
Sorry, Ben. Sure hope you’re renting.
I work with a few Chinese guys. They assure me that the real estate bubble in China is far, far worse than what we have here. The government is up to its eyeballs in real estate related fraud and corruption. Lots of carnage ahead.
I flew back from Bejing a few years ago with a Wall Street lawyer who was trying to do due diligence on some property loans they had purchased there. He was one sad puppy.
Bejing at the time was full of empty buildings that would put Detroit to shame - in a good way, if you know what I mean. Concrete shells stretching to the sky with nothing inside. Sitting in empty fields full of grass. Makes Houston look look like a thriving metropolis.
This was about 2003, for those that track these things.
Another thing I learned on that trip was that the Chinese are all about fraud, and nothing about reality, although they are very honest with themselves as they do it. A real cultural conumdrum. Everything is about presentation and perception, while at the same time they value commitments highly as they work to defraud each other.
Very confusing culture.
I guess the Chinese are going to find out how great our loan notes are here in America .
smlandlord- for more understanding of the “confusing Chinese culture” read the translations of the “father of modern Chinese Literature” Lu Xun, or sometimes written Lu Hsun in English.
The difficulties of understanding that mindset, you have pretty much nailed on the head. Lu Xun’s writings will take you a little farther into it. And here’s a warning: it can be hard to stomach at times!
Note: I do not hate China or Chinese culture! There’s plenty to respect and admire. But there are some realities here that ,IMO, we are not at all prepared to deal with.
We are babes in the wood.
Well, if that is the case maybe they won’t mind the billions in worthless MBS they have bought from the the US. God save us if some jerk in Washington wants to bail out the investors…
OT, but where did the “implied guarantee” for FNMAE MBSes come from?
The Powers That Be in the financial world are terrified of something called “cascading cross-linked defaults”. Basically, company A goes belly up and so can’t pay back it’s debts to company B which then goes belly up when it can’t pay back it’s debts to company C etc, etc, ad infinitum. and then the entire economy collapses into one big mess. Any company that is considered big enough that it’s failure would be likely to trigger this is considered to be “too big to fail”. It is assumed that the government will always step in and bail them out thus the “implied guarantee”.
If the chinese investors are burned by MBS losses then they will stop buying. Credit will no longer be available to buy houses. Housing prices drop putting more bagholders upside down and in default. They stop buying stuff so manufacturing and service businesses start going belly up. People are laid off. Even more people can no longer carry their mortgages etc, etc ad infinitum.
This is why the government WILL step in to both bail out lenders and flood the market with credit by buying MBSes themselves. The alternative is a 1930’s style depression.
I don’t think Chineese are as smart as people think they are. They sell cheap stuff accepting dollars, invest dollars back and buy treasury debt which gets paid back in depreciating dollars. how smart is that. And Japanese aren’t any smarter either. these folks funding the housing bubble are going to get screwed most when its all done..
Actually the strategy the chinese are following is VERY smart. They are moving all the real wealth of the US, in the form of factories and other productive assets, to china by following this strategy. When the endgame comes the US dollar will become worthless and trade with the US will stop but they’ll have all the factories, all they will have lost is notional paper wealth. At that point all they need to do is print up renminbei and hand it out to the peasants and they will be able to keep the factories churning out goods for the chinese consumer market. In the US, all we’ll be left with is a dumb look on our faces when we realize that the rest of the world is no longer going to loan us money to buy their stuff with. We’ll have no productive resources of our own to produce the things we want. Additionally, with the US consumer out of action the cost of raw materials and energy will plummet leading to even greater prosperity for china.
If we stumble China falls on its face. Who do you think buys all of the stuff China makes?
Besides which, it might surprise you to learn that (according ot the Federal Reserve) American manufacturing output has never been higher than it currently is. A good article:
http://acuf.org/issues/issue61/060611news.asp
I’m becoming convinced that all this talk of China’s rise is pure media-generated hype.
Uh huh. That’s only because we now count burger flipping and other services as manufacturing.
Diemos, I agree, China should come out of this swimmingly.
I’m not sure how they’ll pull it off but I was there back and forth in the 80’s and 90’s. They have have been VERY motivated all along to “rise to the top of the world heap” and have done a darn good job in very little time so far.
I’ve been wondering how they could manouver out of all this US debt with the least amount of pain to themselves. Your scenario sounds plausible at least. I’d love to hear more ideas on that because it does seem like their stickiest problem.
Am not at all worried about them finding replacements for American consumers. Too many Chinese, Indians becoming middle class now and add on Japan going back into consumer mode, who the heck needs 200 milion Americans?
Ok. As I’ve been thinking about economics I’ve come to the conclusion that both the Austrians and Keynesians are partially right and partially wrong in their outlook. The Austrians are right when they say that money is just ink on paper and not real wealth. Real wealth is the raw materials, physical capital and the labor that are used to produce the goods and services that we want. You can’t produce any real wealth by printing money.
When china came out of communism they had ample labor and raw materials but no physical capital. They adopted a mercantilist economic policy and began transfering large amounts of physical capital to china from the west. They’ve been recylcing the dollars that they receive into T-bills in order to keep this going. Just like the individual’s road to true wealth, they’ve been suppressing their current consumption in order to invest in physical capital.
At this point people argue that when demand from the US falls off china will go into a deflationary depression and be left with T-bills that have little to no value.
This is where the Austrians get it wrong and the Keynesians are right. If you have a deflationary depression due to credit contraction where there exists raw materials, physical capital and labor that is sitting idle, then you can get that real wealth back to producing goods and services by printing money and distributing it to the people. Basically if 100M RMB/year of demand from the US disappears you can just print up 100M RMB /year and distribute it to the peasants and the production of consumer crap for the west will pretty seamlessly convert to that much production of consumer crap for the peasants. They’ll love it.
As for the T-bills, if it’s held by the government then it’s crap and they’ll just through it away. If it’s held by individual chinese it’s still crap but the government will print up some RMB and reimburse the bag holders.
People look at the US/China trade and wonder why the chinese would be stupid enough to take worthless T-bills in exchange for valuable consumer goods.
In reality the US/China trade consists of China sending overpriced bling-bling to the states in exchange for valuable physical capital and worthless T-bills. They’ll run this into the ground until the US economy collapses and then keep the physical capital and throw away the useless T-bills. In the end they will come out far ahead. Not since the indians traded Manhattan island for some beads has there been a worse trade.
This is one of the instances where a dictatorship is better than a democracy. China can get away with suppressing their peasants consumption and propping up our short-term “prosperity” in exchange for the physical capital that will ensure their long-term economic dominance. Our politicians, concerned only with winning the next election, allow this to continue for their short-term gain.
And that is where the Chinese really have us beat hands down: long term vs. short term thinking.
I really feel there is no way we can come out on top , or even equal , because of this Achilles heal of ours.
That, and we are all together too arrogant to consider that somebody could “beat” us economically, especially a “poor, backwards country”. So we did not prepare for what we were really dealing with when it came to China.
Insted of looking at the big picture, we looked at the bizarre blip in Chinese history that has been the past hundred years.
I will be absolutely astounded if China does not succeed in kicking our butts on this.
Oh and there’s one more reason that the Chinese are going to cream us economically, and it’s something that Americans just don’t get about Chinese culture, again because we look at the past 100 years only:
Chinese culture is way more materialistic and money-centered than Western culture has ever been- probably why they can turn the idea of communism on it’s head and combine it so nicely with a huge and growing middle class.
It’s not a bunch of spiritual air and spit eating Daoists running around over there.
I will respectfully disagree with you gentlemen over China, in particular over the notion that the Chinese are thinking for the long-term. Their loan standards make ours look stringent. Defaulted loans comprise 40% of Chinese GDP. Keep in mind that this is during an unprecedented economic boom. What will happen to the default rate during a recession, or even when growth slows?
http://www.carnegieendowment.org/publications/index.cfm?fa=view&id=18308&prog=zch
China’s Achilles heel is that it is still a Communist nation. The financial system is still based on a central planning model. Part of the reason these free-market reforms have caught on is that Communist party members often (by law) sit on the boards of companies. They legislate themselves a fat slice of the proceeds. It’s corrupt as all can be. These free market reforms can be rescinded at the drop of a hat and they will be as soon as the party ends.
Hmmm…
“China’s Achilles heel is that it is still a Communist nation. The financial system is still based on a central planning model.”
unlike the US where the financial system is controlled by the Federal Open Market Committee deciding to flood or deprive the market of credit?
“Part of the reason these free-market reforms have caught on is that Communist party members often (by law) sit on the boards of companies. They legislate themselves a fat slice of the proceeds. It’s corrupt as all can be.”
unlike the US where executives vote themselves $100M paydays even as their company goes bankrupt?
“These free market reforms can be rescinded at the drop of a hat and they will be as soon as the party ends.”
unlike the US where anybody’s failure can be erased at the taxpayer’s expense?
China may not be an exemplar of an uncorrupt free market economy but I think you neglect to shine as harsh a light on our own system. As the old joke goes: Two guys are hiking in the woods when they come upon a bear. As one guy starts running away the other calls out, “Why bother? You can’t outrun the bear.” He calls back, “I don’t need to outrun the bear, I just need to outrun you.”
The bottom line is that as long as physical capital is flooding into china their system is good enough for the moment.
As for the financial system in china being a mess. Yup, it’s a mess. Eventually there will be a blow-up and when it happens the chinese will do exactly the same thing that we do whenever our financial system threatens to blow up. They’ll print up a bunch of money, bail out the bagholders and life will go on.
I agree completely with Diemos on the corruption thing.
Drawing attention to political/financial/corporate corruption in China while ignoring our own is a perfect example of the pot calling the kettle black.
It’s this kind of delusional thinking that has been getting the US in trouble in their dealings with China all along.
The Chinese are the first to admit corruption is an out-of-control problem.
We focus on it for 2 seconds when the sh%t is really hitting the fan and then it’s back to business as usual and patting ourselves on the back about how morally/ethically superior we are.
Not a method for fixing our problems, IMO. But it is a GREAT way to never fix anything while the ship’s going down, and keep yourself happy while it’s sinking.
There’s a huge condo bubble in Baja between Tijuana and Ensenada. My stepdaughter is a fairly new RE agent here in Chula Vista and tried to get me to “invest” in one. Fat chance.
Testing:http://heraldtribune.com/apps/pbcs.dll/article?AID=/20060624/BUSINESS/606240580