Seems I know more than a few people (mainly in their 20's, no career, no direction) who got into recruited into lending business in the past year (and then went out and bought a house with the new job too!).
I think the accounting term for what's about to happen is LIFO (last in, first out).
Even crazy easy credit isn't enough to get people to get new loans. Wonder what the industry can come up with for a last call.
U.S. mortgage applications fell to an 11-month low last week on a drop in demand for loans to buy homes, suggesting a slowdown in the housing market, according to industry data Wednesday.
"Housing has passed its peak," said Robert Brusca, chief economist at Fact and Opinion Economics
In addition to falling loan demand, U.S. home builder optimism fell in December to its lowest since April 2003, according to the National Association of Home Builders.
December 22, 2005
Housing bubble effect #5000: Get out the pink slips: Loan apps fall to 11-month low
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keith - dont know if you follow pimco's mcculley. but here is his latest monthly newsletter:
http://www.pimco.com/LeftNav/Late+Breaking+Commentary/FF/2005/FF+December+2005.htm
Keith - absolutely correct.
I know a little more than basic economics, yet my neighbor, who doesn't have any education past high school and worked at Shoe Carnival, is a mortgage broker and told me I'm crazy and that real-estate will never go down. She proceeded to spout out the lines generally reserved for realtors. It's impossible to argue with an idiot so I just smiled and went on my way.
That's okay, at least she can get me a discount on shoes when she's back at the Carnival next year.
arioch - great post.
this is happening more than the media reports. come here to scottsdale, arizona and you'll find many folks living in $1 Million plus homes, with NO income. Just riding the ponzi scheme up and up.
And then bam, the music stops, and they'll wonder what hit 'em.
I think we'll be amazed at the bankruptcies to come. How could someone living in a $1 Million house, with two Hummer H2's in the driveway, who took great around-the-world cruises, with rolex watches and diamond rings, the epitome of success, go bankrupt?
Well, that's exactly how.
Sold my Clinton Township House last summer and moved into a cheaper house in the same town.
Can't cash out completely just yet, so I figured I'd by down to put less equity at risk.
I'm planning on retiring to the NC coast in 3 to 4 years, but still need to live in this town until my son finishes HS this spring.
I remember 1988 and how long the RE market took to recover from that down turn. I don't have the time to wait out another hit like that. I only hope I bought down enough and that the NJ market only flattens. At least so I can keep most of what I still have tied up in this current house.
I still wonder about the southeast as a continuing potential RE hot market. That market seems driven more by Baby Boomer's, from all over the US, buying into areas they want to live in during their retirement. I currently have quite a bit of my NJ equity $ invested in this theory.
So far it has been working.
What's your opinion?
Anon:
Depends on where in the SE. If you are thinking Florida, the number of housing units coming onto the scene(especially condos) is going to create a huge glut of supply, driving down prices. Also, condo-conversions are rampant down there, especially in Miami. Other places like Atlanta have not seen anywhere near that appreciation, and neither has Charlotte for that matter, but then again, the job growth in those two markets hasn't matched Florida's either. I am not familiar with other parts of North Carolina, or whats going in S. Carolina, but I think the owner market in Florida is going to be hurting, just based on affordability issues. For instance, in Miami, which by most statistics I've seen has a similar income to Phoenix, AZ, but housing prices are nearly 50% higher, with more construction, and they aren't seeing the same level of immigration... do the math.... and it seems like trouble.
"They are screwed, done, glazed and baked, fried, finished, dead meat and have no clue."
Sir, that Parrot is deceased!
Depends on where in the SE. If you are thinking Florida, the number of housing units coming onto the scene(especially condos) is going to create a huge glut of supply, driving down prices. Also, condo-conversions are rampant down there, especially in Miami. Other places like Atlanta have not seen anywhere near that appreciation, and neither has Charlotte for that matter, but then again, the job growth in those two markets hasn't matched Florida's either. I am not familiar with other parts of North Carolina, or whats going in S. Carolina, but I think the owner market in Florida is going to be hurting, just based on affordability issues. For instance, in Miami, which by most statistics I've seen has a similar income to Phoenix, AZ, but housing prices are nearly 50% higher, with more construction, and they aren't seeing the same level of immigration... do the math.... and it seems like trouble.
You will see in my blog ( www.economicviewpoint.com ) that I'm very bearish on Florida housing. Primarily it's because people here have let the sun get to their brains and have lost coherent thought.
Florida is a great place, don't get me wrong. It's just not worth living here if one is going to pay double or triple for a house what it cost 5 years ago while wages have been largely static otherwise.
It's clear the refi boom is dead, even as rates fall, because homeowners (technically people who rent money from the mortgage banks that hold the notes to their homes) realize their inflated equity is evaporating: http://money.cnn.com/2005/12/28/real_estate/mortgage_applications.reut/index.htm
With refi activity dead, the RE "wealth effect" will die and the mortgage industry will tank. The number of people borrowing against stock portfolios in 2000 wasn't anything close to the number who've borrowed against inflated RE and spent during the past 3 years. The 2006 housing wreck could even be the final nail in Bu$hco's coffin, even though Bu$hco had virtually nothing to do with it! It's going to be big, much bigger than anybody is admitting. Once foreclosures dot every block in Southern California, I predict foreign buyers (emerging markets are booming and Japan is coming back now) will start moving in.
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