Did we jump the shark this week?
Sure was easy writing this blog, let's put it that way. Hypotheses turned into data turned into reality this week it felt like.
Thoughts?
December 08, 2005
Question for readers - was this week's barrage of news and reports "the end"? Has the bubble now officially burst?
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12 comments:
when the head of freddie mac predicts declining home prices, the ucla study predicts 800,000 jobs lost, Toll Brothers continues to implode, investors run from phoenix and miami, ...
Pop.
Nice blog
Its too early to tell if this is a pop or a false pop.
California has already declined but in terms of real numbers it won't show up until second or third quarter of next year....after that ... could be up to five years of declines if it doesn't happen all at once...I suspect 40 - 50% drop next 5 years.
It may have popped but you still have to change the mindset of individuals from their stubborn expectations of what they should receive from their home or investment...this will take some time....then the real pain begins. 2006 will be a hard year....2007 will be a horrible year.
I must agree with the comment above, houses are not like stocks, people will resist selling their house for less than they imagine its worth for as long as they can possibly hold out. This will keep the average home price from bursting.
In reference to the above comment, I too agree that houses are not like stocks, but that is exactly the way people have been treating them....like stocks! What I find amazing in some of these responses is that people all still using all the old standards that apply to housing. The problem is that we are witnessing something historic. The price disconnect from proven fundamentals is unlike anything we've ever seen in our lifetime.
I own a mortgage brokerage in N. Nevada, and have several commissioned reps working for me. I have made a lot of money in the last 4 years (been in the biz 12) and if anyone would hate to see it all go away, it would be me. But I'm not one to bury my head in the sand, and I see the truth coming down on us hard. The stories I could tell you of what I've seen over the last couple years would scare the hell out of any non-believer. Suffice to say for now is that the "bubble" is real, trust me.
Have you seen the price of gold lately? Do you know why it's up? You should. You may think that this has nothing to do with what we talk about here, but think again. People in the "know" are starting to protect themselves against something big. Last time gold went up?.....70's recession. Meanwhile, do not believe any of the garbage they're spinning about a healthy economy on CNBC or Bloomberg.
I too like gold right not - there is no safe haven - not dollars, not the dow, not housing, not bonds, not any foreign currency. even cash ain't king - with the US trade imbalance and deficits, where is it safe to park $$$? Answer - gold.
As to the bubble - prices will be sticky at first on the way down - homeowners and investors will be stubborn to drop, and also will do gimmicks and tricks - like "Free Car with Condo" which will hide the declines in price.
Then all hell will break loose. When? By summer of next year.
Be smart folks. Go conservative, and look at gold, look to short housing, and short retail.
What a super BLOG!
We sold our big house to a speculator who just HAD to have it! He did a quicky on it and put it back on the market WITH NO SUCCESS for nearly a YEAR! Not only that but his other residential high end properties are STILL on the market too.... whoopsy!
I am in Illinois. Illinois and Wisconsin have some of the highest real estate taxes in the USA. One of the unintended consequences around here of the housing bubble and tear downs that is rarely discussed has been that real estate taxes have BALOONED along with the value of the house! Not to mention natural gas to heat the place. Our taxes went up vertically.... how would you want to wake up and find your taxes going from 20,000 to 30,000 to 40,000 thousand dollars a year! OUCH! Natural gas to heat the place... $1500 per month! OUCH! A big home YES but such expenses DO get to you after a while!
And now we sit at a very fashionable resort suite hotel (that gave us a fantastically low rate! and wait for the bubble to take full effect... People thought we were nuts for not immediatly back into the over priced market...... NOW THEY ARE SAYING WE WERE SMART WITH PERFECT TIMING!!!!!
Has the bubble officially burst? No, but the public consensus appears to be shifting and this may be more significant than rising interest rates, inventory levels and affordability.
The buying frenzy of the past few years was fueled by people who believed that housing prices would continue to go up. This optimism finally appears to be waning.
I think the bubble has started leaking and the leak is getting stronger. I think a slow leak started in the summer and the leak got stronger when Toll announced its news on Nov 8th (when this excellent blog started). I think the leak has grown even stronger this week. When the US national median home price falls 20% below the peak, I think we can say that the bubble has burst.
The bubble won't be ended by the media. The bubble will end because a lot of stupid people will see why taking a $600K loan is a stupid idea.
Seriously, who takes a $600K loan?? Either you're rich and don't need one, or you buy a reasonable house with a $200K loan, or you rent.
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