Hey, it's your blog too - talk about anything you want here, as long it's about our little friend, the housing bubble, in some way
January 11, 2006
New: BUBBLE TALK ongoing chat area - talk about any housing topic you'd like here
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114 comments:
Where can I find the most overpriced housing in DC?
The evidence has been accumulating since August - the housing bubble in DC has started to burst. Sales are falling, inventory is increasing and the ratio of house prices to median incomes are at a record high. The fed has been hiking interest rates since late 2004; and at least two more 0.25 percent increases are likely in the first 6 months of next year. Many DC borrowers are particularly vulnerable to increasing interest rates. Last year, 38 percent of house purchases were financed with high risk interest only mortgages. Next year will be ugly, ugly, ugly for the flippers and speculators.
After four years of realtor hype, prices in some areas were pushed higher than others. It is well understood that Condos now look like a disastrous investment. But what about communities? Parts of NE and SW have been overpriced with claims of gentrification, but were the worst excesses in the previously low income parts of DC? Which part of metro DC is going to take the hardest hit; Silver Spring? Friendship Heights? G-town?
How can we compare apples and oranges when talking about price and bubbles? We can't totally use median price of home prices for the past 30 years because homes have gotten larger and have more ammenities than in the past. I think price per sq ft is a good measure for comparisons but how do you show the adjustment for inflation as well as the difference in the cost and types of materials used? A 1950s house may have been of brick and wood floors and today have many dated features or materials not used. My parent's home in Los Gatos, California was a little over 1100 sq ft when they bought it in 1963 for $17,000. It was a basic starter home, stuco over chicken-wire, oak floors, fireplace, average yard, two car garage, 1 1/2 baths, nothing by today's standards. So they paid about $16 a sq foot. Today that would be around $97 a sq ft and in some markets like Austin that buys a lot more in ammenities like real stone and brick instead of stucco, granite counters, tile floors etc. So how can we escape the hype of a bubble with the reality of lcoation, quality, and cost per sq foot?
Also some of those charts posted that show the median price of a home going up if you added the average size of a home during that time period and then found the average cost per sq ft and adjusted it for inflation, most of the numbers always come out to around $94 a sq ft. Can we find some rational point of cost in additon to historical costs of 2,3, 4 times income in historically high cost areas and desirable locations? Also look at how cost of housing have come down compared to homes in say the 1800s and the number of home owners having gone up? Even if you bought a home at a fire sale the eventual cost of remodling and updating an older home to code and modern ammenties drive one to some sort of baseline price per sq footage, no? I know I bought a home in 1989 in a run down Tampa neighborhood for $23,000 and it was 3500 sq ft built in 1905 and I had invested a lot of blood, sweat and tears for two years plus a lot of money renovating it myself (so saving the cost of contractors) and by the end the real cost of the home had risen to $90,000 and could have gone much higher if I had to pay for plumbers, carpenters, painters, and maybe even put in a gourmet and baths. Any guidance on price relevancy?
On Christmas Day I went to visit a relative in the BUBBLE zone of Twin Lakes/Lake Geneva, Wisconsin. They say that once you pass the Wisconsin border you have passed the Cheddar Curtain.... Anyway the tear down mania run by speculators is converting many old summer homes into 6000 sq ft plus three story vertical homes. The real estate taxes in this area are among the highest in the USA. How would you like to pay 200,000 Dollars a year in Real Estate Taxes!!!!! You can on Lake Geneva! The real estate taxes on lake property have doubled in the last three years! The city government of Lake Geneva has the highest per capita tax collections in the state of Wisconsin and it is NOT ENOUGH! The schools are crying that they need more.......
Anyway, the bubble in this area appears to have burst. The properties according to sources are just laying on the market. I was told the story of one home owner who wanted 1.1 Million for his small lake front home on Lame Elizabeth who got an offer of 800,000 and turned it down..... FOOL! This home has been on the market since Spring.
Owner should have taken the 800 grand and RUN!
I went by an other new subdivision on the South Shore of Lake Geneva, the former property of the Northwestern Military Acadamy. What was interesting to see was a tent set up sheltering a map of the new mega buck subdivision. There were several new spec homes up priming the big buck pump! It looks like the RE agents had spent the day their out in the COLD under the tent desperately waiting for the drive bys! I think they will wait a long time!
foxwood - I'll see if I can find an analysis of housing prices per sq. ft. adjusted for inflation on an annual basis since say 1930. That's what we need.
Anon in WI - here's something that NOBODY is talking about. During the .com days, all that extra cap-gains tax flowed into US and State coffers, and it was gravy days.
Same thing is happening today at the State level - as housing gains flow in in the form of property and sales tax receipts. That's why states that were in desperate shape just 2 to 3 years ago are now flush with windfall cash.
But... what happens when the bubble pops? Do state appraisers take the appraisals they use for tax basis down? I think not. Do they have a plan for their receipts to drop (sales tax first then housing tax)? I think not.
Bottom line, homeowners are gonna see huge tax increases at the same time the interest only and ARM crowd is going to see huge payment increases. Double whammy.
And the states will be in a world of hurt in 2006 when retail sales drop off as wealth effect subsides.
Here we go again.
I used to live in stuart florida until dec 1st. I took my money and ran to a cheaper market. Anyway i was talking to one of my best friends there on sunday. She works for a very big RE broker there. She bought 2 condo's there one on the beach and one preconstruction unit, and she has another she lives in. She told me that she wants to keep the ocean front condo if she can. She has a 7 year arm right now and she pays about 2500 dollars, which is to much to pay for her. She is getting refinaced with a 1% interest loan that is another 5-7 year arm type loan. Her new payment will be about 1500, much more affordable to her. I think she is refinacing for about 450k? My question is how exactly does this loan work? Does anyone know? She bought her second spec condo for 190k, they are just getting finished now. 299k was here first listing price. i'll keep updating to see how that market is going for her. mchinup
11 Condo's coming on the market, 575-1200 Sq. Ft..these condos are in 4 buildings.
Photo 1
Photo 2
The owner was unable to unload his investment properties ($369k & $790k) so he's taken them off the market and is repositioning them as "affordable housing" units.
These condos appear to be in 100-year old buildings with 50 years of deferred maintenance and no off-street parking.
Are you aware of any other community that has seen the downside of condo conversions? Are there any communities which have placed restrictions on condo conversions such as requiring a capital reserve account be fully seeded before handing the project over to an association?
I am supportive of attempts to bring affordable housing units on the market but my sense is that these new owners will be paying more in mortgage payments than the units had previously rented out for and will then be saddled with onerous condo dues as they take on maintenance and repairs of these buildings.
[But... what happens when the bubble pops? Do state appraisers take the appraisals they use for tax basis down? I think not. Do they have a plan for their receipts to drop (sales tax first then housing tax)? I think not] Keith In mass when prices go up the mill rate comes down to keep the tax rate about the same. In Florida they don't do that. People are going to get huge tax bill and the county's are using every penny. The new people moving in there are going to be screwed. I just sold my house there in dec, my taxes were 3000 because i was homesteaded. The new owner will be slammed with a 10k dollar tax bill. Florida will be in trouble in the long run IMO. She was already complaining that her insurance bill was almost 3 times what mine was. Quite a few insurance companies are not writing in florida now. The state better start thinking of a new tax plan there, or there will be hell to pay soon. Imagine 13k for taxes and insurance on a 3 bedroon 2 bath house? Florida is headed for some trouble down the line, JMO mrchinup
There is concern in the Midwest that many of the new jobs created since the dot-com recession were related to real estate bubble/boom ie new builders, remodelers, re agents/brokers, mortgage brokers, Home Depot clercks, furniture store workers, etc.
While all this was going on, the manufacturing base of the region continued to disappear at a rapid rate.
Thus as the boom/bubble deflates, the new jobs will disaappear along with it AND there will no jobs to fall back on.
According to a recent report the medium income per person in the MIDWEST RUST BELT is already back to where it was in 1989! Michigan was at the bottom, Illinois was next, Ohio was right there too.
Question: will there be enough jobs at Walmart, Target, TJ Maxx, K-Mart, to absorb all these people and will they with their lower pay be able to afford their MORTGAGES!?
http://www.jibjab.com Click on BIG BOX STORE The year in review is also good......
Why is it that whenever I see a local newspaper print an article about the bubble busting 2006 I see the same basic story?
-"The dramatic increase in real estate prices was due primarily to low interest rates and now that interest rates have gone up, sales have slowed down"
(What about the fact that speculators have driven up prices too damn high causing demand to diminish?)
-"Economist for XYZ reality association/bank says we expect modest declines in 2006 and a nice soft landing"
(The economists for the real estate and mortgage industries wouldn't have a vested interest in trying to convince everyone there will be a soft landing, would they?)
-In markets that didn't see the double-digit price increases you see this line,” since we didn't see the dramatic run up in prices here in ABC City, we don't expect large price decreases. But watch out in those overheated markets."
-In markets that did see the big increases you see lines like,” inventory is up, but sales are still strong and we expect this to continue into 2006. We see this all the time in real estate, just when you think things will go down, it always goes up, up, up."
I just wanted to point out that faced with the facts people have begun to acknowledge that there is a housing bubble, but are still in denial as to the extent of the ramifications. The "it won't affect our community" crowd just doesn’t understand that in the age of globalization, this already is a worldwide phenomenon.
From my Daily Reckoning email (www.dailyreckoning.com) a good observation today that I'll post here for reaction:
________________________________
Incomes per hour are not going up - they're going down. And the average
man...as we recall the data...has no more real spending power per hour
worked than he did 30 years ago. Is he richer? Hmmm...his house went up
in
price. His wife went to work. Interest rates went down...finance
companies
invented new ways to lend him money...so he can spend more. But what is
it
that brings him the extra spending power? Is he really benefiting from
this new, post-industrial economy? Does he get a share of the profits
from
selling iPods? Does he get royalties on Disney movies? Not likely.
And why should he? Inherently, an hour of his time is no more valuable
than that of a Chinese person. Why should he earn more? Why should he
be
richer? Whence cometh the extra loot? In the past, the answer was
simple.
The factories - representing huge, fixed capital outlays - were in his
backyard, not in China's. Now what's in his backyard that makes his
labor
so much pricier? The new post-industrial 'platform' companies are freer
to
move about. He cannot get a grip on them. He cannot force higher wages
out
of them. Nor is he in a better position to own their shares than an
investor from Paris or Manila.
He had a huge advantage when America was an industrial country - the
factory could not escape. He and other workers could unionize and
exploit
the capitalists. No more. Where is his advantage? Is he better educated
than the Chinese? Has he more oil in his backyard? Has he more skills?
Even if the platform, creative, genius companies were more profitable
than
the factories...why would they give this fellow a piece of the profits?
Not that we're getting misty eyed over the fate of the poor lumpen.
He's
had it good for a very long time. If it ain't so good in the future,
well,
that is just the way things work. But he really has no way to increase
his
purchasing power -- faced with billions of competitors in the East --
how
will the U.S. domestic market grow? How will he pay back all the money
he
borrowed? How will he keep up with payments...with spending...with
life's
little setbacks...when the credit flows less like Kool-Aid and more
like
tar?
We don't know. But we wouldn't want to hold his mortgage. And we
suspect
that the marvelous performance of the U.S. economy over the last few
years
is a trap and a swindle. It was caused not by a dynamic new economic
model, but an old-fashioned credit binge.
What is the take on this!
Home prices zoom up in NovemberBy MATTHEW HAGGMANmhaggman@MiamiHerald.comHome prices jumped sharply in November, appearing to counter worries the South Florida housing market is slowing down.
The median price of an existing single-family home jumped to $391,100 in Broward County and $381,600 in Miami-Dade, according to the Florida Association of Realtors.
In October median homes prices had dropped to $368,900 in Broward and $366,300 in Miami-Dade, a steep decline from previous months. Indeed, prices in Broward had dropped for two consecutive months before the release of new sales figures showing a sharp price hike in November. And the persistent rise of interest rates, and the fact mortgage rates have creeped higher, led some to think the long-predicted slowdown of the red hot housing market was finally here.
Others, however, attributed the October dip to hurricanes -- particularly Hurricane Wilma -- that battered South Florida and closed businesses for days.
The pundits predicting a return to skyrocketing home prices turned out to be right, at least for now.
South Florida home prices also rose sharply compared to the same period a year earlier. In Miami-Dade November prices were up 31 percent compared November 2004. In Broward the price of a single-family home in November was up 29 percent compared to the same period a year ago.
Meanwhile, the number of homes sold in South Florida remained down in Miami-Dade and Broward counties, a relatively consistent trend throughout the year. November homes sales were down 25 percent in Miami-Dade and 21 percent in Broward, compared to the same period the year before.
The Florida Association of Realtors tracks the median price of existing single-family homes. It does not monitor condominium prices
You load sixteen tons, what do you get Another day older and deeper in debt Saint Peter don't you call me 'cause I can't go......
Local condo flippers may be in too deep
By Scott Van Voorhis
Thursday, December 22, 2005 - Updated: 08:52 AM EST
The Hub’s jittery condominium market faces another storm cloud: hundreds of unsold units in new condo towers that brokers and mom-and-pop investors had bought early on in hopes of flipping for quick profits.
Some have exited, as planned, with thousands in windfall profits. But others may not be so lucky amid falling sales and dropping prices in an overloaded condo market, real estate executives say.
Thousands of new condo units, in glitzy downtown towers and modest suburban projects alike, are opening up across the Boston area. And more than 10 percent of these units have been snapped up by investors of various stripes, according to Brian Rugg, who puts out an influential market report at ERA Boston Real Estate Group.
With the market sliding, a flood of condo flips could grease the market’s downward slide, executives warn.
“Putting more supply in a soft market, that obviously would create more volatility in prices on the down side,” said Thomas Meagher, head of Northeast Apartment Advisors.
One project where condo flippers can clearly be seen at work is East Boston’s newly minted Porter 156, a one-time lightbulb factory where loft-style units sell for prices ranging from the high $200,000s to well past $400,000.
Amid this rush to cash out, Rhonda Kelley, a local music publicist, counts herself among the lucky ones, flipping her condo for $439,000 shortly after Porter 156 opened this fall and pocketing more than $100,000. But she winces when she looks at the myriad of online postings from other would-be Porter 156 flippers.
“There are a huge number of flippers,” Kelley said. “If I didn’t close quickly, I would be up against 30 or 40 units in a matter of a week.”
Still, Porter 156 is far from unique, with condo speculators flocking to an array of new Boston towers and projects.
Looking to cash in, Will Montero, a top Boston real estate broker, has created his own condo flip investment pool that includes cash from Ohio doctors, San Francisco investors and overseas financiers.
Over the past three or four years, Montero and his fellow investors have snapped up as many as 40 condos in some of the city’s top new high-rises: Fort Point’s Channel Center, South Boston’s Court Square Press and various Leather District buildings. Some were buy and holds, others quick flips.
Not to mention East Boston’s Porter 156, where Montero finds himself with two units to unload.
But he has no plans to quit flipping, even with signs that the condo market’s best days may be gone.
“It’s a pretty interesting game,” Montero said. “Real estate blows away anything in the stock market for the average investor.”
The bubble is deflating and if your someone that's got suckered into variable rate loans by greedy self centered mortgage brokers, well, you better look out. In 1 or 2 years your monthly payments are going to sky rocket.
At this time everyone else will be selling their houses and you wont be able to get rid of your house so quickly. If the family has a hard time, or your a little low on cash, the banks will be happy to foreclose on your house!
The nick name bankers have for ADJUSTABLE RATE LOANS IS THE BULLET LOAN. BECAUSE MANY PEOPLE SHOT THEMSELVES BY TAKING OUT AN ADJUSTABLE RATE MORTGAGE!
Read the Facts
Don't listen to money hungry Real Estate and Mortgage Brokers
http://www.fdic.gov/bank/analytical/stateprofile/2005_fall/profile/table5.htm
Tennesse Ernie Ford sang it all!!!
Sixteen Tons -author Merle Travis, Sang by Tennesse Ernie Ford
Some people say a man is made outta mud
A poor man's made outta muscle and blood
Muscle and blood and skin and bones
A mind that's a-weak and a back that's strong....
You load sixteen tons, what do you get?
Another day older and deeper in debt
Saint Peter don't you call me 'cause I can't go
I owe my soul to the company store ...
I was born one mornin' when the sun didn't shine
I picked up my shovel and I walked to the mine
I loaded sixteen tons of number nine coal
And the straw boss said "Well, a-bless my soul" ....
You load sixteen tons, what do you get?
Another day older and deeper in debt
Saint Peter don't you call me 'cause I can't go
I owe my soul to the company store .......
All I can say is we're all lucky Florida Real Estate and Real Estate nationwide cannot be easily traded online through the likes of Scottrade and Ameritrade because if real estate traded ..You would see a major correction in a matter of a week. All those condo flippers would be Flipping off there shiny new balconies. On another note Im worried when exsisting Home sales come out December 29. Hold on to Your hats and grab a chair because the music is finally stopping IMHO.
fibonacci knew what he was talking about!
arioch - I'm kinda liking ebay stock - figure people will sell whatever is not bolted down to cover their ever-increasing interest-only ARM mortgage payment before foreclosure
I agree with Urbania. Florida is going to be riddled with empty condos. The only thing I can imagine saving the condo industry here is if foreigners keep buying vacation homes in FL but I'm not sure that will be enough. We live in the panhandle and they are continuing to build condo towers all over the place. There are already hundreds of condos on the market that are not selling. Who do they think is going to live in all the new units?
I think single family homes are going to be hit hard here as well. There have been a gazillion speculators in this state. I've noticed quite a few of the flippers throwing their houses on the market hoping to get out ASAP but they're sitting on the market for a long time.
arioch,
Don't forget they can always liquidate those priceless Beany Baby collections, Cabbage Patch dolls, Pok-e-mon cards, Tickle-Me-Elmos, and fake Rolexs they wasted thousands on.
It's "Porsche" pronounced poor-sheh. And it isn't a joke like Target pronounced Thar-ghette. Some of the great Docktor's vehicles have proven to be awesome investments while providing decades of owner satisfaction. Other models?..., well nevermind. Same with primary homeownership. THere are a few parallels worth noting. Both incur carrying costs, taxes, insurance, etc. Both can be used while still being an investment. Actual results are a crapshoot if the intent is to purely make money. Easy to sell in good times, hard/impossible to sell in bad. Both subject to fickle consumer tastes. There is a plus side to both; if you buy carefully and mantain condition over the long run the pleasure you derive day-to-day overrides any financial consideration.
The problem with Real Estate in Florida is not only the price of the Real Estate fueled by flippers is the cost of taxes and Insurance. Many people can afford the sales prices but few can afford the new taxes and Insurance. Since Florida has the Save our home act . Cities can only raise taxes 3 percent max on homesteaded property...when someone buys: taxes are adjusted based on a percentage of sales price. If You own non homesteaded property or You just bought Your screwed. These greedy Counties especially Broward county Florida have raised taxes on investment property nearly triple in the last five years.(Still the same caliber of service as five years ago) Practically forcing landlords to have to sell . These idiots dont know that they have fueled the affordable housing crunch. If Your a Landlord in Many Florida Cities You work for the City.
Regarding all the new Condos being built accross Florida ..Many say dont worry foreign buyers are coming or People are moving to Florida. People have always been moving to sunny Florida and foreigners have been buying,but with all these condos going up Youd think that an entire foreign country is closing up shop and moving to Florida.
Used Home sales out in the A.M wont be to pretty should take the stock market down a peg. This report IMHO will not be the one to finally wake up the Real Estate Dreamers but when the report comes out next month it will be really ugly and Business weeks Hot property blogs name should change to Dont touch property with a ten foot pole blog.
Here is the latest on Austin from the Austin Statesman
Austin home market surges; November median is an all-time high
Home market surges even as supply drops; November median price hits an all-time high
By Kate Miller Morton
AMERICAN-STATESMAN STAFF
Tuesday, December 20, 2005
Central Texas home buyers shrugged off rising interest rates in November, sending sales up 24 percent and the median price to an all-time high of $170,000, up 15 percent. But the supply of homes fell sharply, to a four-year low, and homes in some areas are selling within days, sometimes with multiple offers.
The hot markets include Southwest Austin, close-in East Austin, and South and Northwest neighborhoods. In East Austin, the number of sales is up 146 percent so far this year, and the median price is up more than 40 percent, to $155,000.
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Sandy Kerr, an agent with Keller Williams Realty, recently listed a house for $199,950 in the Shady Hollow subdivision of Southwest Austin. Two days later, she said, she had a contract and a backup contract, both for well above the asking price.
Houses that are priced well "seem to fly off the market," she said, though fast sales don't necessarily translate into big price jumps. Prices in the Southwest market rose just 1 percent last month, with a median of $223,000.
Sales have been strong all year. But until last month, prices had been rising at a more moderate pace. Through November, the median price is up 6 percent from the same 11 months of 2004.
Even in some areas where homes are selling fast, prices haven't been shooting up. But sales are growing much faster at the upper price ranges, helping drive up the median price.
Sales of homes priced between $100,000 and $150,000 are up about 11 percent, while sales of homes priced at $1 million and up are 50 percent higher than a year ago, though only 20 homes fall into that category.
Bill Stanberry, Stanberry & Associates CEO, said he thinks demand is just one element fueling rising median prices.
"The median simply means a lot of the lower-priced homes weren't sold or weren't there to buy in November, and so the people bought higher-dollar homes," he said.
"That may be a reflection of the interest rates ticking up," he said, adding that rising mortgage interest rates have a bigger impact on buyers who may be stretching to afford houses than on more affluent people.
Mortgage rates have risen to an average of 6.3 percent, up from about 5.7 percent at the beginning of the year, according to Freddie Mac, the federal mortgage finance company.
Through November, area sales were up 19 percent, and the median was up 5 percent, to $163,000. But new listings have decreased all year, tightening the market for buyers.
"Austin is doing very well," said Jim Gaines, research economist with the Real Estate Center at Texas A&M University. "I don't know if you can say it's the leading market in the state, but it's definitely the leading market among the major four: Austin, San Antonio, Houston and Dallas."
Austin's momentum is bucking the national trend, according to Walter Molony, spokesman for the National Association of Realtors.
"We are seeing a slowing in home sales, but not in prices," Molony said of the national market. "Prices are continuing to rise at historically high rates. We expect price appreciation to slow down in 2006, but still rise a little faster than historic norms."
Home prices have been relatively flat in Central Texas for several years, keeping homeownership in reach for a larger share of the market than in many East and West coast areas.
Austin's third quarter median price was $167,100, a 5.4 increase from the year before. The national median was $215,900, a 14.7 percent increase from the third quarter 2004.
Central Texas could see a much higher rate of appreciation next year if the new listings fail to keep up with demand. But many agents say they think the lack of new houses on the market is partly attributable to the traditional slowdown around the holidays, when owners are reluctant to show their houses.
"Buyers don't seem to be seasonal, but the sellers do," said Carol Strickland, president of Avenue One Properties.
kmorton@statesman.com; 445-3641
The sheer amount of discussion regarding a housing bubble has convinced me we are in one. Just yesterday I was at an airport in the CNBC shop looking at magazines and heard an interview on "Kudlow and Co" about how there is no housing boom.
I remember lots of disucssion about the stock market soft landing towards the mid/end of 2000.
Housing is talked about so much that it's impossible not to be in a bubble, be it physical or expected. It's toast, the goose is cooked, and batten down the hatches and hang on.
This list of most overvalued (and undervalued) housing markets came out today on CNNMoney, for what it's worth. Top of the list (with the percentage over what the median priced home should be valued, according to the authors of the report):
Naples, FL +84%
Merced, CA +77%
Salinas, CA +75%
Port St. Lucie, FL +72%
Stockton, CA +72%
Madera, CA +70%
Santa Barbara, CA +70%
Modesto, CA +67%
Napa, CA +65%
Riverside, CA +65%
Medford, OR +64%
Sacramento, CA +61%
Atlantic City, NJ +59%
Chico, CA +59%
Fresno, CA +58%
West Palm Beach, FL +57%
Redding, CA +56%
Santa Rosa, CA +56%
Bend, OR +56%
Sarasota, FL +56%
Miami, FL +55%
Oxnard, CA +55%
Vero Beach, FL +54%
Los Angeles, CA +54%
Fort Lauderdale, FL +53%
Vallejo, CA +53%
San Luis Obispo, CA +53%
WHAT IS A SOFT LANDING?
If houses loose a lot of value in a short period of time I guess thats a hard landing.
What's a soft landing? If the same houses loose the same value over the next 10 years?
That doesent sound any better to me.
The MEDIA has a love affair with that economist from the real estate trade group. Why must they feel the need to take his word for what is going on? For example he was interviewed on NBC. Don't they know that he is an industry schill who will bend the facts in favor of the real estate industry? It reminds me of the MEDIA rushing to get the opinion of Ms. Lundburg on gasoline. She like the real estate economist is just an industry hack.
Note the consistency of that RE economist's comments. Before he said there was NO housing bubble. Then once the negative data came out he said it will be a "soft landing" which got parroted by every pundit in the MEDIA and other stooge economists. How the hell does he know it will be a "soft landing"? He is simply trying to bend the psychology of the moment.
Sorry but I see it as a HARD landing due to the panic driven exodus of the speculators which creates a self feeding downward sprial.
At least in today's article in the Chicago Tribune, one economist called the situation correctly by saying the market peaked in June and that according to his study the prices will fall in 2006.... across the country due to rising rates and the quite shutting down of the creative financing deals. To bad the other MEDIA groupies do not interview him or have him debate the RE industry economist schill!
loved this quote:
People aren't really shopping prices," said Bill Trask, a broker at Coldwell Banker Friends and Neighbors Realty in suburban Portland. "They're shopping payments."
in other words:
"uh, duh, I don't care what the price of the asset is - I just care what my debt service is"
duh.
I never in my life thought such reckless and stupid economic behavior.
Never underestimate the fiscal stupidity of your countrymen. Another failure of our education system?
wrecking ball - thanks for posting. here's a part that made me cringe:
_______
"Without a doubt, it is the most stressful situation we have been in," said Mia DeSanctis, a stay-at-home mother of one.
Gone are the days of bidding wars and open houses that draw dozens of shoppers.
________
There are going to be so many stories of people buying at the top, getting in over their head (interest only no down etc), trying to sell, but finding no buyer. then having to drop the price to sell (and stop the payment that they can't afford) - and take the loss (and go bankrupt possibly)
All they did was do what the media and Bob Toll and the NAR was telling them to do - get a home. Live the American dream. Stop paying rent.
And that one decision, after a lifetime of work in many cases, causes their financial ruin.
So sad.
The fat lady's belting out the death scene now.
I nominate this as the most definitive sign of The Top:
http://news.yahoo.com/s/ap/20051230/ap_en_tv/governor_race_trump
The New York Daily News, citing unnamed Republicans, reported Friday that Trump, the billionaire real estate developer and TV personality, is considering a run for governor as a Republican.
-------------------------
World's most notorious and famous real estate investor is getting out. Hmm.........
Hi Keith;
I really like your blog. I have to ask you a stupid question. I am a person that has been renting my entire life. I have been saving long and hard to buy my first home. Gathering from what I am reading about your blog, it seems I should wait the market out. Do you have any recommendations for first time homebuyers who need a place to live?
Anonymus, I didn't say the bill passed yet. It has failed for three years. That is why a law suit was file and challenged school funding and the Texas Supreme court ruled that funding schools only through property tax was unconstitutional and instructed the state legislature to pass a new bill correcting this deficiency or that schools will not be allowed to open in August 2006. The legislatrue is suppose to meet in Jan to try and work out a deal. The Democrats have been obstructionist in the battle with Republicans and neither party seems willing to do what is in the best interest of the taxpayers of Texas or schools. The high cost of property taxes is the most regressive form of taxation and the most counter-productive. This is why Texas ranks near the bottome for home ownership. The fact that there is the possiblity of reform and a significant reduction in property taxes bode well for the market in Texas. If Texas can escape any significant home price run up and the speculative plague that has hit other prime markets and stay with the healthy PE ratios for rents, Income to mortage ratios, and normal iinflation adjusted annual return (which is in effect a zero increase and zero decrease) then this tax reform makes homes even more affordable.
Texas has some 22 million people. It is continuously growing and is in the sunbelt. It is home to three of the largest cities in the country. It has a diversified state economy and oil, ports, beaches, agriculture, high tech, telecommunications, manufacturing. Texas has a NORMAL economy not built purely on Real Estate like Phoenix. It has absorbed a lot of people from New Orleans reducing bloated inventories of apartments in Houston and a lesser degree in other Texas cities. People will move to Texas to LIVE not to Speculate. Austin is a Great city to live and an influx of people and money will help the cities over all economy which is currently growing naturally and whose High tech industry is much healthier than in 2000. Recently an office building in Austin sold for $245 a sq ft, the highest price for any commercial space in Texas. Samsung is building a new fab plant, the office vacancy and retail space vacancies rates have dropped to healthy levels compared to the bubble of 2000. Though rents for commercial and retail and housing are rising they haven't risen enought to over stimulate speculative building. Coming at the end of a bi-coastal bubble they are better poised to prevent the same thing happening there as lenders and builder position themselves to prevent further bubble induced losses. With a lot of people cashing out of their high priced homes in other markets and using that cash to move to Austin with substantial down payments on high quality homes that will insulate them better against any price declines. Would you rather buy a 3300 sq foot home on a large lot with all the bells and whistles for $330,000 or less and put $200,000 down and have a $130,000 mortgage at 6.5% fixed for 30 or even less at 15 years? Or even (for those lucky enough to really have cashed out of CA or Florida) and pay cash and have no mortgage? What city will suffer more? Las Vegas? Phoenix or other cities in the bubble markets where people bought high and have no options but to live like the Japanese for the next 15 years paying off their over-inflated notes?
So, if any investors read this, beware. Texas is not for dummies. The market is unique. There are plenty of homes at affordable prices that you can't buy and flip fast and make a killing nor buy and charge excessive rents to cover you 0 down investment. Until the tax bill is passed next year you will have very high tax bills on top of any other carrying costs. The benefit of any tax reduction won't be in effect until 2007 tax year and won't be actualized until that bill comes due Jan 1, 2008. Texas and Austin are for those individuals who are tired of their over-priced cities and are looking for a better quality of life and who buy to LIVE in their home in Texas. Those who think they can do a Phoenix flip will be burned. No city in Texas is building 60,000 houses a year or experiencing 100,000 new residents a year to push up demand.
Austin Metro is 1.2 mil and Austin about 680.000. The market has plenty of housing units, only 6600 realtors and many neighborhoods that won't be appreciating at even 1% a month. The hot neighborhoods are still high for Austin and Texas and can still suffer a price reduction as people look to the new areas of Austin that are "hot" and "affordable" and price concious. If you can buy new 9 miles from downtown in South or SW or SE Austin for $105 a sq ft or less you'd have to be crazy to buy in the old "hot" areas of 2000 where homes go for up to $500 a sq ft and need a lot of updating. As in any market you need to evaluate value, location, distance from employment and competition. That large Master Planned community is a sure loser as you'll be competing with new build for up to ten years. But if you look for quality at prices per sq ft that are near the historic norm adjusted for inflation and a home and not an investment then Texas has many viable options to those seeking a better quality of life.
Wednesday, December 28, 2005 8:37:24 PM
foxwoodlief said...
To Anonymous interested in Austin: Febuary is an intersting time to go to Austin. You'll find many things about Austin you'll like. Normally the weather is temperate, you'll be in Cedar Pollen season so if you have allergies, a good try out to see if you can tolerate the pollen. You'll still have lots of trees (mostly the oaks) with leaves but some brown grass. You'll love the Air Port and it continues to expand service across the country with, I think I read recently, to Boston and NY City. The city has quite a few distinct areas. I-35 divides the city in half with the western half part of the hill country and the eastern half part of the black praire. The river divides the city into North and South. Immediatlly south if very desirable with Barton Springs and Travis heights and priced accordingly. Very bohemian in these parts. Just north is downtown and Tarrytown and around Lamar are really great neighborhoods. To th NE of downtown the hottest area is Frenchman's place and other parts of East (traditionally the hispanic/african american side of Austin) are gentrifying and light rai is headed into that area as well (light rail from leander to East Austin is ready to start construction). Ben White (US 71) further seperates South Austin and this area south of Ben While has some great and affordable 80s homes and immediately south of Ben White between S. Congress and Lamar is really interesting and heating up but you can still find homes for around $90 a sq ft. SW Austin from Circle ranch (very large Master planned community) north to the River offers great older neighborhoods and easy access to town. This area is where a lot of interest has shifted over the past several years and is where a lot fo Silicon business are expanding, especially around the OakHill and SW Parkway areas. Newer homes here are a great buy. I bought off 71 on the way to Bee Cave just inside the Austin City limits so close to Lakeway and Austin in a small, master planned community of around 300 homes that is just about built out. It has been under construction for the last four years and struggled during the .com bust and the sluggish real estate market that Austin has experience the past six years. Lakeway is a great upscale area but is 28 miles from town though it is on the shores of Lake Travis. The NW Hills has always been hot as has the area around Mt Bonnel (NW) but prices are high and homes dated and the area has grown so much the past 10 years that it is becoming extremely congested and you pay for location rather than value. The far north is still struggling and suffering from the uncontrolled growth of the 90s and though many homes are inexpensive they are not in areas that are as nice as the NW Hills or South/SW Austin or Lakeway. Austin does suffer some of the worst congestion for a mid-size city with a few years still to go before some of the current highway improvements provide some relief. If you choose to buy north be prepared to pay for those "values" in long commutes. During rush hour I-35 North is a parking lot for 20 miles to Georgetown.
Some of the smaller communites within 28 miles that offer low cost homes are Lockhart, San Marcos, Georgetown, Taylor, Elgin, Bastrop. These are definitely "Texas" towns with the same conservative bent that Texas is famous for. Central Austin, NW Hills, South Austin tend to be the Liberal areas most associated with Austin that distinquishes Austin from the rest of Texas.
Taylor has a lot of old historic homes but economically depressed and one must commute to find employment. Lockhart is similar (but to the SE) and has great potential if it every finds a local economy to boost the area out of poverty. Bastrop is growing but very conservative and quiet. San Marcos 40 miles south of Austin adn 50 miles North of San Antonio is a great area, growing (even if the city is fighting growth every step of the way) and home to a Texas University (LBJs alma mater) not economically depressed, has a great spring and historic square and homes but most people have to commute to San Antonio or Autstin for employement.
Hope that gives you a point of reference to start your visit to Austin. Oh, and visit South Congress, the 6th street Entertainment district, the warehouse district near Lamar for a sense of culture and a horse drawn carriage ride through downtown to see the Capital and the historic areas is worth the money for a taste of Austin.
Here is a cut from a blog from Austrailia to help put the US bubble in perspective. As I've mentioned in some of my blog comments no one wants to compare the US economy and house bubble to other world markets or establish a true base price for homes. If we exercise caution and learn from the mistakes of other countries we can quickly recover from an fizzle in local bubbles.
From Australia:
Housing wealth versus income and total wealth
Non-financial assets (mainly housing)
% household disposable income % total household wealth
Australia 628 68
Canada 288 46
Germany 340 56
Japan 392 44
UK 448 52
US 241 37
Source: OECD, ABS, Datastream, AMP Capital Investors
While there has been talk recently of a housing bubble in the US it takes only 350 weeks of average wages to buy an average house in the US versus 500 weeks in Australia (ignoring tax). The relatively expensive nature of Australian housing does not appear to be explained by home ownership rates, tax breaks, house size or holiday homes – these are all similar or “better†in the US. While our tendency to congregate in large cities may be a factor, the expensive nature of Australian housing is more likely to be due to the fact that Australian housing is very overvalued after an extended bubble.
The obvious way to avoid losing money in the bubble is not to buy real estate right now.
But what are good ways to make money? Keep cash, and buy when blood is running in the streets is the standard answer.
What else?
It is a matter of perspective. Those home owners and flippers were and are pleased with the outrageous increase in the assessed value of their homes.
But, But, when gasoline was approaching $3.00 a gallon Ohhhh did they yell and holler fowl play.
I heard some real estate doctor says that there will be a little blip in activity and then we will be back into steady gains!
Go ahead and invest before it is too late!!!
Mister Anonymous,
you wrote
Why is it that whenever I see a local newspaper print an article about the bubble busting 2006 I see the same basic story?
-"The dramatic increase in real estate prices was due primarily to low interest rates and now that interest rates have gone up, sales have slowed down"
I to am also puzzle by this. expessially due to the fact mortgage rates have been dropping. But don't let that stop the experts at Forbes from explaining their theories.
When mortgage rates hit 5.5% on a 30 year loan, do you think it will stun a few experts?
I passed a condo project on Phillipe Pkwy in Safety Harbor, Fl. This is a "small town" north of St. Petersburg. This condo - for those who are interested - is not new. It looks to be 5 years old or older. Anyway, there are quite a few For Sale signs next to the street. It looks like a nice place, but I doubt I could afford it - yet.
ACH
From http://www.truecontrarian.com/
U.S. REAL ESTATE: LOOK FOR THE FIRST TRUE NATIONWIDE COLLAPSE OF U. S. REAL ESTATE IN ITS HISTORY (December 26, 2005): U.S. housing prices in many markets have more than doubled in the past five years, even as U.S. rents have only moved up with inflation. In spite of this fact, a fairly substantial number of financial analysts are not expecting a significant decline in real estate valuations because "it has never happened before on a nationwide scale". What these folks always fail to consider is that there have never been interest-rate-only mortgages and negative-amortization mortgages before, either, in any part of the world, at any time in its history. Japan had the closest thing, with 100-year mortgages in the late 1980s; its real estate thereafter declined 60% nationwide (collapsing even more in some previously "hot" neighborhoods). Just today, at a nearby realtor's office, I saw a sign in huge letters: "40-Year Mortgages!", as though they were a sure path to wealth. Caveat emptor! One third of all mortgages in 2005 were of the negative amortization variety, meaning that buyers' total mortgage debt increases each month, rather than decreasing, as was formerly the case back in the "old days" (meaning before 2003!). Touts for mortgage companies such as Countrywide Financial frequently boast about how their innovative products are making it possible for anyone to buy the house of their dreams. They're absolutely correct--which is exactly why the housing market is so dangerous. Already, inventory in the U.S. is at a 20-year high nationwide, and at a 30-year high in many cities, while new home prices have been falling for several months--4% just in the past month, according to this week's offical government data. It's just a matter of one year, two at the most, before "60 Minutes" runs a segment on how honest, sincere, working-class Americans were misled by devious, greedy mortgage brokers into getting a negative-amortization loan, and how they have therefore been led to the brink of bankruptcy. Also expect this kind of media coverage of the real estate collapse by the end of 2006: "Denver's real estate market is down 15% in the past year; Las Vegas is down 20%; Phoenix, an incredible drop of 30%. Will your town be next?" The accompanying photos will, of course, show residential blocks with a "For Sale" sign on more than half of the lawns, with a few aerial shots of large condominium projects--ideally, with a few key elements that are obviously not completely constructed--in foreclosure
saw this hilarious post at http://www.goldismoney.info/forums/showthread.php?p=161809#post161809
"Its only been a year since the Kerry and Bush signs went down and now it appears there is a new election. The candidate's name appears to be "For Sale" and it seems like everybody around here supports him! He must be running against "For Rent" because I see a lot of those signs too, but not as many as for the other guy. Anyone heard of these candidates, or know what they stand for?"
Study the history of irish feudal landlords or watch the film "The Field", you'll have some idea of the basis for Ireland's current obsession with owning property.
Malaise in old europe, low interest rates, parental subsidies, shills, opaque real-estate laws, speculators, panic buying, government medling and corruption have led to a property buying binge on par with Tokyo circia 1985.
In the 5 October issue of Ireland's Sunday Business Post, Economist David McWilliams put together an excellent commentary and analysis of the Irish property bubble, what we can learn from Japan's property boom and bust and how the current real-estate bubble is harming Ireland's long-term competitiveness.
http://archives.tcm.ie/businesspost/2003/10/05/story322681372.asp
The article
Why have housing stocks gone up ever since this blog started?
thanks for your wisdom
last anon - nice try. check out
http://finance.yahoo.com/q/bc?s=TOL&t=3m
invest in housing stocks, mortgage bankers, home improvement stores.
or just take your cash into the backyard and burn it.
Woo Hoo!
Fannie Mae (FNM) shares jumped more than 9 percent, hitting an intraday high of $53.60 -- a price not seen since August. The stock at midday traded up $4.54, or 9.3 percent, at $53.29 on the New York Stock Exchange.
Check out these stocks since 11/23 (that is the date Keith asked us to follow his stock advice):
Sell Short:
FNM
TOL
TGIC
SPF
Buy:
COP
If you had done the exact opposite of what Keith said, you would have made money on EACH ONE of these stocks.
Amazing.
written in november.....
everyone_calm_down said...
The blog author says:
"1) Sell all of your personal real estate.
2) Short homebuilders, lenders, Fannie and Freddie, home furnishing retailers and mortgage insurance companies
3) Raise cash and put into 4%+ saving"
I'd like the author of this blog to put his money where his mouth is and tell us what he would do with a $10,000 investment. Using today's 11/23 prices (market has closed for holiday), where would the blog author invest 10k today? Please give us specifics (stocks/shares/prices/long or short/etc.....this way we can see how good this guy really is and see if anything he says has any merit.
Wednesday, November 23, 2005 2:49:45 PM
Housing Panic said...
For the 10k:
$5000 - 4% interest savings at HSBC
$1000 - short FNM
$1000 - short TOL
$1000 - short TGIC
$1000 - short SPF
$1000 - long COP
Please track those puppies and enjoy
These posts have a twinge of 'Schadenfreude' to them if you ask me. Why wish the market to crash and the home owners suffer? Because prices went out of control? All most want is a place for their familes and place to stay in , not flip. Well at least most people I know. Prices are what they are, what are you going to do? This is going from Housing Panic to Renter Panic.
Housing Panic,
You are taking some pretty tough hits here.
I tried telling that despite suburbs being over proced in many markets. Home builders would thrive.
You lost money for anyone that listen to you in November.
I have during this time as documented by my housing boom blog.
Just curious if you notice the nice downward slid of Mortgage rates all through December?
Don't beat yourself up though. All other blogger that screamed "Short the Home Builders" are looking just as dumb.
is everyone here running a sprint or a race? does anyone seriously think COP won't be much higher a year from now? two years from now? 10 years from now?
Does anyone seriously think the homebuilders and lenders will thrive in a massive downturn?
and anyone anonymous flaming is gutless. post your name so we can mock you in a few months
oh, FNM popped up on bogus news - rudman came out in the afternoon and corrected the bloomberg misquote that originally popped the stock.
Last anon,
Those whose property future beliefs run counter to CW don't wish the average home owner financial harm. An average home owner should be able to ride out a crash/correction in their own home. We do wish to warn those in denial that there is a downside risk and that they should put themselves underwater and assume the tide will help them float.
I reserve my Schadenfreude for the speculators, dishonest real estate agents, easy money speculators, corrupt apraisers and mortgage bankers who give away bad loans as though they were Santa Claus. Most of these folks deserve a good spanking.
Last anon,
Those whose property future beliefs run counter to CW don't wish the average home owner financial harm. An average home owner should be able to ride out a crash/correction in their own home. We do wish to warn those in denial that there is a downside risk and that they shouldn't put themselves underwater and assume the tide will help them float.
I reserve my Schadenfreude for the speculators, dishonest real estate agents, easy money speculators, corrupt apraisers and mortgage bankers who give away bad loans as though they were Santa Claus. Most of these folks deserve a good spanking.
Keith - are you serious? How can you say "is everyone here running a sprint or a race?" when you are advocating to ignore 40 years straight of median home sale gains and instead say "sell all real estate NOW!"
All I was saying is that you made 5 stock picks last month, and all 5 of them turned out bad. The odds of that happening are 1 in 32.....that is real difficult to do.........let me know when you are in Vegas so I can bet the "DON'T COME" when you shoot craps.
Also, I didn't come up with "Renter Panic", but I wish I had.....that is a good one.
It's so hard to type when you can stop laughing.
Mortgage rates are falling just when the baby boomers are getting ready to retire.
The economy is coming back.
What next?
The collasp of energy cost?
Under 3% unemployment?
Evidense that Americans are improving their net worth by REDUCING debt?
Just laughing and enjoying the good times. How about you?
this blog is the best!!!
Sorry ment can't stop laughing.
Housing Panic. The combination of your simple thinking skills match with your arogence and topped off with the inability to admit being wrong will destroy you.
Thanks for the entertainment!!!
keith b,
Can you explain what COP is? Yahoo stock ticker lists it as Conoco Philips, which hasn't much to do with housing other than that when oil goes up, suburban property loses value.
I noticed SRPIX is down right now, where is this optimism coming from? SS is heading towards bankruptcy, inflation adjusted wages have stagnated or fallen, our trade deficit is worse than ever, oil is double what it was in 2003 and American consumers and car companies are stuck with more oil-hungry SUVs than they know what to do with. Where will the money come from if house prices continue to rise?
My stock picks:
1) SRPIX
2) The company which provides ink for fed reserve currency printers.
3) The company which produces brown envelopes (for bribes)
4) Kyocera or another Japanese tech company (they've learned from their mistakes, we haven't, deflating the property bubble might partially reinflate the tech bubble.)
5) A put on a crane company
6) Stock in a crane salvage and recycling company.
Is anyone planning on getting cheap mortgage money now while waiting for the housing price correction ?
Since there are two views of the future (higher/lower interest rates), it seems that for those that have significant equity in a house now, and are considering buying a second home or investment property after prices correct, it would make sense to get a mortgage now.
If the future holds higher interest rates, you will be in good shape. If the future is lower rates, you can just pay off the mortgage. Since the spread is so low between the rates, you wouldn't won't loose much in the interim (I personally also get a discounted rate since my wife works at the bank which further reduces the spread).
Also, in the worst case hyper-inflation scenario, you would still benefit with the spread working in your favor.
Anyone else thinking the same (or know a good reason not to) ?
dogcrap - time will tell my friend. time will tell.
I hope you keep coming here week after week as it happens. You know where I'll be.
word
Anonymous, if housing starts to fall I would expect interest rates would fall as well. I dont see why you would want to take on extra debt now.
Since Ireland is 3 just steps behind in its stairway to property heaven, I'm interested in how the collapse plays out in parts of the U.S. where the bubble was strongest.
The statistics which puzzle me the most are the markets (FL,WA,CA,D.C.) where inventory is rising at the same time as median price is rising.
Did the law of supply and demand suddenly evaporate in this "new economy?" But then I thought about what happens when first time buyers finally drop out of a market. Wouldn't that tend to cause a spike in the median sale price? To be sure, the spike is short lived as speculators are feeding off other speculators without any underlying reality to support their stairway to heaven.
Lobbing off the bottom of a bell-curve is almost certain to raise the mean. If this is the case, is there any way of measuring this?
from my view in AZ, where inventories have nearly tripled the past 6 months, while prices have yet to plummet, here's my take talking to folks with houses for sale
they didn't get the memo.
basically, they say neighbors who sold their homes for crazy prices (like me). and they still think they can get those prices or more.
but alas, with exploding inventories, no buyers, and investors who have fled, the only way their homes will sell is with drastic price reductions. they're not even getting any lookers.
one neighbor who put her place out at 40% above where even I sold mine for said that she hasn't gotten one looker in 3 months.
but check this out. she plans on RAISING the price this month? Why? Because she thinks since it hasn't sold in 3 months, she has 3 more months of APPRECIATION
that's what's happening here. you'll see inventory build, sales dry up, and THEN you'll see the prices come down.
Does anybody know what's up with Glendale, California. We know a flipper there who said it's basically immune to trouble because of a large Armenian population who just keeps buying.
There was SO much PANIC when the yield curve inverted last month........I imagine that everyone on this blog is SO relieved now that the yield curve has reverted......
I love the month of January....this is the time when I get to thank my lucky stars for all the mortgage deductions I can take from my taxes. Thank you all you renters for subsidizing my mortgage.
Keith_B -
FNM sure took a hit today on your so called "bogus news"........must have been a bad day for you on your FNM short sale.
FANNIE MAE (NYSE:FNM) Delayed quote data
After Hours (RT-ECN): 54.00 0.20 (0.37%)
Last Trade: 53.80
Trade Time: 4:00PM ET
Change: 0.62 (1.17%)
I live in Glendale. The Armenian people are the shrewdest business people in the world. It is part of their culture. I have never won doing business with them.
devest -
don't you remember? in an earlier post, Keith said he is paying 2k a month in rent until he moves to the UK.......that is a lot of pennies
formerly - it's called a weekly VACATION rental. They charge hotel like rates here in Arizona. $2g a month is a steal.
A real rental (12 month lease) would be substantially less.
But to get a vacation rental (beautiful place - view of all of phoenix and mountains, pool, jacuzzi, etc) at $2g a month shows you how bad the rental market is here - vacation or regular.
panicearly - what would you think about investing in Japan stocks, or even buying Japan real estate? Doesn't seem like your housing can go down anymore, does it? Nice time to enter (somehow - no idea how to do that)
If you bought a condo in Japan today, could you rent it out and get positive cash flow?
That's the kicker here - you'd be happy to get 50% of the cost of ownership in rent.
All I can say is we're all lucky Florida Real Estate and Real Estate nationwide cannot be easily traded online through the likes of Scottrade and Ameritrade because if real estate traded ..You would see a major correction in a matter of a week. All those condo flippers would be Flipping off there shiny new balconies.
Ah, you speak to soon..as to selling condos online..don't forget ebay
Condos galore...the best buys seem to be the KittyyCondos at least they come with Catnip!
...and even more real estate and condos online.
I keep hearing the negatives. The 4 areas i'm familiar with our still trending up. I don't need stats or realtor to tell me bubble or no bubble.
austin- up
socal-los angeles,oc,san fernando valley, ventura, santa clarita etc- all up
hawaii maui- up
salt lake city - up
All of these areas still are moving
up and plenty of buyers. no gloom and doom. alot of the socal areas have buyers with multiple families purchasing together and living together i've seen more and more of this the last 4 years.
2 or 3 years before we see any real drop in prices. The interest only holders will hold on for a while. Most of these loans we locked for 5 years starting back in 02,03,04, which means 07,08,09 due. I keep hearing rates are up, what rate, rates 30year and adjustables are real close to there lows but i keep hearing rates are up. Lastly i think the only issue is will foreigners keep buying our debt, thats the real question.
panic early
when japan home values were at the top - say $1 million US for a 2-bed condo, what would it cost a month to own a place, and what would it cost per month to rent the same place? How out of whack did it get?
And were they using "creative" mortgages - interest only, zero down,etc? What's a normal mortgage over there now - 30 years?
thanks!
panicearly - same thing going on here in the US now. Rents flat - for years. While home prices doubled past 4 years in many areas.
And rent income would only cover 50% or so of cost of housing.
Thus, pretty obvious what's coming
I live in Glendale. The Armenian people are the shrewdest business people in the world. It is part of their culture. I have never won doing business with them.
So, does this mean there's merit in our flipper friend's claim that Glendale is immune to a bursting bubble?
I have been buying and selling Homes and condos ( I have never played in the condo pre sale game)for nearly 20 years... the last three I have only been selling.(Im glad I kept a few as rentals) I would buy the Homes do a complete restoration ie kitchens baths flooring landscaping roofing. I would carry the properties for almost six months during the entire process..I would then sell and make between 12-20 thousand a deal after all that hard work. I enjoyed making a difference in the neighborhood by taking the ugly duckling house and making it the swan. The last few years I started noticing that many speculators would buy a house not even mow the lawn and make 50 grand. WOW just like magic. Condos in my building would sell three times without a single person moving in. I tell You its pure BS there is no justification for these prices. IN This part of Broward County Florida I have seen a 42,000 condo in 2000 sell for 170,000 today. Its still in a bad neighborhood. Lately inventories are rising at such a dramatic pace that I truly believe South Florida is heading towards a 10-12 mo supply of Homes not to mention dot.condos . On another note I have friends who work for large builders and they made a killing in Places like Florida and Las Vegas as the cookie cutter House stayed the same but the prices tripled. 100 percent mark up. Greed ...
Does anybody know when real estate busted in the early 90's what did that do to rents? up or down.
And still, a strong case has not been made on this board for the view that a drop in real estate values is imminent.
Yes homes are over valued. They were over valued for a long time and still no crash.
I know a few people who sold their house 3 years ago to move into a smaller house/rent and are kicking themselves today.
So, do you think they will double in price again this year?
Anybody have info on the seattle housing market. Thanks
No, I dont think housing prices will double this year, but they may continue to go up...
There are some intersting new realestate mashups at: http://googlemapsmania.blogspot.com/2006/01/7-new-google-maps-us-real-estate.html
for dc/CA/sf/seattle.
There are some intersting new realestate mashups at: http://googlemapsmania.blogspot.com/2006/01/7-new-google-maps-us-real-estate.html
for dc/CA/sf/seattle.
There are some intersting new realestate mashups at: http://googlemapsmania.blogspot.com/2006/01/7-new-google-maps-us-real-estate.html
for dc/CA/sf/seattle.
Home P/E ratios for 9 metro areas
Avg. 1988-2000 2001
Boston 20.5 30.2
San Diego 22.8 29.7
San Francisco 23.8 27.2
Los Angeles 21.3 25.6
Seattle 20.4 25
Seattle is not looking good.......
In the first quarter of 2001 the average price of a single-family home there rose 4%, but by the end of the year had fallen 7%. "We're seeing a bubble bursting right now in San Francisco," says Robert Shiller, an economics professor at Yale University and partner at Case Weiss Shiller. "We've never seen such a sharp drop, and we're expecting it to fall even more." Shiller, who warned of a stock market bubble in the late 1990s and coined the phrase "irrational exuberance," believes there's the risk of a housing bubble in other major cities. At the top of his watch list are Portland, Ore., Seattle, Denver, and New York.
If you want to see for yourself just how far out of whack the Seattle market is check out this listing:
MLS 26000601. And it gets better-that place is practically UNDER I-5.
Seattle is a joke- choked w/ traffic and no signs of ever having one in the future- they just put the kabosh on a rapid transit system.
The only thing nice here is the weather and the only reason I think that is because I'm from Maine and spent last year in Upstate NY.
I'm starting to worry about what to do w/ my downpayment $ that I'm planning to put to good use once housing crashes.
I did really well with regular CD's in the 80's (interest at 18%-duh) and , being a (scared and) very conservative investor, am very tempted to take everything out of the stock market and just put it in my credit union.
What are people's thoughts on this kind of move?
I'm not too worried about interest rates going back down to previous low levels, but I am a little worried lately about dollars suddenly losing all value- am I being a complete alarmist about that?
Any info on Portland, Oregon's housing market would be greatly appreciated. Are we in a bubble? If so by how much?
I can't find hardly any news that Portland is out of whack.
To answer your question regarding rents, from the sample I looked at, there was not a decline in nominal rents in most markets, but the rate of increase was fairly flat.
Keith; great blog but why does it display the most recent postings at the bottom of the page? I look on it on different computers/browsers with the same results
Re. the Portland market: it seems to be very similar to the Seattle one,eg. over-priced and stalled, with the general consensus being "our area is different, no bad bubble here".
Typical head in the sand approach to life.
If you want to see what's REALLY going on,
1) choose a neighborhood in Portland and go to the MLS list. Plunck in your criteria (ie. price, square ft., etc) and see what comes up.
Then go back every few days and see how different the list looks for same neighborhood and same criteria.
My list for Seattle has showed a striking change in the past couple days (ie. more pages of houses = more houses on the market).
2) Then go to Craigslist and search portland RE for "reduced" every few days. The numbers of "reduced" should be growing exponentially soon, if it hasn't already started in Ptld.
While you're on Craigslist, every now and again when you have a moment, click on one of the properties.
I found a doozy the other day. They were trying to bribe people into coming to the open house by giving away free Starbucks giftcards to the 1st 20 people and also having a drawing for a $100 Nordstroms gift card.
Now, I don't know about Ptld. but I do know that in Seattle this sort of desperation to sell a house has not been present for a good many years.
Sound like the market might just possibly be tanking? Pretty soon it'll be hard for people to spin this in a positive direction, no matter how hard they try. For the time being tho, they are still trying.
Portland info from http://www.benengebreth.org/housingtracker/
Holding up pretty well, except for high-end
Trend 01/07/2006 1 month 2 month 3 month 4 month
Median Price $325,000 0.0% -0.3% 0.0% -1.5%
Inventory 4,121 -6.9% -14.1% -13.4% -6.2%
Historical Data
Date Inventory 25th Percentile 50th Percentile
(Median) 75th Percentile
01/07/2006 4,121 $239,900 $325,000 $499,000
01/01/2006 3,986 $239,500 $325,000 $499,000
12/28/2005 4,157 $239,000 $324,900 $499,000
12/21/2005 4,263 $239,000 $325,000 $497,000
12/14/2005 4,364 $236,500 $325,000 $495,000
12/07/2005 4,426 $235,000 $325,000 $499,000
12/01/2005 4,440 $235,895 $329,900 $499,900
11/28/2005 4,488 $236,950 $329,900 $499,900
11/21/2005 4,674 $239,000 $329,000 $499,000
11/14/2005 4,710 $236,097 $329,000 $499,000
11/07/2005 4,800 $234,900 $325,900 $499,000
11/01/2005 4,836 $239,000 $329,900 $499,900
10/28/2005 4,848 $238,500 $329,900 $499,900
10/21/2005 4,865 $234,900 $329,900 $499,999
10/14/2005 4,848 $235,000 $327,750 $499,900
10/07/2005 4,759 $234,900 $325,000 $499,500
10/01/2005 4,769 $234,950 $327,000 $499,900
09/28/2005 4,800 $234,900 $329,000 $499,900
09/21/2005 4,750 $234,900 $329,500 $499,950
09/14/2005 4,588 $231,000 $329,000 $509,900
09/07/2005 4,395 $229,950 $329,900 $509,900
09/01/2005 4,377 $229,900 $330,000 $519,000
08/28/2005 4,373 $229,900 $329,900 $511,300
08/21/2005 4,337 $228,000 $329,000 $509,900
08/14/2005 4,241 $229,000 $329,900 $520,000
on comments - it is what it is with blogger - sorry!
Banker,
Keep reading for stock picks.
I use ebay and it sucks. In the early years it was like the gold rush. I would get over retail for stuff. Today stuff sells for "sight unseen wholesale" with the posibility of fraud. Supply has exceded demand. Sure it can go up. Is it worth it, HECK NO! Can someone else start up somthing competitive? Heck Yes! Ebay's formula for success = Give the service away, slowly charging, then raising fees to their current gouging levels after going public.
I'm getting the impression that most posters/readers on this and other housing bubble blogs are waiting for the crash so they can finally buy a home, esp. in overheated markets. But what if the US market repeats the pattern in 1990's Japan, where the monster bubble of the late 80's deflated slowly over a period of almost 15 years? If we have a similar pattern, which I believe is likely, you could buy in 2008, when house values are off 25-30 from the peak, and by 2011 your mortgage will be worth more than your house, which will be off 50% from the peak.
I AM waiting for the housing market to crash. I want prices to go so low that I can basically buy the house outright.
After that , I'll just live a nice quiet life.
Prev. ANON
It wont crash and hit rock bottom. Come down some and level off. But not down to 200-2001 prices. So...if you cant get in today, I doubt you will tommorrow. Especially with rates rising.
Again all the "chicken little's" out there are being sooooo apocolyptic. Yes, even I wish I could have bought a house in San Jose for $16000 in 1963 like my parent's did, have a great job, live off one income, and have multiple pensions when I retire, but it ain't going to happen!
In 1980 friends of mine bought a house in Phoenix for a whopping $85,000 at 14% interest for 1600 sq ft. Now that translates into $215,000 in today's dollars and if you had that mortgage at 14% today, well, don't cry for me Argentina at 8% or less.
People still refuse to take all the factors for the price of a home in to account, location, job market, interest rates, size of home, ammenities, adjusted for inflation, current building costs, etc. If the stock market stayed flat for a year (gosh, it did in 2005) would people feel the market had no where to go or that some stocks were unde-rvalued and other's over-valued? At some point prices have to stop rising as demand slackens, interest rates rise, job growth slows but that doesn't mean the end of the world and the next GREAT DEPRESSION. Though even in the depression with 30% unemployement (and no social safety net) that meant 70% worked.
And even in 2006 the entire capitalization of the nations real estate, adjusted for inflation, still does match Japan's in the 80s, a country the size of California and one that isn't growing and has 300 million people. Nor is every homeowner tapped out in his equity (even with a 50% drop in some markets) or can't make his mortgage payments.
If the market slows there will be bargains in many areas, especially if the local economy doesn't support incomes or job growth and people paid too much. Here in Phoenix we bought a house in the historic district in 1994 for $62 a sq ft and it needed work. We sold it four years later for $130 a sq ft but not until we sunk $40 a sq ft into a total remodel. Today in that same neighborhood people are asking $200 a sq ft for a dump. Plan and simple math: overpriced. Now if those folks had put $$ into updating those houses they might not be so overvalued but as with most greedy people (not just investors) there are people who don't maintain their homes, invest in their neighborhoods and because some guy down the street did and sells, jackpot, they think they DESERVE the same price for their piece of crap without investing to make it more valuable. Then the guy who buys can't afford to update and remodel without being way over-invested and the neighborhood still looks like hell with $200,000 home as it did at $60,000 homes. Part of the problem in California...too much speculative money and not enough reinvestment in those homes.
I think most of the guys who "gleefully" anticipate a meltdown are just plain envious of those who made wise investments or went to college so they earn enough to live in nice homes or are like those idiots in the neighborhoods I've invested in who want a jackpot without the sweat equity or labor.
Be careful what you wish for as my mom use to say, it might happen. Meltdown? When I spent some time in Ecuador a few years back after their economy melted down it didn't matter that you could buy an apartment in the equivelent neighborhood in Quito as Fifth Avenue for as little as $25,000, if you didn't have a job, you had no money. If you had a job and no money you couldn't get credit to buy. If you had the cash you didn't invest it in Ecuador. Is that what you idiots want with the US? So greedy and selfish that all you want is the prices to fall so you can "pay cash" and to hell with the world?
Oh and you think your cash would be safe in a meltdown? Remember the bank runs in the 30s? Remember cash is fiat money and unless you have it stuffed in your mattress it ain't really there.
Oh, and for several of you bloggers who have implied that I'm a realtor, not. I'm a Director of Radiology in a Phoenix Hospital and my wife works at a Law firm and you know there really is a LOT OF REAL money here in Phoenix.
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