Good term: Hit and Run. That about describes Phoenix for sure. Investors swooped in, driving prices up 55% last year, buying up everything in sight.
Then BAM, they were gone like cockroaches in the night, with the locals left holding the bag.
And now we go back to exactly where we started. However, tens of thousands of folks will lose everything. Everything.
Investors hit and run on housing
Catherine Reagor - Arizona Republic
04/25/2006 02:07:34
Investors didn't just ravage metropolitan Phoenix's housing market last year. Almost 28 percent of all home sales nationally were investor driven in 2005, according to a new report.
In Phoenix the figures is probably closer to 35 percent.
The National Association of Realtors reports 27.7 percent of all homes sold last year went to investors, and another 12 percent were sold to people buying vacation homes.
The demand for both investment and vacation homes obviously drove the housing market to its record levels last year. Those sales made up 40 percent of all deals.
If the housing market fell by half that much this year, it would be devastating to Phoenix's economy. For the first quarter of this year, used home sales were off 34 percent from 2005's first quarter.
April 30, 2006
Arizona Republic columist: Investors "hit and run", ravaging the Phoenix housing market
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Hey - that's the same Catherine Reagor that wrote the rosy housing article back in early March that everyone ripped her for!
Wow - I guess she has finally sobered up.
Here is her blog at AzCentral:
http://www.azcentral.com/blogs/index.php?blog=164&blogtype=Columnists
" hig and run"
"columist"
"buying up everything in site"
If I ony had my red marker!
"Then BAM, they were gone like cockroaches in the night, with the locals left holding the bag."
Ouch! My literate ears!
hehe .. bring on the pain ..
I've said all along that rising home prices hurt the majority of people. They cause property taxes to go up. People who really intend to buy a house to live in are forced to go deep into debt. Only the investors who get in and out first make money. Everyone else ends up screwed.
Arizona Republic columist: Investors "hig and run", ravaging the Phoenix housing market
Good term: Hit and Run. That about describes Phoenix for sure. Investors swooped in, driving prices up 55% last year, buying up everything in site. Then BAM, they were gone like cockroaches in the night, with the locals left holding the bag. And now we go back to exactly where we started, [this is a comma splice] however, tens of thousands of folks will lose everything. Everything.
Pyramid scheme. Ponzi scheme. Hit and run.
Whats amazing is that it was so easy to spot and so easy to stay out of since renting was the far better choice. Meanwhile we're saving up for a cash purchase when our area's home values drop 50% which could easily happen.
Well maybe its not so hard to understand. When Bush gave his infamous state of the union speech prior to invading Iraq I was flabergasted by the publics inability our unwillingness to see throw the obvious con job. I always overestimate the intelligence of my fellow Americans.
was she the one who wrote us that petulant letter that repeated the same mantra about 20 times: "You gentlemen need to do your homework." Guess she finally did some of her own.
An interesting article that says what we already know. But I learned that credit card issuers can charge 32%! Wow.
Financial "Perfect Storm" Brewing Over America's Middle Class, Says Bankruptcy Expert
A weaker housing market is the final element of a confluence of economic currents which, if left unchecked, may well lead to a financial debacle for America's Middle Class Homeowner. This can be averted only with luck, or by timely action at the State and Federal Legislative and Regulatory levels.
New York, NY (PRWEB) April 30, 2006 -- "A weakening housing market, together with other financial currents in the U.S. Economy, represents the potential final impetus to a ‘Perfect Storm’ brewing over the American Middle Class, and, without luck or prompt legislative action, may lead to disaster, especially for homeowners.” So says Warren R. Graham, a New York Bankruptcy Attorney. The other prevailing currents threatening to collide over the heads of an unsuspecting public, claims Graham, include rising interest rates, limited recourse to bankruptcy relief and the virtual elimination of usury and other restrictions on credit card issuers.
For many millions of Americans, who live “paycheck to paycheck,” the only thing defining their status as Middle Class, and differentiating them from the so-called “Working Class” is their ownership of a home, and the equity accumulated in it. Graham points out that that equity is being eroded by two factors: the first is the threat of declining home values, and the second is the propensity of homeowners, over the last few years, to refinance their homes or take out home equity loans at very low adjustable rates to pay off high interest credit card debt. Now, Graham says, the equity is at risk, because of the softening in the market, the fact that the adjustable rates have risen consistently (and are expected to continue to do so), and the reality that much of it has already been borrowed out to pay off credit card debt, and for other purposes, such as home improvement.
Coupled with the risk of declining home equity, Graham argues, is an enormous, and, to date, largely invisible swinging of the pendulum toward the credit card issuers, and their sponsoring banks. After years of intense lobbying (on both sides of the political aisle) by that constituency, the bankruptcy laws have been extensively rewritten, so as to restrict, severely, access to certain kinds of bankruptcy relief, especially for those who, while certainly not well-off, earn above their respective state’s median income. “Credit card holders, of course, had no lobbyists on retainer,” says Graham. At the same time, the same financial institutions have found creative ways, by re-domiciling themselves in states hungry for their business, such as South Dakota, to avoid the restrictions of usury laws. So now, observes Graham, it is not unusual for your credit card interest rate, if you are carrying a balance, to rise suddenly from that 5% “teaser rate,” to an unprecedented 32%, in the event of a default. “And worse,” Graham points out, “a ‘default’ doesn’t have to be non-payment. Your cardholder agreement, which you likely have not read, allows periodic review of debt to income ratios, and problems with other creditors as a justification to change rates on almost no notice.” Add to that the changes in banking procedures, by which banks have restructured their “minimum payment” requirements on cardholders carrying balances, “and that monthly $250 minimum payment has now jumped to $600, or more, multiplied by the number of cards the consumer may be carrying.” The homeowner who wants to do something about this has a much harder time doing so, according to Graham. “His or her house has less equity, because of a softening market, or because it has already been tapped by the homeowner, and the cost of borrowing against it is higher, by virtue of climbing mortgage rates.”
In the meantime, the Middle Class homeowner’s income has not even remotely kept pace with these increased costs, Graham points out. “And this does not even take into account the likely substantial effect of rising gasoline and energy costs.” “And when the homeowner finally reaches the end of his or her tether,” says Graham, “ his or her income level may prevent recourse to bankruptcy. Chapter 7 liquidation may be unavailable altogether, and Chapter 13, in which a percentage of creditor obligations are paid over time, while mortgage debt remains intact, may not be feasible, because the income may simply not support the cost of financing a repayment plan.” Thus, Graham concludes, bankruptcies may be dismissed, and homeowners may have to dispose of their properties, or worse, lose them to creditors in satisfaction of their mounting debts.
According to Graham, “one does not need a crystal ball to see that a potential debacle is looming for the Middle Class homeowner.” Unless pure luck prevents these currents in the economy from coming together, or unless the U.S. Congress revisits its ill-conceived bankruptcy reform (especially that part of it geared to consumer debt) and state banking departments review their willingness to ignore usury prohibitions that date back to biblical times, disaster may await. “The credit card industry, in the flush days of the late 1990’s started down this path,” says Graham, “and may have overplayed its hand. But without attention and intervention by legislators and regulators, the victim is likely to be the backbone of this Country—the American Middle Class.”
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They should look into this new debt-resolution program I heard about on TV, "Don't Buy Stuff You Cannot Afford."
I heard it's 100% effective.
In case you missed it the first time: http://danwho.net/mp/index.php?id=snl_dontbuystuff
I wonder when the california "investors" will be leaving Albuquerque? We sold our house in one day to one of these bozos. New mexico is not arizona. Houses are inexpensive there for a reason. There are no good jobs, the wind is terrible- creating dust storms, the altitude is very hard on people's health. Albuquerque is as high as Denver. We moved to Austin and are waiting out the bubble burst, before we buy again. The "investors" are not even looking at what they are buying.
Rumors are Greenspan is telling people that the economy will essentially be "flat" if not into the negative by the 4th quarter of 2006. I bet he said it with a smile!!
Greenspan should keep his mouth shut. He has created this massive bubble and now is running around issuing storm warnings....
When Joe Homeowner gets disenfranchised, he might consider moving to Bangkok to avoid getting lynched.
I've been thinking about what the next step in this mess will be. Can you imagine the Chinese coming into the housing market with all those deflating dollars and buying up coastal properties.
I really think the Fed will stop after this last hike and wait until after the mid terms to start raising rates again. By that time the dollar will be in a tail spin.
I'm buying gold until then. I plan on selling after the elections.
I might be off in my ideas, and would love to hear some other thoughts.
Looks like Phoenix isn't going to rise from its ashes for a while.
They don't call that area "The Valley of the Sun" for nothing; a low Sonora desert basin, where you can feel the heat hit like a wall when you step from shade into direct sun.
Lee, according to Jim Sinclair you will be "Golden" for at least the next three years. Very high interest rates may eventually make gold less attractive. If the dollar goes into a tailspin then we are all up the creek (at least with a paddle). If the fed repeats the rate hike policy of the late seventies early eighties and you have confidence that the dollar will be stabilized then it may be a good time to sell some. I bet that they don’t save the dollar. Every fiat fails eventually. Well, maybe my microwave calls me crazy for a good reason.
Tom
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