April 24, 2006

This article sums it up nicely: The Housing Bubble Has Popped


Yes, it's taking the MSM a bit of time to catch up to reality. The bubble popped afterall in Q4 2005. But nice to see them out with the news we've all known for some time...

Classic bubble. Classic ponzi scheme. And now, the classic ending, as we revert to (and possibly beyond) the mean.

Reports of falling sales and investors stuck with properties they can't sell are just the beginning. Property owners should worry; so should their lenders.

Ladies and gentlemen, unfortunately, a lot of people around the country are going to be badly hurt as this bubble unwinds. And, after they have taken their losses, the financial institutions that were the engine behind this folly will take their own hits. 'Easy Al' Greenspan at the Fed tried to bail out one bubble with another bubble. While it bought some time, it will end in far-worse pain.

36 comments:

Mark said...

Oh boy. . .now the mainstream media is really catching on. . .there goes the neighborhood. . .btw - my neighbor's "price reduction" condo here in Walnut Creek, CA did not get ONE person at the open house this weekend!!!. . .my other neighbor has had her place on since October at full-price. She is going to take it off the market and rent at below her cost until "the market comes back.". . .

David said...

"my neighbor's "price reduction" condo here in Walnut Creek, CA did not get ONE person at the open house this weekend!!"

reduce again.

borkafatty said...

Who needs a Nuclear bomb, this in itself is the biggest mushroom cloud hovering over us...

read this article from my local rag, gives me a lot of faith in my state. ...Not!

Mass is going to be hurting bad!!

http://www.lowellsun.com
/front/ci_3741974

christiangustafson said...

I'm worried about keeping our cash savings accounts at Wells-Fargo. I think they have got to have incredible exposure in CA and AZ. Sure, they are FDIC, but I'd rather not have to worry about that.

Is there a large bank without significant mortgage liability? I've been looking at HBSC, but I'm worried about the U.K. angle with them, and their own bubble.

Where's a safe place for a money-market account, one that will survive the coming wipe-out?

The Thinker said...

While I agree that there is a housing bubble, I dont think this article proves that main-stream media has picked up on the bubble's bursting. After all, this article is on MSN in a feature called "Contrarian Chronicles."

I will hold off on saying main-stream media has acknowledged the busting of the housing bubble until I see it on the cover of the New York Times.

christiangustafson said...

Correction, we've been considering HSBC.

Anonymous said...

Hundreds and Hundreds of houses are for sale in my town, population
of 15,000. Same thing to the north of us, same thing to the south! But what really worries me is that its all mexicans doing the work!!
Wheres whitey? when this all comes to a stop, whos going to get the leftover work? The mexicans? Our town is infested with mexicans!! This is minnesota not Arizona!! We are so screwed when this all ends next year!!

foreclose_me said...

TreasuryDirect.gov is the safest place to stash dollars. 4-week t-bills.

panicearly said...

"infested with mexicans"

they are humans are they not, just working for a living while fat ass americans just get fatter.
just humans eating i guess

keith said...

I've got the up to $100k FDIC limit in my HSBC 4.75% savings account.

But in the end, why earn 4.75% on dollars that depreciate faster than that, with inflation rising faster than that?

one answer. gold.

Sly said...

The media is behind the reality here. Maybe that is why owners are holding onto their high price.

I rode around today and found 10 homes in 10 minutes with signs up. In one cluster of three homes, one had gone "buy owner." Identical home just around the corner. The competition is on. I picked up a flier for one and laughed. $610,000.

A coworker has had his old house on the market since last year. The place looks just as it must have in 1978. He was asking $450,000. He got an offer of $399,000 and he turned it down (it's not worth that trust me). He agreed to an offer of $425K and the deal fell through. He is now taking it off the market and will relist again.

I doubt he will get 300K for it.

Anonymous said...

hmmm, my house just appraised for $100,000 more than what I paid for it 1 year ago. Additionally,my neighbors sold their home recently for $110,000 more than what they paid initially. housing values might go down in certain areas 5%-10% but there is NO evidence of a housing bubble.

The Thinker said...

Can we say the bubble's burst because inventory is up? Houses are still selling for astronomical prices. I still can’t find a seller willing to sell for a reasonable price. The bubble isnt burst because people pull their houses off the market, the bubble is burst when the prices come crashing down, and frankly, that hasn’t happened yet.

Anonymous said...

We are a bit upset here. Our own situation is fine but my brilliant bro-in-law has just gotten his 21yo daughter into a 200k condo in the DC suburbs...right at the top of the housing bubble.

He is one of the "get yourself into a house" to become financially stable and "real estate never goes down" guys. So, his daughter & BF are owners of a $200k condo and neither have good jobs and have not yet graduated from college.

And DC condos started plunging about 2 weeks after they closed on the condo. We told them repeatedly that real estate was a big danger area....even to the point of making money bets that housing was going into the tank. But no and now his daughter will be upside/down in a mortgage and in bad economy..and only 21. So sad.

Anonymous said...

panicearly said...
"'infested with mexican's"

"they are humans are they not, just working for a living while fat ass americans just get fatter.
just humans eating i guess"

No, they're criminals who have invaded a foreign country (ours), undercut the native workers (lowering salaries), destroyed the school systems of several states, and overwhelmed hospitals, jails, and prisons. They constitute nearly 30% of all convicted violent criminals in America.

What's preventing these ILLEGAL ALIENS from eating in Mexico other than their fear of Mexico's corrupt politicians? Doesn't the fact that the Mexican government encourages them to come HERE tell us something? Castro did the same thing when he sent us a hundred thousand prisoners and mental patients whom Jimmy Carter welcomed with open arms because he was so COMPASSIONATE and LIBERAL. The American fools who do or encourage these things never actually pay for them themselves either financially or emotionally, but those who do suffer the consequences are not so flippant about a genuine disaster.

Anonymous said...

Oh, and he did the same rah-rah routine with his other daughter & husband. Now they too own a house bought at the top of the RE bubble...and both are in the military with uncertain assignments ie one going to Iraq.

Geez.

Anonymous said...

I'm not a racist or nothing, all I'm saying is, as long as the negros stay in the inner city, and the mexicans dont date any of my daughters I'll be fine with them infesting my town.
It's the Indians up here in minnesota that really piss me off!!

Anonymous said...

Saying they are criminals is not very Christian of you, Jesus would be ashamed. They are struggling with globalization and the corruption in the Mexican Gov. that is pushing them away. If anything, they should be willing to return to Mexico with open arms. But as long as Corporations and financialist keep on running this racket, the flood will continue and it is something we will have to accept.

keith said...

in regards to inventory swelling and prices remaining relatively steady

many have predicted correctly thus far the stages the bubble (and all bubbles) follow. Inventory is the first step after the peak. What happens is that sellers think they "deserve" a price - similar to the one their neighbors got who sold pre-peak.

Problem? The buyers disagree with this price. So you get a standoff where sales dry up (it's happening) and inventory builds even more.

And then the dam breaks, panic sets in, prices move down, wise folks take what they can get and get out, others hold out, and eventually lose everything.

Anonymous said...

Mexicans! Forget that. We need a way to keep these darn sneaky Canadians out. I've had enough of their hockey and bacon. They need to stay up there where it's cold!

Joe Logic said...

In Bill Fleckenstein's defense, this guy has been writing about the bubble for the past couple years, a lot longer than this blog. His comments on the housing ATM and Greenspan are very similar to what I read here. Google Fleckenstein bubble to see some of his past writings.

Anonymous said...

Yep, that article was actually written by Fleck weeks ago.

Fleck has been bearish for years and has been writing for MSN for years (and been on CNBC) and has summarily ignored by the mainstream press for years.

Tobin Smith said...

ALL WAVES MUST BREAK

Every speculative wave I have observed or participated in has a final six- to 12-month orgy of buying that serves to draw in the latest and last speculators into the game -- like the people who bought all the condos in D.C. last year.

Soon after the blow-off speculative orgy is through, the market has peaked (i.e., when everyone who could have bought has bought) and the whole thing unwinds.

First, all who make a living from the speculative bubble deny the end of the wave.

Then some of the early speculators come to their senses and cash out, and leave the market mostly unscathed.

Then the crushing reality hits (that the speculative game is over) just six to 12 months after the game was ALREADY over, but most didn't know.

What is left of the speculative wave is what I would politely call the "bag-holders" -- the people who instead of buying and flipping their investment in the speculative wave now have become long-term owners of their investment to the delight of no one.

Which is where we are today in the D.C. area, Miami, Naples, San Diego, etc.

There will be exceptions, of course, in areas where supply is still much lower than demand because of geographic or regulatory constraints.

But for the most part, the condo-flipping wave we forecast as being dead last March was, in fact, DEAD last March.

It was a great, great speculative wave, and it made millions of folks some good money --for some it made GREAT money.

But folks, it's dead, the fat lady has sung -- so turn out the lights, the party is over.

You just lived through one of the great speculative waves of the last 100 years. Just know that it is over -- you have to accept that it is dead and not live in denial. Count your profits and rejoice -- or take your lumps and sell, or move into your new condo and wait it out.

Like all speculative waves, the condo wave finally peaked and crashed into the shore as EVERY speculative wave eventually does.


by Tobin Smith

Anonymous said...

why not provide a source when you excerpt an article? For those of us (what %?) who are able to decipher "MSM" as "mainstream media", we are still left wondering where this article actually ran.

Anonymous said...

in regards to inventory swelling and prices remaining relatively steady

many have predicted correctly thus far the stages the bubble (and all bubbles) follow. Inventory is the first step after the peak. What happens is that sellers think they "deserve" a price - similar to the one their neighbors got who sold pre-peak.

Problem? The buyers disagree with this price. So you get a standoff where sales dry up (it's happening) and inventory builds even more.


=========================

Also don't forget the "mix shift" effect, when sales of higher end homes represent a larger share of a (sharply reduced) volume of overall sales. This pulls up median prices, when in fact prices for the same kinds of homes are flat or already starting to fall. This is happening now in many markets, and not receiving enough attention from bonehead reporters. The only way to see past this is to look at sale prices of the same homes, or at least to look at sales price per sf.

Anonymous said...

Re our neighbors south of the border:

How can you deny that a vast majority of them have left a NEGATIVE effect on society? Either you are of their heritage or you DON'T live in a neighborhood full of them!!!
If you're so damn "proud" of being Mexican, why not go protest there?

Anonymous said...

Keith you keep pushing us to buy gold. I feel I'd be buying at the peak. How much higher can it possibly go without the USA reverting to a gold backed currecny? Would you say there's a gold "bubble" happening right now?

Anonymous said...

Anonymous said...

"Saying they are criminals is not very Christian of you, Jesus would be ashamed. They are struggling with globalization and the corruption in the Mexican Gov. that is pushing them away. If anything, they should be willing to return to Mexico with open arms. But as long as Corporations and financialist keep on running this racket, the flood will continue and it is something we will have to accept."

Why do you assume I'm a Christian? I'd rather stand on my head and eat a bug. And illegal Mexican immigrants ARE criminals. It is a crime to enter America without permission. "Illegal" and "criminal" are more or less synonomous.

Greedy American employers luring Mexicans here for slave labor (and sending them when sick or injured to local hospitals for medical care at taxpayers' expense) should be rounded up and thrown into prison, where they can be slaves (a.k.a. "bitches") for incarcerated Mexican gang members. Still, this doesn't excuse Mexicans from coming here illegally.

"They are struggling with globalization and the corruption in the Mexican Gov. that is pushing them away."

No, if they were struggling, they would do something about their corrupt government instead of running away. They are not patriots (so why wave the Mexican flag?); they are cowards, and the United States owes them nothing.

Anonymous said...

Hopefully it pops with enough of a bang to wake up Americans.

The Fed Reserve is accountable to NO ONE!! Corrupt politicians and big business make a killing by manipulating our economy.....bust/boom, bust/boom all at their hands. There is more happening here than just a housing bubble - change in BK law, no M3 disclosure, inflation....they are setting us up to fail yet again.

Anonymous said...

It seems that illegal alien/immigrant issue always bring out strong emotions and opinions (Not all of them, I must say, racist or ignorant) from people on this blog.

That alone tells me it'll be an explosive issue in the coming elections. I really hope we don't get played by the politicians because of this issue.

Gosh, I could really use a third (or fourth or fifth) party.

Anonymous said...

Here's the reality.

The illegal immigrant issue (I refuse to say either "aliens" or "undocumented") is another BS distraction from The Powers Who Run Things to distract us from the real criminals.

Just like "God, Guns and Gays"---complete idiotic emotional rubbish meant to convince rural and suburban non-rich people into voting entirely against their own interests---while pursuing policies carving an enormous hole in the productivity and livelihoods of millions of hard workers. This is transferring wealth from the masses around the planet into the pockets of stupendously wealthy and powerful tycoons in China and in the USA.

Almost all of us have more in common with the Mexican laborers than we want to believe. They just got the ass's hind end of the "globalized" economy (let's say "robber baron" economy) a few years before the rest of us.

We are a hair's breadth from ending up without insurance in the ER.

After the excrement impacts the rotating ventilator turbine, the next diversionary scapegoat will probably (once again) be "The Jews" as the new people-to-blame as "sinister financial manipulators" (blah blah blah).

It's quite easy to envison already, they will blame "necon advisers" (aka Jews) who "tricked" Real Normal Republicans into the crazy Mideast wars---as if Dick Cheney was just a patsy---"and just look at the two Former Fed Chairmen, Greenspan and Bernanke."

Already, notice how Fastow etc are already taking the fall and being blamed for Enron? (yes, a surprising # of the accounting etc underlings convicted or pled guilty from Enron are Jews) Wouldn't surprise me if Lay + Skilling get off. Skilling's own mother doesn't believe he knew nothing. {PS: I believe Fastow et al are guilty as sin---and so are Lay + Skilling}

keith said...

on the gold question - my take is the dollar is going to collapse. If you believe that simple theory, then you buy gold, which will go up in price as it will take more dollars to buy an ounce.

at the same time, foreign banks are moving out of dollars and into euros. they'll likely in some cases move into gold - thus more demand.

next, booming economies like china and india have consumers that will want more gold - jewelry mainly

finally, you'll have speculation. first was .com stocks, then housing, then stocks again, and after that safety fails, back to old faithful - gold

I think we'll see gold $2000 in the next 24 months. At that point, I'd sell

Until then, enjoy the ride - and it will be a crazy, stomach churing up and down ride from here to $2000.

Anonymous said...

In regards to all the trash talk about Mexicans legal or illegal, I would bet my last dough-nut none of you can know by looking at them, I encourage you to make a visit to the Statute of Liberty.

These same fears and comments have been made of each and every immigrant group in the past.

The Irish in particular were considered scum. The Italians, the Jews ...

Grew up avoiding getting beat up by blacks because they hated whites and more importanly Cubans. Those damned Cuban immigrants were taking their jobs.

Yes, the took their jobs, they did it better than anyone else had and they move up the food chain.

Bahahahah.... most of you have obviously not been down to Miami. Now it is the Haitians who are taking jobs that others won't take. But they are moving up while the new wave of Argentinians are taking over the low paying jobs.

That's America. Nothing you can do about it except be nice to your future tax base.

If you really want to get serious about the problem I suggest you start by having bigger families. Because the Latinos are rabbits my friend. Even if you don't let anymore in, they will be the majority soon.

Habla Espanol?

If you ever visit Miami, you will need to. And Mexicans are NOT the majority there.

Now go write your congressman about English only law.

Anonymous said...

We are going to let in one billion Chinese and Indians. The Latinos will be their toilets for the next 1000 years

BAHAHAHAHA

You better go learn Mandarin

Grinch34 said...

I agree with the Thinker, but I do think that we are not far away from a crash. Adjustable rates are starting to adjust and will excelerate greatly in the coming months. This will cause the following two major events: massive foreclosures as a result of peoples inability to pay; massive job loss as a result of peoples inability to buy.

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