Put down the blog, close your eyes, and think of Phoenix, San Diego, Miami, Vegas, Boston, DC, Naples, Tampa and a few more housing bubble cities of your choosing.
Now see their housing markets falling off the cliff. No more construction. Moth-balled condo projects. Foreclosure and HUD signs everywhere. Absolute housing revulsion.
Picture all the ways this mother of all bubbles affects a community. The baker, the dry cleaner, the hardware store owner, the car dealer, etc.
Hear what dinner conversations will sound like (oops, sorry, I mean currently sound like), and how different that was from the euphoria, joy and bragging a year ago.
Take two minutes and really think it through. And consider how it will effect your life, your job, your family and your friends as well.
This is real, it's here, it's a long way down, and it's gonna suck.
July 21, 2006
HP'ers: Picture what a 30% to 50% decline in housing values looks like
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40 comments:
If the pop turns into a full-blown big bang, it won't be pretty.
One thing bubbleheads aren't thinking about: When you're planning to "swoop in" and pick up properties at the bottom, how will you know where to buy?
The Bubble rapidly accelerated gentrification; across the country, formerly desolate or dangerous towns and neighborhoods became hot, trendy, and dotted with cafes on every block.
People forget, that cycle can reverse itself anytime. My old childhood street is now too dangerous to drive down to see my old house; passer-by drivers are frequently shot.
The same thing can happen again, and it isn't easy to predict where. That's especially true because there are other dynamics going on. In ten years or less, boomers will start leaving their walk-up urban condos and three-storey Victorians when they can't take the stairs anymore. Will they be replaced by happy, smart, bubbleheads who saved their cash for the opportunity? Or something quite different?
I think we'll be feeling as much uncertainty at the bottom as the next guy.
Not going to suck for me.I saw what was going to happen four years ago.I sold my house three years ago took the profits and am currently renting and saving,when the market bottoms out then I will consider buying, till then I will just sit it out till the bargins come along
combine this with Peak Oil and global recession, what do you get?
Detroit, USA
What will Detroit be like then? Mogadishu
detroit will be the new beruit
sorry - beirut
tomato tomato
It is hard to imagine that a depression could happen in our lifetime, we only heard stories from out grandparents. . .but just because something hasn't happened in 75 years doesn't mean in can't happen again. I would guess that we will see a severe recession - not a full blown depression. . .probably like early 1980's with 11 unemployment. We here at HP have been a year ahead of everyone else, and it has all happened exactly as we have said - first sales slowdown, then huge inventory, then price reductions (now about 40% of listings in CA) then foreclosures (not doubling here in CA). . .then retail, restaurants, etc. slow down, layoff, and it spreads to service industries. . . .not a pretty picture.
correction - should have said - foreclosures NOW doubling). . .in post above.
construction still booming. LA area housing still selling.
I rent an apartment near the town's police dept. That's how I'm hedging my safety against a reverse gentrification of my region.
Anonymous said...
construction still booming. LA area housing still selling.
man, think how stupid that guy must be. probably doesn't believe in evolution, the big bang or stem cell research either
where will the hispanics go?
Asian gangs are already entrenched in San Diego
La Rasa is waiting at the border
Phillipino's already over run Mira Mesa..not one cat left
I'm looking forward to the exodus of people from the Tampa-St.Petersburg area.
A reduction of about a third of the population would be ideal.
Whatever it costs, it costs.
What sucks is watching all the forces at work together trying to debauch the dollar. The gov., the FBs, the lenders, the bankers, on and on. All this time and energy and material wasted on a consumeristic binge should that should have died long ago. The whole country should be about ready to hurl by now. Are you suggesting that this false housing economy should continue on ad infinitum because we can't think of anything better to do with ourselves? This whole thing has been a reckless waste that has no future. Bring on the pain, the sooner, the better.
"Phillipino's already over run Mira Mesa..not one cat left "
.AND trailer trash like your mom have run out of money to get drunk and start bar fights..not one tooth left!.. wait..only 1 tooth left.
You forgot to throw bird flu into the scenario...
The thing that kills me is that everyone can now CLEARLY see what is coming. And yet, there is still NO LEADERSHIP....on ANY problem of importance.
The politicians are still aruging about flag burning, gay marriage, stem cell research....it is infuriating.
cheaper housing will be good for many. much higher disposible income. One friend says his mortgage takes up "most" of his income. another doens't go out at all anymore because he can't afford it.
"Anonymous said...
cheaper housing will be good for many. much higher disposible income. One friend says his mortgage takes up "most" of his income. another doens't go out at all anymore because he can't afford it."
The wife and I can afford to go out, we just don't want to. We both resent the higher and higher prices we are seeing slowly creep into the big picture, that wouldn't be there is Americans started living like adults with a brain between their ears instead of an "I WANT IT NOW" sign. I am seeing the slowdown in the local economy everywhere I go and everyone I talk to! The rank and file is noticing the rising prices of everything. And I am not in a housing bubble area! Its not going to be an overnight collapse in the economy, but I believe that a 30-50% decline in housing bubble areas is coming, bringing with it lots of hurt all around!
Boston is already down 10-20%. My aunt sells real estate there. More to come. The time to buy is when prices form a 50% retracement pattern from the recent insane runup. That's how I figure out where the bottem is in a stock- so it may hold true. So, if prices went up 100k in the last few years (on a given property), then when they come down 50k, is when I'll start looking. Prices may go even lower due to macroeconomics.
sold at the peak said...
"The Bubble rapidly accelerated gentrification...
...People forget, that cycle can reverse itself any time...."
How true, one aspect of living in DC is that I am numb to the sight of unemployable teenage and twenty something thugs on the streets and subway, there are many areas that have been good areas that may quickly go bad as desperate owners rent to any thug with some cash to pay the first months rent.
Boston isn't going to come down 30-50%? Mercy child, it is already half way down to 30% and the fun has just begin.
Look through the lags and see the possiblities.
America has been in decline since its last REAL boom between 96-2000(3 indicators, employment growth,wage growth and real wealth hitting all growing during a period of years. During the 91-01 expansion, that is what happened from Q3 1996 to Q1 2000). It has been declining since then, with decay in Urban areas, wealth effect only still happening at the top, weak job creation, bitter labor environment that is worse than the numbers indicate.
Classic Monetary phenom boom, much like the "short boom" of 72-73 after the historic 60's expansion monetised by the FED, though this one got started a little later and has lasted a year longer, but the end result will be the same, a recession then stagflation.
A bitter pill. Might as well take our medicane now, pay the piper and come out of it in the 2010's a stronger and wiser nation. But alas, I figure the poor policy will continue, fools.
You guys are all crazy! when the bottom is reached, no-one will want to buy. That is how you know it's the bottom. And, for that matter, very few people will understand, and have the balls or money to buy.
If we go into a depression, the prices will tank below anything I've seen on this site. Get a grip!
The dark ages are almost nere!
Do any of you seriously believe that Congress will let millions of families lose their homes? There will be no depression because Uncle Sugar will bail them out. If you want to plan for something, get ready for the inflation and devaluation of the dollar that will accompany the bailout.
Illegals will get the boot for sure and look for a lot of expats to come back to the USA with their tail between their legs. That $3K/month pension check just won't cut it abroad anymore when one dollar = one peso.
There are some real risks here. Notable signs of the times: (economic)
1) WaMu just laid off 900 people, 350 of them directly in the mortgage business.
2) Ameriquest off'ed 3800.
3) WaMu sold their mortgage business to another bank (Wells Fargo?)
4) Restaurants have been showing same-store sales going down.
5) Home Depot and Best Buy disappoint. (As well as others.)
6) Homebuilders disappoint big time.
7) Intel: laid off 1000, 10-15k more to come.
8) Dell, Disney, Intel, many others, earnings and forecast disappointments, rumored layoffs. Don't even start with GM, Ford.
9) Jobs growth has disappointed (been less than equilibrium for new workers) for a few months now
10) Fannie Mae and Freddie Mac: two year-missing financial statements, management shuffling and firings
11) DJIA down 6% since may
12) Mortgage business slowing, homebuilders dealing with inventory glut.
13) Inflation is high, not just in the US, but around the world.
14) Inflation-adjusted income hasn't increased in 4 years.
15) Housing debt is near 10 tril. Government debt is 8.4 tril. Fed deficit is > 400 bil including Iraq/Afghan costs.
16) Most new jobs in the last few years has been in retail and real estate.
17) Gas is real expensive, as are health care and of course housing.
(social)
1) Everybody seems to be talking real estate. Everyone has friends who've made "quite a bundle" on housing recently.
2) Two TV shows on TLC about property flipping: "Flip That House" and "Property Ladder"
3) A coworker recently left work to start a positioin in the real estate business.
4) A huge glut of real estate professionals.
5) Constant barrage of radio ads peddling "100% financing 1% payment option adjustable rate loans"
6) People are paying way more than a few years ago on their mortgage payment, despite low interest rates.
7) Books by NAR chief economist proclaiming "Housing Boom No Bust: Get in WHile You Still Can". ("Dow 36,000", anyone?)
8) People can't even come close to paying real estate recurring expenses using rents collected.
9) Google "housing bubble": 10,000,000+ hits.
10) My roommate who works for a temp agency was called to work at a mortgage broker firm, calling up banks to get lists of mortgage clients for new leads. (said no)
11) War breaking out in Isreal/Lebanon. Could spread to Syria, Iran. Meanwhile, Iraq war is going nowhere, has potential for civil war.
12) Overheard a neighbor and a girl at the coffee shop talking about buying a home. Coffee shop girl was real proud that she'd saved $4,000 for a down payment and was wanting to look around for a condo. (In Cali! $4k!?!? DP on a litter box maybe)
Another notable sign;
13.) U.S. might get dragged into war in aid of Israel, if Syria and Iran gets into the picture.
So Pa,
Where do you live that's not a bubble town?
WL
"Anonymous said...
So Pa,
Where do you live that's not a bubble town?
WL"
Small town of Delta, in south central PA. but where you live dosen't matter. All of our bloggers know whether they are in a bubble area or not. Same rent to own formula applies everywhere.
"skytrekker said...
I think you will see a 30-40 percent decline in many markets- but the decline will likely be spread over 5-7 years- like water torture........."
So true. I would like to see this over and done with, but that "sticky" aspect of housing
will just draaaaaaaaaaaag it along.
Slow torture indeed!
>>> How true, one aspect of living in DC is that I am numb to the sight of unemployable teenage and twenty something thugs on the streets and subway, there are many areas that have been good areas that may quickly go bad as desperate owners rent to any thug with some cash to pay the first months rent.
And the worse of it is they don't let you carry a gun to protect yourself from them. I lived in Florida for a while which has similar issues, but at least it was easy to get a permit for a gun.
You would think in the nations capital you could exercise your constitutional right to defend yourself. Remember, the first thing the British did leading up to the revolution is to disarm Boston. (Which also leads in gun control, how ironic)
>>> RE: Washington DC and guns
Read Ann Coulters chapter "A Ruger is a Girls Best Friend"
Funny, my wife carry's a Ruger before the book came out. (And she's blond ;-)
"The politicians are still aruging about flag burning, gay marriage, stem cell research....it is infuriating."
The idea here is divide and conquer.
divide and conquer and distract with meaningless emotional issues.
The inflation issue is a tough one - makes decision-making tough.
If there'll be a big dollar devaluation, then now is the perfect time to buy real estate - right before interest rates and prices go shooting up.
That's a big bet to make, though. Inflation/devaluation would have a lot of consequences that the US Government wouldn't like - first of which that overseas military deployments would suddenly become MUCH more expensive and unwelcome.
Another consequence would be that oil markets would be under pressure to switch to pricing oil (currently priced in dollars) to a more stable currency. This would result in a situation where oil could become more expensive IN TRANSIT from wherever it is pumped, to here, as the dollar slips further against the euro or whatever substitute currency is chosen.
Another consequence would be that there would be a huge shakeup as the entire country retools to become a country that manufactures goods for domestic use and export rather than retailing imported goods. There would be a lot of import-substitution as cheap imported goods become expensive. If you believe there will be inflation, short big retailers selling imported goods (Wal-Mart, every other retailer). Malls would shut down.
Interest rates would skyrocket and the high cost of borrowing would deter risk-taking.
It's in the Federal Government's interest to prevent inflation, even at the cost of smothering the little guy (the homeowner). This is why the Fed isn't run by an elected official.
"You guys are all crazy! when the bottom is reached, no-one will want to buy. That is how you know it's the bottom. And, for that matter, very few people will understand, and have the balls or money to buy."
Are you kidding? I have about 200k I profitted from selling my primary home to a sucker last month!!! I am using that to buy at the botom.
A used car salesman is a good economic barometer. One that I know sez the people have terrible credit and still want to get a car with no money down. J6P is getting very squeezed.
This is going to be very interesting. Possibly very dangerous. Traded for another gun last weekend (9mm).
I keep wondering why the date 2010 keeps popping up. Now I read that China will continue to use much of the world's concrete and steel building seaports and highways until then. India also. The demand for fuel in those 2 countries is increasing as a result.
We are just getting what we deserve - we are basically - spoiled, selfish, self centered, Liars, Cheats, and just out for our selves, So what we are seeing is the Death of The Big Lie We All Bought Into because of our Selfish Ness. Now the Reckoning Starts - First The Crys of I don't Deserve this - Second the Change of Financial Wealth will Occur - Third the Roar of Anger will fuel the Investigation and Search for Person(s) to Place the Blame on - Fourth - The Gap between the Haves and Havenots will grow by 15% Permantely adhering large groups of Individuals to Semi- Poverty for the Rest of their Natural Lives..
LET THE BLOOD LETTING BEGIN.....
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