Nice to see the mainstreamest of the MSM put out some honest stuff (wake up Catherine Reagor someone).
Gotta be more than a few over-leveraged McMansion-owning WSJ readers who put down their morning edition and coffee and blurted out "Oh, crud, I'm screwed now" on the train to work today.
Boy, this article is like reading HP the past six months. Some of these quotes sound like my good stuff (very hard indeed, underestimating "the dark side", predictions of a 50% price crash)
I'm tellin' you folks, batten down. It'll now get uglier than even we imagined. Welcome to Housing Panic, goin' mainstream.
As Data Point to Slowdown, Housing Market May Land Harder Than Economists Predict
Home prices in some parts of the country are falling. Builders are scaling back. Bubble or not, the biggest housing boom in recent U.S. history is coming to an end.
Now here is the big question: How bad will the aftermath be? At this point, most economists expect a "soft landing," a gradual decline that won't derail the nation's economic expansion, now in its fifth year.
But there is a good chance they are being too optimistic. The boom has depended heavily on the upbeat psychology of consumers, builders and lenders. As moods swing, the landing could be very hard indeed.
"We could be underestimating the dark side," says Mark Zandi, chief U.S. economist at Moody's Economy.com and among the first to seek to quantify the housing boom's broader effects. "Euphoria could turn into abject pessimism very quickly."
Because the market has risen so far, economists worry it has the potential to fall much harder than their main forecasts would suggest. As Janet Yellen, president of the Federal Reserve Bank of San Francisco, put it in a speech last week: "We can't ignore the risks of more unpleasant scenarios developing."
When housing took a similar turn in the 1970s, new-home sales quickly fell to their long-term norm. This time around, that would entail about a 50% decline in sales, says Ian Shepherdson, chief U.S. economist at consulting firm High Frequency Economics.
August 07, 2006
Housing panic is here: WSJ predicts "the landing could be very hard indeed", asks "how bad will the aftermath be?"
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26 comments:
We're on the way!!!! I live in Orange County Cal. One of the biggest land holders here has just stpped all construction on one one of their biggest housing projects. I'd say, about 3,000 homes! I heard that the plans have been put on hold for at least 6 months. want to bet, it will be a lot longer?
I do a lot of design work related to new building in OC. I saw this comming and sold all my houses. My girlfriend just closed today on the sale of her house.
She cut it really close!!!!!
I expect to be un-employeed within the next few weeks. Than, it's the beach, and finding fill in work.
All my money is in gold and a money market. I'm 48 and have enough in the bank to retire. But the best thing is that I'll be able to sleep at night, knowing I have no debts! :-)
send me articles or who it is and let's research
and take your girl out and get loaded
you positioned yourself nicely, although like many HP'ers, you can only do so much especially since a lot of people will be losing their jobs soon. it's good to have money to eat, low housing costs to pay, no debt, and gold I'd say
I hope that it just crashes here in the Portland, OR/Vancouver, WA area. What the Californicators retiring up here didn't ruin, the specucators did. There is no way that someone on the average family income making $48K can afford a 400K house. I rent my house for half what it would cost in monthly mortgage payments. I will retire within 2 years and will keep renting unless I find an exceptional place to buy at the right price. I feel no sympathy for those "investors" who ran up home prices and now stand to lose everything when they can't afford their 2 or 3 mortgages. They deserve everything that is coming to them. There will be fewer $45K suv's in the Starbucks line in the morning.
"There is no way that someone on the average family income making $48K can afford a 400K house. I rent my house for half what it would cost in monthly mortgage payments"
- that about sums up the housing bubble I'd say
give it some time, and both statements will resolve themselves
To the Portland poster:
I am in PDX too. What do you think about the condo madness going on? It is unbelieveable. Apt building all over are "going condo" at a very fast pace. And the high rises are cool but I can't for the life of me figure out how there are that many people with 500k+ to plunk down on a piece of AIR in Portland.
I saw a condo in John's Landing for sale yesterday, 1700 sf for 417K, down from 430K. And the condo fee is $285, almost half my rent in a very nice complex in the West Hills!
Keith and Anon 1,
I know of a big developer in Pittsburg, California area that was suppose to start their Phase 2 project. To date, 95% of the roads are complete. Having a construction background, normally at this stage, foundation & slab layout begins and sometimes concrete placement and framing.
Today, it looks like a ghost land with nothing going on. I mean to equipments or any type of construction activity. I suspect, the developer may have went back to the drawing board and redesigned everything (reducing the number of bedrooms?) and repricing them.
I can't wait to find out.
McMansions on hold:
http://tinyurl.com/rstkl
Developer is trying to put in 17 houses on 11 acres for about $1M each at "Stone Canyon Ranch". The idiots fenced off the lots after the roads were in and before any dirt work started on the sites! Now they have these barren, fenced lots sitting there with no buyers in sight after nine months on the market. My guess is the bank will pull the plug on this "Stoned" Canyon by next Spring.
predictions of a 50% price crash
I read that as a 50% decline in sales not price.
the dark side - i get it
Veritas, I see many of these McMansions being condemned by local governments (eminent domain) and converted into public housing or housing for municipal workers. Many have a bath for every bedroom, so it isn't too big a stretch to see them used that way with a communal kitchen. Not much room for the chickens and goats on the small lots though...
maranite - I stand corrected - he said sales (volume I imagine)
even I haven't predicted a 50% price decline. that, although possible, would be the world has ended type stuff
the one market that has a shot? phoenix
RE: the condemed houses idea.
Gwinnett County Georgia did it in the '90s. The county bought foreclosed houses in nice neighborhoods and converted them to halfway homes for recovering junkies and low risk prisoners.
Keith said;
even I haven't predicted a 50% price decline. that, although possible, would be the world has ended type stuff..
So who wants to do the math?
What will the decline be as prices revert to the mean?
I have seen at least a 100% increas in prices over the past 4 years in my town. I think a 50% hair cut is reasonable.
To the PDX Poster. Yes, I saw the crap that they are throwing up on John's Landing. We drove around vancouver yesterday. There were open house signs all around and no one there but the realtors. There were nice apartments near the Columbia River on the Vancouver, WA side. They became condo conversions in the winter and they told everyone to buy or else move. Nearly everyone moved. Now they sit vacant with no takers and the monthly mortgage payment would be at least 2 to 3 times what the rents were. The job growth in the Portland, OR/Vancouver, WA area is typical of the rest of the country. It's mostly in the service, housing (building, loan, etc.) areas and some government and is slowing down considerably. There are few high paying jobs coming in to the area and rumor has it that Intel over in Portland is headed for a big layoff. Portland can't keep their school system afloat but can spend millions on a tram for people to ride to the OHSU Hospital and millions more for a down town trolley that no one rides plus the state AND local income tax. A lot of us are waiting for better housing opportunities. What will happen to Starbucks when the yuppies can't afford to get their caffeine buzz in the mornings?
phoenix went up 52% in 2005, so it needs to come down 33% to get back to 2004. but it does need to fall 50% or around to get back to its historical mean
but that's phoenix, a very very very special case, and bubble ground zero
some smart person do the math on the US median house price - regressing back to the mean, how much $ and % are we talking - I forget
I sure wish Darth Vader would hunt down and destroy the Real Estate agents. The last remnants of evil in the galaxy.
There is a difference between the mean (average) price and the median (middle number in a listing of numbers ranging from high to low) price of homes sold.
Praise G*d for my good blessings. I sold over a million dollars worth of investment property last year. Paid off our personal house and farm. The remaining cash is invested in PM's and FOREX.
This is the big one. No doubt about it. I spoke with a local RE agent today. He said the market is tanking on the McMansion's. No calls and certainly no buyers. 2nd Great Depression here we come.
From the PDX poster:
The condos I saw were built in the 80s and looked to have been apts, now 400K+ 1700 sf condos. If you look on Craigslist you'll see some of the South Waterfront Merriwether condos renting for $2500-3000/ month. Geez.
I agree about the tram. With a starting price tag of 8 mill it was an indulgence, at 55 mill and counting it's an enormous waste. But I can't help be awed at it's design and futurism. With just the towers up it has a huge coolness factor. It screams Portland vision and hipness. Sorry, I'm a sucker for design. Reminds me of the War of the Worlds, lol.
As for the streetcar, I have to disagree there. Use has exceeded projections and it's utility will become even more valuable as the city grows. Mass transit is our THING, we have to do it well.
But I heartily agree on the whole housing being way out of whack with incomes. But who is buying all the tower condos??
Someone please convince me that this is going to be something other than an incredibly hard landing! You can't!
Another blog submission last week suggested that the condos were previously being purchased by out of state flippers. That is probably true. Yes, I agree that Portland has a unique flavor. However, the down town trolley system will become a drain on the city budget that will never pay for itself. Years ago the city laid off 300+ teachers and staff from the Portland school system and increased the class sized because they said that they didn't have enough revenue. They then turned around the next month and appropriated several million $$ for the first part of the trolley system. The school infrastructure is crumbling. Then a deal was made with Intel (I think) to give them tax breaks provided that they would not hire above a certain level of personnel in their plant. There went future jobs and surprise at property tax time that December. The MAX transit system waited years and years before they dicided that it would be nice to run it to PDX airport. The previous governors all had the idea that the road to Mt Hood had to stay a dangerous two lane road because of the mentality that if it became a safe 4 lane road, more people would use it. Yes, Portland is unique and is a beautiful city but their anti growth mentality and failure to adequately fund the school system (which isn't a priority) is one reason that a lot of people who inititally move there end up moving across the river to southwest WA.
The positive outcome of all this will be a very large increase in the number of realtor suicides.
Being childless and having a kind of childless existance (no friends with kids, even co-workers only have one) the school thing sort of never reaches my radar screen. Not that I don't care it just doesn't come up.
I used to live in St. Louis and there is nothing Portland has done wrong that St. Louis didn't do. But St. Louis hasn't done any of the things Portland has done right.
The Portland red line to the airport was built almost immediately after they announced it. The latest track, the yellow line, came in under budget and ahead of schedule. Amazing! St. Louis' second line came in 9 months late and 126 million over budget! Had some malfeasance associated with it too. Lawsuits. firings.
If you're from the Portland area I can see where you'd be more critical. But coming from a city of incompetence and apathy, Portland is a marvel. A gorgeous marvel.
Open eyes,
Gold is money. It has always been money and will continue to be money. Why does the US keep 8000 tons of gold in Fort Knox? Because it REALLY is money.
Portland is well-run, and you can't take that away from it. I don't think it can go wrong building infrastructure while it can, as long as THIS time the streetcar tracks don't get ripped out later on!
Live in san diego county, currently work in orange county / irvine area. Excavating and grading. 'I' cannot believe the ongoing building of residential and comercial properties! This is my bread and butter....and it scares me! Who is filling these homes? Who can afford them? BUT, i have seen and heard of developers putting a halt to current and future projects (large projects too) My company just priced out a new 'Yellow' piece of machinery (called a 657 scraper) Mind you, this machine runs in pairs (two rigs hooked together) Just one was 1.5mil. Here comes the math, 3mil. for two! Pencil that out....it doesn't anymore! We didn't either
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