Boy, the news sure is negative these days. Not sure I've ever seen a cycle so negative
So let's do a positive thread - see if it's possible. What good comes from the bubble bursting and financial meltdown underway?
I believe the housing bubble bursting is the best thing that could've happened at this point, accepting the fact that the bubble happened at all which is the mother of all bad things.
The faster we can get this thing deflated, the better off we'll be.
We can take our medicine over 10 years (hello, Japan) or we can take a straight shot of the bad stuff and be up and at 'em tomorrow. I choose the latter. Although tomorrow might take three years.
Here's my positive rant:
- I want to see a day where kids can graduate from college, scrap together 5% or 10% down, pay their PMI, and buy a house for less than it would cost to rent.
- I want people to live in houses, not day trade them. I want to see housing appreciate at the same rate as inflation, if not a little less.
- I want real estate investors and realtors to be seen as disgusting relics of the past, leaches preying on society.
- I want the corrupt real estate industrial complex to get a serious, industry-changing spanking, with new regulations, new laws and new codes of ethics. And yes, devastating layoffs - we need about 10% of what we have, the others should go find honest work for a change.
- I want people to not trust the government, leaders, institutions and especially the media.
- I want Americans to address their problems head on, versus hiding them in the corner. Social Security, Medicaid, Medicare, Immigration, Education, Jobs, Pre-emptive Wars, the Debt, Deficits, Tax Policy, Wal-Mart, Social Imbalance, Foreign Trade, the Dollar, Global Warming and especially the Britney/Kevin Thing.
So there. That was positive, wasn't it?
August 05, 2006
The positive side of the housing bubble bursting
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53 comments:
"I want real estate investors and realtors to be seen as disgusting relics of the past, leaches preying on society."
If realtors are really leeches (note spelling) why do we need 10% of them?
I agree that there should be fewer, and they should be subjected to much more stringent regulation. But I wonder whether it's time to let up on that profession a bit. No, I am not one of them. I've joined in the bloodsport in the past. But Osman's classy and unflappable comments on this blog, combined with Swann's unnerving meltdown in response to our debate with him, has caused me to reassess. They are, after all, people -- and though everyone would agree the realtor profession has more than its share of unscrupulous and incompetent types, we shouldn't paint them all that way. My conscience talking.
10% get to stay, but their job description radically changes, as does their compensation package
The days of commissions will come to an end, and they'll earn an hourly wage, or a project-based fee. % of sales price no way
Keith-
You've a negative experience obviously. Like maybe an ex-girlfriend left you and started making more money than you as a real estate agent.
Don't worry she will go back to waitressing soon as will many others.
Because "Real Estate" will be a bad word.
However, there will be people that exist to be intermediaries in transactions.
Keith what do you do?
Share with us all?
only negative experience I've personally had with realtors is giving them tens of thousands of dollars of my money, when with a better system (key: google vs. mls) that number would have been 95% less
Keith- That's like trying to get a non Democrat or Republican into the white house.
Ever heard of the Dept. of Real Estate.
If they won't let it happen then the NAR surely won't. They will lobby to Congress to not let it and the paid politicians will go along with it.
I just want it to be over already so I feel like buying a house isn't like going into the casino
I want there to be no inflation. Inflaction in any amount cheats all of us. I want the government to abolish the the Federal Reserve and take back our monetary system.
I agree with Keith. I would rather have it in one shot and be done with it. But, I think we are looking at the long 10 year decline. Many interest groups are going to jump in and do everything they can to keep prices high and it's going to slow down the transition to getting things back to normal.
I would like to see people living in the housing space they need and not the space they want.
I want people to stop thinking that a 5,000-6,000 sq. ft. plastic box is a mansion.
I want people to stop thinking that a trailor located 8 stories up, next to a freeway, better known as a condo, can be worth $600,000.00.
I want houses to be known as homes and not McFlippable investment packages.
I want our elected officials to stop beleiving everything that developers and homebuilders tell them.
I want people to stop being duped by the advertising media.
I want people to USE THEIR BRAINS!
More realtor suicides would be a positive outcome.
I want to see a Blue Book for Real Estate, based on P/E ratio and not on unrealistic and fraudulent appraisal.
I want to see our real estate professional held accountable for misinformation. 3 strikes and you'll go to jail.
I want to see this Housing Bubble as a Lesson Learned for our kids; that GREED can and will have adverse consequences.
Wow, there sure are a bunch of crybabies here.
And leftists. I like this one: "I would like to see people living in the housing space they need and not the space they want."
Maybe you can find a nice little Stalinist to run for the nomination of the Democratic Party and make your nightmare come true.
I want to see Lereah get grilled in front of a senate panel (kinda like Bill Gates in 1998). What would be extra nice is one or more senators referring to him as a lying leech on society as you mentioned.
I want to see every member of the "bling faction", those who HELOC'd to buy Hummers and boats and look at you with that "smirk" like their better than you get seriously spanked financially.
I don't need too. He's already in office.
Oh..yeah you right wing, left your brain behind, capitalism will solve all our problems, free corporate marketeer. When heating oil is 3.50 a gallon, natural gas is 4.00 a therm, and electric is .50 per KWH all those people in the big plastic houses will be crying about.....WWWHHHHAAAAAA why didn't someone tell me that I would not be able to afford to heat or cool all this space. Those overblotted cheap, plastic boxes will go the way of huge SUV's. Car lots full of them, can't sell. Homebuilder lots full of them, can't sell.
You right wingers just don't get it.... It's not about Democrate or Republican. It is about our Government not taking a leadership role in anything except filling the pockets of their off shore, pay no taxes, corporate brethren.
So pull your head out of Ann Coulter's a**, clean the sh** out of your ears and wake up.
From a selfish perspective, a positive result would be for renters to have access to a 3 bedroom, 2.5 bath family home in OC at a reasonable price of $250,000 to $350,000. In this way, a family doesn't have to be leveraged to the hilt to have a private, decent place to live.
Now, inventories ARE up, loan apps ARE way down, foreclosures in CA and OC ARE way up, but I don't have the same confidence that some posters have that today's median prices (around $610,000 per home where I live) will go down by $250K. It'd be great, but I cannot believe that will ever happen. The forsale signs still show $719K and $790K. It's freaking ridiculous!
So my optimism about the bubble burst results is measured. Just like the Miss Universe contest, the prettiest contestant you hand pick while watching never quite wins it all.
I still don't understand why real estate agents get the blame for investors stupidity.
I'll agree there are too many uneducated/inexperienced agents.
A boom in any market creates excess. No one wanted to be an agent in the early 80's when real estate slowed.
Maybe a solution would be to up the minimum educational requirements to a college degree.
How in the heck would you find homes/neighborhoods without an agent? Not everyone uses a computer.
when will the senate call housing bubble hearings?
when will time magazine put the housing meltdown on the cover?
april 2008 and november 2006 are my guesses
Blame borrowers, lenders, appraisers, not real estate agents. Only since the last big recession did the government allow less than 20% down payment and the option of adjustable rate mortgages.
Most borrowers today are too poor to own a home. Lenders should require borrowers put 20% of their own money as a downpayment. Fannie and Freddie have screwed the system, not real estate agents.
It's the RE correction in combination with radical envioronmental change, and geopolitical turmoil that is going to finally force us to answer the Buckminster Fuller's real question. To paraphrase: we have recently found ourselves to be aboard a closed-system spaceship called Earth, and just at the time we realized this, we began to figure out the Operating Manual. We already know what does not work, and we are tantalizingly close to figuring out sustainable technology. Yes, this is the worst mass-extinction in the history of Spaceship Earth, but some threatened spieces are going to make it. Will we be able to afford domiciles? As Bucky said, our accounting is wrong - we won the cosmic jackpot. We're a planet of 2.5 billion billionaires. Yes, everyone gets food, clothing, shelter, education, and health care when the sun outputs 100% of our annual energy needs in, oh, about ten seconds. In fact, political will is the main obstacle, not technology.
I'm not flogging any political "side". We have to get past that, pronto. I refuse to be put into a convenient bin of any sort and there are a lot of independent thinkers here. Keep thinking freely.
Fannie and Freddie have screwed the system, not real estate agents.
Exactly!
If people had $50k or more invested as a down payment they would do anything to save the house from foreclosure. Now they will look like rats jumping off a sinking ship when the house starts to lose value.
One positive result of mass poverty, should that be the unfortunate outcome of our global economic brinksmanship, is that people are more likely to help one another. Our current culture is very isolating. Observe how people conduct themselves in public, enveloped in a shield of electronic devices. Anything to avoid contact with actual people in front of us at the present moment. Fewer distractions open us up to the truth: the best things in life are free and happiness is a state of mind.
Lack of community aside, I find that apartment living has many advantages I'd forgotten about. My energy bill is somewhere in the neighborhood of $20 per month. No yard work, no maintenance. Today I will go for a long bike ride - tomorrow golf, perhaps.
I give people the benefit of the doubt. Strangers are more likely to be friends we haven't met yet. This is something Americans need to relearn.
Relocate Wall Street and all hedge funds to a deserted atoll in the South Pacific and use it for international target practice. The entire planet would be better off.
Anonymous said...
I want to see a Blue Book for Real Estate, based on P/E ratio and not on unrealistic and fraudulent appraisal.
Now that is a REALLY good idea!
Rather than 'emotional' or 'need-based' pricing, you could look it up in a Blue Book and find out the real price.
Like Kelly's you could have a scale: instead of 'fair/good/excellent condition', you could have 'not-so-good/good/prime location' with prices (per square foot maybe?) according to the scale.
If someone asks you for more per sq ft than the Blue Book says, at least you could counter by looking up the sq footage 'real' price. If the property really is worth payng more for (in your opinion). at least you'd be able to do it with full forethought and acceptance.
Why is it only real estate where people feel free to price things according to how they feel about it?
The used car industry would grind to a halt if all the buyers/sellers were so emotional about it!
Real Estate Blue Book - Seconded! :-)
Be patient Markus Arelius. Once those properties are now owned by the bank/lender, you'll be able see prices go down by 30% - 40%.
Thank you Speedingpullet. I suggested that Blue Book. In fact, just like car prices, for every improvement made to a particular house, there will be an appreciation value assigned to it. The value may vary depending on the area you live. Location can also be valued and so forth. If the area is in a bad neighborhood, then there will be a deduction.
Put it simply, it is just like buying a used or new car.
I disagree. I don't want to control anyone. I want the free market to reign.
The housing bubble crash will cause house prices to dip BELOW the trend for awhile where I can get good deals.
Like gambling, view this whole thing as a "stupid people tax". A huge number of new houses were built financed by stupid people who will now lose them. We can be thankful they financed the build out. Now we ask that they gracefully bow out so we can go in and buy them cheaply.
I can't wait to tear the eviction notices off my new McMansions that I get for pennies on the dollar after the crash.
We're looking at a 50-60% haircut or worse, employment devastation, bread lines, the rebirth of American communism as all the bankrupt people (new have nots) vote in Communist, er, I mean Democrat politicians. Bring on the full 1930's style depression. I've got a nest egg just waiting to scoop up the bargains.
Life is hard, you go bankrupt, then you die.
I am for Free Market. The problem is there's a great number of greedy but stupid & dumb people who wanted to get rich overnight, thus we have a housing bubble. It has taken a toll on our economy and guess who's going to bail them out; we the taxpayers. Just watch when the Dems takes control of the White House and Congress.
- I want people to not trust the government, leaders, institutions and especially the media.
Hey, Keith, all HP'rs trust the Government. We all know the Gov. owns the FED Bank. The News is objective, and Keith, if it is in print or on TV it must be true.
Calling all parents and their kids:
Paying for college is solved...
http://www.londonexternal.ac.uk/prospective_students/undergraduate/index.php
London U's distance program, ~2.7K pounds or ~$5.1K US dollars for a whole degree. Best value for the money in existence and a top tier intl degree program.
Work part-time, while studying, then afterwards, upon finding full-time work, rent an apartment and you'll start your life with savings in the bank!
If you later (5-7 years in the future) need to get a full time MBA, you can pay for it out of your pocket with negligent loans though at this point in time, I really don't see the need for a full time MBA unless you think you have a shot at the hot careers tracks in finance or consulting which require one to study at Wharton, Harvard, or London Business.
Anon got it right - realtors aren't to blame for the bubble. Blame should go to the loosey-goosey subprime lenders, their investors on the secondary market, and the Fed for keeping rates too low too long. I recently said goodbye to the lending business and can confirm that the frenzied demand for housing was created by too easy access to cheap money. Over the years I witnessed lending standards deteriorate to practically nothing......have a pulse? great, and sign here!
So folks, not sure when or what will happen in the end because all these zero-down, stated subprime loans are new; they weren't around during the last crash. On a personal level, I agree that most realtors and mortgage brokers are clueless and out to make a buck for themselves with no regard to the custmoer. However, with all the resources people have access to these days via the internet, it should be their responsibility to get educated.
Problem with 'Free Market' , Anon1, is that you're treating real estate like stocks.
A house is an investment, and should apprectiate every year (by a realistic amount) if looked after, but its still a place to live, not a commodity.
Does anyone talk about the Free Market when it comes to used cars?
No.
Because people realise that a car is a way of getting from A to B, and prices can be 'proven' to be too high or too low.
No one awaits the new 'used car' figures on the market, or short sells used car dealers.
No matter how much the owner loves his car and wants to get as much as he thinks its worth, someone will come along and say
'hmmm...Blue Book price is $X but you're asking $Y, why? "
If the answer's good enough, the buyer might offer $Z dollars, otherwise he can walk away and find another car without the emotional pricing.
Houses should be no different. No matter how 'charming' or 'enchanting' they may be, there's no reason in the world why you can't put a monetary value on that.
Builders do it every day to the nearest fraction of a cent when building new, so what exactly are you paying for when you buy an existing home?
Cost of construction today, lot size per sq ft, and other 'pluses' or 'minuses'.
Good school district? Plus.
Power lines over the back yard? Minus.
All this stuff has monetary, not touchy-feely value.
'Charming' but 100 foot away from the 405? Deduct some money.
Old SFH with teak hardwood floors? Price it accordingly and the buyer can make up thier minds if teak floors are worth the extra money.
Just take the emotion out of it all.
In the coming years the Great Depression is going to get renamed World Depression I because what we'll be going through will be World Depression II.
But on the brighter, lighter side I have a pet peeve about the housing bubble that may have a happy ending for me.
For the last few years it has been impossible to hire a good handyman.
All the great guys that used to work on my house are off doing $100,000+ kitchen remodels. Think they'll come back?
Hmm. Volume down 5% from last year's overheated market doesn't sound like falling off a cliff...
I imagine the bursting bubble will force people to stop connecting who people are(identity/worth) with what they own(house/hummer).
If they suddenly have nothing, they will either learn to value simple and basic life aspects(truth, beauty, goodness,etc.) or believe they are worth nothing. (which does not seem possible for egocentric people)
When the rules changed that allowed you to buy and sell houses without capital gains consequences, the housing market turned into a tax-free stock market. May of 97 was the change. You used to have to hold a house for like 2 years and couldn't be flipping. There was also the over-55 rule that was repealed.
Thank the free market-cultists for the instability and greed it unleashed. In other words, republicans.
Those people corrupt everything they touch. Here's hoping the next downturn draws a target on their backs.
End of sprawl
Less pollution
Better environment
"Thank the free market-cultists for the instability and greed it unleashed. In other words, republicans. "
Hmmm, didn't your hero Bill Clinton push for NAFTA? Didn't he also sign off on the changes in the tax law for home sales? And wasn't it Robert Rubin who cooked up that dandy deal with China and Japan that sold out our manufacturing base in exchange for low priced imports?
Why can't you face the truth instead of blaming someone else? The whole country is in a terrible, f_cked-up mess because collectively we all are living beyond our means.
Volume is down more than "5%", you are following the lags and not the current situation. The BIG builders are already starting to talk about laying off AT LEAST half of their workforce starting in January 2007. OUCH. To the ones that have to lay off 75% DOUBLE OUCH!!!!!
I think the deflating bubble will increase competition for fewer and fewer real estate dollars. We might be able to get those archaic and ridiculous costs shrunk. For instance look at what one will pay for title & escrow fees, literally thousands of $$$s. For what? These people don't do jack, but process paperwork which they rarely do well. If I might add, I think it will be positive to see the loan officer population cut by 80%. I am sick of getting calls to refinance and "lower my payments" at my apartment.
Time to go on a diet Real Estate industry, cut that fat!
Here's an unfortunate result of the housing crash - it is going to give Realtors MORE power, not less. When the real estate market was hot, all those "for sale by owner" businesses started gathering steam. Now that it's really hard to sell a house and homeowners are desperate, you see news stories about homeowners and builders offering realtors big incentives to move their "product." We'll never be free of the 6 percent commission now! Damn it.
-Raising the Roof
Just got my electric bill in OC, Edison cranked it up three fold, gold luck with your crap box McMansion out in idiotic Riverside!
I'd like to see less "paperwork" (re: Hunter's comment)involve in real estate transactions. Perhaps as "do-it-yourself" loan processor software of some sort. All you have to do is plug in the numbers and the program will do the rest for you.
I'd like to see property appraisers, loan brokers and real estate agents evaluated for good performance and credibility by an independent bureau like the BBB.
Agree with everything you said Keith except the 5-10% downpayment.
Bring back the 20% DP and that'll stabilize things better.
Also , get rid of the ridiculous 250K per person capitol gains exclusion.
That right there should have told us we were being set up for the mother of all speculative bubbles.
Price in line with wages, lower property taxes. Balance.
Abolish Fanny Mae and all programs that supposedly made housing more affordable but in reality do nothing but inflate the price of houses.
Go back to making banks responsible for the loans they make.
No sell-offs to the secondary market.
What a racket.
Anon 7:18-
I believe it was Clinton, our very own Republican "Democrat", who got rid of the capital gains tax on homes.
I've long thought that percentage-based Realtwhore commissions (guess that gives away my bias) are completely insane.
In Orange County, the median price is $641,000 (according to Jon Lansner's blog, which works out to be a SFR in a bad area, a condo in a nice area, and a parking space at the beach).
Now, let's say you sell one of these gems at the median price. At 6%, the seller pays $38,460 to the agents. Assuming the house was on the market for one full year (!), that works out to be over $52 a day, no holidays or vacation. Did the seller (and we're talking about the median here, nothing even close to luxury) really receive $52/day worth of service, every single friggin day of the year from his/her agent? How about from the buyer's agent? What a joke this is!
Please, Realtwhore-lovers out there, please explain to me, rationally, and quantitatively, how the seller of one seriously (and by definition) mediocre property received over $38,000 worth of "service."
(P.S. It's kind of more fun if you embarrass yourself :)
I don't know if i could live with myself if i denied my local realtor of another Rolex,or the full size euro-warwagon! I mean really....what's 6% of 2mil anyway?
Who am i to deny?
THE FIRST REALTOR I COME ACROSS THAT TELLS ME, 'NOW'S NOT A GOOD TIME TO BUY!' I WILL BUY FROM THEM!
I can't believe some of the self serving B.S. artists here in San Diego. I can't wait to see them driving a 72 pinto, workin at Taco Bell!
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If you have a moment, please visit my antique auto classifieds site.
Good luck!
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