Nothing real made Phoenix houses worth 49% more in 2005 than they were worth in 2004. Especially since there's no real jobs there.
There wasn't anything about crappy Ft. Myers that made real estate there 48% more valuable in a year.
Did Orlando suddenly discover oil or gold, or maybe Google moved their HQ there? Because after seeing home prices skyrocket 42% from 2004 to 2005, you'd reckon something major happened there.
Folks, it was just a classic mania, a fools game, a Ponzi Scheme. Looking back on it now it's laughable.
Go ahead, take a minute and have a good guffaw. Get it out of your system. How could people be soooo stupid (again)?
What's not gonna be funny now is the correction, which will see home prices in cities around the world crash to levels not seen in years, before the bubble started, before we lost our minds.
We're already well on our way.
December 07, 2006
Looking back on it now, wasn't it all just so damn obvious?
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32 comments:
Ask Casey serin how obvious it was.He is still trying to figure out what happened.
and silver is over $14 - whoooopeee!
That's why you should by Hecla (HL) and COEUR D ALENE (CDE) - because they're both going to go to the moon. As will the silver ETF SLV
I worked for a large California Bank (ORE department) in the early 1990s when housing took a huge hit. Foreclosures skyrocketed. I believe the record shows that bust was a result of high unemployment and layoffs. This housing bust is not related to unemployment and it is not related to high interest rates. It seems like owning a home has just become more of an expense than a benefit at any price. As a previous homeowner for 15 years when I look at a house I see alot of work. Although I did my own gardening and minor repairs it takes away from family time and can get expensive. Knowing what I know about owning a home the price has got to be right before I buy again (and I probably will), otherwise I am going to rent for awhile (play tennis, golf, go hiking ride horses etc...) and let the management company worry about the maintenance etc...
I still do not know why they consider a return to historical levels as a bad thing.
In fact, I would argue that more would benefit from a return to historic price levels than if prices remained flat until wages caught up, which in and of itself is laughable because you know it ain't ever going to happen.
Or, will it?
BUT. . .everyone wants to live in Phoenix,Orlando,San Diego, Miami, Las Vegas, etc. . . .so sell the house in Cleveland and Detroit or Boston and move . . .oppppps. . .can't sell the house in Detroit? In foreclosure . . .ditto Cleveland. . .Boston prices off 20% and falling??. . .hmmmm guess the suckers can't leave the snowbelt . . .too bad for Phoenix.
It does seem obvious. It always did. I'm still grappling with why it was so difficult to convince others of the obvious.
All you had to do was look at the empirical data to see that the run-up in home prices was unsustainable. But everybody knew somebody who had had great success owning a home. Was this just one more battle in the war between the scientific method (empirical data) and supersition (anecdotal evidence)? I think so.
Economic storm brewing in America
By Ambrose Evans-Pritchard
Last Updated: 12:01am GMT 07/12/2006
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America's stock markets typically start crumbling four months before each recession, anticipating the crunch in profits. Shares then grind relentlessly down for 10 months or so until they have on average knocked 26 per cent off the S&P 500 index, Wall Street's listing of top companies.
So if you think the US property slump is looking scary after October's 9.7 per cent drop in new home prices, it may be time to take a little money off the table. It has been a lucrative autumn rally, but the four-year bull market is long in the tooth by any standards.
As we report today, the rate of insider stock sales by company directors on both sides of the Atlantic is the highest since records began 20 years ago, with sales outnumbering purchases by 60:1.
It makes scant difference whether your shares are on Wall Street or the London Stock Exchange. The FTSE 100 index is a global play these days. The lion's share of profits come from overseas, while London's AIM market has become a bet on Chinese and Russian companies nesting there by the dozens.
The world economy is what matters, and I don't like the smell of it. Nor, apparently, does Hank Paulson, who made $700 million at Goldman Sachs before taking over the US Treasury this year. He has reactivated a crisis team with a command centre in Washington to cope with the "systemic risk" in a market melt-down. His worry? 8,000 unregulated hedge funds with $1.3 trillion at hand, and derivative contracts now worth $370 trillion. "We need to be very careful here," he said.
A well-sourced article in Washington's Weekly Standard says Mr Paulson fears a "serious crisis that would be a body-blow to the US economy".
Yes, China is booming - for now - but it accounts for just 4 per cent of world consumption. The great US shopping extravaganza is six times bigger, and remains the anchor of the international system. It is slowing fast, unsurprising after 17 interest rate rises from 1 per cent in June 2004 to the current 5.25 per cent. "Big ticket" orders for cars, aircraft, computers and such plummeted 8.2 per cent in October.
Average house prices have fallen from $244,000 in April to $221,000 last month, with more violent corrections in Florida, Arizona, and New England. Builders have warned of a "death spiral" as they slash prices to off-load a glut of unsold homes.
The "happy handover" orthodoxy of the International Monetary Fund is that America will escape with a shallow slowdown. Asia and Europe will pick up the growth baton. The world will march on without missing a step.
Nice if you can get it. The more ominous possibility is that America fails to recover quickly, and takes the world with it. Japan already shows signs of stalling. Retail sales have fallen for two months. Far from bursting back to life as expected, it is still teetering on the edge of deflation.
France ground to a halt in the last quarter as the surging euro ate into the country's industrial core. Airbus was humming when the euro was worth 90 US cents. Now it must compete at $1.33, with wage costs in euros set against delivery contracts in dollars. Currency hedges protect for a while, then reality hits.
German industry says $1.40 is the pain limit. It is hard to see what can stop the dollar sliding that far as funds bet on US rate cuts next year. The yield premium that kept the currency aloft earlier this year is about to narrow, perhaps sharply. The central banks of Asia and Russia are sated on dollar reserves. They may not slash their US holdings, but they are unlikely to add either. So who will fund America's deficits?
"The US needs a trillion dollars a year just to stand still," says David Bloom, currency guru at HSBC. Modern financial crises have always begun on the peripheries of global economy, setting off a chain reaction. Mr Bloom says the seizure this time will be at the heart of the system as the dollar buckles, pressing down on the "aorta of capitalism".
So we have a world where the ageing economies of Europe and Japan are too fragile to withstand a dollar slide, yet America needs a weak dollar to cushion its own downturn. Meanwhile, China is holding its currency far below equilibrium. Nobody is doing much to break this impasse. The 1930s come to mind.
The consensus is that America will rebound quickly, averting a sticky end. But it takes two years for rate rises to feed through an economy, so Americans have not yet faced the worst. Nobody knows how US households with record debt will cope with the squeeze. Borrowings rose 8.1 per cent in 2000, 8.6 per cent in 2001, 9.7 per cent in 2002, 11.4 per cent in 2003, 11.1 per cent in 2004, 11.7 per cent in 2005, with no let-up in 2006. Debt payments have reached an all-time high of 13.9 per cent of personal income.
Americans extracted 6 per cent of GDP from their homes last year in equity withdrawals (ie, more debt), mostly to subsidise their lifestyles. This game is up. Professor Nouriel Roubini from New York University says recession is inevitable. "People have been using their homes as their ATM machine, but many are now facing negative equity so there will be a lot of foreclosures. As the housing recession spreads to manufacturing, this is going to lead to a much harder landing than people think."
The bonds markets are alert, even if equities are not. Interest rates on 10-year Treasury bonds (4.46 per cent) have dropped below short-term rates (5.25 per cent) for five months. This is the "inverted yield curve" of satanic fame, flag of recession. Ignore that at your peril.
Whatever happens, the Federal Reserve will come to the rescue. But how soon? The Fed minutes from December 2000 show some governors fretting about inflation long after the danger had shifted to slump. That wily old bird Alan Greenspan silenced them, knowing in his bones that the economy was going over a cliff.
His untested sucessor, Ben Bernanke - burdened with inflationist baggage - does not yet have the credibility to pull off that stunt. Whatever he really thinks, he will have to play by the book. So batten down the hatches for a long storm.
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Yeah, I've made pretty much the same point. It's really quite astonishing how many people are (I can only assume intentionally) blind to it, though.
I plan to pay for sex with canned food during the Greater Depression.
Real estate still blasting along in Scottsdale. When will it end?!!!!
You folks on here rooting for global depression better hope it doesnt happen. You'll have to forego sipping your lattes at your ghey little cafe, and OH MY GOD, you might have to work for a living. I mean real work. Work with your hands. Shoveling shit.
Not here in California,
now everyone wants to RENT here.
Coconutz!
Everyone wants to live in Orlando? Puhleeze! Between the carjackings, the house-to-house murder spree and the heat and humidity last weekend during my business meeting there, I think I'll let another person take my place. Gotta love those postage-sized lots and a few feet between your house and your neighbor's. I 'can't' get any better than that. LOL.
I've spent a lot of time on this housing crisis issue over the last year. I've been saying it was a problem for three year. I sold my house and told my close friends to do the same. Some actually heeded my advice and sold there house and converted funny money into real dollars and eliminated debt. Other than those close friends I'm amazed at the continued optimism so many people show.
I'm a student of history and if you look into the phychology of the late 1920's you find a lot of similarities to the forced optimism of today.
I liken this to the experience to that I had on Sept 11th. After the planes hit it looked bad, but I never thought that the building would collapse as quickly as they did. Like that day a explosive fireball has done irrepairable harm to the girders of our economy. We are all dead men walking.
The 1930's was a terrible time. And that economic crisis lead to politically crisis and eventually war (Guess what folks Iraq is a joke war when compared against historical ones - just look at the numbers). What is going to happen to China if the growth driven by the American consumer stops?? They are still a communist government and when such governments have an internal problem they tend to try and externalize it. Korea most certainly will start getting more free hand (and support).
I'm a conservative, but I wrote to Senator Clinton in the hopes of waking up someone to help diminish the damage. There are things that can be done to ease the pain (e.g. loosen bancrupcy laws). But people will come to their senses much too late to avoid the damage. It is always that way and will continue to be that way.
Gold stocks anyone.
I've also got some tulips for sale.
It's all about the free money and Buzz Saw wants his too. Friggin' pissin' me off man. Rrr!
Richard, You linked me with some website a few months ago and I accidentally deleted it, Could you repost the web address? All I can remember is "The march to war" and global money and 911 stuff. I had it on my favorites list so I have no Idea what the website was called. Thanks
silver at 14, is still down from 50 in 1970s
Anonymous said...
silver at 14, is still down from 50 in 1970s
And what would that $50 be worth today? Sounds like silver is a sure bet investment, kind of like housing!
To answer the question, where in the world can prices that have doubled, tripled, be worth it?
Just finished reading American Theocracy, good book, talking about religion in America but touches base on economics as well. Troubling to say the least. I fear the decline can not be reversed unless we are willing to cease selling our nation down the river for trinkets, oh wait a minute, didn't we learn that trick from the Dutch? The Indians sold this nation to Europeans for trinkets, guess Kharma is at work.
silver at 14, is still down from 50 in 1970s
I'm not worried, it will get there.
I just visited Phoenix for the first time to check in on the real estate investments I made last year through a broker in Boston.
To my suprise...Phoenix is right in the middle of a big fukin desert!!!!!
I mean holy crap, I just bought 5 house right in the middle of a massive, one of the world's biggest, fukin deserts!!!!
My houses are going to be one big fukin sand dune in 10 years time. OH CRAP!
I'm trying to buy some puts on the upcoming crash stocks but they are all priced as if the writers don't want to take any chances!
Everyone wants to live in Orlando? Puhleeze! Between the carjackings, the house-to-house murder spree and the heat and humidity last weekend during my business meeting there, I think I'll let another person take my place.
))))))))))))))))
Sounds like your clients or your companies do business in a very bad part of town. Too bad for you, but not for me. I am a native and I say:
Good stay away.
We don't want anymore Yankees, here anyway.
Ya'll take up too much space and resources in our home town.
Come to Disney and spend spend spend then
go away.
Actually Ft. Myers beach is on of the best in America...and it got discovered in the last 5 years by people who were paying retarded prices in Naples and Sanibel.
"the house-to-house murder spree and the heat and humidity last weekend during my business meeting there"
Uh, yeah but I live in Florida and it wasent at all hot last week..low 80's...and what business meeting were you in? The crack business? Your full of shit, man.
Spend your money here then leave. We like it like that.
Orlando is the armpit of Florida, populated by losers who can't cut it anywhere else.
silver is a PM and an Industrial metal. Silver has been priced SOOOOOO lo for soooo long nobody wanted to mine for it. Now we have soooo many liberal yutz's that dont want mines or oil drillin etc, the cost to start a silver mine or a new mine is extreme. silver has been used by industry for years (ie photog) and now the benefits od silver are just being realized.
skeptics say "digital photog will end any silver price increase", yet they dont see the big big picture. those wacky lib enviromentalista are becomeing silver investors best friends. LEAD is being phased out of electronics in the EU and replaced with silver !
do you kknow silver is the best conductor for electricity? great for those lead sodering.
do you know about samsungs new clothes washer that uses silver to kill bacteria?
do you know about silver nantech threads used in clothing to kill oder in socks and undies?
that same silver in clothes can benefit the military, as an anti-bacterial if a soldier wears silver threaded uniforms and is shot the silver threads will help fight infection in the wound.
silver is used in the making of flat screen tv's.
the uses for silver are increasing, the supply is decrreasing because the lo price for soo long did not encourage annyone to dig it up.
buy silver. save you family from the thief inflation.
"Uh, yeah but I live in Florida and it wasent at all hot last week..low 80's...and what business meeting were you in? The crack business? Your full of shit, man.
Spend your money here then leave. We like it like that."
F off MFooker. Your brother's waiting in bed for you.
"F off MFooker. Your brother's waiting in bed for you"
Actually, your mothers in bed waiting for me....
Orlando is the armpit of Florida, populated by losers who can't cut it anywhere else.
Homestead, FL
Why do so many people post here that such and such a place is an armpit or a place where only losers live because they can't make it any where else?
Sounds like a lot of folk with self-esteem issues since that is typical of people who are unhappy with themselves, to cut others down to make them some how feel superior.
Did you not read todays paper about Miami (and Homestead is part of Miami)? Asked to identify with one word their city and they said, "Corruption." Some 20,000 more leave each year than move there and it has one of the lowest per capita incomes in the country. So much for all those high rise condos being built for who?
And what is so special about Homestead? I was stationed there in the 70s. Other than the gateway to the keys and everglades it is a farming town with no industry to speak of unless you consider drug trafficking an industry.
Don't get me wrong, there are many redeeming things about south Florida and seeing past all the problems and iincome disparities and such I find much to like about the sub-tropics, hurricanes and all.
There is also a lot of nice things about Orlando or Jacksonville or Tallahasee or Tampa. If south Florida is your cup of tea, enjoy it. If not, move. Same with any place. People live in Orlando for a reason or it wouldn't be so large. Even Lubbock, Texas apparently has redeeming qualities to people or they wouldn't live there.
Stop looking at the negative and the glass half empty and start looking at the positive things for a change.
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