HousingPanic Stupid Question of the Day

Things appear to have really sped up in the bubblesphere with the imploding housing market, combined with a world spinning out of control with Iran/Iraq/North Korea etc, all kinds of stories from Wall Street, and the continuing political drama.

So, HP'ers, what'd I miss? In trying to connect the dots, what dot did we miss? What connection didn't we make?

Forbes columnist: "20% decline in median single-family house prices nationwide, and that number may be way understated"

20%? Pretty bold.

We're talking a devastating crash if that comes to pass. What do HP'ers think the peak to trough number will be?

Man, I wish I could fast forward a few years to see how this all turned out. I feel like I should be shorting every stock I can find that touches the consumer.

The housing bubble is deflating rapidly. I expect at least a 20% decline in median single-family house prices nationwide, and that number may be way understated.

A bursting of the bubble would force many homeowners to curb their outlays in order to close the gaps between their income and spending growth. That would surely precipitate a major recession that would become global, given the dependence of most foreign countries on U.S. consumers to buy the excess goods and services for which they have no other markets.

With soaring stock portfolios now ancient history and leaping house prices about to be, no other sources, such as inheritance or pension fund withdrawals, are likely to fill the gap between robust consumer spending and weak income growth. Consumer retrenchment and the saving spree I’ve been expecting may finally be about to commence. And the effects on consumer behavior, especially on borrowing and discretionary spending, will be broad and deep.

Glut of high priced condos in LA - "builders still bullish on new projects!"

Knock knock. Who's there? Realtor. Realtor who?

Real tore up that I just lost everything I owned thanks to my realtor

he he he

Tell your best housing bubble joke here. Winner gets the HP gold star of the day

US laughingstock Florida getting uglier and uglier and uglier

Warning - if you live in Florida, you might not want to read this. And yes, I'm gonna get in a bit of trouble here. But here goes...

Maybe I missed a memo, but when did backwater towns like Tampa start generating household incomes that could find buyers for $500,000 apartments? When did Florida start getting tons of Fortune 500 jobs that could support $1 Million Toll Brothers McMansions? When did Florida get rid of the humidity, the bugs, the race issues, the lack of culture, the Piggly Wigglies and the strip malls from hell? When did Florida stop being the laughing stock of the US?

I suggest it never did. But it got really good at the Housing Ponzi Scheme. It got really good at generating fake income from people buying homes from each other at higher and higher prices. It got really good at no-down, no-doc, negative am financing. It got really good at cash-out refis. It got really good at using Housing ATM loot to buy that big ol' pick up truck with the NASCAR stickers and the confederate plates.

Now it's getting really good at crashing.

Adios Florida. It was fun while it lasted. Now you're heading back to being the laughingstock of the US (again)

Economic gloom tightens grip

Floridians' confidence in the economy plunged this month to its lowest level in 13 years, University of Florida economists said Tuesday.

The chill in the housing market, higher interest rates and fuel prices appear to be taking their toll. National confidence numbers also fell in August, but not as much as they did in Florida.
The Florida Consumer Confidence Index fell 11 points to 76, while the national index, compiled by the Conference Board, went from 107 to 99.6.

The Florida drop is very similar to the one that occurred last September in the wake of Hurricane Katrina, only this time there was no hurricane to blame. Chris McCarty, director of survey research at the University of Florida's Bureau of Economic and Business Research, thinks the changed outlook for housing is at least partly responsible.

"Florida is in a position to really be affected by a decline in housing," McCarty said. "There are a lot of overvalued markets in Florida, and there are a lot of risky loans, some of which are going to readjust right about now," he said. "Also, a lot of employment increases over the last few years have been related to housing."

If you're not for us 100% you're a fascist, pro-terrorist, anti-American, cut-and-run coward

I really hope Americans aren't still buying this BS

Man, I can't wait for the carnage in November, for both parties

Vote the bums out. Let's get new blood. Hopefully the bursting of the housing bubble helps sharpen the point of the bayonette a bit more

Bubble Sign #12949: HousingPanic continues to set records for visits and page views

Now if this blogger could just make some $ off of the blog and retire to an island to blog full time, all would be good in the universe...

Thanks HP'ers for your support this past year. 250,000 page views a month coming up - pretty darn cool.

Seriously, I blog for fun, and to try to create a forum for folks to gain the information they need to make good life decisions. I hope for some of you HP has saved you from a big mistake (that of buying a home at the peak)

Cheers

Keith

Housing bubble burst effect #11093: Realtor sign pollution crackdown in San Diego

I've gotta admit, living in Phoenix for so long, the sign pollution and dancing $10 an hour open house arrow guys were so annoying, when trying to enjoy a nice drive out in the desert.

Well, in bubble-central San Diego, the local authorities took it into their own hands. Bye bye realtors, we'll sure miss you. Thanks MM for the link...

Local real estate agents are incensed after code-enforcement officers collected more than 100 open-house signs and threw them in the trash behind City Hall.

City officials say the signs failed to comply with existing codes for temporary signage and that they were placed illegally in the public right of way.

The crackdown Sunday came as part of the city's nearly $1 million beautification program, which includes monthly code-compliance sweeps.

"About a month ago, we started doing some of these sweeps,” Councilman Ed Gallo said. "Work-at-home signs, telemarketing signs, garage-sale signs. We're not picking on the real estate people."

Real estate agents say that without the ability to post clear signs directing potential buyers to open houses, properties will languish unsold in an already tough real estate market.

"Even though there are ads in the paper, without signs, people don't know where to go to find the open houses," said Pamela Wilcoxson of Prudential California Realty.

HousingPanic Stupid Question of the Day

What will the US and UN do tomorrow about Iran, now that they're in violation of resolution #1696?

Consumer Confidence Crashes (we'll have a blue, blue christmas without you)

More of tomorrow's headlines today at HP. In the end, perhaps it's a good thing that Americans are going to cut back on the consumer spending orgy, especially during the Holidays, which I've always found disgusting.

Full disclosure: I'm short retailers PSUN, HD, LOW, RTH, AMZN and CC (so far)

A sharp decline in sentiment may signal a grim holiday for retailers and trouble ahead for the economy

Retailers, prepare to get Scrooged this coming holiday season. Consumers are becoming increasingly pessimistic about the economy as they worry about jobs, the weakening housing market, and high oil prices.

Americans have already cut back on entertainment, eating out, and all sorts of discretionary spending. The report may signal trouble ahead for consumer spending—and perhaps for the overall economy.

Early reports of August retail sales show that shoppers of all stripes are already cutting back, from the lower-income shoppers at Dollar General (DG ) to the more affluent who buy their linens and dishes at Williams-Sonoma (WSM ).

P.F. Chang CEO Rick Federico says he hasn't seen anything like this for over 15 years. "There have been other ups and downs, but none where the industry is seeing discounts fall across the segment for a prolonged period of time," says Federico.

With all these worries weighing them down, it's hard to imagine consumers opening their wallets wide during the upcoming Christmas season. They may have to make due with other expressions of holiday cheer.

Scary bubble chart of the day

For new HP'ers: What is HousingPanic?

With the record traffic we're getting, obviously a lot of new folks have found their way to this little HP corner of the internets (I always loved the use of that word - he he). So let's address the question of 'What is HousingPanic'?

As loyal HP'ers know, this isn't just a housing bubble blog - if you want that go to Ben's boring blog. Some would say this is the Fox News of bubble blogs though - opinionated, sensationalistic, over the top, in search of ratings, stupid, loud, attacking, etc. No matter your view, I hope you never think it "boring" and I hope from time to time it's pretty damn funny.

And I hope you learn something along the way, something that you can use in your daily life, for the better.

Bottom line, this is an opinion blog, one which discusses the buildup and unraveling of the debt-fueled American economic system, with housing speculation at the core. We get into the causes, the effects, the nuances and the players, and try to tie it all together. Here's a recent thread exchange, hope you enjoy and comment away

Keith, I thought this was a housing bubble blog. Why do you always post all this war stuff?

This isn't a housing bubble blog. this is a blog about the unwinding of the debt-fueled, speculative financial bubble, helped along by the continuing blowup of world events, misguided financial policy, and aided by incompetence and corruption in the white house, fed and the REIC.

Houses and real estate happen to be the speculative asset that people bought with tremendous leverage which are now selling off.

If that asset happened to be goat cheese, maybe I would have called the blog "goatcheesepanic". hope that helps

One day we'll look back on this and say "what were they thinking?" The negative-ammortization timebomb (and WaMu bubble trouble)

I smell a systemic meltdown... Someone wake up Neil Bush and Charlie Keating...

From Barron's ("The No-Money-Down-Disaster", by Lon Witter, Aug. 19, 2006):

"The following figures are from Washington Mutual's annual report: At the end of 2003, 1% of WaMu's option ARMS were in negative amortization ... At the end of 2004, the percentage jumped to 21%.

At the end of 2005, the percentage jumped again to 47%. By value of the loans, the percentage was 55%.

Every month, these borrower's debt increases; most of them probably don't know it. There is no strict disclosure requirement for negative amortization.

This financial system cannot work; houses are not credit cards. But WaMu's situation is the norm, not the exception. The financial rules encourage lenders to play this aggressive game by allowing them to book negative amortization as earnings. In January-March 2005, WaMu booked $25 million of negative amortization as earnings; in the same period for 2006 the number was $203 million."

Ahmadinejad finishes with an original, created and new slogan: "Death to Israel". I guess "kill the Jews!" was getting a bit t

Get ready for an even more expensive commute from that new Toll Brothers house in the far-flung exburbs. The deadline approaches my friends. What will the Security Council do?

It's time for another Churchill speech to kick off WWIII in style

FLASH: American consumers pulling back: Consumer confidence index plunges (yet again), number even worse than expected

Isn't it interesting to hear housing inventory is "higher than expected", sales are "lower than expected" and now consumer confidence falls "more than expected". Note to MSM: Call HousingPanic - we'll tell you exactly what to expect - none of this bad news is coming as any surprise to HP'ers, is it?

By the way, the Republicans are about to be completely swept out of power in November. As much as I cringe to think it, get ready for "Speaker Pelosi".

Also get ready for one heck of a market meltdown pre-election. The entire US economy is 70% based on consumer spending and they're in full hunker-down-for-the-winter mode and getting worse daily.

Worries about the job market caused consumers' confidence in the U.S. economy to tumble more than expected in August to its lowest level in nine months.

The Conference Board, a New York-based research group, said Tuesday its confidence index fell to a reading of 99.6, down from 107.0 in July. The index was lower than analysts' expectation of 102.5.

"You've got a deterioration in business conditions coupled with lackluster job growth," Franco said.

Americans' sentiment about the labor market worsened in August, with consumers saying jobs are "plentiful" decreasing to 24.4 percent in August from 28.6 percent in July, and those saying jobs are "hard to get" increasing to 21.1 percent from 19.6 percent.

One year ago, Bush: "Brownie, you're doin' a heckof a job". Today, HP: "How many more days remaining for the dimwit on the left?"

October 2005, Ben Bernanke: There is no housing bubble to burst, cooling won't hurt economy

Oopsie - my bad! But he knew it all along, didn't he?

"House prices are unlikely to continue rising at current rates," said Bernanke, who served on the Fed board from 2002 until June. However, he added, "a moderate cooling in the housing market, should one occur, would not be inconsistent with the economy continuing to grow at or near its potential next year."

Greenspan has said recently that he sees no national bubble in home prices, but rather "froth" in some local markets. Prices may fall in some areas, he indicated. And he warned in a speech last month that some borrowers and lenders may suffer "significant losses" if cooling house prices make it difficult to repay new types of riskier home loans -- such as interest-only adjustable-rate mortgages

HousingPanic Stupid Question of the Day

How's renting looking now?

Perhaps we are, like Japan, to suffer Deflation versus inflation as our housing-fueled, debt-fueled economy collapses?

I admit, I struggle with the idea of inflation vs. deflation as our fate (as I bet Ben does too). But I'm at least open minded to the idea that as consumer spending falls off the cliff, as the consumer-debt fueled economy collapses (along with home prices), perhaps it's deflation around the corner, not inflation? Perhaps we'll see the Fed rapidly dropping rates (again) to try to get us out of the mess?

Smart people in the room chew this one over and let us know your thoughts. Cite some good sources to back up your arguments.

All asset bubbles are "Credit Bubbles." Well, Debt is just the other side of Credit. I think that Americans are running out of bubbles. No? Also, the Fed and its constituency, Bankrupters and Fraudsters of New York City (BFNYC), are running out of "options" to push more Consumption Debt (yes, mortgage is consumption debt) and Scams.

And it was the unprecedented push of Consumption Debt, mostly via "reckless mortgage lending," that has kept the US economy out of a recession for the past four years. I think that the "Bush recovery" has been pushed as far as it could be pushed already. Nicht mehr, nicht mehr, nicht mehr. (No more, no more, no more).

Now, about the Deflation case. Most people misjudge the powers of the Fed. Almost all its power, long-term, is a matter of The Confidence Game (title of a book on the Fed). Fed is in no position to inflate as most inflationists think.

Deflation will come so suddenly, as a result of the Demand Destruction leading to inflation falling very fast and going from +1.0%, YoY, to below zero within months, that Fed will not be able to pre-empt it.

Once Deflation takes root for few months it would be very hard to get rid of. The proverbial Pushing On the String (not being able to Pushing ON More Debt!) will become a reality. It would be good for Americans to learn about the limits of Fed's power in being able to manipulate the economy. Americans will also learn a thing or two about what wealth is and what an investment is.

Now the burst housing bubble is so obvious comedians and cartoonists will start making jokes about it

Could the US actually lose World War III against the islamic fascists, led by Hitler II Ahmadinejad combined with Al Qaeda?

I think Israel's recent defeat to an out-manned and out-gunned enemy, combined with our ongoing defeat in Iraq, combined with China and Russia lining up against us, is starting to make the odds a little less of a sure thing that we "win" the war on terror (aka WWIII) against the islamo-fascists. I'm actually starting to think they might be the favorite (much to my chagrin).

I don't think the US, the big ol' nation-state, is prepared financially, militarily or psychologically to win a war against islamic and other US-hating nation-states aligned with islamo-fascist terrorist organizations, especially suicidal ones. Think about it, we'll spend over $1 Trillion on a "war" against Iraq, and yet we'll eventually come home as losers.

Here's an interesting older article on the idea, the thought, that we could actually "lose". You owe it to yourself Dear Reader to at least consider the idea in your mind, and the consequences, before you say yes or no to what we're about to do with Iran and Syria.

It's the thought of losing that makes me want to go in right now, today, and take out Iran and their mullahs and Hitler II who calls for the destruction of Israel and funds terrorist groups. It's the idea of losing that makes me want to do the same wherever else this cult is creating a strong-hold (Gaza, Lebanon, Pakistan, etc). You fight wars to win, and that is harsh, and you focus on decapitating the leadership and establishing your authority. We would have "won" in Iraq if we had gone and killed Muqtada al-Sadr and his ilk, burned down the mosques used to hide the enemy, and sent in a real force.

Instead, we fought in Iraq not to lose (and so PC), so we lost. Yes, I'm so far to the right here you can't see me, but I believe in fighting to win. And yes, this does have everything to do with the future price of houses.

The West confronts not a throwback to medieval Islam, but a Westernized version of Islam transformed into a totalitarian political ideology. Although it draws upon Islamic sources and overlaps with some strains of Muslim belief, the ideology of Al-Qaeda has greater kinship with Nazism, another synthetic pagan religion, than with traditional Islam.

Like Nazism, it is a deadly threat. Remember that Hitler very nearly won.

Like the Nationalsozialistische Deutsche Arbeiterpartei, Al-Qaeda might win. Al-Qaeda wants no territory, no conversions, no loot, no slaves. It wishes to destroy the West and happily will sacrifice millions of Muslim lives in order to do so.

Rather than batter Afghanistan, whence any terrorist worth his Cemtex departed long ago, the West should act unexpectedly and without mercy against states which allow Al-Qaeda. There is no need to go into details here. Doing so now offers at least the chance of gaining the respect of the Islamic world. Failing to do so makes probable a gradual accumulation of failures. It means that the war will be Al-Qaeda's to lose. We were lucky with Hitler. We may not be so lucky again.

You can't make this up - REIC whores really starting to get desperate, while eating their young

This grotesque story from bubble-central Phoenix, where builders are trying to make nice with the realtwhores they screwed last year during the peak days (when they stopped paying full commission).

Now? Builders throwing parties, paying bonus commissions, and trying to woo the sharks back into the water. Realtwhores response - a big middle finger.

Meanwhile, doesn't the NAR espouse a code of ethics? Doesn't the buyer's interest figure in this mess somewhere? Gren Credo by the way is doing some great reporting now at the Republic - must have pushed the incompetent Catherine Reagor to the side..

Builders work to mend fences with agents

Home builders are spending big bucks and dishing out heaping helpings of hospitality during what has become the summer of love in the Phoenix new-home market. The objects of their affection? The real estate agents they spurned during last year's housing boom.

The wooing has agents sipping wine and tossing down hors d'oeuvres in Buckeye, networking to live music in Chandler, munching free sandwiches in Florence and cashing fat commission checks.

It was a different world in Phoenix housing last year at the peak of the boom. With buyers camping out at subdivisions, builders didn't need agents to bring them prospects. Builders, looking to maximize their profits, cut agents' commissions or started paying flat fees, if they paid any fees at all.

That angered a lot of agents, who felt that builders were abusing the long-standing relationship between the people who sell homes and those who build them.

But the tables have turned. Demand has evaporated, and builders are trying to get cozy with agents again, throwing parties and offering big fees - commissions of 4 to 5 percent - for selling houses fast.

Yet some agents are steering clear of new subdivisions unless clients ask to see homes there. It's payback, they say, for builders who got greedy in a runaway market in which builders raised prices with impunity and slashed commissions.

Here you go - my favorite NAR / David Lereah honesty-is-the-best-policy slides

Are you ready to see the corrupt and incompetent Kofi Annan plant a big wet kiss on Hitler II (Ahmadinejad) this week?

Well, if you aren't, get ready... I think he's putting on lip gloss as we speak...

UN Secretary General Kofi Annan is to visit Iran next Saturday, the Iranian foreign ministry has confirmed. The visit will come two days after a UN deadline for Iran to suspend uranium enrichment and amid fears it is trying to develop a nuclear bomb.

I'll say it again - I think we're heading for a wicked market crash

Last time I posted a headline that I felt like a stock market meltdown was just around the corner was April 11, 2006 ("Anyone feel like a good crash"). Yes, HP was laughed at there, as the market was setting new fresh highs, confidence was in the air.

Well, on April 11, the NASDAQ closed at 2310. Today it's at 2140, or down 8%. Not a crash, but a big bear hit for sure. Then look at almost any stock that has anything to do with real estate or the consumer and there are crashes all around. Sell in May and Go Away, yet again.

Well, now it's time for a real crash. The Housing ATM is closed, the consumer is rapidly sobering up, GDP is falling, the dollar is tanking, inflation is roaring, restaurant and retail stocks are getting killed, REIC stocks keep going south, consumer and CEO confidence has plummeted, the homebuilder index is drifting to suicidal, the Fed doesn't look like it's done, gas prices are still high and going higher, and last week's housing news and even internal NAR report scared an entire nation of homeowners.

The US economy is rolling over, it's fallen off of that cliff we all knew it would one day. There's only so much debt that can be hoisted, then it contracts, sometimes wickedly. In addition, millions are already feeling the Bubble pain, with realtors, mortgage brokers, appraisers, title agents, builders etc not getting paid (thus not shopping, not dining out, not buying houses...)

The crash might come suddenly, or like the QQQ's 70% freefall 2001 - 2003, it could be a death by a thousand cuts. Something like Iran blowing up (possibly this week) can really set it off, and something like a Fed rate CUT could confuse it even more. But we're going down, not up.

I'm in 5.05% US$ cash, COP options and now 9 stocks (mainly retailers) on the short side via Jan '07 puts, five that are up over 100% already. And I sleep well at night, although I worry about the country and what's to come.

Finally, I think people around the world are now realizing how illiquid their housing assets are, and how liquid their stock investments can be. And now that they're going into hunker down mode, and raising cash, they can hit the sell button right quick.

PBS Video on the collapsed housing market, with NAR hack Lawrence Yun, who must have missed the NAR Bubble Has Popped presentation

Is the bubble all over the mainstream media back in the US? It sure feels that way sitting a few thousand miles away here...

One thing driving me batty right now though is the media reporting that prices went up 1%. No, actually, they're crashing - the use of incentives is distorting this number to the point that it's completely unreliable. In addition, they're reporting it versus a year ago. Why is that relevant?

The real comparison for any market is price versus the peak. Here's a good site to look market by market with charts and graphs for certain timeframes. The true comparison should be "Home price dropped X% since they peaked in Y month." But even that like I said is bogus because of the incentives/cash back manipulation going on.

Here's the video, pretty interesting, but the NAR hack is a joke, given what we saw from them on their internal presentation. He's here saying that there are "many people on the sidelines" that'll make everything OK dokey, soft landing, robust job creation, "we are returning to more normal housing activity", "healthy cleansing", blah blah blah. Why does the MSM let these discredited hacks on?

I do laugh a bit because you know every person reporting on this story owns a home themselves and while someone is blabbing away, they're doing the math in their head how screwed they are, and man, think how different this piece would have been if HP or Robert Shiller or Chris Thornberg were the studio analyst versus the NAR hack..

Doesn't this reaffirm everything we've been saying about the REIC and who's took over these crappy jobs?

HP dedicates this to the Phoenicians who bought homes last year at the peak

HousingPanic Stupid Question of the Day

If a homeowner buys a home for $400,000, got it appraised during the silliness for $500,000, takes out a $100,000 HELOC, blows that on say, cocaine and hookers, and now the home is truly worth only $400,000, isn't that HELOC now truly unsecured?

And are we about to see massive bankruptcies, commoditized credit write-offs and bank failures?

Man, the wicked, shocking, brutal honesty keeps coming: A three-year supply of homes in Queen Creek, Arizona

Even though all of this was predicted, and is part of the Econ 101 meltdown underway, it's still a bit shocking when you see it in print for the first time. We spoke months ago about the far-flung suburbs of Phoenix being a future ghost town disaster area of empty stucco homes as far as the eye could see, that nobody would want at any price, and, well, that's what we've got.

Here's (yet another) report from housingpanicgroundzero, Phoenix, Arizona, complete with panicked realtors getting together to commiserate and figure out what the heck to tell homeowners that they had just a few months ago told "real estate never goes down"

Slowdown in house sales compels 'brutal honesty'

Real estate agents need to be "brutally honest" with sellers today, as there is about a six-month supply of unsold homes, agents were told at a panel discussion Thursday night.

Many clients are still holding out for last year's prices and not trusting their agents, but agents were advised to teach sellers how competitive the market is and not just tell them what they want to hear.

"You are not going to sell a property at market value. You are not going to sell it for its appraised value," said Paul Pastore of Re/Max Achievers in Chandler. "You are only going to sell it for what someone is willing to pay."

There is an 18-month to two-year supply of unsold homes in Surprise and 2 1/2- to three-year supply in the Johnson Ranch area near Queen Creek, said Russell Shaw of John Hall & Associates in north Phoenix. Homes are taking an average of 77 days to sell in the Phoenix area, he said.

It is common for prices to be reduced several times if a house isn't selling. Pastore said he even quit putting prices on fliers because they are so flexible. Agents talked of houses selling for $50,000, $80,000 or other amounts below appraised values. One agent said she has a home priced $100,000 below appraisal that isn't selling.

Bruce Fraser of Century 21 Metro Alliance in Chandler remembers an Ahwatukee Foothills man who insisted that he be able to set the price and commission and wanted a price in the $500,000s. Fraser recommended a lower price. "The man shook my hand and said, 'OK, it's time for you to leave.'

Alan Greenspan's wisest words: "History has not dealt kindly with the aftermath of protracted periods of low risk premiums"

Read every carefully chosen word of this quote, which Greenspan made after he created the bubble (of course). Read every word, slowly, then go back and read every word again, and again, and again.

And you'll see what has happened, and what is to come.

Get ready.

Thus, this vast increase in the market value of asset claims is in part the indirect result of investors accepting lower compensation for risk.

Such an increase in market value is too often viewed by market participants as structural and permanent.

To some extent, those higher values may be reflecting the increased flexibility and resilience of our economy.

But what they perceive as newly abundant liquidity can readily disappear.

Any onset of increased investor caution elevates risk premiums and, as a consequence, lowers asset values and promotes the liquidation of the debt that supported higher prices.

This is the reason that history has not
dealt kindly with the aftermath of protracted periods of low risk
premiums

The housing bubble in three act structure - Acts I and II are now over, what does Act III look like?

Act I - Euphoria and Riches

The glee and riches as the bubble started to inflate, money started falling from trees, society no longer needed to save for retirement, we could buy anything at the mall we wanted, and we bragged how smart we were to everyone who would listen. Bush said buy a home, the NAR said buy two, and Greenspan said use an ARM. Home prices would never go down, they never had, and you'd be a fool not to buy, no matter the price.

Act II - The Realization and Pop

Some chinks in the armor started to appear - silly little things at first like negative cash flow for investors who bought to rent, unaffordability climbing to record highs, the proliferation of the no-down, no-doc, interest-only, teaser-rate loans to get the last fools in. Some folks started selling at the peak and renting, then told others about it.

Bubble blogs started up, the media started saying "housing bubble" more and more. Hundreds of thousands of unqualified societal losers got their real estate licenses, mortgage ads were all over TV where used car and E.D. ads were before. And then the negative numbers started pouring in - construction down, sales down, prices down, confidence down, REIC stocks down, and perceptions changed - houses were now bad investments that would actually depreciate in value for years to come.

This act ended this week with the horrible numbers, and the NAR admitting (finally) that the bubble was over (and actually ended in August 2005).

Act III - The Crash, Aftermath and Redemption

The final act is now to be written. What does it look like? And what's the movie called?

FLASH: I can't believe what I'm reading. NAR admits US housing disaster underway

I'm floored. I never thought we'd see this day. Ever. Even when inventory explodes another 200%, even when sales drop another 50%. Even when prices crash another 20%. I never thought the corrupt spinmeisters at the NAR would ever let information get out that the real estate industry is in historic meltdown mode.

Yet all the dirty laundry finally is here, courtesy of this internal NAR presentation given last week at their annual big-wig gathering. Oopsie, they posted it on their site though.

Of course the MSM won't report it, unless the bloggers get the word out to the point that they have to. And Lereah won't use this internal NAR data when speaking to the press - he'll stick on message for sure - all is well, all is well.

The only glitch is that even after all the horrific data, he still tells his henchmen "soft landing". Yeah, right David.

Here's what the winged monster had to say. You must download the full PowerPoint to see all the amazing charts - including the condo disaster unfolding on slide 16. Kudos to papermoney for the original post.

Real Estate Reality Check - David Lereah NAR Leadership Summit August 2006

What Happened?

•Boom ended August 2005
•Mortgage rates rose almost one point
•Affordability conditions deteriorated
•Speculative investors pulled out
•Homebuyer confidence plunged
•Resort buyers went to sidelines
•Trade-up buyers to sidelines
•First-time buyers priced out of market
•Sellers’ market transitioning to buyers’ market
•Home sales plummet, prices lag, inventories rise
•Cooling markets left with high percentage of exotic loans
•Builders offering non-price incentives
•Days-on-market lengthening
•Residential construction activity slows
•Home prices beginning to soften

HousingPanic Stupid Question of the Day

As recently as last year it was a "seller's market". Now the NAR is calling it a "buyer's market".

What should we really be calling this market?

HP's question: What members of this corrupt and incompetent administration face charges, impeachment or pardons?

Watch this great (and in-depth) PBS video report on Cheney and the Iraq debacle, then ask yourselves can it get any worse than this, can the American people be any more clueless and what will the end result be?

History will not be kind to this administration - foreign policy or the domestic policy debacle. The burst of the Housing Bubble will only expedite the pain and derision.

You are not qualified to comment unless you've spent the hour-plus and watched the full PBS video series in my book (fox news crowd)

HousingPanic Stupid Question of the Day

Crack dealers make money regardless of your personal well being. Arms dealers happily sell arms to both sides of the conflict.

So, is the NAR now changing their tune because their den of thieves made money off of you when prices were skyrocketing (and they were telling you to get in before it was too late), and now they'll make money off you you as prices crash (and they tell you to sell at any price)?

Checking in on the worst condo project I've ever seen - the failed Duke condos in South Scottsdale

Loyal HP'ers know we've been mocking this development since we started. Actually, this development was one of the reasons HousingPanic came to life - call it a jump the shark moment.

A terrible location in the seedy part of Scottsdale, unless you like having your crack dealer close by, with horrific architecture, a stupid, unlivable lay-out and when it came out in 2005 insanely overpriced units - $500k or so for a tiny little apartment. Basically a box of shoeboxes make up the eyesore.

Well guess what. Out of eight units built, after all this time, only one sold. I'd bet others were reserved at some point but the flippers (I mean buyers) probably wised up quick (or sobered up) and cancelled.

So what's a developer to do? Package the shoeboxes together and sell 'em! Now you can buy all seven units together. My recommendation - wait for the bank's foreclosure sale and buy for pennies on the dollar (if you can rent one out for positive cash flow that is!)

Complete and ready to occupy/sell now! With a Downtown Scottsdale area location, The Duke is an innovative 8-unit group of urban condominium homes located just south of the Loloma Arts District in Historic Scottsdale.

One unit sold, and there are 7 units remaining in the BULK sale of approx 9310 sq.ft. While other development in Scottsdale are either in still in planning or sport a luxury price tag of over $500 per square foot, The Duke remains the most affordable! See more at our azarchitecture web-site

Iran christens new nuke reactor, US and/or Israel about to go blow it up

Hope those crazy Iranians didn't spend a lot decorating the reactor, you know, nice Ikea shelving, maybe some Pottery Barn settings in the cafe. Nope, it'll be dust soon... along with the world economy... Get ready for another wild week on the housing / economy / stockmarket / iran / iraq / worldpanic front

UNITED NATIONS — With increasing signs that several fellow Security Council members may stall a United States push to penalize Iran for its nuclear enrichment program, Bush administration officials have indicated that they are prepared to form an independent coalition to freeze Iranian assets and restrict trade.The strategy, analysts say, reflects not only long-standing U.S. frustration with the Security Council's inaction on Iran, but also the current weakness of Washington's position because of its controversial role in a series of conflicts in the Middle East, most recently in Lebanon.
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Defying U.N., Iran opens nuclear reactor

KHONDAB, Iran - Iran's hard-line president on Saturday inaugurated a heavy-water production plant, a facility the West fears will be used to develop a nuclear bomb, as Tehran remained defiant ahead of a U.N. deadline that could lead to sanctions. The U.N. has called on Tehran to stop the separate process of uranium enrichment — which also can be used to create nuclear weapons — by Thursday or face economic and political sanctions

Israelis Back Attack on Iran Reactor

Israeli adults would support a pre-emptive strike against a nuclear facility in Iran, according to a poll by Teleseker published in Maariv. 63 per cent of respondents think Israel should bomb the Iranian nuclear core.

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Here's England's house price chart. Anyone see the bubble? Look closely - it's there somewhere

Here's some charts that should 1) disgust you and 2) make you worry for the fate of the US economy

HousingPanic Stupid Question of the Day

If cities were stocks you could short, which housing bubble city would be at the top of your list?

Devastating housing/condo meltdown underway in Vegas (and it only gets worse)

Las Vegas will challenge for the HousingPanic Bubble Market of the Year award, given that in the middle of their meltdown a further 38,000 condo units are in development as we speak. Talk about adding fuel to the fire, this is going to get insanely ugly, and quick.

I love the advertisement for the W condo units smack-dab in this article (from the mid $600's!). Talk about bad use of ad dollars - geeze!

Anyone want to predict how far condo prices will fall in Vegas from peak to trough? I'd guess 60%. Seriously, 60%.

I'll be in that crappy town in a few weeks and I'll try to pop into one of the condo showrooms and see how big of a discount they'd be willing to give.

Las Vegas' housing market picked the hottest month of the year to show its clearest signs of cooling.

New home sales in July dropped 41 percent from the same month a year ago and existing home sales fell 35.1 percent as the market continues its downward slide after two years of record-breaking sales and price appreciation.

The 1,808 new home closings were the fewest since April 2003 and slightly more than half of the 3,474 closings in the previous month, local research firm SalesTraq reported Wednesday.

"I was kind of shocked when I saw 1,800 new home sales," SalesTraq President Larry Murphy said. "I started downloading the file and I knew it was a small file."

Murphy has challenged the housing bubble theorists every year by citing increasing prices in Las Vegas, but now admits he "underestimated the slowdown."

"Almost unnoticed on the canvas of the Las Vegas housing picture are nearly 38,000 high-rise and mid-rise homes in various stages of development," he said. "They paint a very different portrait of every aspect of the market."

More than 5,000 vertical units had closed escrow as of July and 90 percent of the 11,734 units under construction are in escrow, Bottfeld said. Still another 11,620 are actively being sold.

Recent news that Nevada ranked among the top five states with the largest slump in housing sales during the second quarter is only part of the story here, Bottfeld said.

Fear and the housing bubble

This interesting question over at patrick.net on the F word (Fear).

The human behavior aspect of the late great housing bubble will be a fascinating study down the road - and two words come to mind - Fear and Greed.

Fear drove renters to get into a house or forever be priced out of the market (or so they thought). Greed drove people to buy more than one house, trade in a perfectly good house for a much more expensive one on the hopes of making a killing, and greed drove the entire REIC I'd say.

Now Fear has gone the other direction - people are now panicking, canceling their builder contracts, putting their home on the market as fast as they can, and fear is stopping new home buyers from even thinking of making an offer. Here's the post:

We've talked about the fear/greed cycle that drove the RE market for the last few years. The big fear, as discussed before, was usually about being priced out forever. People jumped into the market because they were afraid not to.

But now the fear is going in a different direction. People are afraid of losing their homes, their equity and their jobs. We're already seeing panic selling here in certain parts of Ca. And the news is offering up daily stories that stoke the fear of the FB's.

What affect do you think all this fear is going to have on the RE market in the near future? Are you afraid?

Florida now in total housing meltdown mode: Home inventories through the roof, sales freefall 33%, prices crashing

It's funny reading this reality versus what that tool mortgage broker wrote the other day about how Jacksonville is going to be fine and dandy. Not.

Important point too that all these crazy listing numbers we're now seeing do not include the FSBO listings. Someone do the research and let us know what those numbers look like.

As the number of home sales and the prices of existing homes in Sarasota-Bradenton continue on a downward spiral, real estate agents are taking a realistic look at the changing market. Sales in the area slumped 49 percent compared to last July as listings remain high.

There are more than 6,500 properties for sale in Manatee County alone, according to the Multiple Listing Service. The glut is forcing agents to take new approaches to the clients that are looking.

"That's a city in itself and that doesn't include the 'for sale by owners,' " said Ken Miller, agent with Re/Max Gulfstream.

Sales continued to tumble throughout Florida in July. Every market in the state showed a decrease in the number of homes sold as compared to last July, with only Naples seeing a bigger drop off in sales than the Sarasota-Bradenton market.

Numbers released by the Florida Association of Realtors on Wednesday showed sales in the local area dropped by 49 percent and prices are now starting to follow suit. Prices fell 11 percent from where they had been in July 2005.

In July of 2005, the median cost of an existing home was $338,100. The median price last month was $302,100. Statewide, home sales fell 33 percent in July, while the median price settled at $250,800.

Want to see what's really going on out there? Read this HP'ers post

Stories like this one warm HP's heart. More more more!

REM said...

Thanks to this blog, I have just taken the deposit I was going to put down on a new house here in Gilbert, AZ and paid off my credit cards.

My girlfriend and I had found what we thought was the best offer to build a house around these parts at $250,000. When we told the builder we were having second thoughts he knocked the price down to $210,000. $40,000!!!!

Something is not right here. I took it as an insult. God it is nice to be debt free and renting!

HousingPanic Stupid Question of the Day - Bonus Edition

Inventory is at record levels. Sales volume has cratered.

Will home prices now:

A: fall faster and harder than anyone ever imagined?

B: fall slowly and surely for years and years to come?

C: stay the same but lose ground to inflation?

D: keep rising at the pace of inflation?

E: soar just like realtors, David Lereah and the NAR said they would?

HP dedicates this song to all the REIC members feeling a bit blue after this week's beating

Get the feeling that a lot of those fast money cocaine junkie used car dealers who beat their wives became mortgage brokers?

Gee, that's a shocker: Rampant overbuilding means condo boom may go bust

Again, everyone else is stupid, or HP'ers are just psychic.

Why is the meltdown underway such a shocker for most people and the MSM? Isn't this, all of this, just so obvious and predictable? Didn't anyone ever take an Econ 101 class?

During the past six years, South Florida's landscape shifted from low-slung homes to condominiums hundreds of feet high. As the buildings reached skyward, so did prices, topping seven figures for the more luxurious digs.

Today, though, the meteoric rise of condo development is on the verge of crashing down to earth.

The seemingly unstoppable juggernaut has come face-to-face with economic realities making even the most maverick developers gun-shy.

As supply outpaces demand, prices already are leveling off and values of newer condos could tumble by 30 percent or more by the time the market hits bottom, experts say.

"The condo market isn't just breaking lightly," Miami real estate consultant Lewis Goodkin said. "It's screeching to a halt."

FLASH: New Home Sales Tumble Badly (and median price number again is completely worthless)

I think this data is generally suspect, being it's from the government, but here it is anyway - pretty ugly.

We especially know the median price number is completely, totally and wholly bogus and unreliable, as it does not include the massive incentives being offered to move all this dead inventory (cars, pools, cash back, etc).

The media will just report the numbers without actually doing any reporting, so people will be led to believe that prices aren't tanking. Bad news folks. They are.

There's this little thing called supply and demand, and we all know what happens to prices when supply skyrockets and demand tanks. Econ 101.

WASHINGTON, DC, United States (UPI) -- New home sales in the United States last month tumbled 4.3 percent from the previous month`s level, the Commerce Department said Thursday.

Economists had expected sales of new one-family residences to decline 2.7 percent to about 1.105 million.

Instead, the figure was 1.072 million, which contrasts with 1.12 million in June and is about 21.6 percent below the July 2005 level. Meanwhile, the median sales price of new homes fell in July to $230,000.

The new data are expected to reinforce the perception that the U.S. economy is slowing significantly and that the central bank has no reason to resume its interest rate increases next month.

Spin spin sugar: "We're not living in a bubble here"

Bubble? Meltdown? Nah! Keep buying - full steam ahead!

I love the local media and REIC reports that do mention the bubble bursting - but never in that area - it's "those other people"

No, it's not. Here's a hilarious report today from the melting-down Florida market:

Statewide existing-home median sales prices have increased nearly 100 percent over the last five years, according to the Florida Association of Realtors, rising from $127,400 in 2001 to $254,800 this year.

The Jacksonville metropolitan statistical area continues to be ranked high in housing, despite the recent “doom and gloom media reports” to the contrary, according to Mark Carlson, mortgage banker and branch manger of Wells Fargo Home Mortgage.

“We’re not seeing it,” said Carlson. “We’re not living in a bubble here.”

Northeast Florida Builders Association Executive Director Daniel Davis agrees.

“What we’re seeing in other areas in the state — where there was a large amount of condo construction and high volume of investors flooding the market and there’s a ton of inventory — is not healthy for the new construction market,” said Davis, who is also City Council vice president. “In Jacksonville our numbers are much better as far as inventory and investors that are backing out of the market. The quality of life here, the availability of housing and the jobs we are creating are bar none.

“We are insulated from all the other problems that you might see across the nation and across the state where they’re relying on one industry, or they don’t have the natural resources that we have that attract homebuyers.”

CBS News lead story last night: Housing Market Cools - "Once hot markets now seem frozen"

It's amazing to watch the collective conscious change right in front of our eyes. Here's some quotes from last night's CBS lead report on the housing crash underway:

"Prices are down 8% in Florida, 5% in California, and outside DC, nearly 4%. Prices are slipping in other cities too ..."

"Rather than reduce the price, which builders hate to do, they're offering automobiles, televisions, trips, they'll pay part of the closing costs" - David Lereah quote

"At this point sellers are willing to try anything, anything but lower the sales price... many of these sellers seem to be in denial"

"It could get worse... it could do even lower"

HousingPanic Stupid Question of the Day

An HP Classic:

Are you ready?

Yahoo Finance housing poll: "Existing home sales fell in July to the lowest level in 2 1/2 years. What next?"

Vote at http://finance.yahoo.com/, scroll down to the bottom right hand corner. Current results:

Housing will weaken further 75%

Housing will stabilize 21%

Housing will improve 5%

21851 Votes to date

Someone's got some 'splainin' to do

"Sellers in many areas of the country are pricing to reflect current market realities" - David Lereah, after yet another horrific housing report, August 23, 2006

"Far from a real estate “bubble,” what we are experiencing today is a phenomenon that takes place only once every other generation: a long-term real estate market expansion" - David Lereah, in "Are You Missing the Real Estate Boom" - February 2005

"I refuse to answer the question on Fifth Amendment grounds" - David Lereah, at the 2008 Housing Bubble Congressional Hearings, February 2008?

Shockingly honest language from Dallas Fed President: "This is the roughest, most sudden correction we have ever seen in the housing market"

Richard Fisher, President of the Dallas Fed, had this to say the other day. I am so reminded of Cisco's fate in 2001 - where John Chambers, their CEO, had built all this capacity, and the whoosh! the bottom fell out of the telecom market almost overnight.

The key area of concern in the real estate markets is the housing market. You know the facts here, so I’ll make this brief by repeating what a friend who has been a major homebuilder since 1973 recently told me: “This is the roughest, most sudden correction we have ever seen in the housing market.”

But in making monetary policy for the nation, this provides scant comfort for the Federal Reserve. Nationwide, single-family permits are down 26 percent from the peak last September.

We are well aware that consumption drives 70 percent of the nation’s economic growth and that a significant slug of the purchasing power of consumers has in the last few years been greatly enhanced by refinancing their mortgages in a rising-price market.

Optimism, Excitement, Thrill, Euphoria, Anxiety, Denial, Fear, Desperation, Panic - HP'ers, where are we now?

I've got a feeling we'll be hearing something very interesting very soon from this nut - he was too quiet yesterday.

I think he might say he has the bomb. Now THAT would be interesting, wouldn't it?

Another sign of the Housing Apocalypse? The never-ending mortgage

I almost spit up my diet coke on the tube this morning when I looked over my shoulder and saw this headline:

The Mortgage that Never Ends

Parents will be able to hand down their home loans onto their children under a radical shake-up of Britain's mortgage industry which starts today.

In a revolutionary move, homeowners would never need to repay a single penny of their mortgage before they die.

Instead, the debt will be passed to their offspring, allowing them to slash the amount of inheritance tax they would have to pay.

One expert yesterday nicknamed the new mortgages as 'the debt that never dies' as the loans can continue to be passed on through the generations.

With these radical new home loans, parents can take out a cheaper interest-only mortgage which passes to their children after their death.

James Cotton, mortgage specialist at advisers London & Country, said: 'One of the big trends in the housing market has been parents helping their children get onto the property ladder.

'This generation of first-time buyers is having a lot of problems getting onto the ladder. This is just the ultimate extension of the 'parents helping their children' principle.'

FLASH: Existing home sales plunge worse than expected, inventory exploding to record levels, prices are anyone's guess due to bogus NAR data

That about sums it up... Too bad though we can't get an accurate read on prices. But with no buyers and all sellers, you know what's really happening out there...

Code Red.

Sales of previously owned homes plunged in July to the lowest level in 2 1/2 years and the inventory of unsold homes climbed to a new record high, fresh signs that the housing market has lost steam.

"The housing sector is fragile," said David Lereah, the association's chief economist.

The inventory of unsold homes in July rose to a record high of 3.86 million. At the current sales pace, it would take 7.3 months to exhaust that overhang. That is the longest period to exhaust the supply of home since the spring of 1993.

One of the things that Federal Reserve Board Chairman Ben Bernanke and his colleagues are watching closely is the housing slowdown. If home prices and sales were to crash, that could spell big trouble for the overall economy. Thus far, Bernanke has said the market's slowdown has been fairly orderly and smooth.

Lereah said he still expects a "soft landing" for the once high-flying housing sector. But he urged the Fed to leave interest rates alone and refrain from bumping them up again -- as some analysts have said is a possibility.

The housing sector's transition from a red-hot market to a cool one has important implications for the overall economy.

Consumers who watched their homes rise rapidly in value over the last several years felt wealthy and more inclined to spend. They also borrowed against their homes -- treating them like ATMs -- to support their spending ways.

But with home values not going up as much now as the double-digit gains seen in the past several years, consumers have tightened their belts. That has contributed to a slowing in overall economic activity.

Last week the National Association of Home Builders reported that confidence among builders sank to a 15-year low.

HousingPanic Stupid Question of the Day

When a builder or home seller sells a home for $500,000, plus throws in $100,000 in incentives (a new car, a free pool, etc), how come the sale price isn't recorded accurately as $400,000?

In other words, when the NAR's median price numbers come out today and tomorrow - remember that they're deceptive, bogus, worthless and not an accurate representation of what's really happening in America today.

Ah, can't beat a good Ponzi Scheme: LA - 2% of homes affordable for family earning median income.

If nobody can afford a home, wouldn't you say that presents a problem?

P.O.N.Z.I.S.C.H.E.M.E.

Also, isn't it interesting that even though Indy was "most affordable" they're also one of the foreclosure leaders? Hmmm.... Thanks mm for the link

Most homes sold in the United States in the second quarter were not affordable for a family earning the median income, the National Association of Home Builders said Tuesday.

The NAHB-Wells Fargo housing opportunity index inched down to a record low 40.6 in the second quarter from 41.3 in the first quarter. Just 40.6% of the homes sold were affordable for a family earning $59,600.

For the fourth quarter in a row, Indianapolis was the most affordable market, with 87.4% of the homes affordable for families earning the region's median income of $65,100. The median price in Indianapolis was $120,000. For the seventh consecutive quarter, Los Angeles was the least affordable market, with just under 2% of the homes affordable for a family earning the metro median income of $56,200. The median sales price in LA was $521,000

Another day, another admission of the housing meltdown underway from the newly honest Toll Brothers

Wonder if we scared Bob with our talk of SEC investigations, arrests, Congressional hearings, etc. He sure is being honest and blabby now, as his stock tanks and his company fades away...

Luxury home builder Toll Brothers on Tuesday said its quarterly profit fell 19 percent, partly on write-downs on land options, and slashed its forecast for the year for the third time, underscoring deteriorating U.S. market demand.

"The speculative buyers of 2004 and 2005 are now sellers," Toll said in a statement. "Builders that built speculative homes are trying to move them by offering large incentives and discounts and some anxious buyers are canceling contracts for homes already being built."

Earlier in the month, Toll reported that new orders fell 47 percent to 1,443, while the value of the contracts sank 45 percent to $1.05 billion from $1.92 billion. On August 9, Toll said cancellation rate ran about 18 percent and were highest in last year's hottest markets of Orlando, Florida; Las Vegas, Nevada; Phoenix, Arizona, and Palm Springs and Northern California.

All of this will seem so obvious two years from now... Barron's latest housing expose: The No-Money Down Disaster

Barron's is all over it now. Here's some highlights from their recent expose on the disaster unfolding with housing - a disaster which will impact the entire world economy and flip it on its side. Seriously, folks, we're in a heap of trouble now. Thanks Aaron for the lead... Extra credit for why the photo...

A HOUSING CRISIS APPROACHES: According to the Commerce Department's estimates, the national median price of new homes has dropped almost 3% since January. New-home inventories hit a record in April and are only slightly off those all-time highs. Existing-home inventories are 39% higher than they were just one year ago. Meanwhile, sales are down more than 10%.

Although the stocks of new-home builders are down substantially, the stock market and many analysts are ignoring other implications of the housing news.

The following figures are from Washington Mutual's annual report: At the end of 2003, 1% of WaMu's option ARMS were in negative amortization ... At the end of 2004, the percentage jumped to 21%. At the end of 2005, the percentage jumped again to 47%. By value of the loans, the percentage was 55%. Every month, these borrower's debt increases; most of them probably don't know it. There is no strict disclosure requirement for negative amortization.

This financial system cannot work; houses are not credit cards. But WaMu's situation is the norm, not the exception. The financial rules encourage lenders to play this aggressive game by allowing them to book negative amortization as earnings. In January-March 2005, WaMu booked $25 million of negative amortization as earnings; in the same period for 2006 the number $203 million."

I got this email today from a lender. Immediate cash! Any credit! Expires tonight!

CODE RED, CODE RED. HOUSINGPANIC DECLARES HOUSING BUBBLE CODE RED. FULL STOP.

The Southern California housing market is "in the early stages of a tsunami wave of cancellations and price cuts,"

I guess that idiot mortgage broker from earlier today isn't believing articles like this one...

Boy, if you know anyone in Cali looking for a home today - please send them this link..

Calif Housing Market Could Pull Homebuilders To New Lows

Watch out, California. Your housing market is about to get smacked.

The Southern California housing market is "in the early stages of a tsunami wave of cancellations and price cuts," predicts JMP analyst Alex Barron. Home builders with big exposure to this market could potentially take a hit that's even bigger than the beating many took in Florida.

Barron, who recently returned from a three-day tour through Southern California, said he sees similarities between market conditions in this area and those in the troubled Florida market.

"Demand has hit a wall" in Southern California as skyrocketing prices over of the past few years have made homes less affordable, said Barron. Builders have responded by offering higher incentives and steep price cuts, and by allowing buyers to put down shockingly small deposits - of less than 1% - on homes, he said.

"Deposits below 1% are a very ominous sign as it signals to us that demand is very weak and homes have now become very unaffordable," said Barron.

"If it's a $700,000 home and suddenly the builder has cut the price for similar homes to $650,000 or $600,000 - and you only put down a $5,000 deposit, why wouldn't you walk away from it?" he asked. "We would expect cancellations to rise dramatically in coming months as it will be relatively painless to walk away from such a small deposit."

Just because I love hearing the stories: HP'ers who sold at the peak and now rent, share your stories

Ah, the sweet life. No debt, plenty in the bank, renting for pennies on the dollar.

No property taxes, no maintenance costs, no depreciation, no condo fees.

Yes, my friends, at this day and this time, renting is the sweetest feeling imaginable.

Share your stories here, and congrats!

Home Depot and Lowes: Investors are not waiting for the roof to collapse, but they expect some meaningful damage

I had the luck of being in the UK market since early last year, and thus seeing what happens when a housing market goes flat. And that's flat, versus a collapse, as HP'ers know I fully expect in the US.

What happens after consumers realise the HELOC train has left the station? They stop spending. And where do they stop spending first? Duh - at the home improvement store.

B&Q (owned by Kingfisher) is the Home Depot of the UK - same colors, same products, same same. And since the UK market flattened out, B&Q has hit the skids, with some horrific sales (or lack thereof)

This is why I'm now short (via January Puts) Home Depot and Lowes. And if you research Home Depot, in addition to being a lousy run company with the worst CEO in the Fortune 500, you'll see that they've bought up a lot of suppliers too, with their focus on the trades and wholesalers. So it's not just the consumer drying up that'll kill them, but with homebuilding falling off the cliff, that's a lot less lumber, a lot less saws, a lot less nuts and bolts, etc that'll be needed

I believe these two stores will get slaughtered, and I mean slaughtered, during the housing meltdown. Just as B&Q got killed over here.

Investors are not waiting for the roof to collapse, but they expect some meaningful damage. Since January, shares in home improvement giants Lowe's and Home Depot (NYSE:HD) have both fallen by more than 15 per cent, while the broader US retail sector is off only 2 per cent. Amid fears of a general consumer slowdown, housing has taken centre stage.

There are risks. Lowe's on Monday cut its earnings forecasts and said that same-store sales growth could be as low as zero in the third quarter. But the company appeared to focus on general pressures facing consumers from high fuel prices and geopolitical concerns rather than the housing market itself - which the company expects to have a soft landing.

Even if that is the case, however, it is worth a peek across the Atlantic at what happened to UK market leader Kingfisher when the housing market enjoyed a relatively soft landing. Sales growth turned negative and operating margins halved. Admittedly, most UK retailers also had a tough time, but it does give a sense of the damage that is possible for home improvement retailers when a red hot housing market stops sizzling.

Iran Rejects Offer For Nuclear Talks

Iran's response:

The Iranian government has told senior European officials that it will not accept the only condition set by the Bush administration and its Western allies for talks on the country's nuclear program and will continue enriching uranium, despite the threat of international sanctions, several senior U.S. and European officials said yesterday.

US's response:

The United States threatened to push quickly for economic sanctions against Iran in the UN Security Council if it fails to heed demands for a freeze of its uranium enrichment activities.

"We will obviously study the Iranian response carefully, but we are also prepared, if it does not meet the terms set (by six major powers), to proceed here in the Security Council ... with economic sanctions," Bolton told reporters.

HP's response:

Iran is smartly playing the delay, delay, delay game. Oil is still near its record high, and only going to go higher. Thus the money is still pouring into Iran's coffers. They can play this game for a long time (and keep the price of oil up). Knowing Bush's record unpopularity, Israel's recent loss, the fact that our military is bogged down in Iraq, and their buddy-buddy relationship with Russia and China, and this can drag out for quite some time.

Unless Bush says "F it" and let's the dogs loose.

Meanwhile, those houses in the far-flung suburbs lose value faster and faster, GM and Ford can't lay people off fast enough, and the shopping malls become quieter and quieter...

HousingPanic Stupid Question of the Day

For the love of god why can't realtors just be honest about the housing bubble bursting and current market conditions?

Fleckenstein: Face it: The housing bust is here

I love Contrarian Chronicles. Here's Fleck's latest - I'd call this a stick-a-fork-in-it-it's-done piece on the late great housing ponzi scheme...

Missed in last week's 'Fed is done' euphoria was more stark evidence the housing bubble has burst. Growing numbers of homeowners can't make their payments.

The fabled engine of our economy is clearly unwinding.

At some point (sooner, rather than later), there will be a housing-finance-related "accident," due to an incendiary combination of housing debt and derivatives. That is what lies ahead. What remains to be seen is exactly when the financial bomb gets detonated.

Meanwhile, though this mess has just started, the end game is (and has been) very predictable, as the story states: "Some borrowers are opting to sell homes they can no longer afford."

That, ladies and gentlemen, is how Alan Greenspan managed to make folks' lives ultimately even worse, in attempting to bail out his equity bubble with a real-estate bubble. Let's never forget who the un-indicted architect of this mess was: Alan Greenspan and the other merry pranksters at the Fed.

Of course, those folks who didn't learn anything from the equity mania, and who will turn out to have gotten themselves trapped in the housing mania, really have only themselves to blame. As I have been warning for at least a couple of years now, all of this was going to be wonderful until it wasn't. That moment in time is upon us.

"Is there a "bubble"? The simple answer is 'no'... Don't be victimized by the bubble hype"

Daddy, what did you do at work today?

Well, son, I bilked people out of their money, I spread lies in the press, and I looked like a total buffoon to HousingPanic readers

Here's an article in American Chronicles by a mortgage broker, published as an article and not an advertisement. Man, another tool for the shed...

Nearly a full third of households are still renting...but if you are one of them, you could be paying a hefty price. Additionally, the children of the baby boomer generation are close to or at the home buying age, but these "echo boomers" could mistakenly decide to put off the purchase of a home because of all the noise about a "bubble" in home prices.

Is there a "bubble"? The simple answer is "no". Even if interest rates move a bit higher, it won't be enough to cause a nationwide slide in home prices. The key to a healthy housing market is the job market.

So with the currently low levels of unemployment and the beefy gains in job creations, it looks like the housing market will remain vibrant. Although it will be difficult to sustain the double-digit gains that much of the country has seen, price declines are highly unlikely. Expect a more moderate rate of appreciation, perhaps closer to the historical 6-7% range, which is still very good.

But this talk of a housing bubble has been going on for a few years now, and those who were unfortunately victimized by continuing to rent instead of purchasing a home are painfully mulling over their missed opportunity. But is it too late? Even with the more moderate levels of appreciation expected, procrastinating on that home purchase could cost you a bundle.

Don't be victimized by the bubble hype. Buying a home is a big step, but it is almost always one in the right direction

Like cockroaches when the light comes on: Realtors scurrying to find new employment

With over 1 million realtors (yes, 1,000,000) I figure we'll see a shakeout of over 50%. If not more. So what will those 500,000 people do?

Especially fascinating to watch will be Phoenix, a fake economy based on building homes and call centers. I think we could be looking at unemployment there of 30%+ - although many of those jobs will not show up in the official number as the government doesn't count them - self employed realtors and appraisers, illegal immigrant home builders, etc.

When you have a housing ponzi scheme unwinding, combined with massive REIC job losses, you just have to wonder how low we'll go...

Housing Slump Threatens Jobs - The economy's growth has never before been so driven by real estate. Now that engine is sputtering

With home sales down by nearly a third in Florida last quarter, thousands of those who hoped to cash in on the real-estate gold rush are now facing the cold reality of working in one of the country's most cyclical businesses.

"Everyone's getting out," Massad says of colleagues who have already traded in their real-estate licenses for jobs in the jewelry trade and Internet sales.

"There's somewhat of a time lag here, but everyone's eventually going to feel it," says Jay Butler, director of the Arizona Real Estate Center near Phoenix, where housing-related commerce accounts for about a third of the local economy.

"The numbers just don't add up," says Vince Malta, CAR's president, who predicts a coming shakeout as less experienced agents find they can't earn enough to stay in the business.

That process is already underway in other housing-related jobs, such as mortgage lending, title services, and appraisals.

It's not just bubblesitters paying off any debt and going into cash. Investors and corporations are doing it too.

It seems like the smart money is taking their chips off of the table, heading over to the cashier and going back up to their room to watch CNN. Here's a piece in the Financial Times today, which went on to note that 4 of 5 CEOs expect business conditions to deteriorate next year.

Looks like the leaders are seeing the storm clouds and are getting ready. Even though the masses are still out driving their leased convertibles with the top down. That's a lot of metaphors, but you get the point... Get to the basement, quick.

Investors' liquid dreams will not stave off crisis

Companies, pension funds, banks and private equity investors are certainly flush with cash. But it is unclear why they should keep lending it at cut-price rates or spending it on ever more expensive assets.

Every period of financial distress, from the Dutch tulip mania in 1637 to the Asian crisis 360 years later, has been marked by the kind of financial speculation and expansion in credit we are witnessing now.

Admittedly, the shock even that triggered previous liquidity crunches - lean harvests, wars, corporate scandals - has yet to materialise.

But the recent history of hurricanes, killer diseases and terrorism shows that there is no shortage of candidates. Investors should bear in mind that liquidity is a fickle friend and will disappear faster than they can say "bear market".

Ah, the drumbeat of war... pa rump a pum pum, pa rump a pum pum

Should be an interesting day tomorrow. Already getting more and more interesting by the hour... Iran and oil prices can quickly add the kerosene to this housing fire...

Iran has turned away U.N. inspectors wanting to examine its underground nuclear site in an apparent violation of the Nonproliferation Treaty, diplomats and U.N. officials said Monday.

The officials, who spoke on condition of anonymity because of the confidentiality of the information, told The Associated Press that Iran's unprecedented refusal to allow access to the facility at Natanz could seriously hamper international efforts to ensure that Tehran is not trying to make nuclear weapons.

The revelation came on the eve of Iran's self-imposed Aug. 22 deadline to respond to a Western incentives package for it to roll back its disputed nuclear program. The United Nations has given Tehran until the end of August to suspend uranium enrichment.

Meanwhile, Iran's supreme leader Ayatollah Ali Khamenei said that Tehran will continue to pursue nuclear technology, despite a U.N. Security Council deadline to suspend uranium enrichment by the end of the month or face the threat of economic and diplomatic sanctions.

"The Islamic Republic of Iran has made its own decision and in the nuclear case, God willing, with patience and power, will continue its path," Khamenei was quoted as saying by state television.

Pat Buchanan trumps HP, declares "third world conquest of America"

Illegal immigration, in the context of a housing meltdown and recession, is going to be the single biggest issue in 2008. Addressing this subject is not racist, it's reality. If green people from France were the ones pouring across our border illegally, I'd have something to say about that too.

Nice to see Buchanan taking the lead in what is otherwise a leadership vacuum. Both parties are gutless and clueless on this issue, seeking to score political points versus addressing the issue head on. Hopefully we'll see a change, and if the Republicans push this issue, they can win on it.

Here's the synopsis of his new book, via Drudge:

As Rome passed away, so, the West is passing away, from the same causes and in much the same way. What the Danube and Rhine were to Rome, the Rio Grande and Mediterranean are to America and Europe, the frontiers of a civilization no longer defended.”

So begins a new work of warning from Pat Buchanan. And this time Buchanan goes all the way. STATE OF EMERGENCY: THIRD WORLD INVASION AND CONQUEST OF AMERICA hits streets this week and is designed to jolt readers with stats/analysis of illegal immigration gone dangerously wild.

Buchanan warns: “The children born in 2006 will witness in their lifetimes the death of the West."

Buchanan slams the president: “Concerned about his legacy, George W. Bush may yet live to see his name entered into the history of his country as the president who lost the American Southwest that James K. Polk won for the United States."

The Republican Party, a wholly owned subsidiary of the U.S. Chamber of Commerce, is in the grip of a cult called “Economism.” It is all about money now. The GOP worships at the “Church of GDP”

HousingPanic Stupid Question of the Day

What percent of people in America now believe home prices are heading down? What percent believed that a year ago?

(bonus points if you can identify the animal and make the connection...)

Want a peek at what's to come? Look at the housing crash underway in Australia

Housing can only go up and up and up they told us. There's never a bad time to buy real estate, they told us. Housing prices have never fallen, they told us.

I found it interesting in the article below that homes in the far-flung surburbs are getting killed even more than the closer in ones because of petrol prices. Ditch the hummer, and ditch the stucco roof home in Maricopa too...

Also, that sea of interest-only, no down, speculative buyers in 2004 and 2005 who have never seen a real estate downturn? They're about to find out why a down-payment, paying principal and PMI used to be the norm, not the exception. Hopefully they'll be the norm again one day soon.

And all of a sudden, 40%+ price drops seem more realistic. Away we go...

Housing crash puts sellers in debt crisis

A THREE-BEDROOM brick-veneer house in St Clair sold for just $260,000 at the weekend - down about 42 per cent from its last sale at $450,000 in 2003 in a further sign of the depressed state of the Sydney property market.

Only one person bid on the house in the city's west. The mortgagee sale was forced after the owners could not meet the interest payments on the $405,000 they borrowed to buy the house at the peak of the market.

The Herald checked 16 properties in south-western and western suburbs listed at the weekend and found 60 per cent had prices or had attracted offers at a discount to their last sale price.

Increasing petrol prices appear to be compounding the impact of repeated interest rate rises on properties in Sydney's outlying suburbs by driving prices down.

Lethbridge Park, near Penrith, recorded the second highest fall, when a townhouse that sold for $257,000 in 2003 was resold by mortgagees for $156,500, reflecting a roughly 40 per cent fall.

At Heckenberg, a four-bedroom house that sold for $330,000 in 2003 resold at $255,000 in another mortgagee sale. Four of the seven registered buyers put in bids before the Adaminaby Street house sold at an approximate 22 per cent discount to the property-boom price.

Given it has been 16 years since the last recession, long-time estate agents fear the fate of a generation of owners who had not experienced having a loan when times were tough.
Mr Beatty said: "There was a wave of people punting on the expectation of constant price rises until well into 2004, even after the three interest rate rises of late 2003. There has been significant price deflation and many now have negative equity in their homes.

House stager: $10,000. Realtor: $30,000. New carpets: $5,000. Still doesn't move? $9.95 St. Joe!

Yup, times are-a-gettin' tough. Next we'll be seeing voodoo doctors, palm readers, rain dancers and exorcists if this dead inventory doesn't start movin...

When sales fall, they call St. Joe

Donald Ward Cranley doesn't need to look at the latest economic indicators to know how the real estate market is faring. He just checks the inventory in his shop, Ward's Gifts, on High Street in Medford.

If sales of the beige, 5-inch St. Joseph statues are slow, it means the real estate market is strong. If sales are brisk, the market is weak. Lately, all signs point to a real estate meltdown: He's selling 300 statues a month.

"We can't keep them in stock," he said. "Everybody comes in here looking for them. Realtors are buying a dozen at a time."

St. Joseph statues have long been used by sellers to help move property. Tradition has it that if you bury a statue upside down and facing the property you are trying to sell, St. Joseph will direct a buyer your way.

About half of the agents in Zajac's office use the statues. Some sellers are a bit reluctant to embrace the tradition, but if the market gets soft enough and houses sit for long enough, most eventually come around, Zajac said.

August 22nd is just hours away... What will the Iranian whacko do?

As HP readers may remember, 8/22 is the date that the Iran whack job said he'd get back to the world on their nuclear offer. Not the 21st, not the 23rd, not by the end of July as they required, not the end of August. Nope, the 22nd.

Why? Because that's the day muhammad rose to heaven.

Really. So great, we have the whacko there who believes that he's ushering in the appearance of the hidden imam, and we have the whack job running the US who believes in the rapture, the battle of gog versus magog, and armageddon. Nice combo, the two of 'em, wouldn't you say?

So, now that we've got that out of the way, enjoy Iran Week, and the market turmoil. It started early with their test firing 10 missiles today. Fresh off of his victory versus Israel, I think he's more emboldened than ever, and will have a big, BIG, announcement for the world this week.

Read the entire article in today's Times. You'll be glad you did.

Iran's president is the West's looming nightmare - and this week he's promising to make matters worse. If some Iran-watchers in America are to be believed, we could be 48 hours away from the day of judgment.

Mahmoud Ahmadinejad, Iran's president, has promised to deliver on Tuesday his response to international demands that Iran stop enriching uranium for nuclear use. By the Islamic calendar, Tuesday is also a holy date: the night when Muhammad rose to heaven from the al-Aqsa mosque in Jerusalem on a buraq, a fabulous winged beast with the body of a horse and the face of a woman, and reappeared in Mecca.

Will Ahmadinejad seize the moment to unveil the possession of some new fissile material or weapons system, perhaps a nuclear-tipped one? Bernard Lewis, the West's foremost scholar of Islam, has even warned that on such a symbolic date it would be wise to bear in mind the possibility of a cataclysmic event such as a strike on Israel.

Are we seeing a head and shoulders for Gold? And will we see a commodities meltdown now as well?

I sold GLD last week at break-even (again) - $624. The chart is a perfect head and shoulders. I wanted to stay in, especially with Iran's August 22 approaching, but figure cash at this point is safer. Remember - my goal is asset protection during this meltdown. If gold isn't going to act in its traditional role as a flight to safety and store of value, what will?

Also, I've been watching the insane run-up in Nickel. Talk about a blow-off top and buying panic. Now you have the UK market makers restricting trades there.

Bottom line - with a worldwide recession coming, wouldn't that help tank commodities - Gold and Silver included?

Perhaps there are no safe havens? I hate US$, it needs a place to go, but that place must generate interest and maintain worldwide buying power.

Financial Times lead editorial: Hard edge of a soft landing for housing - "effect on world's economy could be depressing indeed"

When the world's most respected business publication comes right out and tells it like it is, well, I'd say that trumps David Lereah, the goober at Bloodhound, that LA realtor poster, Bob Toll and all the other housing ponzi scheme purveyors and polyannas.

Yes, being a realist or a truthteller doesn't make you Mr. Popular, but in the end, aren't people better off with the truth? One thing Bush and Cheney should have learned by now with Iraq, or Dusty Baker with the Cubs...

Prepare for the fall folks. This epic credit-leverage-fueled, investor-led ponzi scheme spread to the financially uneducated and unsuspecting masses all over the world, and now it's over.

Hard edge of a soft landing for housing

The world's leading economies have long been given extra impetus by an extraordinary boom in the price of houses. That boom now seems to be coming to an end, but exactly what happens next and what the effect will be on the world's economy is not clear; the risks, however, are substantial.

Naturally, attention is most closely focused on the US market, particularly following the Federal Reserve's decision last week not to raise interest rates after 17 successive rises. That market now looks feeble.

What makes housing prices so im­ponderable is that they are bound up in the animal spirits of everyday punters. Prices can be pushed higher simply by the expectation that that is where they should go, as buyers scramble to buy what they cannot afford using ever more innovative mortgage products, while sellers hold on to property and sell only with a view to buying something even bigger. A slowdown in these red-hot markets is inevitable. It may be gentle, but it is impossible to rule out a collapse of sentiment and of prices.

Even a soft landing would mean a prolonged period of stagnant nominal prices. Prolonged weakness in the housing market has characterised the struggling Japanese and German economies, which is hardly encouraging. The trouble is that greater housing wealth has encouraged consumers to borrow and spend. If housing wealth stops rising, even if it does not fall, consumer spending, the engine of economic growth in the short term, is likely to stall too. Australia and Britain have both seen this pattern already. If the US consumer were to give up and go home, the effect on the world's economy could be depressing indeed.

Fundamentals? Negative cash flow? Historical deviation from the mean? Nope, it's the "negative information" causing the housing meltdown

Gotta love a realtor who blames the media and the "negative information" for bursting the bubble.

Try reality, hon. Try economics 101. Try being honest with your clients. And try to get a grasp of the fact that the Phoenix market is in full melt-down mode, and the "negative information" is just the light of truth finding its way to your clients (oops, I mean suckers).

Folks, I'd have a lot more respect for realtors if once, just once, I'd hear one say "yup, housing became wildly overvalued and now prices are going to come back down to their historic averages". Give me one honest realtor, just one. Is that too much to ask?

Here's (yet another) realtor-quote-infested article from the lazy reporters in Arizona.

Home buyers have the upper hand in the Valley’s real estate market for the first time since the record run-up in prices began two years ago, but industry-watchers say most are reluctant to jump in and instead are waiting to see when values will bottom out.

Put simply, buyers are scared, said Jan Montgomery, a realtor who owns Canyon Shadows Realty in Mesa. “There’s a lot of negative information coming at them about the bubble bursting and the market falling,” she said. “Everything is all negative and they’re taking that on themselves, thinking ‘Maybe I shouldn’t do anything. I should just wait until it settles.’

Some sellers are finally starting to realize their asking prices are too high and are cutting them. Listings are up considerably and prices have reached a tipping point in sensitive areas, mostly on the outskirts.

“There’s a lot of buyers that are still on (the) sideline,” said Neil Brooks, who sells homes mainly in Scottsdale for Century 21 Arizona Foothills. “There’s a lot of sellers that are still in denial.

An honest view from a realtor in Atlanta (why can't more just tell it like it is?)

Mish posted this the other day, from a realtor on Fool. I'll put just the most recent letter, but it was fascinating to read the progression - how the realtor got to this point, from uber-cheerleader and braggart just a few months ago. Go to the link to read his postings from 2004 onward.

You know there's a million realtors out there all dealing with the same issue - the bubble has burst, sales have dried up, they're now seen as liars, they've been disintermediated, and the money just ain't coming in anymore.

Many probably can't even make their own house payments anymore. That's not gleeful - it's just the way it is.

2006-07-20
Most of the regulars here know that my wife and I are a REALTOR team associated with one of the major national firms here on Atlanta's north side, out in Roswell and Alpharetta. It's been a character-building year, as another agent in our office put it the other day. What makes it more stunning, at least to me, is that it started out so well. We ended the first quarter with nine deals pending or closed, which is a very solid start. Then we hit a brick wall with only three deals in the second quarter and that would make it our worst second quarter ever in our 12 years.

"Then it got worse. Normally, over the years, about 1 in 15 deals falls out -- that is, they fail to close. Usually, it's over the inspection contingency amendment, but not always. At any rate, two of our three second-quarter contracts failed to close. Unbelievably, we booked and closed only one contract in the second quarter. So here we are, July 20, with only 10 deals for the year.

What a mess.

"So here we are with 10 deals and needing a total of about 20 to meet our cash flow needs: personal and business, plus taxes.

Today show report from a few weeks ago about the bubble bursting

Housewives watch this show right? Probably caused a few dinner table conversations that night:

"I told you, you fool, not to put OUR money down on that Phoenix pre-construction condo! You idiot! How could you!"

That type of thing...

So whadda ya think - I found a house for $279.99 - assembly required

Scroll back up and take a look...

I think that's a fair price. But you would be looking at thousands of dollars in transaction fees, that's the only drawback. Drop that sucker down in San Diego though and it'd be worth at least $300,000!

Realtor troll posts to HP. Must be getting mad, lonely and desperate right about now...

This same troll posted the historical median prices from LA to another post - kind of like the one we used to get months ago with the US median prices - with the inference that prices never go down, that real estate only goes up and up and up and up and up

Sorry Richard (nice photo/drawing by the way - ha!), past performance does not dictate future returns. But that's not on the GED test, so I'd understand if that's news to you...

Here's the troll's HP letter:

Hello All,

Let me guess, those of you who are putting off buying a home, are the same people who made the same conclusion three years ago.

I bet, three years from now with rates hovering above 7.5%, you'll have something else to complain about.

Congrats! It's never a bad time to buy real estate. Life doesn't wait for you. If you truly want to understand the local market, talk with an real estate agent or better yet, call the local Board of Realtors who will provide you hard evidence.

Sincerely,Richard Johnston, REMAX
Los Angeles Real Estate Agent

Empty malls: Consumer euphoria turns into a consumer-led recession - Consumer confidence tumbles again

HP firmly believes you'll now see a consumer-led recession, as they wake up to the reality that the housing ATM closed, they actually owe all that money to someone, their phantom equity is falling, they haven't saved in years, their wages haven't increased, inflation (real inflation, not the government number) is out of control, their credit cards are maxed out, and they're in a whole heap of trouble.

Keep in mind consumer spending represents 70% of our entire economy.

No more trips to Ethan Allen, no more spending sprees at Home Depot, no more dinners at PF Changs. It's time to tighten the belt, hunker down and get back to reality.

Confidence among U.S. consumers fell more than forecast in August as Americans paid higher prices at the gas pump.

The University of Michigan's preliminary index of consumer sentiment declined to 78.7 from 84.7 in July. The measure has averaged 88.1 since monthly data were first compiled in 1978.

``The housing downturn and the cumulative effect of energy and electricity price increases and higher interest rates, among other factors, are definitely having an impact on the consumer,'' Fisher said.

``The housing boom's behind us and the bubble is deflating very rapidly,'' said Joel Naroff, president of Naroff Economic Advisors in Holland, Pennsylvania.

House gambling in Reno - you would have already lost 10%, and another 20% fall is on the way

Poor folks (and flippers) who got suckered in (by the NAR) and bought at the top last year. They've already lost 10%+ and we're just getting warmed up.

If you bought in Reno last year for $500,000, you've already lost $50,000, plus say 8% selling costs or $40,000, so you're down $90,000 in a year just by making the stupid mistake of believing real estate always went up. Two years from now you'll have lost another $100,000, and you're well on your way to Chapter 11. Ah, the power of leverage...

Should have stayed at the craps table.

Morris estimates that the downturn will last about three years. Though he said this downturn is a typical market correction, and is not especially bad compared with historical downturns in the area.

"Prices are probably going to adjust across the board for the majority of houses a solid 20 percent," Morris said. "There will be a few that will adjust by the spring or summer of '07 by 30 percent, and a handful that will adjust worse than that."

Reno's median prices fell 4 percent in July, to $399,000, compared with the same month a year ago. Sparks fell 7 percent, to $315,000, and the North Valleys saw a 4 percent drop, to $278,500.

David Graham, Realtor for Ferrari-Lund Real Estate, said that because of the market shift, buyers have changed their behavior.

"Properties are being shown, but buyers are saying that it is too expensive," Graham said. "Buyers are being very selective today before they make an offer, and price is the determining factor.

"(The price) was much too aggressive to start with, and the market conditions are saying we can't support that price."

Phoenix dead housing inventory at 53,126 today - and growing

Ya gotta wonder why houses are still going up in Phoenix all over town, with unsold inventory now at 53,000 units, up 523% over last year this time.

Yes, that's five hundred and twenty three percent. For Greg, the confused realtor at the Bloodhound group, take note - supply, demand, price.

I think inventory will stay in this range for a bit, as people pull their listings now and give up, not getting the price they "deserve", finally realizing they tried to sell too late.

But then again, you have all those flipper-owned condos coming on the market too, and I doubt many of those flippers will choose to rent 'em out and lose their shirt with the negative cash flow.

At the end of the day, Phoenix is still Housing Rout ground zero in my book (and in my heart). If you want to see a housing disaster, take a vacation this winter in Phoenix. The layoffs, the illegals, the For Sale signs, the "New Condos Available" listings, the lying realtors, the empty new neighborhoods, and the locals wondering where all the buyers went.

Desperate and soon to be destitute Americans still sucking the phantom "equity" out of their crashing houses

Don't any of these fools realize they have to pay that money back one day? Oh dear god this is going to end so, so badly.

Many U.S. homeowners continue to take cash out of their homes even as mortgage rates climb and home sales slip, helping to brace the economy, economists said.

This year, Americans who refinance their mortgages are expected to draw $257 billion of wealth out of their homes, according to mortgage finance giant Freddie Mac.
That's $13 billion more than the refinancing cash-out seen in 2005 - the hottest year of the recent housing boom.

"I would have thought the home equity extractions would have been much weaker now," said Frank Nothaft, chief economist for the mortgage finance giant.

Consumers' spending of cash extracted from rapidly rising home values has helped fuel the U.S. economy's expansion over the past few years. But the housing sector is cooling, and most analysts expect that support to consumption to falter.

With existing home sales off 7 percent in the second quarter and mortgage rates climbing, some economists see the ongoing refinancing spree as the once-hot housing sector's last gift to the nation's economy.

The evil Ameriquest competing with incompetent Century 21 for worst real estate ad?

Renters and Hispanics - the last suckers in?

HousingPanic Stupid Question of the Day

If the housing bubble didn't pop, and home prices kept going up 10% a year, wouldn't that have kinda presented a problem for society?

Could China crash?

I've seen overheating before, but then you have China. Plus does anybody trust a group of insulated corrupt communists to manage the fastest growing major global economy? I know I don't.

I think the perfect storm, and China crash, could come about with:

1) The US consumer strike lessens demand for China's (oops, I mean Wal-Mart's) crap
2) The US$ bonds China bought up with their surplus capital becomes more and more worthless
3) Congressional pressure gets China to revalue their currency (thus lessening demand for China's (oops, I mean Wal-Mart's) crap)
4) China's tightening policies (see link) cause speculation in Chinese assets to stall, and like Shanghai, property values to fall
5) Even cheaper labor is found elsewhere as Chinese demand wage hikes
6) Rebellion and political strife in China spooks markets and access to capital
7) China's state-sanctioned baby-murder policy (oops, I mean one-child policy) continues to create a demographic timebomb, with younger workers not being able to pay for a rapidly aging population's needs

That's my starter list, gotta be more. But sooner or later, China (oops, I mean Wal-Mart) will blow.

THE People's Bank of China raised the deposit reserve ratio of lenders 0.5 percentage points yesterday to rein in excessive lending. The hike brings the reserves most banks are required to deposit with the central bank to 8.5 percent. The central bank also raised the bank deposit reserve ratio 0.5 percentage points in June.

"The move aims to tighten up banks' liquidity, curb excessive growth of money and credit, as well as maintain the development of the economy," said the central bank in a statement posted on its Website. The move came as a surprise to many economists, who have been calling on the central bank to raise interest rates to reduce the money available for investment and prevent possible overheating of the economy.

The US may be heading for a crash — but it's not the end of the world

I hope HP'ers enjoy some of the view I get by being a US citizen based in Europe. The whole world understands that the planet's economic engine relies on the US as its sparkplug (no matter how much they dislike that fact). And I think everyone outside of the US is getting a wee bit nervous about the upcoming housing-led US recession.

This article mirrors my view - that we're best off deflating the balloon, taking our medicine, then going on to prosper. The fatal error Greenspan made was in taking the easy way out, which created the mother of all disasters. If he had done the right thing in 2001, we wouldn't be in the mess we're going to be in in 2007 - 2011. Oh well. Now let's see what Ben does - is he a short term thinker, or a long term visionary?

Now we are about to discover, with great consequence for the world, whether this run of successful soft landings can continue, or whether the United States, the screaming engine of global growth for the past five years, is heading for a crash.

There are, broadly, three views among economists and, it seems, among Fed officials about what happens next.

The first, an optimistic assessment in keeping with recent economic history, favours the soft landing. The Fed has raised rates by just enough, according to this view, to restrain growth so as to squash inflation back into its box. The Fed funds rate now stands at 5.25 per cent; with inflation in the 2.5 per cent to 3 per cent range, that represents a real rate of about 2.5 per cent, a reasonable amount of restraint.

The second view is pessimistic and fearful. It believes that the Fed has already gone too far. The housing market, the driver of so much demand for the global economy, is off sharply. Many Americans are desperately refinancing short-term adjustable rate mortgages they took out three years ago when rates were at historic lows. They are finding themselves with thousands of dollars less a year in disposable income than they had last year. Debt levels are sky high and the savings rate is negative.

As consumers rebuild their tattered balance sheets, they will cut spending sharply, with catastrophic consequences. High oil prices are making matters even worse.

The third view might be called fatalistic realism. It accepts the second proposition that, on current policies, a recession is coming, but insists that it is absolutely necessary and its says that the Fed, far from pressing on the economic accelerator, should keep its foot on the brake.

For the Fed, and the world, a recession may be the price that now needs to be paid to avert a longer-term catastrophe.

HP'ers we have a new expression: Housing Rout

All those adjectives, and we never came up with that one. Should have. Joel Naroff, President of the National Economic Advisors, gets the credit. Let's make it stick.

I also like "rolling over" versus "soft landing". Nice to see the MSM pick up some non-NAR-endorsed housing lingo...

On a year-over-year basis, housing starts are down 13.3% in July.

Echoing this, the confidence of U.S. home builders collapsed in August, falling to the lowest level since February 1991, the National Association of Home Builders reported.

Economists generally agree that the housing market's rolling over. There remains a debate about the magnitude of the decline and its impact of the overall economy.

Joel Naroff, president of Naroff Economic Advisors, said it is no longer correct to describe the weakening housing sector as a slowdown. "Rout" is now the proper word, he said.

"Things seem to be getting worse. By the end of the year, we will likely be looking at starts off at least 20% and permits 25%. Is that a bubble bursting? You tell me," Naroff said.

Right on schedule, here come the homebuilder layoffs

And, as HP'ers know, there's many (unfortunately) more to come throughout the REIC - realtors, mortgage brokers, builders, title agents, Home Depot sales people and so many more tied to homebuilding, which is crashing (housing rout).

Then you have the multiplier effect - dry cleaners, restaurant workers, Lexus salesmen, etc.

Then you have these laid off people 1) trying to sell their homes, adding fuel to the housing fire, 2) not buying new homes and 3) not shopping at Nordstroms.

And that makes the cycle speed up even faster. And no, there's no way out of this, it's just a ride we have to take on the credit bubble highway. So I hope you've packed for the journey.

Homebuilders have not had to work hard to sell houses in Frederick County — until now.
A previously booming industry is laying off workers, offering cheaper upgrades and advertising heavily.

Dan Ryan Homes, which has been in business in Frederick County for 16 years, recently laid off about 20 percent of its 200 employees and, for the first time ever, is depending on advertising to attract homebuyers.

Other major homebuilders are also laying off workers, said Brian Patchen, director of the Frederick County Builders Association.

‘‘Builders had been building at full capacity and the layoffs are obviously a reflection that they are not at full capacity anymore,” he said. ‘‘They can’t afford to carry extra employees.”

‘‘We knew it was going to happen,” Kostreski said. ‘‘It has been too pretty for too long.”
The dip is part of a natural ebb and flow of the housing industry, she said.

Been away for a couple of days - what'd I miss?

I was up in Scotland - got to play at St. Andrews (Eden course) - great town, insane real estate prices there and in Edinburgh, but what else can you expect in the property-ponzi-obsessed UK?

I read in the papers on the way home that buy-to-let (i.e. rent) mortgages have reached an all-time high in the UK, and that investors are snapping up properties regardless of the yields, cash flow or fundamentals. Why? The promise of future price appreciation.

When oh when will this big house of cards finally collapse?

I saw that the market rallied thinking the Fed was done and peace & prosperity will break out again. Wrong. Psyche. Head & shoulders. August 22nd. Consumer strike.

I also read that Dubai is home of 17% of the world's cranes. No, not birds, cranes of the big metallic kind.

Finally, I saw that London bankers made a record £17 billion in bonuses the past year, which has inflated home prices here a bit more, as that loot goes toward Ferrari's, Russian girls and Chelsea flats. And yes, all regardless of the fundamentals!

My question is, what happens when the bonus money runs dry, as it always does with these cycles, and there's no new sucker (bonus winner) there to buy the Ferrari, Russian girl or Chelsea flat at a higher price? Anyone remember the sea of used (and repossessed) Porsche's in Silicone Valley in 2001?

Cheers

Cut the house price (another) $20,000, or throw in a free Jeep?

Here's an issue an HP'er brought up in BubbleTalk - cut the price or add an incentive? As you know, the homebuilders are mainly going the incentive route so as to not destroy the "median new home sales price" number, and also to keep some integrity in their pricing so as to not piss off their recent buyers (who'll sue).

By the way, this is why the NAR's numbers are bogus.

So what do HP'ers think the seller should do?

Are there pros and cons to incentives vs. price reduction besides bringing attention to a property? Who pays taxes on the incentive? Is there anything else he should consider before going through with the incentive idea?

Another way of spinning it: Home Sales Decline in 28 States

This should adequately freak out any sellers or buyers... as well as the entire REIC. Get ready for our Time Magazine cover story!

The slowdown in the once-sizzling housing market is spreading, with 28 states and the District of Columbia reporting spring sales declines, led by big drops in former boom areas of Arizona, Florida and California.

Nationally, sales were down 7 percent in the April-June quarter this year compared with the same period in 2005, the National Association of Realtors said Tuesday in its latest state-by-state look at housing conditions around the country.

The Realtors survey showed that the biggest declines occurred in states that had been enjoying red-hot sales during the five-year housing boom.

The five biggest declines this spring compared to the April-June period of 2005 were Arizona, down 26.9 percent; Florida, down 26.7 percent; California, down 25.3 percent; Virginia, down 23.9 percent, and Nevada, down 23.5 percent.

Brrrrr... the consumer-fueled economy will be getting colder after this CNN report: Home prices in deep freeze

Congrats to the HP'ers who had Detroit in the Housing Death Pool. They're leading the nation downward now...

I do hate reporting on these deceptive NAR numbers, as they use prices last month vs. 12 months ago, when we all know damn well things have changed dramatically in a year. But hey, here it is...

Second quarter numbers are in for more than 150 markets. Overall growth is down; more markets show declines. Plus: Where the strength still is.

After several years of turbo-powered growth, home prices have gone into a stall, according to the latest prices released Tuesday.

Nationally, the median home price rose just 3.7 percent to $227,500 from last year's second quarter to this year's, according to the National Association of Realtors.

It was the second consecutive quarter in which home prices failed to repeat the gains of more than 10 percent recorded throughout 2005.

Twenty-six markets of the 151 surveyed experienced price declines from a year ago, ranging from 0.1 percent (Columbus, Ohio) to 11.3 percent (Danville, Illinois).

And at least 59 markets finished the quarter down from their highs set sometime during the previous three quarters. Boston, for example, showed a slight gain (0.6 percent ) compared with a year ago, but the city's median price of $304,700 was down from its high of $306,500 set in the third quarter of 2005.

Among big cities, Detroit cratered 8.0 percent and Cleveland sagged 5.2 percent.

Savings, stocks, bonds, pensions - faggetaboutit! We own a HOME!

Why do I have a feeling the upcoming baby boomer retirement wave is about to come crashing down on the big coral reef of life?

More use homes as main asset

Instead of building a nest egg for retirement, a growing number of homeowners are putting themselves in a debt trap.

Economists and investment advisers say that more Americans are relying on their homes as their primary asset for retirement. These retirees-to-be reckon they can always tap the expanding wealth in their residence to cover their leisure years.

The reasoning goes something like this: Need some cash? No problem, just get a home-equity line of credit. And because home values have skyrocketed in recent years in places such as the East Bay, homeowners figure they can replace the equity lost from taking out the loan within a year or two. Plus, down the road, they assume they can always just sell the house or get another loan to raise some quick cash for retirement.

"People are making the mistake of thinking they live inside a big piggy bank," said Libby Mihalka, president of Altamont Capital. "They don't realize it can all snowball out of control very quickly. Their house is not an ATM."

"This is a form of financial insanity," said Frank Fernandez, chief economist with the Securities Industry Association. "You are digging yourselves deeper into debt using an asset that could decline in value."

"Among my East Bay clients, I often see a person's retirement plan and equity in their home comprise well over 90 percent of their net worth," Valentine said. "Among Peninsula clients, it's only about 50 percent."

Iran President Ahmadinejad interview with 60 minutes on CBS news - video from YouTube below - uncut and complete will also be on C-SPAN TV in US

Here's the interview with Hitler Junior (Ahmadinejad)

Sociopathics are always fascinating to watch. Especially when they're heads of state.

And yes, this has to do with the bubble, because this nut will crash our market, send inflation out of control with oil as the lead, and take down the price of your house even faster.

Watch the whole thing by clicking on the youtube poster's video playlist

With the housing ATM now out of order, what happens to the companies who installed and serviced the ATMs?

My guess - a complete meltdown, massive layoffs, eventual insider trading arrests, and stars of the 2008 congressional hearings. Note - I'm short Countrywide (CFC). Here's Fleckenstein's take on this heading-south-quickly group:

Neither a borrower nor a lender be Meanwhile on Wednesday, the financing mechanism of the housing ATM food chain saw some holes blown in it. Specifically, Accredited Home Lenders (LEND, news, msgs) was down over 20% on a poor quarter. Accredited Home (like New Century Financial (NEW, news, msgs) a week earlier) was forced to keep the loans that it was unable to sell.

No prisoners were taken last Wednesday -- witness the pummeling not just of Accredited Home but also New Century and Countrywide Financial (CFC, news, msgs). (CFC's monthly comps were horrific.) Adding to the angst: Toll Brothers (TOL, news, msgs) and WCI Communities (WCI, news, msgs) -- "building" blocks in the housing ATM itself -- reported poor results that day, which saw the homebuilders under pressure. Ditto all those members of the financial-dark-matter group that I mentioned in last week's Contrarian.

House pigs waking up, now downsizing the McMansion

Looks like some Americans are seeing the error of their ways, downsizing their soulless McMansions (and those heating and air conditioning bills) for a simpler way of life. Three cheers for anyone so smart.

My take: Shallow people who view their possessions as the most important thing in their lives live in McMansions. Unless you have eight kids, do you really need eight bedrooms and 8,000 feet? Maybe they'll sell the Hummer too...

Watch out below at the high end of the market - the McMansions are going to get slaughtered first.

Americans are carrying a lot of excess weight and desperately want to slim down. No, not their waistlines -- in the size of their homes.

"Steeply deteriorating." "Hard landing." "Kaput." These are some of the terms used by analysts to describe the slowing of the U.S. housing market. And with the glory days of home-price appreciation now over, some homeowners are declaring, "Downsize Me!"

A huge gap between the supply of homes for sale and demand for housing means prices are leveling off -- and could tumble.

David Horwitz and his wife, Diane, are the type of homeowners looking to streamline their expenses and unload their roomy homes for more humbler abodes.

The Horwitzes, both semi-retired, just moved into a 1,200 square-foot apartment on the Upper East Side of Manhattan after living in a 2,200 square-foot home in Scarsdale, New York.

"Our property taxes went down by 1,000 percent, the ConEd (bill) was cut by two-thirds and the cost of home maintenance was reduced by at least 50 percent," said David Horwitz. "No gardener, no roofer cleaning gutters, no tree spraying, no snow removal, no exterior painting every six or seven years."

The Horwitzes, who have no mortgage, plan to reside in the apartment for a while, so even if prices fall it is of little significance to them.

"Homeowners are probably sensing now may be the right time to get the best price before the market cools further," Ramirez said. "Some of these homebuyers are empty-nesters now finding their homes are larger than what they need and more than they can handle."

The average home size went from 1,500 square feet in 1970 to more than 2,400 square feet in 2005. During the same period, the average household size declined, from 3.11 to 2.59, he said.

HousingPanic Stupid Question of the Day

Should people who make $50,000 a year be living in $500,000 houses?

After the flipper scourge left Miami, Phoenix, San Diego and Vegas, where do you think they went?

Would you believe China?

Shanghai already saw the boom, and the government helped lead to the current bust. But the rest of China is still booming and a commie-led bust is gonna burn many in this game of hot potato.

It's interesting to see this disease spread though throughout the world - China, Canada, Venezuela, ...

Real estate prices in Beijing, Shenzhen, Guangzhou, Shanghai and other cities are currently skyrocketing, while large numbers of newly built apartments lie empty.

This defies the conventional wisdom that property prices are determined by supply and demand.

A number of factors contribute to this, including secret deals between real estate developers and local governments, as well as the entry of overseas speculators to the domestic property market.

Although overseas capital accounts for a rather small portion of total investment in the real estate sector, it plays a disproportionately big role. This is because the price of real estate, which, apart from being one of the basics in people's lives, is regarded as an investment, is largely set by the expectations of the investors, or house buyers. Overseas capital, small in proportion as it is, helps largely drive up the market expectations and, in turn, real estate prices.

This sharply increasing overseas investment in the domestic real estate sector could give rise to property bubbles. Once they have burst, these bubbles could deal a telling blow to the Chinese economy as a whole.

The vast majority of countries ban housing speculation, taking into account that housing is one of the basics on which people's livelihoods rely. Many have enacted laws to limit housing speculators' profits. Among the 187 member economies of the International Monetary Fund, 137 have worked out measures to restrict the entry of overseas capital to their real estate markets.

One of the lessons learned from the 1997 Asian financial crisis demonstrates that giving free rein to the international capital's housing speculation is bound to trigger domestic monetary crises.

I think HP'ers need a bit of this tonight - enjoy. Imagine, by John Lennon

Is this the part of the real estate cycle where people start selling everything not bolted down to make their ever-increasing house payment?

Hello, my name is HP (Group: Hello HP!). I'm not a gambler. I don't have a gambling addiction (Group: Awww!)

Like many HP'ers I'd imagine, I am not a gambler. I wager on stocks, but small amounts. If I'm in Vegas, I'm looking for the $5 table. If I have a stock hunch, I would generally throw $1,000 at it, $2,000 max. I like security, I like firmness with my investments. I like cash. COP and GLD too, but mainly cash.

Sure, I could have made a boatload following my own advice, shorting the homebuilders that have already crashed. Could've made a fortune buying spec condos in Phoenix in 2003 and then getting out by 2005. But I'm not a gambler.

I won't be the type of person who makes a fortune then loses it all.

So, with that type of personality and investment philosophy, what's a person to do in this environment? It almost feels like if you don't gamble a bit, you could get killed, really killed.

Why? Because if you touch stocks or bonds, you'll probably lose as this market just drifts lower and lower. Shorting seems wise, but can backfire real quick with a merger announcement or manipulation.

If you keep your money in US Dollars, you'll probably lose as we inflate our way out of this disaster. If you're in real estate, we KNOW you'll lose.

Even gold and silver are just treading water. Foreign stock funds - they're going down too - when the US gets a cold they sneeze. And foreign currencies are like throwing darts.

So, if you believe inflation will roar, the economy will tank, the dollar will keep falling, the US has gone over the cliff, and you're just looking to hold onto what you got, what's a non-gambling person to do? Serious replies please, my US$-heavy portfolio needs some ideas.

Bubble sitting hits the MSM: Maybe some other folks will (finally) start doing the math too

I knew it was time to sell my loft in Phoenix (that had gone up 100% in 24 months) when I could rent it out for $900 a month, or sell it for $320,000, where the new owner would be looking at a total monthly burden of $2,500 a month.

So in other words, the place would rent for 36 cents on the dollar, the new owner would lose $1,600 a month in pure hard cash flow if he tried to rent it out, and the only reason people were being so stupid was because they were betting on future price gains. How wrong they were.

Congrats to all the bubble sitters out there. You were mocked, now you're envied and written about.

Convinced home prices will fall? So are a lot of other Americans.

Some - known as bubble sitters - are acting on their conviction. They're cashing out by selling their homes and renting, figuring they'll return to the market after prices have fallen.

Bubble sitting has contributed to softening in housing markets, especially in new homes. Builders have reported slowing sales and they're offering numerous incentives, rebates and discounts in order to move inventory. Just this week, builder Toll Brothers announced they expected sales to decline substantially for the year.

Dean Baker, an economist and co-director of the Center for Economic and Policy Research, is a bubble sitter himself, having sold his home a couple of years ago. "It is a very bad time to buy. Prices are heading down," he said.

Baker also predicts that the markets that have run up the most will suffer the worst turndowns. He compares it to the tech bubble when Nasdaq stocks rang up the biggest gains before the pop and fell the farthest from their highs after it.

Play the overpriced Phoenix condo game: Guess what this one will be worth in two years

Here's your standard 2 bed, 2 bath in Tempe, Arizona, right off of a busy road, directly (and I mean directly) under the flightpath of Sky Harbor airport. 1800 sq. ft., and yes, it has a microwave!

Well, on the bright side you can watch the birds right out of your window. 747's and 777's mainly, and if you're lucky the big low-landing birds that really rattle the windows from UPS and FedEx.

List price: no, not $150,000. Not $250,000. Heck, not even $350,000. Really, it's more than $350,000, even though at that price the owner wouldn't be able to break even by renting it to a couple ASU students.

No, this gem is at... drumroll please... $1,150,000. Yes, one million, one hundred and fifty thousand dollars. Choke. Gasp. Faint.

So, what will the bank buy it back for in two years, post-foreclosure? What will the real price be in two years - what will the market bear? Get your guesses in now.

HousingPanic Stupid Question of the Day

Have we already entered The Great Recession?

Now this is laughable - the REALTOR code of ethics, which realtors must not have gotten a copy

Read through this worthless document and you'll see examples of realtors, and the NAR themselves, breaking every tenent.

I know during their grueling "schooling" they have to take an ethics session, but I'd say most slept through that part.

Here's some laughable highlights:

REALTORS® continuously strive to become and remain informed on issues affecting real estate and, as knowledgeable professionals, they willingly share the fruit of their experience and study with others

REALTORS® shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property or the transaction.

REALTORS®, in attempting to secure a listing, shall not deliberately mislead the owner as to market value.

REALTORS® shall not accept any commission, rebate, or profit on expenditures made for their client, without the client’s knowledge and consent

REALTORS® shall not accept compensation from more than one party, even if permitted by law, without disclosure to all parties and the informed consent of the REALTOR®’s client or clients.

REALTORS® shall be careful at all times to present a true picture in their advertising and representations to the public

REALTORS® shall not knowingly or recklessly make false or misleading statements about competitors, their businesses, or their business practices.

HousingPanic Classic: Re-read Barron's "The Big Glut"

Every once in awhile I like to re-read the classic bubble exposes. "In Come the Waves" is still #1 by me. But this Barron's story is also top-shelf.

IT WOULD SEEM TO HAVE IT ALL: four bedrooms, a guest house, a pool and a rock waterfall. But the vacation home in Naples, Fla., hasn't been drawing much interest from buyers, so the seller recently threw in that most modern of amenities: the $1 million price cut. That's brought the asking price down a full 25%. "If you want to sell, you've got to go back to '04 prices," says Chip Harris of Coldwell Banker Previews International, which is handling the property.

The market for second homes could use a second wind. After a long string of double-digit annual price increases, a number of second-home meccas across the country are suddenly suffering from plunging sales volume and burgeoning inventories of unsold homes. Result: Naples-style discounting is starting to spread.

[much more - read the full story...]

HousingPanic Question of the Day

Besides "Suzanne reserached this", what's been the best housing bubble idiot quote that we can now turn into a catchphrase?

(someone go find me some good David Lereah stupidity...)

San Diego single family home prices plunge $20,000 in July, "cooling off of the market is very, very hard and very, very fast"

And to think we're just getting started.

San Diego, I'm sorry to say, you're screwed.

Condo Prices See Significant Drop

While the news that home prices finally went negative year-on-year last month grabbed plenty of attention this week, a new report shows that the price dip has been even more exaggerated for condos and townhomes.

When compared with June 2005, median prices dropped $20,000 in the county last month for single-family attached homes, a category that includes condos, condo-conversions and townhomes. That’s a 5.2 percent drop over the year.

The prices also decreased by 2.4 percent from May to June and 5.7 percent from the beginning of the year, according to HomeDex, a resource compiled by Dr. Robert Brown, professor of economics at California State University, San Marcos.

As usual, those in the industry are divided over what the numbers mean, with some predicting a calming of the market and others seeing a potential crisis.

Many real estate professionals and analysts view the change as the attached housing market starting to return to normal after the escalating prices of the last few years. Others aren't so optimistic.Realtor Jim Klinge, who has been in the realty business for 22 years, said the current conditions are unlike anything he’s seen before."It’s anything but normal, if you ask me," Klinge said.

Chris Thornberg, an Anderson Forecast analyst at the University of California, Los Angeles, said the housing market is in uncharted territory. Thornberg attributes the "everything’s fine" response from the realty industry to the "bunker mode" mentality that comes in circumstances like these.

"People are loathe to realize losses in homes," Thornberg said. "They don’t want to talk about it, to think about it."Thornberg said that these numbers aren’t evidence of a soft landing.

"The industry has been really blase," he said. "This cooling off of the market is very, very hard and very, very fast -- more than we’ve seen before."

Homebuilding: Another American industry at the end of it's road. WCI orders fall 88%. Yes, 88%. Toll Brothers orders fall 45%. Pop.

The US housing industry has completely imploded, similar to the US telecom industry during the .com bust. It's over.

* Nearly everyone associated with homebuilding will be put out of work, yes, including the illegal Mexicans.
* No more homes will be built or needed for at least a decade in the US.
* City and State budgets based on homebuilding fees and property tax revenues will be decimated
* The stocks of most of these companies, down 50+ already, will head toward zero or they'll be acquired.
* You'll see massive write-offs as the builders devalue the land and assets on their books
* Millions of Americans, directly and indirectly, will now suffer the consequences of yet another popped bubble.
* Homebuyers will sue, but there'll be no assets with which to pay them off
* And the corrupt Bob Toll will go to prison, hopefully for a long, long time.

Toll:

Toll Brothers Inc. said Wednesday the value of signed contracts in the luxury home builder's fiscal third quarter fell 45% from the year-earlier period's record pace, and for the fourth time lowered its 2006 home-delivery forecast.

The builder lowered its estimate of homes it expects to deliver in the fiscal fourth quarter to a range of 2,500 to 2,800 homes, from between 2,900 and 3,300 deliveries. For the fiscal year, Toll sees deliveries between 8,600 and 8,900 homes.

WCI:

The latest news from WCI Communities (WCI) will blow your mind. WCI builds condo towers and single-family homes all over Florida and a few other places. I want to direct your attention to a line from the company's earnings release this week:

"Tower homebuilding orders for the second quarter 2006 decreased 82.6% in value to $57.0 million and 88.8% in units to 36."

I love a good graph. But the NAR and REIC won't like these...

Graphs of inventory exploding and prices falling from around the country. A picture is worth a thousand David Lereah's they say... (don't they?)...

REIC: You know you're in trouble when they create public service ads against you

"Just say no to drugs" replace with "Watch out for Whitey"

Which is colder?

HousingPanic Stupid Question of the Day

What's the shoe-shine guy thinking now?

Gotta love realtors - so many either clueless, dishonest, deceptive or in this case out-right confirmed liars

Here's Russ Jensen's report from Phoenix, a market in the middle of an epic housing collapse. It's an excellent time to buy! Prices going up over 100%! (Wonder if Russ himself is out scooping up properties - I'd bet... not)

Home values have increased by an average of 21% in Phoenix. This does vary by zip code. However, this is a highly sought after community and the Phoenix area home values are projected to grow.

Money Magazine June 2006 edition says that homes in the Phoenix area have increased 44.9% in one year and are expected to increase to 108.4% in the next five years - more than double the current home values! This is an excellent time to buy.

Now here's the actual Money Magazine article... and Phoenix chart. Note that Russ (oopsie!) said they predicted a 108.4% rise over the next five years. 100% incorrect Russ - Money listed 108.4% as the bubble rise Phoenix saw over the PAST five years. But hey, you knew that anyway, didn't ya? Didn't ya?

You can contact Russ here, see if we can get him to post a mea-culpa at Realty Times (yeah, right). And if anyone has free time, surf Realty Times and post more realtor lies and deception here. It's so easy to find over there, it's like shooting fish in a barrel.

WWIII: The Bible vs. the Qur'an vs. the Talmud. Let's get it on!

So I like to break up the housing bubble meltdown with some world meltdown every now and then. I think it all goes together, so stone me.

As a betting man, here's my WWIII odds to win:


Bible: 2 to 1
Qur'an: 3 to 1
Talmud: 20 to 1

The Bible has better weapons, even though the Qur'an has some crazy ass martyrs. Unfortunately the Talmud is just outgunned, and would need a miracle.

Place your bets!

(Aw, come on, you gotta love HP - it doesn't get more politically incorrect than this one does it?)

OK, here's the scam. Builders funnel "money" to "charities" who give it to "suckers" for downpayment to buy a house...

Then they jack up the price of the house that the "mark" buys, 1) making even more money, 2) clearing through dead inventory and 3) celebrating that they found another sucker

The IRS caught on to this and is (hopefully) putting an end to it. But the damage was done, 580,000 people took the con, and now they're stuck with homes that are likely declining in value and in many cases ARM loans they can't pay.

Oh, boy, I can't wait for the housing bubble congressional hearings. Thanks PE for the link.

IRS: Charity lending is scam -- Down-payment plans called misleading

Calling them scams, the Internal Revenue Service plans to revoke the charitable status of down-payment assistance programs that have fueled the business of Dominion Homes and other builders.

"So-called charities that manipulate the system do more than mislead honest homebuyers and ultimately jack up the cost of the home," IRS Commissioner Mark W. Everson said in a statement. "They also damage the image of honest, legitimate charities."

Federal law prohibits home builders from helping customers directly with down payments. For years, however, builders have partnered with charities to funnel money to buyers. The IRS is examining 185 such charities, which have helped hundreds of thousands of people buy homes with government-backed mortgages.

Typically, a charity gives the customer a down payment, and the builder reimburses the charity plus a processing fee. The programs offer a similarly popular service for individual home sellers, usually through their real-estate agents.

The programs help buyers with the 3 percent down payment required for a government-insured Federal Housing Administration mortgage. Many of those buyers get in over their heads financially and later lose their houses, studies show.

Nearly a third of FHA loans nationally last year involved charitable down-payment assistance to the tune of hundreds of millions of dollars.

Without their charitable status, down-payment assistance programs can't do business with the FHA.

A Dispatch series, "Brokered Dreams," in September detailed the risks to home buyers and taxpayers of such down-payment assistance. The stories focused on the partnership between Dublin-based Dominion and the Nehemiah Corp. of America, a California charity that pioneered the business strategy.

Nehemiah, the largest program, received $143 million in down-payment money from sellers in 2004, according to the most recent IRS filings. Seller "donations" accounted for more than 99 percent of Nehemiah's revenue.

David Dillen, president of Colony Mortgage, partnered with Dominion on hundreds of loans involving down-payment assistance. But Dillen said HUD was long overdue in shutting down the gift programs.

"What the hell took them so long?" he said. Colony followed HUD's rules but didn't agree with them. "It was a big scam."

Want to see who to profile as potential bombers at the airport? Here's a random guess of what they might look like

OK, since HP is not PC (as long time readers will know), and I'm pissed I can't get on my flight from London to Phoenix in a few weeks without having to worry about getting slaughtered by religious fanatic cult members, here's my take.

Memo to the world: If you want to make your airports and mass transit safe, pull over anyone who looks like this and make sure they're not carrying a bomb.

Now if it was green people aged 50 to 60 trying to kill everyone, then I'd have a picture of green people aged 50 to 60 up instead. But it's not. It's Muslim men aged 16 to 40. Deal with it, or we die.

Thank you. Now back to the bubble.

An open letter to Congress to call hearings on the corruption within the Real Estate Industrial Complex - please send to your Congressman

Dear Sir;

I am calling on you to initiate hearings in regards to the corruption prevalent within the Real Estate Industrial Complex. Many of these fraudulent and corrupt practices have led to the housing bubble, and now housing collapse. Initial points of investigation should include:

* Corrupt appraisers being paid off or promised future business in return for "making the numbers work"

* Mortgage brokers kicking back realtors when recommending their services

* Developers who gave money to bogus charities, who gave the money to new homebuyers to in order to purchase homes from those very developers

* Realtors steering clients to homes and developers where they were being paid bonus commissions or kickbacks, and not disclosing this to the buyer

* Rampant mortgage fraud, underwritten by firms who knew the applicant was unqualified, knowing that the loan was to be held by an unsuspecting third party or commoditized

* Deception practiced by the National Association of Realtors, promoting homeownership when they knew prices were declining and unsold inventory was skyrocketing

* Insider stock sale transactions by Bob Toll and others, dumping their shares at the peak while cheerleading their stock and prospects to the public, knowing the market was deteriorating, cancellations skyrocketing and their stock price and business model soon to decline

* Fannie Mae and Freddie Mac cooking the books and running out of control, imperiling the US financial system

* Congressmen taking outright bribes and campaign funding from the Real Estate Industrial Complex to "look the other way"

* The impact of misguided tax policy (cap gains tax exclusion for home sales) and policy ("ownership society" encouraging people who could not afford houses to buy at the peak) on the housing bubble

* The actions of the Fed and ultra-loose Fed policy in creating the bubble, including Greenspan's recommendation in front of Congress for people to get into ARM loans right before he began raising interest rates.

The population will be in full panic mode soon as the Housing Ponzi Scheme collapses. It is your duty to protect the American people from this ever happening again, by cleaning up the Real Estate Industrial Complex as you helped to with the corrupt Analyst / Investment Banking relationships, and corporate systemic fraud and deception during the dot-com bubble and bust.

Thank you

Newsweek: Another sobering article on the human side of the housing implosion and HELOC / ARM tsunami

I read stuff like this and I'm 1) not surprised 2) upset 3) worried and 4) pissed

I keep recalling two recommendations from the brilliant scholars who helped run us into the ground - Alan Greenspan and George Bush.

First you had Greenspan recommending people get into ARMs - right before he launched the most aggressive interest rate increase cycle in decades.

Then you had the wise George Bush tell everyone about his "ownership society" dream, encouraging the last folks in the world who should've been buying homes (at the top) to buy (no matter the price) - the people with no money, no downpayment, no savings and no chance of making the ongoing (and rising) monthly payments.

Yes, people make their own decisions in life. But when rich people encourage poor people to make awful decisions, I've got a problem with that, a big one as a matter of fact.

And so you get this... people losing everything, worse off than ever, while Rich Whitey and his friends will be doin' just fine.

House Broke

Millions of Americans bought into the real estate boom with adjustable mortgages and home equity loans. Now rising interest rates are forcing them into agonizing financial choices.

Across the country, millions of homeowners are finding themselves in a similar situation. Real estate purchases that once seemed like such moneymakers have become financial burdens instead.

U.S. homeowners now owe about $9 trillion in mortgage debt. Of that, about $425 billion in adjustable-rate mortgages-initially pegged at historically low rates, but designed to shift with market trends after periods ranging from one to 10 years—will reset sometime this year, according to Freddie Mac, a government-sponsored housing financing company.

Another $600 billion in home equity lines of credit (or HELOCs) and second-lien mortgage loans, which became popular when rates were low as a means of paying off credit card debt or financing home improvements, are also being readjusted.

Those with fixed-rate mortgages payable over 15 or 30-year periods may be seeing little change, but those who banked on rates remaining near the 4.6 percent lows of 2003, are getting some unpleasant shocks when their mortgage bills arrive in the mail. As their payments rise, many are struggling to keep up. Foreclosures and delinquency rates are rising. And with the markets cooling in many regions—existing home sales across the country have slipped for three months straight and new home sales nationwide have declining as well—there are growing fears of a looming crisis.

Howard Dvorkin, president and founder of Consolidated Credit Counseling Services, a nonprofit debt management organization, says up to 10 percent of those now seeking counseling are being squeezed by adjustable-rate mortgages or home equity loans. "And this is just the tip of the iceberg."

HousingPanic Stupid Question of the Day

Has America, and not just housing, fallen off the track?

Toll Brothers plummets (again). The epic housing bubble is over. Bob Toll sold at the tippy tippy top. Where is the SEC investigation?

Man, nobody, and I mean hardly anybody, is stupid enough anymore to buy a Toll Brothers house. I guess there might be 8,900 maximum still in the US (Toll's forecasted '06 unit sales), but will someone, anyone, tell them to read HP? At least negotiate 40% off.

HP calls on its readers to formally file an SEC complaint against the Toll brothers for their so perfectly timed insider stock sales. They obviously had inside information on the deteriorating conditions inside their Ponzi Scheme (oops, I mean business) and knew of cancellations before the general market, and then they traded on it, further enriching themselves.

Here's the debacle at Toll today. Man, I hope "The Banker" didn't kill himself...

Homebuilder Toll Brothers (TOL) reported a 48% plunge in third-quarter new orders and again cut its delivery forecast for the year, as the company blamed oversupply for the weak U.S. housing market.

Toll, the country's largest luxury-home builder, also warned that it is walking away from certain land option contracts, which will results in write-offs of deposits. The company said it will quantify this impact when it reports earnings later in August.

Based on its current backlog, the company expects to deliver between 2,500 and 2,800 homes in the fourth quarter, compared to its previous guidance of 2,900 to 3,300 deliveries. For its full 2006 fiscal year, the company believes it will deliver between 8,600 and 8,900 homes.

In a prepared statement, Toll Brothers CEO Robert Toll said the current housing slowdown first manifested last September and is "somewhat unique."

"It is the first downturn in the 40 years since we entered the business that was not precipitated by high interest rates, a weak economy, job losses or other macroeconomic factors," he said.

"Instead, it seems to be the result of an oversupply of inventory and a decline in confidence:

Speculative buyers who spurred demand in 2004 and 2005 are now sellers; builders that built speculative homes must now move their specs; and nervous buyers are canceling contracts for homes already under construction.

The resulting excess supply has exacerbated the drop in consumer confidence, which first appeared last September, that was already a drag on new-home sales."

The company also said it saw an increase in its cancellation rates in a number of markets, including Orlando, Fla.; Northern California; Palm Springs, Calif.; Las Vegas; and Phoenix.

Think anyone in America cares about our fiscal meltdown?

thanks borka for the link

TIME magazine: "Many (sellers) remain defiant to the point of delusion, demanding one more drink at the housing bar". Classic.

TIME is getting closer and closer to putting the epic housing collapse on their cover. Can't you feel it? Here's highlights of this week's edition:

The Boom Is--Is Not!--Over: The Great Real Estate Debate - There's an anxious face-off between sellers and buyers of homes as expectations of big profits fade

When Holly Schiller bought a town house in Fort Lauderdale in the fall of 2004, she figured she would pocket a profit before the place was even finished. Schiller, 51, and her husband had already flipped several properties in Florida's sizzling market, and this one sounded sweet: three bedrooms, private elevator, designer appliances. Villa Medici, promised the builder, would be modeled after a "true Italian Tuscan village," featuring Mediterranean façades and a resort-style pool. "As with any 'limited edition,'" the pitch stressed, "demand always exceeds the supply."

Well, maybe not always. The housing market in parts of South Florida is melting faster than a snow cone on Miami Beach.

Schiller's town house has languished on the market for 18 months. She has slashed the price by $75,000, to $565,000, offered a $2,500 bonus to the selling agent and at one point threw in a $2,500 store credit for home furnishings--all to no avail.

"Buyers are extremely hesitant," says her broker, Rob Rose, adding that hundreds of similar properties are for sale, with similar gimmicks--from free Caribbean cruises to gym memberships (personal trainer included).

Schiller is nervous. She's renting out another property at a loss, while trying to sell that one too, and has a deposit down on a second town house under construction. "They keep telling me 1,000 people a day move to Florida," she says. "I don't know where they're going. They're not buying."

The house party had to end eventually, even if sellers refuse to believe it. Many remain defiant to the point of delusion, demanding one more drink at the housing bar.

In places like Phoenix, Ariz., Las Vegas and Los Angeles, epicenters of the boom, look out below.

Sales of existing homes nationwide are down 8.9% this year, including a 17% free fall in the West, according to the NAR.

If you live in Bubbleopolis, things certainly look scary. In Miami there's a 17-month supply of single-family homes for sale, according to the NAR. Some 75,000 condos are coming on the market in Miami--Dade County, many purchased by speculators with no plans to live in them. "There will be lots of foreclosures, lots of auctions," predicts real estate agent Rose.

Experts in market psychology say stubborn sellers have a classic case of denial. Richard Peterson, a San Francisco psychiatrist who specializes in financial decision-making behavior, points out that "people would rather gamble and hope prices come back. They ignore information suggesting that prices are dropping." It's the same mentality that leads blackjack players to double down in a losing streak.

Housing meltdown, Tampa-style: "You don't want to create a panic". Too late.

Another of the "housing bubble city of the year" finalists, this view today from Tampa. Anyone hear that big sucking sound coming out of Florida?

Home glut brings price cut

With an average of nine homes for sale for every buyer in the Tampa Bay area, incentives alone are failing to move the market.

Home sellers have wooed buyers by offering free trips to California and $9,000 bonuses. They've advertised cut-rate financing and promised to cover buyers' closing costs.

But coming off an unusually weak summer sales season, many Tampa Bay area home sellers are confronting a market reality they've dreaded: They'll have to cut prices.

The price declines aren't the ear-shattering pops predicted by housing bubble gloom-and-doomers - the Tampa Bay area's low unemployment and popularity with retirees works against that scenario.

But with an average of nine homes on the market for every buyer - the biggest supply and demand imbalance in years - prices are suffering.

"There's no doubt the prices aren't going up, and in most cases they've fallen, slowly or substantially," said Jim Knetsch, owner of RE/MAX Realty Associates Inc. in Carrollwood.

The price cuts are nailing some investors who entered late in the game. They face the prospect of breaking even on their homes - or worse. Many have turned to renting as a desperate expedient.

"We're getting calls, 'We can't sell them. Please lease them,' " said central Pasco Realtor Pam Koenig, who pulled listings for 130 properties chasing renters in Land O'Lakes alone.

"You don't want to create a panic. We've got enough to deal with what's going on with the property insurance market," Mayo said.

Still, Realtors like Knetsch think the market has yet to hit bottom. With the current glut, those who want their home noticed slice the price.

HousingPanic Question of the Day

What was Ben thinking?

Here's your NAR and David Lereah current BS (oops, I mean talking points) - all is well, remain calm, remain calm!

Why do I feel like I'm reading a message from the Titanic captain to his crew? Or maybe watching a press conference with the Iraq Information Minister?

Home Sales to Hold Fairly Steady for Balance of Year

To: National and Business desks, Real Estate Reporter

WASHINGTON, Aug. 8 /U.S. Newswire/ -- The housing market is in a process of stabilizing with little change in overall sales volume expected over the balance of the year, according to the National Association of Realtors(r).

David Lereah, NAR's chief economist, said the indicators already are leveling-off. "We've seen a minor easing in closed transactions of existing-home sales, and a slight increase in the leading indicator of pending sales based on contracts," he said. "New-home sales and housing starts have been fluctuating, so the overall market is stabilizing."

"On one hand is the rise in mortgage interest rates that has slowed sales in many higher-cost markets, and on the other is 3.8 million new jobs over the last two years," Lereah said. "This means many potential home buyers could enter the market in the foreseeable future, especially in moderately priced areas where affordability conditions remain favorable. In fact, this is already occurring."

NAR President Thomas M. Stevens from Vienna, Va., said current market conditions are favorable for buyers.

"The rise in housing supply is the biggest change in the market over the last year," said Stevens, senior vice president of NRT Inc. "Clearly, this has taken pressure off of home prices and has significantly widened choices for buyers. At the same time, sellers are getting excellent returns - but in this competitive environment they need real estate professionals more than any time since the 1990s to market their homes and maximize value."

Circle your calendar for August 22 - the day the world goes mad?

I highly recommend getting your own blog. You get to publish some whacked-out stuff, like this one on Ahmadinejad from the Drudge Report. If it hits the fan, you can always say "hey, that's the crazy stuff HP had an article on!" I'm not saying it's gonna on 8/22, but it is interesting...

I always found it weird that he said he would answer the West's offer on a nuke deal, but not until August. Never made sense that there was a specific date he had to wait for. Well, maybe here's why. Spooky.

Housing panic? Try world panic, oil panic, stock market panic and WWIII panic. This guy and his masters are driving most world events right now, if you connect the dots.

Tick. Tick. Tick.

WSJ: Scholar Warns Iran's Ahmadinejad May Have 'Cataclysmic Events' In Mind For August 22

In a WALL STREET JOURNAL op-ed Tuesday, Princeton's Bernard Lewis writes:

"There is a radical difference between the Islamic Republic of Iran and other governments with nuclear weapons. This difference is expressed in what can only be described as the apocalyptic worldview of Iran's present rulers." "

In Islam as in Judaism and Christianity, there are certain beliefs concerning the cosmic struggle at the end of time -- Gog and Magog, anti-Christ, Armageddon, and for Shiite Muslims, the long awaited return of the Hidden Imam, ending in the final victory of the forces of good over evil, however these may be defined."

President Mahmoud Ahmadinejad "and his followers clearly believe that this time is now, and that the terminal struggle has already begun and is indeed well advanced. It may even have a date, indicated by several references by the Iranian president to giving his final answer to the US about nuclear development by Aug. 22," which this year corresponds "to the 27th day of the month of Rajab of the year 1427.

This, by tradition, is the night when many Muslims commemorate the night flight of the prophet Muhammad on the winged horse Buraq, first to 'the farthest mosque,' usually identified with Jerusalem, and then to heaven and back (c.f., Koran XVII.1)."This might well be deemed an appropriate date for the apocalyptic ending of Israel and if necessary of the world. It is far from certain that Mr. Ahmadinejad plans any such cataclysmic events precisely for Aug. 22. But it would be wise to bear the possibility in mind."

FLASH: Ben blinked

Too much pressure from the incumbents in power leading up to an election and from the real estate industrial complex

Goodbye dollar. Hello gold. 9 to 1 though? Man, that's amazing.

Fed Leaves Key Interest Rate Unchanged After Long Stretch of Hikes

WASHINGTON (AP) -- The Federal Reserve on Tuesday left a key interest rate unchanged, marking at least a temporary pause in what had been the longest unbroken stretch of Fed rate increases in recent history.

The Fed's rate-setting committee voted 9 to 1 to leave the federal funds rate, the interest banks charge on overnight loans, at 5.25 percent. It was the first time the Fed had met and not raised rates in more than two years.

However, the relief for millions of business and consumer borrowers could be only temporary.

The central bank said that "some inflation risks remains," holding out the possibility that it could resume raising rates at future meetings.

When academics look back on the Late Great Housing Bubble, the poster-child city might surprise you

Sure, Phoenix, San Diego, Tampa, DC, Boston, Vegas, Naples and Sacramento are obvious crash victims, but worldwide, one city rises to the top.

Rampant speculation, buyers made up of speculators buying from other speculators (the perfect Ponzi scheme), a god-forsaken area to live in (you thought Phoenix was hot?), stupid prices, no economy to support it (after homebuilding is done), and a collective "what the heck were they thinking" heard around the world for hundreds if not thousands of years to come.

It's Dubai. The world-wide housing bubble epicenter and future environmental wasteland.

DUBAI, United Arab Emirates - With 14,000 laborers toiling day and night, the first of Dubai's three palm-shaped islands is finally about to get its first residents.

The Palm Jumeirah, a 12-square-mile island group, is part of what's billed as the largest land-reclamation project in the world, the product of five years of brute hauling of millions of tons of Persian Gulf sand and quarried rock

Many observers believe Dubai's frenetic homebuilding will soon outstrip demand.

"We've still got a shortage of properties in Dubai, but that's likely to become an excess in next six or 12 months," said Steve Brice, an economist with Standard Chartered Bank in Dubai.

Brice said year-old estimates that 50,000 housing units would hit the market in 2006 will be more than doubled. Nakheel, one of three big developers here, has said it will release 60,000 units in the 2nd half of 2006 alone.

Nakheel's two copycat Palms, the Palm Jebel Ali and Palm Deira, have also been delayed by design changes and other factors, Kazim said. A nearly finished fourth Nakheel archipelago, shaped like a map of the world, has attracted few buyers and remains mostly unsold.

Kazim said The World's sales trouble stems from simple economics: Nakheel is selling empty islands for tens of millions of dollars only to builders promising low-density luxury.

HousingPanic Stupid Question of the Day

Pause or 1/4, market crash or market rally?

Ah, the lesson of tulips

Every now and then I like to read about past financial bubbles in human history - always puts the current one into such sharp focus, as every criteria is met, behavior is the same, and yes, they all end the same too. It's never different this time.