January 28, 2007

Housing prices are crashing and crashing hard. You just don't know it yet. "It's going to get bloody"

It should be obvious by now that the Commerce Department and NAR housing reports are laughable.

It should be quite clear that pricing data that doesn't include incentives and cash-back is bogus. And when you see new home sales numbers just dropping slightly, when they don't include the 40% - 50% cancellation rate, you should just laugh and laugh.

You're being lied to Americans, you're being taken for fools and suckers. If you want the truth, it's out there. You just have to look for it.

Here's an illuminating article in the WSJ for starters:

WSJ: Housing Glut Gives Buyers Upper Hand

A quarterly survey of housing conditions in 28 major metropolitan areas by The Wall Street Journal showed that the inventory of unsold homes at the end of 2006 was up substantially in nearly all of the markets from the already plentiful level of a year earlier. The biggest increases were in the metro areas of Miami-Fort Lauderdale, Orlando, Tampa and Jacksonville, Fla.; Phoenix; and Portland, Ore.

The survey also includes recent pricing trends -- nearly all negative -- based on surveys of real-estate agents by Banc of America Securities in New York, a unit of Bank of America Corp., as well as data on late mortgage payments and job-creation prospects from Moody's Economy.com, a research firm in West Chester, Pa. Employment figures have a huge effect on housing demand.

"It's going to get bloody down here," Mr. McCabe says. He estimates that condo prices in Miami-Dade fell between 8% and 10% last year and will drop 20% in 2007. Eventually, he predicts, hedge funds and other investors will step in to buy surplus condos in bulk at huge discounts.

Mr. Dennehy estimates that condo prices have fallen at least 15% to 20% in the county over the past year, though it's hard to measure price changes because sellers often give incentives such as free upgrades or help with closing costs that aren't reflected in the price.

Mr. Otteau figures home prices fell an average of about 10% in New Jersey last year.

In Scottsdale, some sellers are cutting prices by 10% or more, says Dale Pavlicek, sales manager for the Coldwell Banker Residential office there. "There are a lot of vacant homes on the market," he says. Sellers who bought in the past year or two are barely breaking even or are coming to the closing table with money to pay off their mortgage and other costs, he adds.

42 comments:

Anonymous said...

"Eventually, he predicts, hedge funds and other investors will step in to buy surplus condos in bulk at huge discounts."

China has a trillion+ to buy up CA and turn it into public housing to solve their over-population problem.

OPEC members will buy up Florida and make a fortune off the rent. Americans will own less and pay others more.

The 'W' legacy: Freedom lost.

Metroplexual said...

Kieth,

Just look at the craigslist, or backpage listings for lease to own or rent to own. Essentially alot of bagholders trying to hand their problem off to you.

BTW my BiL tours PHX with the RE builders all the time and it really pisses them off to see so much of the inventory out there and that it rents for so little. The PHX rental market is a screaming bargain. 3-4 bdrm houses can be had for about $1K or less.

Anonymous said...

Looks like everyone knows prices are crashing except the Fed and Greg Swann

Anonymous said...

Hey, someone ask Swann whether he's maxed out his credit cards yet...

Anonymous said...

I gotta believe 95% of Americans still don't realize what's around the bend

Anonymous said...

It's a new paradigm, and everybody who doesn't buy, now, will be priced out forever. Anybody who does buy will be rewarded with a lifetime of riches, as their property will continue its 30% yearly price increase.

Renters, and anybody born in a future generation, will not be able to afford a $10,000,000 starter home in 15 years. They will live in tent cities, and Hondas.

This asset bubble is different than all of the others - it will never slow down, or pop. The gains are permanent.

Anonymous said...

Hey PARADIGM!!!!!!!

WHAT THE F**k ARE YOUR SNORTING,SHOOTING OR SMOKING?

I WANT SOME!!!!!!

Patch Tuesday said...

Oh Jesus, we've went from the "Easy Button" to the Panic Button...

Anonymous said...

If only Kerry or Gore were elected, none of this would've happened.

Anonymous said...

If Kerry or Gore was elected then Pets.com would be at $2000/shr right now and everyone would be a millionaire daytrader instead of broke flippers

Mark in San Diego said...

Remember everyone - it took Cisco nearly three years to go from about $90 to $9. . .denial, false hope, all the way down. . .it is back to $26 now. . .think of that as a house. . .$900K to $90K and then back to $260K - Year 2000 to 2007. . .will Cisco ever get back to $90 in our life?? And we would all agree, it is a quality company. . .now about those shitboxes in Phoenix and Riverside County???. . .and some of the poorly built condos all over!

Anonymous said...

Three years i sold for a nice profit and was in a big hurry to try to find a new place to buy and fix up. I just sold in september and i'm in no hurry to buy in the least. Actually im disinterested, could rent forever if i can talk my wife into it.

Anonymous said...

RE agents are super heroes, there are the ones out there facing the wind
(at least when the fan setting is on high in the climate controlled car)
if it wasn’t for them my house would have only been worth a fraction of what I can get for it now.
How many people do you know that are willing to get out of bed in the morning and look forward to rough day driving around the neighborhood, or even picking up the phone occasionally, they deserve a lot more than a measly %6 for all this effort.

I’ve always wondered why aren’t RE brokers RE investors?
Could it be that investing takes risk?

Doesn’t everyone say ‘when I grow I want to a RE agent?’

I think many HPer are closet RE agents

FlyingMonkeyWarrior said...

Are We Building a Ghost Town?

by Tim Gallagher on Jan 26, 2007 3:38:02 PM


One of the fascinating aspects of living downtown (Orlando, FL) is watching all of the new construction going up all around us. I love what the new buildings add to our skyline.

My concern is this... Are we heading for a bust? Who is buying all of these condos? I'm afraid that a large number of speculators have created a false sense of demand for these units - keeping the prices jacked up while pricing out people who might actually want to live there. Also with the big slowdown of condo sales in Orlando, I'm starting to get concerned.

Case in point #1 - The Sanctuary. Located on Church St and Eola Drive, This building opened quite some time ago, yet by the looks of it at night (and from what I hear from a resident), it appears to be well less than half occupied. A look at an MLS listing also has a number of them up for sale. Investors looking to get out?

Case in point #2 - This article from today's Sentinel reveals that the developers of Eola Place (one block from the Sanctuary) are returning deposits and delaying the building of this condo - and that's AFTER they've already cleared the land.

Now, factor in places that are currently under construction, such as The Vue, The Paramount, Star Tower, and others, and its easy to see some cause for concern. Prices continue to remain high (I understand that $350K can buy a 500sq ft condo in The Vue), and yet the buildings keep going up.

Contracts should be closing on The Solaire soon (The condo building at the soon-to-be-renamed Premiere Trade Plaza) - I'm curious to see how occupied this building becomes in the near future. What does all this mean for projects like Tradition Towers and the Monarch, which haven't even started construction yet?

What do you think? Am I being Chicken Little here?

http://tinyurl.com/2flfo3

Mozo Maz said...

Hey Anonymous 4:28

Chill, man. You're looking at a bubble blog Meme.

Just like "Suzanne researched this" and "It's a 'Sweet Deal'"

lost cause said...

They get free housing, food and healthcare in Cuba and North Korea. Why can't we be more liberal and progressive like those countries? Everyone wants to live in Cuba

Anonymous said...

not sure about you all…
I don’t mind giving up vacations for life or eating in nice restaurants,
So long that both my wife and I each work 2 jobs and pay the down the house.
Crossing my fingers that nothing in the house breaks down.

Its just this 5 hour a day commute that’s getting to me, we wanted to leave NYC and live in the suburbs so now we’re in the Mid Hudson Valley, really nice place but there aren’t any good paying jobs out here so I sit in a train for 2/12 hours each morning and 2/12 hours each evening. Also got a weekend job to help pay down the car payments

But you know what …..‘i’m a home owner’

Anonymous said...

interesting article from our local paper....
http://www.recordonline.com/apps/pbcs.dll/article?AID=/20070128/NEWS/701280331

Davos said...

Remember everyone - it took Cisco nearly three years to go from about $90 to $9. . .denial, false hope, all the way down. . .it is back to $26 now. .

And CSCO was (is) one of the 'good' stocks out there. Or at least acceptable in the big world of Nasdaq-casino junk stocks.

Mark in San Diego said...

Catching up on reading blogs on Sunday afternoon . . .one thing is clear, links to California newspapers, Sacramento Bee, Orange County Register, etc. . . the ARM re-sets are now epidemic. We might want to set aside February 1 (just kind of an arbitrary date)for the real beginning of the end. The slow train wreck is now hitting the wall, and panic has set in. These next two to three months will change the way people think about real estate, and by June, real estate will be as popular as internet stocks in 2002. Millions of people will be out of their homes, and government investigations will be underway. . .the housing burst bubble will be THE agenda for the 2008 presidential elections. . .Iraq will be a nice diversion to talk about.

Anonymous said...

I think this is going to take a long time to sort out. People I know in the industry are very worried.

The ones with money will live to see another day. The undercapitolized specuatators will take a big hit. Especially the one's that hold on to the greed instinct/emotion.

Anonymous said...

I am one of the few people out there that actually want to buy soon. I am truly afraid this is a soft landing and the rates will now simply rise while prices stay flat. This would screw me and suck. Coworkers think I am stupid. Tell me I am not and it will be ok... despite an upcoming rate hike.

Richard said...

Mark said ".the housing burst bubble will be THE agenda for the 2008 presidential elections. . .Iraq will be a nice diversion to talk about. "

Nope - you and Keith may think the housing burst is the story of the decade...

Energy..energy..energy...including the nuclear war with Iran/China/Russia/the greater ME - will be the AGENDA.

The 20K "surge" is the current distraction.

Then the attack on Iran (07) and crash of the US$...then the Great Global Depression of 2012 - the North American Union... seamlessly transitioning to the die off of 90% of the human species...

Did I miss anything...??

Nope - that about wraps it up.

Cheers

Lost Cause said...

lost cause said...
They get free housing, food and healthcare in Cuba and North Korea. Why can't we be more...


Theft (ID). Check.
Lies. Check.
Total lack of original thinking. Check.

Are you trying to earn your badge in Republican spin monkeying?

lost cause said...

North Korea is leading the progressive world to freedom. We should mummify Dear Leader Kim Jong Il and lay him right next to the mummified body of our Great Leader Brother Vladimir Lenin.

We are not like those crazed Reich wingers who worship Jesus. We mummify and worship the body of our Lord Lenin so all future generations will be able to see the Great Leader of the socialists who led the Soviet Union to triumph.

Anonymous said...

Anonymous said...

I am one of the few people out there that actually want to buy soon. I am truly afraid this is a soft landing and the rates will now simply rise while prices stay flat. This would screw me and suck. Coworkers think I am stupid. Tell me I am not and it will be ok... despite an upcoming rate hike.

Monday, January 29, 2007 2:25:56 AM

Rising rates will cause prices to drop. Real Estate prices are "sticky" because the seller wants maximum price & as long as they are not in an "absolute must sell" situation (most) then they can wait it out. But there are enough sellers who will crack that will cause prices to slide. The cracking of sellers & sliding of prices maybe exacerbated/accelerated by all the loose & exotic lending thats occurred the last few years. Rates may rise, but you'll end up with a much lower payment because you're principle financed will be much lower. Do not worry. In an ironic twist, it will be seller's chasing the rare commodity of a GOOD buyers now. They will treat you like a king until you sign the dotted line. Make sure they do and throw in everything so the home is in mint, move in condition, and that they cover all closing costs to include points that pay down your interest rate to offset any rising in mortgage rates that occurs this year!!

Anonymous said...

Anonymous said...

I think this is going to take a long time to sort out. People I know in the industry are very worried.

The ones with money will live to see another day. The undercapitolized specuatators will take a big hit. Especially the one's that hold on to the greed instinct/emotion.

Monday, January 29, 2007 12:37:46 AM

Yes, the sin of greed will blind many to the wisdom of cutting one's losses to live another day. Instead they will go down in financial flames w/ foreclosures & bankruptcy. There will be many personal/individual tragedies from this, the leading edge of which is just now coming to light. They will start to come in waves with the real estate market's "spring surge" which just like the Iraq surge, will turn out to be both a false hope unfulfilled and facilitate the setting in of the harsh reality and true gravity of the situation many a modern irresponsible homeowner & president will find themselves in. Namely an overpriced home/war and a outrageous interest rate/human cost. The exact converse of what makes economic sense (low rates, higher prices; high rates, lower prices)

striker said...

Richard, Do you have any good links?

Fresh, recent stuff? thanks.

Anonymous said...

"so now we’re in the Mid Hudson Valley, really nice place but there aren’t any good paying jobs out here so I sit in a train for 2/12 hours"

That Poughkeepsie area is the start of the rust belt w/o IBM keeping the region employed. When Big Blue goes, so does the Hudson Valley. It's bizarre to see a northeast corridor region with affordable housing and reasonable cost of living but no companies taking up residency given its proximity to NYC and Southern Conn.

Anonymous said...

http://www.marketwatch.com/news/story/commentary-realtors-economist-stayed-sunny/story.aspx?guid=%7BEBC34E29%2D49EE%2D4925%2DA69A%2D52807DBE0C1E%7D

Realtors' economist stayed sunny all year
Commentary: David Lereah saw bottom in first quarter, second quarter ...
By Rex Nutting, MarketWatch
Last Update: 5:31 PM ET Jan 25, 2007


WASHINGTON (MarketWatch) -- There are two universal truths at the National Association of Realtors: 1) It's always a good time to buy or sell a home; and 2) We've seen the worst of the housing market correction.
The second truth was in the script used throughout 2006 by David Lereah, chief economist for the NAR, even as sales plunged by 8.4%, the fastest decline in 17 years. See full story.
With annual sales of 6.48 million, 2006 was the third best ever, but after five years of steady increases, it was a rough year for the industry. Through it all, Lereah never stopped smiling.
At the beginning of 2006, Lereah was projecting home sales would fall about 4.4% to 6.79 million. In the end, however, the decline was about double what he'd projected. For 2007, Lereah is currently projecting a decline of about 0.9% to 6.42 million.
Here's what Lereah was saying throughout 2006 and into 2007, and what the market was doing.
January 2006
Lereah's forecast: "The market is in the process of normalization."
Actual sales: Fourth-quarter sales fell at an annual rate of 12.6% to 6.94 million annualized.
Lereah's post-mortem: "The level of home sales activity is now at a sustainable level, and is likely to pick up a bit in the months ahead."
April 2006
Lereah's forecast: "Home sales will move up and down somewhat over the remainder of the year but stay at a high plateau."
Actual sales: First-quarter sales fell at an annual rate of 8.6% to 6.79 million.
Lereah's post-mortem: "This is additional evidence that we're experiencing a soft landing."
July 2006
Lereah's forecast: "The market should even out just below present levels."
Actual sales: Second-quarter sales fell at an annual rate of 6% to 6.69 million.
Lereah's post-mortem: "The market is stabilizing."
October 2006
Lereah's forecast: "We expect sales activity to pick up early next year."
Actual sales: Third-quarter sales fell at an annual rate of 22.2% to 6.28 million.
Lereah's post-mortem: "This is likely the trough in sales."
January 2007
Lereah's forecast: "The good news is that the steady improvement in sales will support price appreciation moving forward."
Actual sales: Fourth-quarter sales fell at an annual rate of 2.3% to 6.24 million.
Lereah's post-mortem: "It appears we have established a bottom."
Conclusion
It's unfair, of course, to single out Lereah's forecasts. He wasn't the only economist who was surprised by the extent of the collapse in housing in 2006; some were just as wrong on the other side by predicting the housing bust would bring down the whole economy.
But Lereah was the only one who presented his opinions alongside an economic indicator that's treated as an objective gauge of the housing market. Along with his bully pulpit comes extra scrutiny.
Lereah was traveling on Thursday and unavailable to comment. The senior economist at the NAR, Lawrence Yun, said in an interview the most recent sales trends show almost no movement up or down since August or September.
"In hindsight, we did not anticipate how strong the demand from speculators had been," Yun said of their 2006 forecast. "Now, with the speculators out of the market, and with low mortgage rates and steady job growth, we anticipate an improvement in sales."
It's possible that Lereah may be right, finally. The bottom must come some time, why not now, some 19 months after the bubble peaked?
But it's also possible we could be far from the bottom, as in the housing bust of 1978-1982, when it took 42 months for the market to recover.
If so, it could be a long year for David Lereah.
Rex Nutting is Washington bureau chief of MarketWatch.

Anonymous said...

Anon 2:25-

It sounds like perhaps you are too young to know this:

Real Estate prices DO GO DOWN. Sometimes most devastingly.

The fact that they have risen fantastically for ten years running has helped convince some who were not around for previous busts to not realize that RE IS cyclical.

There is just too much evidence out there that what is coming will be a bust of historical proportions.

Also, historically, when interest rates rise, prices fall. So instead of being afraid of rates rising, you should pray for their increase as it will just drive prices down further.

Hang in there Anon and hang tight. these prices have nowhere to go but down. You'll save yourself a lot of money and heartache/headache by just watching and waiting.

Watch the market closely, yourself. Do not depend on RE agents and the local paper to tell you the truth aboout what's happening in your local market.

Anonymous said...

ye gods, do people still visit this absurd site?

bozonian said...

Great Bay Area Crash article with charts, facts and numbers at Safe Haven:

http://tinyurl.com/24hlaq

bozonian said...

Beside the commonality of asset bubble, speculation and crash, stocks don't behave the same way houses do.

House owners are filled with self delusion about how much their house is worth. They'll hang onto it a hell of a lot longer than they would a mere financial asset. You can live in a house. You can customize a house. It has YOU all up in it. You can't live in stock certificate. It's just paper and there is not nearly as much emotional attachment.

This will eventually lead to the sad scenario which will be played out in millions of households: homeowners too "honest" to walk away from their homes and leave the bank holding the bag will be paying twice as much per month mortgage as someone down the street in the same type house who bought it in a foreclosure. They'll be feeding their monthly income into a money hole that will be losing value.

It's hilarious and sad at the same time.

Richard said...

Striker

Go to my blog - click on my name or picture.

I try to post every day on the world's path to self destruction.

Currently the draft - presented to the House of Rep January 10 is pasted.

If you have Kids - boy OR girl...be scared very scared.

Anonymous said...

Anonymous said...

ye gods, do people still visit this absurd site?

Monday, January 29, 2007 7:31:58 AM
------

Please save this site for NAR's Lereah quotes in a few years after the multi-trillion toxic loan bomb has gone off & rates are at 7-8% again & short sales are the norm.

Anonymous said...

I have been playing the field occasionally for homes, interested in buying but not going to jump in come hell or high water like alot of other idiots. Anyway, I see a house FSBO on a listing that has been sitting since 9/06. They are asking 250K. I see that it sold in 2003 for 154K!! So I low ball the agent and say I will offer 160K. She actually emails me back and says that the owners would probably not go below 220K. So I email back and say I'll check back in a few months when everything goes spiraling down. Ha, never heard back!

Anonymous said...

anon said :
That Poughkeepsie area is the start of the rust belt w/o IBM keeping the region employed. When Big Blue goes, so does the Hudson Valley. It's bizarre to see a northeast corridor region with affordable housing and reasonable cost of living but no companies taking up residency given its proximity to NYC and Southern Conn.
-----------------------------------
affordable housing ?
reasonable cost of living ?
maybe back in the 90's
Housing prices are up approx. 300% since 2001 here in the mid Hudson Valley, Incomes have not gone up since 1999.

the excuse for prices going thru the roof up here is because people are leaving the city in droves since 9/11
but not only is it not true, cause most homes purchased during the boom were local people being caught up by the hype.

But if it was true that large amounts of people were leaving NYC wouldn’t prices drop in the City?
and we all know that’s not true.

Major housing price correction awaits this area.

Anonymous said...

"those shitboxes in Phoenix and Riverside County???."

Hey watch it. Own 1 shitbox in Riverside COunty. The truth is you cant even afford one of 'those' shitboxes let alone an OC one you pretentious Orange County troll.

btw..I currently rent that shitbox out to an ex-OC guy that got his rent raised so he moved there. HAHAHAHAHAHHAHAA

Anonymous said...

These next two to three months will change the way people think about real estate, and by June, real estate will be as popular as internet stocks in 2002.

Exactly. 2007 will be to housing what 2002 was to internet stocks. In other words, one hell of a great buying opportunity.

Jan 2002 - Jan 2007
- yahoo up 300%
- ebay up 200%
- amazon up 350%

I'm not saying housing will go up 300% between now and 2012. But as with all market downturns, just when everybody thinks there's no end in sight, that's the signal that the market is about to turn.

But you all go ahead and keep talking about 70% price drops. If that's what makes you feel better at night sleeping in the 1 bed/1 bath ghetto apartment of yours.

Anonymous said...

"But you all go ahead and keep talking about 70% price drops. If that's what makes you feel better at night sleeping in the 1 bed/1 bath ghetto apartment of yours."

Hey, you forgot about the 90% die-off, rampant cannibalism, and the drawing & quartering of David Learah on ppv TV!

Anonymous said...

March 2007 will be to housing what March 2000 was to internet stocks.

Pets.com $80 and now $0
Yahoo $350 and now $27
Amazon $450 and now $38

You FB's can rot in you $800K 1br/1bt debt shack smoking your crackpipe thinking that you're a millionaire.