I know, I know, housing crashes play out over long periods of time (see Japan). But good god, how long do we have to be stuck in "denial"?
It's time for "fear".
I think the Sunday Arizona Republic article fanned the fear flames in Phoenix for sure, or at least made people (Greg Swann) think twice about existing in their happy bubble of denial.
January 24, 2007
So, have we turned the corner to "fear" yet?
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I think people who committed mortgage fraud or live in cash-back houses are in fear today
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Yes, Mr. Big Stuff, who do you think you are? You think you can afford to mess with globalization? Are even the big guys on Wall St. getting tired of being pushed around by mad global capital, operating through hedge funds? It looks that way.
Now John Castellani is worried about hedge fund takeovers. Mr. Castellani is the head of the business rountable. In an op-ed in the Wall St. Journal, Castellani argues against a pending SEC (security and exchange commission) that would allow stockholders to have direct voting rights in electing board members. He warns that short-term speculators (meaning hedge funds and private equity funds) will use the new ruling to movi in and loot the companies. A suit brought by AFSCME trade union against American Insurance Group (AIG) is the venue for the SEC ruling, although Castellani appears to be more concerned about speculators. See http://www.realcrash.com
i think we're moving to fear in the credit markets, though it's not making the news. as for housing, i'm calling fear by june-july. these things take time.
I think, in most places, we're still stuck in denial. But there has to be some significant fear in the bubble hotspots like Phoenix, Florida and Vegas. As the sales and prices continue to slide, that fear may spread like a contagion, infecting other areas.
Anywhere that speculators bought real estate on emotion and anecdote, that's where the fear will take hold first. They will hear more and more Casey Serin stories and realize how easily that could be them. Speculators will become desperate to sell and will precipitate further reductions in prices.
Non-speculators will be the last to know as their homes remain on the market for months due to the high asking prices suggested by their greedy and out-of-touch realtors. Only then will the fear become widespread.
I still see so much denial.
all stages - euphoria (the really dumb), denial (most), fear (phoenix, miami, vegas and more), panic (investors, Donald Trump, flippers, fraudsters, REIC) and desperation (foreclosures, REIC, NAR, homebuilders)
For Northern Virginia, we are stuck in denial. Seasonal factors contribute to this. There "appears" to be good inventory "burn down" here. In reality, it's sellers giving up for winter with plans to list again in the hot season. For No. Va., I agree with Howie g: fear cometh in june-july. Also, many more ARM resets by june. Many more REO's by june. Lower prices produce "disappointment," but, when people see that the downward spiral is feeding on itself, that's when fear will kick in.
I'm in South Florida, west of Ft Lauderdale, and Sellers are still in denial here. The amazing thing is that property is still selling even at these high prices. Asking prices on average are falling, but slowly.
howie g, WTF? Take your pills man.
Greg's studying to become an Amwy salesman...
Denial will last until the spring/summer real estate numbers come in and the realization hits that Goldilocks has left because the porridge is too cold. This is when the inventory explodes and it's clear that those of us who are potential buyers have decided maybe it's not such a good idea to spend 70% of your income on the house you can rent for 20% of your income.
What happens when supply explodes and demand stays the same or declines? (Hint: the answer is not 'a soft landing')
i agree with the anon above. norhtern va is still in major denial.
I think we're still in denial, and that it will be the longest of any of the stages we face...I bet some people will still be stuck there throughout '07, no matter what happens in the spring.
Here in Florida, we are still in the denial stage. But, things are just starting to move towards the fear stage as the MSM is finally printing articles on the housing bubble and it's bursting. I agree with the other posts that we won't really move into the fear stage until after the spring / summer numbers come out. The only thing that I believe would speed up the slow march to the fear stage is if The Fed went ahead and raised the funds rate. I understand that this rate doesn't affect mortgage rates, but that's not what the REIC is telling people (it's psychological for the market). If this were to happen, I believe sellers would panic because the REIC keeps telling people the market is going to get better because The Fed is going to lower rates this spring.
Denial is still big in MA and NH home owners... Fear is in full swing for buyers as they dont want to get squashed in the next few years if they buy at todays prices
Denial; San Diego, Palm Desert....
I agree w/ the NoVa anon poster. There are tell tail signs of cracks in the market but everyone is saying those are isolated incidents and due to seasonal factors and not due to hyperinflation of housing. The "Area is different" was articulated in a recent local housing market report to justify a predict of a 5% appreciation in 07.
Spring/Early Summer of 07 is the acid test. That is when inventory will "surge". Buyers stay on the sidelines and/or use the most recent off season comps which are down 20% from 05 bubble prices & 10% from 06 slide prices. 90% offers will be all that seller will get, they will refuse at first, but then someone will crack under the pressure and sell. The cracks will multiply & the stubborn sellers will all drop price once july hits and reality sets in. Fall 07 pricing will be = to 2003 pricing, as current pricing has returned to 04 levels.
We are still at the denial stage. Based on conversations with several people I know, they are still under the assumption that the worst is behind us and real estate is ready to once again begin its monumental climb to the stratosphere.
I believe the 'fear' stage will be reached towards the end of 2007 or the beginning of 2008. Once all those ARMs have reset and more stories flood the market regarding foreclosures, the anxiety level of current and potential future buyers will become more apparent.
Fear in AZ.
Denial still everywhere else.
The tip of fear is still a couple of months ahead...I think it will happen two weeks into the spring season when everyone flood the market assuming spring will be the major turn around and they should have their signs up and flyers printed so not to miss the millions of suckers...ummm...Buyers. So when the MLS numbers double, and all that is heard is crickets, thats when home owners will go into the "BUT YOU SAID TO WAIT UNTIL SPRING YOU SOB...I SOLD OUR BENZ AND BMW, PAWNED MY WIFE'S ROLEX AND KIDS XBOX 360 TO KEEP US AFLOAT UNTIL SPRING...I'LL KILL YOU %$#^!!!" In a way I am starting to feel somewhat bad for them...Oh well...
~BD
San Francisco and surrounding Bay Area: Denial. Strong denial.
Might see some fear in the crappier parts, like Concord, Tracy, and other outlying areas that although they don't see or touch the Bay, try to jump on and call themselves "Bay Area"
But I'm still hearing "It won't ever happen in San Jose."
I don't know why not; San Jose isn't such a great town.
Its denial mixed with fear, here in Central Florida (Melbourne).
I know I am sick, but I sometimes call the numbers in "For Sale By Owner" signs, just to get a feel for how desperate they are becoming. The last one I spoke to told me he would beat the builder's price in that community. The builder had recently cut prices by 30k on those homes.
Its getting tense out here.
The denial is louder than I've ever heard it, even in summer 2005, which suggests that there's fear beneath. This is what will keep the morons on the roller coaster all the way to the bottom. The idea that they might have to go back to working for a living is such anathema to these losers that they'll say and believe literally anything first.
I agree with Paul E. Math. Here in West LA realty clerks are hoping for the spring weather to bring out the buyers. I don't even mention the housing bubble here because these folks are in 100% denial and most taking some kind of antidepresant. They all believe that a 5% or 6% drop in the median is nothing.
I expect to see a new add campaign by the NAR in the spring to get people to buy. I believe this will be a larger production than the last. Of course they will argue that prices have never been lower and you better buy now before it goes up!!!
OC & SoCal -- denial, with a persistent itch on the back of the neck, breaking the skin and in need of a band aid.
Hudson Valley NY in major denial.
GrandInquisitor said...
'Houses purchased in 2000 for 175K are now listed for 475K. So ask youself, if you were the owner of that home when does fear set in? Say you get an offer for 375K, or 20% off asking price. That's a huge discount, but you still made 200K in the span of 7 years for doing absolutely nothing.'
it is the same here in the Mid Hudson Valley NY.
This is exactly the reason this bubble will pop.
1)Incomes have not gone up in the past 7 years.
2)Population did not go up in the past 7 years
3)30 year fixed rate only went down 2% at most (71/4 in 2000 to at lowest 51/4 in 2004)
so what can possibly justify over 100% increase in the value of housing?
answer = human herd metality.
those who bougt in 2000 planned to spend 30% of their income on Principal and interest and the remaining 70% for Taxes, insurance, cars, cable, cell phone, electric, heat, food, clothing, auto insurance, auto gas,vacation, home maint, 401K, trash removal, landscaping, internet,holiday gifts, misc hygine products, wine. etc.
Those who bought between 2002 - 2006. are spending about 60% -70% of their income, (not everyone but most)becasue they figured that they can always re-fi cash out to pay for every day expenses. now that properties arent appreciating how do you pay for that furance that broke, increase in Taxes, increase in heating fuel, increase in medical costs etc..
first you max out the Credit card.
next you begin cutting back on 'extra spending' like eating out, Cable tv, wear layers lower the thermostat, no vacation, drive with that anoying noise under the hood hoping its no big deal.
eventually you begin blaming the RE broker 'who talked you into' this purchase.
then you begin hating this stoopid big house thats draining all the fun in life.
you begin thinking of selling.
problem you cant get what you payed for it.
decide to wait a little while for the market to turn around and sell as soon as you can break even.
wait
wait
leak under kitchen sink and you decide to fix it your self after getting a quote from a plumber for $300 (now damn plumbers are rip offs)
spend $50 in Home Depot work an entire weekend, make situation even worse, cut your hand on that damn pipe.
end up calling a plumber after all and now it cost $450 to replace entire peice under the sink.
THATS IT! you say
I'm selling this damn money drainer
even if i loose $200K..
cant wait to get my life back and spend 100 bucks at the bar and hang out with the buddies,
Man i miss life before this House.
So it looks like the consensus says we're in denialfear, a whole new category where people deny to themselves that they should be in fear
Interesting!
People have a real difficult time owning up to there mistakes. Since buying a home is the biggest purchase anyone makes (generally) noone wants to admit they blew it.
The more people deny there mistake the worse it will be. People will hang on until the bitter end. Sort of like what happened in the tech stock crash. Noone wanted to sell there stock because they were hoping it would turn around. Noone wanted to see that brokerage statement because it was more bad news.
As foreclosures continue to skyrocket because home prices no longer justify the debt noone will want to be upside down on there house. They know it makes no since for one's financial situation yet they just won't be able to react from fear.
This is sort of a denialfear stage. It is like being on the top of K2 (next to Everest) where you just can't do anything because you are enjoying the view too much but you know you have to go down the mountain or die.
most of the masses aren't even in the anxiety stage yet. ask your clueless friends.
ask my 2 neighbors across the street who refi'd and are spending 75k+ each on updates.
Ha! Not even. We aren't even to anxiety yet.
'Houses purchased in 2000 for 175K are now listed for 475K. So ask youself, if you were the owner of that home when does fear set in? Say you get an offer for 375K, or 20% off asking price. That's a huge discount, but you still made 200K in the span of 7 years for doing absolutely nothing.'
What is interesting in regards to that comment is it fails to take into account equity extraction from those homes. We have all heard and seen the data pertaining to refis and HELOCs which actually makes even those individuals who purchased 7 or 8 years in precarious positions.
Furthermore, there are also those individuals who decided to 'upgrade' to larger, better homes without first selling their existing home. I know of one individual off the top of my head who is in that exact position. Building a new home (which was essentially paid for up front) while still sitting on their existing home in a flat/depreciating market. That is almost one of the worst positions to be in as further erosion in housing brings the price of that first home down further.
Gotta remember that there is NO BUBBLE in many sections of the country. None here. Housing construction boom, Nope! Flipping, Nope! Prices out of whack, not much. One or two dimwits from Balt/DC paid too much for spec sh*tboxes, but that's about it!
Our only development is pretty pricey, but they are putting up a large (2800-5000+ sqft), quality product. Local well known builder, plywood roof, walls, floors, everywhere, no chipboard anywhere! Denial? You can't deny what's not here!!
Will we be affected? Hell yes.
Talked to a local small construction company owner tonight while I was out getting groceries, (which by the way are going up in price ala 70's style.) He says the bottom dropped out of building overnight. He had to lay off all his employees and go to work as a machine operator for someone else. For the last two years he couldn't keep up with the contract bids (works in Balt/DC corridor), had to turn down a lot. Then all of a sudden nothing, NADA, gone.
I am very surprised at the speed with which this thing HAS taken off on the downslide. Its still going down slow, but a 'faster' slow than I ever expected!
Remember: Housing is always sticky on the way down.
grandinquisitor:
"It's only the folks who bought in 2003 - 2006 who may experience fear at some point."
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But don't forget the thousands who bought before the bubble but then just had to "liberate" some equity for a remodel, the Alaska cruise, a sweet yellow hummer, and to pay off the maxed out credit cards.
When these people put their house on the market in the spring, they are pricing it at 475K hoping we foolish buyers will do them a favor and bail them out.
Anon - The bar analogy reminded me of that song...
It's 2AM - "Closing time. You don't have to go home, but you can't stay here." AND "Closing time. Every new beginning comes from some other beginning's end."
If "death" is foreclosure, then this process, for an individual, does not begin until a notice shows up. Also, psychologists say you can slide back and forth between stages of grief. Does it even work collectively? As an analogy, it's fun, but a little weak. Herd mentality rules in panic selloffs, no?
Personal observation from the banking world.
More people today have made loans against their homes via cash out refi's, variable rate home equity loans, etc. than in years past. Fed numbers show that what I observe in my little corner of the banking universe is going on wholesale in the country. ON the whole, Baby Boomers DO NOT pursue the debt free ownership of their homes and DO NOT throw mortgage burning parties (anyone remember those?) to celebrate the free and clear ownership of their homes as did their parents - in my opinion, they are too stupid to see the simple logic and the beneficial aspects of OWNING a home with no debt, but that's just one credit mongerer's opinion.
Just because the morons bought prior to the gas being thrown on the price appreciation fire doesn't mean they avoided the temptation of going out and mortgaging the joint to pay for some idiot overpriced vacation or granite coutner tops or new windows or Muffy's private college tuition or any number of items that they just can't live without. Not all, but many of that generation have no self-control or will power. They seem incapable of saying the "no" word when it comes to spending. It shows in their purchasing habits, their waistlines, the size of their cars and their insistence in building controlled environment subdivisions 40-50 miles from their workplace even as gasoline goes up and up in price. As one old black man I once knew from Mississippi would say, "they've been educated beyond their knowledge".
Boise, ID:
People selling homes: Fearful
Boise, ID:
Develepers --- Very fearful/begining to have thoughts of desperation.
Idaho
Realtors --- no fear. In order to have fear they would have to have compassion for those who are suffering in their losses from following their advice and buying into a decling market. If their are any realtors who read this and you say that's not true then
GIVE BACK YOUR COMMISSION TO HELP PEOPLE PAY THEIR MORTGAGE BEFORE THEY GO BANKRUPT!!!!!! ACTIONS SPEAK MUCH LOUDER THAN WORDS! YOUR "HOUSING CAN NOT GO DOWN SALES PITCH" HURT THE COMMON MAN BEYOND BELIEF. WHERE IS YOUR SHAME?!!!
Realtors know that people will eventually lower their prices (or go bankrupts and be forced to sell) and they will be able to siphon off the cash once again albeit at a much slower rate than their gluttonous apetites would like. Their only real sorrow is that their housing cash cow is not giving off much milk until people lower their prices and take their losses.
"The REIC keeps telling people the market will get better because the Fed will lower rates this Spring"...
hehehe....In the Fall they told people the market would be better in Jan. because the Fed would lower by then.
Some realtor actually convinced friends of mine last late summer to wait til Jan. '07 to put their house on the market for that reason......And they believed her!
Jayman1957 said...
2007 the Year the Denial Ends
Wednesday, January 24, 2007 11:05:44 PM
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I'm trying to get my friends to hold off on buying at least until they see what this year brings, with the trillion dollar ARM reset and all that. Just think what all those toxic mortgages resetting will do to the housing market in Southern Craplifornia, the land of interest-only, neg-am, nothing down financing and incredibly outrageous home prices. By the end of the year, my "job" should be a lot easier...
"....THATS IT! you say
I'm selling this damn money drainer
even if i loose $200K..
cant wait to get my life back and spend 100 bucks at the bar and hang out with the buddies,
Man i miss life before this House."
Wednesday, January 24, 2007 11:13:29 PM
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The guy will also most likely be newly divorced (or re-singled, if you prefer) and will be hanging at the bars to pick up on easy low-end women -- or just to drown his sorrows in some cheap booze.
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