February 23, 2007







Anonymous said...

days to prepare?

who's been selling you crystal balls?

Anonymous said...
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Anonymous said...

Keith, you should open up a chain. Instead of Dairy Queen, you can call it Drama Queen. You can sell a variety of merchandise from cards that when opened say, "Are you ready for the housing panic," and "Get out, get out, the house is on fire."

Seriously, though, you so overstate things so much. We have been in this slowdown almost 2 years now, and nothing has crashed. There are no great deals on houses.

The only thing that's happening is people who got in with subprime loans and ARMS and things are now facing the repercussions, which is a painful restructuring of their loans and slow unloading of inventory.

Yes, this might be enough eventually to cause an economic slowdown but just as with prior crashes it's not going to be a total blood bath. The govt. will step in as usual and bail everybody out.

Anonymous said...

I am somewhat into genealogy and have become familiar with US Census Reports from back in the day. During the Great Depression many people were documented as being boarders living in the homes of others paying room and board.

During the past year I have noticed many cookie cutter homes with cars parked all over the place. There is one place in particular that has around 10 cars parked in and around the house at any given time. These are not inoperative cars but modes of transportation for the many folks living in the same house.

Bad times are here! It’s going to get much worse. Here’s an article: http://www.atlanticfreepress.com/content/view/1033/81/

Anonymous said...
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Anonymous said...
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Anonymous said...

No sudden crash, but a long grinding down, trapping many suckers along the way in dead cat bounces, for years if lucky, decades if not.
Hopefully, the middle class and the government they support will be wiped out.

Anonymous said...


veritas_faust said...

Would this be a good time to finally sit through "Apocalypse Now the Director's Cut?"

Or is that being too dramatic?

Dr Housing Bubble said...

And the catalyst is the subprime market. You saw this coming HP but did it last a lot longer than many of us could have imagined. I was starting to take a sip of the Kool-Aid.

Again, looking at NEW and Novastar we can see that the subprime market is taking the initial smack down of the down market. Soon sellers will take it in the shorts.

Dr. Housing Bubble

Anonymous said...

US Housing Market Crash to result in the Second Great Depression

This week’s data on the sagging real estate market leaves no doubt that the housing bubble is quickly crashing to earth and that hard times are on the way. “The slump in home prices from the end of 2005 to the end of 2006 was the biggest year over year drop since the National Association of Realtors started keeping track in 1982.” (New York Times) The Commerce Dept announced that the construction of new homes fell in January by a whopping 14.3%. Prices fell in half of the nation’s major markets and “existing home sales declined in 40 states”. Arizona, Florida, California, and Virginia have seen precipitous drops in sales.

The Commerce Department also reported that “the number of vacant homes increased by 34% in 2006 to 2.1 million at the end of the year, nearly double the long-term vacancy rate.”

“The US economy is in danger of a recession that will prove unusually long and severe. By any measure it is in far worse shape than in 2001-02 and the unraveling of the housing bubble is clearly at hand. It seems that the continuous buoyancy of the financial markets is again deluding many people about the gravity of the economic situation.”
Dr. Kurt Richebacher

The bottom line is that inventories are up, sales are down, profits are eroding, and the building industry is facing a steady downturn well into the foreseeable future.

The ripple effects of the housing crash will be felt throughout the overall economy; shrinking GDP, slowing consumer spending and putting more workers in the growing unemployment lines.

The banks and mortgage lenders are scrambling for creative ways to keep people in their homes but the subprime market is already teetering and foreclosures are on the rise.

“Not only did the buying stop in December by foreigners in December, but the outflows were huge! Domestic investors increased their buying of long-term overseas securities from $37 billion to a record $46 billion. This is a classic illustration of ‘lack of funding’. So, the question I asked the desk was… ‘Why isn’t the euro skyrocketing?’”

Why, indeed? Why would central banks hold onto their flaccid greenbacks when the foundation which keeps it propped up has been removed?

The answer is complex but, in essence, the rest of the world has loaned the US a pair of crutches to bolster the wobbly dollar while they prepare for the eventual meltdown. China and Japan are currently hold over $1.7 trillion in US currency and US-based assets and can hardly afford to have the ground cut out from below the dollar.

December’s figures indicate that foreign investment is drying up and the world is no longer eager to purchase America’s lavish debt. The only thing the Federal Reserve can do is raise interest rates to attract foreign capital or let the dollar fall in value. The problem, of course, is that if the Fed raises rates, the real estate market will collapse even faster which will strangle consumer spending and shrivel GDP. In other words, we are at the brink of two separate but related crises; an economic crisis and a currency crisis. That means that the unsuspecting American people are likely to be ground between the two mill-wheels of hyperinflation and shrinking growth.

In real terms, the economy is already in recession.


az_mtb said...

A funny thing happened at lunch today as I was discussing my living situation with a coworker. I told her how my wife and I were renting a brand new house in a nice neighborhood for $700 less per month than it would have cost us to buy it at the owner's asking price, excluding HOA, homeowners, tax. She then proceeded to ask me if we were going to buy it from him.

I responded "Perhaps, if the price comes down to a reasonable level."

Here is where things got wierd.

She then looked at me and said "Well.....prices never actually go down.


I tried to correct her at this point by saying that housing prices can easily go down. I told her that this is in fact happening all around my neighborhood. Desperate owners are dropping their prices little by little, and yet their debt-boxes continue to sit.

She just gave me a glassy-eyed look.

I gave up at that point.

I didn't even bother to tell her that CNNMoney.com projected average prices in our metro area were to drop 6.7% this year alone.

Some unfortunate souls are still firmly in denial.

joey said...

A bit over the top I think

Anonymous said...

U.S. subprime woes seen worsening if oil pinches borrowers

Troubles buffeting the U.S. mortgage market could get worse as resurgent crude oil prices squeeze the finances of already hard-pressed borrowers, analysts say, and that could spell more trouble for Wall Street.

The fallout from subprime mortgage lending industry could even trigger a long-anticipated correction in the U.S. stock market, they said.

Rising energy prices could lead to a cash crunch among borrowers with riskier credit profiles, many of whom are already grappling with rising interest rates on their mortgages.

Subprime loans are mortgages aimed at such lower-income and lower-credit-rated home buyers. This sector has been hit hardest by the recent downturn of housing values.

Mortgage delinquencies are rising as adjustable-rate mortgages reset higher and home price appreciation slows, and after weakened underwriting standards left many homeowners with home loans they could not afford.

"The subprime borrower is the one who would be hurt the most if gas and heating oil prices went up further," said Jim Awad, chairman of Awad Asset Management in New York.

"The thinking is that if you are going to have a spike in energy prices here, it would hurt the poor consumer who is already at risk."

For the stock market, he said, the further hits to the mortgage markets "could give you the excuse for a correction."


Anonymous said...



Is there something specific coming that you know that we don't... or just the general mayhem that has been occuring.. like this from Bloomberg:

U.S. Stocks Decline in Worst Week Since August as Mortgage Concerns Mount

Anonymous said...

If Fannie or Freddie or Countrywide announce something nasty next week, it's all over folks

Anonymous said...

Keith, you are losing it. The crash is and will continue to be a disaster in slow motion. I realize there is always the urge to make things 'one louder' in order to keep people coming back, but you're not reflecting reality. The recent implosion of several subprime lenders is just another step in a long slow process.

Relax, have a beer, get in touch with reality. You'll look less of a fool if you do.

Anonymous said...

I am building an underground shelter up in the mountains on my property.I have enough rations to live underground for at least 1 year.I am very paranoid right now.We are on the verge of a serious disaster.

autofx in Phx said...

Yeah, Keith keeps trying to figure new, more colorful ways to trumpet the crash. But it will indeed be in slow motion and won't look like so many people are picturing it. I can't possibly imagine what would keep Keith obsessed with this for so long. OK, OK, there was a liquidity-fueled housing frenzy, and now it will fall apart and take a lot of people down with it. We know, we know. Ho hum!!!

Anonymous said...

Well, the end is almost here...

"Therefore, according to LEAP/E2020, and contingent on the specific evolution of each component of the US economy, the month of April will account for the inflexion point of the impact phase of the global systemic crisis, that is to say the moment when all negative consequences of the crisis pile up exponentially. More precisely, April will be the time when negative trends will converge, transforming many « sectorial crises » into a generalised crisis, a « very great depression », involving all economic, financial, commercial and political players."


blogger said...

I think we all thought it would be a slow unwinding, but the pace is getting fierce now with subprime imploding and surprises everyday.

The other shoe is about to drop.. I can sense it.

And I think it's next week.

Gold coming up on $690 is telling the market something. Countrywide breaking to $39 is telling the market something. NEW, LEND and the others imploding is telling the market something. The net outflow of funds out of the US last month is telling you something. The dollar being so weak is telling you something. The Fed and NAR and MSM and everyone telling you everything is gonna be OK is telling you something. Bob Toll changing his tune and not calling bottom anymore is telling you something.

Add it all up, and we're about to find out what that something is.

And it could be next week.

That's why I think everyone should stop putting off what they knew they had to do and do it. By the time you get to it, whether that's buying euros or yen or getting out of stocks and bonds or buying guns and ammo or whatever your plan is, it's time to act.

It hath been foretold.

Anonymous said...

Canceled contracts masked glut of homes, economist says

Housing analyst David Seiders told Chicago-area builders Thursday that the federal estimate of 3.5 million homes for sale at the end of 2006 is "grossly understated."

"There is a big inventory overhang out there, and it's bigger than anybody understands," he said.

In an annual forecast on the local industry in Addison, Seiders, chief economist of the National Association of Home Builders, cited the high level of sales contract cancellations in 2006.

It created a snag in the recordkeeping, so many homes marked as sales in government data ended up back on the market too late to be counted as inventory, he said.

"Cancellation rates more than doubled between the end of 2005 and the end of 2006, meaning that net sales for the year nationally may be down 65 percent."

He predicted the Chicago region's 2007 housing starts to be down 24 percent from 2006.

Nationally, he sees a 17 percent decline in starts in 2007, coming on the heels of a 14 percent drop in 2006.

The Commerce Department reported last week that housing starts in January had dropped 38 percent from the year before to an annual pace of 1.4 million units, the slowest rate since August 1997.

Analysts note that such widespread discounting and incentives have kept a bad spell from turning disastrous.

"The common phrase that you hear on buyers' lips is, `What are you giving away?'" said Buz Hoffman, president of Lakewood Homes in Hoffman Estates.

Hoffman said his firm probably will scale incentives back from last fall's levels, when Chicago-area builders were trying to entice buyers with price cuts, special financing deals and such exotic enticements as free college tuition.

Patrick Curran, president of West Point Builders & Developers in Hinsdale, said his company is offering flexible closing dates to address buyer concerns that they won't be able to sell their existing homes in a slow re-sale market.

That fear--that consumers will be stuck with two mortgages--not only kept browsers out of model homes but also helped to propel those cancellation rates.


blogger said...

Here's the sign of impending doom: Tom Vilsak withdraws. The country will be devastated tomorrow.


Anyone know Tom Vilsak was running? How delusional could that guy be?

Anonymous said...

Despite home prices dropping, fewer than 10 percent of families in the East Bay can afford an average-priced home, a trade organization reported Thursday.

Only 9.3 percent of all East Bay households can afford to buy a median-priced home, according to the Sacramento-based California Building Industry Association. Despite a relatively high median family income of $83,800, the East Bay is ranked as the 19th least-affordable metropolitan area in the nation, said spokesman John Frith.

"I think as the state continues to grow there's not enough entry-level homes being built," Frith said. "Affordability has fallen."

The association analyzed data from the National Association of Home Builders and Wells Fargo Housing Opportunity Index and found that affordability declined in five of the state's 28 metro areas. The Los Angeles area ranked as the most expensive place to live, with only 2 percent of its families able to afford the median sales price of $525,000. The most affordable spot in the survey was Chico, where 26.8 percent of families could afford a $245,000 home.

Christopher Thornberg, principal of Beacon Economics, said he was wary of the statistics but understood the point that the study was trying to make.

"The point is that prices are relatively high compared to income," he said.

Thornberg said the phenomenon is unlikely to change this year as homeowners refuse to cut prices and buyers are cautious.

"When there's a housing bubble there's either massive amounts of overbuilding or overpricing," he said. "California had some of the greatest price appreciation in the country, and in the process of correcting itself it's gone completely flat, and prices will slowly start to go down."

Swings in housing prices aren't unusual, he said, citing Southern California in the early 1990s as a volatile time for home prices. Eventually the prices froze and stayed virtually unchanged for about seven years, Thornberg said.

"Prices were allowed to go on rising in part because lending standards were stretching and because it had been a good deal in the past 10 years. The house was always worth more two years later," said Stephen Levy, director of the Center for the Continuing Study of the California Economy.

Levy said that as the market changed, homes were no longer as affordable. There is no guarantee of appreciation and it will become tougher to finance, he said.

"And the ability for homeowners to pay for this is a lot harder," he said.


Anonymous said...

The 2nd post said "no great deals on houses"

There sure are in Florida. People are buying new houses in Sarasota from the builders for 40% less than people paid for the same house 18 months ago.

All over the place you can rent a house that lists for $1 mil for only $2500/month.

If those are not great deals, I don't know what is. And we are only at the very tip of the ice berg.

Things will take until about 2010 to really unwind.

Anonymous said...

"Yes, this might be enough eventually to cause an economic slowdown but just as with prior crashes it's not going to be a total blood bath. The govt. will step in as usual and bail everybody out"

With what money? You are telling me they are going to pony up a few trillion to deal with this?

Rubbish. The government has already taken its proactive measures: i.e. the changes to the bankruptcy laws to ensure that the banking system is protected. Beyond that, they are not going to step in and save the Casey Serin's of the world from their own stupidity. This is not a $3 billion "loan" to airlines. You are talking trillions of dollars. You telling me that middle American is going to dip into their pockets to save the "liberal elite" in the overpriced housing markets?

Get real.

Anonymous said...

No bubble, No problem. Become a protection seller.

"ABX needs protection sellers badly,"

As more subprime mortgage lenders filed for bankruptcy in recent months and others have reported disappointing results, the perceived risk of owning lower-quality home loans has increased. That's sparked a plunge in these subprime mortgage-backed CDS indexes as more investors seek insurance against default and sellers of protection dwindle.

"ABX needs protection sellers badly," Peter DiMartino, an asset-backed securities strategist at RBS Greenwich Capital, wrote in a note to clients late Thursday. "Real (not perceived) problems in select mortgage pools and in the subprime mortgage lending industry do not make for an ideal fundamental opportunity at this time."

A closely watched index that tracks risky subprime mortgage derivatives plunged to record lows this week on concern about growing problems in the market for low-end home loans.

ABX.HE indexes track credit default swaps (CDS) on subprime mortgage-backed securities. CDS are derivatives that provide insurance against default. Mortgage-backed securities are home loans that have been packaged up together and sold as a single security.

The ABX.HE index that tracks CDS on the riskiest subprime loans, rated BBB-, that were sold in the second half of 2006 fell to 69.39 on Friday, according to Markit.com, which administers the indexes.

That's down from 72.71 on Thursday and 79.04 at the beginning of the week. In early February, this index was above 90.

Friday's price means that if investors wanted to buy protection against default on a notional $10 million of these loans, they would need to pay $3.061 million up front, plus a fixed 2.42% annual payment.

This is a record low, and represents a spread of roughly 1,500 basis points.


Anonymous said...

keith, i like the update, but you need to get a


up as a quick link.

he bashes dems, reps, and everyone in between. he speaks of our shell economy, our invasion of illegal aliens, and our lack of leadership at all gubmnt levels.

Anonymous said...

'Short Sales' Rise
As Housing Market Cools

As the number of borrowers falling behind on their mortgage payments climbs to the highest level in five years, the number of "short sales" is increasing.

In a short sale of a home, a lender allows the property to be sold for less than the total amount due. In many cases, the lender forgives the remaining debt.

Short sales fell out of favor when mortgage delinquencies were low and rising home prices made it easy for borrowers who ran into trouble to sell their homes or refinance their mortgages. But as the housing market cools, interest in short sales is increasing.

Economists attribute the increase in delinquencies in part to a weaker housing market and the widespread use of adjustable-rate mortgages, many of which now are resetting at higher rates. In addition, as demand for mortgages softened, lenders loosened their standards and made riskier loans.

Anonymous said...

I think that people calling Keith out on "blowing the horn for so long" don't really understand the nature of crashes.

They start out slowly...but usually...there is a breaking point that basically opens the "flood gates"

Anonymous said...

...and I looked beyond the horizon and saw a great sphere,
bubblicious, crimson in tone,
they withered as the one feared reset,
and many foresaw the closure,
and the mighty giving forth imploded.
Quatrain C07 - Q02

Anonymous said...

I get it that I’m the real estate reporter, so this should not come as any surprise. And it’s not, but here’s the rub. We get all these earnings reports from the home builders, whose earnings drops and cancellation rates are really quite staggering, and then we get reports from the U.S. Commerce Department on housing starts, which dropped 14% in January, and then everybody screams that we haven’t hit the bottom of the housing market and if I say anything even remotely bullish, I’m just a shill for the National Association of Realtors.

Let me say this: if you live in Florida, don’t depend on making any money off of your home or condo right now. If you live in Arizona, your house is going to sit on the market a lot longer than it would have two years ago. If you live in California, your prices are ridiculous. If you live in Detroit, you might as well wrap up your house, put a bow on it and give it away to the first person that passes by, because nobody’s going to give you actual money for it.

What a lot of people fail to take into account is that new homes make up 20% of the market. The rest of the homes are already here. The new home market is still in the dumps, no question.

“The data point that we focus on is the number of vacant houses in the system – today it’s about 2.2 million – it should be 1 million,” says Margaret Whelan, homebuilder analyst for UBS. “So the spread – that 1.2 million is why we think it will take 3 years before housing supply really bottoms and we start to see real growth in permits back to historical levels.”

For new homes, it is a buyer’s market. Homebuilders are giving away everything and the kitchen sink to move inventory. They don’t want to lower prices so much because that kills the balance sheet, but if you want help with the financing, if you want the extras thrown in, you can negotiate hard and well at the closing table.


Anonymous said...

"You telling me that middle American is going to dip into their pockets to save the "liberal elite" in the overpriced housing markets?

Get real."

They'll do something. They did something in the case of the stock market crash and 9/11, which was increase liquidity, lower interest rates and all that.

In case you didn't notice, the current slowdown was planned by Bernanke and the Fed who raised interest rates.

It's nothing to worry about. Unless you bought in on an ARM in 2004-now or something.

bobbyj0708 said...

I'm with Keith.

I sat back and watched subprime blow up this past couple weeks (and watched my etrade account go parabolic, wonderful feeling) and wonder what's next. A hedgie or two blows, the stock market tanks - who knows. But don't you just feel something big is right around the corner? Something that we've never seen before? I sure do.

Anonymous said...


Miss Goldbug said...

AZ MTB said: "Some unfortunate souls are still firmly in denial".

I know what you mean, I can't talk to anyone I know about this bubble, just for that reason, except my Sis & bro-in-law who are also renting and think the way we do here on this blog. Everyone else says that "prices never really go down". I found out its not worth it to try to explain it to them.

Welcome to the club.

Anonymous said...

I am going to make sexy time with the blow up realtor doll I just got at larry flynt's new porn store in tempe arizona.The doll actually screams such phrases as;
you last so long, there is no bubble and spank me, I have been a bad realtor.So my friday evening will be so great with my $40.00 realtor doll.

Anonymous said...

"If you live in Detroit, you might as well wrap up your house, put a bow on it and give it away to the first person that passes by, because nobody’s going to give you actual money for it."

Detroit's economy has economic problems for sure, but don't forget it's surrounded by one of the biggest sources of freshwater in the world.

FlyingMonkeyWarrior said...

anon 12:00 am said,

Let me say this: if you live in Florida, don’t depend on making any money off of your home or condo right now.
So I say,


Just came across this amazing and Bullish interactive web sight. Is it a real mini boom, in the midst of a National bubble bursting or will Downtown Orlando, home of the talking rat, go the way of Downtown Miami?


Miss Goldbug said...

"U.S. Stocks Decline in Worst Week Since August as Mortgage Concerns Mount".

I'll add that gold and silver stocks skyrocketed during the same time period. It's only going to get better.

Miss Goldbug said...

Wells Fargo and BofA stocks are both closing down for the week -whereas gold and silver stocks had big gains this week.

Get ready!

FlyingMonkeyWarrior said...

Peter Millar: Seven-fold increase in gold needed to avert debt depression
Submitted by cpowell on Thu, 2007-02-22 00:14. Section: Daily Dispatches

7p ET Wednesday, February 21, 2007

Dear Friend of GATA and Gold:

While it is almost a year old, a study of the enduring importance of gold in the world economic system by R. Peter W. Millar, founder of Valu-Trac Investment Research Ltd. in Scotland (www.valu-trac.com), seems ever more compelling, and Millar graciously has agreed to let it be shared with you.

Millar stresses the periodic upward revaluation of gold as the mechanism for defeating a deflationary debt depression at the end of an economic cycle. Millar writes:

"The first cycle unfolded as follows:

"-- Phase 1: Stability under a gold standard until 1914.

"-- Phase 2: Inflation until 1921, which resulted in a buildup of debt.

"-- Phase 3: Disinflation, which brought stability and allowed asset inflation until 1929, but encouraged a further buildup of debt.

"-- Phase 4: Instability after 1929 caused by deflation of assets from overpriced levels and exacerbated by excessive debt levels, leading to depression of economic activity.

"-- Phase 5: Monetary reform enabled by a revaluation of gold to overcome deflationary debt depression.

"In the second half of the 20th century we saw a repeat of the first three phases of the same cycle:

"-- Phase 1: Stability from 1944 to 1968 under a gold standard.

"-- Phase 2: Inflation from 1968 to 1981, which caused and justified another buildup of debt.

"-- Phase 3: Disinflation from 1981 until the end of the 20th century, and maybe to the present.

"However, it appears that Phase 4 (instability and ultimately deflation due to excessive debt) may have started. If so, Phase 5 (revaluation of the gold price to raise the monetary value of the world monetary base and hence reduce the burden of debt) becomes likely or inevitable. The extent of that revaluation would need to be major according to our calculations, probably by a factor of at least seven times, possibly up to 20 times the current price of gold."

The price of gold when Millar wrote his study, in May 2006, was about where it is tonight.

Millar's study is titled "The Relevance and Importance of Gold in the World Monetary System" and you can find it at GATA's Internet site here:


CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

Help Keep GATA Going

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at www.GATA.org.


Anonymous said...

You're talking about old lady madonna kissing, Paris Hilton best partying, drug sniffing, drunk driving, head shaving, cooter baring, rehab escaping, fornica gyrating, bubble gum pop spewing future Porn princess'es musical career now right ... Cos ... that's dropping faster than a mexican peso ...
The House bubble OTOH ... is slower than molasses in winter. Its gonna collide with the great Baby boomer unload their northern tundra built in the 70's McShitbox and its gonna be worthless in 30 years. But thill then, it will claw it way down one freaking penny at a time ... Blink ... and well it'll be exactly where it was before you blinked.

Anonymous said...

Uhhh, I don't know if you people noticed but this is a WORLDWIDE phenomenon: Sydney, Kuwait, Qatar, England, Canada.


I sold my house, bought my trailer a la "Independance Day". I'll meet you in the Nevada desert, somewhere near Area 51.....
Food, check, guns, check, ammo, check..........

Anonymous said...

I know what Keith is saying.
The data coming out this week.

1. New Home Sales on Tue
2. Existing Home Sales on Wed
3. OFHEO's Q4 report on Thu.

Housing starts set this ball rolling, Toll gave it some more momentum.

The snow ball is about to turn into an avalanche.

Get out of its way!!

Anonymous said...
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Roccman said...


Heard it here first;

"The Great Global Depression of 2012"

with a special presentation of "DieOff" followed closely behind.


Anonymous said...

I must ask, how many people here predicting the second great depression are in the Mortgage Banking Industry? Or Banking/Finance? I couldn't agree more that there will be a trimming of the fat both with lenders and borrowers. BUT to think that people everywhere will stop buying houses, refinancing and generally overspending is just plain non-sensical.

There are trillions of dollars worth of loans that will be refinanced this year. There are still people buying houses, whether they need too or not they still do. There are people who still need to cashout money for emergencies, kids in college or just generally over spending. THESE THINGS WILL NEVER CHANGE.

Back in the Carter Era there were banks selling rates in the high teens and people still bought houses. Housing markets will go down and people will still buy. The only change you will see are investors taking more precautions. These securities are high risk. Unless you people all forgot what that means, there is a chance that you will make a ton of money and you are just as likely to lose a ton of money. People will just be more careful now.

As someone who works in the industry I can tell you this....people are not worried about being out of work. People are only concerned about tough times until things level off. The whole world is not about to crash down upon us, I know that is upsetting to some on this board but you need to come back to reality. If the U.S. goes down they drag the whole world with it. Nobody will idly stand by while this happens.

Roccman said...

"Rising energy prices could lead to a cash crunch among borrowers with riskier credit profiles, many of whom are already grappling with rising interest rates on their mortgages."

Really ...suprise suprise...

It hath been foretold...

we are out of cheap oil.


Anonymous said...

Tonight I was asked if the housing crash is just a secular version of the bible believing apocalypsers or just another Y2k-like fad... I worry that posts such as this are not helpful.

Anonymous said...

A builder in salt lake city has just reduced the price of the last 5 townhomes of about 90 townhomes built over the last couple of years. Original price 250,ooo the last sold for 340,ooo and now the final 5, the best veiws of all with all upgrades have been sitting for months and the builder said today they will sell them for 279,900. Are they worth it and what will that do to the other that they sold above that price?

Anonymous said...

my friend today bought 800k home in PA with 100K annual income and 15K down.I was told that the home would be worth 1 mil in 2 years and I should jump in too as I also make similar figure. when will this madness stop? He is not even a citizen or green card holder. He told me if things tun bad he would just drop the keys and leave the country. who will take loss in the end.

Anonymous said...

I forgot to tell you that the realtor selling the 800k home was a blond in her twenties touting the american dream of having 4200 square feet mansion for 4500 dollars a month. the biggest lie was "I am closing this 3rd house in one week. only 2 are left in the community of 40. So jump in. The builder is giving 18K incentive which wont last after this weekend.

Anonymous said...

Cannot wait till the crash gets going here in NOVA/DC area. Prices have been sticky downward for a while now. Since REIC and Congress are headquartered here it will be nice to see those bastards lose money on their overpriced homes!

Anonymous said...


You are not overstating the case at all. In fact, it will turn out that you understated. Its amazing given the data and news reports, epxert opinion, behavior of major investors, that there are some who still believe that its a minor thing and that its all going to be o.k. Its not! Rough times are a commin. The lack of historical perspective and ability to deny the obvious are truly, truly amazing. Well with dolts like this cruising around its not surprising that things are they way they are. It will be slow sure, but it will be very painful. Keep it up Keith. it would be great to track down the denier posters in say tree years time. I would love that--they would probably still deny anything signficant happened

Anonymous said...

Keith's drama is abit amusing.

Yet it does have a certain message wrapped within it. Those of us that have lived long enough to go thru a few of these cycles can appreciate the urgency of the warnings... and warnings... and wa...

Keep in mind, the history of world is virtually written in the misery, remorse and regret of those that couldn't shake their dullness or comfortable routines to see the signs flashing before their eyes.

And the money'ed and powerful know this very well about YOU. This truth is key to how they make so much money when the opportunites of these grueling cycles present themselves to the smart money.

For those that calmly disregard the drama, it is like shooting fish in a barrel with ease for those that know how to separate you from your money when this all plays out. Your complacency is a necessary element to the game.

I was in commercial real-estate developement from the mid-80's to the mid-90's working for an off-shore investment fund. One and one-half billions (B) dollars we sunk into domestic income-investment properties and ground-up development during the go-go days up until about 1991.

The ride was exciting, the compensation wonderful and bonuses astounding. It was a classic bubble, concentrated that time in the commercial R.E. sector.

By 1989 the signs were everywhere of a nasty turn. Yet, the common human tendency to discount the bad and hope for the good reigned throught our company.

At one point, I engaged in abit of my own drama, dropping a couple or three 'gloom and doom' finance articles into the company fax and hitting 'send all'. The news bits seems at the time far-away and somehow overly alarmest and vague.

I was derided and ridiculed for being so very drama-filled. The co-investors in the company continued to hold their options and pour in every single dime of their own.

At first the unravelling was relatively slow. So much so that it wasn't really noticed except by those really watching... closely... the underlying fundamentals at the time.

The dull, unmotivated and worse, unstirred by 'drama' continued to invest invest invest, like it was 1999 (except it was 19*89*)

The holidays of 1990 brought undeniable signs that the first stages of the meltdown were gaining momentum. Many of our so-called high-profile tenants, many of them finance firm and others playing that buttle, simply vanished in the middle of the night. Often leaving their offices still furnished, papers still on desks, even food on the kitchen counters ready to eat. Yet, they were long gone, many never to be found.

This started happening more often as the days went by. Accounting firms folded, architectural companies went from staff of 40 down to 2 (the original partners) when building ground to a halt.

By this time, our firm was now actively involved in seizing lease collateral. (We even towed Hitler's command car and had it stored in our underground basement garage. It was in the collection of one of our lease tenants.)

By this time the free-fall was becoming something no-one could ignore.

Yet, the company officers-investors that did start to notice were in too-far. Way to far, too late to stop the bleeding.

At this point, our major banking underwriter-lender 'partner' LOL... HA! (Chase) was now playing their card.

As the lease and investment income plummeted, our firm drew-down cash at a withering pace to continue to indemnify the bank.


This gave things an air of 'normalcy' that was completely built on smoke and mirrors.

This is the part where the so-called 'slow motion' meltdown was very very deceiving. This is the part where money, power and influence (in this case Chase Bank) knows well is the ideal time to hang you with your own rope. While you *think* things are recoverable, waiting for the turn-around.

Hope springs eternal. The nay-sayers are just 'drama queens'

This phase lasted for a full four years. Mind you the ending was still scripted from the very beginning, yet the 'hanging' is more like slow water torture and feels like you might survive.

At first.

Many think there no cause for drama or alarm, yet the ending of the script dicates completely the opposite indeed.

By mid-1995 the bottom of the commercial R.E. crash had been 'nearly' reached. Our company had invested upwards of 700 million cash holding it all together through the period. R.E. values in the commerical sector were in the toilet. Returns were sharply negative throughout.

Starting to sound familiar?

By late summer 1995 CHASE BANK SUDDENLY AND WITHOUT WARNING CALLED ALL THE LOANS AND HANDED OVER 1.5 Billion dollars in our R.E. purchases and development, that we all put our heart and soul into for 10 years to the court conservator.

Despite our many-years-long efforts to re-finance the money to reflect current market conditions and interest rates. Our off-shore cash source was deep and and we had every ability to see it through.

But no matter, it was the bank's move at that point to engineer a vast transfer of wealth to their account, on their highly advantagous terms.

Sounding even more familiar?

The properties were ultimately slushed back and forth among a complex network of bottom feeders and thru the back-door to officers of various banks and finance concern at unimaginable profits.

It was vultures picking off every tidbit of meat off the bones of our R.E. investment firm.

We were the 'fish in the barrel' and we were killed very easily. It was a clash of two very strong financial titans and the result was predictable.

The current unwinding it just as predictable and crystal clear.

It's simply no more and no less than the way raw capitalism works, leaving behind human wreakage in it's wake in vast quantities.

I remember the last few days sitting in the office and hearing the sob stories of former high-flying company President, V.P.s, Controllers, etc. who had lost virtually everything and vastly much more. One, a 65 year old gentleman that was immensely well-liked by everyone cried and cried, telling how he had to move back home with his 86 year old mother.

The first time this now elderly woman had to support her son in nearly 50 years.

The unfortunate thing is; the underlying fiscal strength of the finance system and the world economy was in far better shape then than it is now.

So, my recommendation is; don't discount the air-raid sirens and neon-flashing signs as mere theatrics.

Cuz shooting fish is incredibly easy when you are the one blinded by the muddy waters you are swimming in.

Paige Turner said...


Yes indeed. We are waiting for the straw that will break the camel's back. The stage is set for total financial calamity and the slightest upset will create a perfect storm. A Middle East "crisis" or another 9/11-style "terrorist" attack could do the trick -- probably during the Bush regime.

Anonymous said...

Without 20% yearly gains they were nothing. They built a house of straw. The thundering machines sputtered and stopped. Their leaders talked and talked and talked. But nothing could stem the avalanche. Their world crumbled. The cities exploded. A whirlwind of looting, a firestorm of fear. Men began to feed on men.

On the roads it was a white line nightmare. Only those mobile enough to scavenge, brutal enough to pillage would survive. The gangs took over the highways, ready to wage war for a tank of juice. And in this maelstrom of decay, ordinary men were battered and smashed.

Except for one man armed with an AK-47, and a Honda full of silver.

Anonymous said...

Alarm bells aside, anyone who would pay more than 50% off asking on either coast, big cities and small towns both, is crazy right now.

And for all I know, that applies to the heartland too.

Let's face it, we had a real mania going here. NONE of these homes are worth what people paid for them, unless they bought 12, yes 12, years ago.

The subprime mess is heading up into prime. You just know it. Because you personally know "Prime" borrowers" who were pressured into borrowing more than they could reasonably afford.

Anonymous said...


I have to take a step back for a minute here and it may be the wine talking, but, while I completely agree that the housing market has gotten out of hand, and in many respects, capitalism and globalization, has gotten out of hand, America still offers the best alternative to any other form of government modern society has yet to witness.

More specifically, as a Gen Xer who has worried about retirement since the age of 10 and has little saved, I am certainly mindful of the challenges that we face, not only as an American citizen, but more importantly, as a citizen of this world.

In this regard, I find it disingenuous {sp?} that, on one hand, those on this forum (and me included) rail against the injustice of our society, and greed and self interest, yet offer no real solutions, or sacrifice, to solving the problems. I suppose what I mean to say is that some 250 years ago, a certain group of individuals sacrificed their lives, their fortunes and their honor to develop a world wherein freewill and individual choice was paramount, yet on this blog, while such principles are held in such high regard,the word of the day appears to be no more than individual self preservation.

Society is not created nor maintained by the indivudual, but results only from sacrifice.

Accordingly, I will not buy gold nor Euros nor Yen, but possibly to my detriment, will maintain faith in the US dollar as it is reflects, even with its many faults, possibly the greatest form of government this Earth has ever witnessed.

Think about it, what is the alternative?

Anonymous said...

I guess what I am saying is...if the US fails as we know it, what is the alternative that we will be living in?

Anonymous said...

The slow grind is what's going to screw everyone over.

A sudden drop is shocking!! But slow depreciation will sneak up on people and before they know it they are trapped.

After all, everyone needs a place a live, right?

Anonymous said...

You know what's extra, double, super creepy about all this?

The supposed experts were caught with their pants down. It seems the experts were so lost in formulas and calculations they didn't see the tsunami of foreclosures on the horizon. WTF is in charge around here?

The answer is "the salesmen, and the brokers". For the past 5 years those two professions have been the arms dealers for buyers and sellers in the real estate market. They didn't care about the quality of the transactions, only that they got paid. And you know what? I would be that way too. Why not? If the Federal Reserve starts giving away money, the best place to be is brokering that money and walking away with your commish with no responsibility on the eventual future of that money.

And who got the richest? New York money brokers like Goldman Sachs.

Why do the rich get richer and the poor get poorer, and why does this never change throughout history? Because the masses are stupid with their money. Anyone who bought a house at the going rates after 2003 and hasn't sold by now is a fool who will set back his finances 10 years or more.

The people who we all think are in charge are out to lunch. The financial predator dogs of war have been set loose. You're on your own folks. If you make stupid financial decisions, no one is going to rescue you except maybe your family.

Of the main stream media, only Nouriel Roubini, Peter Schiff and to some degree CNBCs Bob Pisani even brought up the real danger of a housing crash. Even now as the theater is burning down the pundits are debating whether the bottom is in. I bought FMT puts today. They were cheap! Within minutes of buying they FMT plunged and they went into the green. The masses and even Wall Street are in denial and a housing stock bear can really clean up right now. I had to tell myself, "If you truly believe that housing is crashing, then act upon your convictions and buy those March puts in almost all of the mortgage lenders".

I had no choice but to put my money where my mouth is, the only honest way to know what a person really believes: what they spend their money on.

Even Cramer got this housing thing wrong. However, he did warn people off of New Century well before it tanked but not for the reasons he should have.

Anonymous said...

Nope...looks like we were all wrong...at least that's what the NYTimes is saying in this article.


Talk about goading renters.

I'm beginning to think that if all the renters "ganged up"...and got a roommate...we could drive rental vacancies through the roof and end this thing before more people get hurt.

And they are still pumping No Doc loans here in Los Angeles over at the WaMu bank...only up to 100k though.

Are these the loans to keep the homedebtors afloat for just a bit longer...only to possibly forclose with even more debt?

Anonymous said...

Keith,trumpet all you want. I like the drama, its better than TV without the commercials. Its one great, big REALITY show.

In fact I'm enjoying it immensely partly because I'm angry. I go back to zillow and see how much the homes I used to own are supposedly worth now. I'm angry because I didn't participate in the greatest Ponzi scheme of all time. I'm angry because I didn't foresee what Greenspans incompetent bumbling would cause. I'm angry because shitshacks are out of reach for the average Joe unless you get a "teaser" loan. I'm angry because of the constant lying coming from government, corporations, NAR and shills and there are probably other reasons as well.

So I am enjoying the great unwinding. But I'm sure its going to be a slow process. I'm absolutely certain there is a Plunge Protection Team so they will interfere to prevent anything catastrophic. All atttempts at prosperity must be maintained and that will involve propping the stock markets up as long as possible.

One of the key ingredients in the unwinding that NOBODY on this board has figured out is that most of America lives paycheck to paycheck. When there ARM adjusts and most Americans are surprised when this happens there is no cushion left. Its either cancel the $100 cable bill and stop drinking $3.00 Starbucks or forfeit the house UNTIL their ARM adjusts again.

What government will do to stop the bleeding is lower interest rates once again (2008). Of course Uncle Sam will be between a rock and a hard place as this is going to devalue the dollar even more which of course will have its own string of consequences.

The recession that MI, OH and IN is feeling right now (which hasn't made the news in any significant way) will spread as people are laid off from the housing related jobs. And that is happening in a big way as we speak primarily in the big bubble states. I see consumption flagging, why its taking so long is beyond my comprehension unless its the fact that we've been taught to be good consumers no matter how bleak the future plus the fact the average american has no idea WHEN there ARM will adjust.

There isn't going to be any kind of cascading failure. That would be underestimating the governments ability to use smoke and mirrors. Nothing is more important than the ILLUSION of prosperity. The illusion can be maintained almost in perpetuity because of governments collusion with the media. Media dutifully reports government lies like the unemployment figures and anything the NAR thinks is fit to print.

So, its going to be a slow and gradual process which is tantalizingly suspenseful, don't you think? After all there is always that slim possibility something might happen that government can't cover up or throw money at. Something that will disrupt the illusion of prosperity and make Americans consider saving instead of spending.

Anonymous said...

Keeping powder dry:

Excellent post detailing your experience during the last bubble. Thanks for sharing, it was very instructive.

Anonymous said...

The only thing that's happening is people who got in with subprime loans and ARMS and things are now facing the repercussions, which is a painful restructuring of their loans and slow unloading of inventory.

dont forget all the re-fi's loanowners did to buy crap and keep the econ going.........they will be hurt also!

Anonymous said...

What, you think you are going to live forever?
Lighen up!
All you will lose is money. It is handy, but really not the important thing in life. You will still eat. If things go really bad, you may not eat like you wish, but you will survive. You will still have a place to call home, even if you dont own it. The sun will rise.
Money is great, but you can still do without it. Like the song says, your cash aint nothing but trash. Its not that important.
Try just enjoying the many great things we have in life. Most of it is free.

Anonymous said...

7:07 AM,
You really need to grow up.
The problem isn't too much capitalism, it's too much government (Fannie and Ginnie led to the securitization of mortgages, so now the lender doesn't care if it's paid off or not, because it has been sold to investors; too many regulations and taxes; not enoug personal responsibility because "the gov't will oversee things").
The US is as corrupt as any banana republic due to its government.
Democracy never works for long: “If everyone votes they’ll vote themselves circus and bread.”
-T. Jefferson
I hope for complete destruction, and helpless sorts like you will be owned by others.

Anonymous said...

Anonymous said...
I guess what I am saying is...if the US fails as we know it, what is the alternative that we will be living in?

While I agree with you I have two points: The rich get richer and the poor get poorer. BUT in our democracy, at some point the people speak up and elect independents who represent them and their average middle class children/adults-of-tomarrow. When things get bad enough, I believe America will turn itself around. It may take a generation or more to undo the damage being caused by the current batch of elites. But we are free to change things. Trust me, I am sick of America only because I know it is the greatest place on earth (or has the capacity to be). I want my country back!

Vote independent!

Anonymous said...

It's funny that all the loser mortgage companies are saying essentially the same thing, "Gee, we didn't know how bad things were getting."

Yeah right. Whose software were they all using? Something made by Microsoft? But I digress.

This isn't an oops. It's something they all saw coming but preferred to ignore. Why not? As long as those comissions get paid, those stock options get sold (after being retro-dated) and those loans get sold to stupid foreigners and retirement funds, the gravy train rolls on.

What's the worse that could happen? The corporation goes bankrupt. The management and employees still got their bonanza paydays so there you go.

All I can say to home owners who bought houses that will plummet to 40% of their original value, and rich foreigners who are about to get their nut sacks shaved is: "You stupid fucks. Now get out of my house, which used to be yours. I don't care if the snow is 3 feet deep and the kids don't have their winter clothes. It's not my problem. Having trouble financially? I hear that male prostitution is the next bubble. Get in early before the rush begins."

Anonymous said...

After we pull out of The Middle East, there will be lots of surplus 7.62x39 and 9mm ammo for sale cheap. I like the SKS rifle which is legal even in California. You can buy surplus lock boxes from your local realtor for $10 a case, they are fun to shoot as as they explode when hit.
Have fun!

Anonymous said...

Yes, there is the catalyst just around the corner, I will say w/i the next two weeks all will be evident.

"days to prepare?
who's been selling you crystal balls? "

more like he's the only one with Brass Balls! He is a prophet!

Miss Goldbug said...

Thanks Flying Monkey Warrior for the Gata article! Very good read.

Gold has to rise to bring down inflation - history will repeat itself.

Anonymous said...

if the US fails as we know it, what is the alternative that we will be living in?

A: The Republic of New China

Dr Housing Bubble said...

keeping powder dry:


Thanks for the comparison. It is true that there is an enabler to all this and the psychology of those in the know is to be in denial and keep the bubble going on and on. Again banks and lenders seem to be back in the game. The difference from 1989 to 2007 is that EVERYONE is now part of the game; those that can't buy because it is too expensive, those that have equity lines, those that flipped, those that just bought at the peak...the play includes a lot of new actors.

Anonymous said...

bank issues 10$ of debt for every dollar of deposits, sell the debt paper to gov. for insurance against loss, seems thus that there is 90% to many dollars chasing the same products and maybe like nasdaq stocks are 90% to high price,ala year 2000, aqnd seven years later, still 50% down needing another 8 years to break even, or enough time to plant and harvest from seed, orchards

Bill said...


This week’s data on the sagging real estate market leaves no doubt that the housing bubble is quickly crashing to earth and that hard times are on the way. “The slump in home prices from the end of 2005 to the end of 2006 was the biggest year over year drop since the National Association of Realtors started keeping track in 1982.” (New York Times) The Commerce Dept announced that the construction of new homes fell in January by a whopping 14.3%. Prices fell in half of the nation’s major markets and “existing home sales declined in 40 states”. Arizona, Florida, California, and Virginia have seen precipitous drops in sales. The Commerce Department also reported that “the number of vacant homes increased by 34% in 2006 to 2.1 million at the end of the year, nearly double the long-term vacancy rate.

Anonymous said...

then if one holds and pays tax at 90% higher than salable prices for 12 years one could pay the fair market value, in taxes alone, due to compoundings in devaluationing market, then perhape one could afford to buy, today, the decaying pits, one bought 25 years back, and keep them to

Frank R said...

"There are no great deals on houses."

You obviously have not been looking in southern California because some AMAZING deals have surfaced just in the last couple of weeks. Entire neighborhoods have for sale or for rent signs up. It's here, believe me.

Anonymous said...

Hmmmm, you may be right about this Keith. My sources have confirmed that the body of Jesus is being flown to New York for a public showing on Monday!!

“If it proves true, the discovery, which will be revealed at a press conference in New York Monday, could shake up the Christian world as one of the most significant archeological finds in history. The coffins which, according to the filmmakers held the remains of Jesus of Nazareth, his mother Mary and Mary Magdalene will be displayed for the first time on Monday in New York.”

Click Here

Oh yes, he’s back. He’ll be making his debut at the heart of the money changers power base. Wall Street bankers, you are in some deep doo-doo.

Anonymous said...

Can't we just all get along???

Miss Goldbug said...

Greedkills said:"And they are still pumping No Doc loans here in Los Angeles over at the WaMu bank...only up to 100k though".

WaMu is one of the 10 top ten sub-prime lenders on the implode-o-meter. Someone else on this blog said WaMu trys to push people into I/O loans who can quailty for fixed!

This is a true story, it happened to me recently with this bank.

I went to WaMu to do a wire transfer in the bay area, when I got home the bank left a message on my machine saying it didnt go through. I had double-checked the routing number at the bank and it was correct. Now I get a letter from WaMu charging me $30 dollars for a wire transfer that didnt go through. They said the routing number is wrong, and they refuse to directly talk to Capitol One to confirm it is correct.

Plain and simple: WaMu are crooks. I am pulling all the money out via a cashiers check next week and close the account. They want money so bad they lie about a correct wire routing number, so they can keep my money even longer and charge me to boot.

Another true story about WaMu: Recently my mom renewed her 5.20% CD, the teller said she would get the same rate...just this week, my mom received a statement. The new interest rate on that CD is 2.5%!!

They must be going down hard to have tellers make up lies to tell customers.

Beware of the WaMu.

Anonymous said...

Yes, now we can begin to argue whether it is the bottom or not.

Anonymous said...

Do yourself a favor take the next available flight home.
The lack of greenhouse gases on the european continent is effecting your thinking, as well as all vegetative plants; a week in LA with deep breathing may replenish those starving brain cells.
Europe is being overrun by 15 century thinking, ‘arab invasion’, this ideology has been subtly fed via the euro media (AKA BBC) there is a clear undertone of ‘our way’ (small group of dictators rule, funded by fossil fuel) will prevail.. and the ‘Bush’ (AKA American way) will collapse.
When you arrive here in LA you’ll remember that here in the US, majority of people can live very comfortable even if this huge lending / Housing market were to collapse tomorrow before noon.
Many creative folks already driving around in vehicles fueled by alternative energy, There are dollar stores every where, you can fill up your basement with canned food/cereals, juices/purchased at Sams Club for less then 100 bucks, you can get a decent used running car for less than $1000, and there are Salvation Army and Frugal used everything (clothing, furniture) stores all over this country.
Unlike Europe, we can get really good cheese and wine for very cheap.
And if Housing really comes down a lot then a lot of people will be able to afford their home too.
My prediction is that the side of europe that functions the Dubai way, will have the biggest collapse and may trigger an internal European bloody war. (breaking every ‘international’ war law). The middle class in the US will live a more modest life for a while till the savings to debt ratio returns to normal.
Remove the BBC filter from your eyes and things will clear up a bit..
I agree that Housing prices will continue to decline, however, the impact will be least felt here in the US.

Anonymous said...


The guy who writes this blog is just the latest in a long line of wannabee "guru's" forcasting the end of the world. I am old enough to remember his ancestral Cassandras going all the way back to the 1960's. Well folks the world only ends once and it's not likely this time around. All you people sitting on the sidelines of the housing market just hoping to get a steal when "the bottom falls out" are likely to be sorely dissapointed, much as you were as the prices spiralled upwards and you sat on your thumbs. The modest drops in prices in some areas around the country were entirely predictable given the HUGE runup in prices and represent only a tiny retracement of the run up. The adjustment will play itself out over the next 9 months and be history. Roofs are not stock certificates. Everybody needs a roof. And no, I didn't just buy a house and am trying to make myself feel good.

Anonymous said...

The slow grind is what's going to screw everyone over. A sudden drop is shocking!! But slow depreciation will sneak up on people and before they know it they are trapped. After all, everyone needs a place a live, right?
This is what the Fed is counting on. Now you know the REAL meeting of the term "soft landing"....

Anonymous said...

Within the next week or two all hell is breaking loose.

Anonymous said...

Sweet Jesus - the time is here, you've been warned - fill up the cars, Iran about to spill over!

-Secret CIA man

Anonymous said...

Central Valley Business Times, CA - Feb 23, 2007

“I think the housing bubble has kind of adjusted itself,” Mr. Bankaci says. “What we’re expecting for 2007 are increases"

Anonymous said...

Housing slump may soon affect jobs, study says
By George Avalos/Contra Costa Times

Article Launched:02/24/2007 06:19:21 AM PST

The East Bay's employment market remains the Bay Area's star performer, but the relentless erosion of the housing market could tarnish the region's economic luster and darken the job outlook, a new report warns.

In an assessment that starkly declares "The East Bay forecast: The real estate juggernaut falters," a researcher with UCLA's Anderson Forecast said the region faces plenty of economic hazards in 2007. Economist Ryan Ratcliff of the Anderson Forecast suggested real estate will impede the East Bay economy this year.

"We've only seen the beginning of the East Bay real estate slowdown," Ratcliff wrote in his report.

The biggest concern is that home sales have nose-dived in Alameda and Contra Costa counties.

"We may not have seen a rebound yet in the housing market," said Bruce Kern, executive director of the East Bay Economic Development Alliance, which commissioned the quarterly study. "We may see continued softening. Hopefully, by the second half of this year, things will have bottomed out and we can adjust."

The decline in sales activity has also caused residential construction to plummet.

During 2006, the number of residential construction permits that builders pulled declined 4 percent in the East Bay. It was far worse in California: Statewide, residential permits sagged by 22 percent, according to the Construction Industry Research Board.

"Like many other regions in California, real estate has gone from pulling the economy forward to actually holding it back - it's just taken longer to happen in the East Bay than in most other parts of the state," Ratcliff wrote in his study.

The construction board's data, though, also show that the East Bay residential construction market in 2006 was a tale of two counties.

Permits in Alameda County rose 31 percent in 2006, bolstered by healthy gains in multifamily residential construction. But Contra Costa County, where single-family subdivisions have sprouted, suffered a 28 percent decline in residential building activity compared with 2005.

"Since Contra Costa County has been the center of gravity for the building boom, this suggests that we've only seen the beginning of the East Bay real estate slowdown," Ratcliff warned in his study.

Despite the gloomy warnings about the East Bay, analysts said a rescue mission could be mounted from an unexpected sector of the economy.

The long-battered technology industry surged during 2006 in the Bay Area. Researchers believe tech's comeback will benefit the East Bay as well, because so many East Bay residents work in Silicon Valley or at tech firms near their homes.

"We have seen a firming up in the last six to eight months in technology manufacturing and services," Kern said. "That is a strength we have been looking for as we anticipate a softening in our housing market."

Ratcliff said the pace of the tech industry's rebound, as well as the ripple effects, are certain to determine how well the East Bay fares during 2007.

"While the East Bay will likely bear most of the brunt of the real estate slowdown," Ratcliff wrote, "exactly how severe this slowdown becomes will hinge on how much steam is left in the tech renaissance."

Still, some economists such as Sean Snaith, a consultant with the Stockton-based Business Forecasting Center at University of the Pacific, say the fallout from the housing slump, as well as the slump's extent, has been overplayed by economists such as those with the Anderson Forecast.

"It was not a housing bubble, but a housing souffl\é," Snaith said. "If some of the key ingredients in the souffl\é were missing, it would go flat. But it was not a bubble."

Snaith argues that the housing market in California and the East Bay has actually been more resilient than some forecasters believe.

"Despite all the land mines that housing was going to hit, and the economy was going to hit along with it, we have been able to avoid them so far," Snaith said.

And the East Bay itself, along with the nation, has not careened into a recession because of the housing market's struggles. Snaith pointed to strong total economic growth in the fourth quarter for the nation, continued employment gains in California, and the East Bay's reaching a record number of payroll jobs in 2006.

"The East Bay and California are not one-trick ponies," Snaith said. "It is not just housing, housing and more housing for those regions. They both have very diversified economies."

Anonymous said...
This comment has been removed by a blog administrator.
GrandInquisitor said...

Watching this "epic crash" is like watching a snail crawl 20 miles. It's about as exciting and is taking that long to unfold. The market has absorbed every subprime implosion, higher rates, and higher inflation without a hitch. The builders are dumping land on the market like there is no tomorrow. When the hell are we going to see the desperation? When are we going to see the panic. All that I see is soccer moms driving their Excursions to the mall, and living in 5,000 sq ft homes. Not sure what the rest of the country looks like but central NJ is still doing just fine. No impact at all yet, except maybe the ability to negotiate a ridiculously high asking price down 10%......waiting impatiently.

Anonymous said...

My Mister Bear, what a big schlong you have! But I don't see Mrs Bear around here, so what exactly are you thinking? Oh never mind, my risk premiums are at an all time low, and I feel fine. I'll be crocheting in the upstairs room! There's some hot chocolate on the stove. Ta ta!

Tomorrow's FT headlines, today:

"Goldilocks Raped"

Anonymous said...

"will maintain faith in the US dollar as it is reflects, even with its many faults, possibly the greatest form of government this Earth has ever witnessed.

Think about it, what is the alternative?"

Here's why the duck 'n cover crew is on high vs 'the let's do something about it' Thomas Paines of the world... what can the average person do?

For the past decade, my friends and I have written a slew of letters on the failure of the scientific establishment from creating real career tracks for those with a true science education. As a result of this poor planning (govt and industry), the rest of the world (particularly Asia-Pacific) have caught up with the US in the sciences (along with the help of corporate America's capital infusion). Instead of us creating those jobs locally, we have the media pundits screaming about US citizens not applying for PhD science programs. Well guess what? There's no shortage of Americans applying for medical school (another grad program in the applied sciences or even pharmacy school) and the reason for it is that there are non-tradable service jobs in those fields whereas science R&D work is disappearing. Now, in light of this situation, wouldn't you be telling young kids to study for the MCAT (MD admissions exam) instead of designing a new sensor chip since his design will probably end up in a Moscow or Beijing lab as soon as an Intel executive sees the first draft?

Anonymous said...

cnbc on banks giving loans to illegals


with subprime blowing up I think this ends too

JR Junky said...

To all you yahoos who think there are no problems in central New Jersey (like our present leaders and finance TV want you to believe) here is a uptodate listing of over 250 houses listed for Bankruptcy in Somerset County NJ. I know several contractor/flippers who are caught
big time.


FlyingMonkeyWarrior said...

Nice and really funny pic! Although I liked the other one too.

Shakster said...

Next on the butcher block?Helocs,and the Parent banks.Otta be huge.This is a slow grind unless consumer,investor,and foreign capital psychology is peirced.Psychology is key,and the CBs know it.Are they worried?Lets study this issue to find out.The numbers don't matter until sentiment does flip flop.

Anonymous said...

I love the mad.mike Mad Max prologue...

Keith, the end is not here yet. That's because now all the foreign gub-ments flush with their trillions are planning to go into properties and equities. The bubble will grow to worldwide mammoth proportions. The bank that controls Norway's retirement funds wants to put 60% into equities. This new bubble will explode with the impact of a supernova and there will be global chaos.

I'm liquidating all assets into gold and heading for Area 51 posthaste........When the ashes settle, we'll move back into the shells of the Sydney skyscrapers....

Anonymous said...

Financial services sector and banks leading the deflation driven depression with real estate collapse

The stock market quietly topped out like in 1929 and 1987. The financial stocks and banks are leading the worst nightmare of deflation driven depression.

The real estate market is in deep trouble. The mortgage delinquencies are skyrocketing. People are paying interest on their so-called home equity lines by borrowing.

Large credit card companies have issued letters reducing credit lines to all those who they suspect are sub prime borrowers. They are just fueling the fire and creating their own bankruptcy scenario.

Before all this debacle is over, close to 70% financial institutions will go belly up.

The Dow Jones Industrial Average had its biggest weekly slide since August as rising consumer prices reduced the odds of an interest rate cut and concern mounted that mortgage defaults may reduce profit growth at banks.


Anonymous said...

Repossessions peak as U.S. housing boom goes bust

For high-risk borrowers in the U.S., the dream of owning a home is fast becoming a nightmare, Tom Bawden writes from New York.

Repossessions of homes in the United States are set to hit their highest level in decades after the housing slowdown put millions of "subprime" borrowers at risk of default. And the effect will be felt by investors worldwide.


Anonymous said...

Well, one thing is for sure ... if you want to call the bottom on this housing market, just wait until the average Joe admits that housing is in a slump and nobody should buy.

That will be the bottom.

The average Joe still thinks housing is a great investment, so of course, this isn't the bottom yet.

Anonymous said...

"As a result of this poor planning (govt and industry), the rest of the world (particularly Asia-Pacific) have caught up with the US in the sciences (along with the help of corporate America's capital infusion). Instead of us creating those jobs locally, we have the media pundits screaming about US citizens not applying for PhD science programs."

Well corporations decided that science doesn't have a premium so they petitioned to get work visas (H1B) and L1 and whatever else (student conversions) to get science wages down in the U.S. So what student in their right mind is going to go into science and engineering knowing that their job could be given to a foreigner whenever the company wants?

My cousin graduated science from Davis 2 years ago and he was one of the small minority of non-second generation Americans in the class. It was primarily second generation Americans (and children of greencard holders) and primarily Asian.

I sure wouldn't recommend my kids go into science. There's no market for it in this country.

Anonymous said...

Amen amen amen re science.

I'm speaking from experience (PhD Physics, ivy edumacation).

I have no future in science. I worked hard for a long time. I'm 38, been unemployed for a year.

Only options are prostitution in the Military Industrial Complex, or prostitution in the Financial Manipulation Complex.

To nobody's surprise these are the things that hasn't been outsourced---the first because of laws. The second just hasn't gotten there yet, they're still making enough money not to care. But the next time around (the next boom after the upcoming bust), the hedge funds will be hiring mathemeticians and programmers in Moscow and Bangalore, not NYC or London. Only the sleazy schmoozers stay in the USA. fcuk.

Anonymous said...
This comment has been removed by a blog administrator.
Anonymous said...

"There are no great deals on houses."

You obviously have not been looking in southern California because some AMAZING deals have surfaced just in the last couple of weeks. Entire neighborhoods have for sale or for rent signs up. It's here, believe me.

Rents are cheap and falling fast here in NoCal as well. check out this Craigslist ofering:


"Note: the house is currently for sale, so special rental conditions apply. We have discounted the rent by $250. The house is shown frequently, but nothing is selling currently. While we cannot promise this, it is likely that you would be able to stay in the house through July."

Anonymous said...

Anonymous said...
..... There’s no shortage of Americans applying for medical school (another grad program in the applied sciences or even pharmacy school) and the reason for it is that there are non-tradable service jobs in those fields.....

Non-tradable, as in can't be shipped overseas!?

Guess again, there was a recent article I read where some guy needed a hip replacement. His company's insurance carrier sends him first class to India on a jet, puts him in a top rated, world renowned Indian hospital (the guy says the service would rival any 5-star hotel, and the medical attention was fantastic) then brings him back after a week to ten day stay, again first class air. Total cost was around 12% of what it would have cost to do it in the U.S., INCLUDING THE AIR FARE!

Routine medical lab work is also being outsourced, with specimens shipped next-day-air overseas and back apparently cheaper than it costs to do it in the U.S., again, INCLUDING THE AIR FARE!

Don't assume that anything done or made here (other than a fresh pizza) can't or won't be done somewhere else!

Anonymous said...

Everything will be fine, I havent used all of my HELOC monies.

Anonymous said...


I can relate. I was a physic major. So was my dad. Dad worked for DOD until they asked him to do nukes. He demurred and has spent most of the last 20 years working for defense subcontractors, except for a short interlude subcontracting for NWS. He really wants to do meteorology, but lacks the MIT PhD (he was rejected by Woods Hole because he didn't go to a snobby enough undergrad).

I saw the writing on the wall ... professors even told us that their most successful grads went to wall street. I said fuck it and ended up in transportation. I've been struggling, partially my own fault (didn't finish the MS), but at least I got a CDL ... though I think Class B's will be fighting with out of work Class A's soon ... shit.

The only good side is that I am highly motivated, and I'm better than a lot of people in my field (who got Urban Planning degrees). That is to say I'm mathematically literate.

Anonymous said...

Good call Keith. Looks like you nailed this one

DOW plunges 500 points -200 points within 5 minutes