April 13, 2007

Leading real estate investor: Prices may fall 20%, and "It will be the biggest housing-price decline since the Great Depression"

Any questions?


Man, now EVERYONE is starting to sound like HP, eh? Even the big boys... I think we'll be hearing the "since the Great Depression" comparisons for a long time to come...

Heebner Says Home Prices May Fall 20% Amid Bad Loans

April 12 (Bloomberg) -- Kenneth Heebner, manager of the top-performing real-estate fund over the past decade, said U.S. home prices may plunge as much as 20 percent because of rising defaults on riskier mortgages.

Subprime loans, made to borrowers with a history of missed payments or untested credit, and ``Alt-A'' loans, which require little or no documentation, account for about $2.5 trillion of the $10 trillion in outstanding mortgages, according to Moody's Economy.com. As much as 40 percent of these loans may default, flooding the real estate market, Heebner said.

``It will be the biggest housing-price decline since the Great Depression,'' Heebner, 66, said today in an interview in Boston. Prices may fall by a fifth in some markets, he said.

That would leave home prices at levels last seen in 2003 and 2004, the middle of boom that lifted prices to a record in 2005. The damage from high-risk mortgages will slow the U.S. economy, though not enough to send it into a recession, Heebner said. Fourth-quarter growth was revised to 2.5 percent from 3.5 percent because of housing, the government said March 29.

Heebner, who co-founded Capital Growth Management in 1990, manages the $1.6 billion CGM Realty Fund. The fund has gained an average of 20 percent a year in the past 10 years, the most of any real estate fund over that period, Bloomberg data show.

29 comments:

ramen ronin said...

You folks are all wrong. I made good money with my real estate broker and salesman. In fact I made almost a grand in one hour.Today.
How?
Got a box of Ramen noodles-hawked them in their offices...
RAMEN NOODLES!!! GETCHA RAMEN NOODLES! Sold out in a half hour.
Real estate is passe. Ramen noodles , that's where the $$$ is-the gold of the new millenia.

tmaioli said...

Add in decline of jobs, decline of wages, no health insurance, war, and we have the perfect storm coming - the clouds are the darkest I've ever seen heading this way.

AMIGAUSER said...

I would say the biggest sign that the housing/real estate market had topped out was Zell selling Equity Office Properties to Blackstone.

I considered this my Goldenwest momment, and sold all my Office property shares.

Since the commerial real estate market is supposed to save the Property market, how long before it also begins to have price decines?

Anonymous said...

BUT SUZANNE RESEARCHED IT DAMMIT!

Ashwaubenonobserver said...

I see lots of brand new retail space here in the Green Bay suburbs. Some of it has been sitting empty for over a year now. I wonder who took the hit on that?

I think predicting a 20% decline might turn out to be be a conservative guess.

IRAQ-VACATIONS NOW 85% OFF said...

Let me see...

If also our leaders have sent the US automotive industry to overseas, and our US housing market is set to crash from "MANY THINGS" - like massive job losses, maxed out credit cards, bankruptsies, no spending money at the end of the month, wage cuts, zero savings, no home equity anymore, increased living expences, higher gas costs at the pump, etc., etc., and .... Hmmm... plus that 9/11 was a total scam (as to what really went down), I would think at this point that SOMEONE SHOULD GET FIRED!

Don't you? Hellooo????

I myself - from living in Michigan, USA can just say this: Back in the early 90's, lots of layoff's where going on - but as time went on, you would read headlines like, "GM announced today that it's calling back 1,700 workers, or Steelcase or Herman Miller are calling back 940 workers or Kelloggs now adding 2,300 new jobs over the next 15-months, etc, etc., you would SEE AND FEEL THINGS GETTING BETTER! And those jobs were high paying jobs! Nevertheless, those days are gone! THERE WAS NO CALLBACKS!!! Some plants (republican operated)are just shut down - or gone - after moving to Mexico or China. I bet 55% of the manufacturers in Michigan (thats left)have moved 70% to 100% of their jobs overseas - or Mexico. Dont get me wrong, I think other countries should have good jobs as well, but if our leaders cant MANAGE the SIMPLE direction, PACE and success of our country's best interests, then WE should FIRE the elected officials who cant do their jobs, or WASTE and/or steal the wealth from America!!

Bush's warmongering is WRONG, TRAGIC and STUPID from day one - just for starters as well. Even the late former president GR Ford from Michigan said that Bush was wrong by going into Iraq and was against it before bush lost his nut. NO SH*T!

Nevertheless, I just read in the 4/12/07 copy of the Detroit Free Press something that sums it all up!!:

Former Chrysler Chairman Lee Iacocca tears into the Bush administration in his new book saying America's leaders have failed the nation. "We've got a gang of clueless bozos steering our ship of state right over a clif, we've got corporate gansters stealing us blind and we cant even clean up after a hurricane much less build a hybrid car."...

lol Ramen Noodle's company stocks jumped 9.4% yesterday!

RESTORE AMERICA!!!! DEMAND BUSH AND CHENEY IMPEACHMENT!! CALL OR WRITE YOUR LOCAL REPUBLICAN REPRESENTATIVE TODAY! TELL THEM TO FIRE AND VOTE THESE A*S HOLES OUT NOW! ITS NEVER TOO LATE!!!!!!

anonymous wimp said...

Note how his credentials are touted as a hedge fund manager, but that he denies that the housing crash will lead to a recession.
So he's half-right?
If I recall correctly, ANY downturn in median house price is a first since the great depression, so ANY decline in MHP is the "biggest since the 'great depression'"?

LauraVella said...

Prices will definitely fall lower than 2004 prices...this is only the beginning.

I project a 70% price slashing by the time this bottoms out.

This country is far worse off than it was in the 1980's or the 1990's.

Anonymous said...

2003 price. Shrug. I bought my home in 2001 and will still be better off than people who rented all this time.

You losers couldn't afford a home in 2003 at 2003 prices. What makes you think all of a sudden you'll be able to afford a house at 2003 prices in 2007?

SPECTRE of Deflation said...

What can I say except the guy is optimistic after I take a peek at the Case-Shiller Index. The housing market is a snowball at the top of a 14,000 foot mountain. It has just started rolling, and when it reaches the bottom, the carnage will be horrific.

Anonymous said...

This country is far worse off than it was in the 1980's or the 1990's.

You sound like an old man talking about "those crazy kids today". Every generation thinks the next generation is fucked up and also thinks their day was better.

Why are things so bad, because India and China make products for $1 an hour instead of unionized goons who used to make it for $20 an hour? I applaud this and wish every manufacturing job got sent overseas.

And why are things so bad, because unlike in the early 80s we don't have 70% marginal tax rates and I can actually keep some of the money I earn? My god what a shitty time we live in.

You, Keith, Mort and the rest are nothing more than communists who are upset you lost. Well sorry sugarplum life's a bitch. Capitalism has winners and losers. Don't blame the game because you can't play well.

Anonymous said...

" I bought my home in 2001 and will still be better off than people who rented all this time.
"

Dont worry, Ill be buying your shit shack for CASH at 1998 prices chump.

HAR HAR HAR.

honica jewinski said...

LMFAO!!!!! "Heebner" That's freakin perfect! I like this dude already.

Anonymous said...

The "game" as you called is flawed. It incentivizes people with little education and no scruples to scam under-educated people into taking on subprime mortgages they don't understand, or houses that they cannot afford; thereby generating huge commissions. It relegates people who went to school and actually learned a skill, people who care about their credit and their careers; and can't just jump on whatever bandwagon that happens to be on its way to boom-town.

The "game" today rewards the stupid people. The people with nothing to lose, with no career goals. These "game" "winners" move as a mob buying real estate which in turn pushes prices up. And so more of the walking, borrowing dumb jump in, and so prices go up even more. And, then they sit back count their equity marbles and feel smart, and do it again. Their friends feel jealousy and ask their "winner" friend for advice. Can you guess what kind of advice a "winner" gives someone who wants to be like them? And, so with all this demand home prices go up again.

It's just a pyramid game. Why can't everyone see it??? Those that were in the "game" first are the Grand Poo-bas and all you people who bought your invesmtne properties after them are on the lower rung just adding to their wealth. Well, I'm not playing. I'm way to educated to know the difference between a "game" and the present value of a financial asset. And, so I rent for half the cost of buying the house in which I live. Watching bitterly as people with less education and much less common sense feed on an all you can eat buffet of credit, having an orgy of housing transactions.

I do believe in the long run those us you learned a craft, who actual have careers (sorry mortgage brokers and realtors you do not qualify) will be happier and better off the "winners" of this so called "game".

I cannot wait for the coming Armageddon, where the financial system will cleanse itself of all these imbalances and return capital to its rightful owners.

FMW said...

Keith are you pumping and dumping Ramem?

Anonymous said...

Just like in 1926, Florida will be the the canary in the coalmine, with the first to have a full fledge realestate bust followed by the upcoming stock market collapse.

With homeowners insurance gone mad, taxation gone mad, and now the majority state congress which is republican, sceeming up a new bill that would require all coastal communities have shutters accross all homes windows. I wonder if anyone realizes the cost of shutters? ROTFLMFAO, and the dumbasses that live in florida keep re-electing the same idiots that allowed the insurance jack up, and the taxation screwing too.

As I have said repeatedly, the bush built schitt sandwich commeth, prepare. Then again, with the likes of sharpton and lieberman calling themselves democraps, whats a person to do. We are stuck between the greedy corporatist (republicans), and the dumbass infighting democraps. Damn the bad luck.

anon666 said...

anon 2:40 says, "2003 price. Shrug. I bought my home in 2001 and will still be better off than people who rented all this time.

You losers couldn't afford a home in 2003 at 2003 prices. What makes you think all of a sudden you'll be able to afford a house at 2003 prices in 2007?"

And the person who bought their house in 1994 is better off than you.

To answer your second question, ugh, I'm making 2007 wages in 2007. In 2003 I was making 2003 wages. I'm probably earning about 15-20% more. Also, my savings account is a lot fatter in 2007 than it was in 2003, enough for a substantial down payment when the time comes.

BTW, I already decided won't be buying a house in 2007 for a 2003 price or for any price. Actually, I'm holding out to purchase your in house in 2009 for your 2001 price. Sweet!

RipeDurian said...

"Why are things so bad, because India and China make products for $1 an hour instead of unionized goons who used to make it for $20 an hour? I applaud this and wish every manufacturing job got sent overseas."

You are a fool for so many reasons, its quite amazing really.

Blah said...

If we get Katrina II this summer that will accelerate the deceleration. (does that make sense?)

Anonymous said...

"Even the late former president GR Ford from Michigan said that Bush was wrong by going into Iraq and was against it before bush lost his nut."


True, but the situation in iraq has changed. We are fighting terrorists there now, as well as some of the local extremist population (I tend to think of the local extremists as being a half step away from full fledged terrorists). Just because Al-qaeda was there when we invaded is not a reason to leave now. They are there so lets fight them. Problem is our stupid politicians who don't seem to want to really take Al-qaeda out.

Why don't we tell Pakistan to get rid of Al-qaeda or else we will cross the border and do it ourselves? Worried about a few nukes? I doubt they would launch first as we would level the entire country if they did.

Problem is the USA has become a land of limp wrist lard-asses.

chris g said...

Iraq Vacations Guy, the reason why those guys aren't getting called back is because they can't compete worth a damn against Toyota or Honda. And while Toyota and Honda are building plants here to take up the slack, they're not building them in Michigan because the unions will eat them alive from the inside out, just like they're doing with GM and Ford.

If you think the Toyota/Honda comparison of quality is unfair, crack open the auto issue of Consumer Reports each year and look at the number of problems per vehicle after 3 years. Toyota and Honda are much lower in problems per vehicle after 3 years. I hope GM and Ford are figuring out a way to address this with their current lineup.

I work for the gov't agency that insures pension plans so I read about these companies' legacy liabilities all the time. GM has hundreds of thousands of retirees with low-cost medical care and fat pensions. Toyota and Honda have only a few hundred retirees in this country. That's most of your problem right there. Unfortunately it will take at least 20 years to level that problem out. Good luck with that.

Anonymous said...

Heebner called for 50% price drops last year in a Wall Street Journal article. He's just being careful now that we've begun dropping. Doesn't want to scare people with what he REALLY thinks! That could cause a PANIC!

I like Heebner. He was one of the veery few who was not afraid to come out and say it last year. Good guy.

-Sally

Anonymous said...

Why are things so bad, because India and China make products for $1 an hour instead of unionized goons who used to make it for $20 an hour? I applaud this and wish every manufacturing job got sent overseas
-----------------------------------
I don't wish every manufacturing job go overseas, but he has a point. What's left of unions will bury our manufacturing sector. We are in a global economy and unions only serve to make our home grown manufacturers uncompetitive, thus basically forcing them to go overseas or out of business. There is no magic middle ground that unions keep talking about. Read any college level economics book, it's just not possible.

Mort said...
This comment has been removed by the author.
uh huh said...


Some plants (republican operated)are just shut down - or gone - after moving to Mexico or China


What is a Republican operated plant and how do you know the political affiliation of the owner or management? Does that mean Democrat operated plants will stay open in america even if they lose money? If that is the case, then why doesn't George Soros open factories here to employ Americans? Most of his investments are in foreign companies. It was Bill Clinton and the Democrat-controlled Congress that brought NAFTA. It was Bill Clinton who signed the GATT and WTO treaties. It was Bill Clinton who gave China Most Favored Nation trading status.

Anonymous said...

I wonder how many would buy their places at todays prices, yet expect buyers???? I have a feeling most "hot" houses today are not worth the downpayments, and the credit bubble was just monkeyed in order to justify price increases, and protect the banks that hold the downpayments, all the rest is currency fraud, that the taxpayers will be repaying, no fear to Chinas trillion in bonds, when tens of trillions have and are being looted almost yearly from the economy, just that they have 5 times more people

Anonymous said...

The big boss, Ramen chief died recently, so better stock up as most companys take a quality nosedive when that happens, stock up 10 percent tho???

Danilo Bogdanovic said...

Not so new news...in Northern VA, prices have dropped an average of 18% from August 2005 to December 2006 (much more in some areas and products such as condos). It's been about flat for the last several months.

I wish we all had a crystal ball to know for sure, but to say that it will drop another 20% (40% total) in this area may be a far fetch.

Swurvey said...

It doesn't take a rocket surgeon to predict falling prices in the future, when they have already begun!

Here in Vegas, I have seen foreclosure homes selling for as little as 55% of their original price.

Ex: sold in '04 for 430K, just closed escrow at 235K.

peace