May 28, 2007

I'm back

Lots of articles now in Europe about the housing crash underway, I'll post some coming up. Brits losing money in Florida. Brits losing money in Spain. And now Brits predicted to start losing money in ... you guessed it... Britain!

I also saw too many hilarious reports from the US press with analysts and headlines trumpeting the "surge in new home sales" showing how the US market is bottoming. Damn, are they that stupid? Prices collapse, sales tank versus last year, and the media and analysts report increasing sales. Amazing. Absolutely amazing.

Finally, in Old Europe villages and cities, I don't get the sense of a housing ponzi scheme, except in the new-build or "off-plan" developments. Passing by country estates, little villas and farming towns on the train, I get the sense of families who own their homes outright, have owned them for generations, and where houses are just that - a home. A place to live. A place to settle down.

Not lottery tickets and get-rich-quick schemes.

After the crash, after realtors go away, after Congress regulates the REIC and after this crazy lending orgy, that's where we'll be again I hope.

Houses as homes.

25 comments:

Anonymous said...

well as a sign of desperation now the bush administration is talking to iran.

ecobuilder said...

In Germany you'll need to pay 50% downpayment (no joke) to get a mortgage.

That's why old core Europe (France and Germany) is more immune to housing bubble.

Spain is different. 15 years ago Spain was poorest country in European union. British and Russian locusts invaded a real-estate market and boosted Spanish REIC.

Mark in San Diego/Zurich said...

That is my impression from visiting Europe - people actually look at housese as a place to live - Spainish housing boom was really a "Brits Abroad" housing boom. . .locals were pissed off about rising prices because their kids couldn't afford to stay in those "British Towns.". . .near Maliga, some towns are totally British - tea rooms, fish and chip places, and no Spanish being spoken.

SeattleMoose said...

My brother in law lives in Warsaw Poland and we have been there the past few years. Prices have really shot up in the Warsaw area...almost doubling in just a few years.

My sister lives in Australia. She and her husband are "flippers" and right now....they are flopping.

It truly is a global bubble.....

Anonymous said...

Keith, hope you're keeping a note of the major mainstream "the market has bottomed" declarations.

This would make a laugh you ass off, gut busting read in a year of so.

Anonymous said...

Keith - please post more on Europe's bubble(s). The shape of the US crash is well understood by everyone who has the sense to see it.

Metroplexual said...

Hey Keith,

I will be seeing Ron Paul at the Colbert Report on June 13. Anything you would like me to ask him if I get the chance? On say housing or something germane to your blog?

Benjamin Franklin said...

The New York Times had an article on Florida high-rise 'specuvestors' who now want OUT of their pre-build contracts, even sacrificing their $340,000 deposit(s) to get out of their contracts:

http://tinyurl.com/3bkyfg

Others are trying to sue, looking for any reason to cancel contracts, etc.

Selected excerpts:

The condo mania of recent years also beset cities like Las Vegas, Phoenix and Washington, but while those markets are also full of resales, analysts say South Florida drew the most investors.

“Between the Latin American influence and the out-of-state buyers who have a love affair with Miami because of its ambience,” said Jack McCabe, a consultant in Deerfield Beach who tracks the South Florida housing market, “they flocked to it and pushed it to the point where about 70 percent of all sales were to investors.”

Real estate analysts say South Florida’s housing market peaked late in 2005, and would-be flippers stopped buying in 2006. People who bought condos before 2005 might still make money or at least break even if they sell soon, the analysts say, but those who bought at the height of the mania stand to lose a bundle.



“I ask if they’d be willing to sell at their 2003 price and walk away with their deposit back,” Mr. Zilbert said. “A lot of people are saying, ‘Yes, please, yes, please, yes, please.’ ”

Anonymous said...

Congress will do what it always does - act AFTER the fact to make headlines and pander for votes.

Depending on who's in power, BOTH parties grow government to buy the votes of idiots schooled by the Socialist education system who think more government is the answer to every "problem".

Bubbles will ALWAYS happen. The condidtions and psychology of some market will evolve to facilitate it whether the instrument is tulip bulbs, NASDAQ stocks, gold and silver, or beanie babies. That's just the way it is, and though shit for people who can't be bothered to pick up a history book.

Quark

Anonymous said...

Read that the mojority in iran is under 20 years of age, while the majority in the west is more than 50 years of age, seems they might inherit what they attempt to destroy

K.W. - Southern Ca. said...

Europe's housing crash is just in
a more advanced stage then ours.

It's good to report on both.

Anonymous said...
Keith - please post more on Europe's bubble(s). The shape of the US crash is well understood by everyone who has the sense to see it.

K.W. - Southern Ca. said...

There is also another reason - obtaining credit is not so
easy in Germany as it is here.

In Germany you'll need to pay 50% downpayment (no joke) to get a mortgage.

That's why old core Europe (France and Germany) is more immune to housing bubble.

Spain is different. 15 years ago Spain was poorest country in European union. British and Russian locusts invaded a real-estate market and boosted Spanish REIC.

dude said...

well in germany there is a lot of ads for "easy credit" everywhere...

Germanic said...

Hey HPers and FBers,.

Oh. Doesn’t the grass look greener on the other side of the Atlantic?
You couldn’t pay me to live in Europe; it is a crowded smelly and hateful continent.
Here in the US we continue to evolve.
There will be an abundance of financial opportunity for HPers during this housing down cycle in the US.
Envy and greed is all you’ll find on the other side of the pond.
Of course the Housing crash in Europe will be much worse then here, in the long run Europeans will remain a poor people.
China, and India are already leaping ahead of Europe much like the US has been doing since its separation from Britain, the Middle East will soon realize that Europeans have caused all their hardship and not little Israel.
Lets not forget Africa; she too will rise from a thousand years of European oppression.

My friends, sure the image of an old European homestead ‘all paid for’ (its owners slaughtered every generation by whomever ruled the day). Sounds soo romantic.
The truth is they are rotten to the core! evil to the bone!
Keith, keep us informed on how things are going.
Got popcorn?

Anonymous said...

And the building continues.

Could this be the reasoning:
I build something (a widget, a condo, whatever) and can sell it for 5X what it cost to build (I get cheap illegal labor to build my widgets).

Then there's a change in the market and I can only sell widgets for 3X what it cost to make. Of course this being a business I'm not emotionally bent on any particular price, just so long as it's what the market will bear and so long as I'm making a shitload of money.

A 200% markup will just have to do in tough times.

shtove said...

Germanic, stop calling me your friend.

You know nothing.

Anonymous said...

shtove said...
'Germanic, stop calling me your friend. You know nothing.'

shtove, We here clearly remember how unpopular the housing meltdown seemed just a little over 1 year ago.
Germanic is right, European history to date tells the story.

Germanic said...

shtove said...
**Germanic, stop calling me your friend. You know nothing.**
I’m guessing you know something we don’t.
Please enlighten us.

Anonymous said...

AL-QWEEFER SAID:

"I also saw too many hilarious reports from the US press with analysts and headlines trumpeting the "surge in new home sales" showing how the US market is bottoming. Damn, are they that stupid? Prices collapse, sales tank versus last year, and the media and analysts report increasing sales. Amazing. Absolutely amazing."

There was asurge in new home sales in the sense that everyone expected a 16% decline MOM and instead we got a 16% increase. A 10% YOY decline isn't really a "tank" in sales. Al_Qweef, you have to realize the US consists of more than Phoenix, San Diego and Miami where you're right things are in the shitter. But come one man, that's like what 5% of the country? Perspective amigo, perspective. Outside of those areas, things are fine housing wise. And no you knee jerk morons, I am not saying 20% is in the bag. I'm saying you are not seeing the big picture and concentrating on a couple of bad markets. Try to buy anything 1/2 decent in NoVa for under $500K or Boston or Seattle. Some collapse in prices.

Anonymous said...

Looking long-term, I don't believe we will soon again see a time when U.S. real estate is a good investment based on appreciation. Why? Because given the vast amount of debts and liabilities in the U.S. today, it's hard to project sustained income growth for the next 2-3 generations of Americans. Aside from easy credit, income growth is what drives housing appreciation, far more than population or GDP growth.

The biggest liabilities by far are for Social Security and Medicare, and I believe EVERYONE underestimates the difficulties Congress will face reforming these systems or reducing liabilities by a meaningful amount due to: 1) growing political power and organization of seniors (via AARP); and 2) entrenched medical lobbies that will resist universal health care reform. Unless we can whittle down the $50 trillion entitlement liability, starting soon, the income growth of today's young people in the U.S. is permanently screwed. Income stagnation = very little housing appreciation, not enough to justify rising utility and property taxes.

Even if a young American owns a $250,000 (median price) house with 100% mortgage, that liability is not as great per capita as entitlement programs. So much focus on housing doom. So little on entitlement doom. But long-term, they are linked.

Anonymous said...

HAHA the price of my Tickle-Me-Elmo is up 300% while you suckers have your money in 5% CD's

Anonymous said...

Huge bubble in Eastern Eurpean cities, very easy credit, no financial controls, they went from communism straight into the world's biggest liquidy boom.

Check out some major Eastern Europen cities, sure they are nice but would pay $1 million USD for an appartment in Prague?

Anonymous said...

Ecobuilder, that is AWESOME about the 50% downpayment in Germany!!! I believe we had a similar situation here in the US after the Depresssion?

OMG, This would be my wildest dream come true!!!

Maybe it will get so bad here that they'll demand 50%. I can only hope and pray.

SerpentMage said...

ecobuilder: Sorry to burst your bubble, but you don't need 50% down payment. I know because I have purchased a house in Germany. What you need depends on the bank and the mood of the bank.

Anonymous said...

In Germany you'll need to pay 50% downpayment (no joke) to get a mortgage.

I am currently considering to locate back from the US to Germany, and looked into what it would take to buy a house there.

Downpayments are expected in the 20% range, but you can get 10% or even lower down payments if you can prove good income.

30 year loans are still the majority; rates are usually fixed for 10-15 years.

Prices are comparable with US; about 150-250k Euros in smaller/mid-size towns for a starter single family house; it goes up to SF Bay Area levels in Munich or Duesseldorf. Berlin seems to be the only affordable very large city. Eastern Germany is very cheap mostly, but then there are not many jobs.

It's about where the US was 5-10 years ago - i.e. not many 0% down, almost no ARMs, etc. But then most loans are kept with the bank, so they try to keep risk manageable.
Appreciation rates have been relatively low in the last 10 years (but then the Euro has appreciated a lot). While there is a mini-econimic boom starting, appreciation is expected to be modest since population is declining rapidly.