June 25, 2007

HP'ers - When will we hit housing "PANIC", and what will that look like?


I hate to say it, but I think the majority is STILL in denial. We've got a long way to go.

Capitulation will be an interesting time in America. An interesting time indeed.

But it's PANIC I'm interested in today. Will we recognize it when it hits? Will there one single catalyst? Will you start seeing "housing panic" in media headlines? And when will it hit?

52 comments:

The average man is a moron said...

Here is a disturbing piece. All in all--people are idiots. Its o.k. a few of us can profit by it or at least be entertained.....

A recent survey reveals three out of four Americans have not yet changed their spending habits in response to housing’s downturn. The Boston Consulting Group also released these results yesterday:

74% of Americans said they would be able to sell their home in less than 6 months for a price they think it’s worth
55% are “confident that their homes continued to increase in value compared with a year ago”
85% of those polled believe their home will rise in value over the next 5 years.

decaffeinated said...

An easy to recognize trigger would be the failure of a large financial entity. For example: Wash. Mutual (toxic mortgages) or, say, Morgan Stanley (derivatives exposure).

Anonymous said...

It depends on who you are. I think many people have already pressed the panic button, just ask Casey Serin, but maybe society as a whole is still in the denial phase.

Anonymous said...

I'm not sure people are in "Denial".

From what I have seen talking to people most are just "Clueless"

Sheeple being led to the slaughter

Anonymous said...

Looks like a fun ride. WWeeeeeee...

Anonymous said...

It's only going to be in places that experienced a bubble. People are pretty private about things like this - who wants to admit he bought high, sold low? So the panic may only surface as frantic, ill-considered selling. Wasn't there an article showing over-correction? That's what panic "looks like".
Finally, when we supress our emotions and do not talk about problems, our desperation manifests in other ways - relationships, physical and mental health.
Where do all the foreclosed-upon folks live, by the way? Thank goodness for month-to-month rentals.

SPECTRE of Deflation said...

Based on the polls/surveys I have seen, we are definitely in denial based on homeowners answers. Like a roller coaster, once you come over the top, things happen very quickly. One minute you are having a great and wonderful time, the next thing ya know the dumbass next to you has hurled his lunch all over you, and suddenly you aren't having a good time and want off. Sorry folks, once on you must ride the sucker until the bitter end.

SPECTRE of Deflation said...

Keith, these numbers speak volumes concerning denial. Poor things will never know what hit em'!

"74 percent of the survey respondents said they were confident that they could sell their home within six months at the price they think it's worth.
...
Looking long-term makes homeowners even more optimistic: 85 percent believe their home will rise in value during the next five years, and 63 percent believe a house is a good investment."
http://biz.yahoo.com/cnnm/070621/062107_housing_perception_gap.html?.v=1&.pf=real-estate

Anonymous said...

I agree with another poster, that once the word gets out about Bear Stearns and especially a large bank like WaMu, then they will finally start to consider something is very wrong.

I think we will see a lot more panic selling by the end of this year with perhaps higher interest rates.

Anonymous said...

We will hit the "Panic" stage in DC when people see coworkers with high incomes walk away from homes that they put little to no money down on because the are $100K upside down and the ARM is resetting. (most of Prince William County) Why would they pay twice what it costs to rent? At first owning was only a little more than renting (but we were going to get rich). Now the tax benefits aren't as good as they hoped for and the mortage is going up. Since this is no longer a get rich scenario, it's time for six months of no rent or mortgage during forclosure. When the sellers realize they can't compete with the banks...Game Over; PANIC!

James dean said...

DC area, people are still 95% in denial. The concept of the market being soft has translated into appeasing the buyer with just about everything but significant core price reductions. Ergo, nothing is selling but low end condos for the ignornant low-end buyers and McMansions for the few price-insensitive and not so savvy elite. You can find some bargains from desperate and fearful sellers, but not enough for the pool of potential first time buyers. Take away the first time-buyers and you have what we have now - nothing moving.

Conclusion: mostly still in denial, but it cannot last much longer.

Columbo said...

Just looked at the Homes Sold section of Sunday's paper here in Columbus, OH - I'm a bit shocked by all the purchases. Definitely Denial.

oh sh*t! said...

The Bear Stearns CDO mess is the tip of the iceberg. A Biblical revaluation of CDOs is taking place now. The resulting liquidity crunch will have everyone in a panic! What happens if major banks and brokerage houses have to close overnight? Who runs the trading desks? The government will be looked to bailout everyone; the printing press can do it but not without hopelessly devaluing the dollar. Got gold???????????

Anonymous said...

Hey, where's all your housing links? You took more than half away : (

I referred alot of people here for the links as well as the content and will now have to refer them elsewhere

Anonymous said...

Soon everyone will learn Freddy Krueger and Jason Vorhees have been running Wall St. the past few years.

Anonymous said...

Time to go buy a boat and live off the sea for the next 20 years!

Prince William County Bomber said...

panic is only going to hit those that are trying to sell or need the equity. The vast majority of people that see their home values as just a fluctuating number affecting their property taxes really do not care - hence the denial of any issues.

Guy Daley said...

The bubble areas might be in a panic mode because there was a much higher speculatory participation than in non-bubble areas with the exception of MI, OH, and IN which is due to economic collapse AND fraud, Chicago and Memphis which are due to I don't know what.

Until that list of 500 worse foreclosure zip codes in the states came out I had no idea Memphis was in such bad shape and I haven't seen an ounce of news coverage on it. Usually the pain is spread all over within a state but not in TN, its just in Memphis.

38127 Memphis TN 56 206 156 418
38109 Memphis TN 60 179 118 357
38128 Memphis TN 42 159 90 291
38118 Memphis TN 35 135 86 256
38125 Memphis TN 42 138 73 253
38141 Memphis TN 38 110 78 226
38104 Memphis TN 12 32 176 220
38106 Memphis TN 39 97 81 217
38115 Memphis TN 31 111 73 215
38116 Memphis TN 35 123 51 209
38111 Memphis TN 24 111 64 199
38114 Memphis TN 28 107 64 199

I say MIGHT be in panic mode because there is always that little trained voice in the back of the sheeples mind that Uncle Sam will come to the rescue. People probably think that FEMA will come and cash them out since this is another disaster.

But most people are too busy, working, smoking, drinking and reproducing to pay much attention to whats going on around them. Unless it was a big accident that people could slow down to 5 mph to watch as they drive by, it won't get noticed by many. Most people don't know where Iraq is on the map.

keith said...

"Hey, where's all your housing links?"

they're all there - I moved some of my favorites to the top of the blogroll

touchy touchy! someone moved your cheese!

HP'ers if there's a blog you think belongs on teh blogroll send me a note

Anonymous said...

at a neighborhood cookout this wknd...(DC suburbs)...I am the only renter among 6-8 owners...(of course, I pay $1900 to rent the $550,000 TH that the others pay $3000-4000 in mtg pmts).

Brought up the housing bubble popping...nobody knew what the hell i was talking about...not denial, clueless. Hope none of them has to sell anytime soon.

Anonymous said...

On ziprealty I am tracking 12 homes. Las one I added was about 6 weeks ago and some have been there since January. In the past 2 weeks 2 of the 12 have sold.

Small sample, I know, but 2 homes selling in 1 weeks after months of no sales can't be dismissed.

Anonymous said...

We are 9 months into the mortgage tightening. No more easy credit for anyone with a pulse. ARMS resetting all over the place. Interest rates higher. All the things that were supposed to have put the housing market into full blown free fall panic by now. Yet many posters are seeing what I'm seeing; people still buying homes and owners convinced 20% is still in the bag.

I'm seeing huge inventories around me as well as foreclosures. But prices haven't budged. There is a home about 1/2 a mile from me that has been on the market for 390 days and not 1 price reduction. Ove a year on the market and they're still asking $700K for a 2200 sq ft home That is not a sign of panic, anything but.

I'm getting sick and tired of waiting. What I'm also getting frutsrated is the HP mentality of absolute certainty that it's coming. The more I think about it the more I see that the denial of owners is simply the mirror image of HPers and other bears' optimism that 50% off prices is in the bag.

SPECTRE of Deflation said...

Keith, thought you might enjoy reading this piece. It makes clear we are in for some real pain:

The Beginning of the End?
by William Thomson


Business Times Singapore Investment Roundtable June 2007

The beginning of the end?

The bull market appears to have peaked and a major correction in global bonds and equities is looking more likely, say panelists

PARTICIPANTS

Moderator: Anthony Rowley, Tokyo correspondent for the Business Times

Panelists:

Marc Faber, investment adviser and publisher of the 'Gloom, Boom and Doom Report'

Mark Mobius, president of Templeton Emerging Markets Fund mc, and director and executive vice-president of Templeton Worldwide Inc

William Thomson, chairman of Private Capital Ltd in Hong Kong

Christopher Wood, managing director and equity strategist at CLSA Asia-Pacific Markets in Hong Kong

OVERVIEW

LIKE the often-prophesied end of the world, a major correction in global bond and equity markets is a long time in coming - so much so that many investors are tempted to think that it may never happen. But, as two of our eminent investment experts comment in the panel discussion below, the most dangerous words in the English language are: 'This time it is different.'

The 20-year bull market in bonds is already looking very shaky, following recent sharp rises in government bond yields. While the market unwinding is unlikely to happen overnight, the implications for ultra-narrow credit spreads in general are clear to see. As central banks tighten monetary policy, in belated recognition of rising commodity and asset prices, the liquidity bubble that has propelled markets - emerging markets especially - to record highs is expected to burst. The correction could be savage, as our panelists point out.

Anthony Rowley: We're privileged to have some of the best in global investment talent taking part in this Investment Roundtable, at what could be a critical turning or tipping point for bond and equity markets.

Our panelists are veterans on the world investment stage, and also in these discussions. A very warm welcome back to all of you. Marc, let's throw the ball into your court first. Does the recent sharp rise in bond yields signal the beginning of the end of the sustained global bull market in bonds, and possibly a bear market in equities too?

Marc Faber: We had a more than 20-year bull market in bonds - Sept 21, 1981, to June 2003 when the 10-year (US) Treasury bond yield fell to 3.3 per cent and the JGB (Japanese government bond) yield fell to less than 0.5 per cent. We are now at the onset of a major bear market in bonds worldwide that should bring interest rates above the level in 1981 when US Treasuries were yielding over 15 per cent. But this process will take at least 10 years. In this environment stocks will not do well in real terms but will rise in nominal terms. How high will depend on (US Federal Reserve chairman Ben) Bernanke's money printing presses.

William Thomson: I believe the bull market in US Treasuries that began in 1980 peaked in 2003 and that we have been in a long-term topping action since. The recent rise in interest rates indicates that bond prices are probably moving into a lower trading range with higher yields than we have become accustomed to. Central banks have been behind the curve in raising rates and until recently they were beguiled by phony, low-inflation numbers. As a result, real interest rates, after adjusting for inflation, have been too low. Commodity price inflation (in terms of food, energy and minerals) is now seeping through the global economy and boosting even government-manipulated inflation readings. Thus, interest rates are rising as central banks take belated notice. Equities are overbought short-term and due for some consolidation.

The exact timing of a bear market will depend on many factors in individual markets including, but not limited to, interest rates. A bear market next year would not surprise me since the global expansion will be very long in the tooth by then, and markets will be trying to assess possible changes in US fiscal, monetary and possibly

protectionist policies in 2009 with a new US administration.

Christopher Wood: The 10-year US Treasury bond yield has broken above the long- term trend line, in place since the beginning of the great bond bull market back in 1981. The recent equity rally has occurred in the context of rising government bond yields, just as the sell-off in February/March occurred in the context of falling bond yields.

All this suggests that the Fed model, where hundreds of billions of dollars of portfolio capital is allocated globally on the relationship between bond yields and earnings yields, has broken down.

Anthony: Even so, it is often argued that a 'new paradigm' is at work in the equity and bond markets - one that has invalidated past investment cycles and boom and bust theories.

Mark Mobius: Someone once said, 'The most expensive words in the world are: This time it is different.' There is no new paradigm at work in equity and bond markets which would invalidate past investment cycles and boom and bust theories. The nature of markets is such that there will always be excesses in bullish moods and bearish moods. In 1999 and 2000, the majority of investors felt that we had entered a new paradigm and earnings did not matter but the 'burn rate' (the speed at which companies could spend and expand) was more important. Of course that mania resulted in disaster for many investors.

William: I agree. That long bull market seems over and we may enter a bear market or a longer trading range at higher yields than in recent years, reflecting higher underlying inflation.

Marc: There is no new paradigm but there are central banks that expand money and credit at a fast pace and create 'excess liquidity'. This is particularly true of the US Fed, which through its expansionary monetary policies led the US to have a close to US$800 billion current account deficit, which then leads to a 'savings glut' and excess liquidity around the world. This liquidity then drives all asset markets, including stocks, commodities, real estate, art, collectibles, and even until recently bond prices, higher.

Anthony: If the music has to stop, or the tempo to slow sharply, when is that most likely to occur?

Mark: No one knows when the music will stop and the party end. Normally, however, when everyone is unanimous about the viability of the market and the impossibility of it going down is when the market will probably crash. It's just like when you have a party with lots of alcohol. Everyone is happy and gets drunk. They feel wonderful and the world is bright. Then the alcohol wears off and you wake up with a hangover. It's all over.

William: My crystal ball is cloudy right now. This upswing has been very strong globally. The imbalances we have talked about remain but have not as yet caused real upsets. But they will have to correct sometime, either violently or gradually. My best guess is that the new US president - if there are tax and other policy changes in 2009, the markets will begin to anticipate them ahead of time, probably in 2008, maybe later this year, adding uncertainty. On top of that, the Chinese may want to cool their economy after the Beijing Olympics. Higher interest rates, in the interim, globally should have some dampening impact.

Christopher: The continuing US housing slowdown could still be the source of a renewed growth scare that will hit markets in coming months. Rising bond yields would surely pose a blow for the US housing sector, which continues to deteriorate, if the breakout on the 10-year Treasury bond yield is sustained.

Marc: It will stop when the excess liquidity gradually dries up. This can happen for a variety of reasons. Consumer price inflation could accelerate and economies overheat, thus draining money from the financial sector into the real economy. Or it could happen because of illiquidity in the US household sector, which would curtail imports and lead to the current account deficit of the US no longer expanding. There are already some clear cracks in the global asset bubbles: US housing prices, the sub-prime lenders, investment banks, and most recently, the bond market. The second half of this year could become painful.

Anthony: What, in your view, is most likely to be the factor that will precipitate a correction or crash in markets?

William: We can only hazard guesses. More than likely it would be some event that markets cannot discount - say, an attack on Iran, unrest in China, or protectionist measures in the US by a new US president as the result of a recession. If the correcting event is unexpected, and of a major kind, it could cause problems with derivatives - leading to financial instability.

Christopher: Rising credit spreads remain the key risk for equities and all other financial asset classes since they have the potential to bring an abrupt end to the global credit bubble of which leveraged buyouts have been the latest most extreme manifestation. Credit is much more mispriced than equities.

Marc: Excess liquidity has been driven by the US current account deficit growing from 2 per cent of GDP in 1998 to close to 8 per cent now. Growth of the current account deficit has slowed down as the US consumer is struggling. If US inflation were properly measured, we would already be in a phase of stagflation in the US. (The rate of new money flowing into the global system) has slowed down considerably and so not every asset bubble can continue to expand. The global bond market was the first casualty.

The reason that other asset markets have continued to soar is, however, increased leverage and a flight from cash into assets as people rightly begin to realise that paper money's purchasing power is collapsing. Therefore, any catalyst, no matter how small, could one day reverse investors' expectations and lead to a process of de-leveraging and a collapse in asset prices.

Mark: The underlying viability of markets is earnings power. If market participants think they can make profits either short-term or long-term, they will continue to hold investments and even invest more. Therefore, we must look for that event or series of events which lead to people thinking that the ability of their stocks to make money for them has ended. The perception of earnings power viability can last a long time but the trigger that tips the scales and causes people to act can be a relatively meaningless event which is really unrelated to the market itself.

Anthony: Is it equity or bond markets that are most at risk of a severe and lasting correction?

Marc: Emerging stock markets are now vulnerable because they are the most extended. They were the prime beneficiaries of the excess liquidity.

William: They say in America, when the paddy wagon comes round, it takes the good girls with the bad.

Christopher: Neither is at risk of a severe and lasting correction until credit spreads blow.

Then only government bonds will go up.

Mark: Equity markets tend to be more volatile but even bond markets can take a severe beating in a strong downtrend.

Anthony: Is a correction likely to impact developed and emerging markets equally and which ones would suffer most severely?

Christopher: All Wall Street-correlated stock markets are likely to be impacted.

Mark: Those markets that have risen the most will probably suffer the greatest percentage falls, so emerging markets, since they have risen more than developed markets, should have greater declines.

William: History would indicate that emerging markets would be slightly more growth potential and should be bought on significant weakness.

Marc: Emerging markets would suffer the most in a global tightening environment coming from the US current account deficit no longer expanding.

Anthony: What would be the likely magnitude of a correction in terms of percentage fall?

Mark: A severe market correction could range between 20 per cent and 70 per cent.

William: That is impossible to say. It depends on the reason for the reaction and will vary from market to market. Ten per cent is hardly a correction; 25 per cent does not seem unreasonable; 50 per cent seems far too great unless we have a true crash, especially as we had one like that in 200 1-3.

Christopher: If credit spreads blow, a bear market would ensue which would mean 50 per cent-plus corrections. Otherwise, corrections are likely to be limited to 10-15 per cent.

Marc: Once the shares of Goldman Sachs are down by 20 per cent from their peak the phones at the Fed and at (US Treasury Secretary) Hank Paulson's office will ring asking them to cut interest rates to support the asset markets. So, who knows? But in real terms (in gold terms) US financial assets will be 'toast' for a long time.

Anthony: Thank you all, as ever, for a very stimulating discussion and we look forward to welcoming you back - before or after the 'crash'.

Anonymous said...

>> Got gold???????????

Nope! I asked the clerk (who happened to be the manager) in the grocery store last night if I could pay in gold - he looked at me funny. Cash was not a problem, though...

Why on earth would he accept gold, even in a complete economic meltdown? All that gold to be transported nightly via the Brinks truck? Don't think so. It will simply be easier to pay with your debit/credit card. In other words, gold useless...

Anonymous said...

still denial period.

Anonymous said...

Just some localized anxiety!

Plenty of Denial tho!

Anonymous said...

People dont't realize that a 550,000 homes with a dowmn payment of a 20% from from house they sold and now moving up. The paymnet may only be slightly over 2,200. No pmi,i/o 1 1/2 years ago 4.75, will adjust after 5 years. You save something on taxes rather then renting. So to buy a 550,000 with i/o is not to high a payment. it's when they adjust and don't care to look a head. People i know have started to have their reset and now there going with 30 year i/o to keep payments down so there essentially renting long term. 30 year i/o is really 10 year only because a 10 years it re amortize's to 20 year loan so alot people will not know the significance for 10 years. Any questions. People are using their homes just like a leased vechicle that you trade in and get another after a time.

stuckinthecity said...

A recent survey reveals three out of four Americans have not yet changed their spending habits in response to housing’s downturn.


Housing downturn? What housing downturn??

Anonymous said...

In Newport Beach and most of Orange County it is definitely still "denial". Some minor concern on a few minds. Remember, HP is not a cross-section of the populace. We are bearish; the majority of the people are not. I read "clueless" in another, above post. I'd agree with that around here....

stuckinthecity said...

I'm getting sick and tired of waiting. What I'm also getting frutsrated is the HP mentality of absolute certainty that it's coming. The more I think about it the more I see that the denial of owners is simply the mirror image of HPers and other bears' optimism that 50% off prices is in the bag.

June 25, 2007 2:52 PM



and there is the stalemate!

stuckinthecity said...

Keith, can you link my blog? thanks.

http://secondcitybubble.
blogspot.com/

Anonymous said...

REIC is in fear

homedebtors are in denial

gekko said...

yup, DC area denial still at large. just at lunch today with some coworkers and one was asking the other about his condo complex. thinking of 'investing' in one next yr after his promotion. i didnt say anything. the positive was, the one living there mentioned 1br's going for 260, and he did buy at the peak for 300 so at least he knows he is under water.


stock market up again. i keep waking up thinking well the market is only down from here, only to be corrected.

Anonymous said...

I would also state that people are in the "clueless" camp. Or perhaps ignorant is the better word.

I've had numerous conversations with friends and coworkers regarding housing. I've done the math right in front of them with some effective rent vs. buy calculators. One would think that the lightbulb would switch on when the math is staring you in the face. Yet, at the end of the discussion, they just whistle along their merry way ignoring any evidence which lies in contrary to their idealistic view of the world. Housing in particular.

In my opinion, the only thing that will eventually bring housing back to equilibrium is the reduction in the amount of "easy money". Once credit begins to dry up (that process is starting), then it will simply cascade downwards, eventually reducing prices of homes in areas that are inflated. Higher interest rates will contribute to this slide as well.

The downside for all of us on the sidelines is that this process is VERY slow. We are talking several years of waiting. So if one has the patience, I believe in the end it will be rewarded. But it will be a slow and arduous ride for many.

Anonymous said...

Why on earth would he accept gold, even in a complete economic meltdown? All that gold to be transported nightly via the Brinks truck? Don't think so. It will simply be easier to pay with your debit/credit card. In other words, gold useless...


Keith,

Can we have a thread on the gold as money topic. might be good.

Anonymous said...

4:35 you have nailed it. for the vast majority of people what counts is monthly payment. Paying ent on a $550K home or paying an i/o and getting a tax deduction on a $550K home ends up costing the same.

All the HP 20% down, 30 year fixed, income to debt ratio calculations are meaningless in this context. It's like saying someone making $50K shouldn't own a $60K BMW. OK that's true. Doesn't mean that they can't lease a $60K BMW. Lease, own, buy, rent, all semantics. All that counts is the monthly payment.

Before you jump on me calling me a troll, realtwhore or what have you, save it. I'm not saying this is financially sound, but it is reality. And it is the reason this catastrophe in the making simply is not happening.

Anonymous said...

"Where do all the foreclosed-upon folks live, by the way? Thank goodness for month-to-month rentals. " - Anonymous.

That is great! I am a multiple "HomeDebtor" as the folks here like to say and I am having a great time with all this gloom and doom. While all the people were buying homes with artificially low mortgages, those of us that bought in 2000 - 2003 and rented out our investment properties were angry because rents were low. Just heard this morning that rents in the Phx area have gone up 5% in the last 6 months! Looks like all the folks that are getting foreclosed are simply renting, and the people that are on the sidelines killing the housing market, partly spurred from the doom and gloom found here, are also renting. As far as all this doom and gloom, all of you better be careful what you wish for, because you all are sending these emails from a "home" Even if you own it free and clear, or have a non-toxic mortgage or are renting I am sure that you need to have some way of supporting yourselves. If all the scenarios happen the way you all think they will, then it will come home to roost, and all of a sudden you may find that your blogging and aiding to the collapse with your pessimism may become a self fullfilling porphecy. Think about it - Rumor that a bank is failing, everyone starts taking all the money out of the bank at the same time - bank ends up failing. Think about it, do the people on this blog live somewhere where shelter is not needed? Are all the people on this blog living in a box and pirating WiFi to send their messages? If bond prices go up, and people cannot afford homes due to interest rate hikes, that is worse than not affording a house due to cost. That is REAL inflation, and then you might find that it is not your home that is depreciating in value, it is you. High inflation=Low job growth=Low Economic growth=YOU OUT OF A JOB! The REAL problem is that there are too many people and finite resources. All these people have to live somewhere. All that is happening now is that the people that were going to buy, are standing on the sidelines in a rental instead of plugning in a new home. Making folks like me happy. Sure, I don't make it in appreciation, but who cares. The house could go down to $1.00 for all I care. I still will be able to charge a higher monthly rent as long as folks need a roof, and won't buy a house. So keep it up, I am loving it, just be careful what you wish for....

Anonymous said...

>> Can we have a thread on the gold as money topic. might be good.

I asked this question before, and I'll ask again, since no one answered: In America, when has gold ever been the medium of basic monetary exchange?

Like it or not folks, we're just upon the day of the cashless (electronic) society. Last time I checked, ain't not gold coin gonna fit thru my PC's Ethernet cable...

Duh? said...

One note on these people that you say are in "denial". Of those people that supposedly you say are going to have a harsh reality because they think their house is worth more, how many do you think will actually sell? Of those that will actually sell, how many will here from their realtor it is a buyers market, and simply say "ok forget it, I am not going to sell in this market" and of those that do try and sell at a higher price, then maybe they will budge, and maybe they won't. Also, as far as the permits going down, that is good news. Less inventory. I would be more concerned of a longer market downturn if the builders continued to build. They will overreact like everyone else, and now they will build too few homes. However, people have not stopped creating families, in fact with all the immigration, legal and illegal, and the banks finding more creative ways to get these people in homes because they have now had a taste of the profits, the turnaround will also be strong. Do you really think the fatcats on Wall Street are going to let the government change the whole formula? We have the best government money can buy. They will have some hearings, make a stink, maybe even change a few laws that sound good, but in the end, things will generally not change. Yun saying that "household creation" is down 70% simply means that folks are waiting longer for the inevitable. They are not stopping having children, it is just where they are having them. How long do you think these people are going to want to continue living with mom and dad. Come on. As far as joe sixpack selling in this market, well they can get the low prices, becase they are idiots for selling in a market like this. It is one thing if you have to sell, another to sell in a market like this because you are listening to the talking heads on TV and also the talking typing on this blog. This to will pass, and when it does, you all that did not buy in this buyers market are going to be angry. For once, I do agree with the NAR. Why would you not want to buy a house on sale. No coupon needed....but this is the herd mentality on display. Market good, everyone buys, market bad, everyone sells....dumb.

Stephen said...

Exactly correct, Anonypussy 6:39.

The month-to-month consumer cares only about his cash flow.

Of the basic financial statements: balance sheet, income statement, and cash flows, only the latter seems to affect the monthly consumer's financial decisions.

Unfortunately for this monthly consumer (great job, by the way, education system), he has no awareness whatsoever of basic personal finance and accounting. He will continue to run his household based on his cash flows until such time as this neglect of the other aspects of his financial health so deteriorate that they begin to crimp his cash flow.

Therefore, I think that two things are converging to bring about an imminent credit crunch: (1) less $ to lend, (2) consumers' deteriorating income statements and balance sheets.

The sad thing is, consumers are generally not aware of either one.

Anonymous said...

When does the guy who loaned the bank the money that was used to loan to the buyers of those highly appreciating/appreciated houses break even on the loss of purchace power versus housing that his money took, that by some estimates was 80-90% which includes the rate of return he received

Anonymous said...

When the FB in my office finally admits home values are declining. So funny how he pretends to know nothing about the housing bubble. He has been told by MSM that only home values at the lower end are declining. So this is what he believes.

robert said...

Anonymous said...
“Just heard this morning that rents in the Phx area have gone up 5% in the last 6 months!”

So renting in Phoenix is now comparable to buying? As a landlord, you have less competition for renters? Has income kept up with housing prices or, in your case, kept up so that you can name your price for a rental unit?

“As far as all this doom and gloom, all of you better be careful what you wish for, because you all are sending these emails from a "home".”

I would almost agree. However, I think BH’s will fair better than those in foreclosure, bad credit, and no cash on hand.

“you may find that your blogging and aiding to the collapse with your pessimism may become a self fullfilling porphecy.”

We’ve gone around the “self fulfilling prophecy” in the past. Even the NAR has pointed fingers at BH’s for causing the decline in housing. Of course I/O, no Doc, ARM, negative amortized loans had nothing to do with it.

“Think about it, do the people on this blog live somewhere where shelter is not needed?”

No I don’t. That is, I don’t need a $500K+ McMansion, nor a home in which the sellers think they set the market. Price it right and I’ll stop by and take a look, but make it quick, I’ve got 60+ other homes to look at this weekend alone.

“If bond prices go up, and people cannot afford homes due to interest rate hikes, that is worse than not affording a house due to cost. That is REAL inflation, and then you might find that it is not your home that is depreciating in value, it is you.”

Then try to sell that home to someone with no money down, poor or non-existing credit. Your buyer pool is shrinking.

“The REAL problem is that there are too many people and finite resources."

You gotta be kidding. You actually had a pretty good rant until the “they are not making any more land” spiel.

“Sure, I don't make it in appreciation, but who cares. The house could go down to $1.00 for all I care. I still will be able to charge a higher monthly rent as long as folks need a roof, and won't buy a house.”

Your home worth $1.00? That means that your next door neighbor’s home is worth roughly the same. I’ll offer your neighbor a short sell so he can get out from under the NOD. No need to rent from you.

robert said...

Duh? said...
“It is one thing if you have to sell, another to sell in a market like this because you are listening to the talking heads on TV and also the talking typing on this blog.”

Or, you followed the heard and now your ARM has re-set you can no longer afford the mortgage.

Anonymous said...

Anon said "Just heard this morning that rents in the Phx area have gone up 5% in the last 6 months! Looks like all the folks that are getting foreclosed are simply renting, and the people that are on the sidelines killing the housing market,"

I don't really see what you are getting excited about. I have friends who just moved to PHX and got 3 months rent free for signing a one year lease. Are those incentives included in the calculation of rents? Those sorts of incentives are just crazy, and a lot of landlords will just have to lower rents to compete.

I live in Boston, an area well known for its tight housing market, and rents haven't gone up in real terms since 2000. Of yeah, and the bottom apartment in my three unit building is vacant and has been for three months. I don't see much of a concern with rising rents.....

Anonymous said...

Whew - Thanks Keith. I found the cheese, er, I mean the links. Now I can relax

Anonymous said...

Where was clueless on the chart I think my city is there


sequoia512

WereDoomed said...

I'll believe it's a full-fledged panic when the gubmint resorts to buying up large numbers of empty McMansions from failed banks, using what's left of the social security trust fund to finance it. As a bonus, the McMansions can be levelled and turned back into park lands in a kind of giant public works project, to provide jobs for all the unemployed.

Future generations will look upon post-cold war America as a time of moral, spiritual and cultural decay and decline. We deserve to feel the wrath of a vengeful God for the horrible way we have wasted our precious resources. God bless you Keith for keeping this blog going, someone has to tell the truth to the masses of mind-numbed idiots whose brains have been turned into pudding watching the latest sludge served up on their big screen plasmas.

Anonymous said...

http://www.irvinehousingblog.com/2007/06/25/houses-should-not-be-a-commodity/?ref=patrick.net

westwest888 said...

70% of the country (US) are homeowners, so none of them are entertaining the idea that their easy gains are evaporating. No one wants to think their $550k house is only going for $495k now. Or $445k next year. Or $400k the year after that. -10% a year folks while rates rise and we inflate at 3-4% while the GDP has negative growth for two or more quarters and a recession is declared. How inflation with negative GDP growth, you ask? Because of the global economy. Everyone has their hand in our pockets. The energy companies, the state gov, the local gov, the HOA, etc. Inflation is measured on rents, which will creep up half as fast as home prices creep down returning us to the fundamentals. And for our homeowner friends, it's not going back up until a decade of inflation tarnishes the real value while it rebounds to a nominal value of $500k again.

Anonymous said...

To a point I believe weredoomed,
in the fact that we do deserve to feel the wrath of a vengeful God, but for our sins and corruptions!

'Love' of money is the root of all sorts of evil!

But, America is the most generous country in the world, with aid during crisis, foreign aid, we feed the world. Plus the advances in medical and bio tech.

We are the leader in actual cash contributions to charities!
And believe it or not, Republicans donate more than Dems, and Christians donate the bulk for the Repubs!

Yes we deserve death because of sin, but a Saviour shed his blood for the likes of you........and me!

Read I Tim 1:15
John 3:16

cobra2411 said...

Housing panic? This time next year. When the March numbers come in like crap again I still see people believing the "weather" line again. April will have them crossing their fingers, but by the time the May numbers come in and it's clear that '08 isn't going to be the year of the turnaround then you're going to see real panic.

I know people who have taken their homes off the market believing next year will be business as usual and even though it's going to cost them money to hold for a year, when they sell next year they'll get their price any everything will be ok...

As for the stock market? ????? They have their heads even farther up their asses then the homeowners... All I can say is soon. Probably about the time they're forced to put a real price on the CDO crap (if it's even worth anything at all) and Moody's and the like re-rate it. Then when it goes into the "crap" category the insurance / pension funds will be forced to sell and it will domino...

We're very close to the stock market turning though I believe because the last week or so, bad news didn't set off a 100+ point surge up...

I thought it was going to happen a couple weeks ago and I shorted heavy and almost got my ass handed to me (thank god for trailing stops...) I'm short again, but with much less on the line... I'll wait till I see clear direction...