November 27, 2007

FLASH: GOLDMAN SACHS PREDICTS UNITED STATES HOME PRICES TO COLLAPSE. THIS IS NOT A DRILL.


I never thought I'd see the day that a major US investment bank admitted what we've known here at HP for years - that the United States housing market will suffer a historic crash, and the drop from peak to trough will be sickening. Man, has the world gone HousingPANIC?

IF YOU ARE CONSIDERING BUYING A HOME TODAY - DON'T. IF YOU'RE TRYING TO SELL YOUR HOME, CUT THE PRICE, CUT IT FAST AND CUT IT HARD. YOU'LL BE LUCKY TO GET OUT. IF YOU'RE LISTENING TO A REALTOR ON COMMISSION, WELL, THEN YOU'RE SIMPLY A FOOL.

A 15% nationwide decline will be horrific folks. A 30% decline will stun even me. I can't even picture how devastating that will be, for the homedebtors who listened to realtors on commission, and for the American and world economies. Banks will fail. Millions will lose their jobs. Cities will go bankrupt. And the US dollar will collapse.

But I think we all need to get our heads around that number folks. A 30% nationwide decline would mean places like Phoenix, Tampa, San Diego, Vegas, Naples, Boston, DC, Detroit, Sacramento and more will see 50%+ declines, and will not just see recessions, they'll see true 1920's type depressions.

Wow. This is gonna be ugly. Get ready. We predicted it, but now we have to deal with it.

NEW YORK (Reuters) - The housing slump has increased the chance of a U.S. recession and will further weaken home prices, Goldman Sachs Group said on Tuesday, cutting its stock recommendations on a slew of companies vulnerable to sluggish growth.

In a grim assessment of the U.S. economy's health, the investment bank said the Federal Reserve will have to cut its lending rate to banks by 1-1/2 percentage points to 3 percent in the next six to nine months to avert a recession.

Home prices will likely decline by 15 percent from their peak. But if the United States enters a recession -- which Goldman expects the economy to narrowly escape -- home prices could fall as much as 30 percent nationwide, it said.

57 comments:

Anonymous said...

This act will be used by our new american nazi gvt to lock up free speech dissenters, kinda like us talking against the war or the NAR

Alert - S 1959
Eviscerates Free Speech

THIS IS AN URGENT ACTION ALERT

S 1959 "Violent Radicalization and Homegrown Terrorism Prevention Act of 2007" must be stopped at all costs.

Pick up your phone today and contact your US Senator's office to instruct them to vote "NO" on S.1959.

Click here for your Senators contact info:
http://www.senate.gov/general/contact_information/senators_cfm.cfm
Full PDF text if the bill: http://tinyurl.com/3a3y2z

If this bill is passed, and becomes law, your words and actions could be considered terrorism. S 1959 EVISCERATES FREE SPEECH, and empowers the government to declare ANYTHING they deem an "extremist belief system" to instantly make you a 'terrorist' and resulting in stripping of US citizenship, torture, and/or execution, with no habeas corpus rights, no ability to challenge even in the US Supreme Court.
Contact your Senator and let them know they will be looking for another job if they vote yes on this bill, which is now introduced into the Senate as S.1959 THIS BILL **MUST NOT** BECOME LAW, PERIOD.

http://www.govtrack.us/congress/bill.xpd?bill=h110-1955
http://www.govtrack.us/congress/bill.xpd?bill=s110-1959

If this becomes law, your words could be considered "promoting an extremist belief system", and all they have to say is that you are using PLANNED OR THREATENED *FORCE* (DOES NOT HAVE TO BE VIOLENCE) -- FORCE by exposing CORRUPTION, CRIMINALITY against "THE CIVILIAN POPULATION OF THE UNITED STATES, *****OR ANY SEGMENT THEREOF" READ THE BILL MANY TIMES AND VERY CAREFULLY--YOU ARE THE TERRORIST (WHICH MEANS THEY CAN STRIP YOUR CITIZENSHIP, AND HAVE YOU TORTURED AND EXECUTED).
Senate is back in session today, do not hesitate, call, fax, email your Senator ASAP.
Click here for your Senators contact info:
http://www.senate.gov/general/contact_information/senators_cfm.cfm


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6% Realtor said...

Old News - Sacramento prices are already down 25% from the peak (8/05) and we've got more to go. We've got an interesting year ahead. The good news is that real estate agents are starting to drop out (at last). We've still got a lot of dead wood to get out of the industry in the next year but we've just started now. That said I've had a good year, met my goals and my clients goals, and helped a couple of people save their finances. I can feel good about what I do and take some time off!

Anonymous said...

MURST???

If you Kudlow & Cramer cheerleaders think that today's phony rally was any sign of a bull market comeback, you need mental help.

You should do like all the smart money out there who are taking advantage of these PPT and shady group induced dead-cat bounces to get out of the US market.

Like Trinity said, "If you see an agent (of disinformation), you don't fight, you just run!"

Jambu said...

HOLY FUCK BATMAN!!

Man I wanted prices to fall, I didn't want a god damned depression. Something about carefull what you wish for eh Keith?

Get ready for Japan style 0% interest rates and a dollar that will be usefull only for ass wiping and coke snorting.

Anonymous said...

SUZANNE!!!!!!!!!!!!!!!!

Paul E. Math said...

I don't see how we avoid a recession, I really don't.

You can drop the interest rates, trying to lower capital costs for businesses. But each time you drop rates you undercut the USD and you make everything more expensive for businesses and consumers.

A vicious cycle is the most realistic outcome. Even if you lower rates, noone is going to want to touch a US Mortgage Backed Security when the dollar is tanking so they are going to have to offer higher rates on them to investors. The only way you can offer higher rates on the MBS is if you charge a higher rate to mortgage borrowers. And the same damn thing happens to businesses trying to issue bonds or commercial paper.

We're not just fahqued - we're super-fahqued. Yeah, I think Goldman is still being optimistic at 15%.

Anonymous said...

Anon #1:

Get help and fast.

Anonymous said...

Just got another 2000 rounds of ammo. It is about all I buy now. It cost nearly $700 a few years ago that would have cost $200. There is no inflation. The Door said it best "this is the end this is the end my friends".

Burn Baby Burn

Anonymous said...

But Greg Swanndive has 21 reasons why Phoenix real estate is a great investment!

Anonymous said...

I'd like to see the NAR debate Goldman Sachs. The NAR is predicting home prices to increase next year

Anonymous said...

6% Realtor said...

"That said I've had a good year, met my goals and my clients goals, and helped a couple of people save their finances. I can feel good about what I do and take some time off!"

Feel Good? I BET...

Anonymous said...

Though I kind of agree with Goldman and really don't care if prices collapse, let me point out the source. Are these the same briliiant financial minds who got us here in the first place? Do they have any credibility left?

Anonymous said...

DAMN YOU GREENSPAAAAN!!!

Anonymous said...

If you want to see something real ugly go to Mortgage Implode-O-Meter.

http://ml-implode.com/

192 imploded lenders and still counting!!

Yeeeehaaa!!

Anonymous said...

So a bubble area like Southern Mexifornia may well drop 50% in nominal terms, 80% in real terms, before it's over.

Buenas Dias!

borkafatty said...

Good crash and crash quick...I have a project to do and the materials are outrageous..

I am hoping with a good ole fashion American crash, prices for materials will follow suite.

big and rich said...

Goldman is just trying to panic the fed so they cut rates.They are so full of shit it is unreal.Abby joseph is the biggest con artist out there.

Andrew Hac said...

What did I tell you all before ? Huh, did you get it ? No...

Here it is again.

Americano is as toasted as a snapper turtle skewered on a stick all sizzling over a bed of white hot charcoal with all the fat, the juices dripping out of its carcass.

Yes, that is what the Americano will be like two years from today. Mark my word !

christiangustafson said...

Keith --

If we have a deflationary depression, how will that affect my commute time?

Anonymous said...

NEW YORK (Reuters) - The housing slump has increased the chance of a U.S. recession....

Yes, and driving your car into a brick wall at 40 mph increase the chance your airbags will deploy!

Face it, a recession is a-comin'. But what's so bad about that? The economy could shrink 2% over the next year and we'd only be back to where we were a year ago, but they'd call that a recession. Nooo, we always gotta be growin', right? See where that got us.

Natural Eyebrows said...

Give it to Goldman Sachs. They got out in time.

http://tinyurl.com/399bdo

Edgar said...

Goldman Sachs is full of crap. They give everyone the green wienie. They are the maggots who have helped destroy this country and I hope they all get vd.

TM said...

I think probably we're already in recession, so a greater than 15% decline is likely in the cards.

Our chickens have come home to roost with a vengeance. It's not even about homedebters vs. bitter renters anymore. Hard times are coming for us all, and right soon.

Anonymous said...

"Just got another 2000 rounds of ammo." anon said.

Buy all the ammo you want, I'll just come round and steal it from you.

Anonymous said...

They're still understating the risk of a recession. If housing prices fall 15% there will definitely be a recession.

30% would be devastation, a true 1929 type of scenario. It's sad thinking about it, but I don't see any way around it and it's been obvious for years something like this would happen. It's time to cleanse the government and get new people into office. This is just ridiculous.

average joe said...

try 80-90 percent drop in the RE market, maybe even as high as a negative 130 percent !!!!!!!!

this is with the subprime mess

without the subprime scams, mess it would have been 30-40 percent drop.

The problem here is that the subprime scams caused the prices to artficially go up 1500 percent in some areas since 2001 and that is a big problem.

Frank@Scottsdale-Sucks.com said...

cut its lending rate to banks by 1-1/2 percentage points to 3 percent

That's insane. A 3-point cut would be so horrible that people won't be able to buy gas to drive to work.

Anonymous said...

Nice to see recessions are a thing of the past, if only just barely. I was worried this boom might end like all the others have.

Anonymous said...

Goldman is just talking up their position. Remember, they are short mortgages, as they stressed in their fictitious Q3 results. They have to get the most out of their mortgage short positions to cover their Level 3 asset holes.

chirwad said...

OK - And I know this is a little bit of "I'm ok, you're not" - I bought in June '07 literally a few weeks before the credit market seized up. So, I got a jumbo loan at 6.37%. I also got a second mortgage at 8.7% for 100,000. I'm paying both at 20% more than the payments require. I don't think I'm screwed, because I don't plan on leaving or refinancing anytime soon, but with everything happening now - what happens if there is a catastrophe in my life. Maybe I am screwed after all.

Anonymous said...

Just a 20% drop will take virtually 1/2 of people from having equity to being under water. Thats when people really start to walk. Forclosures have been accelerating in Colorado Springs the last few months. We will break the old record of almost 3900 set in 1989 but will break it by double that next year at current rate of decent. This will probably almost equal total sales at the current rate of decent as well.

Houses aren't so much over priced here as they are just to damn big. Way to many 3000 and up sqft houses here. Even at around 100 a sqft that is some serious green. I went to look at one that is for sale and rent today. Nice house 5bd/3b/3cg granite CT ,wood floors3900sqft rent 1700 buy 469000 down from 529000. Rent value says 250+-10k. Expensive yes but you get a lot of house for the money as opposed to OC or San Diego. However why buy when you can rent for 2/3 the price.

Sequoia

Princess Mononoke said...

I keep feeling penny stock coming soon to Countryslim. You know one of those GUT feelings that can't be ignored. For HPer's that are not familiar with the term it is the following:

>>In the U.S., penny stocks are common stocks that trade for less than $5 a share.<<

http://en.wikipedia.org/wiki/Penny_stock

Anonymous said...

Hallelujah! I'm happy.

We sold at the top and are renting, so tough shit for the greedy fools who were stupid enough to buy in a bubble.

Anonymous said...

Even YOU didn't expect home prices to "drop that much" Keith???!!!

WTF? Did you expect Americans would go merrily along paying 10 X income for a home FOREVER??

I'm astounded, frankly. Google median income and then decide how far home prices have to fall to get America on a sane track again.

nmoerbeek said...

It would take a 50 percent drop in my town to bring homes back in line with incomes. I don't know I just have a feeling it is not the end of the world.

Anonymous said...

Wells Fargo just took a big hit and Freddie Mac is going to water down their shareholders by $6 billion

Blood in the streets

Anonymous said...

I predit the US$ and Yen will be 1:1 in five years.

Princess Mononoke said...

I noticed HPer's were posting prices in their areas. Well I just had to "one up you" on the ridiculous housing prices in my area.... These are all listed on MLS. But you can go to www.zillow.com and type in 90046 zip code. I only chose 2+1 so you can get the idea. Cheers! :)

1241 N VISTA ST West Hollywood, 90046 - $1,550,000
Beds: 2 | Baths: 1 | Sq. Ft.: 1,315| Lot Size: 5,480 Sq. Ft.
Year Built: 1917 | Listing Date: 05/22/07

1021 N OGDEN DR West Hollywood, 90046 - $1,395,000
Beds: 2 | Baths: 1 | Sq. Ft.: 1,226| Lot Size: 6,500 Sq. Ft.
Year Built: 1920 | Listing Date: 07/09/07

936 N VISTA ST West Hollywood, 90046 - $1,050,000
Beds: 2 | Baths: 1 | Sq. Ft.: 1,162| Lot Size: 6,110 Sq. Ft.
Year Built: 1922 | Listing Date: 10/11/07

Anonymous said...

Americano is as toasted as a snapper turtle skewered on a stick all sizzling over a bed of white hot charcoal with all the fat, the juices dripping out of its carcass.

I suspect that Andrew Hac is that judge Bruno Tonioli from the show Dancing With The Stars. They both use the same nonsense analogies.

Princess Mononoke said...

Anonymous said...
>>I suspect that Andrew Hac is that judge Bruno Tonioli from the show Dancing With The Stars.
November 28, 2007 9:17 AM

OMG! You have me FLOL!!! I never thought of that... But your right!

Anonymous said...

"Sacramento prices are already down 25% from peak (8/05)"

You mean home prices (which never go down) ARE DOWN 25% from "peak" (in a bubble that never existed?)

Look, I know you think you're somehow building credibility here but for that to occur you'd need to be able to say that every seller you represented in the last 3+ years you advocated they RENT after closing their sale!

But that didn't happen did it? You would have been cutting your income in half. So instead of doing the right thing... and telling these people to keep themselves (and their bubble bucks) on the sidelines you put them in over their head and at the peak of the market, didn't you!?

Please don't waste my time.

DinOR

Anonymous said...

Oh, and don't forget to call your US Senator and make sure they vote FOR! S 1959!

Kieth, nevermind.

DinOR

LauraVella said...
This comment has been removed by the author.
Anonymous said...

I'm astounded, frankly. Google median income and then decide how far home prices have to fall to get America on a sane track again.

November 28, 2007 7:13 AM


============

Median income includes those on welfare, college kids, pensioners,etc. Those people aren't buying homes.

What you need to do is find the median income of home owners. It is a lot higher, around $75K household income compared to $45K when including everyone.

So using the 3X rule, median homes should be at around $225K which is exactly where it is now.

Here is an example of how much of a difference median income is between renters and homeowners in New Hampshire. In some counties renters make less than 1/2 of what owners make.

http://www.freestateproject.org/com
munity/nh_reports/swyers/housing

In Utah:

For all dwellings, the median income in Utah was $47,934. For Utah homeowners, the median income was $57,529,

http://www.imakenews.com/cppa/
e_article000865132.cfm?x=b11,0,w

And this is the case everywhere.

LauraVella said...
This comment has been removed by the author.
Anonymous said...

Ok I believe in "HOUSING BUBLE",
sold my FL properties in 2006(invest profit in GOLD), sold my NJ primary house(invest profit in GOLD as well), and rent apartment, BUT in NY metro area it doesn't looks like prices going down. Actually it's vice versa, going UP. So Florida, Nevada, California, YES it's UGLY, but guys what about Manhattan or Brooklyn ??? Why nothing really going on there ??? Hundreds of new condos and prices UNBELIVABLE HIGH ??? Thanks for comments.

Anonymous said...

To the previous posters about Goldman Sachs - agreed! they are definitely trying to enhance their position right now...so not sure how valuable their pov is right now.

As far as interest rates going to 3% - that would be terrible for everyone - yes you on this blog. Very few will escape consequences. I said this before if they have to bail out some banks/brokerages particularly where I have my money - great! A fahqued financial system is not good for any of us.

The trick is now, identifying which bank/brokerages are going to take the fall...I do not know at this point.

Anonymous said...

I agree with previous posters: Goldman Sachs is full of BS.

While I agree that home prices will crash, the purpose of this report is simply to get the Fed to lower interest rates so that Goldman can unload some more CDO crap from their holdings and to enable more of their LBO deals to go through.

Nimesh Patel said...

Who is this guy Andrew Hac? And why is he so darn disrespectful towards Americans. He always refers to us as "Americanos" and keeps saying how bad we Americans will have in the coming recession. Doesn't he understand that if America catches a sneeze then the rest of the world will catch the flu? The world financial system can not survive with America going into a recession/depression. We are the ANCHOR. If we go down. The rest of the world will go down too.

foxwoodlief said...

We've been through this before and nothing is new. The end of the world...not. The sky is falling...not. Problems, yes, but life always goes on.

A lot of the pictures and graphs Keith has used over and over and over again. The one poster asked where have all the readers gone....many may still drop in but it all you hear is the same old news over and over and over again...like the little boy who cried wolf...people stop listening.

Most people here rarely talk with facts or rational, just hype and editorialize. No one talks about inflation adjusted prices, true cost to build, inflation etc. Most post contradict...even the gold buggers....adjusted for inflation the high of the 80s would be $2,000 ....so much for inflation protection.

The death of the dollar? Please, currencies always cycle...they said the Euro was dead after it was launched and lost 30 or so percent of its value when it dropped below .88 and now it is where? Almost 1.5? And the Canadian currency? I was valued more than ours in the early 70s and then went as low as 40% less and did Canada die?

The dollar will rise in value when our deficit drops and the drop in the value will help that through making thinks here a bargain...so now Canadians are coming south to buy homes, clothes, books, cars....it is all a cycle. Remember the biblical saying, "There is nothing new under the sun."

Home prices collapse? Yes, bargains where you don't want to live. Bargains if you have good credit or cash...but over all, few bargains. If Phoenix and Vegas are epicenters....homes till cost more than I'd pay or more than they are in many places in the USA...and yes, I wouldn't buy in these markets without another 25% drop...but will it happen? Maybe, maybe not, but I don't care.

My income keeps going up...as does the price of everything else. Inflation? That will eat away at the value of homes, etc. If the world didn't hold so many dollars then we'd be screwed....but now they are screwed.

Oh, and Europe...wait till their bubble breaks....

DaveO said...

"The economy could shrink 2% over the next year and we'd only be back to where we were a year ago, but they'd call that a recession. Nooo, we always gotta be growin', right? See where that got us."

Good point. I've always wondered why it is that our economy has to keep growing just to maintain our standard of living? Shouldn't a 0% increase in GDP mean that we're perfectly stable, in that we aren't growing (which is impossible to do indefinitely) but not shrinking either? Am I right or wrong?

It's the same thing with cities or regions that complain about a zero population growth, and wish that their population was growing instead. Why should the population have to increase just to maintain the existing population's standard of living? Growth is not sustainable (monetary or population-wise) forever, because the system of checks and balances must maintain the law of averages. When growth occurs, there must be a decline later on or somewhere else. Why don't some people understand this?

Princess Mononoke said...

These are all listed on MLS. But you can go to www.zillow.com and type in 90046 zip code. I only chose 2+1 so you can get the idea. Cheers! :)
November 28, 2007 9:05 AM

I'm sorry I meant to refer you to www.ziprealty.com - They offer a free property search service with no obligation. I refer family and friends to this site so they can keep track of the market in their area. You can get new listings on MLS emailed to you daily and boy are their alot of NEW listings everyday over here in Cali.

time machine said...

" foxwoodlief said...
We've been through this before and nothing is new. The end of the world...not. The sky is falling...not. Problems, yes, but life always goes on.

A lot of the pictures and graphs Keith has used over and over and over again. The one poster asked where have all the readers gone....many may still drop in but it all you hear is the same old news over and over and over again...like the little boy who cried wolf...people stop listening."


LOL

"Very Prosperous Year Is Forecast
Guenther Analyzes the Report of Mellon Covering 1929

That 1930 may be a very prosperous year, industrially and otherwise, without the peak conditions that made 1929 and exceptional year for business prosperity, is an observation made by Louis Guenther, publisher of the Financial World, in a statement based upon Secretary Mellon's fiscal report...
"To grow too fast is often unhealthy because of the suddenness with which a readjustment must be met. By far and large the country would be better off were further progress made along more normal lines...

Fortunately, we have returned to a more normal mind in appraising prospects. We are not looking for the Midas touch on everything to which we turn. That makes us more satisfied with normal incomes and normal profit returns."

-The World, December 15, 1929"


Foxwood, denial can be a cruel mistress, some might even call her a bitch.

westchester chick said...

"A lot of the pictures and graphs Keith has used over and over and over again. The one poster asked where have all the readers gone....many may still drop in but it all you hear is the same old news over and over and over again...like the little boy who cried wolf...people stop listening."
---------------------------
Actually I think readers are up - I'm a long time HP fan and I always read but don't always post because there are usually so many posts already by the time I check. I think it's just getting interesting. 50% price cut would really just bring us back to 2001 prices which were still ridiculously high

Anonymous said...

did i read city was paying out 11 percent interest in money it borrows yet the fed is talking up rate cuts from its 4 percent...... gonna screw the savers aGAIN AND AGAIN......

Anonymous said...

i buy in phoenix when prices get to the prices of distressed properties in year 2002 and i break even.....

HOUSE2008 said...

Sequoia said..
"Houses aren't so much over priced here as they are just to damn big. Way to many 3000 and up sqft houses here."

Very true! My dad built homes back in the early eighties through the early part of the nineties and was charging $70-90 sq ft.Many of us don't need (or want in my case) that much house. 2200-2400 sf is ok. I'm tired of these McMansions. Give me a home that I can make a mortgage payment WITH plenty of savings left over after expenses so in the golden years I'll never utter the words to my wife while in a huge house "I'm sorry honey", while I strap on my shoes to go to work at 70. These homes at these prices will have me working till 60 & no savings to really speak of. No thanks