July 31, 2006

The bubble's new housing graveyards - Another Arizona builder walks away from hundreds of unfinished houses

It's not just the half-finished condo towers that will create urban eyesores for years to come, you'll also see these deserted graveyards of framed houses dotting the fringes of Phoenix, Tampa, DC, Boston, Albuquerque, Tucson, Sacramento, Vegas, Boise and more...

Unfinished houses put people in limbo

State and local officials are investigating a months-long work stoppage that has left about 200 unfinished houses in Casa Grande and Maricopa withering in Arizona's summer as home buyers wonder whether they'll ever be able to move in.

Buyers like Laquita Jackson and Cedric Moore, who signed a Turner-Dunn Construction Inc. sales contract more than a year ago, have been stranded in rentals instead of living in their dream home. They fear thousands of dollars in earnest money has evaporated.

They haven't been able to contact anyone from Turner-Dunn in weeks.Other buyers, like John Wayne, applied a full-court press on the small construction company, only to move into houses with conditions so dangerous that some buyers are afraid to let their children play in their backyards.

As the Valley's housing market ebbs, smaller builders like Turner-Dunn, which may have arrived late to capitalize on Pinal County's gangbusters housing market, are more prone to failures, said Jay Butler, director of the Arizona Real Estate Center at Arizona State University.

Unlike big builders, they can't absorb rising labor and materials costs, struggle with credit and sometimes lack experienced management that can deal with a cooling market, Butler said.

"If you look at the numbers nationally, the market is slowing tremendously," Butler said. "With small builders, the problems just cascade."

The bills for the housing bubble and all the debt that's been run up in the last few years are coming due

As Fleckenstein says here, "exhaustion" finally has set in, and now the long way back down the ladder... time to take our medicine we should have taken in 2002.

"The 'use-your-house-as-an-ATM-to-live-beyond-your-means' stimulus is finished, thanks to the recent de-leveraging/crackup in the bond market. The refi game and the bull market in housing it created postponed the consequences of the largest stock market bubble in history. Though the Fed and the rest of the government succeeded in postponing the fallout from the massive misallocation of capital that took place in the mania, they have also succeeded in compounding and exacerbating those consequences. Even more leverage was created in the system, as we attempted to speculate our way to prosperity.

"In short, the excesses from the bubble have not been cleared away, but they will be, along with the recent excesses from the refi bubble … These developments will tend to be self-reinforcing, and especially damaging, if and when housing prices join the decline."

Exhaustion: built into a bubbleThe Federal Reserve precipitated, aided, abetted and cheered the largest (by dollar volume) stock mania in the history of the world. That mania exhausted itself in 2000. The exhaustion was not caused by the Fed tightening, contrary to what many folks believe, any more than the 1929 market break (and ensuing Great Depression) was caused by Fed tightening.

Manias end in exhaustion, though there are always coincident events surrounding the end of the move that get blamed for the decline. In both 2000 and 1929, higher interest rates were present, but they were not the cause. The preceding bubble was the cause of both the subsequent exhaustion and the ensuing bust.

HP dedicates this song to all the unemployed realtors and mortgage brokers out there

HousingPanic Stupid Quesiton of the Day

Why to real estate industrial complex members and real estate investors/flippers visit HousingPanic of all places?

Incredible leverage: The reason this financial bubble was and will be the biggest in world history - we're in unchartered territory now

This Century 21 commercial just gets better and better as the bubble bursts

Developers Across the Country Nix or Delay Condo Projects As Sales Slow and Costs Rise

Remember the "condo dead pool" idea? It's not just the projects in Vegas now, this condo cancellation craze is going to spread world-wide.

Too bad, they had such pretty pictures and websites, and threw such great pre-construction parties, to go along with the $800,000 price tags

In a city cluttered with condominium construction, Old City 205 aspired to shine as an ultramodern residence for the well-heeled with its zinc and glass facade, loft-style homes and windows that span floor to ceiling.

Too bad no one will get to move in now: The $40 million project in Philadelphia's Old City neighborhood won't break ground after the housing market softened and increasingly picky buyers balked at its price tags from $400,000 for a studio to over $2 million for a three-bedroom penthouse.

Brown Hill Development, the company behind the project, noticed slower traffic and decided it didn't want to be left with unsold units, said partner Greg Hill.

From coast to coast, developers are nixing or delaying condominium projects as home sales decelerate, construction costs soar and lenders start to balk at financing units that might not sell. What's making it worse is the glut of high-priced condos and too few people who can afford them.

In Las Vegas, projects nixed include high-profile developments such as Aqua Blue, a $600 million, 825-unit luxury condominium-hotel resort that counted Michael Jordan as an investor; the $3 billion, 4,400-unit Las Ramblas resort, backed by George Clooney; and Ivana Las Vegas, a $700 million, 945-unit tower named after Donald Trump's ex-wife.

Related Las Vegas, one of the two developers for Las Ramblas, had cited rising construction costs and slowing sales for the cancellation.

In South Florida, canceled condo developments include 1390 Brickell Bay and ICE in Miami, Fort Lauderdale's The Waves Las Olas, and Promenade in Palm Beach County. WCI Communities Inc., a luxury home builder based in Bonita Springs, Fla., said in June that new orders for its high-rise condominiums fell by 84 percent in the second quarter. The company will now go forward with only three to five condo projects in 2006, down from as many as 15 to 17, mostly in Florida.

With housing looking increasingly anemic, it's not surprising that developers are bailing out.
Domb said he's gotten about half a dozen phone calls over the past four weeks from developers asking if he would like to buy their properties.

The coming crash in consumer spending (tied ever so perfectly to the crash in housing)

Ah, the wealth effect. Always so fun on the way up (like the dot-com rush of '99 and '00). But boy, watch out for the way down (like the dot-com bust of '01 and '02).

Also, during the bubble, tons of jobs were created to build these unneeded overpriced homes. Now those same jobs (and more) go away as more homes aren't needed for quite some time, now that we have massive oversupply.

Doesn't this Time Magazine housing bubble cover seem like a million years ago?

And I wonder how long to their "Housing Meltdown" cover?

America's House Party
Record home prices are inflaming passions--and pocketbooks--as never before. Inside our raucous obsession with real estate

threadjacked thread - really boring stuff on israel etc

July 30, 2006

HP'ers: Add your caption to this picture

HousingPanic Stupid Question of the Day

Why did people think it was different this time?

It's all falling apart now: Anger, frustration, violence against realtors and neighbors turning against neighbor as real estate melts down

More excellent reporting from Gren Credo of the Arizona Republic. I sure wish "rolodex of realtors" Catherine Reagor would read his stuff and learn. Reporting the new reality from the street-view is so much better than dialing up your realtor buddies to ask for spin.

Here's highlights of his excellent report today on the housing disaster unfolding in bubble-ground-zero Phoenix:

As Valley home market cools, emotions heat up

Real estate agent Neil Brooks was getting the feeling that his client was about to completely lose it. He'd seen it before. He had just broken some bad news about her house deal, and she wasn't taking it well. She was pacing, yelling and swearing at him, tossing a cellphone from hand to hand. "I was thinking, 'OK, here we go,' " said Brooks, who's with Century 21 Arizona Foothills. "Something's going to happen. Something's going to blow."

He was right. The client whirled suddenly and whipped the phone at him. But he was ready. He ducked, and the phone shattered against the wall behind him. The client stormed out of the house.Brooks wasn't mad, and he wasn't offended. The business of buying and selling houses provokes extreme emotional outbursts.

The stress, the financial worries, the personal feelings people have about their homes - sometimes it's too much to take. People yell, they lose sleep, they cry, they're stricken with buyer's and seller's remorse.

That's especially true these days in metropolitan Phoenix's post-boom housing market, where nearly everything has reversed since last year's frenzy.

Home prices have become a touchy subject. Builders are discounting speculative homes, and resale prices are flat, or down, in a lot of neighborhoods. Buyers are submitting lowball offers. Even some sellers and their agents are having trouble agreeing how much similar homes in the same neighborhood are worth.

Two houses on the same north Valley street, similar in size and age, are for sale. One lists for $749,000 and the other for $775,000. A third house came on the market on the same street a few doors from the other two. The new listing was similar to the others in size and age but priced at $659,000.

Reaction: outrage."The neighbors were really mad," said Thomas Stornelli, principal of Global Network of Homes in Scottsdale. "They knocked on the door and asked, 'What are you thinking?'

Suddenly, angry neighbors were confronting them. One night, someone tore down their for-sale sign.

There was a lot of talk about how investors cashed in on the Phoenix market when home values were soaring. That euphoria convinced less-experienced people to try the investment game. Some were hurt.

A woman walked into Barry's Realty Executives office about nine weeks ago, sat down and began crying. She said she bought two houses last year, fixed them up and quickly sold them, making a $50,000 profit on each.

She was a novice investor, but it all looked easy. She took her profits, threw in some extra money and bought five more houses. She spent money fixing them up, but when she put the houses on the market, she realized she had bought at the peak, Barry said."Her eyes just started to well up, and she just started bawling," Barry said. "She said she couldn't sell them for what she bought them for. She said her monthly payments were about $20,000."

Realtor's attack on HP readers continues... "let them go to hell in their own way"

Boy, it truly is amazing, yet sickening, to watch a realtor try his hardest to spread disinformation and denial.

I'd take this as representative of the kind of unethical behaviour probably seen throughout America today in the realtor profession.

Deny, deny, deny. Sell houses by any means necessary. Lie if you must. Cheat if you can. But get that commission!! There just have to be more suckers out there somewhere. Go find 'em!!

They'll learn though. Liars will get flushed out of the system, and truthful agents (like Osman) will survive the meltdown.

Here's today's attack by the ethical, brilliant and witty folks at Bloodhound Realty. Have fun responding on their site - the HP'er replies on the last thread were hilarious.

The BubbleBrains swooped in en masse today, having only just now discovered my 21 reasons to bank on the Phoenix real estate market.

Courage, confidence and competence are often found together in a solitary soul, but cowardice, cowering and impotence — these are the attributes of character of men who run in packs.

I am more than libertarian enough to let them go to hell in their own way, but it seems only common courtesy to point the way.

So I sent them hither and thither — blithering Bubbleheads lathered up into a dither. Now that’s just good, clean fun.

HP declares the week of August 1, 2006 "Oil Week"

Everything in the news this week will revolve around oil in some way or another.

Oil will begin to have a greater impact on your personal life (it's sure hot out there, no?).

"Housing Bubble" and "Oil" will be mentioned in the same breath.

Your government will seemingly be controlled by Big Oil.

Oil. It's all about Oil. Embrace it. Understand it. Deal with it. And buy some ConocoPhillips stock already.

HP'ers - let's hear your best plays for making some $$$ off of this epic financial meltdown

You know mine (short retailers, long oil, long gold, and everything else 5% cash). Let's hear your best plays for not only how to stay afloat, but to make some $$ during the meltdown.

Here's one HP'er's suggestion, so help a brother out. I'm looking for ideas myself:

Anonymous said...

Can someone start a blog site to help us "hper's" making some mad money... like which homebuilders to short, mortgage lenders, etc.... i think this is a great site... but i want make some mad money off the fools of these obese americans... driving suvs

July 29, 2006

Realtor attacks HousingPanic ("cult-like fever to inflict suffering") and its readers ("brown shirts" and "flying monkeys")

This "attack the messenger" stuff will just get worse and worse I'm afraid. Where the bubble bloggers may even take some blame for the economic meltdown and people's misfortunes.

I think HP does good - at least for anyone who listened starting a year ago, and for first time home buyers a few years from now who'll be able to afford a home. I blog to warn others, and to expose the corrupt and powerful REIC, pure and simple.

Here's the attack by "bloodhound realty" (nice name). Feel free to respond on their site, make the author look like the ignorant fool he is, but play nice!

HousingPanic, a particularly vitriolic BubbleBlog — which is saying something — asks:
Realistically, how overvalued are Phoenix home prices?

Obviously, I consider this a profoundly silly question, but to lurk among the BubbleBloggers and their seething commentariat is to acquire an education in a slice of America invisible from this side of the sewer gratings.

Notwithstanding the idiotic economic analysis, which is really no worse than the static-market fallacies paraded as profundities in the pages of the Arizona Republic, these sites — and not just HousingPanic — are infested with a cult-like fever to inflict suffering — at second hand, to be sure — on people who are in fact guilty of nothing except failing to have drunk the BubbleBlogger KoolAde.

That’s all one. I don’t care. The whole of the last century was dominated by the bad behavior of viciously angry wretches, but look where it got them. The BubbleBloggers will someday bawl balefully in private, but they will never, ever admit that they have been very publicly very foolish.

You will know and I will know and in the secret chambers of their hearts they will know they were wrong all along. But as long as you don’t hold your breath waiting for that contrite admission of error, you should be fine.

Here’s where I do start to care. Whenever the subject of Phoenix comes up in a BubbleBlog, the assembled Brown Shirts pile on, for whatever reason. This is their perfect right — even though I think they’re wrong.

HousingPanic Stupid Question of the Day

Who should we dedicate the upcoming week to?

* Iran / North Korea / Israel / Hezbollah / Hamas / Syria
* The Late Great Housing Bubble
* Ben Bernanke
* World War III
* The NASDAQ Meltdown
* No-down, no-doc, interest-only, teaser rate loans
* Unemployed realtors, appraisers, builders and mortgage bankers
* Lance Bass & Britney Spears
* Condoflip.com
* Bob Toll & David Lereah

Or something/someone else?

He who controls the oil controls the game

(especially if you have nukes, missiles and an army too)

Sunday NY Times Cover Story: Housing Slows, Taking Big Toll on the Economy

I'm not sure how I feel about the MSM reporting what HP and the bubble blogs have been saying and predicting for months. Proud? Vindicated? Worried?

What I'd like to see them pick up and run with now is the devastating effect the housing bust is having on the biggest bubble cities, where like Phoenix 40% of the entire economy rests on homebuilding, and the individual investors and last-suckers-in who are getting slaughtered.

I'd also like to see some good reporting on the homebuilders, who haven't adjusted their books yet to reflect the decline in asset values (in violation of Sarbanes-Oxley), and who sold stock at the peak (Bob Toll) with inside information.

Here's the article in its entirety. Hey, it's Sunday. Print it out and read it over a nice cup of $5 coffee...

The housing industry — which largely carried the American economy through the tribulations of the 2000 stock-market crash, a recession and climbing oil prices — has lost its vigor in recent months and now has begun to bog down the broader economy, which slowed to a modest 2.5 percent growth rate this spring.

That was a sharp comedown from the 5.6 percent growth rate of the first quarter, the Commerce Department reported yesterday, caused in part by the third consecutive quarterly decline in spending on houses and apartment buildings, after several years of rapid growth.

It hasn’t slowed down a little bit — it has slowed down a lot,” said Doug McCraw, a developer who has scrapped his plans for a 205-unit condominium tower in a neighborhood just north of downtown Fort Lauderdale, Fla. “Anybody who did not have a shovel in the dirt has chosen to wait till the market settles.”

The housing slowdown is perhaps the clearest effect of the Federal Reserve’s two-year campaign of raising interest rates in a bid to tap the brakes on the economy and reduce inflation. That campaign has been largely successful, with the decline happening gradually while other parts of the economy, mainly the corporate sector, pick up much of the slack.

Housing is going from being far and away the most important contributor to growth to being a measurable drag, and it’s happening gracefully so far,” said Mark Zandi, chief economist of Moody’s Economy.com, a research company. “But there’s now a growing and measurable risk that things don’t go according to plan.”

The biggest risk, economists say, is that the optimism that fed the real-estate boom will reverse dramatically. The number of homes for sale has surged in recent months, particularly in once-hot markets, like the Northeast, Florida, California and parts of the Southwest. As builders delay land acquisition and construction it could reduce employment and spending in the coming months.

More broadly, just as rising housing prices during the boom added to Americans’ sense of wealth and well-being — encouraging them to spend more on a variety of goods and services — the reverse could dampen sentiment and lead consumers to pull back on their purchases.

While the fate of housing prices has received far more attention recently than real estate’s role as an engine of job growth, the sector has also become one of the country’s most important industries. Residential construction and all the activity that swirls around it — mortgage lending, renovations and the like — account for roughly 16 percent of the economy, making it the largest single sector, slightly bigger than health care.

For much of the last five years, housing — along with health care — was also one of the only reliable generators of jobs. From the start of 2001, when the Fed began cutting its benchmark rate to steady a faltering economy, until early last year, the housing sector added 1.1 million jobs.

The rest of economy lost 1.2 million jobs over the same period, according to an analysis by Moody’s Economy.com.

Housing continued its rapid growth last year, and other industries began hiring in far greater numbers than they had been, creating the healthiest national job market since 2000. In the last few months, though, three pillars of the housing sector — homebuilders, mortgage lenders and real-estate agencies — have stopped adding to their payrolls, and overall job growth in housing has begun to slow.

In South Florida and Las Vegas, where contractors until recently complained that they could not find enough workers to begin work on many projects, developers are scrubbing plans for new condominiums because they cannot sell enough units to get construction financing.

Mr. McCraw, the developer in Fort Lauderdale, said slowing condo sales and a 35 percent jump in the cost of construction materials like steel, copper and concrete convinced him to shelve his project. He is now considering building office space, where demand remains strong, or simply waiting for two years.

In Las Vegas, cranes are still busily at work on new casino projects but dozens of gleaming condominium towers that were slated to sprout up a few miles from the Strip are not likely to be joining the city’s neon-bedecked skyline soon. John Restrepo, a real estate consultant in the city, estimates that only about 7 percent of the 60,000 condominium units that were announced and under construction as of the first quarter of the year are actually being built today.

Among the high-profile projects that were scrapped is Las Ramblas, an 11-building, $3 billion condominium and hotel complex being developed by the Related Companies and Centra Properties and had investors like the actor George Clooney.

The period of irrational exuberance we saw in ’04 and ’05 and the gold rush fever has gone away,” Mr. Restrepo said.

The Commerce Department said yesterday that housing investment fell at an annual rate of 6.3 percent last quarter, after dropping less than 1 percent in each of the two previous quarters. It grew at roughly 9 percent a year during the previous three years.

Still, building activity for single-family homes, condos, hotels and casinos in Las Vegas is vibrant enough that construction workers are not struggling to find work, said George Vaughn, a business manager for a local of the Laborer’s International Union of North America, which represents almost 5,000 workers in Las Vegas. “The boom is still on,” he said.

The situation is somewhat different elsewhere. An official at the International Union of Bricklayers and Allied Craftworkers said housing work was more difficult to find, but most of its members had been able to find work on commercial building sites.

“If something were to happen with both markets, that would affect us — and everybody for that matter,” said Robert A. Fozio, director of the union’s Northern Ohio district.

On average, real-estate jobs pay somewhat less — about 7 percent less a year on average — than those in other parts of the economy. But real estate has also been one of the only industries creating good jobs for workers without college degrees in recent years, especially in construction and contracting work.

At Hovnanian Enterprises, one of the nation’s largest homebuilders, executives are renegotiating the company’s options to purchase land for future developments, in an effort to delay some transactions and reduce the purchase price on other parcels of land. In April, it forfeited $5.6 million in deposits on property near West Palm Beach, Fla., and Minneapolis, because it was not ready to build in the area.

“It doesn’t make sense to own the land and have it sit there,” said J. Larry Sorsby, the company’s chief financial officer and an executive vice president.

Orders for Hovnanian’s homes fell by 18 percent in the three months ended April 30 and cancellation of existing orders by homebuyers rose to 32 percent from 21 percent a year ago. The company, whose earnings jumped 34 percent to a record last year, is expecting a mere 3.4 percent profit increase this fiscal year.

Mr. Sorsby said the company had not resorted to layoffs, but it had been asking sub-contractors to lower labor costs — with some success.

Going forward, many economists say, the biggest question is whether the orderly real-estate slowdown the Fed has engineered thus far will continue. “Outside the threat of surging energy prices,’’ Mr. Zandi said, “the most significant threat to the expansion is that the housing correction turns into a housing crash.”

The fact that mortgage rates remain low by historical standards offers one reason to doubt that a crash will happen. The average rate on a 30-year conventional mortgage was 6.8 percent last week, up from 5.7 percent a year earlier, according to the Fed.

On the other hand, the boom of recent years has pushed housing prices out of reach for many families along the coasts. Already, some homeowners have resorted to creative loans, like interest-only mortgages, to afford a house, and even modest increases in mortgage rates have the potential to cause a significant drop in demand for new houses.

In either case, housing seems unlikely to continue being the economic powerhouse it was over the last five years.

“Housing is just not going to be what it has been,” said Edward Yardeni, chief investment strategist at Oak Associates, a money management firm. “It could go back to being a significant but relatively small contributor to economic growth.”

HousingPanic Stupid Question of the Day

The housing bubble has burst. The middle east is in flames. The administration's incompetence has been exposed. We're $8.4 Trillion in debt and counting. We can't meet our future liabilities. Our currency is being devalued. The market is falling. And Britney and Kevin are reconciling.

So now what are we to do?

Things fall apart; the center cannot hold. Now even the corrupt David Lereah is changing tune

Here's some recent gems from the corrupt David "there's no bubble" Lereah of the NAR. Sometimes it looks like he's given up, other times he's still got that NAR hat on and says whatever he can to keep his job...

"Sellers have recognized that they need to be more competitive in their pricing, given the rise in housing inventories," said David Lereah, NAR's chief economist. "Home prices are only a little higher than a year ago."

"I hope we are hitting bottom," said David Lereah, chief economist for the NAR, which is predicting sales of about 6.60 million this year.

"The major housing indicators have been moving up and down within a reasonable range, which means the market should even-out just below present levels,” he said. “At the same time, housing inventory levels are balanced in much of the country, so overall price appreciation will be at a normal rate. We should see home sales rise and fall month to month, but don’t look for any big shifts one way or the other.”

"If the Fed overshoots and the economy slows too much, some of these local economies will be hurt and that could hurt housing in a significant way," Lereah said.

"Sellers are stubborn and eventually sellers give in and start softening their price demands. That's when the buyers start coming back into the market," he said. Mr. Lereah cautioned that median selling prices would likely start to show year-on-year price declines for the next several months -- as has happened in some expensive East Coast cities, such as Boston, and in the condominium market.

First wave of housing price declines not reflected in official numbers as sellers give away free stuff instead

When the builders use incentives, those costs go against their marketing budget lines in the P&L, but median sales price doesn't drop (wink wink NAR). Pools, cars, trips, counter tops, flooring, you name it - it all costs something.

Now mom and pop homesellers are getting into the act too

This is how the bubble ends - not with a bang but with a whimper. But after the incentives, raw price drops will be necessary to clear the dead inventory

Pools, vacations are new lures for homebuyers

On the fence about whether this is the house for you? Maybe a free swimming pool will convince you. Or perhaps a free vacation.

Such is the state of U.S. housing, as home builders pull out all the stops to keep business booming -- a sure sign the once red-hot market has turned in favor of the buyer.

Nearly all measures of housing activity have pointed not just to a slowdown but to a sector that is struggling. Sales are sliding, supply is swelling and price appreciation is abating. Now, home builders are going beyond offering free washers and dryers, refrigerators and microwaves, ponying up more expensive perks and luxury items to lure buyers.

Las Vegas-based Wagner Homes is giving away swimming pools said to be worth $30,000 on some of its projects.

Some incentives -- occasionally in the form of cash via bonuses, refunds or fee waivers -- are worth as much as $100,000, said Larry Murphy, president of SalesTraq, which monitors real-estate trends in the Las Vegas area.

"Swimming pools, gold club memberships, home landscaping ... all of them are being offered," Murphy said. "Home builders lower prices only as a last resort, so prior to that they prefer to give incentives, which are masked within the sales price. They don't want to reduce prices, not only for the peace of mind of having to deal with the homeowners who have already bought but because it would cause problems with appraisals."

Extravagant incentives are most prevalent in states such as Florida, California and Nevada, where home prices had risen the most but are now seeing the sharpest softening, analysts say.

I shorted SOLD (housevalues.com) on 6/19, it's down 41% since then. Amazon.com down 20% last week! And put options way over 100% gains

Ah, gotta love being right. 5.25% cash, GLD, ConocoPhillips (COP) and shorting SOLD and Home Depot (HD) among other retailers with put options for December.

Where's "The Banker" when we could really mock him?

Here's what one idiot said when I shorted via put options housevalues.com (SOLD):

Keith....another example of your too late investing philosophy.Zillow came out the end of January....at that time SOLD was at 17. Over the next two months, SOLD goes from 17 to below 8. Today the stock is at 8......now you are getting in???If you knew Zillow was going to kill SOLD, then you should have acted when Zillow launched.

And I'm really liking put options - anyone else playing that game?

Charge It

In “Hamlet,” Shakespeare's Lord Polonius said, “Neither a borrower nor a lender be.” Today's consumer philosophy is closer to the 1980s bumper sticker: “He who dies with the most toys wins.” Polonius would be laughed out of the home electronics superstore.

July 28, 2006

Enjoy your trip to buy cheap crap at China-Mart

Looks like I missed the official, no-doubt-about-it, circle-the-wagons, ding-dong-the-witch-is-dead end of the late great US housing bubble last week

48 hours of cancelled flights, sleeping in JFK, and finally get home to London tonight after reading about 20 newspapers and magazines, and 50 housing related articles. Lots of news these past few days, and the MSM really has put a nail in the coffin I'd say, reporting what we've been saying for a year now. I swear reading the USA Today is like reading HP six months ago...

Bottom line: Would everyone agree that overall, the collective wisdom has now changed? Wouldn't most informed, sane folks now agree that in the US, housing will be a depreciating asset for some time to come?


July 26, 2006

HousingPanic Stupid Question of the Year

Is a housing panic underway?

NY Times uses the "B-word" - "The housing industry appears to be moving from a boom to something that is starting to look a lot like a bust"

"Starting to look"?

Man, if it looks like a duck, it quacks like a duck...

Classic Ponzi Scheme, classic asset bubble. And a textbook boom and bust. Nice to see the MSM catch up, albeit a year later...

Selling a new home is getting harder and harder: Just ask the builders who are being forced these days to entice potential buyers with expensive inducements such as free swimming pools and fancy kitchen cabinets.

At the same time, the torrid pace in the existing-home market is slackening, as prices are leveling off and properties are staying on the market a lot longer than they used to.

Adding it all together, a variety of experts now say, the housing industry appears to be moving from a boom to something that is starting to look a lot like a bust.

The latest housing data, released Tuesday by the National Association of Realtors, made clear that a significant slowdown is under way.

HousingPanic Stupid Question of the Day

With the housing ATM closed, their credit cards maxed out, inflation roaring and gas at $3.00-plus, how are consumers going to keep consuming at their old pace?

July 25, 2006

HP'ers - dissect the latest NAR existing home sale numbers and give us the real headlines

Being on vaca, I don't have time to do the research to I'm outsourcing it to you the readers

The headline is that prices were up 1%. That's against a year ago! So pull the numbers monthly and report here - what $ and % have homes fallen since the peak and just in the past few months?

The NAR will spin their bad news as good news as long as they can. But eventually even they won't be able to hide the truth. Report on stupid David Lereah quotes today too

Also, I talked today to a developer friend of mine in Scottsdale, and his report is "the bottom has dropped out of this market - it must be the damn inventory!"

Away we go...

Existing-Home Sales Flattening, Prices Cooling – NARWASHINGTON (July 25, 2006) –

Existing-home sales were down modestly in June, and home prices were up slightly from a year ago, according to the National Association of Realtors®.

Total existing-home sales – including single-family, townhomes, condominiums and co-ops – declined 1.3 percent to a seasonally adjusted annual rate1 of 6.62 million units in June from an upwardly revised level of 6.71 million May.

Last month’s sales were 8.9 percent below the 7.27 million-unit pace in June 2005.

David Lereah, NAR’s chief economist, said the housing market is flattening-out. “Over the last three months home sales have held in a narrow range, easing to a level that is near our annual projection, which tells us the market is stabilizing,” he said. “At the same time, sellers have recognized that they need to be more competitive in their pricing given the rise in housing inventories. Home prices are only a little higher than a year ago.”

The national median existing-home price for all housing types was $231,000 in June, up 0.9 percent from June 2005 when the median was $229,000. The median is a typical market price where half of the homes sold for more and half sold for less.

“The change in price performance is directly tied to housing inventories – a year ago we had a lean supply of homes and a sellers’ market, with monthly home sales at an all-time record high,” Lereah said.

"I just want to get out of the house and not be too screwed"

Here's a pretty typical story on Foreclosure Road from Denver. Note the fake appraisal, the declining property value, the "creative financing" gone awry, and the barge-like bank.

At the end of the day, get ready for an epic wave of foreclosures these next few years.

An epic wave.

Homeowner Eric Elkins is struggling to avoid the real estate world's dreaded F-word. Foreclosure may be his only way out.

Elkins says he can no longer afford his payments. He owes $285,000 on his Highlands Ranch house. But it's worth less than $250,000. 'I just want to get out of the house and not be too screwed,' he said."

He and his then-wife bought it for $252,000 in 2002. Last year, Elkins put the house on the market for $299,000. At that price, the home attracted only three showings. Increasingly unable to afford his payment, he contacted his lender, U.S. Bank. At first, the bank told him he couldn't refinance again because he owed more on the house than it was worth, he said."

He inquired about selling, but to sell a house for less than it's worth requires lender approval. Eventually, Elkins' lender came up with a better idea. 'He put me into two home-equity lines of credit,' Elkins said. 'It was all very creative.'"

These new loans replaced his mortgages. One was interest-only, meaning Elkins wasn't required to pay the principal during the term of the loan, keeping payments low. Both loans had adjustable interest rates. As for the value of the house versus the size of the loans needed to refinance it, well..no equity, no problem. 'He got an appraisal for $285,000,' said Elkins of his lender. 'I don't know how he did it. It was exactly the amount I needed.'"

Unfortunately, Elkins' financial situation is still disintegrating and his payments keep rising. He put his home up for sale again in May. In June, he got an offer for less than $250,000. His broker submitted it to U.S. Bank for approval.

The bank had to decide what to do about the deficiency. One option would be to grant Elkins an unsecured loan for the balance. Another would be for the bank to take the loss. The loss on a short sale is typically smaller than the loss on a foreclosure.

Unfortunately, the bank did not respond and Elkins' bidder moved on. 'This property will end up foreclosed on because the bank cannot respond quickly enough,' said Elkins' real estate broker, Gretchen Faber. 'U.S. Bank is completely uninterested in cooperating with me or with the buyer's agents. It isn't just U.S. Bank,' she said. 'All banks do this.'"

HousingPanic - The Official Bubble Blog of the United States of America and God Himself

Housing Panic is America's only trustworthy bubble blog - fair, balanced and unafraid. We report the bubble news, the truth, and then you decide.

HP was also recently endorsed by God himself. Every other source of housing bubble information should be seen as untrustworthy, anti-Christian and un-American. Why? Because our site has this flag, and others don't.

Luxury condos in the middle of junkyards, crack dens and strip joints - Housing Bubble effect #2215

One thing I've noticed around the country during the bubble was the building of $500,000 condos in places where $10 crack cocaine was more like it just months before.

In Phoenix, that includes projects like the X10 Wine Lofts, The Vale and everything downtown. Clear out the hookers, clear out the burned cars, and get those yuppie condos up ASAP.

Well, in the end, most folks are going to find out that no matter what the brochure showed, instead of yuppie wine parties, they got an episode of COPS outside their always-closed door.

Here's a great write-up from the Wash Post. Wish Catherine Reagor would read one of these and be inspired..

Who'd Want to Live There?

Developer Jim Abdo eased his silver Range Rover down a potholed alley on the eastern edge of the District, pulling to a stop a few feet away from a junkyard dog.

The German shepherd slept on the other side of a chain-link fence, under a piece of tin. Crushed cars and stacks of tires surrounded the dog. Beyond that: auto repair shops, a strip joint and a nightclub where police last year arrested the owner in connection with a 220-pound cocaine bust.

"I've just found the greatest freaking site," Abdo said in his rapid-fire fashion. He lowered both windows. The smell of fuel and oil wafted in. He pointed to a banged-up red Ford. "That's where the center part of the private green space will be. It can feel like a sanctuary!"

Will anyone pay $700,000 to $2 million?

"There's 87 units here. I only need 87 people to say, 'Jim you're crazy, but we love it.' '' Abdo said with a wry smile. "Right now I'm sleeping okay at night."

July 24, 2006

Watch the Sacramento flipper meltdown home by home

This new blog (thanks Marin blog for the link) tracks homes in Sacramento - what the flipper paid and what the desperate last sucker in is trying to get today

The smart flipper will take what he/she can get and get out in time to lick their wounds. The stupid flipper will hold out for the irrelevant price they paid, and go bankrupt in the end.

Too bad there's not a "sell" button or stop-loss orders on houses, eh?

HP'ers gonna need to take the lead

I'm in the Smokey Mountains in TN this week, yup, strange to be back in the ol' USA. One thing that greeted me for sure here is what I expected - a sea of for sale signs! "Vacation condos!"... "Taking reservations now!"... that kinda thing

I can say, here's my observations from 48 hours back in the States:

* Fox News is sickening. Want to see obvious, disgusting jingoism in action? Then look up at the upper left hand corner of the Fox News screen at the waving American flag under the Live symbol. Now ask yourself why that's there.

* People in TN are very, very, very large

* There seems to be even more retail than I remember. Best Buy, Lowes, Home Depot, Wal-Mart, Sams Club, you name it. I wonder what they'll do with all the closed stores in the next few years - tear 'em down?

* Man, things are cheap here. My contact solution is 25 cents on the dollar versus the price in London.

* My grandma who lives in Florida is talking about having to sell her place because the insurance is up 60%, the condo fees up 100% and taxes going through the roof. Yup, I told her to cash out and rent

* What, no Cricket scores?

Cheers - talk amongst yourselves here and post article links - I'll try to keep up

July 22, 2006

FLASH: Remember "Elevation Chandler" moth-balled condo tower? Well, now this: "State is investigating high-rise developer"

We reported July 7 on the stupidest condo project ever attempted in America, the "Elevation Chandler" tower in the suburban Chandler Arizona. Construction on these $1 million plus condos stopped in April, the developer lied about having financing and now he's under investigation. Meanwhile, millions of dollars of liens have been filed against him by the subcontractors.

Meanwhile, can you imagine being one of the suckers who gave this developer money to reserve a unit? Think you'll ever see that money again? And I wonder what they'll do with the building -knock it down, or maybe make it offices one day?

This is going to happen all over the country as developments stop before they start (Ivana Trump) or stop mid-construction and become urban blight.

The developer of the stalled high-rise hotel project south of Chandler Fashion Center is being investigated by the state Department of Real Estate. The probe has to do with whether developer Jeff Cline violated state statutes by marketing the project's condominiums before he was granted a public report from the department.

It's in the investigations division," department spokeswoman Mary Utley said. "They're reviewing the whole matter." She declined to go into specifics, citing the investigation.

Cline has said he plans to put condos on the ninth and 10th floors of the hotel on the southwestern corner of Frye Road and Loop 101, where construction stopped in April at the eighth floor.

On Friday, Cline asked the city for an extension to pay for city permits that expire Monday. The permits, which would have cost $691,970, would allow electrical, heating and air-conditioning work to proceed. They were issued six months ago. Friday evening, the city had not decided whether to grant the request.

Before construction stopped, workers were operating under a permit to build the shell of the structure. That permit expires Sept. 24.

Also on Friday, Cline purchased an advertisement in The Chandler Republic that said he is preparing to resume construction by late summer on the eighth level of the hotel. Fine print at the bottom of the ad said, "Condominiums are proposed only and no warranty is given or implied that the improvement will be completed." Cline said that sentence does not imply that the condos may be scrapped.

Want to see what's REALLY going on out there? Check out Condoflip's new Panic Button

Why a site with the tag line "Bubbles are for Bathtubs" has felt the need to recently develop terror alert system inspired color coded panic buttons, well, you be the judge.

This should absolutely crack HP'ers up... Enjoy!

If you are a seller using Condo Flip, we give you an opportunity to lower your price to a point that makes your condo irresistible to another buyer. Essentially, you are creating a dramatic price drop.

When you have a listing in Condo Flip and you push a "panic button", your price automatically drops, and thousands of buyers are notified.

These listings make up the regular Condo Condo Flip™ marketplace. This is the level that most sellers will use to sell their condos. The listing price is determined by the seller.

Condo sellers that push the Level 2 panic button will have their condo's listed price lowered to a break-even point. These become great deals. The price of the condo is the seller's original contract price plus 8%.

When a condo seller pushes a Level 3 panic button, they agree to give up half of their deposit, thereby reducing their price to less than what they paid for it. This is for the most desperate of circumstances. The price of the condo is the seller's original contract price less 6%.

"There never was a bubble in Las Vegas, and there isn't one in the future. Prices have to continue to rise"

There's two types of denial I'm seeing. The first is the corrupt real estate industrial complex denial, which I understand, as the crash in home sales and prices is killing them. So like Baghdad Bob and Bill Clinton, deny, deny, deny.

Then there's just your total and complete idiot, who chooses to ignore the data for whatever reason, who hopes against hope.

As you read this article, you'll find it strange because it honestly addresses the inventory situation, but fails to grasp the effect supply and demand have on prices. The "experts" also do what the NAR is now doing to hide the truth, and compares prices versus the same month last year, when as we all know, last year was a million years ago.

Here's one study that predicted Vegas to have the biggest decline in the country this year. Enjoy what these fools in Vegas have to say, and boy, let's make sure we track 'em down next year...

Analysts: Home prices won't fall Values still going higher in Las Vegas

Despite historically high inventory, the cost of housing in the Las Vegas Valley increased in the first half of 2006 and will continue to rise through the end of the year, according to housing analysts.

At the quarterly Crystal Ball housing-trends seminar on Thursday, market watchers said the valley's residential real estate market has defied detractors who said the good times couldn't last.

"Home prices are still going up in Las Vegas," said Larry Murphy, president of real estate monitoring firm SalesTraq. "That flies in the face of bubble theorists. There never was a bubble in Las Vegas, and there isn't one in the future."

Yet prices were up 5.7 percent year-over-year in June, from a median of $273,000 in 2005 to $288,550 last month. In the first half of 2006, the median resale price was 7.1 percent ahead of the same time a year earlier.

"Existing-home prices have not collapsed. They've come down to a more normal pace, especially compared to the 40 (percent) or 50 percent we experienced in 2004," Murphy said.

Steve Bottfeld, a senior analyst with research firm Marketing Solutions, said the price increases should continue through the end of 2006 even as sales decline.

The overall falloff in closings will come as the market grapples with substantial inventory.
About 20,000 resales are on the market in Las Vegas as investors and homeowners with adjustable-rate mortgages look to trade in their properties.

"Speculators and people who bought homes with (adjustable-rate mortgages) in 2004 are in a lot of trouble and they're trying to get out," Bottfeld said.

The condominium-conversion market has a two-year supply of homes, with 15,785 apartment units designated as potential conversions, Murphy said, though he added there were no guarantees that all those rentals would change over to for-sale properties.

The sheer availability of housing options in Southern Nevada won't hamper appreciation in coming months, Bottfeld said.

"Prices have to continue to rise," Bottfeld said.

"I can wait you out. I'm not buying your overpriced place on some silly discount"

I just loved this transcript from a chat at the Washington Post with their real estate editor last night. It speaks for itself

Your worst nightmare: I'm a very well paid professional, who just crossed into a six figure income last year. I have basically no debt beyond my student loans. I rent. I'd be interested in buying.

But you see, I spent the past five years listening to all of you blather on about RE. The smug attitude. The snotty "oh you rent" comments. We warned you that this was a bubble. We told you that ARMs, or worse yet interest-only ARMs were amazingly stupid on historical low interest rates (which can only go up). We told you energy prices were skyrocketing, driving up inflation (and eventually interest rates).

But still you bought the condo for a half mil on $80,000 income. And were condescending about it.

So now I'm sitting back, putting a grand or two a month away. I have no pressure. I'm ahead of the game. I just have more downpayment. Rates going up? Who cares? NOW is when you use ARM loans, when rates are higher and going up ... by the time it resets rates are going back DOWN.

You on the other hand have an albatross. Those low, low payments die when your ARM (or god help your interest-only ARM, or worse yet your teaser) resets. Maybe you can afford it. Maybe you can't. A lot of you can't. Or you get a job elsewhere. Or whatever. The point being you are competing with desperate builders of new construction, and have a timeline. Or didn't you notice the backlog of properties?

I can wait you out.

I'm not buying your overpriced place on some silly discount. I'm buying at 2002 or earlier prices. If not from you, then from your bank when you foreclose. So keep dreaming about "soft landings." All the greater fools already bought ... the rest of us are those who could afford it, but weren't willing to mortgage our futures on crazy loans and overpricing.

Maryann Haggerty: Who is sounding a little, well, smug and condescending now?

HousingPanic Stupid Question of the Day

Was P.T. Barnum just proven correct (again)?

July 21, 2006

HP'ers: Picture what a 30% to 50% decline in housing values looks like

Put down the blog, close your eyes, and think of Phoenix, San Diego, Miami, Vegas, Boston, DC, Naples, Tampa and a few more housing bubble cities of your choosing.

Now see their housing markets falling off the cliff. No more construction. Moth-balled condo projects. Foreclosure and HUD signs everywhere. Absolute housing revulsion.

Picture all the ways this mother of all bubbles affects a community. The baker, the dry cleaner, the hardware store owner, the car dealer, etc.

Hear what dinner conversations will sound like (oops, sorry, I mean currently sound like), and how different that was from the euphoria, joy and bragging a year ago.

Take two minutes and really think it through. And consider how it will effect your life, your job, your family and your friends as well.

This is real, it's here, it's a long way down, and it's gonna suck.

Betting against the retailers with put options

I now have $1000 to $2000 each (small 'cause you can lose it all) in January put options (shorting) on the following retailers:

Circuit City - CC
Amazon.com - AMZN
Home Depot - HD
Federated Department Stores - FD

Just fun money to play around with. I think it's gonna get brutal out there as the housing ATM has now closed, credit is drying up, interest rates are up, the wealth effect is over, real estate industrial complex job losses mount, and consumer panic sets in.

I used to be a buyer for May Company, recently bought by Federated, and boy their stores are just awful, boring, frustrating and outdated. Amazon has a 47 PE that needs to get whacked, Home Depot is run by an incompetent CEO and no longer has the housing/construction windfall, and Circuit City is Best Buy's poor cousin, and it's tough to justify $5000 on a new TV when you just "lost" $100,000 on your house.

I'll keep you posted. Up 120% on Home Depot in a month already. Anyone else have any brilliant suggestions?

California housing panic: Help the head economist for their realtor association come up with a new term to replace the discarded "Soft Landing"

This is almost so funny it's sad. And isn't it amazing to see everything we've predicted (and gotten beaten up for) coming true in front of our eyes? Man, the wheels must have really come off the cart for the head cheerleader to sound suicidal. Next David Lereah will come out with a mea-culpa.

You can email Leslie here. Let's here your best suggestions. I'll take "Housing Panic" of course as well as "Epic Housing Meltdown".

Housing Expert: 'Soft Landing' Off Mark -Leslie Appleton-Young is at a loss for words

The chief economist of the California Assn. of Realtors has stopped using the term "soft landing" to describe the state's real estate market, saying she no longer feels comfortable with that mild label.

"Maybe we need something new. That's all I'm prepared to say," Appleton-Young said Thursday.

The shift in language comes as debate over the real estate market is intensifying. The long-awaited drop-off is happening, but there's little agreement about how brutal the landing will be.

Federal Reserve Chairman Ben S. Bernanke said in congressional testimony Thursday that the national housing downturn so far appears orderly.At about the same time, however, D.R. Horton Inc. Chief Executive Donald Tomnitz was telling analysts that the home builder's sales in June "absolutely fell off the Richter scale."

The Realtors association last month lowered its 2006 sales prediction from a 2% slip to a 16.8% drop. That was when Appleton-Young first told the San Diego Union-Tribune that she didn't feel comfortable any longer using "soft landing."

"I'm sorry I ever made that comment," she said Thursday. "When I get my new term, I'll let you know."

WSJ: "Certain builders are slashing prices so much that it is making it difficult for rival builders to compete"

MSM is now covering the builder price slashing going on in the bubble markets. Remember, these builders can go much lower than Joe Homeowner, and they'll crush him on the panic to the exits. $100,000 off? No sweat. No down? No sweat.

Blood is in the streets, and it's getting worse. It'll be a race to the bottom from here on out.

As the nation's home builders struggle with big inventories, a surge in cancellations and a pullback in demand, many are aggressively offering discounts in high-profile promotion campaigns aimed at getting a dwindling number of home buyers into their sales centers.

Mr. Barron, who recently returned from a tour of the Florida housing market, says certain builders are slashing prices so much that it is making it difficult for rival builders to compete. He cites the South Fork community near Tampa, where Hovnanian Enterprises Inc. was selling homes in the low-$300,000 range while Lennar, 500 feet away, had slashed its prices for homes of a similar size to about $230,000.

The price cuts and incentives aren't unique to Florida. There are signs and ads for significant discounts in other previously hot markets such as Phoenix; Washington, D.C., and California.

Some builders, such as Centex Corp., had been offering 12-hour sales at some of its sales centers in California, where buyers would be offered as much as $100,000 off the price of a multimillion-dollar home if they purchase a home during the sale hours.

The stench of housing bubble fraud

Nice to (finally) see the MSM reporting this stuff. Johnny come lately, but better late than never. Thanks trex for the link.

There's been so much fraud and deception out there, for years we're talking, that it'll take a decade to wash ourselves clean I think. And for goodness sake, when will the Congressional Housing Bubble and Fraud hearings start already?

Attack of the real estate rip-offs - Urge to cash in on the housing bubble has spawned an industry of schemers

Every boom has a dark side. The merger mania of the 1980s produced insider trading scandals. The ’90s stock bubble was busted for biased investment research.

And so it is with real estate, the hottest market of the past eight years. The urge to cash in on rising home values has spawned a growing share of hucksters, schemers and rip-off artists.

So far, it is tough to know exactly how widespread the problem is. Just as conflicts with stock analysts and bankers didn't come to light until after the Internet bubble popped in 2001 and investors started to get hurt, only now, as the market starts to turn, are complaints over shady real estate practices pouring in.

The market was so hot that everyone was looking to jump in and make a fast buck,” says Martin. “You have a lot of property flipping and false appraisals.”

Stripping people of their home equity has become rampant in the subprime lending market. Credit-challenged home owners who often don't know exactly how much home equity they're sitting on are easy targets, says Allen Fishbein, director of housing and credit policy for the Consumer Federation of America.

“It's pushed by mortgage brokers, who are largely unregulated,” he says. “They have no fiduciary duty to the borrower.”

HousingPanic Stupid Question of the Day

Realistically, how overvalued are Phoenix home prices?


So much bad news for the homebuilders, I can't keep up. 43% cancellation rate for MDC

Boy, this seems exactly like the telecom wipeout of 2001. Right when they ramped up production to meet surging demand, WHAM!, the bottom fell out of the market and all the orders got cancelled.

You just know massive layoffs, billions in write-offs and desperation pricing are next.

Check out the 43% cancellation rate for MDC, and the write offs, cancellations and use of incentives at the growing more desperate by the day D.R. Horton.

D.R.: "The current home-sales environment is characterized by an increase in both existing and new homes available for sale, higher-than-normal cancellation rates, and an increase in the use of sales incentives in many of our markets," Horton said at the time.

MDC: The cancellation rate surged to 43% from 19% the prior year, reflecting jitters over the housing slowdown.

"The cancellation rate is the highest we have seen from the publicly traded builders due to M.D.C.'s high concentration in weakening markets," said Banc of America Securities analyst Daniel Oppenheim in a research note.