You'll tell your grandchildren about the days to come one day.
I used to listen to stories about the Great Depression with disbelief and awe. I used to hear stories in the 80's about condos in Florida going for a fraction of their original price and wonder what fool could have overpaid so much.
Well, kids in 2050 will be amazed at the sheer stupidity, gullibility and greed exhibited from 1999 to 2006. Hopefully they don't repeat it.
Sales of existing single-family homes and condominiums in Palm Beach County and the Treasure Coast posted double-digit declines for the fifth straight month in May, the Florida Association of Realtors said today.
Condominium sales took the biggest hit, dropping 40 percent in Palm Beach County compared with May 2005, the association said.
That decline follows an even bigger slump in April, when condo sales plunged 50 percent compared with the same month a year earlier.
"When prices have been artificially increased by speculators flipping units back and forth, always at a higher price, that works fine until you reach the end of the 'greater fool theory,' when there's nobody out there to pay a higher price than you paid," said real estate consultant Jack McCabe, chief executive of McCabe Research and Consulting in Deerfield Beach.
"We reached that point at the start of 2006," McCabe said.
"Thirty percent of the market is investors, and they got burned at the end," said Mike Dooley, president of the Florida Association of Realtors. "It takes a lot for their properties to be absorbed."
State and national home sales also ebbed as the real estate boom continues to go bust - or at least to "correct" itself, as Realtors prefer to say.
"We're seeing inventories skyrocket and sales dwindle, and the logical outcome, as anyone who has taken Economics 101 can tell you, is that price corrections always follow," analyst McCabe said.
July 03, 2006
Read this from Palm Beach and then try to deny an epic real estate collapse is underway
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9 comments:
The massive speculatory bubble and its inhumane offshoot the Real Estate bubble are near the end!!!!
The Florida bubble might be the biggest bubble of them all. In Tampa, builders are going bankrupt because of the massive overreaching the last couple of years.
We are all in trouble!
As they say - all real estate is local. In Palm Beach it wouldn't surprise me if the decline is epic, not just because of the degree of speculation, but also because it's sinking in to people that storms are getting worse and they keep heading towards Florida (especially among those who think about global warming).
On a nationwide basis, things aren't so bad. As you can see in my post about housing cycles what we are experiencing is not a bubble, but a normal housing cycle. Unpleasant times ahead (worse in some areas), but far from a collapse.
It's a new paradigm, and everybody who doesn't buy, now, will be priced out forever. Anybody who does buy will be rewarded with a lifetime of riches, as their property will continue its 30% yearly price increase.
Renters, and anybody born in a future generation, will not be able to afford a $10,000,000 starter home in 15 years. They will live in tent cities, and Hondas.
This asset bubble is different than all of the others - it will never slow down, or pop. The gains are permanent.
Kibitzer I liked your post on housing cycles. I like visiting this site and seeing the articles but a lot of the comments give no real information as they just want to reinforce someone's view that the "END OF DAYS" is upon us without looking at history, data, INFLATION adjusted prices, COST PER SQ FT adjusted for inflation, historical averages adjusted for inflation for higher cost areas etc.
I've never bought houses to flip or because I though I was going to get some unrealistic dividend like 20% increase a year. I always assumed I'd maybe get 3% or at least the annual inflation rate so as to keep my dollar cost constant in my payment.
We are due a recession and all the nasty by-products that will produce with unemployement, foreclosures, etc. Flippers, people who pay a mil for a house not worth $250,000 will get burned but in capitalism there are always winners and losers. My friend in Phoenix who owns two houses there (one he bought in 1982 and is a rental and almost paid off and the other he bought in 2000) finally noticed that there is apprehension in the air, lots of homes for sale, and now agrees that the prices will come down. He owes $182,000 on his house that he could have sold last summer for $412,000 so he'll be okay in the long run as he doesn't plan on moving, or as he says, "we'll do what we did in 1989, hunker down and stay put" and that is what a lot of Americans will do.
As far as Florida and the coasts, a few hurricanes will absorb excess capacity don't you think? There wil be some pain and maybe people will learn to LOVE THE COAST instead of destroy it with over building and living in areas nature never intended man to live. They may return to the wisdom of our ancestors who knew to build on high ground.
I've been telling my parent's to sell their over priced home in the Bay Area for 20 years and have thought "Bubble" every time I saw their 1962 rancher go UP and Down in value and then go up to even higher levels. I feel like the little boy that cried "wolf" once too often as I was partially right each time about prices going down but then they rose to even higher heights. My parent's attitude? We paid $17,000 for this house, it is paid for, we've lived here for 45 years, if we sold we couldn't afford to stay here, etc so they really don't care if the price goes up or go down because their house if a place to live, their home, and if more people take that attitude then there would be more stability in the market place, but then I guess we'd have European style stagnation and low growth and not sure a lot of Americans want that.
There are thousands of small towns and cities in America that have no growth, declining populations, or minimal growth and wealth and jobs and growth all seem to be concentrated in ever larger cities that siphon off even more people from smaller communities because there is no opportunities. I'm sure the planet is doomed to Mega Cities like Tokyo, San Paulo, Mexico City, New York City, Houston, BosWash corridor which will fuel home building for a long time.
Balderdash! Impossible! Home prices never decrease!
My realtor says so.
Too bad your housing cycle graph is simply wrong. Use an accurate graph, and you will see that housing prices did not rise at all for 100 years, from 1890 to 1990. In fact, based on analyses of European home sales, prices have not risen for 400 years. The only departure from this trend is the bubble that began in 1997. If this bubble follows the path of all others, prices will regress to their 1997 levels. So, to find the "correct" value of a house, multiply its sale price from that year by about 1.212, to adjust for inflation.
kibitzer...take another look.never has there been a credit bubble like this..take away credit from the middle class and this game is up.
I really think we are in unchartered territory here and graphs of the past don't apply as much because of the way this country has pushed the envelope on debt in every area, from federal govt, state and local govts, consumer and mortgage debt.
Combine this with inflation numbers that make less and less sense. Could someone more knowledgable explain if and how the following three things are included in official inflation statistics?
1 - health care - rising in cost more than 10 percent a year for at least 7-10 years
2 - oil/gas/fuel - up 100 percent from three years ago
3 - education, college - rises 7-10 percent a year.
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