I don't trust the NAR with data, but I'll go ahead and link to their existing home sales report, which shows inventory for sale in May 2006 of 3,604,000, versus May 2005 of 2,556,000.
1 million more homes. A million pieces of dead inventory, and building.
Yes, the next step (from Econ 101 class - I highly recommend it) is, you guessed it, prices decline.
Away we go.
July 03, 2006
Wanna buy an existing home? There's 1,000,000 more of 'em on the market now than there were a year ago
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29 comments:
All of us who have been watching our local markets knew this was coming.
I think that we should add another 1,000,000 by the end of the year.
1,000,000 houses! Who cares. Prices still high, employment low, population aging and they all need houses.
How long has the sky been falling for you housing bubble bloggers? How long have you been say the bubble will burst? That's right for about 4 years.
Why don't you smart guys man up and give an exact date when the housing panic will begin, instead of year after year predicting
"it's gonna get bad, it's gonna get bad."
Hey king
I agree with you. Emplyment is low. You nailed it right.
Yep, if employment was high, 1,000,000 houses might not be such a problem.
King-
Soon you will be back at Burger KING!
King -
Why the hell are you posting at a housing bubble blog? Did you google "Foreclosure" or "Help I am in Real Estate Hell" or "My ARM is broken and I am F'd" and end up here?
King go back to screwing your clients!
it's true that people have been early in preidcting a housing bust, and that some have been saying it 4 years...
but consider this -- being early does not mean we were wrong -- in fact, as house values went up, our case only got stronger. the imabalances got further out of whack. the crash, delayed, only had to be bigger.
It's not the like the guy who says the Second Coming is going to be Tuesday, then when He does not come Tuesday, he says Wednesday. Much as you realwhores would like people to believe.
King - it's always nice to hear both sides of the story. The peak areas in housing can't be supported if the cost of a home is 10 times the median income. A million more homes/6+ month supply means a buyer's market. If buyers don't buy - prices will drop because there will always be a certain number of people that need to sell. As for unemployment - that picture can change anytime too. I work for a Fortune 500 that has had several "voluntary" cutbacks in the last few years. One of my clients has outsourced a huge chunk of their tech support to India and another has relocated a department to Ohio for the cheap labor. Also "aging" people die and their families sell their homes and with the cost of long term care sometimes those aging people sell their homes themselves to pay for their own care.
The hostility! Look, I can sit here all day long and predict that the Cowboys are going to win the Superbowl, and inevitably they will win some day. But when they do win in 10 years does that make me some sort of rainmaker prognosticator king?
Look if you're looking for prices to go down so that you can finally move out of your mother's basement and get a place of your own. Keep waitin' ain't gonna happen. Have you ever stopped to think that residential housing was WAY undervalued in 1997 when housing prices started going up? Waiting for the correction? THIS IS THE CORRECTION!!! Prices are now where they should be. Also, people are living longer and baby boomers' kids started getting to the age where they need houses and there you have it. Markets are efficient. For much of the country there is not much difference between rents and mortgages except for Phoenix, the only resort to you housing crash theorists and I will concede Phoenix.
And employment is low haha. My typo. Unemployment is low and wages are going to go up they always do after years of high productivity levels - which we have had.
Prices will stagnate but will not collapse sorry guys.
THIS IS THE CORRECTION!!! Prices are now where they should be.
__________________________
As per usual - NOW IS A GOOD TIME TO BUY! Is that the first line in the 2 page realtor exam review booklet?
In my town in 1997 homes were 2.25 times the median income. Clearly undervalued!
Today the median price is 7.75 times the median income. CLEARLY OVERVALUED!
KING...I think you should definitely go out and buy a house...TODAY!
they aren't making any more land you know!
wow that rebroker king is truly clueless
but sure is entertaining to see such a fool strut his stuff
must be under a lot of pressure, and definitely in denial stage
I hope he sticks around during the downfall - will be fun to watch
king, your a dork, employment is not high as the government has lied since the end of the cold war and it has gotten worse since the dot.com recession.
The housing bubble is done, the massive New England area bubble has burst(thousands of layoffs in just June itself in that area), the San Diego and San Fran bubble just burst in June which will proceed 500,000 lost jobs by December in California. The Miami and Phoenix bubble are next. Million of jobs will be lost. Deal king, deal with that reality and watch your fantasy world crumble.
2006-12 is a bleak era in American economic history. Oh, the horror, the horror
Calling me names really isn't countering my valid arguments. As for buying a house? I don't need to I have two in which I reside and liquidated all my houses and sold my last about 6 months ago. (I broker, flip, and develop) I saw the slow down coming. Look I'm not saying Realtors are going to be hurting, they will, believe me they will.There will definitely be a slow down, a long one, I agree, but it won't crash.
Thankfully I've worked hard the last ten years and the RE in my name no longer stands for Real Estate but for RE-tired (at 35). So when you read my posts and get angry, instead of calling me little names or telling me some little anecdotal story about how your company is doing this and the prices in your town are doing that bring some real facts to the big people table or don't come at all.
the King stated:
"And employment is low haha. My typo. Unemployment is low and wages are going to go up they always do after years of high productivity levels - which we have had."
Productivity?! Oh, pa-lease! Adjusted for cheap imports and debt/income and debt/GDP, there has been almost no gains in real labor productivity at all since the early '90s!!! Looking at so-called multi-factor (capital and labor) productivity, virtually all of the gains have gone to capital's share, that is, corporate profits and gains from rentier activities, primarily from financial transactions, the largest share coming from the expanding debt bubble.
Profits as a share of GDP are near a post-WW II record, whereas wages/GDP are at a low since the Great Depression/WW II and STILL FALLING in the aggregate (made worse by rising out-of-pocket expenses for medical insurance and the like).
The only actual growth in real "labor" productivity has occurred in China, Malaysia, Philippines, Thailand, Vietnam, etc., that is, those workers producing for US firms' foreign subsidaries and contract producers who "export" back to the US. Foreigners are seeing their wages and spending rise and capital deepen, while 80-90% US workers exchange wage increases and capital deepening of their output for soaring debt levels and cheaper imported goods. All the while we deindustrialize and militarize the country and the rely on despotic regimes for our energy and consumer goods.
And where do you think the US job growth is occurring since '01, outside of mining and refineries? That's right, the real estate-related sectors, including realtors, lenders, title agencies, appraisers, construction, home improvement stores, real estate-related business services, and indirectly autos, boats, eating and drinking establishments, and so on.
What happens to jobs in these sectors when the housing sector plateaus and then grinds lower as occurred from 1989-90 to '94-'95 after the 1980s bubble?
What happens to Asia's economies when the US, Aussie, Kiwi, UK, Canadian, and Shanghai house bubbles all deflate simulataneously?
As far as stagnating, SoCal and SF Bay Area inflation-adjusted median prices went nowhere from 1982 to 1995 (and '96-'97 in some locales) after the late-'80s peak, whereas prices fell 20-25% in real terms from the peak (up to 40% nominal and 50-55% in real terms for the high end in the Bay Area).
Houses in the bubbliest areas are so overvalued, due to adjustables falling from 6% to 3.5% and anyone with a pulse being able to become a mortgagee, that prices could fall for 6-7 years and decline by 40%-50% or more in real terms, wiping out trillions of dollars in purchasing power over the period.
All of this having been written, however, one should not rule out the possibility that house prices will flatten out in the worst case with the Fed flooding the economy with torrents of reserves via the money base. The problem here is that even flat house prices will shut down the house ATM machine that has given us an incremental growth of real GDP of ~1% or more over the past 4-5 years. And, as long as the Fed is pumping, oil and commodities prices will remain high and eventually pass through to business (as has been occurring since last year), forcing them to raise prices and/or fire people, just as the main engine of economic "growth" is sputtering.
The Fed officials can pump all they want in such a scenario and not succeed in encouraging loan growth in the midst of rising foreclosures and loan-loss provisions, resulting in real M2 growth and money velocity slowing, setting up the increasing risk of a debt-deflationary implosion at some point.
It's late in Imperium Americanum.
bc_or, you made some good points but between 2001 and 2004 productivity averaged 3.8%. Long term productivity is 2.5% so maybe I'm missing something.
"It's late in Imperium Americanum." Oh really? My only little question is who will take our place? Let me guess, Japan? Canada? Eastern Europe after they join the EU? Britain? France? Oh I know China? Yeah right to all of those.
Here's the truth, America is they greatest country in the world because our economy is the most flexible. Oil prices are going to go down. And WAGES WILL GO UP. Corporations war chests are completely full of capital and wages have not moved while unemployment has stayed low. What does that tell you?
REBROKER said
"How long has the sky been falling for you housing bubble bloggers? How long have you been say the bubble will burst? That's right for about 4 years"
Those of us who can see the train coming but are unable to precisely predict when it will hit are still a hell of a lot smarter than those who can't even see or hear the train.
We've all heard that crap before, "if you always predict something, it will eventually happen", but that's just a slogan. If you believe it's true, put your money where your mouth is and buy all the real estate you can, using whatever exotic loan you can secure. It only goes up you know ; )
"1 million more homes. A million pieces of dead inventory, and building."
I doubt all those homes are empty or inventory. Sure, there are probably a million or more homes around America that are boarded up, abandoned, and can't be given away for $10,000 in a lot of the small towns, ghettos in America. You can go to small towns where no one wants the old homes but new homes are being built and since building costs are high those new homes can cost two or three times more than those older unloved homes. What are three million homes compared to the population of the USA approacing 300 million and growing? What percentage of all the housing units available in the entire country would that be? Would 10% empty, forclosed mean disaster? It would be like saying 10% unemployement, what does that mean? 90% work?
A lot of markets haven't even recoverd the value of what those markets saw back in the early 80s, others have soared way above. I read this week that California has recovered its spot as the place most people are moving back to so what does that mean for an over regulated under supplied housing market? Sure, most will rent as they can't afford to buy and prices will have to come down but where and how much? When does that beach house become reasonable in La Jolla when millions would want those few thousand homes?
They have said Jesus is coming back for 2,000 years and back in 1844 thousands sold everything expecting the return only to be sadly disillusioned. Some believe that eventually Christ will return, I believe that will happen when the Bunny rabbit marries Santa, but there will always be ups and downs in every market, stocks, bonds, real estate, today a city is the hot place to be and 800 years from now a ghost town.
Life goes on. People live, struggle, work, die. There have always been the rich and powerful and the weak and helpless. The indentured servant, the slave, the serf, always enslaved to the master. Some people choose to be enslaved to a mortgage, a family, a church, a job, nothing is going to change there.
Oh and back to California, I joined the AF in 1975 and never went back, why? Because I couldn't afford it, or I thought, and if I had say in 1979, sucked it up, paid what I thought were over inflated prices that would look like a bargain today and that house would be paid for.
I'm the first to admit that I've always been a "Bubble" believer for 30 years and expected this major Bubble correction and have yet to see it occur. It will happen, maybe in my lifetime, who knows.
Still, Rebroker King has some valid points to consider. This site may eventually prove to be right on, but in the end all that matters is your individual responsibility and response. Get educated, get a good job, live within your means, pay off your home and hope for the best.
A doctor who spends more than he makes is poor. A blue collar worker who spends less than he makes will be rich. I had a friend who wanted to buy a new house in 1994 in Phoenix. I tried to get him to buy an older home in the central city for $68,000. He made $70,000 a year. I told him buy this house, pay it off in 7 years. Then if you want a bigger house, sell and reinvest the money in a bigger house. He bought a new house, $135,000. Two years later that house was worth, $135,000 (competing against homebuilder) the one downtown went up to $98,000. He said, "I should have listened. I'd have made some money and saved a lot in interest and landscaping and drapes and gas in the long commute to work. The key is live below your means, pay off your debts as quickly as possible so the RIch can't keep living off your labor through interest payments.
(Here's the truth, America is they greatest country in the world because our economy is the most flexible.)
hahahahha. ahahahahah. hahahahha.
Rebroker King:
I have to give you credit, you are right on about a number of things: Corporate cash levels are high, unemployment is low (4.6% - practically full employment), but what I think that you are missing is the flattening of the yield curve that has brought ARMS to the same rates as 30yr fixed. This is having a major impact on affordability and forces people to pay the "real price" for a house. Fewer people can or will stick their neck out to make outrageous payments for a beat up rambler in a crappy part of town. I'll wager your theory on Baby boomers kids buying while they live against my theory of baby boomers selling speculative purchases once they don't see them as appreciating assets. I don't care which way it goes since I am somewhat hedged, but It is an interesting show to watch!!
Once the 1,000,000 get sold I wanna see then build 2,000,000 more, preferably far out on third tier beltways, mandating xtreme commutes of no less than 100 miles each way, in the soon-to-be-introduced H5's. I fervently pray that the new homes are no less than 6500 sq. ft. with all the accoutrements, including vaulted ceilings. Can we start a prayer chain?
King said " Have you ever stopped to think that residential housing was WAY undervalued in 1997 when housing prices started going up?"
Not really, because mainstream housing (by mainstream I mean not the Hamptons or nextdoor to Liz Taylor which have always had rediculous premiums)has been at about 3.5 annual income as a mean.
Granite counter tops, double glazing, swimming pools etc never has (until this recent bout of idiocy) added a net value to a property, ie if it cost you 10k it might add 5k over and above the price over the house next door that hasn't got the extras.
Rebroker King admits "flat housing prices"
We may or may not see housing prices drop quickly, BUT. . .even flat housing prices mean no more using the house as an ATM (I posted a week ago about local bankers not giving new loans). This will slow the economy (and already has) - coupled with higher energy prices, a mild recession is in the cards (at least!). So if housing prices stay flat for 10 years, and inflation is even 3%, then in 10 years, housing prices will be 30% below today. That sound like a housing crash to me.
You all make great points and I agree with you all.
To be honest, I just wanted to shake things up a little here. The most recent weeks of posts have really degenerated into of vortex of stupidity.
The public's ignorance of ARM's will be their undoing. But I wasn't playing devil's advocate when I said US economy is flexible, it is. There will be some rough times, but time goes on, people get new jobs in different sectors and life goes on.
Globalism is the problem that will make the coming debt crisis far worse than many expect. Asian economies are heavily dependent on U.S. consumption and countries like China are expanding their economies at unsustainable rates. Developers like Rebroker took advantage of the easy credit available here and made theirs - OK by me but not exactly a net positive for those saddled with the debts.
All of us are in the middle of this wild party so we have no perspective of how these interlocking financial systems have become badly distorted and unbalanced.
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