Anyone make the mistake of listening to a realtor in Boston lately?
This house price disaster unfolding in cities across America will do more devastation to families' financial well-being than any economic event since the Great Depression. And even the NAR won't be able to spin their way out of this mess.
House prices plunge: All Hub gains since March ’04 vanish
Boston house prices plunged last month at their fastest pace in more than 13 years, erasing all gains recorded since early 2004, new figures show.
Market tracker The Warren Group reported yesterday that median house-sale prices in Suffolk County, which mostly consists of Boston, fell to $325,950 - a stunning 13.31 percent decline from October 2005.
That drops prices back to May 2004 levels. It’s also the sharpest 12-month pullback since 1993.
“The October numbers continue a trend we’ve been seeing for some time now - a pronounced slowdown that’s affecting every facet of the housing market,” Warren Group CEO Tim Warren said.
Wellesley College housing economist Karl Case is less optimistic. “All of the indicators - sales volume, prices, everything - are pointing downward,” he said.
December 03, 2006
The new Boston Massacre: Boston area house prices crash 13%, erasing all gains since 2004
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44% Drop in Price in Ft Meyers Florida. Orlando home prices increase, up 5%.
Source; Orlando Sentinel
Boy, I never would have predicted this... oh yeah, I did.
I like how the independent analysts, Warren Group and Karl Case, both point to further declines while The MAR declares that the declines are over. The MAR doesn't seem to realize that the more they contradict reality the more their credibility is obliterated.
Hey, the anons are backkkkk
Doesn't matter if credibility is eroded. There are always new first time homefools to pitch an Option-ARM to.
Damn!
I was in Ohio recently, housing prices there are falling, and foreclosures are soaring. . . they didn't even have a bubble. This is a nationwide problem cause by a massive "credit bubble.". . .also here in San Diego, friends are trying to buy a new house, and the underwriter want more down because they were told, "possible declining value of homes in 2007 requires that bank to require a larger downpayment.". . .banks are now tightening up!
The problem is that the vast number of people are completely unaware of current events. Everyone buying now is basically ignorant or insane because a sane person would not buy something now when they could get it for 10,000 less next week.
The only buyers left are the ones with a bag of money and a box of stupid.
Banks are tightening up? I'd say a lot of home owners are "tightening up" in anticipation of the reaming they are going to get next year.
Bend Over! Big Ben is comin' in baby!
When the price drop erases the gains since 2001, then I'm buying in Boston. For now I'm loving what I'm seeing
"The only buyers left are the ones with a bag of money and a box of stupid."
LOL! Post Of The Day!
M3 is growing at 10% annually, and the USD just dropped 2% in the past ten days. Have any of you HP doomsayers ever heard of inflation? That awful 13% "crash" in the new "Boston Massacre" will be mostly erased by inflation next year. Five years from now the average price for houses will likely be double what it is today.
Don't believe Keith's rent-and-sit-it-out mantra. Buy a house, any house, with a fixed rate mortgage. You will be rewarded in a few years as inflation tears us a new one. People renting will be whining for rent controls as rents skyrocket and owners give them the boot for a new round of condo conversions starting around 2009. Interest rates are going to rise next year and the days of the fixed-rate mortgage may be over.
As housing goes, so goes the US economy?
Researchers say that the recent housing downturn doesn't necessarily mean an end to economic growth.
By Mark Trumbull | Staff writer of The Christian Science Monitor
Evidence keeps piling up that the housing sector, after fueling the American economy with its historic boom, is now in a recession.
Usually, housing downturns precede broader recessions in the whole economy. But this time, forecasters say that, for a range of reasons, the economy may continue on a path of growth.
The decline in home prices and sales volume has ripple effects, to be sure. Wednesday, the Commerce Department reported that the economy grew at a 2.2 percent annual pace in the quarter from July through September, a slower pace than earlier this year. A main reason was the slump in residential construction.
But housing and the rest of the economy may be traveling on divergent tracks. In 2001, the last time the nation was in recession, housing did well as home prices continued to climb. Now, the reverse appears to be occurring.
"Typically in the past when housing fell into a recession so did the economy," says Ed Yardeni, chief economist at Oak Associates, an investment firm in Akron, Ohio. This time, "the rest of the economy is growing quite well.... There seems to be a certain amount of resilience."
Weathering the housing slump won't necessarily be easy.
This week, the median sales price of previously owned homes took its biggest tumble ever, falling 3.5 percent in October from the level one year ago to $221,000, according to the National Association of Realtors.
The housing slump hurts the economy in several ways.
There's lower construction spending, falling purchases of appliances, paint, and other home-related goods, and a negative "wealth effect" that affects consumer spending. As home prices dip, homeowners have less equity in their homes, or less money to spend.
Of the 13 occasions when residential construction turned negative on a year-over-year basis, recessions followed 10 times, according to research by the investment firm Merrill Lynch in New York.
Several factors, though, suggest that the current housing downturn may not drag the wider economy into recession:
• It usually takes more than just a housing contraction to cause an economy-wide recession. Although construction and home sales have often preceded past recessions, some other factors - a drop in government spending on defense, a jump in oil prices - have also contributed to a wider slump.
• The Federal Reserve is learning more about what it takes to guide the economy to a "soft landing." The Fed's goal is to remove inflationary pressures from the economy while not causing a recession by squeezing the credit environment too much.
As in the past, interest-rate hikes by the Fed over the past two years have cooled the housing market. The policymakers have stopped raising rates for now, watching to see whether they can thread the needle just right. Often past efforts have failed, but most economists think the Fed will avoid causing a recession this time.
• The market for home mortgages is very different than in 1990, when the last big housing crunch occurred. Now, when people get a mortgage, the loan generally doesn't stay with the bank that originated it. Instead, loans are packaged in bundles and sold to investors who reap the stream of monthly income from homeowners.
The upshot: The housing market's risk is diffused more widely, so banks face less pressure to cut back on lending during housing downturns.
"One of the important developments on the capital markets since the mid-1980s is securitization" of loans, Mr. Yardeni says. In this housing slump, banks are still lending, and their stocks are doing well on Wall Street.
• While the housing downturn is steep, its effects on consumers may be smaller than many fear. Surging home prices have added trillions of dollars in wealth to homeowners. That won't all be wiped away by a 3.5 percent decline in home values, or even by a 10 percent decline, which some forecasters say is possible.
Moreover, any negative "wealth effect" from home values promises to be offset by rising incomes. In the current job market, with unemployment near record lows, wages are on the rise. It's hard to know how long that pattern will continue, but it will help offset the impact of home prices.
"Income is 10 times more important than wealth" as driver of the economy, says Richard Berner, US economist at the investment house Morgan Stanley in New York.
That's a key reason he expects the economy to escape a recession next year.
"This isn't bulletproof," he says.
The risks are that the housing recession could fall deeper than analysts expect, or that energy prices could spike higher again.
Oil has edged back above $60 a barrel this week, trading close to $62 Wednesday morning. That's still well below its peak of around $75 a barrel this summer.
The stock market shows little worry of recession among investors. Stock prices rebounded Wednesday despite the rise in oil prices, with the Dow Jones Industrial Average well above 12,200 in morning trading.
In a speech this week, Federal Reserve chairman Ben Bernanke described a generally strong economy, where inflation was a greater concern for policymakers than the risk that the housing sector will put too much of a drag on economic growth.
"Although residential construction continues to sag," he said, "some indications suggest that the rate of home purchase may be stabilizing, perhaps in response to modest declines in mortgage interest rates over the past few months and lower prices in some markets."
For both new and existing homes, the pattern this year has been of sales volume declining and prices weakening - but not necessarily every month. Wednesday for example, the government reported that new-home prices rose in October even as sales fell sharply.
http://www.csmonitor.com/2006/1130/p01s04-usec.html
Mark in San Diego said, "I was in Ohio recently, housing prices there are falling, and foreclosures are soaring. . . they didn't even have a bubble."
The problem in so many parts of the country is the rape of the middle class by the rich, by investors, by speculators, by banks, by China, by the decline in US wages due to imports, stagnant wages, obscene profits by corporations, globalization, the Republican parties rape of the workers.
I see that in many place where the bubble didn't occur things are sometimes worse than in bubble areas as their economies are stagnant, falling, populations are declining, poverty increasing where-as in bubble areas there has been psuedo-job creation though mostly based on consumption and construction.
The world is awash in excess capacity and when that occurs the world economy can only suck it up by a collapse or war or both (since the collapse leads to social unrest and war).
Reporting from PHX.. one desperate deveoper offers 40% discount on a few completed houses.. stay tuned!
Fox News was just on saying,"the inventory will be gone by next qtr!!! Buy, buy, buy!!!!!"
getaclue -- problem is California is already priced in for any "inflation". Its even worse because housing prices drop with unemployment. Yet CA prices are dropping even with massive employment. If you believe the statistics the US economy is at full employment. I'd say just recently with layoffs in real estate this is going to change. So, when the unemployment ticks up more, then I'd wager we'll see even more home price reductions. Especially true in honey pot areas like San Diego etc...
If there is a massive dollar meltdown them real estate might hedge inflation again in bubble areas. But it would have to be a massive melt. Maybe home prices are reflecting this prematurely? It could be a possibility and we might be witnessing the shake out before it happens.
I think the fed is going to defend the dollar with higher rates popping the home appreciation. No more pause b.s. The arm homedebtors are facing a closing window. Dollar is more important than real estate -- the stock market boobs don't seem to agree with all the hb stocks running lately.
Talk about b.s. on the hd speculation.
Dollar index close to 80 might be a good time for a straddle trade at the critical point...
Too lazy to log in. Sincerely, anon. :)
getaclue -- problem is California is already priced in for any "inflation". Its even worse because housing prices drop with unemployment. Yet CA prices are dropping even with massive employment. If you believe the statistics the US economy is at full employment. I'd say just recently with layoffs in real estate this is going to change. So, when the unemployment ticks up more, then I'd wager we'll see even more home price reductions. Especially true in honey pot areas like San Diego etc...
If there is a massive dollar meltdown them real estate might hedge inflation again in bubble areas. But it would have to be a massive melt. Maybe home prices are reflecting this prematurely? It could be a possibility and we might be witnessing the shake out before it happens.
I think the fed is going to defend the dollar with higher rates popping the home appreciation. No more pause b.s. The arm homedebtors are facing a closing window. Dollar is more important than real estate -- the stock market boobs don't seem to agree with all the hb stocks running lately.
Talk about b.s. on the hd speculation.
Dollar index close to 80 might be a good time for a straddle trade at the critical point...
Too lazy to log in. Sincerely, anon. :)
Sorry about double post.
Bernanke will not "defend" the USD if it means a deflationary spiral. Since he has stated this position many times, do you think perhaps he might actually mean it?
Now I'm sure he and the Fed don't want a hyperinflationary blow-off like Weimar Germany, but given the choice between a 1929 style crash and moderate inflation, I think we all know the path he and other pols will take. The dollar is going down because it's the only way to avoid world wide economic collapse and rescue the federal government from its entitlement mess.
Ben will drop rates in an attempt to keep the party going.
Other means will be used to force the world to accept dollars. eg. military
Love the picture you chose. Hysterical!
The United States Is In Deep Doodoo!
"Mr. Speaker, we are here now in chapter 11. Members of Congress are official trustees presiding over the greatest reorganization of any Bankrupt entity in world history, the U.S. Government. We are setting forth hopefully, a blueprint for our future. There are some who say it is a coroner's report that will lead to our demise."
http://tinyurl.com/bptd
The base value holding up the US currency is military intervention. Same as all declining empires. Under Clinton Bush, and the rest of the elite average citizens have been sold into indentured servitude at the hands of the "free market". You can not have the typical US standard of living and comepete with one dollar an hour Chinese labor. Fortess America to put american citizens first is the only path that actually will work.
Ben will drop rates in an attempt to keep the party going.
++++++++++
Nope, I don't think so. Ben will protect the dollar by keeping interest rates as high or higher than they are now. If the dollar truly tanks, there goes our banking system, and he can't risk that....
Data Quick reported a 50% decline in median price for 90210 for October 2006. That sounds like a significant event!!!
"Ben will drop rates in an attempt to keep the party going."
Bernanke can "keep the party going" even if he allows interest rates to go up substantially! If inflation is 20% and interest rates are at 15%, then we're back to where we were in '01 as far as the banks are concerned. They love negative real interest rates.
If the dollar breaks 80, it risks free-fall. Supposedly. But everything the Fed has done seems designed to achieve a lower dollar. I'm sure they don't want a disorderly decline, but I don't know what their ultimate objective is. Perhaps it's lower than 80.
At any rate, the assumption that in an inflationary environment, all asset classes increase is simply false. Since real estate has gotten so out of whack, it could certainly decline in both nominal and real terms going forward for years despite inflation rates. As an example, if you had purchased gold in 1980, despite being a hard asset, it was a very poor inflation hedge from that point onward. Housing could follow the same path.
Talk of a strong economy sounds so much like spin and desperation to me. The economy has been built on speculation. Now that we're moving into a contractionary phase, where is growth supposed to come from? As fewer houses are built and sold, job losses will ripple outward through many industries. As defaults increase, credit contraction will ripple outward as well. Since this was the engine of our economic boom, it's going to have a powerful deflationary effect. It will also result in less demand for commodities resulting in lower prices - including perhaps gold. Sure the Fed will attempt to reflate, but that doesn't mean they'll succeed. The world seems to be saying they don't want any more dollars and there's increasing talk of selling oil in alternate currencies. The big question is whether or not the rest of the world will generate enough demand to support prices.
Another component of the picture is military spending. More and more people seem less and less enthused about keeping our troops in the midst of an Iraqi civil war. I haven't seen any reports anywhere now indicating any success anywhere for our military efforts. Could end up with a contraction in that area, too.
getaclue, you need to seriously get a clue. Inflation will only "work" to undo this RE mess if WAGES inflate substantially over the next several years. Do you see this happening with anybody you know? I sure don't. I'm an EE by trade and am basically making the same $$$ as I did in 2000.
Ask around and I'm sure you'll find that most people are either making what they did in 2000 or in many cases even less. Adjust for inflation and I'm making a lot less than six years ago. Great "recovery" eh?
Nevertheless, you're "inflate out of this mess" argument doesn't hold water I'm afraid.
My thoughts exactly on wage inflation. It will be difficult for wage inflation to take place with all the out sourcing and the remaining job growth being tied to the REIC.
I believe that dollars will become scarce in the domestic market, even as they become common in the international markets.
This is going to be one ugly downturn.
Housing has really never been a good investment. If it were, the government would not have had to give mortgage interest tax credit to get people to buy houses.
Q.E.D.
Every time the dollar loses value, outsourcing labor becomes that much less profitable. Domestic industries will have a edge in price and we will do to the world what it's been doing to us for the past 20 years.
Foreign goods will become more expensive but, except for oil, what foreign goods do we really need that aren't luxuries? Production will become profitable and consumption will have to take a back seat to honest survival.
We have all the coal we need for electricity and all I need is the Internet to be happy.
Also, my investments are mostly in foreign assets so I'm quite happy with a falling dollar.
Nordic countries did suffer similar housing bust in the early 90's. Big housing bust followed by huge interest rate raises (from 5-6 to 13-17 percent) because of the need to defend their currencies.
Now you guys have very similar but much worse scenario, dollar is sliding and might even collapse. Double-digit interest rates would be the ultimate killer of the US economy at this point.
One example:
Interest payments are now about 17 percent of the US federal budget with 4-5 percent interest. 15 percent would take out half of the budget without even paying one dollar back!
At this point FED can only print more and more dollars and hope for the best.
>> Fox News was just on saying,"the inventory will be gone by next qtr!!! Buy, buy, buy!!!!!"
I too caught their Sat. morning financial shows. NOW I understand why it's referred to as Faux News. Unbelievable - like nothing bad is happening in housing.
By Mark Trumbull | Staff writer of The Christian Science Monitor
Shill ?
"At this point FED can only print more and more dollars and hope for the best."
http://tinyurl.com/kh74j
Is your real name Ben Bernanke? The pedal is to the metal folks, and mortgage rates are falling. Can Ben and his other banker buddies pull it off one more time?
As a proud Bostonian, I completely look forward to the crash.
And here's why... Boston, unlike deadwood cities like Phoenix or Miami, is actually one of America's few R&D centric cities left. The problem is that during the past five or so years, tech jobs (not just IT but also electronics and materials) have been leaving Mass simply because the cost of living has made it an unattractive area for R&D jobs which pay a bit less than jobs in finance or health care. Thanks to the RE bubble, however, only financiers and doctors could afford to live in the Boston area and in essence, drove out the ones (and their divisions) who could actually maintain what made the Boston area special to begin with, real work. When cities like Boston fade to black, the rest of America soon follows because in general, Americans don't innovate, they just ride the wave of whatever's in motion but cities like Boston do, in fact, innovate which is why I want it restored to its former glory.
FYI, the current biotech bubble in Mass is really the Kendall Sq pilfering team, of swiping NIH work from MIT/Whitehead. It's not like the 90s where grassroots development work was actually going on bay state companies w/o simply pruning the NIH labs and then sending a bulk of the work to other cities and countries.
::It's not like the 90s where grassroots development work was actually going on bay state companies w/o simply pruning the NIH labs and then sending a bulk of the work to other cities and countries.
Also, to the so-called market fundamentalists, please don't argue with me about labour arbitrage.
When this kind of work leaves, patent portfolio's disappear, and within a short time, all kinds of product line start to come up in Asia directly competing against American companies with no IP or IP portection over there. End result, end of American industrial prowess.
Speaking of Ohio, if you go hang out for a while on www.mrlandlord.com you'll find landlords saying Ohio's rental market has been the pits for a couple years now. Too many competitors willing to do "first month free" and "no credit check". It's almost as bad as Michigan.
We talk a lot on these blogs about whether the rental market will improve, but it can't, when there are no no good paying jobs and everyone has bad credit.
==================================
Nice post "Moz". This about sums it all up.
This has been going on for decades. After the murder of John Kennedy in late 1963 they came up with the "post industrial" society. Which means, slavery, where all the productive jobs (which help the nation too) are just shut down.
And after RMN shut down the Bretton Woods Monetary system on August 15, 1971 then that was all she wrote.
"We talk a lot on these blogs about whether the rental market will improve, but it can't, when there are no no good paying jobs and everyone has bad credit."
What happens here is a state of bifurication where those with good credit (i.e. bubble sitters a/o those with savings, stable jobs/businesses, etc) get to live in nice apartments in good neighborhoods and others (a majority of society) has to live in delapidated former bubble (once gentrified) complexes in degenerating neighborhoods since their poor credit scores exclude them from renting in nicer areas. Realize, high credit score, esp in a climate of skyrocketing bankruptcies , etc will be critical to someone living in a safe neighborhood because landlords can't take a risk on someone not paying his rent and most people in foreclosing proceedings will be in this category.
---If that was true all Americans would have "fake breast", "serious bad 'tude", and 5 ex-spouses---
But why can't nice, flat chested women get boob jobs, have a good attitude, and then the nation can be like one big happy midwestern barbacue?
What happened to razor blade guy? I think someone actually passed him the razor blades! RIP.
"I live in southern NH, about 50 minutes from boston. As far as Im concerned this bust hasn't even started."
Hi, this is the Boston anon from 4:18
I think the whole band from Portmouth to Nashua was filled with irritated Mass residents, during the past decade, when the cost of living in MA became unbearable. With that in mind, I feel that the bust will occur in concentric circles, starting first with the city, then the 128 beltway, and then finally, the 495 and outlying regions which would also include southern New Hampshire from Nashua to Portmouth. Nonetheless, outside of crazy touristy towns like Stowe, real estate in NH (and much of VT) hasn't been ridiculously overpriced like it was in eastern Mass.
Personally, I'm hoping to retire around Lebanon (NH, not the middle east) and south of Montpelier so that I can be between the Burlington-Stowe activities and be relatively close to Boston.
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