HousingPANIC Stupid Question of the Day

What percent of realtors do you think have read "Manias, Panics and Crashes"?

What percent do you think should have before they positioned themselves as "financial advisors"?

And who should we send copies to?

Here, have $500,000. Go ahead. Take it. You know you want it. Nah, you don't need a job. Go out, buy a nice house, maybe a Hummer too!

Looking back at it, it was just so incredibly STUPID.

It was stupid for the homedebtor to "buy" a house at a price that made no sense, that they had no chance of keeping

It was stupid for the mortgage brokers to commit obvious mortgage fraud, and game the system for short term gain

It was stupid for realtors and the NAR to destroy their profession with their lies, deception and spin

It was stupid for builders to buy up land at any price and build homes as fast as they could, thinking the Ponzi Scheme would never end

It was stupid for Countrywide and Indymac employees to go along with the scam instead of raising a red flag and blowing a whistle

It was stupid for Fannie and Freddie to buy any Alt-A garbage, exposing the US taxpayer to their stupidity

It was stupid for the mainstream media to cheerlead the housing bubble, when they should have been shouting about the mortgage fraud and stupid prices instead

It was stupid for George Bush to cheerlead housing when prices made no sense with his 'ownership society' Ponzi Scheme promotion

It was stupid for Alan Greespan and Ben Bernanke to do nothing to regulate the lenders as they were mandated to do

It was stupid for the banks, governments and investors who bought the garbage loan CDOs

Bottom line - EVERYONE involved in home buying got stupid. EVERYONE lost their minds. However, unless they're prosecuted, the scamsters and fraudsters will come out ahead. They'll know crime did pay. And they won't be stupid after all.

Bernanke and the Fed come clean - there was a housing bubble, there is a housing crash, they f*cked up regulating mortgages, and it's gonna get worse

Well, I'm glad they got step that out of the way. Only took 'em a few years. The Big Lie is over (for most). So let's move on.

Maybe Norman, Swann, Todd, Retsinas, Lereah, Yun, Atkins, Paulson, Bush, Appleton-Young and the millions of other housing cheerleaders, liars, con-men and swindlers will come clean too.

Hey, one can hope...

Here's Ben "There is no housing bubble" Bernanke yesterday in front of Congress:

Many of the challenges now facing our economy stem from the continuing contraction of the U.S. housing market.

In 2006, after a multiyear boom in residential construction and house prices, the housing market reversed course. Housing starts and sales of new homes are now less than half of their respective peaks, and house prices have flattened or declined in most areas.

Changes in the availability of mortgage credit amplified the swings in the housing market. During the housing sector''s expansion phase, increasingly lax lending standards, particularly in the subprime market, raised the effective demand for housing, pushing up prices and stimulating construction activity.

As the housing market began to turn down, however, the slump in subprime mortgage originations, together with a more general tightening of credit conditions, has served to increase the severity of the downturn. Weaker house prices in turn have contributed to the deterioration in the performance of mortgage-related securities and reduced the availability of mortgage credit.

The housing market is expected to continue to weigh on economic activity in coming quarters. Homebuilders, still faced with abnormally high inventories of unsold homes, are likely to cut the pace of their building activity further, which will subtract from overall growth and reduce employment in residential construction and closely related industries.

HousingPANIC Quote of the Day

"Think about it: The house you can buy today for $400,000, two years ago people were standing in line to buy it for $600,000."

Ed Smith Jr.,VP of governmental affairs and industry relations for the California Association of Mortgage Brokers, January 2008

Yale Economics Professor Robert Shiller - "We are talking trillions of dollars worth of losses"

Unlike the jokers at Harvard and the NAR, here's someone who gets it. Thank god for bubble-busters like Shiller, Schiff, Thornberg, Roubini and Roach. I'll take the intellectual firepower and morals there any day over corrupt bubble-cheerleaders like Lereah, Yun, Bernanke and Retsinas.

“American real estate values have already lost around $1 trillion [£503 billion]. That could easily increase threefold over the next few years. This is a much bigger issue than sub-prime. We are talking trillions of dollars’ worth of losses.”

“Over the next five years, the futures contracts are pointing to losses of around 35 per cent in some areas, such as Florida, California and Las Vegas. There is a good chance that this housing recession will go on for years.”

“This is a classic bubble scenario. A few years ago house prices got very high, pushed up because of investor expectations. Americans have fuelled the myth that prices would never fall, that values could only go up. People believed the story. Now there is a very real chance of a big recession.”

I've just finished this book - "Bubbles and How to Survive Them", and it's joined Manias, Panics and Crashes as one of my all-time favorites

The author John P. Calverley does a great job talking about what makes a bubble, what to look for, how leaders react, what to expect from the central banks, what the impact is on inflation and the currency, and how to preserve your wealth when the masses go mad and then recover their sanity one by one.

Some of my favorite quotes:
_______

"At some stage the bubble reaches a phase variously called euphoria or mania, where speculation mounts on top of genuine investment and expectations for potential returns reach wild heights. Strong market performance is extrapolated endlessly forward and any consideration of fundamental valuation criteria is swept aside"

_______

"The worst point of the Depression came in March 1933, when the wave of bank failures led to a general panic and the closure of all banks. The Dow Jones index actually bottomed before then with the close on July 8th, 1932 at 41.88, a drop of 90 percent from its peak."

_______

"Governments have even less interest in drawing attention to the dangers of asset bubbles. Voters generally like bubbles. Many people profit from them, though for some the gains turn out to be only on paper and disappear later... But in general it is easy to win elections during bubble periods, because people feel wealthy and the economy is doing well."

_______

In the end the author calls for an "Asset Evaluation Committee" and a warning system for when our financial system (stocks, bonds, real estate, etc) venture into bubble territory, so at least investors are warned. I like the idea, and instead of a committee of humans, I'd recommend a computer. The fundamentals are the fundamentals, and when people are paying 8 times income for a house, it's a bubble. When stocks' P/E is 40, it's a bubble. When renting is a fraction of the cost of "owning", it's a bubble. When people are camping out to buy an asset, it's a bubble.

Give us a nice color coded warning system, instead of Greenspan's "Froth" or "Irrational Exuberance" parlance, and even the masses will get it.

I highly recommend this book for all HP'ers. You owe it to yourself. Then pick up "Crash Proof" by Peter Schiff so you know how to invest, and for god's sake read Manias, Panics and Crashes. I'm not that smart - everything I predicted came from reading that one classic book.

FLASH: Housing crash over! Phoenix has year-round golf and pro athletes!

Since we recently published the Time magazine "goo goo for housing" cover, and the Century 21 "Suzanne" commercial, I thought I'd hit for the trifecta and remind HP'ers of the stupidest realtor we've ever seen, and his now-hilarious 21 reasons why the Phoenix housing market wouldn't crash.

The chart above is for all of Phoenix (Maricopa County) c/o zillow.com. F*ck that's ugly, and it's gonna get worse. I guess the good news is the golf might get cheaper...

Damn, I pity that clueless realtor's clients. If he has any. They likely lost everything by now, all because they listened to a realtor who had no idea what he was talking about, except for his commission.

Here's reasons #20 and #21 - you'll have to google to find the rest. And please feel free to add to the "21 Reasons the Phoenix Housing Crash Will Be Historic" list.

20. A significant number of active and retired professional athletes maintain homes here, in no small part because the Phoenix/Scottsdale area has… 21. Year-around golf.

Here's a look at how bad the housing crash is getting city by city

Take Housing Watch for a spin. Lots of 10% price drops now over the past six months as the Ponzi Scheme ends and the credit crunch takes hold.

If you "own" a home and want to salvage any of your paper gains these past few years, get your home on the market immediately, and price it below any home in the neighborhood, significantly below if you need to.

The speculators are gone. The flippers are gone. 50% of the buyers are gone. If you're going to sell a home in the next couple of years, it'll be at a "drama price" or it'll be sold to a complete and total fool (aided by a realtor on commission of course).

Ugly.

The worldwide housing Ponzi Scheme is over as overheated property markets crash around the world

Ah, ya gotta love the first truly worldwide Ponzi Scheme. Who'd have thunk that Irish people would be losing their shirts in Spain or that Brits would be getting slaughtered in Latvia.

The worldwide credit bubble is over. And people around the globe have seen what's happened in Phoenix and Miami and Boston and San Diego and more and they're pulling out of the scam as fast as they can, at any price.

It's over. Ding dong the Global Housing Ponzi Scheme is over.

Thanks to HP'er Christophe in France for the link

Foreign property dreams crash - Irish investors face meltdown as real estate prices plummet throughout Europe and US

Tens of thousands of Irish homeowners may be facing financial meltdown as hugely hyped overseas property investments turn sour.

Lured by unrealistic promises of extraordinary returns, Irish investors borrowed heavily to pick up cheap buy-to-let apartments abroad. But property prices in these so called "hotspots" have begun to plummet in recent months.

Along with rising mortgage rates, the strong euro and dismal rental markets, dark clouds are forming for a so- called "Perfect Storm" that could decimate the investment nest eggs of the househunters in the sun.

About 150,000 Irish investors are thought to have bought properties in Spain. However, the oversupply of apartments in Spain's Costa del Sol has pushed the price of some properties down by as much as 20 per cent.

Last month, the Kyero Spanish house price index revealed massive price falls across the country, with the average value of a two-bed home in Mallorca falling €33,000 to €292,000 in the past four months.

Similar slumps have been logged in areas from Gran Canaria to Girona and Cadiz. Estate agents are now advertising "price-reduced" homes in almost every region.

The slowdown in the overseas property market comes at a time when Irish investors in properties promoted by Michael Lynn, the solicitor and property developer at the centre of an investigation by the Law Society, are already worried. Some of these investors have paid deposits on overseas property but have not yet secured the title.

"If you look at a typical two-bedroom apartment in the Costa del Sol, its paper value could be about €250,000," said Darren Costello, managing director of propertyinvestments.ie, a Dublin firm that offers advice on overseas property investment.

"But you'd be hard-pressed to find a buyer for €200,000."

Bulgaria has been touted as a investment "hotspot" by Irish property promoters. But new figures from investor.bg, reveal that apartment prices in Sunny Beach fell by 4 per cent in July alone.

Similar slumps have been experienced in Ahtopol, Prmorsko and SvetiVlass, as a massive oversupply of tourist apartments remains unsold.

Other hugely popular eastern European or Baltic markets have skidded to a halt, with dramatic price-falls in some countries. Latvia's bubble has well and truly burst, with the Latio Investment agency revealing falls of almost 11 per cent since April.

Estonia and Lithuania have also experienced decreasing property prices. The central statistics office in Poland has also reported values slipping in the second quarter of the year. In Budapest, Hungary, some 3 per cent has been snipped off prices of new apartments, according to the Global Property Guide.

One Irish investor is facing losses of about €30,000 after buying a Budapest property for about €79,855 three years ago. The investor, who is now trying to sell his property, was advised that the best sale price he can secure now is €69,000. By the time he sells the apartment, he will have paid about €20,000 in fees, taxes and renovations.

Top 10 reasons why this housing and economic crash will be the biggest ever

1) Leverage on a level never before seen
2) Millions of unregulated enablers propagating The Great Housing Lie (for commissions of course)
3) Stability is in the end destabilizing (Minsky)
4) Financial innovation run amok (CDO's, SIV's, Option-ARMs, Negative-Am, Interest-Only)
5) Globalization of risk and information
6) REIC corruption (shout out to Angelo, Nicholas and Bob)
7) A corporate MSM who did not do their jobs
8) Stupid Fed policy
9) The unchecked greed and ignorance of the greediest and most ignorant generation ever (baby boomers)
10) Blogs

What'd I miss?

When a Ponzi Scheme ends, the easy money goes away, and the con men, promoters & speculators have gone home, this is what you have left

“Kelly Markham earned $200,000 in commission in 2005 as a loan officer at an Irvine mortgage brokerage. When commissions dried up, she began looking for another job to support her six-month-old baby and hang on to her $600,000 home.”

“‘I’ve signed up for work at a temp agency, but all I’ve gotten is five hours of work in the past four weeks stuffing envelopes in some office,’ said Markham, as she perused Starbucks job listings online one recent afternoon.”

Weeeeeeeeeeeeeeeeeeeeeeeeeeeeee!!!!!!!!!!

Classic roller coaster
Phoenix Case-Shiller:
Miami Case-Shiller

You know that excitement you feel (chuga chuga chuga) as the coaster is climbing the hill. Oh, how high will we go? Weeeeee, this is gonna be fun.

Then you get to the very tip top, and it's calm. You have a nice view. Everything's gonna be OK. It's peaceful.

And then, if you're sitting in one of the front cars, you feel gravity taking you down. You start to scream. You see the drop ahead of you. You scream even louder. But oddly, you only hear silence from those behind you. Oh, that's because they're still enjoying the peak, having no idea of what's to come.

Well, now the whole coaster has crossed the peak, the ones in the front are screaming their heads off, they've got a full view of the drop ahead, and even the ones toward the back of the coaster can feel the gravity take hold, even though they don't have a clear view of what's ahead.

Here's the Case Shiller graph for Phoenix and Miami. And of course, one of my favorite coasters at Cedar Point.

Yum! You know you want some!

While realtors and mortgage brokers are eating this:



HP'ers are eating this:



And David Lereah, Lawrence Yun, Kendra Todd, Nicholas Retsinas, Bob Toll, Blanche Evans, Angelo Mozilo, idiot realtor bloggers and Time Magazine are eating this:

Random look at housing crash through zillow zip code graphs. Here's a slice of Phoenix (85323). Any questions?

I took a quick spin on zillow.com (you know you love it) today to check out the freefall in home prices in my old 'hood, Phoenix Arizona.

It wasn't pretty.

I also looked at real estate foreclosures and noticed a bunch of units in my old development heading to auction. Gee, what a shocker. When "ownership" prices skyrocketed to three times the cost of renting, and flippers were buying at any price, you just knew how this one would end.

And end it has. And now, it's a long, long, long way back down.

And the clueless homedebtors and cheerleader realtors in Phoenix still have no idea what hit 'em.

SHOCKING FLASH: Alan Greenspan shocks markets, says home prices are going to crash and crash significantly. No, I'm not making this up.

- Cause greatest financial mania in human history - check

- During mania, tell people to take our adjustable rate loans - check

- During mania, deny there was a mania - check

- After crash starts, admit you screwed up - check

- To finish things off, tell the world that home values are gonna crash and crash significantly - check

Wow.

A HOUSINGPANIC MESSAGE FOR ALAN GREENSPAN - GO F*CK YOURSELF. YOU RUINED LIVES. YOU DESTROYED FAMILIES. AND YOU WILL NOT BE FORGIVEN.

Greenspan alert on US house prices

US house prices are likely to fall significantly from their present levels, Alan Greenspan has told the Financial Times, admitting that there was a bubble in the US housing market.

In an interview ahead of the release on Monday of his widely-anticipated memoirs, the former chairman of the Federal Reserve said the decline in house prices “is going to be larger than most people expect”.

FLASH: Real Estate fund manager expects a 50% fall in home values for inflated coastal markets

Are Arizona and Nevada close enough to the coast Ken?

For anyone thinking of buying a home today in San Diego, Miami, Tampa, Naples, Phoenix, Vegas, Boston, DC, Sacramento and a few others - unless you're getting 50% off of the peak bubble price, don't even think about it.

And nice to see an expert talk about the 800-pound gorilla in the room - that incentives are cuts in value just like price cuts are.

"I expect a 50% decline in the inflated coastal markets.... [When] homebuilders' conference calls talk about the concessions they make in the form of extras at no cost to the buyer, they can be 20% to 30% of the house price. So the full 50%... may come in other forms"

- Kenneth Heebner, manager, CGM Realty Fund, September 2007

HP'ers - vote for your favorite "there is no housing bubble" or "we've hit bottom" REIC Quote of Pure Stupidity

Here's ten that come to mind. Submit more stupid quotes here, and vote for your favorite. I'll award the HousingPANIC REIC Quote of Pure Stupidity based on your input...

1) There's no national bubble. You have to have a huge deflationary scenario to make a national bubble make any sense - James F. Smith, chief economist at the Society of Industrial & Office Realtors, June 2005

2) I don't foresee any national decline in home price values - Frank Nothaft, chief economist, Freddie Mac, June 2005

3) The sky is not falling. Yes, home prices are sky-high, but we really don't have a housing bubble that is anywhere near bursting - Jim Jubak, MSN columnist, June 2005

4) Although a "bubble" in home prices for the nation as a whole does not appear likely, there do appear to be, at a minimum, signs of froth in some local markets - Alan Greenspan, June 2005

5) There is no real estate bubble. Bubbles are for bathtubs - Kendra Todd, September 2006

6) Cassandra, though, can stop wailing: the expected price corrections mark a slowing in the rate of increase -- not a precipitous decline" - Nicholas Retsinas of Harvard JCHS, September 2006

7) "We think the housing market has now hit bottom" - David Lereah, NAR, September 2006

8) "I think psychological factors are currently the biggest drag on the housing market" - Lawrence Yun, NAR, May 2007

9) "There is virtually no risk of a national housing price bubble" - NAR anti-bubble talking points, date unknown

10) "Hate to burst your housing bubble but there isn’t one" - Jerry Bowyer, author of "The Bush Boom", July 2006

Miami Florida property crash: You may never see something like this again in your lifetime

One of the ugliest housing / property crashes in the history of the US is happening in condo-crazed Miami Florida. As this Bloomberg headline story points out, in the middle of the crash, builders are still building. And there are no buyers.

Fuel to the fire my friends. Fuel to the fire. Summed up nicely with this realtor quote: ``This is dumbfounding to me,'' Rosser said. ``It's a building boom in the middle of a housing bust.''

Anyone want to guess the percent downfall from peak to trough? 20%? 30%? 50%? 80%?

When the dust settles, this dot-condo flameout will be a crash for the ages. Miami may see the worst fall - yes, even bigger than Vegas or Phoenix.

Well done Miami. Well done.

Miami Condo Glut Pushes Florida's Economy to Brink of Recession

July 20 (Bloomberg) -- In the middle of the biggest glut of condominiums in more than 30 years, Miami developers keep on building.

The oversupply will force prices down as much as 30 percent, the worst decline since the 1970s, and help push Florida's economy into recession as early as October, said Mark Zandi, chief economist at West Chester, Pennsylvania-based Moody's Economy.com, who owns a home in Vero Beach, Florida.

``Florida is the epicenter for all the problems that exist in the housing industry,'' said Lewis Goodkin, president of Goodkin Consulting Corp. and a property adviser in Miami for the past 30 years, who also foresees a recession. ``The problems we have now are unprecedented and a lot of people will get burnt.''

Thirty-seven new high-rise condos and 20,000 new units are being built in Miami's 1,040-acre downtown, where sales fell almost 50 percent in May, according to the Florida Association of Realtors. The new units will join the 22,924 existing condos in Miami-Dade County that were for sale in April, according to Jack McCabe, chief executive officer of McCabe Research & Consulting LLC in Deerfield Beach, Florida. That's the most unsold units since McCabe began tracking sales in 2002.

While the housing industry is responsible for 10.6 percent of the nation's jobs, in Florida it accounts for 20 percent, Zandi said. Florida construction jobs fell 2.9 percent in May to 626,200 from the peak in June 2006, according to the U.S. Bureau of Labor Statistics.

``All those jobs are going away now, and we're seeing the trickle-down effect in declining sales in big-box retailers and home-furnishing manufacturers,'' McCabe said. ``Florida is headed to a recession.''

``The market is as close to a depression as Miami has seen in 30 years,'' Eichner said. ``There's a gargantuan supply of homes and the overwhelming preponderance were built for speculators, not for people who are living there.''

As much as half of those putting down deposits for Miami condos are speculators looking to flip units, or sell them quickly for a profit without living in them, said McCabe of McCabe Research.

With sale prices falling, McCabe said he expects up to 50 percent of them to walk away from their deposits in the next 18 months rather than complete the sales.

Many ``flippers'' closed on their units and now can't sell them, said Michael Cannon of Integra Realty Resources-Miami Inc., leaving completed condo towers with floors of dark windows and empty balconies.

The skyline of Miami is visible from Key Biscayne, the barrier island where John Rosser lives. Some nights the real estate broker scans the new buildings and sees more dark windows than lighted.

``This is dumbfounding to me,'' Rosser said. ``It's a building boom in the middle of a housing bust.''

FLASH: US homebuilder sentiment falls to "suicidal"

Come down from the ledge, Bob Toll

Come down from the ledge, Ara Hovnanian

Come down from the ledge, Richard Dugas

NEW YORK (Reuters) - Homebuilder sentiment slid in July to its lowest since January 1991 as fallout from the housing slump and subprime mortgage crisis caused a glut of new homes, the National Association of Home Builders said on Tuesday.

Homebuilders are struggling to unload excess inventories left to them as speculators abandon contracts and buyers find it harder to obtain mortgages. Soaring delinquencies on the riskiest loans have forced lenders to boost requirements for many borrowers, locking out customers who might previously have qualified, analysts said.

HP'ers - When will we hit housing "PANIC", and what will that look like?

I hate to say it, but I think the majority is STILL in denial. We've got a long way to go.

Capitulation will be an interesting time in America. An interesting time indeed.

But it's PANIC I'm interested in today. Will we recognize it when it hits? Will there one single catalyst? Will you start seeing "housing panic" in media headlines? And when will it hit?