Housing Bubble Update: 8/3/06

[unlawflcombatnt]

The Housing Bubble deflation continues to gather speed. Both New and Existing Home Sales are declining. Home mortgage applications are declining. Price appreciation has come to a complete stop. In fact, prices are falling in many places. Inventories of unsold New and Existing homes have increased dramatically over the past year. Residential Construction Investment has declined for 3 straight months. There is little doubt that the Housing Boom has ended. The only questions now are how big the crash will be and how badly it will affect the economy.

The recent New Home Sales report showed a much larger decline than was anticipated by the so-called "experts." The decline from the original numbers posted from May was actually -8.3%. However, May's numbers were downwardly revised by the government so that the decline in June home sales would not look as bad. Following this manipulation, June New Home Sales were reported as having declined only 3%, not 8.3% (like they actually did.) Below is a link to a copy of the "before" and "after" New Home Sale numbers. The top half of the graphic shows the current New Home Sale numbers superimposed on the previous month's numbers showing what the actual change WOULD have been, had the previous months' numbers not been downwardly revised. The bottom shows the currently "revised" (manipulated) numbers.



The updated version of the New Home Sale decline can be found at Briefing.com at: New Home Sales

According to the U.S. Census Bureau, 103,000 New Homes were sold in June of 2006. This is 12,000 less New Homes sold than the 115,000 sold in June of 2005. This is a decline of 10.4% from the previous June. Meanwhile, the number of New Homes on the market at the end of June was 570,000. This is 112,000 more homes on the market than June 2005's 458,000. This is an increase in the number of homes for sale of 24%. Thus, while the "demand" for New Homes is declining, the "supply" is increasing. As this trend continues, prices will definitely fall even further. This information can be found at the U.S. Census Bureau's New Home Construction.

Existing Home Sales are also declining. June 2006's annualized Existing Home Sales rate of 6,620,000 was 650,000 less than June 2005's rate of 7,270,000 per year. This is nearly a 9% decrease over the last year. The actual number of Existing Homes sold in June 2006 was 700,000, which is 7% less than June 2005's 753,000. The overall price change since June of 2005 was only +0.9%. This is a significant decline in home appreciation from 2005's 9% annual increase, and 2004's 10% increase. Furthermore, were it not for a year-over-year increase in Existing Home Prices in the Northeast, the nation's existing home prices would have declined. Both the Midwest and South areas showed price declines, while the West area had a 0.0% annual increase in price since June 2005. This information can be found at the National Association of Realtors' Existing Home Sales.

In the West, Existing Home Prices have declined -3.4% since their peak $354,000 in November of 2005 to $342,000 at the end of June 2006. Over the last 7 months, Existing Home prices in the West have declined at an annualized rate of -5.8%. In Los Angeles County, median home prices have declined -5.4% in the last 12 months. The decline in prices has been even larger in the homes at the 75th percentile in price, where prices have declined -11% in the last 12 months. This can be seen from the modified graphic below, showing prices from 8/14/05, as well as current prices. (The 12-month change is indicated in blue, with actual numbers horizontally across from the label.



This information can be found in it's original, unmodified form at Housing Tracker


The Pending Home Sales Index of existing homes has declined -9.6% since June 2005. In the West, the Pending Home Sales Index has declined -14.2 % since June of 2005. This information can be found at Realtor.org

Home loan demand has also declined considerably. The Mortgage Bankers Association's seasonally adjusted index of mortgage application activity (which includes both refinancing and home purchasing loans) decreased 1.2% for the week ending July 28. This is its lowest level since May 2002. In the words of economist Drew Matus of Lehman Brothers, "The data suggest that the housing market is cooling and it's cooling pretty substantially." This information can be found in the Yahoo News Story Home Loan Demand Sinks to Four-Year Low.

The Mortgage Bankers Association's seasonally adjusted purchase index declined for the 3rd straight week, dropping 3.3%. This is the lowest it's been since 2003. The purchase index has dropped -24% over the last year, which is consistent with a major decline in the demand for homes.

Residential construction spending has also declined 1% or more for 3 straight months. The year-over-year change in residential construction spending is -0.1%. Most likely this is a response to a continual decrease in demand for homes, and an continual increase in the supply of homes for sale. This information can be seen from the graphic below from Briefing.com's "Construction Spending" under the sub-heading "Residential."

Construction Spending



This information can be found at Briefing.com's Construction Spending

All evidence indicates the Housing Bubble is deflating. Even now, annualized numbers give a more benign picture than is actually the case. The deflation of the Housing Bubble has greatly accelerated over the last 7 months, and is anticipated to accelerate even further. This is definitely not a good time to buy a house. The days of home price appreciation have ended, and are being replaced by price depreciation.

unlawflcombatnt

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[joneschick]

1. the mortgage industry is laying off people

like me. I haven't seen it in the news yet but it is upon us.

[unlawflcombatnt]

9. I've heard about this

I've heard rumblings about this, but nothing very specific. But it seems obvious that there will be large layoffs in everything related to the housing industry, including real estate agents and construction workers. According to one source, 16% of U.S. employment is related to the Housing industry. Economist Dean Baker, in a piece written a year ago, stated that the employment loss from a real estate decline could be in the millions. Only time will tell.

unlawflcombatnt

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[elehhhhna]

33. Homebuilders, too.

[inthebrain]

2. I'm happy the bubble is bursting

The market has been out of control for quite some time now. It's not uncommon to see 50-60% of a couples income spent on mortgage/rent. Me and my group of friends have been praying for this for quite some time.

Boston had it's rents more than triple in a ten year period from 94-04. The housing market is unaffordable for most folks. I hope the slide continues!!!

[TroubleMan]

13. Most of the people in South Florida are, too.

You can't buy a shack for under 200,000 in West Palm Beach. I have 3 kids. If I want a 3 bedroom house (the two boys will have to share a room), then I'll have to shell out 300,000. That's almost a 1/3 of a million. I make about 35,000 a year, and my wife makes about the same. There's no way we can afford that. Don't even think about a four bedroom house...I'll never be able to afford it. Most of the people I know are in the same position. They can't buy a house....it's too expensive. I'm waiting for the market to drop so I can even think about buying.

[unlawflcombatnt]

39. 50-60% of income spent on Housing

You made a good point about the increasing percentage of income going toward housing. There are a large number of families/couples in California spending over 50% of their income on housing. Though rents are not inordinately high yet, monthly mortgage payments are. Last time I checked, rentals for equivalent dwellings were less than half that of monthly mortgage payments.

It used to be standard practice for banks not to even allow someone to pay more than 25% of their income toward mortgages. But with the increasing greed of banks and the finance industry, they've simply dropped that requirement, along with many other lending standards.

If for no other reason, prices are destined to fall as people continue to spend progressively higher percentages of their income on homes. Normally home prices increase in tandem with employment and wage increases, because wage gains increase the buyer's ability to pay more. Such has not been the case in the recent run-up. Prices have increased far more than incomes or employment.

The increased buying power of home purchasers has not come from increased wages. It has come from increased borrowing ability alone, much like the increased purchasing power of consumers under the Bush dictatorship. Unlike the latter increase, however, the borrowing-enabled increase in home purchasing power started long before Bush stole his first election. This trend started in the mid to late 90's and has continued. Home prices have been increasing more than the wages to purchase them for at least 8 years. Below is a graphic representation of this for Los Angeles County.



Though Los Angeles may be an extreme example of this run-up, it is not unlike run-ups in other major markets on the East Coast, Florida, or Phoenix.

unlawflcombatnt

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[NVMojo]

50. I'm with you on this. The prices have been totally ridiculous and

harmful to the average American worker. Makes having a decent roof over ones head a fucking luxury.

[inthebrain]

66. Aint capitalism great!!!!

Look at the poor person who posted above?

Our gain is their loss.

Whatta wonderfull system we Americans have devised. Makes it all the more clear how these idiot politicians can use this system to get us at each others throats.

[LynneSin]

59. Yep, I'm in the market for house hunting and hope I can nab

something marked down a bit because of the bubble bursting.

It's so amazing to listen to these real estate agents try to push you into something you clearly can't afford. I'm a single gal purchasing a home and although I make a decent salary I also know that can change next week. So even though I could afford a 200k home I would be nuts to think I could maintain that especially if something does happen to my job.

One guy I just asked to quit bugging me when he kept saying how things might change if I get married (kept telling him it's only me and that's the way it is)

[inthebrain]

67. Intersting that the political structure has ignored this

They tryed painting inflated housing prices as a good thing.

They're beginning to sing a different tune here in MA. People are fleeing this state in droves.

[niallmac]

3. Are there areas that are immune to these stats?

Boise is in the midst of an insane housing and population boom.
We have no transportation infrastructure to handle the new comers
and our air quality is already in crises but the important thing is
that a lot of wealthy people are making more money in this right
to work state.
Anyway....my question is; What is the 'housing bubble' reality in a
place like this?

[JuniperLea]

5. You will be the new Seattle

In the 80's, tons of people from California sold their homes making huge profits and then moved north, bringing price wars with them. Bid on top of bid... highest bidder wins and the neighborhood gets a boost. Then everyone who grew up in the area and had hoped to make it their home can no longer afford to live in their home town.

The only thing that might save you and your city is that the property tax revenue will go up. You just have to make sure the people in control of the city's purse strings use that money to build roads, upgrade water supplies, etc.

[niallmac]

22. I have visited Seattle before and after the Calif. migration.

I could barely navigate the freeways. I thought I would never get out.
I grew up in San Fernando Valley LA County and saw every orange tree get replaced by a house.

I moved to Hailey Idaho and saw the same thing happen that's happening now in Boise.
There is no planning really when millions of dollars come in
and understandably dazzle the farmers out of their low paying farmland.

Boise is playing catch up and is wayyyyyy behind.

[unlawflcombatnt]

11. Boise Housing Prices (Asking Prices)

It looks like prices were rising in Boise until about 2 months ago. Since then they've flattened out. Meanwhile, inventories have increased well over 100% in the last year. Here's a link to Housing Tracker's information on Boise, Idaho.

http://www.benengebreth.org/housingtracker/location/Ida... /

unlawflcombatnt

EconomicPopulistCommentary

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[niallmac]

21. Ah Ha! Exactomento just what I needed. Thanks!

The building craze here I suspect has been a little 'over exuberant'.

[Gregorian]

18. It's multifaceted. It's not one bubble. And yes.

I was just discussing this with one of the major realtors on the Mendocino coast today. I'm selling a ranch in Oregon and looking for large acreage on the coast of California. I'm not sure I can, nor want to pull it off. But aside from that, some parts of the market are fueled by different sectors than others. I mean, some markets are relatively unaffected. Expensive properties will not decline in value as quickly as lower valued properties. If they did, I would buy one up myself. Another way of stating that is that some things are more valuable than others. Just an aside- I am also looking at property that is situated just below L Ron Hubbard's house on the Lost Coast of Humboldt county. 3000 acres overlooking the Pacific ocean, with a house that is more like a compound. And I mean compound. I laughed when I saw it.

There are people with cash. And the moment valuable properties begin to decline in value, they'll be snatched up before they can decline in price very much. However, there are homes in Withita Kansas that might go unsold.

Now that I sit here thinking about this, it would seem to be a phenomenon related to the great schizm between those who have and those who don't. I find it sickening. I'm so saddened. The suffering that goes on while the rich eat cake. I'm not one of them. I just happen to be willing to put my life savings into one thing because I want a nice piece of land.

[niallmac]

20. N.Calif coastline sounds none too shabby.

The weather matches my moods to a 'T'. Good luck to you and thanks for the insight.
I suspected this was regional. Look and the numbers of population shifts.
People moving here that's for sure and so is the money I guess.

[elehhhhna]

34. When will people make the conncetion between massive tax breaks

for the rich and the timing of the last few years' crazy-high bidding up of desireable properties? Face it: they got big cash bonuses from their tax breaks and HAD to spend it somewhere.

[Gregorian]

37. And there is also another few reasons.

I recall very unhappily that during the last big stock market crash, big time company executives were unloading their stocks and pouring their money into real estate.

There's that, and also the fact that there is only so much land. With billions of people, and a constant amount of earth, people are leaving the less desirable areas and buying up a piece of beauty.

This has consumed my entire life from the moment I had enough money to get my first fixer upper. As hard as I try to get these wealthy people to hand over their money, I can't afford the next step.

There is one key to this mess. And this is why I play in real estate. At some level of real estate value, there will always be a buyer. In other words, if one owns property that is of some value other than just a house, then as the market drops, we all drop together. Ah, what I really meant to say is this- If one is in real estate NOT for the money, and the previous statements I made, then one can totally ignore the "bubble". And that's what I'm doing. I could care less about money. I just want beauty. Enough about me. I can hardly care. I can't expect anyone else to.

It's just a very strange, scary, interesting time we live in. The phenomenon of world population explosion has created some weird things.

[CrispyQ]

63. More & more it is beauty for the rich.

"...people are leaving the less desirable areas and buying up a piece of beauty."

I live on the front range. One of our local papers featured a commentary recently about developers buying all the prime land with views, which will be parceled out & built for the ultra rich so they can have their own private view from their living rooms. Sadly, more & more, that piece of beauty will be for the rich only.


--Six billion miracles is enough.

[NVMojo]

52. good point, Elehhhhna!!!

[unlawflcombatnt]

56. Exactly -- Capital in Excess of Investment Opportunities

You're so right about that. There was already more capital than there were investment opportunities for that capital. The tax cuts just further increased that excess. And that excess had to go somewhere. And real estate was the number one target of that excess.

unlawflcombatnt

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EconomicPatriotForum

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[LeahD]

58. Must be some hefty life savings.....3,000 acres on the coast. n/t

[NVMojo]

51. Reno and Carson City are also out of control, along with Las Wages

and we looked at a tiny three-bdrm/1 bath "shack" in the poorest neighborhood in Reno two weeks ago that was selling for $265,000.! The school's in this neighborhood had 99% of their children on free school meals!

Getting buttbonged in America!!!

[JuniperLea]

4. Think about it

People are not going to sell their homes for less than they currently have in mortgage. Those that are really in trouble took out adjustable rate mortgages and refinanced to the rafters. So, they now have a home worth $400k and a mortgage for $400k. They are not going to sell for $350 and still owe the mortgage company $50K!

I don't see it going down enough to make much difference unless a whole lot of mortgage companies go under and have to do a mass fire sale of properties they've forclosed.

[skids]

7. Bingo.

Watch for foreclosures. Lots of them.

And each foreclosure puts further price pressure on the market, since they are generally sold at a bargain. This, in turn creates more foreclosures. Eventually banks get hungry to foreclose, just by pure inertia. At that point every mortgage becomes a ticking time bomb, with the bank looking for any excuse they legally can find to foreclose -- the more of the balance they have managed to collect the better -- high equity means they don't even try to sell at market value. Just enough to cover their loss, and the ex-owner gets to eat the loss.

So the result will be banks trying really hard to foreclose on the people who have payed the most into their mortgage. A scenario that is a perfect fit for today's backwards society.

Baby boomers in the streets with cardboard signs, I say, are in our future.

[JuniperLea]

10. Yep... you took my thought to the next level! Perfect

You are correct. Sad, but true.

[NVMojo]

53. And don't forget the bankruptcy bull that Harry Reid and other Dems

put their "Yes" votes to ...buttscrewed by our own!

[elehhhhna]

35. And so they will stay in their homes. No sale, no loss.

[fuzzyball]

47. Those with ARM's can't afford to stay in homes in some cases

As the interest rates for fed funds went from 1% to 5.25%
in last couple years, all those people with Adjustable Rate
Mortgages are experiencing large increases in monthly payments.

IMMSMC almost 1/3 home purchases in the last 5 years were financed
by ARM's becaise initial payments were low.

[krkaufman]

44. They could file for bankruptcy.

Oh, wait.

(Think that law was an accident?)

[skids]

6. Excellent Work (K&R) An addendum...

For those of us that don't like to forget the value of a dollar:

In order for a market to post a price decline, any price decline, when the dollar is falling and CPI is rising (that inflation we are told is just an illusion), that market has to be doing pretty damn bad. It must be way the heck overbought. Like astronomically.

Technically as the dollar falls year over year, the housing and stock markets should "rise" because what they represent is something more solid than a peice of paper. That is, as inflation goes up, so should the price of any house.

But inflation by any sane (non government) measure is going up rather fast. And housing prices are falling. In your mind, you should probably take this news as if the prices had fallen another 4 to 8 percent more than reported, to give you a good picture of how much trouble this market is in.

By the way, if you own stocks, they've probably been crashing since 2000. You don't notice because the dollar value of the stock looks the same -- but what each of those dollars will buy you is going down.

http://www.dailykos.com/storyonly/2006/7/31/14239/5181

[unlawflcombatnt]

8. Exactly

I completely agree. The prices shown are in nominal, non-inflation adjusted numbers. How much they've dropped in "real" terms depends on which inflation indicator is used. I think every single inflation indicator used by the government understates inflation. But if I had to pick one, it would be the total Consumer Price Index, which has increased 4.3% over the last year. So that would convert that +0.9% annual increase in price to a real decline of -3.7%. And that 0.0% change in the West would be a -4.3% change in real dollars. And that -5.4% change in Los Angeles would be a -9.7% change.

unlawflcombatnt

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[spooky3]

17. Many sellers in the Wash. DC area are still hallucinating

There are tons of houses on the market that the owners have not updated since they bought them in the 60s-80s and they just don't understand why people are not willing to give them a $500000 profit on them. For the heck of it I went to an open house for a 2 year old house advertised for about $840000 in a questionable neighborhood, where a burned out house was just a few blocks away and there were little run down houses and yards with junk thrown in them (mixed in with some nice places). It was a beautiful house, but the owner wanted a 36% increase over what he paid for it. He obviously put no money into it, it needed lots of $ in landscaping and to correct the corners that the builder had cut, so that is pure increase in 2 years. There is no way that the market went up that much. Furthermore, there were new houses that were boarded up. If the builders couldn't afford to finish and couldn't sell them in the DC market in 2004 and 2005, then the neighborhood that looked up and coming in 2004 when the owner bought it, now looks like it is on its way back down. So people surely aren't going to pay a premium to live there. I was only the 2nd person who had attended the open house even though only an hour was left when I arrived. Yet the house is still on the web at the same delusional price.

An article in the Post nailed it--someone was quoted as saying that once these owners begin to "get it" that their houses are NOT going to sell, the actual average housing price will be very different from what it appears to be now, with so much unsold inventory on the market.

[Cant_wait_for_2008]

24. About time there was an adjustment for those of us who cant afford to buy

a home!

[spooky3]

32. Definitely. I think the condo market will be the most

affected because the speculators threw a lot of money at them last year and drove the prices way up. I do not think the average housing prices in most of the area will go down in nominal terms (unless the interest rates go way up), because unemployment is still low and there are a lot of couples with two high incomes and few expenses who are living and moving here. But sellers who want a 10%+ increase in just the last year are dreaming. And at least there will be a period where your pay increases may be going up more rapidly than the housing prices, which we have not seen for a long time, and if this lasts awhile houses will be more affordable.

[elehhhhna]

36. There's always an idiot selling his house: We had a neighbor

many years ago who listed his 100K home fo 150. he relisted every 6 months for YEARS. When the market caught up with his price (5-6 years later) he finally sold it.

Bet he's kicking himself now,though. Since he sold it (in '99) it's increased to 240K. A 50 y/o 1600 sf box in the Chicago suburbs. YIKES.

[spooky3]

41. hey, that is a description of a $750000 house if it is in good shape

and located in a close in, desirable suburb of DC. Probably another $100K if it is in a good neighborhood in DC proper.

That's how crazy the market is here.

[Digit]

64. I sold my home in N Arlington in 1997 for $280K

It was a 7 minute walk to Va Square Metro.
Now, it is worth probably over $800K

I understand the RE taxes on it are over $5000/yr.

[info being]

29. Inflation is different from dollar-value though :-)

Inflation is how much things cost. Dollar value is how much other currencies cost.

[kineneb]

12. down the road from us, in Sacramento

(Glad to see your post, UC. I was wondering when you would have more "juicy" statistics for us to contemplate.)

Defaults in the lower Sacramento valley are up:

Mortgage default notices are rising
Sacramento, Placer and Sutter counties show big increases in quarter.
By Jim Wasserman -- Bee Staff Writer
Published 12:01 am PDT Thursday, August 3, 2006
Story appeared in Business section, Page D1


More people across the state and capital region are on a track to lose their homes after missing at least two consecutive mortgage payments during April, May and June than during the same months a year ago, according to figures released Wednesday.

Research firm DataQuick Information Systems of La Jolla said Sutter, Placer and Sacramento counties showed some of California's biggest increases in pre-foreclosure activity during the three-month period, while El Dorado County had one of the lowest quarterly increases.


The property researcher attributed the rise in default notices -- documents filed with the county recorder's office when homeowners miss at least two consecutive mortgage payments -- to slowing home appreciation that makes it harder for people behind on mortgages to sell their residences and pay off lenders. That has led to an increase in desperate homeowners seeking a financial way out.

more at (registration required)
http://www.sacbee.com/content/business/story/14286219p-...
---

I saw a "price reduced" sign on Hwy 20 today. And local title offices have been laying off staff. The slide has begun.

[unlawflcombatnt]

28. California Delinquency Notices Up over 60% in last year

Thanks for the information.

I saw another post on the increase in California delinquencies. Delinquency notices are up over 60% (67%?) since this time last year.

Again, everything indicates the housing market is sinking. Prices have been declining in most areas of Southern California, or at least have not increased. Inventories have risen in most Los Angeles County and the surrounding counties by over 100% in the last year.

unlawflcombatnt

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[eridani]

14. Shouldn't this data be sorted into two groups?

I mean non-'hot' markets and 'hot' markets.

[unlawflcombatnt]

27. Hot & Cold Markets

There are definitely some markets that are colder than others. As of my last check, many areas of Texas were not experiencing huge price appreciation, nor had they experienced the same degree of appreciation over the last 5 years that some of the more bubble-ish areas had experienced.

However, as soon as you think it's mainly the largest markets on both costs, you start hearing similar stories from places like Boise, Idaho; Portland, Oregon; and Phoenix. The housing decline is extending to a lot more areas than it was even 6 months ago.

unlawflcombatnt

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[Doctor_J]

15. I felt it

I had to wait a year to sell my house in suburban Chicago, and lost ~7% on the sale price. Still am in a good neighborhood for RE though, so at least I was able to sell, in about 3 months. The house 3 down from me has been for sale for a year and a half.

Also the builder I had stock in has tanked.

[Rockholm]

16. Supply and Demand

With an abundant supply of housing on the market, price must go down. Simple economics. Real Estate has carried the economy of this country for way too long.
We have experienced 11 straight years of record price appreciation. The tipping point has been reached. More inventory means lower prices. While there is a correction or softening happening in a number of areas in the country, the number of buyers looking for a home has not changed. Buyers are smart and have decided that they are not going to pay too much for a home. We will not know when the bottom is reached until the inventories tighten. When the inventories drop, prices will react by going up again.

[unlawflcombatnt]

40. Housing Increasing Faster than Buyers & Families

You're absolutely right about the supply of homes increasing faster than the demand. The government puts U.S. population growth at 1-1.1% per year. That means an increase in population of around 3 million/year. If one assumes an average family size is 4 persons, then the increase in families is about 750,000/year. This is much less than the increase in New Home Construction. In fact, the annualized rate New Home completions was over 2 million per year in June 2006. Below is quote from the U.S. Census Bureau regarding this:

"HOUSING COMPLETIONS
Privately-owned housing completions in June were at a seasonally adjusted annual rate of 2,017,000. This is 6.4 percent (±9.4%)* above the revised May estimate of 1,896,000 and is 2.0 percent (±8.4%)* above the June 2005 rate of 1,977,000.

Single-family housing completions in June were at a rate of 1,738,000; this is 7.5 percent (±9.8%)* above the May figure of 1,616,000. The June rate for units in buildings with five units or more was 255,000.
New Residential Construction data for July 2006 will be released on Wednesday, August 16, 2006, at 8:30 A.M. EDT.

Our Internet site is: http://www.census.gov/newresconst
"

This information can be found at:
http://www.census.gov/indicator/www/newresconst.pdf

From this it appears that the number of New Homes completed is increasing over twice as fast as the increase in the number of families.

unlawflcombatnt

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[redacted]

19. K&N! Bookmarked for later tonight after Malloy

Very concerned about this situation. Thanks for your work unlawful.

[NMDemDist2]

23. I got out of Phoenix just in time and did everything "right" to get a

quick sale for top $$$$

and I did

then bought this acre for cash and plan to die here

edit to add, most cities and counties are raking in the $$$ on RE taxes. expect services to suffer when the bubble bursts too

[tom22]

25. Housing cycles last a long time. The recent boom lasted

for a decade. don't be surprised if the bust lasts for five years or more. A very rate sensitive industry. A lot of money moved out over a year ago. now we will see who can ride out the long storm brewing.

[girl gone mad]

26. The best housing bubble blog...

in case anyone is interested:

http://thehousingbubbleblog.com /

I read it every week. It sounds like things are already getting pretty bad in Phoenix, Miami, San Diego.

[midnight]

30. Thanks girl gone mad.

I bookmarked this for more thorough reading.

[NMDemDist2]

31. that was great and the other linked blog to the Mortgage guy was good too

http://www.housingbubblecasualty.com/

[unlawflcombatnt]

42. More Housing Links

Thanks for the link.

There are some other good links as well. In my opinion, the best general information and overview sites come from 3 articles--2 links to articles by economist Dean Baker at:
http://www.cepr.net/publications/housing_bubble_2005_11...
http://www.cepr.net/publications/housing_fact_2005_07.p...

The 3rd link is at:
http://patrick.net/housing/crash.html
This latter site not only gives the reasons for the bubble and a crash, but also debunks the contrarian arguments.

DQNews is essentially a California real estate site, allegedly put out by "professionals." It gives some highly detailed information about real estate in California. It can be found at:
http://www.dqnews.com /

Below is a partial list of some real estate blogs and forums that I've found interesting.

http://www.bostonbubble.com/forums/index.php
http://www.socalbubble.blogspot.com /
http://www.theburstingbubble.com /
http://econo-almanac.com/bubble1_evidence.php
http://www.housingbubblebust.com/AllCountyPopHsgRate.ht...
http://housingdoom.com/bubble /
http://overvalued.blogspot.com /
http://bubbletracking.blogspot.com/2006/04/tracking-san...
http://bubblemeter.blogspot.com /
http://bubbletrack.blogspot.com /
http://calculatedrisk.blogspot.com /
http://www.camortgagenews.com /
http://www.stock-market-crash.net/florida.htm
http://bbs.housebubble.com/forum/discus/messages/1/1.ht...
http://www.financialsense.com/fsu/editorials/schiff/200...
http://www.housebubble.com/index.html
http://www.housingbubble.us /
http://www.enaghbeg.com/Housing_crash/index.html
http://www.realestatedecline.com /
http://housingpanic.blogspot.com /
http://paper-money.blogspot.com /
http://econo-almanac.com/bubble1_evidence.php?print=1
http://piggington.com/taxonomy_menu/5/13
http://www.readytoburst.com/pop /
http://www.therealestatebloggers.com /
http://realtytimes.com /
http://www.socalbubble.blogspot.com /
http://www.stock-market-crash.net/housing-bubble.htm
http://thehousingbubble2.blogspot.com /
http://hothousingmarkets.blogspot.com /
http://crash2006.blogspot.com /

unlawflcombatnt

EconomicPopulistCommentary

EconomicPatriotForum

___________
The economy needs balance between the "means of production" & "means of consumption."

[unlawflcombatnt]

43. Caveat about previous link

In reviewing one of the blog links I previously posted, "housingbubblebust.com," I would urge caution about the statistics posted there. They show huge appreciation rates in the Los Angeles area through the 1st quarter of 2006. This is not consistent with information from any other source, including government sources. As such, I would not recommend using them as a reliable source of information.

unlawflcombatnt

EconomicPopulistCommentary

EconomicPatriotForum

___________
The economy needs balance between the "means of production" & "means of consumption."

[JPZenger]

38. Some Slowing Is Very Good

Some slowing of the overheated housing market is very desirable.

First, buyers can take more time to consider their purchases, can do more detailed pre-sale inspections and can negotiate needed improvements.

Second, it may help clean out the worst of the mortgage industry, which attracted some real slime in recent years.

Third, it will discourage people from buying more house than they can afford.

Fourth, it will reduce the excessive speculation that had "get rich quick folks" buying properties with the intent of reselling them at a huge profit a few months later.

Fifth, it will help to avoid excessive strains of people's incomes when they are buying a house.

Sixth, it will allow municipalities and school systems some time to catch up on growth that occurred in recent years.

[Nikki Stone 1]

45. Thanks for this thread. I will be bookmarking it.

Thanks.

[fuzzyball]

46. Housing STILL very reasonable in these cities:

Below are Median house prices
Source: US News & World report

Danville, IL --- 58,900
Odessa, TX ------ 65,600
S. Bend, IN ----- 88,200
Boardman, OH ---- 83,500
Wichita Falls, TX 80,500
Abilene, TX ----- 73,700
Buffalo. NY ----- 98,300
Decatur, IL ----- 87,400
Pine Bluff, AR -- 74,800

[cliss]

48. This goes way beyond the housing market, du'ers.

We need to be looking at the bigger picture here. Thankx for all your work, unlwfl. When I looked at the graphs up above, I did a double take on the housing inventory increase of 52%. Did you see that one?

The other figures are ominous, also. I see black clouds gathering on the horizon.

Now while I noticed some people are really happy that things are going to start correcting themselves in the near future (they already have), the danger signs are there. (I agree, by the way).

But in the macroeconomic sense, the storm is already upon us. Look at the banks situation. They have lent out massive amount of money with the expectation of getting their money back. Notice how housing prices are starting to fall.

What happens when a large portion of their portfolios go down in value? The bank is at risk. It stated the high values in its quarterly reports, the bank's strength is based on these values. Now think of all the other lenders who have done the same thing: Home Refinance companies, finance companies, all the others will get the same way.

When the housing market starts to slide Big Time, banks will become shaky.

Watch out for this. Keep an eye on banks and their profitability. This will cause more problems than just the housing market.

[kineneb]

49. good observations

a chain reaction is starting...

1. housing sales slow, for various reasons
2. housing inventory goes up
3. industries dependant on construction and housing sales begin layoffs
3a. banking is affected (as per cliss's post)
3b. contractors stop building, no jobs
3c. suppliers to contractors affected- building supplies, etc.
3d. title & loan companies shed workers
4. unemployment of middle to upper-middle class workers affects economy
4a. fewer discretionary goods purchased
4b. less money circulates as fewer people have jobs/money
4c. social services are strained more to deal w/layoffs
5. whole economy slows greatly
5a. more people loose jobs due to lose of demand
5b. no "onshore" manufacturing jobs left to shore up economy


...and so on, in downward spiral. This is only the beginning.

[NVMojo]

54. add no bankruptcy to that, the kind people can walk away from their debts

talk about a butt screwing.

[fuzzyball]

57. Hey those people took the risk of high loan amounts and they may

end up the losers. That is how any gamble works...
sometimes you win and sometimes you lose. Nobody
forced them to take the gamble, so I will not feel their
pain when it comes.

[unlawflcombatnt]

55. Black Clouds

Yes, I noticed massive inventory increases. In fact, despite the given calculation of inventories (for 9 months) in the Los Angeles area, the true inventory increase over 12 months was over 100%. The same inventory increase is occurring in both Orange County, CA, and Riverside, CA.

I completely agree about how this is going to do great damage to the banking industry. As the housing bubble continues to deflate, so is the ability of home mortgage holders to continue paying on mortgages. The housing decline is going to have a much greater effect on the economy than just the housing industry alone. Over $250 billion in consumer spending was financed last year by home equity loans. That number was expected to be cut in half earlier this year. At this point, it may even go down more.

I think the black clouds are almost overhead now.

unlawflcombatnt

EconomicPopulistCommentary

EconomicPatriotForum

___________
The economy needs balance between the "means of production" & "means of consumption."

[1932]

60. Interest only mortgages insulate banks from downside

interest + fees = bank profit. Paying down principle = ownership of house transferring away from bank.

With interest only mortgages, banks make sure they get their profit up front, so when people default, the bank not only got its profit, but gets all your house, whatever it's worth.

That's an oversimplification, but I think it isn't too far off from reality.

Anyway, I don't think banks are going to be hurt by this. I think banks are going to own a lot of real property as a result, and that a lot of people who own homes will really be renting their homes from the bank (which is what happens when you pay a lot of interest but never the principle on loans). I saw in the paper that some banks in CA are now creating new interest-only mortgages for people whose old interest-only mortgages are in their balloon payment phase. They're basically another interst-only short term loan with an even bigger balloon payment in a couple of years -- ie, homeowners will be renting their homes from the bank.

I think the economy will suffer not because banks (the richest companies at the top of the pile) will suffer, but because the economy is built on consumer spending and it's not clear how much debt people are willing to go into to fuel the economy with consumption -- and I think it will be small businesses that suffer first. I think the biggest will be able to hold out the storm and perhaps find themselves with more economic power once we come out of it (unless and FDR-like president implements on program founded on the principle that the only way we can come out of depression is to redistribute economic power down to those without economic power, small businessman, and worker alike).

[unlawflcombatnt]

62. Declining Consumer Purchasing Power

The banks certainly won't suffer as much as the individuals who've borrowed from them.

I agree that the biggest issue is going to be the dip in consumer spending that will occur as consumer borrowing ability evaporates.

It certainly would be better for the economy as a whole, and even for businesses in the long run, for there to be a less uneven distribution of wealth. Businesses make profits, and investors earn returns on sale of production. If consumer ability to purchase production declines, so will potential profits and returns. Profits and returns can only be increased so much through cost reductions alone. And that limit has pretty much been reached. With stagnant wages, and without a further increase in consumer borrowing ability, there's simply insufficient spendable consumer wealth to continue to increase profits.

Someone has to purchase production. With stagnant (or even declining) real wages, and a reduction in borrowing ability, consumers will be able to purchase even less production than they can at present.

unlawflcombatnt

EconomicPopulistCommentary

EconomicPatriotForum

___________
The economy needs balance between the "means of production" & "means of consumption."

[ScreamingMeemie]

61. Can I just say...One More Time....(sigh)

There Is No Housing Bubble. It's Smoke And Mirrors... Shady Deals...Shady Loan Officers...Shady Appraisers??? God I'm tired of reading this stuff...


Signed,

Disgusted Real Estate Appraiser.

[Wiley50]

65. Is this post tounge in cheek or

just desperate wishful thinking?

PS- I lost my house to foreclosure in 2002
after my back surgury in 2000.
I struggled through my savings
not noticing my credit rating falling
so when I finally tried to refinance, I couldn't
and when I tried to sell
that didn't work either.
I lost $1000,000 in paper equity
and a marriage.
Last year, when my disabilty finally came through
I bought a 28 foot sailboat on Ebay for $2500
My home is now paid for.
On $603 a month
it better be.

And I have a way to sail away from the chaos
to be

[ScreamingMeemie]

68. No it is not tongue in cheek. I've worked in the biz long enough to

know that the bubble was manufactured, and never really existed in the first place. It may be perhaps wrong for me to do so, but many times I caution the refinancers who have bought into the line sold them by a loan officers. Foreclosures here in my neighborhood stand at 30%... yeah, housing bubble...hah.

[unlawflcombatnt]

69. ??

Are you saying there is no housing bubble?