Mish,
Perhaps they misquoted the pricing, remember, real estate always goes up! Better buy 3, if not 4 houses now with a cash-out refi on your primary residence....smart move to catch such a great deal! and watch the wealth grow baby!
...forgot to mention you'll need a 103% option ARM loan with stated income to qualify. Never mind the interest rates.., or that 80/20 piggyback thingy thats tied to the LIBOR rate and adjusts monthly in starting in June 2006.....your house will be sold by then anyways..don't bother finding renters, they'll just trash the place and devalue it...keep it empty and looking sharp, ready to flip in 6 mo! You can't lose!
...don't you feel sorry for those stupid renters, they must be losers who couldn't qualify for the loans.
PS-don't forget to go ahead and buy that H2 you've been looking at, the oil crisis is over..just take a 3rd out on your first home. Why wait 6 long months for your profits to roll in?, enjoy them now!...because real estate always goes up baby!and you can pay it off when you flip those cash machines...er....I mean houses!
Definite pullback. Several homes for sale in our Northern California neighborhood have not sold in weeks. We went to the open house of one down the street yesterday and they'd dropped asking price by $150,000 to $1.7mil. And I bet it still doesn't sell. I think people know prices are coming down and so they're waiting for even lower prices.
Anything close to being finished is getting dumped on the market before prices drop more. The builders are filling their war chests. The construction crews are going to shocked when half of them are laid off this spring.
(One minor nit, when you buy from the builder you forego sales traditional sales comissions.)
if smaller prices are not in the stats, then they do not exist.
Notice the tagline: Built to a Higher Standard. (add): Sold to a Lower One.
Hey Mish,
Didn't buy the house 8 months ago in West Htfd like you advised. Anyway, house in Avon CT next to W HTFD for 749K dropped 40K then anotherr 10k still hasn't sold since around 7/05.. My brother wants to pay 550k for it its 3800 sq ft roughly 150 sq ft which is alittle over the historical avg. what do you think ...thanks for saving me 50 k....ps real estate agent(friend of mine) says nothin over 500k is movng...dave
Dear Mish,
Just a note from a new reader...
I love your clear, insightful writings on the blog; please keep up your wonderful work.
But one thing that I have learned over the years: if "everyone" believes stocks are going up, they will. It's the old self-fulfilling prophecy.
Look, interest rates have quadrupled, oil (a tax on everything) has trippled and still for the last 3 years, stocks have risen. Nothing seems to matter. Only sentiment.
Regards,
Chase
Home prices stil going up in LA county and surrounding areas.
Don't you worry the property bubble will continue with a vengence. By the time this BABY POPS the NASDAQ bubble in 2000 by comparison will look moderate. Easy credit and abundant liquidity will no doubt concieve ways to spend it. Go Baby Go!
just talked to a realtor today and she's says 15% appreication for the next 3 years.
when asked about the 1.5 trillion in mortgages ready to reset this year and next she said "whaaaat"?
Dear Mish,
Just a note from a new reader...
I love your clear, insightful writings on the blog; please keep up your wonderful work.
But one thing that I have learned over the years: if "everyone" believes stocks are going up, they will. It's the old self-fulfilling prophecy.
Look, interest rates have quadrupled, oil (a tax on everything) has trippled and still for the last 3 years, stocks have risen. Nothing seems to matter. Only sentiment.
Regards,
Chase
Steven Chase | Homepage | 01.16.06 - 7:18 pm | #
Actually Chase you have it backwards. If EVERYONE believes something it is about ready to reverse. It happned in March of 2000 and about 6 months ago or so all but a few of us diehards thought that housing was THE place to be. It is that lopsided sentiment that eventually creats a top.
Now just as in 2000 the vast majority thinks this will be just a little dip or we "plateau". Housing being relatively illiquid and there being a desire not to sell at a loss the initial decline may be slow. But a slodown in the sector will lead to a loss in jobs and a slowdown in jobs will lead to a slowdown in consumer spending.
The top is in. The bottom could be 3 years away or 15 it is very hard to say. Best guess at least 5-6.
Mish
"Home prices stil going up in LA county and surrounding areas."
But sales volume is going through the floor. I am a licensed RE agent in the San Fernando Valley, and sometime in Dec, the market DIED. Expect sales volume stats down over 20% for Dec, 30% for Jan, and as much as 40% in Feb. These numbers are not my opinion, they are based on the number of homes that have been entering escrow, and it ain't many.
Our current sales pace in the SFV is well under 1/2 that of last Jan. OUCH!
Just got this article from the Union-Tribune (our local rag here in San Diego, aka, bubble central). Looks like MAY BE things are turning here. You never know, the mania has gone on here for at least 8 years. Longer than I could ever imagine.
Check it out and see what ya' think!
http://www.signonsandiego.com/ne...-
bn16sales.html
I have been saying for a couple years now that the new home & condo industry 'business model' has converged with the automotive business model... large national corps with intensive marketing structures, in-house financing, tight subcontractor relationships, etc. Result is high overhead & fixed cost that must continually be feed new orders... they have to keep building & pushing those homes 'off the lot'...
I've been predicitng for months that when the slow downs occur we'll see incentives like 'cash back' and 'special interest rates'... just like cars... to try and manufacture demand. Now we see it happening around the country.
So what will be 'next'? Look for 'trade ins'... they take your 'old home' and use it as the 'down payment' against a 'new one'... they get the equity you've built up & book a sale ... but hey you get a 'new home'... what a deal!
I'd poop my pants if this really happened (and be even more surprised if people actually fell for it)... but who knows.
one thing i can say from experience is that when the sales start slowing they just keep right on building, which makes the problem that much worse.
And oil acts on top of this.
There's some irony that we seem to reach at the very same time two unescapable tops :
- you can't raise the debt/GDP ratio for ever, hence private money creation has to stop at one time or another, thus ensuring a maximum in asset prices, and indeed often a fall in prices, a credit crunch and a liquidity crunch.
That's the market or consumption side of the problem.
- you can't extract forever fossil energy, metals and other rare materials out of a given supply on the planet earth.
Once you have exhausted close to 50% of the available resources, all things equal, your production peaks (or if you increase investment, your returns drop).
We face both of these events simultanously.
Higher oil prices fuels debt and higher debt fuels oil spending and prices ...
Yet more debt means the top is becoming closer and more oil spending means the top is becoming closer...
In both cases we are borrowing on our future, being foolishly "optimists" thus feeding the pessimist mood.
Who wants to bet the world population may indeed fall in the coming years ?
Anybody wants to know how many russian lives vanished with the crash of the communist system ? Around 15% of the population, some 30 millions, life expectancy fell 10 years.
DF: You actually made a good point about Russia / former USSR. With the meltdown of the soviet system the mortality among 40-60 year olds skyrocketed (many suicides). It seems as if this age group was least able to cope with the changes such as: job losses, standard of living crunch, aquiring of free market economy skills, loss of public safety net, ...
No doubt it's goning to be similar once the big depression will hit the world economy.
Do you guys understand population dynamics at all? Some of the poorest countried have the highest birth-rates. The basics of populations are simple math. Births+Existing Pop.-Deaths=New Pop. in a simplified form, which doesn't account for immigration. The basis of births is a figure called the TFR (total fertility rate). As nations get richer, TFR falls (most likely because of greater opportunity costs to bearing children, and greater cost of children), thereby lowering that new birth number. Also, wealth lowers mortality rates across the board. Hence, the population of a country skews older. This has been happening in Europe and to a degree in the US especially, during the last 60-80 years. As a consequence, the industrialized nations and China will experience actual declines in population over the next 40 years. With AIDS in subharan Africa, life expectancy there has been cut drastically. As a consequence, the rate of population growth in Africa has slowed. With declining TFRs in most of the rest of the world, the world population will peak within the next 50 years. So, yes we will see population declines, but it won't be because of a recession.
How soon before you see the neighbors that closed on these centex boxes a week before, for $100k more, get the lawsuits started for fraud??
nate the demographic laws are well known.
However you have to understand that a level of 6 billions people on earth is only made possible through use of fossil fuels as those vanish so does some of the max population sustainable on earth, all things equal.
And an increasing debt/GDP ratio as the same effect.
However you have to understand that a level of 6 billions people on earth is only made possible through use of fossil fuels as those vanish so does some of the max population sustainable on earth, all things equal.
df - you can have 6 plus billion people on earth with 1/10th the fossil fuels... but almost all of them have to live like Gandhi... that's when the suicides skyrocket... going from flat screens on ones desk & living room to working subsistance plots and living at the neighborhood cooperative.
Dryfly, don't be so sure.
1 most of the so called "green" revolution boosting crop productivities means : feriliisers, and motorised farmers.
With oil more and more expansive most farmers lose access to fertilisers, pet controler, big tractor... ANd with a horse and no fertilisers you get much less crops and many people starve.
2
Don't expect perfect hospitals, helicopters and rescue cars, with less oil. All these will suffer too.
Of course coal can come to the rescue, and nuclear and ... BUt so far, we have no viable alternate energy source, and so far we can't live without fossil energies (if not oil or gaz, then coal or nuclear), fusion is far away, renewable energies the same. so far.
Epimethee - I'm well aware of all that... I was trained as a chemical engineer & worked in the ag processing industry prior to what I do now (mfg sales engineer).
Most of the green revolution was an exchange of capital & cheap energy to replace labor... take away the cheap energy and you have to reinject labor. BTW a lot of that 'energy' is in the form of fertilizers... there is no shortage of natural fertilizers w/ 6 billion people, just the will to collect & process.
So if energy gets expensive look for people to be forced out of service & higher technology production and back into more labor intensive & local food production. There will be a significant decline 'standard of living' when measured in plasma screens & trips to Cancun... but not necessarily a lot of starvation.
Medical might even be a wash... definitely less helicopter air lifts to the Mayo Clinic but maybe fewer early heart attacks, cancer & diabetes (lose weight from spending all day with a 'shovel & hoe' and not a 'keyboard & mouse').
The test will be how we manage the change & especially people's expectations... can we get them back to the farm after they've seen Mall of America...
No offense to the real estate agents who are professional and good and competent at what they do, but in my experience in looking for a home in Southwest Missouri, most of the 'realtors' here seem to be folks who failed at other jobs. There are literally thousands of realtors here and few know the markets or what is really going on. Being a realtor nowadays is like working fast food fifteen years ago - the job of last resort... However, with this slowdow, a pile of realtors will be on the street looking for new jobs. Even here in SW MO, prices are starting to fall. There are homes on the MLS here that have been for sale over a year, and most seem to be at least 90 days plus (though, many get removed, then relisted, and new pictures taken so that when it's summer you don't see the pics taken of the house last winter..) The market is crashing, and though some predict that interest rate hikes will stop in 2006, all it will take is a fall in the value of the dollar against foreign currencies caused by our main trading partners cashing out dollars for Euros and other currencies, for the Feds to be forced to defend the dollar by raising rates. That will be the nail in the housing market coffin and then a true crash will occur. The ARM mortgages are %#@!&'d
Guys, we're still a couple of years before the floor opens on real estate.
Here's why...
Right now, there are a lot of bubble watchers who want to get in during a so-called "correction" phase. These guys have cash on the side and they fundamentally believe that it's a good thing to be a homeowner whereas the really astute individual realizes that a home is just that, a place to rest one's body than an asset class like precious metals, AAA bonds, blue chip equities, etc.
During the soft market of 2006/2007, a lot of these people will be getting into properties, discounted at 15-20%, thinking that they'd beaten the system. Afterwards, the overall volume of buyers will disappear and these individuals will also be stuck in properties that they, themselves, can't sell if their company relocates or they loose their jobs.
That's when we'll see a crash, ala 40-60%, down from 2000/2001 prices and the end of real estate as an asset class. It'll revert back to a depreciating asset, much like a used car but with a steadier bottom of 30-40% of original list price up until the economy starts to produce real jobs and then real estate can go back to being an inflation hedge but that's perhaps another 12 to 15 years away.
From the looks of it, the "rake lady" bought her Centex home beofre the $100,000.00 deduction took effect!
Something I've wondered about buyers with ARM's is why they don't look into buying a rate cap to protect themselves? Don't their financial advisors know about derivatives at all?
-jcr
I enjoyed your discussion with J. Corsi this morning on C-Span. He is very articulate, but totally misinformed on the science of oil. It is tragic that someone didn't suggest he go back to school to learn something about a subject he so much likes to write and speak about.
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