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August 11, 2006 The whole housing market is catching. THE DENVER FLU
"It is just a blood bath, a path of devastation, " says a Denver Realtor. "It is just ugly. "
Home prices down 15-17% from a couple of years ago. Foreclosures up 63%. And the "flu" is spreading to Naples, Miami, Orange County, Boston. Everywhere.
Boston Blues. "It's unbelievable, " a Realtor told The Boston Globe. These are "very large drops. "
Tears in Florida. "One lady broke down in tears, " says a Florida Realtor. "Her husband bought two investment properties, and they are going to lose their life savings. "
Minneapolis/St. Paul. "15 houses per buyer. If we had buyers. "
It's here. For years, we've all heard about the housing bubble and how It could pop. Well, the wait is over. POP!
POP! POP! POP!
The worst real estate bust in American history has begun.
Don't take my word for it. Just ask the people who are in the best position to know, like the Realtors quoted above. They see a drop in prices like you wouldn't believe.
But wait until you hear the lenders - the people who made the bubble possible.
Lenders see a 10-20% tumble in home prices
Yes, you heard right: A 10-20% loss nationwide, according to a poll of American mortgage lenders. And much bigger losses in the hottest markets.
How big? In the last housing bust about 15 years ago, prices in the hot Pacific and New England markets tumbled 25-30%. And that bubble was nothing compared with this one.
Two out of every three lenders told the pollster there IS a bubble. It's real. A spokesman for the polling firm said, "In the minds of lenders, the housing bubble has moved from 'Loch Ness Monster' myth status to an economic reality. "
It gets worse. Due to changes in the mortgage lending market, the Housing bust won't be confined to a few hot markets this time. It will affect every single one of us.
In fact, you'll discover in the next few minutes that we're headed into a devastating recession.
5 out of 10 lenders say the bust is here
This is an amazing admission, coming from the heart of the real estate industry. It's as if the makers of aspartame were saying, "Forget it, you're never going to lose weight. And by the way, our product causes cancer. "
What's more, the mortgage lenders have lots of company. The activity index of the National Association of Home Builders is at a three-year low. And the National Association of REALTORS now predicts sales will drop this year.
Remember, these are paid hacks for the housing industry. The real situation is two or three times as bad as they admit.
Defaults rock the lenders
Over the last few years, a lot of people paid for their homes with interest-only or adjustable-rate mortgages, called IOMs or ARMs.
Now those mortgages are resetting at higher interest rates. Families can see their monthly payment go up 40 or 50%. The result is a huge, huge wave of defaults now hitting banks like a tsunami.
Folks are losing their homes in record numbers. It's not just a personal problem when 10 or 15 million homeowners have negative equity or can't meet their payments. It will take down the world's biggest lenders. We're staring at a financial collapse.
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Hi Moore,
I'm glad I sold my house in February. Of course, I could use the situation to proclaim myself a real estate genius, but it was just luck.
Thanks,
Jackson[/blue]
No surprise here. The "irrational exuberance" that fueled the Nasdaq collapse was transferred to the real estate market after 2001. Not to blow my own horn (but I will:)) I posted maybe 5-6 months ago under the stock market thread that we had not seen the worst in real estate. Alotta folks have been whistling in the graveyard about this situation, but the gravity of the collapse will soon be evident. The anecdotal evidence is overwhelming, and the numbers show a steady rise in unsold units. The condo and vacation home markets are already taking a drubbing, and IMHO this is only the start. I think "middle america" will be spared any real agony, but otherwise there will be alot of misery. Prior to relocating to BA I lived in Miami Beach and the market there was totally out of control for years before I bought / sold and got the fuck out. I still have friends and family in south Florida and they all tell me of steadily declining prices and increasing inventory. Most of that is in the over $400,000 condo market, but eventually it will work it's way down. The wash out will be ugly. Couple that with the spectre of inflation and decreasing purchase power and you have the possibility of some real nastiness. But hey, Bush has got two more years in office. He'll turn things around.;)
[QUOTE=Doggboy]Not to blow my own horn (but I will:) I posted maybe 5-6 months ago under the stock market thread that we had not seen the worst in real estate.[/QUOTE]Many people have been calling the real estate sector a "house of cards waiting to fall" for 2-3 years now. Will it actually happen or will prices just rise another 30% over the next year? The area I'm looking at has been one of the hottest in the country over the last 5 years but prices have only softened a little bit, maybe 5% if at all. Currently, there is much higher housing supply without a doubt but the so called "buyer's market" hasn't really affected prices. Kind of scary looking at houses that have doubled in price in 3-4 years.
I don't think the sky is falling although, as is sometimes true in life, stupidity is going to punished. Total financial collapse because house prices are insane in Phoenix? I'm not seeing it.
Places where prices are low and speculative buying is rare (that's much of the US) are going to be OK. The market will soften, it will take an extra month or two to sell, and prices will come down a few percent but value is always in demand. I live in a nice, mid-size Midwestern town (100K) and prices remain well under $100/ sf.
SF remains very very strong due to moronic land use policy. Bay Area reamains strong with inventory up a bit and price increases moderating. Typical sq foot in high end area in SF about 900$, in mid range about 600$ and in the hood 400$. Lots of morons overpaid last few years. Lots of morons low down, variable rate and will foreclose. These houses will be snapped up by many many young and high income buyers waiting to get into their own house. Its call the free market.
600/ sq foot for the midrange area puts a modest 2000sqfoot house at $1.2M. So your average working guy needs a salary of 480k to qualify for the mortgage assuming the 40% rule. Can so many people qualify? It seems the price / income ratio is way beyond ridiculous.
[QUOTE=Moore]600/ sq foot for the midrange area puts a modest 2000sqfoot house at $1.2M. So your average working guy needs a salary of 480k to qualify for the mortgage assuming the 40% rule. Can so many people qualify? It seems the price / income ratio is way beyond ridiculous.[/QUOTE]Your average working guy doesn't get to buy one of these houses. But a professional couple with two good incomes does. The average working guy that's new to the area gets a 60 minute commute and a 1600 sf house in a lousy neighborhood.
I sold a little more than a year ago when Washington DC's condo market was pretty much at its height. It was not genius on my part; like Jackson, it was pretty much luck (although I was wanting to buy in Buenos Aires and needed to sell to do that)
I feel no pity for those who are getting creamed. It was obvious to me as my finance broker kept encouraging me to re-finance and withdrawl money (1) first with a balloon mortage, and (2) one-year later with an interest-only mortgage, that something was seriously askew in the real estate market. I knew I'd be getting out, so I did it both times. But when my broker rationalized it by telling me everyone was doing it, I just thought that something no good was going to happen somewhere down the pike. People just didn't seem to think there would ever be a downside to the cycle, and were treating their "live in" real estate as a speculative investment.
Oh well. Tulips...Bubbles...Human foibles. Connect the dots.
Be nice, though, to have enough money to capitalize on this collapse -- however large or small it turns out to be -- when it bottoms out.
[QUOTE=StrayLight]
Be nice, though, to have enough money to capitalize on this collapse -- however large or small it turns out to be -- when it bottoms out.[/QUOTE]There's a guy in South Florida who began a company about three years ago with the specific intent of accumulating as much as capital as possible to take advantage when the real estate market bottomed out. I forget his name, but he has many investors. He unabashedly refers to himself as a "vulture".
Assets run in "Class's and Cycles" and housing is no different. We've just witnessed the biggest world wide housing doom in history and housing would be expected to cool down somewhat, but it will be back.
5 years from now what ever you buy today will be worth more money than you'd paid for it. Housing is one of the basic human commodities, "Food, Clothing & Shelter", that everyone needs. Its not going to go down much in value. With the USA population at about 300,000,000 we will need about one million new starts per year just to keep up with population growth.
Moreover, owning your own home has proven threw out time & history to be one of the best investments you can make, since they started counting! Nine out of Ten millionaire's in the USA have made their money threw some sort of real estate, a historical fact.
Owning one's own home is like paying rent to yourself with tax advantages, plus its a hedge against inflation. Frankly speaking, I'd be hard pressed to buy my own house today. If I sold it, it would be impossiable to replace and I'd end up taking a cut in my standard of living.
In time everything goes up in price. When gas was $1.50 a gallon you could buy a pretty nice house for $150,000 dollars. Today with $3.00 dollars a gallon gas it takes $300,000 to buy that same house. Housing is just like any other commodity it will vary in price, but its long term value has always been up, look at any chart. The house I was raised in was bought for $17,000 dollars, today 50 years latter, its a million & a half, not a bad investment.
We will see $4.00 and $5.00 dollar gasoline soon enough and housing prices will act accordingly. The housing thats close in, with less of a commute, will appreciate faster than housing thats an hour or more out from ones work place, Location, Location, Location.
Trust Me, I do this sort of thing for a living.
Exon
Housing is one of the basic human commodities, "Food, Clothing & Shelter", that everyone needs.
You forgot handjobs, the price of which are climbing in the SW part of the USA, because of a recent surge in market demand!