patrick.net

Our favorite housing stocks
http://tinyurl.com/bl5rm
........and a kick in the fannie
http://tinyurl.com/9k92y

A friend who has been looking at condos in Manhattan for the past year told me that REs are starting to call him back weeks after to say that “the condo has been repositioned in the market”.

Yes..... I posted about that in the previous thread...here it is again.

Here is a snip from a current article http://tinyurl.com/9gg3t

Anecdotally a friend who is looking to buy an apartment in the NYC area reports that sellers are calling back after three or four weeks to say that they have lowered their asking price. That’s something that never would have happened three years ago, this potential homebuyer observes.

Check out this flash real estate magazine.......after it loads, go to page 94.... it's an article about "The Antibubble". It's a cheerleading article about how the real estate market is going back to a "normal" market..... It's funny reading some of this stuff, Dotie Herman CEO of prudential claims that NYC real estate in her region will appreciate 8-10% per year. :lol:

http://www.rismag.com/2005/11/index.ipv?flash=1&

Well Duh! That, and greed and/or short-sightedness, among other things.

Your sister should have offered $200K when they called back.

Aren’t you guys getting bored of these blogs and endless articles saying there is a housing bubble? So far nothing has happened except threats of a downturn. It’s getting to be as boring as all the “end of the world” predictions over the past 500 years.

The question is why are you here? Probably because you are a realtor who has nothing better to do because noone is buying!

Well if you've been following the media, you would know that the inventories of houses are rising....and the sellers are slashing their prices hoping to reach a price that will actually sell............meanwhile the interest rates are rising and since noone is buying, next year will not be a good year for real estate.

Johnny Bill-- I too want a bust, desparatetly. As a person who works with data for a living, I don't see it in the numbers just yet (from what I read in the articles listed in the links section of this blog). What I see feels more like the small gravel that begins to shudder down the hill before the avalanche. Maybe it's just a little gravel? Maybe it's the real thing. We will only know after the data tell us so.

I like this blog because I can feel smug and superior before the fact. When folks say to me "gosh I never saw the bust coming," I can smile inwardly, nod knowingly to my blog-mates and wait for signs of the bottom. I've learned a lot from the links! I particularly recommend today's " Housing Bubble, or Just Plain ‘Ole Appreciation?" if you have not yet read it.

Greed or fear? Which is the stronger bubble emotion?

What will the face of the average, greedy Boomer look like as
his cherished equity suddenly evaporates like water on hot, Georgia asphalt?

My guess is that many buttocks are gonna' pucker...and the average Silicon Valley visage will come to resemble the frozen expresssion of the classic "sour puss" face: as if one had just bitten into a giant lemon, unaware...

May I interject some humor?

http://tinyurl.com/7g5lo

Ahahahhahahahahahahahahahahahahahahahahahahahaha

*gasp*

hahahahahahahhhahaaaahahaahahahahahahaahaha

*gasp*

ahhahahahahah

Cheers,
prat

Say what one will about the housing bubble, but it has provided some delightful absurdist theater.

I mean, $900,000! All I can say is bravo, bravo!

Cheers,
prat

Say what one will about the housing bubble, but it has provided some delightful absurdist theater.

And, that's Sacramento. Nothing wrong there, but a tad high, IMO.

Then, tack on another $600K and you get that home around here.
Now, that's really stupid!

Wait, wait, wait. Not a bad place?

You people are clearly insane. That place is overpriced at 300K. *Canadian*.

Or are you so sane that my mind is spinning out of control?

Cheers,
prat

"Real estate is expensive. It always has been. It always will be."

_smile_

When faced with terrifyingly sound mathematical reasoning like that, I mean, like, wow.

http://tinyurl.com/bkecn

Hi!
My name is... What?
My name is... Who?
My name is... Prae-Prae-Praetorian.

Chewbacca,
prat

ScottC,

It's been a while since I've seen you post --welcome back! But then, I myself was away for over a month, so perhaps it hasn't been that long.

If memory serves me, you described yourself as a Texas-based realtor who, while no perma-bear, was relatively sure of the HB's existence and predicted that the market would start to turn by next spring.

Are you playing devil's advocate and having some fun with us, or have your views really changed that much?

@newsfreak:

tipping point:
the moment at which above RV when occupied by the homeowners extended family falls over when partying to Huey Lewis.

That's the p-p-p-power of ARMs!

Can you feel it?

Cheers,
prat

When our questions as potential buyers (not that I'm looking in earnest) are met with the language described above it really should be cause for alarm. This is exactly the same type of spin we were given by people on Wall Street even when it became clear that stock prices could not be justified. Realtors have more control because there isn't a "ticker tape" scrolling behind them. If they were smart, rather than expending effort pretending that a bubble doesn't exist they would be much better served to acknowledge it, look at things from the buyers perspective and put in low ball offers and get this thing over with. Their customers that bought at the top of the market will never trust them again anyway, let alone provide referrals. If they were ethical, rather than try to "prop" up prices they should own up to the mistake and go back to the people that they put in at the "top" and begin discussing exit strategies to put that customer in a better position and minimize the damage. Perhaps discount commissions or fees to offset the damage. They will not get praise initially but when prices have crashed they will in time come to thank you. All of these are strategies used by people that have long term careers in mind. If your realtor isn't willing to own up to their mistake it should be obvious that they only intended to make a quick buck and get out. This is known as "Hit and Run" sales.

Overall, I am guessing (and I at least admit it is a guess) it will be more like giving back between one and two years of the 5 year run up, but that will be more spread out over 3 or 4 years.

Jack,

If the market only gives up 1-2 years of recent bubble gains that's practically the same thing as saying there was no bubble to begin with. Sheesh, have you turned into a radical bull on us after all this time? ;-)

In order for the buy vs. rent equation to make sense, or the HH income-to-price ratio (or inflation-to-price --you pick your favorite metric) to revert anywhere close to the mean, we'll have to see 3-4 years of price gains evaporate. Or, incomes will have to shoot up fast while housing remains flat. I'd love to see that, but wishing and believing are two different things.

I agree the crash/correction will take years to play out, but crash she will. And yes, that's just an opinion, but one that is well supported by the data. Here's another excellent breakdown of HB appreciation vs. rents, inflation, population, incomes, etc. by CEPR: tinyurl.com/17a

@Paul_from_Oz,

I agree that under $150K is pretty unrealistic for 4-5 acres of developed land --with stables no less, but that wasn't what I was commenting on. I was responding to the closing comment ScottC made:
"Real estate is expensive. It always has been. It always will be.
The bubble is in the mind of anyone who thinks otherwise."

Coffe is for closers comes from the movie Glengarry Glen Ross. All Bubble believers should see that movie.

My wife rented that movie for me. It was okay.

Now she wants to watch Chicken Little because she thinks that I look exactly like the main character. :(

@brahma,

forgive me if this is a bit silly. but where can i find the yeild curve for the treasuries? is there some website for this or some symbol?

Here ya' go: (just add the "http://www.") treas.gov/offices/domestic-finance/debt-management/interest-rate/yield.shtml

and how is this related to long term rates?

Traditional fixed-rate mortgages (which are becoming something of a rarity these days) are primarily based upon the 10-year Treasuries. ARM interest rates on the other hand, are based more on the Fed funds rate and/or LIBOR.

chicken little! good call …….I’m thinking with a beer batter really crisp and piquant with a California Shiraz ..No?

I do not eat fried chicken. I do not like meat that I cannot eat medium rare.

medium rare … hmmmm “prime” rib … maybe?

How about a nicely-marbled slab of bone-in rib-eye?

thanks HARM you guys are awesome! kudos to the board for thier wonderful discussion on real estate trends and how people are being suckered. if it was not for you guys i would be in dire financial trouble.

You're most welcome!
*sniff* (_tears welling up_) If I can help prevent just ONE senseless act of financial suicide, then it was all worth it...

Hey all I posted this a while ago, but HARM's back now & there's another person interested in the yield curve.
Drag the diamon along the "year"-axis and see how the curve evolved throughout recent history.
Yield curve historical animator:
http://www.smartmoney.com/onebond/index.cfm?story=yieldcurve

mmmmmmmmmm...ribeye.

Real estate is expensive. It always has been. It always will be.

The bubble is in the mind of anyone who thinks otherwise.

Spoken like a true realtor!

He may very well incurr half of her upside-down debt from this mess when it unfolds.
Just 'cause you lost the battle doesn't mean you lost the war: pre nup. :)

Yes, that's a joke. But it sure is a funny thought? Prenup on bubble deflation.

ScottC,

One does have to wonder why you would come to this site.....All are welcome whether you believe in it or not, but I just can't see why someone would waste their time writing to this blog if they didn't at least partially believe in it. The only 2 reasons I could come up with is:

1) You believe in the bubble, but your in denial and very scared.

2) You don't believe in the bubble and you think you can convince us all that there is no bubble and maybe sell us a few houses.

I believe it is 1, if it is 2, your wasting your time...... That would be like going to a church and trying to convince all the priests that there is no God. You bring no real data that would justify your belief....... I have read a few of your posts and they sound like realtor pep talks, the kind that a realtor will tell their client to prep them for a sale. If you really don't believe there is a bubble, why don't you give us some data so maybe you can make a point.

But that would leave him with a square 20 acre doughnut with no center,

Could be used as a race track........... I hear they are pretty big on racing over there. :lol:

t’s unbelievable. These people have no clue about the reality of the real estate market. No understanding of platting, planning and zoning, subdivision restrictions. Absolutely no knowledge of land values. They want what does not exist–subdivided, developed real estate, with utilities, sewage, phone, and cable, with a fully functional well-built home, cheap.

Sounds like frustration to me....... Like your stuck in low-ball hell :lol: I have a feeling we are going to start seeing more and more realtors writing to this blog. :)

There is no cheap real estate of any value. That’s all I know.

This statement is a self-evident truth. :)

However, applying the statement to the real world requires the interpretation of "cheap" and "value", which are up for discussion.

Allah, please do not be too harsh on ScottC. There is quite some truth in many of his comments.

*sniff* (_tears welling up_) If I can help prevent just ONE senseless act of financial suicide, then it was all worth it…

HARM, you should really start a "financial suicide" hotline. :lol:

I don’t think it is completely the RE agents fault. I believe it is much bigger than that. I believe we are in a massive credit bubble, with the real estate bubble being an after effect. Someone had to be foolish enough to loan 800k to someone for a 199K shi*box, no?

Your right, it's not just their fault....It also has to do with appraisers, mortgage brokers and the like......but in a way, they are kind of forced into it....as I've posted before, if you make a living selling houses and you know they are overpriced, you can't tell your clients they are because you will not sell anything.... The ones I really blame are the ones who became RE agents and Mortgage brokers just because of the boom; These are the ones who will be the first to lose their jobs, because they don't have the experience of what a real market is.......It's easy to sell houses when they sell themselves! .......but they don't anymore :)

allah,

"financial suicide hotline" LOL. Hopefully, they will call me BEFORE they've sign on the dotted line, or I'll never make enough money to operate it. ;-)

It’s unbelievable. These people have no clue about the reality of the real estate market. No understanding of platting, planning and zoning, subdivision restrictions. Absolutely no knowledge of land values. They want what does not exist–subdivided, developed real estate, with utilities, sewage, phone, and cable, with a fully functional well-built home, cheap.

There is no cheap real estate of any value. That’s all I know

ScottC,

I'm not about to argue over the cluelessness/ignorance of the average consumer in ANY market, or that developed RE is a relatively expensive commodity. As Peter P said, "This statement is a self-evident truth."

Please pay attention to his next statement:
However, applying the statement to the real world requires the interpretation of “cheap” and “value”, which are up for discussion.

We're not debating whether or not RE is usually/generally "expensive" when compared to say, food or clothing. We're debating whether or not we're in the middle of an unsustainable cheap credit-fueled bubble right now, and whether or not the fundamentals (rents, incomes. population growth, supply, etc.) justifies current valuations.

“financial suicide hotline” LOL. Hopefully, they will call me BEFORE they’ve sign on the dotted line, or I’ll never make enough money to operate it. ;-)

Yeah....I think it would be a great idea....just think, if someone is married and they don't want to buy because of the bubble but their spouse has his/her (notice how I said his/her to protect me from being called a sexist again) mind fixed on buying regardless,.................. they can call "HARM's financial suicide hotline"......before the do any HARM to themselves financially. :)

Would we really have a housing boom if it was actually difficult to get a mortgage?

I'm totally with you on this one............the problem is the banks sell the note to fannie so the banks aren't in danger........fannie takes a lot of the notes and sells them to investors (mostly chinese) as MBS. This is why they can lend such huge amounts of money....the lenders know a lot of them will default, but they don't have to worry..........the chinese are the ones who should be worried, but they seem to not care......so far! :twisted:

By the way, look at fannies stock http://tinyurl.com/9k92y try going to 5 year view, looks like a downward trend to me....what do you think?

Ah, but there is the rub. If china were to get burned bad enough on defaulted mortgage paper, would they continue to support our economy by loaning us even more money? I doubt it. (once bitten, twice shy) When they stop loaning, how constricted would credit become? Is it possible we could go back to the dark days when lenders required 20% down, a spotless credit record and an actual accurate appraisal?

I know, that is why I don't think another "Great Depression" is out of the question.....I would love to see lenders go back to traditional lending practices and I'm sure they will when all the dust settles. Remember, these interest only loans aren't new, they were used before the "Great Depression" and they weren't used again since then for good reason................until now!

H.Z., we welcome all perspectives here, bullish, bearish or otherwise (as long as people keep it relatively civil).

To say that "there is no national RE market. All RE markets are local" is partly true, but also partly false. As allah mentioned above, the secondary mortgage markets have securitized mortgage risk in the form of MBSs, which are sold to central banks/pension funds/REITs all over the workd. These markets, which were a relatively tiny portion of the overall mortgage finance market just 10-15 years ago, have grown into the proverbial 800-pound gorilla.

How many lenders/banks today still hold the paper they issue, especially the "exotic" IO/NAAVLP stuff?