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I propose we produce a film about the evils of overborrowing during a housing bubble. We could call it "Refi Madness". lol
Friends don't let friends flip condos!
Peter P
2005 Dec 7, 7:05am
I propose we produce a film about the evils of overborrowing during a housing bubble. We could call it “Refi Madnessâ€. lol
How about a new XBox role-playing game "Flip that condo". Players can assume roles such as builder, mortgage broker, realtor, flipper, and renter. Internet game-play will be supported.
New article Real estate investors bailing out?
[snip]
A researcher at Arizona State University told the paper that in the hot market of Phoenix, as many as 30 percent of the properties for sale on the market right now are owned by investors, while Sandra Geary, a real estate broker in Sonoma County in California said that her sales to investors have dipped by over 75 percent.
"Now that the market is slowing down, it's scaring investors away," Geary told the Journal.
Tsk, tsk, SQT...
That will never happen here, because we have limited land, a high population density and millions of rich, well educated asians buying our properties.
Peter P
2005 Dec 7, 7:42am
I just read the article on Patrick’s links about the slowly re-emerging Japanese housing market. It mentioned that a 750sqft apartment goes for about $350K, which is a lot of money. But not too long ago, the same apt sold for $1.5 mil. Ouch.
Japan does look like it is recovering. However, I did see a new construction single family house in Kyoto selling for less than $500K. It does not look too small. I can post a picture tonight. New 900sqft apartments are going for less than $400K.
Japan has much tighter zoning regulations than California and people feel more strongly about keeping their homes. Yet their market crashed badly. What does this say about the California RE market?
From the August "Housing Bubble Glossary" thread:
“MIRAGE†(Moneyed Immigrants, Rich Ancestors, Generous Expatriates): Acronym coined by yours truly to lampoon the bulls’ argument that housing demand is being supported by cash-rich immigrants, wealthy parents and transplants from other states.
Peter P
2005 Dec 7, 7:49am
I was also in Hong Kong. It appears that the media that are openly saying that the housing market is cooling there and that rate hikes will harm the market more.
Peter P
2005 Dec 7, 7:51am
Despite common perception, no one is immune.
Not even the Marina district?
Peter P
2005 Dec 7, 7:55am
Interesting, many people who have contended that there is no housing bubble are now saying that there is a housing bubble but they are immune because...
A small newsflash: our Marin Bubble Blog was mentioned in a local paper.
Rather amusing...it's really helped the blog's visibility
Overall, the response has been positive.
Peter P
2005 Dec 7, 9:08am
You’re blaming Fannie Mae and Freddie Mac for the price of homes?
I blame zoning regulations and supply-side restrictions.
However, GSEs do attempt to affect "affordability" by facilitating liquidity on the financing side. This leads to imbalances in pricing IMO.
You’re blaming Fannie Mae and Freddie Mac for the price of homes? That reflects a severe misunderstanding of the market. Fannie and Freddie place repossessed homes on the market at FAIR MARKET VALUE, which is the going rate for comparable homes. It is hardly their fault the price of homes has risen dramatically.
The fact that the GSE's put AG's monopoly money into the system is what drives up the prices. They buy mortgages from banks, thus taking the risk away from banks. When the banks are relieved from their risks, they loosen their standards to allow anyone to get a loan (as long as they don't have more than 9 bankruptcies). When you allow people from all walks of life to buy houses by putting huge amounts of money in their hands, the laws of supply and demand will drive the prices up. It's very simple and very obvious....I don't know why you would even deny this!
Peter P
2005 Dec 7, 9:12am
Any attempt to make things more "affordable" without increasing supply will create imbalances and is counter-productive.
I do not blame anyone for this bubble because it will correct itself. Market prevails eventually.
I do not blame anyone for this bubble because it will correct itself. Market prevails eventually
...and many of those who created the bubble will suffer from the aftermath.
Peter P
2005 Dec 7, 9:18am
…and many of those who created the bubble will suffer from the aftermath.
Free entertainment. :twisted:
ScottC,
Again, fixing up repossessed homes is a great thing, but this is not the business the GSEs are in (perhaps you have them confused with HUD and Habitat for Humanity?).
As Allah & Peter P noted, their core business and reason for being is purchasing mortgages from the banks/originators, repackaging them as MBSs and selling them to institutional investors at a profit (thus, providing mortgage market “liquidityâ€).
We seem to be arguing apples and oranges here.
Peter P
2005 Dec 7, 9:52am
I expect that the magnitude of the housing bubble bust will exceed my expectations.
Did I just create a paradox?
Talk about entertainment.
http://sacramento.craigslist.org/rfs/116568833.html
With all the chatter about free food, they forgot to mention this is mere minutes away from Folsom State Prison!
Did I just create a paradox?
Which one is greater: Peter P's immovable pessimism, or the bubble's irresistable implosion? :-P
Peter P
2005 Dec 7, 10:08am
Which one is greater: Peter P’s immovable pessimism, or the bubble’s irresistable implosion?
If I am immovably pessimistic, I must be optimistic about my pessimism, right?
A small newsflash: our Marin Bubble Blog was mentioned in a local paper.
http://tinyurl.com/e22s7
-Kurt S
Listen to this guy from the article:
"Clearly, this is a case of someone who has come up with an early case of Marin real estate flu," laughed Marin Association of Realtors President Jack McLaughlin, who was quoted in an Independent Journal article posted on the blog. "We don't have the vaccine for this guy."
Laugh it up while you still can Jack. What an a-hole!
"Hoo hoo hah hah, it's as if the foolish peons don't even realize that I have the most to gain personally for keeping this housing bubble inflated," chortled Marin Association of Realtors President Jack McLaughlin. "Oops, did I just say that in my out-loud voice? Can I get a retraction on that? I mean, I was just kidding!" added McLaughlin.
does anybody know what would be the median home price in mountain view, sunnyvale, santa clara area in 2006, 2007, 2008 and 2009? My estimate is that the prices would bottom out by spring 2008. I dont know by how much. Comments? --Realistic Desi
I would go with a 25% drop by then. Most will probably think that's much too rosy, but that's my story and I'm stickin' to it!
Peter P
2005 Dec 7, 10:50am
I would go with a 25% drop by then. Most will probably think that’s much too rosy, but that’s my story and I’m stickin’ to it!
25% is a bit rosy. IMO many properties will face a 50% - 65% fall.
My opinion... For single family detached homes, I would bet on a decline in real terms of about 20 to 25% by the market bottom (2008 or 2009). Condos should decline by about 30% to 40% in real terms.
Peter P
2005 Dec 7, 11:02am
My opinion… For single family detached homes, I would bet on a decline in real terms of about 20 to 25% by the market bottom (2008 or 2009). Condos should decline by about 30% to 40% in real terms.
I have to add that Zephyr's predictions are likely to be much more accurate than mine.
I expect inflation will be about 4% in the near future, but will drop below 2% by 2009. So the nominal declines should be about 15% for single family detached homes in the areas like the ones mentioned, and about 25% for condos.
For the countrywide averages I expect prices will be close to flat or modestly increased (0 to 15%) by 2009.
There will be examples and selected zipcodes where much more significant drops will be seen. Of course, there will also be some places where prices will continue to rise even during the worst years. For the most part, the more that prices have recently increased, the more they will decline.
Peter P
2005 Dec 7, 11:09am
I expect inflation will be about 4% in the near future, but will drop below 2% by 2009.
Which inflation?
The switch by speculators from the buy side to the sell side of the market is the major factor tipping the scale now. Many of these people bit off more than they could chew, and were naive about the realities of the market cycle.
It will take about two years before most of these amateurs will have given up, sold out and gone away. Then the market will have only the real need buyers, and the experienced investors.
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I’ve noticed that lately there have been a lot of big industry players raising Cain over proposals to limit or even eliminate the mortgage interest deduction (http://tinyurl.com/bht2q). These are the same “pro-business†industry blowhards who typically lobby with all their might against the evils of government “regulation†(which usually translates as “consumer protections†or “eliminating my favorite sacred-cow tax subsidyâ€).
I have a few questions for these people:
Consider the incentives government currently provides for individual homeowners: the 1997 tax law greatly increased the RE capital gains exemption ($250K single/$500K married: http://tinyurl.com/bsfzd). This exemption was even extended to second (investment) properties, for reasons we can only “speculate†about (*smile*). Add to this the already existing generous mortgage interest tax deduction and the popular “1031†tax shelter. Result? A tax incentives system rigged heavily in favor of RE “investing†over saving or investing in any other asset class –stocks, bonds, commodities, etc.
If this weren’t lopsided enough, taxpayers are also partly subsidizing risk for banks and mortgage companies. By selling their conforming loans to the GSEs and selling non-conforming (sub-prime) loans to private MBS issuers & REITS, the lender can simply walk away from default risk with profits in hand and go make more bad loans. (Btw, the GSE conforming loan cap was just raised another 16%: http://tinyurl.com/azd48.) Chickens will no doubt come home to roost for investors in private MBS paper at some point, but GSE-issued MBS paper has the implied full faith and backing of the U.S. taxpayer. This (assumed) low risk has translated into extremely low risk premiums by investors, and incredibly loose-to-nonexistent lending standards. To this day, the GSEs, which still purchase some 50% of the nation’s residential mortgages for MBS resale, remain privately owned for-profit companies with exclusive government monopoly charters, along with implied taxpayer guarantees and access to unlimited Treasury capital. And let’s not forget that the Fed kept their funds rate negative in real (inflation-adjusted) terms for two years, which no doubt “helped†many home values go parabolic over the past few years.
Whatever you subsidize, you get more of –right? Now the taxpayer is heavily subsidizing both sides of the RE market: supply and demand. Predictable end result: historically low risk premiums (low rates on mortgages & MBSs) in a time of historically high default risk, sky-high prices and overextended borrowers. See PMI Group’s breakdown of default risk by city at WSJ.com: http://tinyurl.com/dd6ps.
Is having the government pick winners & losers really a “free market†or “pro-business†philosophy? Are you a “Big Government Libertarian�
Discuss, enjoy...
HARM
#housing