patrick.net

The ideal end of the housing bubble to me would be long lines of repo men forcibly taking back the leased BMW's, Mercedes and "luxury SUV's". Lines of former homedebtors begging for change. A reversion to the mean and the focus shifted away from money money money. I would like to hear a great sucking sound with all the swagger gets removed from those that confused debt with wealth.

shit -taken +taking

SQT can yous be fixing for me?

What Surfer-X said plus:

1. End of Fed interest rate/M3 manipulation (not holding my breath).
2. Complete destruction of GSEs (and MBS/CMO risk shifting from lenders to taxpayers).
3. End of Realt-whore MLS monopoly & market infomation asymmetry (happening as we speak).
4. Return to sane lending standards (which should automatically result from #1, 2 & 3).
5. End of local/state NIMBY anti-development laws.
6. Time Magazine front-page article, "Real Estate: Worst Investment Mistake Ever?"

A soft landing in which prices leveling off while another economic boom brings fundamental in line would be ideal. However, the ideal scenario may not always be possible.

Dream on.

This crash will make the great depression look like a picknic.

PS
I especially like the "Your mom is a realtor" becoming a cuss phrase.
Nice touch!

The ideal ‘end’ is that housing just stays flat or goes down 5% while my salary catches up to home prices.

MarinaPrime, looks like we now have the same ideal scenario. Perhaps we should have sushi. :)

Mortgage rate is rising faster and I have expected. Our ideal picture looks dreamy.

Since I believe housing prices in the Bay Area are overvalued by 35-50%, depending upon the specific area, I can only hope for a soft landing in the "prime" areas. Because the HB is primarily psychologically driven it is likely to deflate very quickly once reality starts hitting people in the pocketbook.

My script proceeds:

* Prices level off, even post nominal gains in some areas -- but below inflation meaning real price losses.

* Realtors(tm) cheer and gloat about how wrong the bears and bubbleheads were. The NAR starts running a series of ads lampooning tin-foil hat wearing bubbleheads and letting people know that "it is always a good time to buy".

* The economy continues to chug along, inflation continues to tick up, unemployment goes down, salaries go up. Life is good.

* But the Fed has to raise rates again and again to keep inflation in check.

* ARMS start resetting. People with 100+ LTV start discovering they are upside down since they've been losing home value against inflation/rates for a couple of years without knowing it. Foreclosures up. Inventory up.

* MP comes to Patrick.net and provides evidence of bidding wars and 1-Haha over listing 850sqft condos in the Marina. Life is good.

* USA Today runs a headline "Soft Landing for US Real-Estate". On the same day the Economist runs a little noticed article about serious macro risks to an accelerating collapse. Although referenced and talked about on Patrick.net it gets lost among the now 1000s of TrollBot postings attacking the site.

* Within 6 months the WSJ runs the headline "West Coast Real-Estate in Free Fall". Sub line is "Is the East Coast Next?" Bay Area prices in non-prime areas fall by as much as 20% in 6 months. Harder hit LA and San Diego fall by nearly 50%.

* Within a year the Bay Area prices correct by 35-50%, with a few areas posting only 15-20% nominal losses. San Diego is the main story in CA, with all but a few areas exceeding 50% losses. Sacramento is a close second. Prices collapse on much of the East Coast, however with DC being hit by far the hardest. Interestingly, NYC and surrounding suburbs fare reasonably well losing only 15-20% with some areas actually posting small gains.

* In a scramble to pin blame for the fiasco somewhere politically expedient, Congress enacts the REECC -- Real Estate Exchange and Credit Committee -- modeled after the SEC and empowered to set and enforce harmonious regulations for the real-estate industry. The FRESB -- Federal Real Estate Standards Board -- is also created to set standards for the industry and is controlled by a wide array of stakeholders outside of the direct real estate industry.

* The NAR, in reaction to new regulations, begins mandatory re-licensing of all agents and brokers nationwide. Rumors begin to surface that upwards of 95% of all existing agents are unable to pass the more rigorous tests. At the same time PWC, KPMG, and DT all announce creation of RE Audit practices which will provide the mandatory public audits of all RE businesses transacting more than US$39.5M per year or US$10M per any quarter.

* HaHa is able to buy a home in the Bay Area with 1HaHa per year salary and just over 1HaHa in the bank. He comes to Patrick.net -- now a time capsule preserving a transcript of the past many years of lunacy -- to let the few remaining readers know his good fortunes. Peter P offers to buy him sushi.

To: Randy H

The scenario is sublime but true. You forgot to add; After these agencies are created, rules will be ignored through the greasing of palms.

A recession will do that faster than a decade or more of stagflation.

Unfortunately, these two things are not mutually exclusive. In fact, short recessions are normal during protracted stagflation.

I personally don't see much alternative to stagflation regardless of whether the RE bubble is a hard or soft landing. I do not think a deflation/depression will be allowed willingly, nor do I think it should be allowed. Inflation for all it's terrible consequences is far better than deflation and depression. Like has already been said, those who wish for depression do not understand that for which they are wishing.

it will all end in tears...

My prediction: the govt will swoop in and help everyone by clever affordable housing schemes and a new New Deal deal - in fact it will be called the New New Deal Deal. Every young person struggling will be helped in proportion with their need. Inflation will be headed off at the pass simultaneously, due to incredibly adroit economic management by the infinitely wise Fed. George Bush will show even more interest in the plight of the people than he does even now, which is hard to believe, I know - that's compassionate conservatism for you - they keep on giving til it hurts. There will be no more drugs or poverty either. Meds will be free.

OT.

A few threads back a troll came here and claimed that there was a development in South San Jose for 900K or so, 5B3BA. So I got all confused and thought he meant a development in Gilroy. So I apologize here for the confusion, it is in fact in South San Jose.

Today I drove by this development on 101, it turned out that this place is right next to the interexchange of 85/101. I was literally shocked when I saw the development, because I have never seen anything so CLOSE to a major freeway (3 lanes each way). It is practically within 50 feet of the freeway with NO sound barrier walls, NO elevation, and if you know that part of the landscape well, it is on the east side of the freeway among the bald mounds with absolute NO vegetation. Of course one should not forget the multiple power lines presiding right over the development.

Now just south of it within 1/4 mile, there is this very major power station taking up acres and acres of land in east Coyote, and the power station sits comfortably within the vision of the future residents of this development.

Let's forget the price issue for a while. I am not sure if I will live there even if the developer PAYS me 900K.

6. Scientists discover that bad investment judgment was a dominant gene. To prevent its threat, all specuvestors were forceably sterilized.

hmm, alternatively, there will be a cultural revolution, and all realtors, landlords, gurus and lenders will be demonised and held up in show trials, to be executed as traitors, without mercy or exception. The landlords' assets will be distributed to the next generation. Future generations of realtors and lenders will lose parts of their anatomy if they are caught in usury or telling pork pies about property. (Landlords and gurus will have been abolished.) Parents will take their children along to the executions to teach them a moral lesson and give them a sound whipping when they get home to reinforce it. There will be no more drugs or poverty. Meds will be free.

Whatever to come, as long as it happens fast and we can all fast forward to the next few chapters, it is ideal.