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| 2006/2/27-3/1 [Reference/RealEstate] UID:42015 Activity:high |
2/27 http://news.yahoo.com/s/ap/20060227/ap_on_bi_go_ec_fi/economy Now officially begins the housing bubble pop. Swami the Magnificent was right all along. \_ He will only be right if there's actually a pop. This is still just a slowdown (oh no 6% appreciation? they'll be ruined!) \_ Actually yeah. Given the interest rates and taxes, around here you have to be appreciating at something like 12% to actually make any money. (Assuming you bought the house right now and certain load characteristics) \_ Well not making money isn't the same as being in trouble. Also that article is about nationwide numbers. Regionally the market could be different. --not a homeowner \_ There's a difference between a primary home and an investment. I dont' have to *make* a penny on my primary. I don't care *at all* what the market does. I have to live somewhere and paying a mortgage to own something is better than paying rent to make someone else rich in my book. My mortgage never goes up. I don't have a landlord or share a wall with my neighbors and I take the mortgage interest off my taxes. By the time my 30 years is up my mortgage will be a fraction of someone's typical rent. My grandmother's mortgage was $200/month when \_ what about property tax? \_ prop 13. Based on the original sub-100k price, it was peanuts. she died. I was paying $1250 for an apartment in a bad area at the that time. I do have to pay for maintenance on the house of course but I get to choose what I pay for and when and how much I'm willing to put in it. I expect to sell in about 10-15 years, take my profit and roll it into a nicer place closer to work and have that entirely paid off within another 5-10 years, live there til I retire then go buy some huge gorgeous place in some other part of the country and have a zillion bucks in the bank and no worries. The ups and downs of the market day to day or even year to year don't concern me in the least right now. It all runs in cycles and I can easily afford to wait to sell until a higher point. I don't think I'll get the top of a cycle, I think trying to time that is impossible but housing moves slow enough that it's always clear if things are generally up/down/hot/cold. \_ Are condos bad then? You're buying something and still have to *eeeck* SHARE walls. \_ IMO: house>>>condo>>>>>>>>>>>>>>>>>>>renting. \_ If your time frame is 10-15 years before a move, then you're in much better shape than the average CA homebuyer. If your time frame is 0-~10 years (which you're not of course) and you recently bought a house in CA, there is a very real chance you may be paying more in interest, property tax, and other non-principal costs compared to living in an apartment, and may also lose equity in your 0-~10 year time frame. \_ No hurry. I live 15 mins from work, reverse commute. Eventually I'll be 2 mins from work, streets only but if that never happened, whatever. I don't see buying a house with a <5 years time frame so much as a primary residence as much as a mid term investment/speculation event for most people. This is a general statement of course. When I was a kid, we moved every 1-4 years and my parents always bought a house and never lost money on one but that was a weird work thing. I suspect most people aren't in that mobile a situation. \_ The average homeowner sells a house after 7 years. Coincidentally, housing markets usually go in cycles >= 7 years. So if you get supremely unlucky and buy at the very top you might have to wait ~14 years to sell for more than you paid, which is ~7 years more than you wanted to. to wait ~14 years to sell at the peak again, which is ~7 years more than you wanted to. In reality, though, talking to people who were in that situation they just took a 'loss' on the property since they had paid enough of the mortgage down to afford to take a loss. I say 'loss' in quotes, because they all traded into bigger houses in better areas and when the market (eventually) turned around they were much better off than if they had stayed and waited it out. If your house falls in price so usually does the one you want to trade into, so qualifying for the mortgage is easier. Many of my coworkers bought houses now valued at $1M+ by selling for a loss in a down market. They don't worry about the (say) $100K they lost when their (new) $600K house doubled to $1.2M and their $300K house (which they sold for $200K) is now worth $600K, since they made that money back and then some through the magic of leveraging. I don't know anyone who bought a house that didn't eventually make money. It's like the stock market in that way. The general trend is up. \_ I lived 2 minutes from work and church when I rented. Now I bought my own place and it's a 20 minute commute, which kind of sucks. The consolation was that there are lots of shops on the way home so it's convenient to pick up stuff when going home. \_ It doesn't take a genius to predict 20% year-over-year won't last forever. However, it's difficult to predict the bottom as well as the top. I would've told you 2 years ago housing was overvalued and yet it kept rising. So now if it falls when do you buy? Stop trying to time the market and buy something you can afford when you can afford it. I did, despite fears of a 'bubble' in 2001, and now I don't worry over it. I have a house with payments I can afford and it would take a 50%+ drop just to go back to what I paid. In short, even if swami is right, he's still an idiot. \_ Not all of us were in the housing market in 2001. \_ Yes, but if you were you might have called it 'overheated' and 'overvalued' then, too. Who knew it would keep rising? I mean, I knew in 1996 that the <DEAD>dot.com<DEAD> bubble would burst, but it rose higher and took longer than I thought. That's another way of saying I was (at least partially) wrong. Same with this guy. He's been saying the housing market will crash and has thus predicted 7 of the last 2 housing crashes, so to speak. \_ Has he? I only started seeing "Swami the Magnificent" stuff about a year ago. \_ I don't know how long, but , again, it doesn't take a genius to point out we're near a top after the run we've had. The market was frenetic 5 years ago so to predict the housing bubble will eventually burst is no great feat. The questions are: When? How far down? For how long? Markets are cyclical. I can predict now that the market will fall, rise, fall, rise, fall, and then rise again with close to 100% accuracy and yet so what? That in itself is obvious (and useless) information. \_ Well, here's his first "Swami" prediction. http://www.csua.com/?entry=36812 http://www.csua.com/?entry=3681 Here in Livermore, prices did begin to fall in 4Q 2005. I'm not saying you're wrong, but as the "Swami" he made a prediction, and so far for my area, he's right. Of course it was just a silly shot in the dark, but you can't really accuse him of predicting 7 of the last 2 housing crashes, so to speak. \_ Prices fell year-over-year? Link, please. -tom \_ Re-read above and try again tom. \_ The yahoo link says that prices were up 4% from December, which means they are probably up 20% from last year. -tom \_ yea but it is still below the all time high set in october, which means Swami's prediction that housing will start falling in 4Q 2005 is so far so good. \_ only if you're a complete moron. Median sale prices go down in 4Q *every year*. -tom \_ how do you make sense of this then, genius?: http://tinyurl.com/p5gfj \_ Uh, December 03 was lower than November 03, and December 04 was flat from November 04. It's called seasonal variation. That's why you compare to the same month (or quarter) one year ago. -tom \_ I am sure you understand the difference between a quarter and a month. Are you admitting that your statement "Median sale price go down in 4Q *every year*." is .... wrong? (I don't expect tom to admit he's the moron, so I will let the that pass. Let's see how tom will continue to try to wriggle.) \_ If you want to define by quarter, prices did not start to fall in Q4 2005; they hit an all-time high, and were up from Q3 2005 and significantly up from Q4 2004. As for your other "point," don't be pedantic; I am saying that the fact that sales prices dropped in December is neither surprising nor meaningful. If it would help you masturbate better, I will admit that home prices do not drop "every" December. -tom \_ No, I was defining by month and using what the original article says (october peak). You were the one who started talking about quarters, with idiotic proclaimations like "Median sale price go down in 4Q *every year*". Yes, exposing you as the "complete moron" (you started the name calling) was kind of fun. \_ I am not the one who brought up 4Q 2005; read the thread, twink. -tom \_ I was talking about peaking in "october", which is in the 4th quarter of 2005, which is very clear from the thread above. You first tried to claim that its a yearly seasonal trend, which was exposed as a load of crap. Next you tried to say that I am wrong if I am using the quarter as the time unit for the peak, but it's obvious from the above that I am using the month. I am sorry, but the only "twink" here is your honor. _/ Your claim is akin to predicting that global warming will stop in the Northern Hemisphere in Q4 2005, and then claiming you're correct after Q4 hits temperature records, because November and December were cooler than October. It's completely asinine. -tom \_ Are you predicting that home prices will go up this spring, then? Do you think Q1 2006 wil be higher than Q4 2005? \_ I think Q1 2006 will be higher than Q1 2005, which is the relevant comparison. But I'm not really in the predicting business. -tom / - So, if home prices go down from Nov to Dec, then go down again from Q4 to Q1, you will still not call that a "top"? When exactly would you admit that home prices had started falling and when that happens, when would you put that date? \_ Homes are not commodities; the fluctuation in prices over the course of the year has more to do with what homes are going on the market than what current prices are. (You don't have an open house on your perfect 3/2 move-in-ready, good school district, nice neighberhood, on Christmas). I would say that home prices have started to fall when three or four consecutive months show declines from the comparable months the year before. -tom |
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| news.yahoo.com/s/ap/20060227/ap_on_bi_go_ec_fi/economy AP Number of Unsold Homes Hits Record High By MARTIN CRUTSINGER, AP Economics Writer 2 hours, 1 minute ago WASHINGTON - The backlog of unsold new homes reached a record level last month, as sales slipped despite the warmest January in more than 100 years. Commerce Department reported Monday that sales of new single-family homes dropped by 5 percent to a seasonally adjusted annual rate of 1233 million units last month. That was the slowest pace since January 2005 and left the number of unsold homes at a record high of 528,000. Analysts viewed the new data as further evidence that the nation's red-hot housing market, which hit record sales levels for five straight years, has definitely started to cool. "The decline in new home sales in January makes it clear that there is some real softening in the housing market," said Joel Naroff, chief economist at Naroff Economic Advisors. On Wall Street, tumbling oil prices helped lift investors' spirits. The 5 percent decline was bigger than expected, dashing hopes that the milder-than-normal January would help to bolster demand. But the new report showed that with sales lagging, the increase in building activity left a total of 528,000 new homes still for sale at the end of the month, a nine-year high. Even with the softening in sales, prices were up in January with the median price climbing to $238,100, up 4 percent from December, but below the all-time high of $243,900 set in October. For the past few years, home prices have been surging at double-digit rates, gains that analysts said will likely slow now that sales are softening and inventories of unsold-homes are rising. Ian Shepherdson, chief US economist at High Frequency Economics, predicted "real downward pressure on prices over the next few months." David Seiders, chief economist at the National Association of Home Builders, said surveys showed that the number of builders who are throwing in various amenities for free in order to move homes has risen to 41 percent. Seiders predicted that home price gains, which were running around 12 percent last year, will slow to about 6 percent this year. He said a lot of this year's change will reflect less speculative investor activity and more sales spurred by people desiring to live in the homes. "Hopefully, that is all that is developing here," Seiders said. Some economists are worried that with the inventory of unsold homes rising, there could be significant downward pressure on home prices, triggering a chain-reaction similar to the bursting of the stock market bubble in 2000, a development that contributed to the 2001 recession. Federal Reserve Chairman Ben Bernanke told Congress earlier this month that for now he was looking for a moderate slowdown in the housing industry, not a crash. The 5 percent January drop in sales followed a revised 38 percent increase in December and was the biggest setback since a 7 percent drop in November. Mortgage rates have been rising gradually with the 30-year mortgage now at 626 percent, according to the latest Freddie Mac survey. Many analysts believe 30-year mortgages will rise to between 65 percent to 7 percent by the end of this year. They think that increase will be enough to trim sales of both new and existing homes and slow the double-digit gains in prices seen in recent years. The National Association of Realtors reported earlier this month that a record 72 metropolitan areas saw double-digit gains in home prices in the final three months of 2005 compared with price levels at the end of 2004. The information contained in the AP News report may not be published, broadcast, rewritten or redistributed without the prior written authority of The Associated Press. |
| www.csua.com/?entry=36812 I missed out while everyone around me is buying a second home or a vacation home in Arizona and all they can say is how stupid I am for not buying something. Likewise, when it is stagnant in the Bay Area it might be hot somewhere else. I personally would not buy right now, but it was certainly smart to have bought a few years back. Still unlikely to see a real drop in prices in bay area for a couple years I think, there's no recession here and tons of demand. But it does look a lot like 2000 in that a) prices seem ridiculous but keep rising, leading to b) ordinary people hyped up about house appreciation gains and speculating, just like every Joe was buying Cisco back in the day with no regard for investment principles. I look at the low interest rates like a money faucet the fed turned on, that seems to mostly go into housing because it's easy to do and touted as low risk. So if the housing market is like a money balloon filled from low interest rates, the question is when it would deflate... I have the feeling that it won't really deflate here due to low housing supply. Because home values are up probably 50% since you started posting this crap. after one happens, while ignoring the fact that prices rose 100% during the time he was predicting a crash. If you're wrong, I'll personally hire four large white supremacists to come to your house and sodomize you until you squeal like a pig. Many of the points are assuming the crash has already started/happened, which is blatantly false. And he makes crazy statements like this: "under current conditions, a renter would be able to live in a house for 30 years, then buy that house outright with the saved principle payments, and have an extra $227,200 of savings on top of that". PITI on a $1M house are $7k/mo, which if you are in the 40% overall bracket come out to 5800. This means you save a $1M house are $7k/mo, which if you are in the 37% overall bracket comes out to 4800. But this makes the unsupportable assumption that the house will not appreciate in value in 30 years. Some people are highly protected but overall, it's not as onerous as Berkeley or as it used to be. Wherever one lives is a home, be it apartment, condo, or house. Calling a house a 'home' is a manipulation of your emotions for profit. Prices are already down every month for Nov, Dec, Jan, and Feb." html Speculators now account for 25% of all purchases, and an additional 13% a re vacation houses, making market very likely to go into free-fall when they all sell. This winter's sales volume in Santa Clara County is only 44% of what it w as last summer, the worst ratio in at least 10 years. Prices are already down every month for Nov, Dec, Jan, and Feb. When rates go from 5% to 7%, that's a 4 0% increase in the amount of interest a buyer has to pay. This means a big hit to the finances of many owners every time interest rates go up, and this will only get worse as more adjustable rate mortgages (ARMs) get adjusted upward. com on 13 Jan 2005: "There is a double whammy inherent in these ARMs," said Frank Nothaft, chief economist for Freddie Mac "At the end of fixed-rate period you face a hike in interest rates and you have to start paying principal. There is more default risk in these interest-only ARMs than in a fully amortizing product." More than 300,000 jobs are gone from Bay Area in th e last 4 years. It's worse than Detroit car problems or Houston's oil bust. People without jobs do not buy houses and owners without jobs may lose the house they are in. Even the threat of losing a job inhibits house purchases. html we hear that "demand for labor that salaries have in fact returned to 1997 and 1998 levels." Local incomes are nowhere near what they need to be to sustain current house prices. The Financial Accounting Standards Board issu ed final guidelines that will force companies to deduct billions of dollars of employee stock options from profits starting in mid-2005. This will greatly reduce the amount of money that local technology employees will get, and that in turn will depress housing prices even more. San Francisco continues to lose population at the fa stest rate of any city in the US and most of those are professional jobs. The problem is not only the dot-com crash, but also outsourcing technical jobs to India, which continues at a frantic pace as corporations realize they can pay an Indian only 20% of what they must pay a similarly qualified employee in the Bay Area. Fewer people in the Bay Area means less demand for housing. The NASDAQ at about 2000 is still only 40% of the 5000 it was at the peak of the recent stock market bubble. The crash in the NASDAQ probably hit the Bay Area harder than anywhere else because of all the stock held by employees of tech companies. That money would have gone into housing, but is now gone. If a buyer puts 10% down and the house goes down 10%, he has lost 100% of his money on paper. If he has to sell due to job loss, he's bankrupt in the real world. Even a small price decline will bankrupt buyers with small equity. Buyers foolish enough to buy with no money down are already bankrupt, but still unaware of the fact. The rest of the economy shows little inflation, but h ousing inflation has been very high. This disconnect makes houses more expensive in terms of real work. There is no increasing salary to pay off the ever higher interest, so the only way to do it is more work. Many buyers will have to postpone retirement due to overpaying for their house. We are already reaping the consequences of poo r lending. Foreclosures are at the highest rate they've been in 40 years, about 1,500 per quarter in Santa Clara county. There are only about 4,500 sales in the quarter, so on average, about one third of house sales are ending in foreclosure. According to the California Associatio n of Realtors, the percentage of Bay Area buyers who could afford a median-price home in the region plunged from 20 percent in July 2003 to 14 percent in July 2004. Lightbulbs going on in many brains in the Bay Area: "Hey, I can just go to New Mexico or Oregon, buy a gorgeous house outright, and comfortably retire on the rest of the price difference. My neighbors just did it, so I'll have friends there too." The number of houses bought for pure speculat ion is increasing. It is now possible to buy a house with 103% financing, the extra 3% to cover closing costs, with no money down. All this is on the unwise assumption that housing will rise ever higher, covering interest payments through appreciation. Even the National Association of Home Builders admits that "Investor-driven price appreciation looms over some housing markets." Trouble at Fannie Mae and Freddie Mac They are now being forced to t ighten up sloppy lending. This means they are not going to keep buying very low-quality loans from banks, and the total money available for buying houses is falling. The best summary explanation, from Business Week: "Today's housing pr ices are predicated on an impossible combination: the strong growth in income and asset values of a strong economy, plus the ultra-low rates of a weak economy. Either the economy's long-term prospects will get worse or rates will rise. Real estate related businesses d on't make money if buyers do not buy. These businesses have a large fina ncial interest in misleading the public about house prices. They do not care about the potential bankruptcy of borrowers, so they will lend far beyond what buyers can afford. Banks sell most loans to Fannie Mae or Freddie Mac, but that is going to end as Fannie Mae shrinks. It is now much cheaper to rent a house in the San Francisco Bay Area than it is to own that same house. This is true even with the deductibility of mortgage interest figured in. Assume 6% interest ($3000 per month), $2000 closing costs, and a buyer loses $770 more per month buying than renting. Renting is a loss of course, but buying is a bigger loss. Remember that buyers don't deduct interest from income tax; Interest is paid in real pre-tax dollars that buyers suffered to earn. That money is really entirely gone, even if the buyer didn't pay income tax on those dollars before sp... |
| www.csua.com/?entry=3681 edu, made possible by generous alumni and students like you. |
| tinyurl.com/p5gfj -> investmenttools.com/median_and_average_sales_prices_of_houses_sold_in_the_us.htm Average US Real Estate Price (monthly chart) along with 12 month xaverage in red, and 12 month rate of change (ROC) green. Average US Real Estate Price Log Chart (monthly chart) along with 12 month xaverage in red, and 12 month rate of change (ROC) green. Average US RE Price (recent monthly chart) along with 12 month xaverage in red, and 12 month rate of change (ROC) green. Median US Real Estate Price (monthly chart) along with 12 month xaverage in red, and 12 month rate of change (ROC) green. Sales fell for the fourth time in six months during a balmy January, while the number of homes on the market hit a record high (Ed. Note: Right now, the number of homes on the market in the United States is 528,000) - the largest supply of homes in nine years. Sales fell 70% in November, rose 77% in October, sank 20% in September and fell 71% in August. For all of 2005, housing starts were up 56% and construction of single family homes hit a new record high of 1714 million units. So far in 2005, new home sales are up 6% from a year ago. The median sales price of a new home rose 38% YoY to $230,800. Roughly $660 million of the $830 million that flowed into sector ETFs last week went to the iShares Dow Jones US Real Estate. Sales of previously owned homes rose 94 percent to an all-time high of 668 million units last year as home buyers continued to enjoy some of the lowest mortgage rates in decades. Not much seems to trouble Federal Reserve Chairman Alan Greenspan these days -- not oil at more than $50 a barrel, record levels of consumer debt, nor a possible US housing bubble. |