Housing Bubble Bursting?

[Randolph Kinney]

Bobby,

There are people in RE and related occupations (including appraisers) who are getting starved out in some of these markets right now. There are people who are losing their homes because of pricing declines and mortgage resets. You might ask some of them how they feel about the health of the market. I'm pretty sure they're not in disagreement with the reports of declines.

Oh wit, dried wit, the real estate market is petering out, and it has lead to lingering doubt, while skeptics reign, but will suffer bane, like the real estate market itself, it having a significant drought.

 

[Big ole Boy]

Randolf, I'm a bubble clown

Of course one must remember that bubble clowns grow into direct proportion to the complete absence of humor expression; albeit for personal reasons, bubble talk is an exercise of complete abandonment of the world around me where clowns mingle with other clowns for total amusement and tongue and cheek entertainment of the highest order of personal satisfaction; there are those unfortunate few that may take something I say, seriously.

 

[Big ole Boy]

Table dressings and bubbles

http://quote.bloomberg.com/apps/news?pid=20601087&sid=awiUo51GOGwY

``It's a brilliant move for GM to pursue talks because it distracts everyone from what's really at issue, and that's that they are a troubled company,'' said Dennis Virag, president of Automotive Consulting Group Inc. in Ann Arbor, Michigan. ``This is all table dressing.''

 

[Bobby Bucks]

George I do sympathize with the unfortunate who lose their equity due to an untimely purchase. For the speculators, I have no sympathy….they knew the rules when they jumped in….or they should have. My job is merely to report the market some days, benefit from it on others.
David does GM still manufacture automobiles? I thought they’re now in the health care industry?

 

[Steve Owen]

Related to possible bubbles...

... bubbles in land prices popping.

http://www.kansascity.com/mld/kansascity/business/14981787.htm

Land values are becoming a flash point for investors and analysts who watch the builders sector.

Of course, if a builder's stock goes belly up, it mainly affects investors in that stock. However, if a large number of builder's stocks go belly up it could have a negative effect on the general economy. Interestingly enough, this could put an upward pressure on housing prices, since fewer builders would likely translate into fewer housing starts, leading to imbalance on the supply side of the market. Possibly scenario: housing prices were on decline, leading to at least hiss, if not pop, of the bubble balloon... then, several builders went under and balloon starts to re-inflate.

 

[Big ole Boy]

The "New" GM Asprin

David does GM still manufacture automobiles? I thought they’re now in the health care industry?

Industrial socialism at its finest - capitalism with a headache

 

[Randolph Kinney]

... bubbles in land prices popping.

http://www.kansascity.com/mld/kansascity/business/14981787.htm


Of course, if a builder's stock goes belly up, it mainly affects investors in that stock. However, if a large number of builder's stocks go belly up it could have a negative effect on the general economy. Interestingly enough, this could put an upward pressure on housing prices, since fewer builders would likely translate into fewer housing starts, leading to imbalance on the supply side of the market. Possibly scenario: housing prices were on decline, leading to at least hiss, if not pop, of the bubble balloon... then, several builders went under and balloon starts to re-inflate.

That is the typical housing cycle; not enough, too much. Balance is relative to the buyer or seller, depending on who can buy (wants to buy) or who has to sell (wants to sell). Price is the discriminator, financing and terms are the enabler. Income is a must.

 

[Randolph Kinney]

Hey Fed -- Enough With the Interest Rate Hikes!!!

Fresh from NAR and their economist, David Lereach, a plea to quit raising the damn interest rates. It is killing the housing market.

From a real estate market perspective, these revelations are disquieting. At present, over half of the nation’s housing markets are experiencing a meaningful cooling of home sales activity. Home sales for the entire state of Florida are down about 25 percent year to date (as of April), and California is posting similar dire numbers. There is no doubt that a transition is taking place in the real estate sector and with fingers (and toes) crossed we hope it will be an orderly transition from boom to soft landing.

In the wake of the real estate boom, there are a number of large metropolitan areas whose housing markets are now fragile and vulnerable to higher interest rates. To the point, these markets have an inordinately high market share of speculative investors and variable-rate mortgage loans. Over 70 percent of all mortgages originated in California during the past two years were variable rate loans. And most of those loans were interest-only loans. It is easy to explain why: affordability. A median income household living in San Francisco had to stretch its credit with an interest-only mortgage to afford a home in a metro area where the median price was over $740,000. And California is not alone. Metros such as Miami, West Palm Beach, Orlando and Washington, DC also have a high composition of variable rate mortgage loans. The bottom line? If rates continue to increase, the higher monthly mortgage payments from the re-pricing of variable rate mortgages could result in higher delinquency and foreclosure rates, which could aggravate already sluggish local housing markets.

So much for that soft landing in home prices, the chief cheer-leader is now saying there is a significant reason to believe the housing market is in trouble.

http://www.realtor.org/reioutlook.nsf/pages/economistcommentary?opendocument&WT.mc_t=LS070506&WT.mc_n=Rsrch

 

[Randolph Kinney]

A 'Loud Pop' Is Coming, But Limited to Inflated Regions

WSJ: What has you so concerned?
Mr. Heebner: I'm worried that more people will default on their mortgages. Risky mortgages such as interest-only and pay-option adjustable-rate mortgages require no principal amortization and in some cases payment of only a fraction of the interest due, have been widely used in the last two years. Some people got 100% financing for their homes. It made the tech bubble look like a picnic. When housing is going up rapidly and you can buy far more than your income can support, some people are eager to make big profits by extending themselves financially.
As housing prices fall more people will be under water, and these people are just going to walk away from their homes. They are going to say, 'I'm outta here.' You're going to see increasing foreclosures over the next several years. As [home] prices come down, it will create a difficult environment for home builders.

WSJ: What data have you most worried?
Mr. Heebner: We're seeing a huge increase in inventories of unsold homes. The role of incentives in selling a home is increasing so the weakness doesn't show up immediately in list prices. Large price declines will follow in inflated markets.

WSJ: Given the big size of some of the markets that you see as inflated, won't the regional 'pops' reverberate throughout the economy?
Mr. Heebner: The pops will reduce the growth rate of the economy, but they won't precipitate a downturn. The economy only turns down when the Federal Reserve takes aggressive action to cause a downturn. I think the current pattern of higher interest rates reflects a decision to normalize rates after taking them to abnormally low levels to stave off potential deflation. When the extent of the housing slowdown becomes apparent, I think the Fed will pause, rather than take rates to a level that threatens an economic downturn. The only real threat to the economy is an overly aggressive Fed, and not a downturn in the housing market, which won't by itself push the economy down. In fact, it provides an insurance policy against the Fed becoming overly aggressive.

http://online.wsj.com/public/article/SB115204791463597636-_dwtqavFBN5w_kTARC8T9SKB_Fs_20060711.html?mod=mktw

 

[Randolph Kinney]

Growing evidence of real-estate 'bust'

HONG KONG (MarketWatch) -- Evidence is mounting that the global property cycle is turning down, as rising interest rates and heightened inflationary pressures combine to put the brakes on demand for real estate, according to a Morgan Stanley report.

Xie estimates the strength underlying the real-estate market may have exaggerated global economic growth by one percentage point in 2004 to 2005. The consequence is that the global economy could suffer a boomerang effect of below-trend growth in 2007 to 2008.

"Innovations in the global financial system have led to a rising correlation of property markets to each other and central bank-policies. It has essentially turned deflationary shocks of the past 10 years into a global property bubble," Xie said.

He cites some telling statistics to illustrate his point.
The value of U.S. housing has risen to 173% of gross domestic in 2005 from 135% in 2000. And in Australia, housing values rose to 347% of GDP in 2005 from 271% in 2000.

Western consumers, who've supported their consumption binge through home-equity refinancing instead of wage gains, would have little choice but to rein in spending if home prices decline. As consumers retrench, corporate earnings will decline, sending the equity market lower.

http://www.marketwatch.com/News/Story/Story.aspx?guid=%7BA4D6C263%2D4036%2D4B7F%2DAF45%2D62282BAA3C84%7D&siteid=mktw&dist=nwhreal