Housing Bubble Bursting?

[Dee Dee]

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.

This guy gets paid the big bucks to spin for the NAR, so being correct in his forecasts has never been his priority.

 

[moh malekpour]

here is a local market watch report

Dominion home sales fall by almost half
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By Alistair Barr, MarketWatch
Last Update: 6:25 PM ET Jul 7, 2006


SAN FRANCISCO (MarketWatch) -- Dominion Homes Inc. said late Friday that home sales almost halved in the second quarter because of tough conditions in the residential real estate market.
The Dublin, Ohio-based company reported sales of 356 homes worth $66.2 million during the second quarter vs. 655 homes worth $123.1 million in the same period a year earlier.
Second quarter 2005 results included the sale and closing of 20 model homes valued at $3.2 million, which the company leased back. There were no model home sale/lease backs during the second quarter of 2006.
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DHOM8.73, +0.22, +2.6%) said it delivered 398 homes in the second quarter vs. 548 homes a year ago. At the end of June, the company's backlog was 548 sales contracts worth $109.5 million, down from 887 contracts valued at $177.1 million.
"The decline in home sales, deliveries and backlog reflect the difficult home sales conditions in the company's markets," Dominion said in a statement.
Alistair Barr is a reporter for MarketWatch in San Francisco

http://www.marketwatch.com/news/story/story.aspx?guid={F0985724-210C-4857-9B94-05364F214F8F}

 

[Randolph Kinney]

Farewell to $60 oil; Brace yourself for $80

It appears there is more concern going forward with energy prices. It takes awhile for prices in general to reflect rising energy cost. This is not good news for the FED, hello interest rate increases.

SAN FRANCISCO (MarketWatch) -- Crude's back at record levels, with the $60-per-barrel price we saw just last year out of the picture for now, maybe even forever, and $80 oil a real possibility by the end of the summer.

http://www.marketwatch.com/news/story/Story.aspx?guid=%7B19065F21%2D1BF5%2D4C0B%2DACB8%2DADCEE6970B3B%7D&siteid=

 

[Randolph Kinney]

Trade Imbalance Is Getting Worse

The nation's current account deficit, the broadest measurement of U.S. trade, is approaching a record $800 billion, or the equivalent of 6.5% of gross domestic product.

Economists say that in order for the trade gap to adjust, there must be some decline in the dollar, which would raise import prices. Financial markets are worried about a sharp decline in the value of the greenback, but even a gradual weakening of the dollar raises the possibility of further inflationary pressures.

Further interest rate hikes are likely to come. Stand by for another FED hike of the FED funds rate in August. NAR chief economist will react by stating there is no housing bubble however, home values will decline as he is yelling at the FED to stop raising the damn interest rates.

 

[Bobby Bucks]

I won't get the prize for post #1000. I was reading this.

http://www.nytimes.com/2006/07/09/u...=1152417600&partner=homepage&pagewanted=print

 

[Steve Owen]

I love catching "experts"

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.

Overall, this is one of the best articles I've read on this issue. However, the statement "The economy only turns down when the Federal Reserve takes aggressive action to cause a downturn." is simply not true. Think Great Depression. The economy can take a downturn if the fed causes it, or more significantly, if the fed doesn't do what it needs to do to prevent it. But, there are many other potential causes of a downturn.

 

[Randolph Kinney]

I won't get the prize for post #1000. I was reading this.

http://www.nytimes.com/2006/07/09/us/09orleans.html?ei=5094&en=c87641ac61f830d8&hp=&ex=1152417600&partner=homepage&pagewanted=print

Bobby, I couldn't help but notice the very first word of the article's title: Investors Lead Home Sale Boom in New Orleans

Buying homes that are in the flooded areas makes sense if: 1) The government repairs all the levies before the next flood and insures the homes from future floods. 2) The people who were displaced either move back or are replaced by new people moving in.

But it looks like you have a significant element of speculation going on in that real estate market to make it prone to any economic correction or lack of repopulating.

 

[Randolph Kinney]

Overall, this is one of the best articles I've read on this issue. However, the statement "The economy only turns down when the Federal Reserve takes aggressive action to cause a downturn." is simply not true. Think Great Depression. The economy can take a downturn if the fed causes it, or more significantly, if the fed doesn't do what it needs to do to prevent it. But, there are many other potential causes of a downturn.

I agree with you Steve. But I especially liked this guy telling us it is the FED's fault because of its aggressiveness as if there is no other reason. The FED was very aggressive when it lowered interest rates down to 1% to head off what it perceived was a deflationary spiral setting in.

I especially like this quote from one article concerning deflation:

"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.

 

[Big ole Boy]

Fixed supplies controls everything else

The FED can not control the amount of oil that is pulled out of the earth which has found its limited at 85 million barrels per day. No matter how many more holes we punch into the ground we will not get anymore than 85 million per day. (from T.Boone Pickens)

Now if you don't believe what Pickens is saying ..... that your business (wishful thinking - I might add)

The FED can not control inflation when the inflation is external to the business cycle. All the FED can do is slow down the economy to the point where hyper-inflation does not take hold. The FED may have to slow the economy to the point that our GDP contracts for the next 10 years until we get "retooled" to other forms of energy and other forms of running an economy which is not based on "runaway consumerism".

An agrairian economy that feeds and clothes itself. But at least we have got the internet and can fly CEO's around in planes that have king size beds and hammocks.

 

[Bobby Bucks]

No matter how many more holes we punch into the ground we will not get anymore than 85 million per day. (from T.Boone Pickens)

I wonder what will happen if we have an oil bubble? Are there reviewers in the oil futures arena?