Housing Bubble Bursting?

[Randolph Kinney]

David Lereah, the Realtors chief economist, said the association will lower its forecast for existing-home sales.

Oh wow! As time lapses, and he looks into his rear view mirror, DUH!, he is going to lower his forecast. I suppose he might change his wording some day about that soft landing he has steadfastly forecast.

Don't you just love some of these pundits and their forecast?

 

[Greg Bell]

Get ready...It's 1979...Look it up..

 

[Austin]

It must be due to new sale statistics being released this week because every news report on the radio today was about the cooling housing market. It is the topic of the week. One thing I heard caught my attention: "One reason for the decrease in sale actitivy is that sellers are refusing to lower their prices and are hanging tough." That is exactly what I expected sellers to do. Now I expect them to hang for a while and then when they run out of rope is when the real fun will begin. If a 4% decrease in sales nationally makes this much news, just imagine what a 25% decrease will do. 25% is the exact number of Virginia for July vs last July.

The crazy thing about this is that I have never seen so much commercial activity in my life locally. Move over Wal-Mart and make way for CVS. I was looking for land sales for a CVS appraiser in Texas on a new CVS and found two pending CVS site purchases. He is appraising a new CVS and this is all with a 10 mile radius of where I live. We are talking million dollar sites. The local city population is down 5,000 is the last 5 years but they keep on building them.

 

[Terrel L. Shields]

when they run out of rope is when the real fun will begin

Austin - you and I remember 1979 too well don't we...big run on RE then kaput. Builders around here are going to hang on as long as possible. But higher interest rates on these commercial loans make it near impossible to even rent the place for the payments let alone the taxes and insurance...Once they are in a position that something has GOT TO SELL, then put the horses in the wagon, she'll be rolling downhill on the way to bottom, just in time to put the economy in the tank.

That soft landing malarkey is just wishful thinking.

 

[Austin]

Terrell: I remember a lot of things is this regard. My dad was a broker and I remember in the 60's a local builder over built the market and one Sunday morning had 36 new houses listed in the paper. I remember he had a big promotion and to show how well he constructed houses put a live elephant in the kitchen and held an open house. Fee baloons and hot dogs too. That is a lot of houses for this area. My dad said: "Well, there goes the market for about 6 months and he was correct. I remember when all of the condo's sold for 40-cents on the dollar and all the baloons the Realtors had strung up to create a carnival atmosphere. That didn't work either. Talk about price stability, those condo prices have not gone up in the last 20 years, they have gone down from the 40 cents on the dollar level. I remember in 1974 when rates started up the market died for about a year. I remember 21% interest rates and doing cash equivlency adjustments and wrap around mortgages. I remember a guy I went to school with that was a masonray contractor. I went to appraise his house during a bust and he had the shades pulled and the door locked. He was peeping out and would not come to the door because he thought I was a bill collector. I remember seeing people in $30,000 cars out picking up aluminum cans on the side of the road so they could make their house payments. I remember a local banker back in the early 60's going to jail for mortgage fraud. That is the way they did it back then.
The more things change the more they stay the same. Famous last words: Can't happen again. The system has checks and balances in place now. Besides, the fundimental are sound..... Just ask your Realtor!
While all of this is going on, we are in the middle stages of a commercial bubble rapidly developing. Demand going down, supply going up like a rocket. When we invade Iran, that should about do it I figure. Like I predicted last year on a thread-right after the 2006 election cycle. Like early 2007.

 

[xm72mhd]

Given my experiences on here, I doubt we can agree if there was a bubble or how big it was or if it is deflated or broken. But, the TODAY show just reported that houses are getting very hard to sell and they are sitting on the market for a long time and home sales were down sharply in July.

Makes you wonder what it will be like when those ARMS kick in.

 

[Randolph Kinney]

I don't know about the rest of you guys but July is normally the best volume month of the year around here. It is pitiful. The month of August is worse than July.

Investors are exiting the market; that decreases demand and increases inventory. We are not into distress sales as normal yet however, that is coming. The volume should really drop when price declines take hold in the market.

No bubble here though. :new_2gunsfiring_v1:

 

[JSmith43]

Given my experiences on here, I doubt we can agree if there was a bubble or how big it was or if it is deflated or broken. But, the TODAY show just reported that houses are getting very hard to sell and they are sitting on the market for a long time and home sales were down sharply in July.

Makes you wonder what it will be like when those ARMS kick in.

A mini refinance boom? Conveniently, Conv. 30 fixed rates have fallen quite a bit in the last few weeks. We have some wonderful 30 year products, and the borrowers can even have interest only payments for the first 5, or even 10 years.

There are lots of little airbags out there that will cushion the fall for many people that, for example, are coming off a 3/1 or 5/1 ARM.

 

[George Hatch]

Lots of products and certainly some opportunities for the loan originators, but it's going to take a lot more work and they're going to have to be smarter to bring it together.

 

[Randolph Kinney]

A mini refinance boom? Conveniently, Conv. 30 fixed rates have fallen quite a bit in the last few weeks. We have some wonderful 30 year products, and the borrowers can even have interest only payments for the first 5, or even 10 years.

There are lots of little airbags out there that will cushion the fall for many people that, for example, are coming off a 3/1 or 5/1 ARM.

What are the breakdown of your borrowers according to LTV? Credit score?

What I am seeing here is a demand for refinancing of ARMs however, the LTV is more than 95% and / or the credit score is poor. It appears there are more of suicide loans (80% fixed first, 20% ARM second) that are going into default than are being refinanced.

It is also being reported that credit card debt is rapidly growing and this is attributed to those people who were borrowing against their homes instead of using their credit cards for spending and now have to use credit cards.