Housing Bubble Bursting?

[moh malekpour]

Bobby, Roger, Brad,
The Maestro is not an official anymore. He is a free agent now and can say anything he wishes. He shoul have talked to KARA homes poeple who filed for Chapter 11 last week before he opened his mouth to Canadian Mortgage Bankers, the BMO, about the US housing market. But the Maestro is a businessman and tells his audience whatever they like to hear for a price of $1000 a pop. Nothing is wrong with that. Mortgage bankers owe him more than that

http://www.globest.com/news/751_751/newjersey/149646-1.html

Last updated: October 9, 2006 09:25am

Kara Homes Takes Chapter 11 Route

By Eric Peterson

EAST BRUNSWICK, NJ-Luxury homebuilder Kara Homes, based here, late last week filed for Chapter 11 protection, with company officials citing slowed sales for the company’s financial woes. The company reported $288 million in sales in 2005.

In the 344-page petition filed with the US Bankruptcy Court, District of New Jersey, a copy of which was obtained by GlobeSt.com, the company listed just less than $350.2 million in assets and a little more than $296.8 million in liabilities. Some $248 million of those liabilities are construction loans from various banks. Most of the rest is money owed to contractors and suppliers. Some of the largest unsecured creditors include RWZ Stairs & Rails Inc. of Lakewood, Benchmark Inc., also of Lakewood, and J. Wright Construction Inc. of Toms River.

According to information released by David Bruck of the law firm of Greenbaum, Rowe, Smith & Davis of Woodbridge, Kara Homes’ bankruptcy attorney, who cited economic conditions and a slowdown in housing sales, the company has laid off 100 of its 170 employees. The company also intends to get financing to complete projects under development, according to Bruck, and expects to seek buyers for several projects in the early stages of development. Company officials could not be reached for further comment

 

[Brad Ellis]

Moh,

Your quote, "The Maestro is not an official anymore. He is a free agent now and can say anything he wishes. He shoul have talked to KARA homes poeple who filed for Chapter 11 last week before he opened his mouth to Canadian Mortgage Bankers, the BMO, about the US housing market. But the Maestro is a businessman and tells his audience whatever they like to hear for a price of $1000 a pop. Nothing is wrong with that. Mortgage bankers owe him more than that."

1. Kara Homes is an irrelevancy in a market of our size. I doubt that Alan has ever heard of them and, even if he did, it would assuredly not have influenced his comments in the slightest.

2. So, he tells his audience whatever they wish to hear? Bunk. First, I will not believe that he gets only $1000 per speech; I'd guess it was more like 10 times that number or more. Further, if he is out spouting stuff that he knows is not true, those speaking fees will dry up overnight. And, I'll bet you that he knows that, too.

Moh, why not give this a rest? You seem so dedicated to prove to all of us that there was a housing price bubble that you will post virtually anything that supports that position. Then, if someone posts something against your position, you bring up this silly sort of accusation.

And, in the same vein, you post articles and pronouncements from equity firm owners and analysts who clearly have a vested stake in all of this but fail to even mention their motivations, reserving motivational criticism for those who disagree with you.

You already know that I think Greenspan is a very smart guy. That does not mean that I agree with him on every little thing- just that I pay close attention to what he has to say. More often than not I do agree but that is because I interpret the data in much the same way he does- only I do not have as much of it.

So now, he is interpreting the data he has in a particular way. I do not see this at all to be self serving; he knows full well- I am sure- that his biggest asset right now is his reputation and I sincerely doubt that this guy, who probably does not even need the money, is going to jeopardize his rep by pandering to anyone. He did not pander to Presidents and to assume that he will now pander to the Canadian Mortgage Brokers is just silly.

The simply fact of the matter is that he, along with the rest of us, does not yet know what is going to happen. We will need many more months of hard data to know for sure.

As I keep on saying, only time will tell.

And if you are so dedicated to this, why not give us your predictions? How do you define a bubble? Have not seen that either.

Brad

 

[Greg Bell]

Here's and interesting article fro all the individuals living in a dreamworld.

DALLAS, TX, United States (UPI) -- Although most U.S. economists are not worried about the possibility of a recession, a minority of economists takes the threat seriously.

James Stack, a market historian and editor of InvesTech Research, said not one recession in the past 50 years was forecast in advance by a major poll of economic forecasters, the Dallas Morning News reported Monday.

'At this stage of an economic recovery, now going into the fifth year, it is time for investors to get more defensive and more conservative,' Stack said. 'They have to navigate their portfolio through treacherous waters for the next six to nine months.'

The recent record highs in the Dow Jones industrial average should not make investors complacent.

'The rally in the Dow is masking subsurface weakness in the Russell 2000,' Stack said. 'More than a little disturbing is the deterioration in these smaller, secondary stocks.'

 

[moh malekpour]

Brad,
your quote

The simply fact of the matter is that he, along with the rest of us, does not yet know what is going to happen. We will need many more months of hard data to know for sure.

And this is greenspan's quote

The U.S. housing market appears to be emerging from its recent travails and the "worst may well be over," former Federal Reserve Chairman Alan Greenspan was quoted as saying on Friday.
"I suspect that we are coming to the end of this downtrend, as applications for new mortgages, the most important series, have flattened out," Greenspan said at an event in Calgary, Canada, sponsored by BMO Financial Group, according to a transcript BMO made available.

Does he say that he doesn't know what is going to happen to the market or he says that the worst well may be over?

Your quote again:

How do you define a bubble? Have not seen that either

I would like to bring your attention to the following link of one of the posts on the forum http://appraisersforum.com/1250447-post1609.html
and ask you to take a look at the historical trendline of the housing market chart from Robert Shiller ,which was posted by Randolph last week, and make your own judgement of the trend between 2001 and 2006 and compare it to other previous 110 years housing market trend and tell me if that trendline for the period of 2001 to 2006 doesn't define the bubble, what does?

 

[JSmith43]

Brad,
your quote
And this is greenspan's quoteDoes he say that he doesn't know what is going to happen to the market or he says that the worst well may be over?

Your quote again: I would like to bring your attention to the following link to one of the post on the forum http://appraisersforum.com/1250447-post1609.html
and take a look at the historical trendline of the housing market chart from Robert Shiller that was posted by Randolph last week and make your own judgement of trend between 2001 and 2006 and compare it to other previous 110 years housing market and tell me if that trendline for the period of 2001 to 2006 doesn't define the bubble, what does?

There was an amusement park overlooking a large recreational lake where I grew up. In the '50's I remember riding on the roller coaster, etc.

One of the buildings was an exercise in illusions. It was called the fun house. For a quarter or so, you could experience many illusions, including walls of concave and convex mirrors. It was amazing to me...as a child.

As an adult, working with statistics and data with ugly, analog roots, but put forth on graph paper with digital certainty, brings back fond memories of the fun house. I remain skeptical.

Actually, what we have is a hot air balloon that is supported by the hot air blown into it by the actions of buyers and sellers in the marketplace.

The added "air source" of the so called bubble is increased purchasing power via lower rates, 100% finance options, expanded risk based qualifying standards, etc. Change any of these factors that increase the lung capacity of buyers and sellers and a little air gets let out of the balloon. Or, if you are Alan Greenspan, it is hordes of recently freed Huns speaking Spanish, working for peanuts that blow air into the balloon

Most of us are talking of hard landings vs soft landings. Some of us are talking about Hindenburg like disasters. This is a hot air balloon! The worst that can happen is the gondola comes loose from the balloon. Maybe the fabric of the balloon (society) gets ripped. Well, we're screwed in more ways than housevalues.com can fathom, if that happens

 

[Randolph Kinney]

Historical Yield Curve

Interesting history, a chart showing 30 year Treasury bonds, 30 year fixed rate mortgages, and the Prime rate. We all should know that the Prime is a short term rate and mirrors the FED funds rate in lock step, a correlation of 1. There also appears to be a significant correlation between 30 year mortgages and 30 year Treasury bonds, as each mirrors the others movements.

However, by inspection of the yield history chart, one can see that there are periods where the 30 year fix rate is going down in yield before the the Prime rate and is going up before the Prime rate. This would indicate a predictive element with the 30 year fixed rate instruments over future FED funds action. One might also conclude that the FED action is following the long term 30 year rate actions, not leading them.

Note what happened in the 1979 - 80 time frame. The 30 year fixed rate instruments were leading the Prime rate up. In the 1980 - 81 time frame, the 30 year fixed rate led the Prime rate down.

Again, the 30 year fixed rate instruments led the Prime up in 1983 - 84. Again, 30 year fixed rate instruments led the Prime rate down in 1984 - 85.

The clearest and easiest example to see on this chart is in 2000 - 01 time period. The FED was playing catch up to what the 30 year instruments were telling the FED. Investors were willing to accept lower interest rates on long term 30 year fixed rate investments over short term interest rate investments that were higher yield. The FED responded by lowering the FED funs rate down to 1%. This condition lastest until 2003.

Note what happened in 2003 and 2004. The 30 year fixed rate instruments were signaling to the FED that it went too far and led the Prime rate up.

Today, you can see the 30 year instruments have peaked in yield and have rolled over, heading down in yield. The Prime rate is holding flat. Predictive?

Treasury Yield Curve

The Yield Curve - the yields of U.S. Treasury bill, notes and bonds - can reveal a lot about markets. The "usual shape" of the yield curve is positive; that is, with short term rates lower than long term. Almost all recessions have been preceded by an inverted curve (with short term rates higher than long term), and such a curve usually points to lower rates in the future. A steeply positive curve points to future higher rates.

 

[Randolph Kinney]

If Economy Can Self-Correct, Let's Fire the Fed

http://www.bloomberg.com/apps/news?pid=20601039&sid=aKsA5SoMf0Zk&refer=columnist_baum

By Caroline Baum


Sept. 27 (Bloomberg) -- Last week, the first real hint of economic distress permeated the bond market, sending short- and long-term Treasury yields tumbling.


Inflation concerns dissipated, recession fears ticked up a notch and conviction about a first-quarter cut in overnight interest rates grew stronger.

 

[Fred]

Interesting history,

Just what I said. Different interest rates moving up and down together.

 

[Fred]

Interesting history,

Just what I said. Different interest rates moving up and down together.

 

[Randolph Kinney]

Just what I said. Different interest rates moving up and down together.

Yep, very perceptive of you Steven. No one could have achieved such a spectacular observation and conclusion without your leading the way. Your work was a brilliant piece displaying your finest quality of analysis and conclusions. I wish I could have been so clear, cogent and succinct to say "rates moving up and down" not necessarily together, maybe a time shift, but that would be out of your scope of work. We all can, now, plainly see the rates moving up and then down, up and then down, up and then down, up ... down ... up ... down, up ... down ... repeat as often as is necessary until you see the pattern and get the point, rates moving up and down. Does everyone see that? Rates moving up and then down? That is all Steven had to say, anyone disagree with that?


edit: spelling