Housing Bubble Bursting?

[Randolph Kinney]

Shiller's S&P Database Excel Available

http://www.irrationalexuberance.com/shiller_downloads/ie_data.xls

Shiller's data for the S&P index, with price, earnings, and interest rates.

 

[Randolph Kinney]

What Are Homebuyers Thinking?

http://www.project-syndicate.org/commentary/shiller41

What Are Homebuyers Thinking?

Robert J. Shiller


Many places around the world have been in a housing boom since the late 1990’s. As I argued last year, in the second edition of my book Irrational Exuberance , the boom is rooted in speculative investment by ordinary homebuyers, fueled substantially by the worldwide perception that capitalism has triumphed, and that all people must look out for themselves by acquiring property. Convinced that private ownership has become essential to smart living, buyers bid up home prices.

There is more in this article and it is worth the read.

 

[Brad Ellis]

Randolph,

Interesting but he simply equivocates too much.

One of those sentences sounds curiously like the American Dream.

What I note in the article is his statement that supply increases to catch up to demand and as demand abates supply over-reaches and then comes back down.

Hmmm- Econ 101.

But, his notion that we are not speculating on car prices going up because the Chinese are using up all the steel is far more interesting.

Actually, I see us in the midst of a commodity price run-up (currently in the "breather" stage) and do believe higher commodity prices will come. I just bought into a new issue set to come out 11/1 that is a natural resources fund. You know they are not making anymore air and water either (well, maybe air).

Brad

 

[Ty Yu]

Burst Bubble: Artificial Equity Begins To Vanish

The largest construction company just sold 100 trucks to a Texas firm and laid off over 100....New construction selling over $250,000 simply is not moving. Foreclosures are up. Builders are getting behind on payments. Most banks simply will not loan on development tracts. The local business center reports the turndown is 'significant'. If that isn't a downturn in housing, what is?

I came across this article from Bloomberg News dated October 11, 2006:

New-House Prices Will Fall for First Time in 15 Years (Update4)
http://www.bloomberg.com/apps/news?pid=20601087&sid=adKLFTFPkhqw&refer=home

Last year, I read that this housing bubble reached *uncharted territory* and no one really knew how devastating it would be when it burst. The mounting evidence can no longer be ignored or concealed behind the propaganda that the irresponsible media used in herding in the *sheep* for the financial slaughter. It was not long ago, that *the media* were encouraging people to *drive until they qualify* and to *buy today, before you cannot afford tomorrow!* People should not have ever been able to borrow 12-15 times their annual income and become eligible for 120% financing on a *no doc, interest only home loan*. Is it any wonder that the bankruptcy laws were overhauled and went into effect on October 17th, 2005. The housing debt trap had been set, most of the *sheep* were gathered in and now the gate at the slaughterhouse is secured.
Bankruptcy filings soar ahead of law changes
http://msnbc.msn.com/id/9457018/

The imminent economic collapse facing the United States will become manifest in 2007, worsening in 2008.

*Thank you Mr. Kinney* for posting such a detailed post/chart on Oct 10, 2006. It brilliantly illustrated the absolute madness from the Housing Bubble of 2001-2006.

 

[Randolph Kinney]

Brad, what I find interesting about Shiller is that he has studied behavior as it relates to investing and has developed indices for same. I find his reasoning and support of the pyscology of fear of missing the greatest speculative investment opportunity of a lifetime compelling. People's perceptions and ways of thinking are hard to change but once they do, their interest in housing as a major speculative investment asset isn't likely to change quickly. That is how he compares pre 1980 with the last 10 years in housing. And because of that shift in how the preception of housing is a investment for the common man, you will have a floor under the price levels. People who thought they missed the party will be looking for opportunities to get in.

The other interesting aspect of this changed behavior, it is global.

 

[moh malekpour]

For some unknown reasons some posters here have a very hard time to accept the reality of current real estate market. Instead of bringing their own data, chart or proofs, they try to make fun, belittle or ignore data or charts that are from some well known researchers and economists.
I am not saying that every piece of data available on the net is reliable and accurate but I am saying that if you disagree with the result, challenges it and bring your own data and chart to the scene.
The term of bubble has become a taboo for some who are overly sensitive to it. They keep asking for the definition of bubble. Well, bubble is not a real estate or economic term. It is a street slang, analogized for the market run up or extremely out of order. Because the shape and form of the bubble is very weak from the exterior and has only air in the inside, it is a slang analogy for a weak real estate market with no stark foundation.

 

[JSmith43]

The imminent economic collapse facing the United States will become manifest in 2007, worsening in 2008.

Ty, I think you should run a search function. I think the imminent economic collapse of the United States has been covered.......Oh! Sorry, that must have been in the Al Qaeda chat room

 

[Fred]

Moh

For some unknown reasons some posters here have a very hard time to accept the reality of current real estate market

Except for those who may be at the apocalyptic end of the spectrum, I didn't notice anyone in the thread no accepting reality. Can you name someone?

The term of bubble has become a taboo for some who are overly sensitive to it. They keep asking for the definition of bubble. Well, bubble is not a real estate or economic term. It is a street slang, analogized for the market run up or extremely out of order. Because the shape and form of bubble is very week from exterior and has only air in the interior, street slang call a weak real estate market with no stark foundation a bubble

Maybe you are just using the term badly and everyone else’s sensitivity is just fine. Among, correction, crash and bubble – bubble has always referred to the largest and most extreme declines.

Bubble has historically been used for “investments” that are little more than wagers on the greater fool theory, like the Tulip Craze in Holland. Applying the term to real estate is inappropriate. So if you think you have a sound point, why muddy up your own message by using bad vocabulary. It makes your message indistinguishable from those who think this is going to be a decline of bubble proportion.

The imminent economic collapse facing the United States

If it is imminent, it would happen even if real estate prices had not been bid up the last few years.

 

[Randolph Kinney]

Fed must hike if inflation stays at current level

Fed must hike if inflation stays at current level

By Robert Schroeder & Greg Robb, MarketWatch
Last Update: 4:14 PM ET Oct 11, 2006


WASHINGTON (MarketWatch) -- The Federal Reserve must resume tightening interest rates if core consumer inflation persists at its current level, said Jeffrey Lacker, the president of the Richmond Federal Reserve bank.

Lacker, who dissented from the FOMC's decisions to hold rates steady at its last two meetings in favor of higher rates, said he was worried that investors do not believe core inflation will decline.

"We don't have any perfect measures of inflation expectations, but what we do have suggests that market participants do not foresee a rapid fall in core inflation. This is why I have argued for further policy actions to convincingly restore price stability," Lacker said in a speech to the District of Columbia Chamber of Commerce on Wednesday.

The Richmond Fed president said it's likely that inflation will moderate over the near term but noted uncertainty over how long it will take.

 

[Randolph Kinney]

September foreclosures up 19 percent

http://eastbay.bizjournals.com/eastbay/stories/2006/10/09/daily21.html?jst=b_ln_hl

California topped the list of states with the most new foreclosure filings in a report released Wednesday by RealtyTrac Inc.

Foreclosures in the state grew 19 percent from August to September, pushing California to the top of the list for the most new foreclosure filings in September. The number of foreclosures in the state tripled since September 2005, with 14,806 properties entering some stage of foreclosure, or about one for every 825 households. This represents an increase of 40 percent since July.

California retained its August rank of 12th in the nation for foreclosure rates.

Nationally, foreclosures dropped 1 percent from August, but still showed a 63 percent increase over September 2005. Michigan, Colorado and Nevada led the nation in foreclosure rates.

Irvine-based RealtyTrac has tracked foreclosure rates since 1996.