Housing Bubble Bursting?

[hastalavista]

New mortgage applications are up sharply, the number of pending home sales is up, the national economy continues to expand moderately, and the rate of unemployment just declined again — to 4.6%.

All of which begs the question: Just what kind of housing bust is this anyway? With gloom-and-doom purveyors forecasting imminent crashes in dozens of metropolitan areas, how could such key fundamentals as jobs, interest rates and even pending home sales simultaneously be trending in the opposite direction?

(my bold)

Anecdotally speaking....

What I am seeing in my market is this:
Many of the refi's I'm seeing (origination and review) are situations where the borrower had their home up for sell and couldn't sell it. Needless to say, their expectations on the refi value are typically "over-exuberant".
On the pre-foreclosures/NOD appraisals, I'm seeing the same thing; new mortgages (less than a year old), house has been for sale and now they are trying to refinance.

As to "pendings are up", I'm seeing many properties that are "pending" now, that were on the market 3-6+ months (average market time here is 30-60 days; beginning of the year, it was 30 or less) at a significantly reduced price (15% in one specific neighborhood in Tracy, CA I researched).

All of which begs the question: Just what kind of housing bust is this anyway?

One that was built upon artificially low mortgage payments with the expectation that continued home appreciation would result in a LTV where one could "swap" the existing mortgage for another.

 

[Brad Ellis]

Randolph,

Thanks for posting the article- did not get a chance to read the LA times this weekend.

I respect Harney. He has always avoided the hype and seems to get his research right.

Of course, whether Kohn and the others who call this a correction (that includes me) are right, still must get some more data. But I fully agree that this appears to be what is going on.

I think one of the things we often forget is that housing, unlike some other assets, serves a purpose greater than just as an investment. The shelter component along with the illiquidity of the market serves to mitigate a "flight" from the asset.

Dee Dee,

If you look at the Moody's chart for markets they expect to decline 10% or more, there are 16. Of these, only 6 are really substantial cities, and even these do not include the really major cities. And, of course, that also presumes that they are correct.

But, in the end, basic economics will take over- just as it always does.

Back to my mantra: Time will tell.

Brad

 

[Randolph Kinney]

Foreclosures On The Rise In San Diego, Riverside

Foreclosures On The Rise In San Diego, Riverside

Oct 13, 2006 9:07 am US/Pacific
CBS Broadcasting Inc.

(CBS) RIVERSIDE, Calif. San Diego and Riverside counties are outpacing most of California and the rest of the nation in foreclosure activity, it was reported Friday.

According to the foreclosure tracking firm RealtyTrac, San Diego County had 4,069 properties in some stage of foreclosure for the quarter that ended in September, compared with 970 properties for the same quarter in 2005, an increase of 319 percent, The Californian reported.

Riverside had 4,403 such properties for the most recent quarter, versus 1,297 for the same quarter in 2005, a 239 percent increase, the newspaper reported.

From the third quarter of 2005 to the third quarter of 2006, the rate of increase was 104 percent in California and 25 percent for the entire country, the Californian reported.

Alan Gin, professor of economics at the University of San Diego, blamed the local foreclosure rates on the region's high cost of housing combined with wages that have not kept pace.

According to most recent figures, the median price of an existing home in San Diego was $598,580 in August. In the same month, home sales were down 25.8 percent from a year ago, according to the California Association of Realtors.

 

[Steve Owen]

We just got thrid quarter results analyzed. Number of sales was down in the MLS compared with 3rd quarter last year. Number of listings was up. List price vs. sale price ratio was nearly the same. Average sp slightly lower than avg sp in 3rd q of '05. Days on market was slightly longer.

Just about what I expected.

I still don't see any evidence of a bubble pop here... and, I would not call this a buyer's market... yet. But, there is some downward price pressure and some evidence of pain on the sellers side of things.

I've had three requests for relos in the last week (after not having any for six months). What's up with that? Well, as I've always said, it's not a good idea to look at your own experience and extrapolate it to the market. Could just be coincidence.

 

[Randolph Kinney]

National Foreclosures Remain Elevated In September

http://www.realtytrac.com/ContentManagement/PressRelease.aspx?ItemID=1240

NATIONAL FORECLOSURES REMAIN ELEVATED IN SEPTEMBER By RealtyTrac Staff

Foreclosures Up More Than 63 Percent From September 2005, 39 Percent Year to Date

IRVINE, Calif. – Oct. 11, 2006

“September was the second straight month in which more than 110,000 new foreclosure filings were reported nationwide, evidence that the spike in August was not just a one-month anomaly,” said James J. Saccacio, chief executive officer of RealtyTrac. “Foreclosure filings are up 39 percent year to date and have already surpassed the total number reported in all of 2005. If they continue at the current pace, foreclosures will exceed the 1.2 million mark by the end of the year.”

California claims top spot among states with most new foreclosure filings

Thanks to a 19 percent increase in foreclosure activity, California leapfrogged past Texas and Florida to report the most new foreclosure filings of any state in September. The state documented 14,806 properties entering some stage of foreclosure, nearly three times the number reported in September 2005 and a foreclosure rate of one new foreclosure filing for every 825 households — 1.3 times the national average. The state’s foreclosure activity has risen more than 40 percent over the last two months.

The RealtyTrac Monthly U.S. Foreclosure Market Report provides the total number of homes entering some stage of foreclosure nationwide and by state over the preceding month. Data is also available at the individual county level. RealtyTrac’s report includes properties in all three phases of foreclosure: Defaults — Notice of Default (NOD) and Lis Pendens (LIS); Auctions — Notice of Trustee Sale and Notice of Foreclosure Sale (NTS and NFS); and Real Estate Owned, or REO properties (that have been foreclosed on and repurchased by a bank).

​

 

[Randolph Kinney]

Just Keep Reminding Yourself - These Are Good Times

I am amazed at the picture that is painted by looking at the low unemployment rate, GDP growth, increasing wage growth, low interest rates, rising stock market and economic forecasts for the future averaging to say a GDP growth slow down, a soft landing and no major problems.

Yet, the housing market is reacting as if these were bad times. I wonder how it will look to the housing market when bad times do come around?

 

[Steve Owen]

I am amazed at the picture that is painted by looking at the low unemployment rate, GDP growth, increasing wage growth, low interest rates, rising stock market and economic forecasts for the future averaging to say a GDP growth slow down, a soft landing and no major problems.

Yet, the housing market is reacting as if these were bad times. I wonder how it will look to the housing market when bad times do come around?

Well, I've seen an individual industry pull the economy down before. The auto industry in a couple of specific patches in the 60's and 70's comes to mind. So, maybe the times aren't as good as all the economic data (with the exception of housing) seems to indicate.

However, I have another possible hypothesis. California leapfrogged past Florida, and Nevada has a lot of the same problems, but with the exception of Michigan things don't look all that bad in a lot of other places. So, maybe what is really happening in those former hot markets is that they are coming back in line with reality.

Yes, I mentioned all the stats are down for Joplin... but, only slightly down. If you are not making your living selling real estate or you are not trying to get out from under an unside down loan, you probably really wouldn't notice the difference.

Of course, if you are a flipper in California, things might not look too good right now.

 

[murray stroupe]

Re;74%

However, I have another possible hypothesis. California leapfrogged past Florida, and Nevada has a lot of the same problems, but with the exception of Michigan things don't look all that bad in a lot of other places. So, maybe what is really happening in those former hot markets is that they are coming back in line with reality.

Yes, I mentioned all the stats are down for Joplin... but, only slightly down. If you are not making your living selling real estate or you are not trying to get out from under an unside down loan, you probably really wouldn't notice the difference.

Of course, if you are a flipper in California, things might not look too good right now.

====================
Steve;

Might be right on CA, dont know but another appraiser, titled ''El flippo flop'';
still has 74% of CA flippers making money.

That sounds pretty good, probably those adding or finding value by fixing up , not just appreciation, may be doing even better.

Would be suprised, if we dont see some severe downtrends due to the interest only loans.125% loans.......

 

[Terrel L. Shields]

The general economy and low interest rates have helped prevent housing from tumbling overnight. Few downturns are created overnight. The peak drilling during the oil boom was 1981, with 4900+ drilling rigs in operation. The price for oil weakened about 10% and slipped another 20% over the next couple of years as the rig count slowly slid downhill. It was March of 1986 when oil prices finally tumbled from $40 in 80-81 to $8 in 86. Meanwhile natural gas remained steady through the early 80's until it followed oil's lead. At that point drilling activity began a steady decline until reaching a 50 year low of less than 700 rigs operating. That's what has led to the oil price 'bounce' that started in 2001, staggered a bit for a couple of years and peaked last winter with $70+ oil and $14 natural gas. There are about 1700 drilling rigs operating today, or barely 1/3rd that was operating in 1980.

The third leg of the housing stool remains steady, market liquidity. Overbuilding has occurred, over-pricing has occurred, the market has slowed, but interest rates are low, borrowers can find banks that will loan, and the regulators so far, have kept out of it pretty much.

This will be a slow bubble collapse if the banks 'self-regulate' and tighten lending slowly, but if the Feds step in like they did in the mid-80's with the S & L crisis, then credit will be frozen, prices will fall sharply, and the RTC or whatever they will want to call it this time, will make life miserable for us all. And so long as the banks don't collapse or are successfully sued by the investors who may lose their shirt in Real Estate "bundles", then perhaps the Feds will stay out.

There is the separate issue of buying property and 'fixing it up' or holding as an investment and some people are good at making money in RE both up the trend line and down the trend line, just as a good stock investor knows when to short a stock.

 

[Fred]

The general economy and low interest rates have helped prevent housing from tumbling overnight.

For a couple of hundred years so far.