Housing Bubble Bursting?

[Randolph Kinney]

Assuming your individual market has yet to experience a downturn, do you continue to appraise based on historical data which does not reflect the anticipated downturn or do you go ahead and become more conservative in your estimations as to reflect your knowledge of current economic trends?

I have some neighborhoods with declining prices. They are evident by the number of short sales and foreclosures that are active listings or pendings. These are typically lower price than historic closed sales and below the rest of the homes on the market. As the price goes down on these distressed sales, it has the affect of chasing the other listings off and out of the market; the number of listings are declining.

Lenders are demanding a statement on the number of properties that are short sales or foreclosures in the market area and how that is affecting the marketability of the subject.

I have some neighborhoods that are not declining in price. They are evident by the absence of short sales and foreclosures. The listings and pendings tend to reflect recent closed sales and are within 5% of the peak historical price levels of 2005.

I have competing neighborhoods that are affected by new construction; builders are offering significant discounts or "free" upgrades. Although the recorded sales price is inclusive of the concessions made by the builder, there is no way to actually document how much of the sales price included seller concessions. This has caused an increase in seller concessions on existing homes, which some times are reflected in the MLS.

It is really dicey out there. A lot more research and time is spent gathering details and talking to parties to a transaction to glean relevant information. Not all information is disclosed in the MLS. You can only support value by what is known.

 

[JSmith43]

Is there anyone reading this thread from an area where there has been a downturn with enough of a track record to support a negative time adjustment?

This would be a good time & place to post a war story

 

[Randolph Kinney]

I have 2; one in Oceanside a SFR, one in Vista a condo.

Do you want details like what they paid a year ago versus the highest listing price on market, which was $40,000 lower?

BTW - neither of these were accepted by the lender.

 

[JSmith43]

BTW - neither of these were accepted by the lender.

That was what I wanted to know

 

[Ty Yu]

U.S. Housing Bubble Burst in 38 States

There are some people who still fail to see the "writing on the wall". The economy will continue to get worse in 2007. There will not be any rebound in the housing market in the next two years or more. Irrational prices will continue to plummet. The *GDP* growth in America is now smaller the some insignificant little island called England once referred to as Great Britain.

Housing Undercuts U.S. GDP / October 27, 2006
http://www.forbes.com/markets/2006/10/27/gdp-housing-economy-markets-econ-cx_rs_1027gdp.html

Economy in the U.S. Slams on the Brakes / October 27, 2006
http://www.iht.com/articles/2006/10/27/business/usecon.php

U.S. "GDP" Real Growth: Only 1.6% in Third Quarter
http://www.bea.gov/bea/newsrelarchive/2006/gdp306a_fax.pdf

Home prices drop in 45 metro areas; sales fall in 38 states / November 20, 2006
http://www.usatoday.com/money/perfi/housing/2006-11-20-home-sales-summer_x.htm

Realtors: Home Sales Fall in 38 States / November 20, 2006
http://abcnews.go.com/Business/wireStory?id=2667451&CMP=OTC-RSSFeeds0312

 

[Randolph Kinney]

psychologically - it is a bubble

http://www.marketwatch.com/news/story/commentary-psychology-favors-buyers-housing/story.aspx?guid=%7B49CC3F2B%2D9AB7%2D413F%2D809D%2D1E59F6E65CF3%7D&siteId=

The bubble blew up from the bottom of the market, as ultra-low interest rates, combined with creative financing by banks and other lenders, enabled people who otherwise wouldn't have qualified for mortgages to purchase homes.

Once the Fed decided to raise rates, lots of low-end buyers found their monthly payments ratcheting higher, thus forcing many to sell. At the same time, others soon found that they couldn't afford the house of their dreams and backed away altogether.

As a consequence, demand dropped while supplies rose, leading to a rare, but palpable, decline in selling prices. This has happened with both existing homes as well as newly constructed ones.

Buyers, though, could care less about the outlook for interest rates: They smell blood.

Prospective homebuyers have become increasingly reluctant to make an offer, figuring that if they wait a week or two, prices will go lower. All those unsold homes out there are proof of the pudding -- they're making sellers anxious while buyers simply bide their time.

Against this backdrop, the supply of unsold homes shows no signs of being worked down.

Once psychology turns, it takes a long time to reverse.

 

[Terrel L. Shields]

New construction still booming, buyers still submitting contracts for more than the list price

new home market here is still hot

It does not represent the full market

I still have not yet seen signs of there being a bubble

no strong indication that the market is weakening

Those are all quotes from the first pages of this thread...what a difference a few months of sobering reality brings

 

[JSmith43]

The *GDP* in America is now smaller the some insignificant little island called England once referred to as Great Britain.

Where do you get this stuff, Ty?

The USA GDP is approximately 5.5 times that of the United Kingdom.

Japan is second in the World, & produces approximately 1/3 the GDP of the USA. Take the European Union as a whole and it's GDP approximates the USA GDP.

And some of you wonder why we need a fence?

 

[DTB]

We need a fence to keep some out and another fence to cordon off some who are already here.

 

[moh malekpour]

Here is a list of countries of the world sorted by their GDP and by far the US GDP is larger than any of them and is almost equal to european union, however, US GDP growth declined in the 3rd quarter to 1.6% relative to the 2nd quarte of 2.6% because of housing decline.

http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)

Rank Country GDP (millions of USD)
— World 44,454,843
— European Union 13,502,800
1 United States 12,455,825
2 Japan 4,567,441
3 Germany 2,791,737
4 People's Republic of China 2 2,234,133
5 United Kingdom 2,229,472
6 France 2,126,719
7 Italy 1,765,537
8 Canada 1,132,436
9 Spain 1,126,565
10 Brazil 795,666
11 South Korea 787,567
12 India 771,951
13 Mexico 768,437
14 Russia 763,287
15 Australia 708,519[1]
16 Netherlands 629,911
17 Belgium 371,695[1]
18 Switzerland 367,571
19 Turkey 362,461
20 Sweden 358,810[1]
21 Republic of China (Taiwan) 346,178
22 Saudi Arabia 309,945[1]
23 Austria 305,338
24 Poland 303,229[1]
25 Norway 295,672
26 Indonesia 281,264
27 Denmark 259,643
28 South Africa 239,419
29 Greece 225,591
30 Ireland 200,770
31 Finland 196,053[1]
32 Iran 192,349[1]
33 Portugal 183,619
34 Argentina 181,549[1]
35 Hong Kong, PRC 177,703
36 Thailand 173,130
37 Venezuela 132,848[1]
38 Malaysia 130,835
39 Israel 129,841
40 United Arab Emirates 129,642
41 Czech Republic 124,310
42 Colombia 122,269
43 Singapore 116,775
44 Chile 115,314
45 Pakistan 110,970[1]
46 Hungary 109,195[1]
47 New Zealand 108,520
48 Algeria 102,026[1]
49 Nigeria 99,147[1]
50 Romania 98,566
51 Philippines 98,371
52 Egypt 89,477[1]
53 Ukraine 82,876
54 Peru 79,394
55 Kuwait 74,598[1]
56 Bangladesh 60,806
57 Kazakhstan 56,088
58 Morocco 51,621
59 Vietnam 51,388
60 Slovakia 47,459
61 Libya 38,738[1]
62 Croatia 38,510
63 Luxembourg 36,531
64 Ecuador 36,489
65 Qatar 34,341
66 Slovenia 34,030
67 Angola 32,810[1]
68 Oman 30,734[1]
69 Belarus 29,566
70 Dominican Republic 29,089[1]
71 Tunisia 28,674[1]
72 Sudan 27,542[1]
73 Guatemala 27,366
74 Syrian Arab Republic 27,297[1]
75 Bulgaria 26,719
76 Lithuania 25,504
77 Serbia 24,058[1]
78 Sri Lanka 23,534
79 Lebanon 22,053[1]
80 Costa Rica 19,985
81 Kenya 18,730[1]
82 Turkmenistan 17,114[1]
83 Cameroon 16,991[1]
84 El Salvador 16,974
85 Uruguay 16,878
86 Cyprus 16,695
87 Côte d'Ivoire 16,373
88 Trinidad and Tobago 16,252[1]
89 Latvia 15,826[1]
90 Iceland 15,823
91 Panama 15,467[1]
92 Yemen 15,193
93 Bahrain 13,515[1]
94 Estonia 13,108
95 Jordan 12,712
96 Tanzania 12,607
97 Azerbaijan 12,561
98 Myanmar 12,151[1]
99 Uzbekistan 11,652
100 Ethiopia 11,174[1]
101 Ghana 10,694[1]
102 Botswana 10,196[1]
103 Jamaica 9,731
104 Brunei Darussalam 9,531
105 Bolivia 9,358
106 Bosnia and Herzegovina 9,343
107 Uganda 8,729
108 Gabon 8,724[1]
109 Senegal 8,609[1]
110 Albania 8,379[1]
111 Honduras 8,294
112 Nepal 7,515
113 Paraguay 7,468
114 Afghanistan 7,309[1]
115 Zambia 7,269[1]
116 Democratic Republic of Congo 7,094
117 Equatorial Guinea 7,062[1]
118 Mozambique 6,491[1]
119 Georgia 6,395
120 Mauritius 6,231
121 Cambodia 6,219[1]
122 Namibia 6,121[1]
123 Republic of Congo 5,980
124 Chad 5,907[1]
125 Bahamas, The 5,870[1]
126 Republic of Macedonia 5,722
127 Burkina Faso 5,635[1]
128 Malta 5,454
129 Mali 5,390
130 Madagascar 5,033
131 Nicaragua 4,910[1]
132 Zimbabwe 4,491[1]
133 Benin 4,406[1]
134 Haiti 3,983[1]
135 Papua New Guinea 3,931[1]
136 Armenia 3,782
137 Niger 3,439[1]
138 Guinea 3,293[1]
139 Netherlands Antilles 3,204[1]
140 Barbados 3,058[1]
141 Moldova 2,917
142 Lao People's Democratic Republic 2,875[1]
143 Fiji 2,861[1]
144 Swaziland 2,546[1]
145 Kyrgyz Republic 2,441
146 Tajikistan 2,311
147 Rwanda 2,137[1]
148 Togo 2,107
149 Malawi 2,076
150 Mongolia 1,881[1]
151 Mauritania 1,871
152 Lesotho 1,467[1]
153 Central African Republic 1,377[1]
154 Suriname 1,345[1]
155 Sierra Leone 1,213[1]
156 Belize 1,111[1]
157 Cape Verde 983[1]
158 Eritrea 970[1]
159 Antigua and Barbuda 873
160 Bhutan 864[1]
161 St. Lucia 818
162 Burundi 799[1]
163 Maldives 787
164 Guyana 786[1]
165 Djibouti 709[1]
166 Seychelles 695[1]
167 Liberia 530
168 Grenada 490[1]
169 The Gambia 461[1]
170 St. Kitts and Nevis 453[1]
171 St. Vincent and the Grenadines 421[1]
172 Comoros 369
173 Samoa 336
174 Vanuatu 332[1]
175 Timor-Leste 331[1]
176 Guinea-Bissau 302[1]
177 Solomon Islands 294
178 Dominica 283[1]
179 Tonga 215
180 São Tomé and Príncipe 70[1]
181 Kiribati 63[1]