Housing Bubble Bursting?

[moh malekpour]

Does anyone know why an article from a reliable source like bloomberg disappears within 2 or 3 days?

 

[Randolph Kinney]

Soft Landing?

According to RealtyTrac, there were 101,507 foreclosed properties in March 2006, that's "only" a 63% increase from a year ago. The strains are starting to surface.​

 

[moh malekpour]

The real estate soft landing crowd theory is that the nation economy cannot afford the hard landing with twin deficits going on and the Fed will do anything in its power to prevent it to happen. This might be correct in theory but in practice we got to see how much leeway the fed has. The fed in one hand, has to deal with inflation and, in another had with recession and slow down of economy. The Fed would not repeat the past rate cut unless the economy gets really slow. If the fed doesn’t increase the rate from next meeting on, we may get soft landing but if the tightening continuous, the hard landing is the possibility.

 

[Randolph Kinney]

FED ain't done yet

Former Fed officials Robert Heller and Lyle Gramley: "I don't think there's any doubt they'll go to 5 percent in May ... I expect them to sit still after that".​

The FED is closely watching employment data, cost data, and spending data. As long as the employment numbers continue to rise with increasing spending, there is a chance for further rate increases by the FED after 5%. The question is whether they will act before or after the fall election if the data suggests more increases in interest rates are needed.

Real estate can have a pronounced weakening but the FED can tighten any way because of inflationary concerns.​

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[DTB]

According to RealtyTrac, there were 101,507 foreclosed properties in March 2006, that's "only" a 63% increase from a year ago. The strains are starting to surface.​

According to an Oct. 20, 2002 New York Times article:
Mortgage foreclosures hit a record 1.23 percent of all home loans in the second quarter, up from 1.10 percent in the previous quarter and exceeding the previous record of 1.14 percent in the first quarter of 1999, according to the Mortgage Bankers Association of America.
And according to the chart caption from a first quarter 2002 FDIC Regional Outlook newsletter article:
The foreclosure rate was at 0.10 percent in 1979 and rose very sharply, to 0.45 percent in 1990.
So the foreclosure rate is 12x what is was in 1979 and nearly 3x what it was in the previous recession.

Relying on this little nugget would have helped one miss a GIGANTIC run up. ROFL

 

[Brad Ellis]

Randolph, Moh

You can continue to cite short sale, forclosure, default and other statistics as much as you want. Most of this data is correct- no one is disputing it.

Where the argument will be is whether or not this alone causes a "bubble" (if there actually was one) to burst, or if it even contributes to a burst.

No one- including me- is saying that the market cannot go down or will not. No one is saying that local markets may not decline. I already said some will go up, others down, and some will just cruise along.

The bulk of these 80/20 loans, I/Os, neg-ams, etc. have been done since 2001. And forclosures are only up 63%- all the way to 1.7%

Forgive me if I do not panic. We all saw this coming.

Now let's see if it continues to climb and gets to really serious levels. Then we will know.

Brad

 

[Steve Owen]

I sold out of my REIT's last year... missed the top of that market, they did very well over the last twelve months. But... the commodities I bought did even better (one way to hedge against high oil prices) so I guess I shouldn't complain. I told my investment advisor "I believe the reasons for selling were sound... only a fool tries to find the top."

 

[Randolph Kinney]

Randolph, Moh

You can continue to cite short sale, forclosure, default and other statistics as much as you want. Most of this data is correct- no one is disputing it.

Where the argument will be is whether or not this alone causes a "bubble" (if there actually was one) to burst, or if it even contributes to a burst.

No one- including me- is saying that the market cannot go down or will not. No one is saying that local markets may not decline. I already said some will go up, others down, and some will just cruise along.

The bulk of these 80/20 loans, I/Os, neg-ams, etc. have been done since 2001. And forclosures are only up 63%- all the way to 1.7%

Forgive me if I do not panic. We all saw this coming.

Now let's see if it continues to climb and gets to really serious levels. Then we will know.

Brad

Excuse me Brad, I have not said the word bubble or the word burst or bust. I have used the phrase "soft landing" and "hard landing". Landings of any sort are nebulous to talk about because as the statistics change with time (price, volume, delinquencies, foreclosures, defaults, short sales, etc.), so people's definitions change.

One thing you have to agree with, last year's statistics indicated a better real estate market than this year's statistics. What changed? Only the direction; some statistics are up, other statistics are down.

People are concerned when the direction is down and they have a stake that is being directly affected. Panic sets in when it is too late to do anything about it.

Headlines demonstrate the concern (see below).

Bernanke must learn to walk the line

Commentary: Triggering a recession is a real chance for Fed

HEMPSTEAD, N.Y. (MarketWatch) -- With bond yields touching new highs lately, the Federal Reserve faces a new dilemma: Raise rates too much and housing takes a dive. Stop too soon and inflation flares up.

To avoid either outcome, Ben Bernanke, the new Fed chief, will have to walk the line between too much tightness and not enough.

Right now, the Fed's more worried about rising prices throughout the economy than about falling prices in the housing sector.

Looks like the FED is not so concerned about the price of a house. No panic yet.

Mike, did you miss the run down in interest rates that went with the run up in the price of a house? All you have to do is step up to plate and put your money down and take your chances. Some people are now selling their real estate and moving their money to other investment vehicles just like the same people who sold out their holding in stock market and went long on bonds and real estate back then. They are not missing it now, are you?

 

[moh malekpour]

Randolph, Moh

You can continue to cite short sale, forclosure, default and other statistics as much as you want. Most of this data is correct- no one is disputing it.

Where the argument will be is whether or not this alone causes a "bubble" (if there actually was one) to burst, or if it even contributes to a burst.

No one- including me- is saying that the market cannot go down or will not. No one is saying that local markets may not decline. I already said some will go up, others down, and some will just cruise along.

The bulk of these 80/20 loans, I/Os, neg-ams, etc. have been done since 2001. And forclosures are only up 63%- all the way to 1.7%

Forgive me if I do not panic. We all saw this coming.

Now let's see if it continues to climb and gets to really serious levels. Then we will know.

Brad

I agree with your assertion that those loans have been there since 2001 but you are talking about two different times and two different volumes of loans.
First, there were not too many of them available then than are now.
Second, the real estate market was on its way up then and interest rate on its way down. The borrower with 100% financed loan had equity built up as soon as signed the loan documents so it was a confidence building for both the lender and the borrower that the loan would not going to go bad. Starting from the middle of 2005 till now, the situation has been reversed: the values have been stagnated and the rates have been increased. Although, the values have been flattened since mid 2005 and rates have been increasing since then, the lenders have been engaging more than ever on 100% financing and still are doing it. 46% of loans that were made since mid 2005 have been 100% financed with neg arm.
So, please look at those 100% financed loans that were made since mid 2005 and tell me if you agree with the following:
1- The borrowers of 100% financed loans didn’t have money to put down to get a fixed amortized low rate loan.
2- Borrowers and the lenders agreed that the 80/20 was the only way to get the transaction closed although the loan was adjustable with negative amortization and the possibility of increased loan payment in near future was very obvious.
3- Both borrowers and the lenders made an assumption that the property values would be increasing in the way that borrowers would be built up equity to pay those neg amortized and adjustable rates.
4- That assumption and hope was not based on the borrowers increasing salary, promotion, or any other income but just property increase and equity built up.
5- Since that assumption and hope are on the verge of extinction, the most recent borrowers of 100% financed loans are going to be the canary in a coal mine.
I don't see how those borrowers with 100% financed loans since mid 2005 are going to handle rate increase of their adjustable loans if the property values just stop increasing. Whers the money comes from to pay for the loan payments. If they had money a year ago or could save it a year ago, they would have it then to put down and get a fixed rate.

 

[DTB]

Excuse me Brad, I have not said the word bubble or the word burst or bust. I have used the phrase "soft landing" and "hard landing". Landings of any sort are nebulous to talk about because as the statistics change with time (price, volume, delinquencies, foreclosures, defaults, short sales, etc.), so people's definitions change.

One thing you have to agree with, last year's statistics indicated a better real estate market than this year's statistics. What changed? Only the direction; some statistics are up, other statistics are down.

People are concerned when the direction is down and they have a stake that is being directly affected. Panic sets in when it is too late to do anything about it.

Headlines demonstrate the concern (see below).

Looks like the FED is not so concerned about the price of a house. No panic yet.

Mike, did you miss the run down in interest rates that went with the run up in the price of a house? All you have to do is step up to plate and put your money down and take your chances. Some people are now selling their real estate and moving their money to other investment vehicles just like the same people who sold out their holding in stock market and went long on bonds and real estate back then. They are not missing it now, are you?

Ain't missing a thing, just started a 750K project 4/1.

I understand diversification but I don't understand how real estate professionals think they can do better in other investment vehicles. Do you really think you understand precious metals and commodities as well as real estate?