Housing Bubble Bursting?

[Randolph Kinney]

Silly statistics - how bad is the housing decline?

For those people who still believe that prices are increasing or that data presented by DataQuick suggests that prices are not declining that much, here is a graphic taken from the San Diego Tribune that shows new home data, a comparison of March 2006 prices and volume to March 2007.

I can tell you from what I have seen in certain neighborhoods in Vista, Oceanside, San Marcos, Escondido and even Carlsbad, existing home sales prices are now below values that were constituted in 2005. That is down, way down, 20% or more from the peak values.

So is this just some sort of correction for the San Diego market or is this getting close to what some might call a bursting of housing price bubble? It is hard to tell because the decline has not hit bottom yet.

 

[Randolph Kinney]

A&E Flip this house EXPOSED!

http://www.myfoxatlanta.com/myfox/pages/Home/Detail?contentId=3200981&version=2&locale=EN-US&layoutCode=VSTY&pageId=1.1.1

ATLANTA (FOX 5) -- What if you found out an American Idol contestant was lip-synching? What if the Bachelor was really married? How real is reality TV? The FOX 5 I-Team answers that question with one of America's favorite reality shows: Flip This House. Senior I-Team reporter Dale Russell found one Atlanta developer on the show, Sam Leccima, wasn't telling the truth about his renovations. Click video for more information.

This ought to take some of the "investors" out of the home market.

 

[Greg Bell]

Darn..I really like flip this house.The shows I saw always had the pretty and pink R.E. Agent swooping in and selling the rat trap for gobs of money and all the rehab group high fiving and slapping backs.Would they lie to us?I would like to follow up on some of those so called deals and see how many are still on the market or have dropping in value over the past six months , that would be a hoot.

 

[Brad Ellis]

Randolph,

Yes. I have never suggested that no markets were in a bubble- I am sure you will remember that I have long said that your county is/was one of those at real risk. I'd say that SD County is in a bubble- and I'd further say that there is real risk that good parts of FL and the Vegas market at least may well be there as well.

My comments always cerntered on the national picture- and that is mostly from my own national perspective.

And, of course on the other post I am not at all saying that the decrease of 1% was material at all- it was just an example of how some news reports can omit a single piece of data that, to some, could be important.

Brad

 

[Randolph Kinney]

Randolph,

Yes. I have never suggested that no markets were in a bubble- I am sure you will remember that I have long said that your county is/was one of those at real risk. I'd say that SD County is in a bubble- and I'd further say that there is real risk that good parts of FL and the Vegas market at least may well be there as well.

Brad, before anyone can say a market bubble exists, they will first have to know how and why a bubble is formed. After that, one has common ground to rationally describe and discuss any problem related to "bubbles".

Arbitrarily defining for one's self what they consider to be a "bubble" does not lend itself to any sort of agreement or flow of information that can add to the knowledge base.

Truly, we are in very unique and interesting times. Home prices have not experienced this kind of inflation that I can find.

My comments always cerntered on the national picture- and that is mostly from my own national perspective.

The problem with your comments, they don't make any rational sense. Are you still insisting that home prices are rising?

 

[Hank Henry]

Are you still insisting that home prices are rising?

I'll answer that, in some areas, yes. I just looked at a condo project in Maryland that the appreciation is pretty straight line over the past year. 8-9% in the last 8 months alone. I'll bet if you look hard enough, you might be able to find 2 or 3 areas of San Diego County which are tracking up also.

But, I will agree, a lot of the country is trending down.

 

[Terrel L. Shields]

Darn..I really like flip this house.

i'm aghast...even more gassed than new years eve..A developer might lie to you? This is like the Civil War expert on Antique Roadshow with the set up on the Confederate Sword...oops.

Well, more war stories. A bank checked construction and found out they were way over draws for the work done...That builder is kaput now. Another is the subject of bets by the local Realtors of how much longer he goes...probably the largest builder in one local town...Way many houses, many are not even listed so not to make the inventory appear too big. Another has 11 new houses side by side in the country, nary a buyer in site and reportedly they ran out of money and need more to finish up.

 

[Randolph Kinney]

Mortgage raters grapple with subprime piggy-backs

http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2007-05-16T171949Z_01_N16233197_RTRIDST_0_USA-SUBPRIME-SECONDLIENS-UPDATE-1.XML

NEW YORK, May 16 (Reuters) - More securities backed by second-lien subprime mortgages are expected to be downgraded in coming months as overstretched borrowers struggle to keep up with multiple mortgage payments.


Loose lending standards over recent years in the U.S. subprime mortgage market essentially paved the way for consumers to purchase their first homes while simultaneously creating heavily leveraged households.

Many first-time buyers opted to finance the full purchase price of their homes by taking a first mortgage to cover 80 percent of the sales price and a second loan -- a second-lien or piggy-back loan -- to cover the remaining 20 percent.


"A lot of these piggy-backs were made to first-time homebuyers who didn't have a strong enough credit history. Therefore, they tend to have a higher likelihood of default, in addition to an already high loss severity due to the nature of being second liens," said Quincy Tang, analyst at Dominion Bond Rating Service in New York.

"Second-liens are in big trouble. If there is no home price appreciation then there is almost no recovery on these loans," said Sarbashis Ghosh, home equity ABS analyst at Merrill Lynch. "2006 (asset-backed securities) deals contain the worst collateral attributes but unlike previous years, when you had home price appreciation to bail you out, you don't have that this time."


As a result of the write-offs, losses on second-lien mortgage pools backing asset-backed securitizations (ABS) have been much higher than expected.

Nicolas Weill, chief credit officer at Moody's, said delinquencies in second-liens are up due to overextended borrowing as well as sensitivity to home price appreciation.

In last year's fourth quarter, the rating agency downgraded 17 bonds backed by second-lien mortgages while it placed 27 other bonds on review for possible downgrade.

Another rating agency, Standard & Poor's, recently raised its expectation for losses on 2006 subprime mortgage bonds to a 5.25 percent to 7.75 percent range from 4.5 to 6.5 percent.


Companies such as S&P use loss expectations to help decide how much protection a bond must have to carry ratings ranging from the top "AAA" tier to those below "BBB-," the lowest investment-grade mark. "BBB"-rated bonds have less protection than "AAA" bonds, making them vulnerable to losses due to the slowing housing market and poor underwriting practices.


Despite the protection built into "BBB" securitized bonds, there is still some expectation of default.


"A 'BBB' issue is not a bullet-proof bond," said Tang. "There have been very few defaults in recent years because we've been in an extremely benign economic environment, with housing appreciation and lower interest rates, but that doesn't mean that if home price appreciation declines by 5 to 10 percent, that this will continue to be true," she said.

 

[Brad Ellis]

Randolph,

Your quote,

"The problem with your comments, they don't make any rational sense. Are you still insisting that home prices are rising?"

Your problem is that you cannot hold on to statements you have made in the face of contrary data.

No- I am not insisting home prices are "rising"- I said that home price averages data showed an increase over the last 3 months and that medians were also up over 2 of the last 3 months- per NAR data.

Had I said they were rising and offered such an opinion that would mean that I expect that they will continue to go up over the coming months but I have already stated that I do not think that will happen each month- and certainly not this year or until late this year anyway.

This -obviously means you are having trouble with distinguishing facts from opinion.

As to your bubble basis comments, I do not recall seeing you do this either. In fact, I am the only guy who was willing to do so.

I'll just take my leave since this is a simple waste of time now.

B

 

[murray stroupe]

RE; Yes in some areas;other areas,flop that house

For those people who still believe that prices are increasing or that data presented by DataQuick suggests that prices are not declining that much, here is a graphic taken from the San Diego Tribune that shows new home data, a comparison of March 2006 prices and volume to March 2007.

I can tell you from what I have seen in certain neighborhoods in Vista, Oceanside, San Marcos, Escondido and even Carlsbad, existing home sales prices are now below values that were constituted in 2005. That is down, way down, 20% or more from the peak values.

So is this just some sort of correction for the San Diego market or is this getting close to what some might call a bursting of housing price bubble? It is hard to tell because the decline has not hit bottom yet.

===============
Thanks for the chart/ graph Randolf;
would call that 18% decline on chart, not a bubble ,but trouble.
And with high leverage, call it double trouble.

And dont know much about SD;

wonder if existing prices below median[new $689,ooo,] did better???