Housing Bubble Bursting?

[Terrel L. Shields]

It is time for the developers and builders to move from a mindset of 'Build it and they will come' to a mind set that is more strategic and thoughtful," according to Kathy Deck, associate director of the Center for Business and Economic Research at the Sam M. Walton College of Business at the University of Arkansas.

" 2,084 complete but unsold, unoccupied single-family homes from December through February, a 152 percent increase over the same period last year. The 2,084 empty homes is a six month supply.

The report also said there are 19,200 residential lots approved for development in Benton and Washington counties, a 47 percent increase.

Just 50 miles S of Steve, there is a different world. Builders are falling like flies. 8% commission to the selling agent...wow.

MEANWHILE BACK AT THE BEAR STERNS RANCH..

No takers at 11 cents on the dollar should put a new perspective on the meaning of marked to market. The best bid was 30 cents on the dollar for assets held by the High-Grade Structured Credit Strategies Fund and a mere 5 cents on the dollar for the High-Grade Structured Credit Strategies Enhanced Leveraged Fund.

Wow. 5 cents on the dollar. That's quite an enhancement for something supposed to be High-Grade. Given that redemptions are suspended there is no escape for many investors caught in the jaws of this Bear Stearns Trap.

from globalinvestor blogspot

 

[Steve Owen]

What is happening in the housing market is reflected across the United States. Some markets are small or not contributory to any significant degree on a national level. That would be the state of Missouri in general and Joplin specifically. What happens there has no consequence on Wall Street or in California. However, what happens in California can affect Wall Street and even Missouri, California having that large of an economy.

This is true to some extent. Part of the reason our housing market has not tanked is because of people escaping California and other high price markets to come to a place they can afford to live.

Part of the reason I posted what I did was to see if it would elicit comments from other places. Although I don't know, it would be interesting to see if the situation is not similar in Little Rock, Boise, St. Paul, Jackson, and Springfields everywhere. So, perhaps it is not appropriate to say the housing bubble is bursting, but rather the California and Florida bubbles are bursting.

 

[Randolph Kinney]

This is true to some extent. Part of the reason our housing market has not tanked is because of people escaping California and other high price markets to come to a place they can afford to live.

Part of the reason I posted what I did was to see if it would elicit comments from other places. Although I don't know, it would be interesting to see if the situation is not similar in Little Rock, Boise, St. Paul, Jackson, and Springfields everywhere. So, perhaps it is not appropriate to say the housing bubble is bursting, but rather the California and Florida bubbles are bursting.

I suppose you can characterize certain markets as bursting bubbles. However, that leaves many markets as something less than bursting, maybe a shade of gray, declining volume with some decline in price.

One aspect I have noticed is the correlation with house price appreciation and the use of ARMs to declining markets. House prices in areas that never went above $300,000 for the peak price and the use of fixed rate 30 year mortgages do not seem to have a problem.

What you are really saying about California is that the population must be declining because of all the people moving to other areas. That has to do something on the demand side, making matters worse, don't you agree?

My brother who lives in Reno tells me that new home sales are setting a record this year. The bad side, the home sales (new and existing) are to Californians and they come with California values (moral and expectations for services). He really hates the idea of Californicating Reno.

 

[Randolph Kinney]

Hedge funds are crashing now

Funds Accelerate Subprime Exit Strategy

[FONT=Arial, Helvetica, sans-serif]NEW YORK -- Two hedge funds that invest in subprime mortgages have run into trouble, with one shutting down and a second stopping investors from withdrawing their cash, The Wall Street Journal reported Thursday.[/FONT]

[FONT=Arial, Helvetica, sans-serif]Investors received a letter earlier this week from Braddock Financial Corp. of Denver. It said it was closing its Galena Street Fund, which mainly invests in bonds backed by subprime mortgages extended to borrowers with poor credit, and suspending redemptions until it can sell assets in the roughly $300 million fund, the paper reported.[/FONT]

[FONT=Arial, Helvetica, sans-serif]A year ago, the fund held about $400 million. But about $100 million seeped out as the value of subprime-related investments deteriorated and investors withdrew money, a Braddock official said, the paper reported.[/FONT]

[FONT=Arial, Helvetica, sans-serif]Another high-profile hedge fund, United Capital Asset Management LLC, in Key Biscayne, Fla., has also stopped letting investors withdraw money from four hedge funds. It has some $500 million in assets, heavily tied to subprime mortgages, and had suffered losses and had received a deluge of withdrawal requests, the paper reported.[/FONT]

 

[Karl]

Californians came here to AZ for "cheap" housing NOW they're trying to sell to get back to Cal. cause they found that cheap housing equates to cheap pay for jobs. Then of course we had the Cal. "Investors" they took a beating!!

 

[Randolph Kinney]

Californians came here to AZ for "cheap" housing NOW they're trying to sell to get back to Cal. cause they found that cheap housing equates to cheap pay for jobs. Then of course we had the Cal. "Investors" they took a beating!!

Absolutely right about that Karl. My brother does not know what future Reno has waiting for it.

 

[Steve Owen]

I suppose you can characterize certain markets as bursting bubbles. However, that leaves many markets as something less than bursting, maybe a shade of gray, declining volume with some decline in price.

One aspect I have noticed is the correlation with house price appreciation and the use of ARMs to declining markets. House prices in areas that never went above $300,000 for the peak price and the use of fixed rate 30 year mortgages do not seem to have a problem.

What you are really saying about California is that the population must be declining because of all the people moving to other areas. That has to do something on the demand side, making matters worse, don't you agree?

My brother who lives in Reno tells me that new home sales are setting a record this year. The bad side, the home sales (new and existing) are to Californians and they come with California values (moral and expectations for services). He really hates the idea of Californicating Reno.

Your first paragraph: Exactly (and possibly, some other markets as increasing).

Second: I had not studied that, but it seems like a reasonable supposition.

Third: I never intended to imply that the California population was declining. That would require a population study, including inward and outward migration, including undocumented, together with births and deaths. In my experience, a lot of the Californians coming here are either retiring or entering business here. In either case, wages are not so important as economic stability. One appraisal I did was for Californians who had first moved to Nevada and were now moving to Branson, with a stop along the way to buy a business in Jasper County. So far, the impact of Californians moving in seems to have been mostly positive. One other very important factor: the internet. If you have good internet services you can do a lot of today's jobs from anywhere... why not live someplace nice?

Fourth: Seattle went through being Californicated about twenty years ago. It had a major impact on their property values, much to the dismay of long-time natives. I kind of followed the story, as well as possible from news services, the wsj, etc., for about the next decade, but I don't know what the long-term effect was. I suspect that Californiation of an area is partly dependent upon geographical closeness, although areas of the east cost, including the South, might be susceptible.

 

[Randolph Kinney]

Californians not buying Arizona houses

Meritage reports ugly preliminary results with no recovery in sight

BOSTON (MarketWatch) -- Meritage Homes Corp. said its preliminary home orders fell 28% and its cancellations bumped up in another sign that builders continue to struggle with a slumping housing market with scant relief seen in the near future.

The Scottsdale, Ariz.-based company Friday said its preliminary second-quarter home orders fell 28% from a year earlier to $502 million, while its cancellations rose to 37% of gross orders, up from 32% in the year-ago quarter and from 27% in the first quarter of 2007.

"Weak demand and high inventory levels have increased competition among home builders, pressuring margins despite reductions in new home starts, lot supplies and operating costs," said Chief Executive Steven Hilton in a statement.

Many signs are pointing to a housing market that may worsen further before it improves. Economists say the market still needs to burn off excess inventory created when speculators fled the market when the mood shifted in 2005. Problems in the subprime-mortgage market and rising mortgage rates also continue to weigh.

Foreclosures are up and the subprime mess has spilled over into hedge funds that made bets in riskier mortgage-backed securities.

"The home-building industry is in a severe recession, the subprime loans created a potentially major psychological problem for investors, and now the related hedge-fund debacle is in the news every day," wrote A.G. Edwards Chief Market Strategist Al Goldman in commentary earlier this week.

Additionally, the critical spring selling season has been a bust for home builders despite "aggressive price reductions as a means to ignite the market," Zhang at Wall Street Strategies said.

 

[moh malekpour]

There are few important events happening in the housing market these days, which are beyond the local economy or local real estate market. These events are nationwide and are going to hit every real estate market any where in the US and may be even in the world. These events are supposed to be constructive and for the good of the economy but they are going to be painful specially for those who are not ready for them or just cannot get used to them. Some of these events have already started but it takes awhile to feel their effects on the market.
1-tightening loan underwriting anywhere and for any kind of loan.
2-No more sub prime loans, as we knew. Sub primes are going to be done with large lenders and they require qualification for the risks that they are going to take. It is going to be very hard to get a loan from a sub prime lender.
3-interest rates for prime loans are going to increase at least 1 or 2 more percent.
4-those who already have refinanced their existing loans may have to wait a long time to be qualified to change their loans to a better loan or cash out. If they are not already on the verge of default and able to pay their loans, they may just keep the house and assume they are renting for a while instead of owning the home for appreciation because there isn’t going to be any appreciation or equity for a while.
The only thing that may change the whole situation is if we get an economic depression and recession but it doesn’t appear to be happening soon.

 

[Greg Bell]

The one thing many don't understand about real estate is that the first rule is
"Real Estate is an imperfect market".Taught to R.E Broker's out of the box is Real Estate is very slooooooooooooow to react to outside conditions that are very liquid.The only thing liquid in a house is in the toilet bowl.The meltdown will take every long time and the longer the goofballs put the brakes on the required crash , the longer and deeper the pain will be.So put on your rose colored glasses and whistle past the Realtors office , This will be a hoot....