Housing Bubble Bursting?

[Karl]

I don't care IF I hadn't done a appraisal in a month I always make RE Agents think I am unbelivablly busy. might as well have fun with em!!

 

[Michigan CG]

New housing down 40% from 2006 and 60% from 2005 in some parts of our city.

 

[Randolph Kinney]

New housing down 40% from 2006 and 60% from 2005 in some parts of our city.

So what's the problem?

Are you suggesting that maybe there was a "bubble" in your market? :mellow:

 

[Michigan CG]

So what's the problem?

Are you suggesting that maybe there was a "bubble" in your market? :mellow:

7% decline in values from 2005-06, but now holding steady pricewise...but it would suck to be a guy in construction about now......POP!

 

[Randolph Kinney]

Subprime risks come home to roost for hedge funds

Subprime risks come home to roost for hedge funds

NEW YORK (Reuters) - Bad bets revealed by some hedge funds in recent weeks may mean other funds will be forced to accept the market's deteriorating views on subprime mortgages and report their own losses soon.

But based on the falls in subprime mortgage indexes, price declines this year may have wiped out some $20 billion in value on the $135 billion in CDOs created using the riskier portions of subprime mortgage bonds since 2003.

 

[Randolph Kinney]

Housing data is bogus

Housing-market data might paint a better outlook than reality warrants

Here's a scary thought about the housing market: Things may be far worse than what's already being revealed by the troubling government and industry statistics.

At issue is what goes into sales price data and what does not. When those numbers are crunched, many of the incentives that sellers are using to lure buyers -- including cash rebates -- aren't being included. That suggests prices may be falling faster in many markets than is now being reported.

The same goes for how the mortgage-application indexes don't account for the implosion of lenders. That could have the effect of masking a slowdown in demand, which is why the housing market could be in for rough sailing much longer than most anyone anticipates.

 

[Terrel L. Shields]

When those numbers are crunched, many of the incentives that sellers are using to lure buyers -- including cash rebates -- aren't being included.

like we said...

could be in for rough sailing much longer than most anyone anticipates.

I am falling back on a 2000 book on Crashes and Manias where it pointed out that RE was having problems in 1927, but the crash (29) did not precipitate a decline immediately in RE. RE actually bottomed much later (33)...why? RE investors thought they could ride it out, but high taxes (created by high prices) and interest payments steadily eroded the RE owner's postion until they were forced to sell or were foreclosed on. Chicago was a classic case. 75% of the 200 or so banks failed and almost all failed over RE loans, not stock market losses.

 

[moh malekpour]

Why a Housing Recovery Is Far Off

http://online.barrons.com/public/ar...taAM_20070806.html?mod=9_0002_b_free_features

THE SPEED OF THE DROP IN HOME SALES has slowed over the past few months, leading some commentators to argue that the housing-market crisis will soon be over. But it's far too soon to start anticipating a recovery. In fact, there are solid reasons to think that the bottom might not be reached for a year or more.
The dynamics have changed since sales began to fall in the summer of 2005. At that time, the Fed was in the middle of its program to normalize short-term interest rates, which inexorably raised the cost of adjustable-rate mortgages. The flood of cheap ARMs when the fed-funds rate was very low was a key driver of the housing boom's latter stages. Many borrowers who were lured into the market by the availability of cheap ARMs should never have been granted loans, but there weren't many complaints at the time.

The key problem now is not the level of nominal mortgage rates, which are not particularly high by the standards of the past decade. Instead, buyers are backing off because the real mortgage rate has rocketed and continues to rise. At the peak of the boom, people essentially were being paid to buy a home. The average 30-year fixed mortgage rate in 2005 was a tax-deductible 5.9%. The Office of Federal Housing Enterprise Oversight says that home prices rose 10.7% that year

As long as buyers expected prices to keep rising, the implied real mortgage rate -- home-price increase minus mortgage-interest rate -- was minus 4.8%. This was an enormous incentive to borrow heavily to buy real estate. Result: a bubble

Bulls have recently been cheered by rising mortgage applications, but the second chart shows that these have become an unreliable indicator. Applications have overshot actual home sales in previous cycles, too, probably because, when the market is weak, a higher proportion of applicants back out of deals.
In this cycle, however, the gap is bigger than in the past, and it probably will widen.
People with less-than-perfect credit are finding it hard to obtain loans at acceptable rates, so they're apparently making multiple applications in the hope of finding a friendly lender. Thus, it makes sense to emphasize readings from the pending existing sales index and the National Association of Homebuilders' monthly survey. Both are still deteriorating.

In sum, the consequences of the bursting of the housing bubble will be felt for years

 

[Randolph Kinney]

Some banks begining to show stress

Credit problems showing up in pair of bank warnings

NEW YORK (MarketWatch) -- Huntington Bancshares Corp. warned Monday that second-quarter profit has fallen prey to a triple play of credit-related issues: rising loan-loss provisions, ineffective hedging and declining net-interest margin.

 

[Greg Bell]

This unwinding and crash will be in slow motion , many years to achieve the economy of 1934..