Housing Bubble Bursting?

[Greg Bell]

Greg, I'm beginning to think you really like all this doom and gloom.

Maybe we should change your name to...."Reaper."

Peter Schiff is my hero

 

[Greg Bell]

First name "Grim"

 

[Alison Swain]

Maybe if everyone just stops talking about it, it'll just go away.

Maybe so. Ever heard of the Law of Attraction?

 

[Alison Swain]

First name "Grim"

Actually, I love reapers. "Dead Like Me" was one of the funniest shows ever. Two bad it only lasted two seasons. Wish Showtime would bring it back (from the dead).

 

[Greg Bell]

Actually, I love reapers. "Dead Like Me" was one of the funniest shows ever. Two bad it only lasted two seasons. Wish Showtime would bring it back (from the dead).

Great series.Sometimes run on the Sci Fi channel now..

 

[Randolph Kinney]

Housing Crisis White Paper Report

http://www.moneyandmarkets.com/whitepaper/Housing_white_paper.pdf

Specifically, the Federal Reserve failed to raise interest rates soon enough, or by a large
enough margin, to suppress extreme house price inflation in the early 2000s. As a result,
price growth greatly surpassed growth in income, employment, and population. Potential
home buyers were subsequently pressured to use high-risk loans to afford a home. And
speculators, seeking short-term profits, piled in, driving prices up even more.

It was a classic asset bubble, one that has left home prices hovering at levels above what
the underlying fundamentals would support. If we try to support these artificial price
levels too in order to minimize losses for lenders and speculators, it merely risks
stimulating more over borrowing by future home buyers.

Indeed, in many parts of the country, declining home prices may be part of the solution.
They should help make homes more affordable for prudent home buyers earning average
salaries and borrowing with traditional mortgage loans.​

 

[Terrel L. Shields]

It was a classic asset bubble

good enough for me and why a lot of people now crying "calf rope" couldn't see it...well, I guess every generation wakes up to a new world and thinks there was no history in the old one.

 

[Greg Bell]

Industry issues? “Walk into the mustard-and-Similac-stained office of any Realtor in Southern California and ask the following question: ‘The newspapers keep telling me the real estate market is dropping like a rotten pear. Foreclosures are up, lending is tight, and I’ve got a cousin who serves complimentary Rob Roys at his Sunday open houses and still can’t draw a crowd. So why should I even be wasting my time considering these astronomical asking prices?’”

“No matter how you phrase the question, you’ll get the same answer: ‘Prices are stable, but houses are just staying on the market a little longer, so now’s a good time to get in.’”

“So it’s spectacularly good or bad timing that Southern California Multiple Listing Service has decided to limit disclosure of days-on-the-market and cumulative-days-on-the-market data.”

“First, this is clearly a change that serves nervous home sellers and their agents, the only parties who would be concerned that apparently lengthy days-on-market periods might prompt buyers to make low-ball offers.”

“Second, despite this hiccup, the real estate market is experiencing a rapid trend toward transparency.”

“Third, it’s a sign of how much the market has changed from a few years ago, when the buying frenzy made days-on-the-market a nonissue. So here’s some advice: When an agent tells you that overpriced starter home you’re looking at just listed two days ago, smile, nod and check to see how thick the dust is on the windowsills.”

 

[Steve Owen]

http://www.moneyandmarkets.com/whitepaper/Housing_white_paper.pdf

All told, it is estimated that up to 2.4 million borrowers could lose their homes, while
lenders, borrowers, and investors may lose as much as $110 billion. By many measures,
this is one of the most difficult times for the housing and mortgage markets in modern
history.

I would tend to agree with the end statement, but the opening line does not seem to mesh with previous posts on this thread concerning the percentage of homeowners going into foreclosure... and, $110 billion is not as big a loss as what I have read evaporated in the tech stock debacle.

these dramatic changes in the savings and lending environment tipped the usual balance between prudent savings behavior and speculative
risk taking, injecting a pervasive, nationwide bubble mentality into the housing market. At the time, only a minority of observers noted the dangers.

Note that I was one of the minority of observers who noted the obvious dangers of such behavior. Unfortunately, the world often does not heed my sage advice.

The percentage of homes purchased as second homes or investments climbed from 34% in 2003 to 40% in 2005, the highest recorded by the National Association of Realtors

There it is! Where you do not have unreasonable speculation, you do not have a run up in prices. When you do not have a run up in prices, there is no bubble to burst. (Note that is not the same thing as saying that prices cannot decline.)

In February 2004, former Chairman Alan Greenspan
effectively steered lenders and borrowers toward a greater reliance on adjustable-rate mortgages (ARMs),

I stated in the Forum that only a fool would borrow on an ARM with interest rates at all time lows. Most Forumites seemed to disagree with me at the time.

countless buyers were lured into homes with values inflated by distorted appraisals. They were encouraged to borrow more on their homes than they were worth. And they are now more likely to have little or no equity stake to help them ride out the tough times.

The root of the problem in many, if not most, locales, IMHO. But, I couldn't help but notice that there was no statement as to the culpability of HO's who also pressured appraisers in many, if not most, of these situations.

Thanks for the link, Randolph. This is one of the best pieces I have read on the subject. Here's another:

http://articles.moneycentral.msn.co...es/HousingTroublesBeginToSnowball.aspx?vv=450

 

[Dave Fitch]

Builders Dumping Inventory

I had an appraisal last week, suburban Indianapolis, of a new spec home built by M/I Homes, a large national builder. List Price $279,000, on the market since March, 2007. Agreed sale price $240,000 = $39,000 = 14 % reduction. I had an appraisal this week, suburban Indianapolis, of a model home built by CP Morgan, a large national builder. List Price originally $249,900, starting back in April of 2006. Numerous price reductions since then. Agreed sales price $193,000 = $56,900 reduction, = 22.7 % reduction. The same base model with only a two car garage, no appliances, and no frills or options at all is still advertised for $193,200. I can understand $5,000 and $10,000 drops being just part of the negotiating game, but $39,000, and $56,900 in this price range is serious. It is apparent to me that both builders were willing to dump these properties before it gets any later in the summer. I wonder what next week figures will look like! Do they both think it's now time to cut and run? What housing bubble?