Housing Bubble Bursting?

[Randolph Kinney]

Nar: Existing Home Sales March 06

Attached in PDF format is the latest data from NAR on existing home sales for sold price and volume.

Look at the volume with seasonal adjustment for the US.

Look at the median sold price or average sold price for the US.

It appears to me that volume has been declining since last year and prices are declining since last year.

I just love the way NAR spins the data.

 

[Mike Simpson]

"I just love the way NAR spins the data."

I use to think that way, but over the years...I've got to admit...they've been A FARSIGHT more accurate than the consistent doomsayers here on the Forum.

You guys started in '99' (albeit the Bubble word hadn't yet been attached to the real estate markets yet...that'd come later), and you've continued through present day. Right through market change, after market change, after market change (including one of the biggest bull markets in history!).

"You don't want to bother to bring anything of substance in to back up your comments? No problemo. I'm sure you won't mind if we consider your comments within that context."

You're one of the better debaters on the inside of the bubble George, but you always resort to this kind of argument: You want proof that you'll analyze (and disagree with), you want evidence (that you'll dispute), you want confirmation (that you'll rebut), and you want support (that you'll disprove).

I've certainly given plenty of reasoning for my contentions over time, and none of it's been accepted as even remotely viable by the Bubblers...not once (except back when I too thought a catasrophe might be possible). Thus, there comes a time when both sides realize they'll never convince the other. It's apparent by now--those on the inside of the Bubble tend to resort to discrediting (sometimes attacking) those they'd disagree with--while those on the outside of the Bubble resort to "I'm right...you're wrong...neener...neener...neener."

"As far as I'm concerned, the wealth of data and reports that say otherwise completely outweigh your "I toured Japan" analysis."

This is a good example of what I was referring to a moment ago; I never said, "I toured Japan." I said, I worked there. And while I keep the letter of engagement as part of my resume'...you'll forgive me, but I haven't the time or inclination to scan that & present it as proof either.

"Nothing personal and it's not just you; I wouldn't take any realty agent's word on pricing without checking up on them."

Now...we're getting somewhere.

-Mike

 

[Fred]

they've been A FARSIGHT more accurate than the consistent doomsayers here on the Forum.

A stopped watch is more accurate. :icon_smile:

 

[Big ole Boy]

.... its a bull market built on top of quick sand ...

 

[Big ole Boy]

New York foreclosures soar

http://www.nypost.com/business/67467.htm

Too many borrowers are trapped by a bull market in real estate built on fast easy credit that created the articificial inflation ...

Its coming Mike ..... its coming .....

THey are hearing Gabriels trumpet in San Diego .... time is near .....

..... I would rather be wrong and find out that I was complelely delusional .... about simple economics ......

...

 

[Steve Owen]

Cycle or strategy

The cycle of using home-equity lines of credit or mortgage refinancing to pay back other debts is smacking into a wall of advancing rates.

That seems more like a strategy than a cycle. So... how do we know that homeowners and banks won't simply come up with a new strategy?

And... I wonder how Mike and Mike read higher foreclosure rates... opportunity, maybe?

When I worry, I worry about something more systemic than foreclosures. Think about the hierarchy of needs... that housing need is going to be high on the list, so that homeowner who gets foreclosed will have to rent or buy a new (maybe less pricy) place. Seems to me like the biggest problem in housing markets would be in places where there was a lot of speculative buying... speculation for rent or resale, not for a place to live with the sideline of hope for appreciation.

However, congress set this up by making mortgage interest deductible and the Fed fed the fires by lowering rates. Now we are no longer a nation of homeowners but a nation that rents from the bank. The real problem is that if Americans have been using home equity to finance other buying and pay off other debt, then having that strategy go down in flames may cause more widespread effects. Less consumer spending has been the lead in to most of the recessions we've had in modern times.

 

[Mike Simpson]

.... its a bull market built on top of quick sand ...

It WAS a bull market (still IS in some regions), and we can't call it quick sand (catch the news today regarding new home sales in March?). Let's call it SLOOOOOOW-NOOOOOO SAND.

"A stopped watch is more accurate."

Ya gotta love Steve's contributions to this thread...short & to the point!

"And... I wonder how Mike and Mike read higher foreclosure rates... opportunity, maybe?"

Funny you should mention foreclosures...I've complained in the past that some doomsayers only post foreclosure numbers when those numbers are climbing (indicating a bias towards negative news).

Also, we have an Agent in the office who built his niche' on the foreclosure market & working w/investors. He's been quite successful, but confided in my wife just two days ago that he hasn't had a sale in nearly 8 months!!! The reason--foreclosures have been down significantly here as prices have been (and continue to...) climb. However, I'm sure one of our resident Boo Birds can find a contradictory neighborhood in this region if they try hard enough (perhaps a chart...or graph?)

By the way Steve O., you mentioned the 'R' word...that's why I've written that I think we could now be seeing the beginnings of another market change. What happens when the economy slides into recession?...rates come down. 1/4 point decrease later this year?...1/2 point the first half of '07'?

At least we won't have to wait 4-6 years to see if this prediction's anywhere near accurate.

-Mike

 

[Fred]

Ya gotta love Steve's contributions

Either love or hate. :icon_smile:

 

[Couch Potato]

Buying makes no sense.

I love real estate as an investment, but in this part of the country it just doesn't make economic sense to buy residential properties. The cost of buying a property is over twice the cost of renting a similar property. Even investing the difference CDs would mean the real estate would need to go up more than 30% in the next 5 years to come close to matching the cost of renting. Yes, the value of real estate in this area went up 30% in six months last year, but that makes it going up above normal average less likely in the next five years, not more likely. Given that earning 10% on the savings won't be too difficult, I can't see why anyone would buy at current prices. Either rents have to go up or housing prices have to go down. Given the large number of available rental properties I've got to believe it will be housing prices coming down.

 

[Mike Simpson]

I love real estate as an investment, but in this part of the country it just doesn't make economic sense to buy residential properties. The cost of buying a property is over twice the cost of renting a similar property. Even investing the difference CDs would mean the real estate would need to go up more than 30% in the next 5 years to come close to matching the cost of renting. Yes, the value of real estate in this area went up 30% in six months last year, but that makes it going up above normal average less likely in the next five years, not more likely. Given that earning 10% on the savings won't be too difficult, I can't see why anyone would buy at current prices. Either rents have to go up or housing prices have to go down. Given the large number of available rental properties I've got to believe it will be housing prices coming down.

I notice you stated you, "love real estate as an investment, but in this part of the country it just doesn't make economic sense to buy residential properties."

It's time to start racking up some frequent flyer miles my friend. If the grass ain't greener on your side of the fence...look for a hole in the fence!

-Mike