Housing Bubble Bursting?

[Randolph Kinney]

It seems to me there are still plenty of people who are able to afford the massively-inflated homeprices of those forced to sell presently (again, a very small % generally).

newbie7, have you done any calculations on affordability in San Diego county? Like, what income level would you have to be earning to support a mortgage payment? Here is a link to CAR (California Association of Realtors) concerning their First-time Buyer Housing Affordability Index (FTB-HAI): http://www.car.org/index.php?id=Mzc2NjY==

The minimum household income needed to purchase an entry-level home at $504,080 in California in the second quarter of 2007 was $101,550, based on an adjustable interest rate of 6.29 percent and assuming a 10 percent down payment. First-time buyers typically purchase a home equal to 85 percent of the prevailing median price. The monthly payment including taxes and insurance was $3,380 for the second quarter of 2007.

I don't make enough to buy my own house!

There is so much hype surrounding the real estate bubble--and again, I'm hopeful that it's true. But methinks they protest too much. It seems to me like an Enron or Worldcom or Katrina--it affected millions of people in horrible ways, but didn't cause much overall market effect.

Somebody please tell me what I'm missing.

:new_newbie:7

I am attaching a graph of the Case-Shiller Index for San Diego showing the home price index from 2003 through 2007 to date, with the future contracts going into 2008 through May.

Question: Do want to buy a home today in San Diego at any price? Do you believe home values are declining? Do you believe home values will continue to decline? m:

 

[moh malekpour]

Weakest U.S. Housing Markets

http://www.forbes.com/2007/10/05/ho...slife-cx_mw_1005realestate.html?feed=rss_news

How much longer can real estate in already depressed areas decline in value?

At least another year.

In fact, it's reasonable to expect 8% to 9% median home sale price decreases through 2008 in Detroit, Riverside, Calif., and Las Vegas, currently the three least stable real estate markets in the country, according to data compiled by Moody's Economy.com, a Westchester, P.A.-based research firm

 

[Randolph Kinney]

Inflation coming back?

Rating the real cost of inflation

The fedaral government says that inflation is under control at 2% to 3% a year – with prices up 15 percent since 2002 – but some key prices have risen much faster, and critics charge that the government is undercounting the pace of inflation

If you're like the average American, when you fill your car up at the gas pump, you're paying 84 percent more than you were in 2000, for an average price rise of 12 percent per year, according to the latest data from the U.S. Bureau of Labor Statistics.

Many of the goods in your grocery basket – such as bread, eggs, orange juice, lettuce, tomatoes and ground chuck – have risen between 4 percent and 5 percent per year. The cost of electricity has risen 4 percent a year, while natural gas has risen 8 percent. And medical care has gone up about 5 percent a year, according to those same data.

Those rates of inflation – the kind of price rises that Americans feel on a daily basis – are often far higher than the official rate of inflation, which has increased an average of 2.6 percent per year since 2000.

 

[moh malekpour]

Inflation coming back?

When did it go away?

 

[murray stroupe]

Re; Week of Oct 7

Personally, I'm hopeful that this IS a bubble, because that means prices will come down and my family won't be locked out of the market anymore.

But after some research, I'm skeptical. For example, this article quotes construction company associations saying that their average COST on a 3300 sq ft home is $404,000. I don't know, but that sounds fantastical. These are major corporations giving highly sculpted information to a financial magazine through. I believe they're up to their waist in debt, but even if all new construction were to cease, that just helps raise prices of existing homes.

The article linked describes the recent Horton auction here in San Diego like if it were a firesale. But the reality is that it was a media blitz so intense, and so costly, with so many onsite herding & fleecing tricks and media banned from the event, that I really doubt their claims of being reluctant to hold the auction, nor that they lost much, if any, money. These were marginally crappy, small, crate-packed-and-stacked condos, in an iffy neighborhood. It's hard to believe the builders associations.

The number of loans in trouble, in this "credit crunch" is a low single-digit percentage of just the recent loans. Is that to cause an avalanche?

I remember the big subprime scandals of the early 90's (and how this was just a few years after the S&L bunkum), and how real estate was "terrible" after both. But historically, it just looks like a few years of flat, before another insane run-up starting around 1997.


There is so much hype surrounding the real estate bubble--and again, I'm hopeful that it's true. But methinks they protest too much. It seems to me like an Enron or Worldcom or Katrina--it affected millions of people in horrible ways, but didn't cause much overall market effect.

Somebody please tell me what I'm missing.

:new_newbie:7

====================
Good points New7;
never did buy into the highly inaccurate word ''bubble ''as a term for RE. As if a soap bubble or water bubble has much of anything to do with RE!!!!!.And the fact the mainstream media loves to use it makes it much more suspect-LOL

True average foreclosure % are low, but the % increase has been rather high[1% to about 2%plus ]is a rather shocking historical increase[100%] , even if it seems low.

And some markets are shocking anyway you look on them[not TN];
but Pam.appraiser in FLA, mentioned land in some areas down 50-70%=not a bubble ,perhaps best called a crash.

 

[Greg Bell]

Crash is a better word.We all know the wheels are coming of the lending part of the Real Estate deal , no loan , no sale.Markets have to be liquid enough for easy transfer.Difficult to qualify buyers plus deprecating assets , yep , a crash..

 

[Karl]

IF you can make your payments & buy/&/or do whatever it is you want Then the economy is going good. IF you can't make your payments & you can't buy &/or do the things you want, the economy sucks All depends on which IF your connected to.

Read history; IF you believe some writer you'll believe we're heading for a CRASH, IF you believe other writers you'll believe things are FINE.

 

[Greg Bell]

Everything was fine after 1929. Just go back and read all the pundits saying the downturn was just an aberration and all will be fine , look it up..

 

[Greg Bell]

Uh Oh...Better buy some canned goods...

FREEZE IS ON AT GIANT MORTGAGE HEDGE FUND
By RODDY BOYD
October 6, 2007 -- Ellington Capital Management, the country's largest mortgage-backed securities hedge fund, sent a letter to investors notifying them that redemptions and withdrawals in two of its funds would be suspended because of a sharp decline in the liquidity of certain mortgage- and asset-backed markets.

The Old Greenwich, Conn.-based hedge fund, which has $5.2 billion in assets, is considered a bellwether for measuring the health of the mortgage-backed securities market.

The fund's redemption suspension covered two mortgage-credit funds with about $1.9 billion in assets between them, according to the investor letter from Michael Vranos, the fund's general partner.

According to the letter, which was obtained by The Post, Ellington's move came after liquidity and value data provided by Wall Street's mortgage-bond desks at the end of September for the bonds in the portfolios varied so widely that Vranos and his colleagues could not assign a fair value to them.

The letter emphasizes that the redemption suspension was not a function of losses or investor withdrawals. The two funds, according to the letter, have a minimal amount of withdrawal requests and any that came in easily could have been handled out of available cash.

Ellington's other funds do have some of the same lower-rated mortgage credit bonds that forced the suspension in the two funds, but not enough to be affected by the valuation troubles, a fund official told The Post.

That Ellington even found itself in this bind is surprising given that the fund has actively diversified away from its roots as an aggressive mortgage-backed derivative trading operation in the 1990s.

 

[moh malekpour]

S&L ghosts hover over housing

http://www.dallasnews.com/sharedcon...N-burns_07bus.ART.State.Edition1.35ad6e3.html

A boom environment: Back then, Texas had been in a long building boom fueled by rising oil prices. Housing prices had risen nicely for years. Many Texans who had started with next to nothing were enjoying a new feeling of wealth as they moved from one appreciating house to another.

Today, home prices across the country have been rising handsomely for years, creating unexpected wealth for millions of homeowners.

Finance frenzy: Back then, the savings and loans were encouraged by changed accounting rules to make big development loans, booking unearned profit.

Today,Wall Street has built the perfect pipeline of profit from lending money to selling securitized loans to European and Asian bag holders. In both cases, someone else would pay the price for bad loans – the FDIC then, and investors today.

Down payments: Back then, Texas homebuyers were advised to put as little down as possible because Texas laws prohibited borrowing equity out of your house. As a result, many put only 5 percent down – an amount that would be wiped out by selling costs.

Today, we've been through a long period of lax financing. The Nitwit Sector (my name for lenders) has rushed to provide 100 percent financing to people with no history of debt repayment.

Low interest rates: Back then, builders marketed houses by "buying down" mortgage interest rates for a year or two. After that, the interest rate and monthly payment rose. Many saw their payments rise as the value of their houses fell.

Today, adjustable loans start with "teaser" rates that reset much higher in a year or two. New owners are seeing their payments rise as their home values fall.

Employment: Back then, construction employment loomed large in Texas. So did employment in finance and banking.

Today, construction workers are leaving Florida and other boom areas because construction is coming to a halt. Mortgage brokers are losing their jobs across the country.