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Housing Bubble Bursting?

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Denis DeSaix said:
I think we've passed the "tipping point" in regard to the housing markets.

I think up to now (or, within the last 2-3 months) there was still a possibility of a "soft landing". The key component was the ability for enough borrowers to refinance their homes and get out of the escalating payments into something that was manageable.

I emphasize the word "enough" because it wouldn't have taken 100% of troubled borrowers to refi, just enough to avoid the accelerated downward trend of defaults. These would be the borrowers who could have afforded to pony-up $10k to $50k to meet the LTV guidelines on a refi with better payment terms. A tough nut to swallow but, for the long-haul owners, the preferable thing to do. Had enough of this type of borrower made the hard choice within the last six-months default and foreclosure levels may have been halted at a level that stressed the system but didn't break it.

That possibility has now disappeared. The significant factor now is the inventory coming on-line that includes regular sales, short-sales and foreclosures. In enough of my markets, these types of properties now compete equally with each other for the available buyer. As additional inventory comes on-line, prices will continue to be depressed downward. I am now of the opinion that we will not see any change until 2010 (+/- 6-months).

I'm doing a pre-foreclosure in the central valley area of California (Merced County). This is located in a bedroom community that experienced significant new-home construction from 1998-2007. This particular home was about 5-years old and was appraised for $650k in June of 2006. At that time, the most immediate sales supported a value of $610-630k with further-distant sales providing the original report an excuse to hit the $650k mark. I do not consider the $20k difference to be fraudulent; I simply think the value was pushed to the maximum edge of the envelope.
It is currently listed for $459k. It had started about 230 days ago at $599k and has been reduced throughout the period. There are two other homes in its development that are listed right now- one at about the same price and another for $100k more. The $459k may still be too high of an asking price to move this property.

This is the type of activity that hasn't fully filtered its way up to the national prognosticators who predict home price trends.
The property I mention (and its twin listed at the similar price) now become the price-target that the buyers are going to evaluate the other list prices against. Even with moderate deferred maintenance (all cosmetic), what incentive would I have to purchase a home at $550k vs. one at $460k and spending $20k to significantly improve it?

As long as this type of variance in the market exists (and assuming that there are enough of these low-priced properties to compete against), this market will not stabilize.

Of course, two years ago when I commented to a chief analyst of one of the largest value analytics company in the nation that I thought there were significant underlying stress-points in the market that show downward pressure not reflected in his numbers, he said (I paraphrase)
"Denis, we sometimes get that feedback from our sources on the ground, but we also look at a lot more data than what the appraiser sees in the field."
Just goes to show that even a Ph.D has difficulty in distinguishing reliability between quantity of data and quality of data. :new_smile-l:
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Denis,

In the current market, the range of foreclosures is the best indicative of the market trend. Comps more than 3 months old are of the past. Some of them are as old as 9 months when they got an offer and sit in the escrow 4 or 5 months as pending sales . These sales are not indicative of current market.

In one of my markets that I searched recently , I saw +/_ 17,000 active listings, +/_ 900 pending and +/_1100 monthly sales. Since I had access to the foreclosure activities in that market, I found out that there are +/_ 6000 foreclosures in the pipeline ready to explode the market. They are not even REO yet but they are out there.

The current active listings consist of two types of sellers. Those who need to sell and those who wants to sell. Those who need to sell are short sales, REOs and highly motivated sellers that are forced to bring their prices to the point of a premium to potential buyers. Those who want to sell have to do the same thing or get out of the market. The coming flood of foreclosures are going to put more pressure on the already devastating market.

The PhD chief analyst and others see what they like to see. If it is obvious to me and you, it should be obvious to them who have more resources but they over look at factual information because they don't want to rock the boat, they think it goes away and some of them want to get their bonuses.
Look at two CEOs of Merry Lynch and Citygroup who knew what was going on their financial system but didn't want to accept it as if by denying something you can get it out of the way
 
moh malekpour said:
In one of my markets that I searched recently , I saw +/_ 17,000 active listings, +/_ 900 pending and +/_1100 monthly sales. Since I had access to the foreclosure activities in that market, I found out that there are +/_ 6000 foreclosures in the pipeline ready to explode the market. They are not even REO yet but they are out there.
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(my bold)

That is an amazing statistic.
Great time to be a long-term buyer.
 
Austin said:
In the words of the great Austrian economist, Ludwig von Mises:

If this true, and von Mises is usually correct, there are two choices. Curb monetary growth which means sky high interest rates or let the currency system collapse. As of this moment the Fed's indicated choice is for a longer term collapse of the currency system to wit the rate cuts. :fiddle: And if this is not enough to worry about, guess who will control all three branches of government while this is all unfolding? :peace:
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NOW who's paranoia is showing?? :rof: OTOH.. "Just because you're paranoid doesn't mean no one is out to get you!"
 
The current active listings consist of two types of sellers. Those who need to sell and those who wants to sell.
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We are seeing this as a bimodal market with a true new construction selling for less than houses on the market for over a year which tend to languish and often have extensive incentives built in to try and lure a buyer. Many are approaching 500 DOM.
governments holds $2.2 billion of [junk] debt
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Government run funds (one of our worst is the Teacher retirement system), banking on high returns and pretending they were making 'safe' bets, bought into mortgages and in the case of the ATRS bought land itself. They were the first speculators in the land west of a new regional airport. They got in at increasingly higher prices putting together thousands of acres, paying managers to hay and pasture it, move the houses off, etc., then begin to catch heat and dumped the whole mess for no profit. They took an enormous risk and created a speculative bubble in a so-called town called Highfill which now has some of the most expensive RE around. Finally 2 developers 'bit' and one built 11 houses. They will go on the market by auction after the developers went back to California. Expect them to sell for a fraction the investment. Another has 80 acres with curbs, waterlines, etc. and no pavement or sewer system. Expects to go under as well.
 
Saying this is like the "great depression" is a hyperbole. These top executives from banks and large mortgage companies got them ownselves and their companies in this predicament. Overstating this situation is playing on attention of the politicans for a bailout.

The media should not give attention to this ranting.

Jerry Dell, ARA
 
Jerry Dell said:
Saying this is like the "great depression" is a hyperbole. These top executives from banks and large mortgage companies got them ownselves and their companies in this predicament. Overstating this situation is playing on attention of the politic ans for a bailout.

The media should not give attention to this ranting.

Jerry Dell, ARA
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It' going to be just a Depression , not a great depression , let's not over-react..
P.S Novastar is belly up as of today.Who's next FNMA???? :fiddle:
 
Riick said:
Original title of this thread: Housing Bubble Bursting?

Well, the folks at Wells Fargo seem to think so:
http://biz.yahoo.com/ap/071115/wells_fargo_housing.html?.v=2

But remember "All Real Estate is Local" -- and when you get a Head Cold, it's just in your Head.
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"We have not seen a nationwide decline in housing like this since the Great Depression," he said.


Stumpf, who became Wells Fargo's chief executive 4 1/2 months ago, isn't the first prominent banker to liken the housing market's current slump to the financial despair of the 1930s.
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It's only a national real estate decline when you are a bank that holds mortgages nationwide. If you are a local bank, you know it is a local real estate decline. :new_smile-l:
 
Jerry Dell said:
Saying this is like the "great depression" is a hyperbole. These top executives from banks and large mortgage companies got them ownselves and their companies in this predicament. Overstating this situation is playing on attention of the politicans for a bailout.

The media should not give attention to this ranting.

Jerry Dell, ARA
Click to expand...
It truly is a shame that your wrong.
 
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