Housing Bubble Bursting?

[Dee Dee]

What George said, in addition to the fact that many HO's have taken out 2nd mortgages and HELOC's on top of their 1st mortgage. Just how many is impossible to track, and a big wildcard.
Add factors such as a flat market with little or no appreciation, inflated appraisals and/or job losses as a result of real estate slowdowns and things start to get ugly fast.

HO's can't refi out of I/O and ARM's to a decent fixed rate mortgage if their LTV is too high.

Mike,
If you're trying to convince us that Co.Spgs. is special just because you're there...nobody's buying it. :icon_smile:

 

[Austin]

Free Comp Checks In The Springs

The reason so many people are moving to Colorado Springs is because they do free comp checks. Edd and Mike have the market covered.

PS: Edd doesn't do comp checks, he does comp checks. There is a difference you know? Mike on the other hand will do a comp check, but never a comp check. Mike used to do comp checks until the latest thread on the subject but then he stopped doing comp checks and now just does comp checks the right way.

 

[Couch Potato]

The problem of speculators is quite large in the Florida condo markets.

Most South Florida speculators have been selling to other speculators, says Jack McCabe, a consultant to developers. Which works fine, until somebody is left holding the property that nobody wants to buy. The number of unsold condos for sale in and near Miami has more than doubled from a year ago to 2,232 and foreclosures are twice the national rate.

It should also be noted that this same article, publish by the Florida Association of Realtors, stated:

The number of half-million-dollar-and-up condos for sale in Miami is twice the number in Los Angeles, where the population is four times as large.

It also mentioned the same consultant to developers is putting together a venture capital firm for the sole purpose of "buying million-dollar properties at 2003 prices -- at 70 cents on the dollar". I believe there is no bubble in many markets, like Charlotte, NC, but with the centralization of lending into national companies the bubbles that do exist in many markets with have national effects as the inevitable decline occurs. Thirty-year fixed rates are at 6.44% and rising.

 

[Brad Ellis]

George,

Your Q+A:

"Q: How many $100k principal losses does it take to wipe out a lender's reserves?
A: Not that many. "

Wrong answer. Right answer is quite a few. We are no longer talking about local banks with a few million in reserves- we are talking about enormous firms with massive reserves.

Countrywide did half a trillion +/- last year- that's with a "T". Prinicipal losses that are not attributable to fraud or misrep will cost the investor, not the bank. And about half of the investors are individuals, pensions, etc. on Wall St.

But, since you say our pronouncements are given no weight in the overall scheme of things, and since Wall St. keeps on buying the paper, I do not believe they are panicking. So, why should we?

And, PLEASE, with all due respect, do not classify what I am saying as painting some rosy picture. I do not believe that things are rosy. I see declines in some markets. I am paying attention to loan types and their performance. CA housing has long been "unaffordable" by many, yet our population continues to grow here. Where will they live?

I'll stick by my statements of an overall soft landing until and unless I see some solid empirical data that is convincing- to me. Clearly many of you have seen what you need to see. So be it.

Greg,

So, you are going to leave the appraisal business to buy up all those foreclosures at 70% of market value (2003 prices)?

If you really believed that, why would you not?

Dee Dee,

Actually, we do have an idea of how many HELOCs there are out there.

Plenty of folks have used their home equity to pay off credit cards and many folks are stretched. Most, however, still have equity left.

Anyone want to tell me why banks/mortage companies are still out there making HELOC based loans up to 100% of appraised value- or even more than appraised value?

Guys this is really fun. I had the very same responses in 2002 when I said there was no bubble- only from different people and they gave me some different and some of the same scenarios.

As I said, time will tell.

Brad

 

[Couch Potato]

Greg,

So, you are going to leave the appraisal business to buy up all those foreclosures at 70% of market value (2003 prices)?

If you really believed that, why would you not?

I do have funds set aside for opportunities I believe will be available in the next few years. In the meantime I'm settling for a 35% return on my money in mutual funds over the past 12 months.

I will not leave the appraisal business, I enjoy it too much.

 

[moh malekpour]

Brad,
As you quoted my first post, I said, “The bubble hasn’t burst yet” it is just started to give a signal that something is on the offing. Speculators are still hearing the soothing songs from the NAR, Freddie and Fannie and those who, as you said, have a vested interest in keeping the status quo of the market by saying it is just a cool off, a soft landing, a seasonal change. Speculators have heard this song before that there was no bubble and rewarded by their resistance to the market alarming in the past and so this time they too are resisting and believing that their beloved market will be back. As soon as they are convinced that this wave is serious, they all are going to rush for the exit door real quick.
You keep saying that you didn’t call the market bubble 2 or 3 years ago, I didn’t call it either but there is much different between today’s market and the market in 2-3 years ago. Then, we didn’t have huge inventory, low sales volume, unaffordable housing and high short and long term interest rates. Today both short term and long term rates are heading up, homes are at the price that no body can afford to buy them, builders have supply more than demand in most areas.
Can you put a stop on short term and long-term rates? The long term seems heading up and what would you say if it reached 7% by the end of this year. It is very close to it and that is what you were quoting that indicates market is going to burst. Isn’t it?
This link is a story of a rural homeowner:
http://www.itulip.com/reportfromthefront.htm

 

[Scott Kibler]

Wall Street smart like herd

Countrywide did half a trillion +/- last year- that's with a "T". Prinicipal losses that are not attributable to fraud or misrep will cost the investor, not the bank. And about half of the investors are individuals, pensions, etc. on Wall St.

But, since you say our pronouncements are given no weight in the overall scheme of things, and since Wall St. keeps on buying the paper, I do not believe they are panicking. So, why should we?

As long as everybody's making money, nobody cares. Everybody wins. People stop making money, well, just be ready to duck when those fingers start pointing.

I'd hate to have a giant pension fund mad at me.

I wonder what the kind of exposure these institutional investors have in securities backed by these, what do you call them, special priced mortgages or some such? I'll betcha those market saturated with investor owned properties have a higher than normal incidence of subprime mortgages too. Speaking of exposure, how much do these big time lenders have of this type of product versus, say, 1982? Doesn't matter I'm sure because we're all very secure in the default predictions that FICO scoring reveals. That saved us all in the last down cycle, right? Oh yeah, all this fancy financing, MBS mutual fund purchasers, computer risk analysis stuff didn't really exist during the last real down cycle did it?

Yup, those Teamster fund managers are going to be pissed, someday.

 

[DeanHarris]

Sorry for my 1st post to be a negative one, but...

As a Realtor here in Orlando- it is brutally slow and I'm in a very large C21 office.

As I write this there are 13,787 Single Family Homes Active in the MLS within Lake, Orange, Osceola and Seminole Counties.

Since 03/01/2006 there have been just 1,788 sales closed-just Single Family Homes.

In total, there are 18,213 properties Active in the MLS for all 4 counties.

Since 03/01/2006 there have been a total of 2,579 sales closed in all 4 counties regardless of property type.

I had my last 3 buyer's back out of the market.

During the Winter I generated a lot of buyer leads from my website. As many as 7 a day in some cases.

I haven't had a single buyer lead in 3 weeks.

People read about housing inventory flooding the market and wait for the big price drops.

Sellers read about record sales for February and think they can get a sale as quickly as last Spring with a 100% profit in mind.

BTW, the "record sales" for Feb are wrong. There are *a lot* of SLD entries only of Condos. They were never actually Active in the MLS, the Broker/Agents just want the credit and comps to be in the MLS.

I see many in Pending Status well past their expected close date.

Many subdivisions have huge inventory and very few (if any) sales in the past 12 weeks.

An example for a very popular well marketed subdivision here, Baldwin Park:

There are 143 properties for sale in Baldwin Park.

7 properties are $200/sq ft or under, unheard of several months ago.

Since 03/01/2006 only 5 properties have sold in Baldwin Park.

Since 12/30/2005 only 18 properties have sold in Baldwin Park.

There are 13 properties in Pending Status. Of the 13 Pending, 6 are past their expected closing date.

I really wish those who didn't truly need to sell would withdraw from the market.

At best, April can expect 2,557 sales *if* sales are as strong as last year...and it isn't shaping up to be that way. So, maybe 2500 sales vs 18,000 in inventory. Doesn't take a rocket scientist to see there will be a fairly major correction.

Inventory will simply grow more as builders offer us massive incentives to sell their product.

When you have a new home builder in a subdivision selling at $164/sq ft and people trying to sell 1-3 yr old homes at $200+/sq ft there is simply a lack of market reality going on with sellers and agents willing to list no matter what.

A healthy correction is in order, and the only thing that will bring the buyers out from the sidelines.

 

[Couch Potato]

Welcome to the forum Dean. It seams like the market here in Central Florida is positioned like Wile E. Coyote just after the Roadrunner said "Beep Beep" near the edge of a cliff; there is no ground to stand on, but that is not yet realized. Hopefully, like the coyote, after hitting bottom the market will be able to miraculously "walk away" and continue as before.

 

[Tom Fryer]

The fallout has already began

Brad, As oil prices and interest rates rise all the talk, persausive headlines, accounting gimmicks, tricks of the trade from the 80's created to make the "walking-dead look healthy" will not work. The fallout has already began.