« February 2006 | | April 2006 »

Fed Watch: Same Old Song And Dance

In a move that surprises absolutely no one, Fed chief Ben "More Questions Than Answers" Bernanke shepherded yet another federal funds rate increase. Tell me again why Greenspan retired?

Bankrate's Holden Lewis has a concise run-down of winners and losers in the horse race. Notice that there are a lot more losers than winners, especially in the real estate market. Reuters has a collection of chattering on what this latest increase means. Money quote:

"The implications for monetary policy of the recent behavior of long-term yields are not at all clear-cut."

"But to the extent that long-term rates have been influenced by macroeconomic conditions, including such factors as trends in global saving and investment, the required policy rate will be lower."

Translation: We have NO IDEA WHAT THE HELL WE'RE DOING, but as long as people keep buying houses and wages don't get too high--Ooh, shiny! Look!

Of course, for some people, this is akin to Numfar doing the dance of joy, not shame. Witness Housing Panic's feelings on the matter:

So to the moon Mr. Ben! 5%! 6%! 7%! 8%! go go go!!!

OK, I'm a sick mutha f*cka. But I guarantee I'm not alone on this one, eh?

No, indeed not. :) I wonder, for example, what Lennar knows that Toll Brothers does not, for example...or why we're getting reports saying that consumer confidence is at a three-year high, when we just got reports yesterday saying the exact opposite thing?

Numfar, do the dance of...uh, well, we're not sure yet.

Posted at 06:44 PM | TrackBack

digg this story

Housing Market: The Gathering of the Fed

"One does not just raise rates at the Fed...."

Economic pundits, analysts, bloggers, and traders are awaiting the results of Ben Bernanke's Federal Reserve meeting with bated breath....ok, no, not really. The general market expectation is more of the same. It's important to have such decisive leadership and strong policy decisions, especially in light of the fact that consumers are getting less and less confident as housing sales plummet while gas prices rise.

Why do I get the feeling that Bernanke spends most of his days at his desk saying stuff like, "Greenspan, what a mess you've left me with..."

Here's a great editorial extolling the virtues of inclusionary housing. This trend, along with its sibling "workforce housing," may be the spearheads we need to build affordable, mixed-income housing that will reenergize middle-class buyers and get them back into the post-bubble market.

I don't know what's funnier--the idea that this proposal is causing homebuilders to cry like babies, or that it namechecks Montgomery County, currently the nemesis of predatory lenders everywhere.

Posted at 05:34 PM | TrackBack

digg this story

Hurricane Housing: The World Katrina Made

The Associated Press has done a Herculean job of covering the long-term effects of the 2005 hurricane season, keeping it where it should be--in the forefront of our memory. Case in point: This heartbreaking story about the trailer park life. It's one thing to joke about that as the centerpiece of Britney and K-Fed's post-"PopoZao" life. It's another for the thousands of families who're actually living it.

If that were not enough, the work of gutting houses in order to assess them for rebuilding or demolition is getting a lot harder, because FEMA is inexplicably shutting down the bases people are working out of. "Insane" just doesn't cut it.

When I first started working on this thing, I never expected that I'd be chronicling the gradual destruction of an American region. Katrina and Rita were like cars hitting innocent passersby, who're now dying lingering deaths in hospitals, alone, uncared for, and often forgotten about.

And just in case you thought this was a new thing, folks who're still stuck in trailers from the 2004 Florida hurricane season will soon be forced to pay rent or be ass out. Somehow I doubt that anyone who's got the money to be paying rent would still be chillin' in a FEMA double-wide special.

Think about this the next time you follow the market's ups and downs.

Posted at 06:00 PM | TrackBack

digg this story

Friday Housing News: Riders On The Bubble

Dana Dratch over at Bankrate advises nervous homeowners how to tame the mighty bubble. I seem to recall giving some similar advice myself back in the day. Talk about being ahead of the bubble curve, eh?

The news of the new home sales dropping is picking up steam faster than Ben Domenech getting fired. Stories like this are the reason why. I can't imagine sitting nervously in front of that debt clock, wondering what'll happen if I can't move my overpriced sh%^box in time to make a profit and beat the ARM reset. Who needs that grief?

My question for the legions of bubble riders would be this: Since the bubble is breaking into little "bubbletes," which markets will survive intact, and which will crash? Where will be the best place to land solidly in order to make smart investments in real estate? Midwest? D.C.? Bay Area? (Just kidding about that last one. :))

Or are we all living in Fairyland now? Is the best bet to cash out, hunker down, go long, and wait for the flattening that Thomas Friedman is so fond of to smooth out the housing market? Because as we all know, if you have to ask, you can't afford it...and right now it's looking like even formerly mid-range and low-end properties are falling into that category.

Image courtesy of the oddly appropriate Fairyland

Posted at 05:17 PM | TrackBack

digg this story

Buying And Selling: Seesaw Sales

Ok, I just can't keep track of the market without a whole bucket of Pepto. Let's see...existing home sales are surging according to Lereah and his legions, but mortgage demand is slipping to new yearly lows. Even by the wacky standards of a post-bubble market, this doesn't make much sense, does it?

Things clear up when you take note of this paragraph:

"A lot of consumers have been having affordability problems, which is why a lot of them have been taking out ARMs," said Chen. "But with ARM rates rising, fewer people have been able to afford a home, which was also behind last week's decline in applications."

People are getting out. Fast. And fewer new buyers are coming in to replace them. In a bear market, the costs are just too much to--can I say it?--bear at this point.

Note the fact that things are still considerably less than sunny in South Florida, and you can get the picture. And as the man some call Cole Kenny points out, that picture is considerably less rosy than it was a year ago.

Where you buy has always been the prime factor in what you buy, but now it's more true than ever. You might literally be stepping from a stable market into a bubble and back again, dependent solely on the market, the whims of freaked-out sellers, and all that froth and irrational exuberance. :)

Posted at 07:36 PM | TrackBack

digg this story

Buying and Selling: We Need (Fore)Closure

This pic comes from what may be the greatest real estate site of all time. I mean, how can you not love this:

Farm life teaches you a lot of values that are lacking in today’s society. It has a way of keeping you grounded, no matter how successful you become. Our family raised cows, pigs, goats, chickens, and many others and everyone had to learn many skills on the farm since very few things that needed doing were hired out. At a young age, farm life taught me many innovative ways to complete any task; and that part of farming had a lot of similarities to the skills I’ve learned as a real estate investor.

How ya gonna keep 'em down on the farm after they've seen triple-digit price gains, eh, Ma? No doubt that this particular example of bovinity was the prime grade on his farm:

I wonder if all that cow milking and dung slinging might have come in to good use for poor Heidi before she lost her home. I know the more cynical among my readership won't have a lot of pity for this woman and her family. Yeah, she bought a house bigger than she could afford. Yeah, she and her husband should've done their research about how ARMs work. Yeah, it's a tough, cold world out there. But that doesn't make it any less of a sad fact that people got blinded by cheap money and were crippled by lack of basic math skills and a fundamental need to be considered "successful" in a monetary sense.

You'll be seeing a lot more stories like these as more ARMs reset. It'll get less morbidly humorous each time.

Freddie Mac's CFO has resigned. I'm surprised he didn't say that he wanted to spend more time with his family or something of that nature. No doubt he wants to be as far away from that mess as possible when the books are finally balanced.

And I think this excerpt from Gentle Ben's latest non-statement says all you could possibly need to hear:

"I will do a better job of raising questions than of answering them," Bernanke said in his prepared remarks.

In other news, Alan Greenspan was heard to say, "YEESSS, MY YOUNG APPRENTICE, YESS...." in between mumblings about "froth" and "irrational exuberance."

Posted at 07:12 PM | TrackBack

digg this story

Housing Market: Double Agents

Kenneth Harney at the Washington Post brings us a tale of realtors playing both sides of the transaction in an effort to get their precious commission.

I'm eternally mystified that first-time--and repeat--buyers will trust such a complex transaction as buying a home to someone who's taken a few courses and does realty as a part-time gig, often while raising rugrats and trying desperately to pay off their own jumbo mortgage. Hell, your average Mickey D's employee gets more training than most "brokers" get. If you don't trust them to mess up your Big Mac order, why would you trust someone with even less training--and more incentive to pad their own pockets--to ensure you sell your home and buy for the best price possible?

Here's another great story from the L.A. Times about being paid to refinance. Amazing stuff, and there is so little regulation to cover this that brokers, agents, and others can pretty much do whatever they want. (A tip of the derby to Ben Jones.)

I find it not coincidental that all of a sudden, people are shocked--SHOCKED!--to find that there're unscrupulous realtors and brokers out there, just as the market is sagging and rates are increasing. Where was all this dogged journalistic reportage five years ago?

As an aside, Silver Spring is located in Montgomery County, MD--the same place where there's a court battle taking place over anti-predatory lending laws. Perhaps the new "bubbles" we will see in the post-boom market will be test cases for stronger oversight of realtor practices. :)

Posted at 06:13 PM | TrackBack

digg this story

Housing Market: Bad Omens

This rather (ahem) ominous pic is in tribute to Business Week's article on the omens of housing. It touches on most of the points we bloggers are already familiar with--the expansion of Midwest into bubble markets while the coasts fall into slumps, the admission that the markets aren't bouncing like the traditional media claimed they would, and the acknowledgement that the continuing drive for more development is "pushing against capacity."

One paragraph caught my eye in particular:

The home-price data from the Office of Federal Housing Enterprise Oversight [OFHEO], which reflect a carefully constructed index based on "repeat sale" information, revealed a powerful 11.9% rate of price increase in the fourth quarter that was not significantly different than the 13% growth rate for prices in 2005 overall.

The OFHEO is basically the watchdog agency of Fannie Mae and Freddie Mac, designed to make sure they still have all their books in the black and aren't offering too many loans that will overextend their portfolio. However, there is a lot of question as to whether or not OFHEO is utilizing its own data selectively. The legendary Bubble Meter has been exploring this issue extensively, and you can read about some of his findings here and here.

The Housing Bubble Casualty relates another sobering aspect of the post-boom market...all the realtors fleeing the industry like the Jews from Egypt. Unfortunately, Ben Bernanke is neither Alan Greenspan nor Moses:

I have met with several of my friends that are also account executives in the industry. One of them told me that only one person in their region ‘commissioned’ last month. For a territory that is used to doing 30-50 million per month, they did only 10 million. There was a time not too long ago, where the top rep in this territory was doing more than 10 million a month. I talked to 2 other reps where nobody in their regions hit their numbers. All but one of these reps is about to start looking elsewhere for work.

This can only mean a bonanza opportunity for FSBOs and such to prove that you don't need fly-by-night, quick-buck types to do the do when it comes to buying your house. Don't let the door hit you in the tuckus on the way out, chumps!

Posted at 02:37 PM | TrackBack

digg this story

Housing Market: Table Scraps

Here's a hilarious story about suing to break out of home contracts that completely symbolizes the housing boom--and the post-boom era as well. Appreciation happened so fast that contracts were busted just so the developers could renegotiate. You can expect to see a lot of these (ahem) "frivolous" lawsuits in the coming months, and one of the interviewees even says as much:

In the next couple of years, McCabe, the real estate analyst, anticipates a "tremendous amount of litigation" -- speculators suing brokers and lenders, developers suing speculators to get them to close and homebuyers suing developers. "It's been a rose garden the last four to five years," he said. "Everyone's been happy because everyone's making money."

Nothing says love like an NAHB temper tantrum. "It's the homeowners' fault! WAAAAA!!!!"

Speaking of rose gardens and other manure-fueled concepts, here we have the latest swill from David Lereah, courtesy of a paper that should know better. Money quotes:

Lereah says it would take a "perfect storm" to swamp the real estate industry. There would have to be a slumping economy, job losses, a large inventory and a significant increase in interest rates to create that storm.

"The only way to build wealth, for 80 percent of Americans, is real estate. If the balloon bursts, then 80 percent of Americans will have trouble with retirement."

There're so many things wrong with that last half that I couldn't begin to correct them all. But Lereah IS correct in that there is no national bubble, but there're a LOT of regional bubbles that are contributing to a sort of Greenspan-esque froth. Some bubble markets will prosper better than others. It depends on a number of factors--job growth, wage stability, employment, available land, etc.

If the big bubble markets go, then the drive to the Midwest will accelerate, which will cause the very "perfect storm" Lereah was trying to duck.

Posted at 01:39 PM | TrackBack

digg this story

Katrina Housing: Return to FEMAVille

Harry Reid is "ashamed" that FEMA trailers continue to sit vacant and unused. At least he's trying to do something about it, though how much success he'll have is up to question.

What's interesting here is the back-and-forth between Reid and Bush over how much of the money should be spent on Louisiana, and how much should be dispersed among all the affected states. If this article is any indication, there's still $2 billion in unclaimed funds out there. This contradicts earlier findings indicating the money is nearly all used up. Of course, $2 billion won't make much of a dent in an estimated $200 billion project, but every little bit helps.

I especially love this piece about how the Katrina evacuees are overtaxing Houston's already-depleted resources. Come on, people, now, smile on your brother...Seriously, Houston was already suffering these problems before the evacuees arrived, but their presence is exacerbating a tense economic and social situation. Check out these comments from Anderson Cooper's blog:

Personly I think welfare is for the weak and just get a job. I have worked since I was 13, I am now 35, and have never been with out a job. When I hear, "I dont have the skills to work anywere', bunch of crap.. so you are telling me you cant flip a burger... What these people need to say is all I want to do is sit on my ass and watch tv and have everyone else support me... Good For you Thomas... I would not have been as nice or as political if it was my comment

These people want to be lazy and have everything done for them. I understand that they have been through the roughest times of their lives but they need to get out of the house and get one of the many no skill jobs that our society offers today. Anything to make a honest dollar. I would be ashamed of myself if I had to accept money every week that I didn't deserve or earn. Stock food, clean dishes, flip burgers anything to stop being a debt to society. I believe Mr. Thomas is correct when he says these comments. The city wants to grow and flourish not continue to fall down this slippery economic slope.

I wonder why it is that people keep bringing up the whole "flip burgers" meme in this situation. If you think you could pay for the mortgage for your destroyed house, find a new place to live, pay for your gas and food, AND your family's welfare, on $7.50 an hour, you are welcome to it.

"Everybody get together, try to love one another right now..."

Posted at 05:23 PM | TrackBack

digg this story

Friday Housing News: Bubble The Market Slayer

"Angel, you bloody git! I'm just trying to pay off my student loans and my bar tab! Why shouldn't I tap my home's equity?"

The 30-year-fixed mortgage is at a two-year high this week, and in even more bad news for ARM holders, the rates on that product are at 6 percent and climbing. It's time to look at things in a "post-bubble" world, folks.

Of course, property tax assessors are a little slow to get the hint. This kills me--you see triple-digit price appreciation in your home, and yet are clueless as to how your state or city might choose to levy bigger assessments on you as a result? Paying for all of those unfunded federal mandates costs money, people! :)

I'll be curious to see if the stratospheric prices for Manhattan condos can maintain or grow in 2006. New York, like other major bubble markets, is an island unto itself (Well, literally, in NYC's case), with revenue streams other markets don't have access to. But it still rrequires people to live there, and no matter what Bloomberg says, the median salary in NYC ($50,000-$65,000) is NOT gonna get you one of those debt machines.

DCist brings us a discussion about instituting a flat tax in D.C.. The real killer, as others have pointed out, is eliminating the mortgage interest deduction. To name-check Holden Lewis' favorite show, one blogger said that this would "drive a stake through the heart" of the housing market in D.C.

Posted at 04:45 PM | TrackBack

digg this story

Housing Bubble: The Eye of Bernanke

The new Fed Chair has his eye on commercial real estate lending. Luckily for us, there's nothing to worry about:

"Our examiners tell us that lending standards are generally sound" and are not comparable to the lax standards that contributed to the savings and loan crisis two decades ago, he said.

"However, more recently, there have been signs of some easing of underwriting standards," Bernanke said in prepared remarks to the Independent Community Bankers of America meeting in Las Vegas.

Ok. maybe there IS something to worry about. But if there is, it doesn't seem to be phasing home buyers, at least in the L.A. region, if this article is any indication:

More than one-quarter of those who have adjustable-rate mortgages say they aren't sure they'll be able to make their monthly payments if their interest rate goes up. These loans have been particularly popular in California and other states with high housing costs.

This just strikes me as wishful thinking. Maybe all of these homeowners should ring up KB Homes and Toll Bros. and tell them to "STOP BUILDING AND LET OUR VALUE APPRECIATE, DAMMIT!!!!"

And if what's going on in Montgomery County, MD is any indication, it seems the lending industry isn't at all keen to tighten its reins just yet. Gotta keep that market churning, after all.

Let's take a look at some random real estate prices for D.C., via Craigslist. Hmm, here's an interesting choice:

Motivated seller is an understatement! All reasonable offers considered.
Because we've had two contracts fall through due to financing problems on the buyers end, preference is given to buyers with financing already in place. (Emphasis added.)

Indeed, there is "evil here that does not sleep. And the great Eye watches all..."

Posted at 05:01 PM | TrackBack

digg this story

Buying and Selling: The Realtor Curse

There's an awesome article from Steven Leavitt and Stephen Dubner (authors of the excellent Freakonomics discussing why realtors are on the way out. You can find the article at the Times and the Globe, but ya gotta pony up free registration for both. You know the drill--BugMeNot. ;)

Money quotes:

A great many of these agents and brokers, more than 1.2 million, belong to the National Association of Realtors, which the Department of Justice accused in a recent lawsuit of behaving like a cross between a cartel and a mafia, hoarding access to home-sale databases and harassing competitors who dared to offer discounted commissions.

The Internet is a natural repository for the sort of data that drive the real-estate market. New sites like zillow.com let anyone try to figure out (if imperfectly) what his home is worth; sites like craigslist.org allow buyers and sellers to easily find each other. As those services and ones like them become more popular, it is hard to imagine that the market will allow Realtors to maintain their hefty commissions.

That's exactly the modus operandi that this site, others like it, bubble bloggers, and FSBO sellers all have in common: We're out to give power back to the people. The more knowledge you have about how to buy and sell your home, the more money you can earn--and the less money you have to give some goofball who took a part-time weekend course and calls themselves a realtor.

If for no other reason, I recommend the book because it provoked a very testy response from the NAR, and that never gets old.

One point that the media is picking up on as housing continues to slow is that the huge boom in employment from housing isn't just in construction. It's in brokers, realtors, sellers, and everyone else who was all about flipping properties to make a quick buck. When the market finally hits bottom and prices drop, the only thing these wannabe-David Learah types will be flipping is your Quarter Pounder with Cheese.

Posted at 12:32 PM | TrackBack

digg this story

Housing Market: "Crash"...?

"Thandie, we just won the Oscar for Best Picture! Why are you so upset?"

"Matt, I'm stuck in a negative-option interest-only mortgage, my payments are about to double, and the housing market makes the Oscar telecast look like the Autobahn! I'm totally screwed!"

Reuters is reporting a continuing decline in new home sales, despite claims that the warmer weather would boost orders a bit. Meanwhile, this statistic about Newcastle's subprime loan buyout shows that there's a healthy market for the bottom-feeders, even outside of Montgomery County. ;)

Is there going to be a major crash in the market? I think, as I've said before, you'll see regional bubbles pop and collapse depending on how severely the market's overextended itself. As long as counties keep levying disproportionate property tax assessments and sellers keep pushing prices $50-60k above their home's actual worth, the market's eventual "correction" will be harder. Some areas, like D.C., NorCal, and NYC, will be able to weather the storm because of a continuing influx of new jobs and investment. Other areas? Well, not so much.

I'm not as much of a pure bear about the market as Bonddad is, but I would heed his warnings nonetheless. People need to "get right" about the market, save their money, and stop flipping properties like they were flapjacks, or we'll be heading for a crash that all the Academy Awards in the world won't make any more palatable.

Posted at 04:30 PM | TrackBack

digg this story

Sunday Housing News: The Resurrection of Brownie

There's a lot of noise being made about the rebirth of Mike Brown as a crusading hero against the failures of Bush and Chertoff regarding Katrina. I am certainly not willing to cut Brownie even the least bit of slack, but at least he has the foresight to realize that they're hanging him out to dry, and he's not going down quietly. Imagine--if he'd shown that kind of testicular fortitude circa August 29, 2005, we might still have a functional city in New Orleans!

It's really hard for me to be empathetic to Brown. I view this much more as yet another case of thieves and liars turning on each other. But it's keeping the aftermath of Katrina in the public eye, which means more people will be realizing what a serious economic and financial crisis this is.

How to maximize your home's sellability, courtesy of CNN Money. Very interesting and useful advice, though I had to snicker at the first header: "Get On Your Hands and Knees." Yeah, if you want to sell in this market and expect top dollar, that's the position to take, all right.

Urban Trekker pointed me to this article from the Washington Post about Montgomery County's new anti-discrimination housing laws causing lenders to flee that regional market. I'm sorry, but that's a crock, kiddies. If it's such an onerous burden to provide fair lending terms and rates, you shouldn't be in the business.

Remember, Ameriquest had to cough up $325 million because it couldn't be bothered to explain to its customers how the game was actually played. I also don't buy the tired old saw that state regulations can cause things to be confusing. If you can boil every bit of a borrower's history down to a three-digit-score, you can afford to give said borrower the rates they deserve.

Posted at 07:30 PM | TrackBack

digg this story

Housing News: Brokeback Market

"Why can't I just quit those highball sale offers?"

Massachusetts' housing market is going down like a stunt double for Heath Ledger. As the article points out, excess inventory will lead to lower prices, which may entice buyers out in the short term. And don't forget, Massachusetts is suffering both increases in foreclosures and its own condo glut, which will give the prospective buyer more power to negotiate. If it's all about moving product, the deal comes down to who can get the most for the least.

As the Urban Trekker points out, property assessments are still partying like it's 1999. Am I the only one who thinks these bizarre property assessments are being used to cover shortfalls for other tax areas, or do they really think that people are just gonna keep building, building, and building, and expect to move those units?

Even sunny Florida is coming to terms with the fact that the boom is over. It is, indeed, "too scary" to be paying two mortgages at once when you can't afford it. Here's hoping the rest of the bubble markets get scared, ah, straight, soon enough. (No offense to Ang Lee intended.)

Posted at 05:03 PM | TrackBack

digg this story