January 05, 2008

From the Wall Street Journal:

Posted at 04:59 PM | TrackBack

digg this story

April 22, 2007

ConsumerAffairs.Com, which has done masterful work in covering the many stages of the housing collapse, has an article today on buying a home in foreclosure. Author Fred Yager walks you through all the steps you need to buy a property on the auction chopping block. It's by no means a cakewalk, as Yager notes:

[F]oreclosure homes are sold "as is" which means that the 25 percent you just saved on the purchase price can easily be eaten up by unforeseen expenses such as repairs not immediately apparent in an exterior inspection. That's because when you buy a home in foreclosure, you may not be able to look inside let alone have an inspector detect structural problems that you'll need to fix before moving in...be prepared to pay for any problems such as electrical or plumbing repairs, leaky roofs, or even vandalism by angry homeowners who break things or punch holes in walls and doors, an unacceptable but not that uncommon way that some homeowners deal with the angst of losing their home to foreclosure.

A lot of bloggers and specuvestors alike crow about the ease of picking up foreclosed properties, especially now as delinquencies and foreclosures are reaching record levels all over the country. Yager's article is a good bit of cold water in the face on that score.

Yager previously wrote about what to do if you find yourself on the other side of the foreclosure gun, which I also recommend.

Posted at 06:08 PM | TrackBack

digg this story

March 20, 2007

The lovely Velvet in Dupont has composed a lacerating no-love note to Alan Greenspan for enjoying the irrational exuberance of his retirement while the market he propped up crashes around him:

Your intent in keeping the economy afloat was a wise foresight on your part. But, you should have stopped with the rate reductions at some point earlier than 2003. You should have also increased the rates at a much faster pace than you did. Since you are so good at shooting your mouth off, you should have also warned all those homebuyers: If they can’t afford a fixed rate mortgage, then they can’t afford that particular house. Of course, you didn’t though. You’re saying it now, but back then, you were happy that the homebuilding industry was keeping the economy afloat and that you looked like a hero. You can’t give stupid people a bunch of money and not advise them of some basic financial rules because everyone else has to suffer the fallout when those people mismanage their money.

It's ridiculous how right this is. Just read the whole thing, won't you?

By the way, did you know that the District's own subprime contaigon has spread all the way from Anacostia to Fairfax? Think about it--the richest and poorest alike are both trapped in subprime hell. The former because it was the only way they could afford a home in pricey, increasingly-gentrified D.C., and the latter because they were trying to buy million-dollar homes on five-figure-incomes. Urban Trekker has the whole thing catalogued, so again, read the whole thing.

Posted at 04:10 PM | TrackBack

digg this story

February 05, 2007

USA Today has a front-page story about the continuing rise in rents in many markets as the housing market slumps:

With the projected rise of 5% this year, rents would be 14% higher than at the end of 2004, the report says. Over the same period, paychecks are expected to rise 4%, adjusted for inflation. The widening gap is likely to worsen the crisis for workforce housing, especially in coastal cities, says Hessam Nadji, a managing director at Marcus & Millichap, a real estate investment brokerage. "This is a national trend. We're seeing rents rise in the majority of markets, and we see this continuing for at least three years.

The article correctly notes that the continuing spate of "condo glut" in many overbuilt markets will help ease things for renters, as the flippers are stuck paying two mortgages that they can't cover and need income fast. Let me take this opportunity to link to a recent Bubble Meter post discussing the flopping condo/lowering rent syndrome in that most overheated of markets, the Big Apple.

Posted at 01:24 PM | TrackBack

digg this story

January 24, 2007

That's the price for this rather cozy little abode, located in the heart of London. As the article notes, the price is an example of "location, location, location" taken to the absolute extreme:

At more than $4,340 a square foot, the mortgage buys a spot within walking distance of tony stores like Harrods and London's iconic Hyde Park. Originally conceived as a maid's room, the apartment at 18 Cadogan Place hasn't been used for years and is littered with trash bags and crumbling paint...The sale of this dark, mildewy room illustrates the astronomical rise in property values across London, which in the past year has seen average residential property prices increase 22.4 percent, to about $703,000, according to figures released Monday by Rightmove, which tracks the British property market.

If nothing else, this is a good reminder that the epidemic of soaring property values--and corresponding lack of affordability--is not confined to the borders of the U.S. alone.

I understand that David, aka Bubble Meter, is going on vacation. Maybe he can look into the bubbiliciousness of merry olde Englande while he's overseas. :)

Posted at 02:06 PM | TrackBack

digg this story

December 28, 2006

By now it's a familiar pattern, replayed for months throughout the housing slump's continuing decline:

First, higher interest rates cause a slackening of loan applications and refinancings:

Demand for home purchase loans also weakened as the MBA's seasonally adjusted purchase index , widely considered a timely gauge of U.S. home sales, fell 10.6 percent to 390.2, its lowest since late October. The index was also below its year-ago level of 432.9...Also driving demand lower last week was a 18.5 percent fall in the MBA's seasonally adjusted index of refinancing applications to 1,604.6, its lowest since early September. A year earlier the index stood at 1,259.1.

Then you have sellers giving in to the inevitable and cutting prices which leads--surprise, surprise--to slight surges in home sales:

The National Association of Realtors reported that sales of previously owned homes rose 0.6 percent in November to a seasonally adjusted annual rate of 6.28 million units. That followed a 0.5 percent sales increase in October and marked the first back-to-back sales gains since the spring of 2005.

Keep in mind, however, that these gains are from existing homes. New home construction is still on the downslope, and excess condo inventory will keep those units standing alone and empty until there are bigger price reductions across the board.

Of course, none of this is stopping the NAR from saying, once again, that now is a great time to buy. And while this statement is much more true than it was, say, a year ago, it's still not true enough. Not yet. But soon....

Posted at 04:33 PM | TrackBack

digg this story

It was an exciting moment early on in the history of this humble blog when we got quoted in the New York Times last year. Well, I'm happy to say that my colleague David Livingston, aka the legendary Bubble Meter has surpassed all expectations with his mention in the WSJ about renters riding out the housing slump.

I've always been of the mind that unless you're 100 percent sure you can commit to buying a house you can afford, with a fixed mortgage and 20 percent down, you should rent. There are too many toxic products out there to lure cash-strapped buyers into financial misery with as it is, and still not nearly enough education and knowledge among the masses. But it's too easy to classify people as stupid renters and gullible buyers. Everyone has a different situation, and different circumstances.

With that said, David and those like him who have sounded the warning bell about housing were dead on the money, so to speak. Prices are too high, demand is slumping, foreclosures are on the rise, and everyone from Ben Bernanke to the Lereah himself has been forced to concede that the downslide is "substantial." If it hadn't been for people like David that challenged the common wisdom of "Renting is a waste of money--you should buy," we'd have a lot more F%$ed borrowers.

So, ignore the haters and listen to the fans, David. You're doing the right thing.

Posted at 03:13 PM | TrackBack

digg this story

November 17, 2006

That's the unfortunate news regarding new home construction for October, as the Commerce Department glumly reports the continuing effects of excess inventory and frightened buyers:

The report signaled that the months ahead could be equally bleak: The number of building permits that were issued fell for the ninth straight month, reaching its lowest level since 1997. Those figures, too, are seasonally adjusted....The report deepened concerns that the contraction in the housing market could brake economic growth more sharply than many economists have been forecasting. And it weighed against any hope for a quick rebound.

And yet, if you go with MSN Money's take on it, it's merely a sign that the market has hit rock bottom:

A private survey of U.S. homebuilders' sentiment ticked higher in November. The National Association of Homebuilders/Wells Fargo Housing Market Index on Thursday got a two-point bump to 33 points in November. The survey hit at 15-year low of 30 in September.And on Wednesday, the Mortgage Bankers Association reported that applications for U.S. home mortgages rose last week to their highest level since January as falling interest rates encouraged more loan refinancing.

Now, the question is what kind of loans are homeowners refinancing into? If the terror that is WAGE GAINS is for real, are people taking advantage of their increased buying power to go for traditional fixed loans? And will the relatively positive signs of economic strength be enough to buffet the continuing deceleration of the housing sector?

Kendra Todd provides some good advice for a buyer's market, and the Urban Trekker has found some great bargains for under $400,000 in the infamously bubbilicious D.C. housing market. Are these the signs of the end of the slowdown, or just the beginning? Hard to say. Those lower-end prices could be for total fixer-upper s?!tboxes, and there's no guarantee of being able to get into them without utilizing toxic mortgage products. But a year ago, would we have even broached the idea of a buyer's market?

I will answer this with a quote from the guru of all things housing bubble, Ben Jones:

The market is overbuilt, and the only cure for that is time, not rate cuts.

Word.

Posted at 01:50 PM | TrackBack

digg this story

November 01, 2006

The Washington Post has an expose of how New York is coping with its slowing housing market. The answer seems to be "Win by any means necessary":

The alliance of 255 Hudson and the car club, for instance, was celebrated at a cocktail party in the club's showroom/garage months ago, with a couple of women hired to mingle and grin wearing little more than pasties and body paint meant to evoke racing stripes. The words "Condo included. Girl Not Included" were painted on their backs.

I'd buy that for a dollar. :)

This reminds me of a new condo offering in Tenleytown, a neigborhood in northwest D.C. The name of the place is Maxim Condos. The development is being billed as "An exclusive collection of only 36 custom-crafted condominiums, finished with the finest materials and best-in-class features for high-performance living."

Ok, are we buying a condo or a NASCAR special? Because when I hear about something named "Maxim" offering me high-performance amenities, I better see this as an incentive for a sale:

I'll be interested to see if these crass tactics actually get anyone to put the John Hancock (heh heh) on the dotted line.

Posted at 12:54 PM | TrackBack

digg this story

October 24, 2006

A few days ago, the Washington Post's Kirstin Downey outlined the new consumer warning against exotic mortgage products. While it's a clear case of closing the barn door after the tornado has hit, there are still many, many homebuyers out there who don't realize the danger of signing on to an option ARM until it's too late:

In 2000, fewer than 2 percent of people in the Washington area had them. In the past two years, more than 40 percent of people buying or refinancing homes here used them.

You can find versions of the pamphlet at the FDIC Web site, among other places.

ConsumerAffairs.Com has a roundup of what happens to buyers who are facing foreclosure, and why it happens. There's probably nothing here readers don't already know, but it's well-written and absolutely necessary for anyone who's in over their head with the home payment.

And to give you more of a look at what the future of the home market will hold, today's Boston Globe discusses the
24 percent drop in single-family-home-sales in Beantown. There is some evidence of buying upticks, which indicates to me that sellers are more willing to meet buyers in the middle and keep the housing downturn from becoming a true flameout. But still...$220,000 for a one-bedroom? I've lived in Boston, and it's a beautiful city, but let's be real. :)

Speaking of being real, here's the money quote from the Globe article:

Real estate specialists said the market can't fully rebound until the excess supply of homes is reduced, a process that could take months or years. The association's data, which are pulled from real estate agents' central databases around the state, said nearly 64,000 houses and condos were on the Massachusetts market in September, 14 percent more than a year ago.

Absolutely. As long as there's a glut of "ghost homes" clogging up the market, people will be gunshy. Prices will have to drop further to get buyers out of their caves again.

Posted at 12:01 PM | TrackBack

digg this story

October 19, 2006

The Los Angeles Times reports that more California homeowners are facing default. Money (or lack of it) quote:

When she started TerraCotta 2 1/2 years ago, company President Tingting Zhang said two or three people would come through her door on the typical day looking for help. Now, it's 30 to 40. "And we haven't reached the peak yet," said Zhang, who believes that the combination of rising interest rates and high-risk mortgages could spell defeat for a rising number of borrowers.

As I said once before, what is happening here is everyone's problem. It's the fault of the homebuyers for not saving enough and thinking they could sneak in to a million-dollar home with beer money.
It's the fault of the lenders for promoting toxic mortgage products to people who can't afford them and aren't ready to handle the sticker shock.
And it's the fault of enablers like Greenspan, Bernanke, Lereah, and so on...all of whom saw the writing on the wall and chose to spread lies in order to cushion their own arses.

I can't say much else without getting furious, so I'll just stop here and remember that it's going to get better...but it'll get worse first.

Posted at 06:37 PM | TrackBack

digg this story

October 15, 2006

One's for the consumer, one's for real estate. Who do YOU trust?

I'm a bit late to the dance on this one, but I couldn't go without mentioning that the Federal Trade Commission is cracking down on anticompetitve MLS operations. From the FTC statement:

According to the FTC, all seven groups adopted rules that withheld valuable benefits of the Multiple Listing Services (MLSs) they control from consumers who chose to enter into non-traditional listing contracts with real estate brokers. Six of the seven blocked non-traditional, less-than-full-service listings from being transmitted by the MLS to popular Internet Web sites. The seventh went further, adopting policies that include blocking such non-traditional brokerage contracts from the MLS entirely. Such policies limit home sellers’ ability to choose a listing type that best serves their specific needs. While five of the groups have entered into consent orders barring such conduct in the future, the two in Michigan have not, and the FTC has issued administrative complaints against them.

Of even more estimable note is the fact that five of the MLS sites are willing to play ball through leveling the playing field for discount brokers. This is, indeed, a great day for the Rebellion. Offering real competition in the listing field can only benefit consumers and brokers. Real competition in a market--hoodathunkit?

Found via the Freakonomics blog, which naturally is quite gleeful over this development.

Posted at 03:25 PM | TrackBack

digg this story

October 12, 2006

Two interesting reports came out today that deal directly with the housing market. The first is the Federal Reserve beige book, which surveys data in key economic sectors from around the country. The report is mostly positive in a moderate sense, but when it comes to housing, the outlook darkens considerably:

Nearly all Districts reported that housing market conditions continued to soften, though several noted that activity increased in some markets. Most Districts reported higher home inventories, and several said that homebuilders and sellers continued to offer incentives to attract buyers....Rent increases were reported by New York, Minneapolis and San Francisco, with Dallas indicating that pricing power was shifting to landlords.

That squares with the typical end of a housing bubble--as owners scramble to get affordable housing in a balloon market, landlords play OPEC and decide to jack the prices of rentals up to whatever they can get away with.

The second bit of news is a report from the Center for Housing Policy that finds the costs of high commutes outweigh low mortgage payments for residents in the 'burbs. If you think you're getting a deal by owning vs. renting, you may be, but the costs of gas, car maintenance, tolls, bus passes, etc., can wipe all of that out. More about this from Brad DeLong.

This is the price of the exurbian exodus. People are so desperate to have land and own a home to use as a bank that they'll willingly sacrifice hours upon hours in long commutes, spend tons on gas, and end up even further behind the 8-ball than when they started. As DCist notes, this could be solved by workforce housing and better public transportation, but the elephant in the room is still overpriced homes.

Prices have to fall, not only for a sustainable future for the homebuying economy, but for the sake of maintaining lifestyles for people who may not want to give up their lives being stuck on the toll road. Read yourself some Kunstler and see if you're willing to make the change.

Posted at 05:56 PM | TrackBack

digg this story

October 05, 2006

Some unrelated bits of interesting news to close out the week with:

The U.K.'s Guardian Unlimited takes a look at the U.S. housing bubble and, unsurprisingly, sees gloom in the future:

A key difference to the British market is that supply in the US is much more flexible because land is more plentiful. Americans build houses by the million each year. So when demand drops off suddenly, the country's housing market can be clobbered by a glut of empty newly built property.

That sums it up right there. Homebuilders and developers just won't stop. They're like the Terminator or the Borg or something. They just keep piling up these crappy constructs and running away with the cash, then wondering why no one is buying the units.

There're some good signs of increased retail confidence thanks to lower gas prices and cooling temperatures, but I note with interest that Wal-Mart--that bastion of the working-class consumer--still missed its mark. It tells me that people on the margins--many of whom bought in with toxic mortgages--are still so stretched out that even a fall of roughly $.60 to $1 in gas prices isn't making much of a dent in their bottom line. And how much of that so-called "windfall" is getting eaten up by mortgage costs?

I am willing to be less bearish than some and say that we may yet weather this storm, but it's still very much up in the air (so to speak) as to how bad things will get before they bottom out. At least we've moved on to the "Acceptance" phase...

Gothamist eloquently explores the disconnect between flat rental prices and an insane market. Property Grunt echoes some thoughts that I had last year--that specuvestors will come flocking back to the stock market as housing continues to tank, witnessed by the Dow's stellar performance yesterday.

Speaking of that, Dean Baker punches a hole in the irrational exuberance as only he can. Money quote:

But, if future profits are projected to be higher because of lower wages or lower corporate taxes (e.g. a higher tax burden on workers or fewer public services), why should the mass of the population, who own little or no stock celebrate?

When a family of four can buy a home in D.C. or New York in the mid-six figures that isn't in a crime zone or powered with a "creative" mortgage, THEN we can start breaking out the bubbly. Will those days ever return? I don't know.

P.S. Hey Robert Cote'! You left a comment here a little while ago and it got swept up in my spam filter. Just didn't want you to think we forgot about you.

Posted at 04:35 PM | TrackBack

digg this story

September 18, 2006

GigaOM mentioned the latest in rental search hotness, MyNewPlace, and correctly notes who their target market might be:

MyNewSpace is not for cities like San Francisco or New York, where Craigslist is king and rent control limits apartment turnover. Helm says his target user is a recent college grad moving to Atlanta to take a job at Coke who wants to post photos of her new apartment on her MySpace.

I'm sure the naming of the site is anything but coincidental. :) Utilities like this are going to serve young upwardly mobile types who are suddenly realizing the seriously fuXX0red condition of the housing market, as well as recent college grads with lots of debt and not much concern for settling down in the near future.

Plus, although free listing sites can vary wildly in quality, they can often be more honest and up-to-the-minute than any for-pay service (Present company included, of course). So for sites like MyNewSpace and Zillow to succeed, they have to offer even more value than free sites to justify the costs. If their base system--accurate listings--isn't up to snuff, what's the point? :)

Posted at 01:38 PM | TrackBack

digg this story

August 17, 2006

This morning I was bitching to a friend who lives in my building about the massive new "condo hotel" conversion going on behind us, keeping us awake at all hours, destroying our trees and sidewalks, and generally serving no purpose.

Why, we wondered, were condo developers continuing to put down stakes on massive new high rises and conversions in such a bearish market as this? Who did they think would buy those units?

Vinnie Tong from the AP sheds some light on this particular condo conundrum:

Hotel-condo projects can be found in different stages of development in cities such as Berkeley, Calif.; Provo, Utah; Pittsburgh and Little Rock, Ark. And they've been proposed for towns as varied as Yankeetown, Fla.; Asheville, N.C.; and West Wendover, Nev.

I think the key to the heavy investment spate lies more in the whole "spreading risk around" angle than it does anything relating to New Urbanism. Condo developers can be true shysters--get in, get the deposits, and break out again. The idea of passing on the risk and making a profit enables these folks to lure in citydwellers like the proverbial moths to the flame.

I'd probably buy a condo before a home in the burbs, but I'd rent before buying a condo. It seems like it combines all the worst aspects of renting (lack of space, intrusive landlords, nosy neighbors) with owning (property taxes, assessments, hidden fees, HOAs, etc.). Your mileage, of course, may vary.

Speaking of New Urbanism, I found a hysterical quote from a discussion at Planetizen that goes even further to explain the condomania:

The New Urbanist allegory works because it connects to the complex concerns of middle- and upper-income Americans. They want to be near other people and to have new and different experiences, as long as the other people aren't scary and the experiences seem safe. That's why people who would never ride a bus or walk around on a crowded New York City street are willing to take a tram from the parking lot at Walt Disney World and spend their days in congested and car-free surroundings.

I disagree with the guy's thesis, but that IS some funny shit. :) And doesn't that picture actually look like your typical sh%tbox development? I didn't choose the title of this entry for no reason, after all. :)

Posted at 05:20 PM | TrackBack

digg this story

August 16, 2006

And so it came to pass that the Lereah looked upon the land of the housing market and claimed it was good:

WASHINGTON - The slowdown in the once-sizzling housing market is spreading, with 28 states and the District of Columbia reporting spring sales declines, led by big drops in former boom areas of Arizona, Florida and California....The Realtors report depicted a tale of two housing markets, with former boom areas experiencing declines and other areas of moderate sales gains during the boom years experiencing strong growth.

Of course, those who've been reading Housing for a while know that this is the latest phase of the great leap inward, where exhausted families and exurbanites flee the cities for cheaper homes deep inland, thus pushing those prices up and giving homebuilders a reason to move all that excess inventory. Meanwhile, the cities attract the super-rich, childless, and anyone else with lots of disposable income.

Naturally, true housing bubble blogerati do not tolerate the lies of false idols like the Lereah, and so they have crafted some truly wicked punishments for his perfidy:

Make him purchase a new-construction condo in South Florida, or a far exurban new Southern California cookie cutter new home for full price, using an an option mortgage with significant pre-pay penalties. And, the condo or house must have a hefty HOA. The punishment fits the crime.

Verily, their verdict is vengeance.

Posted at 12:03 AM | TrackBack

digg this story

August 09, 2006

Someone sent me an Internet the other day about how L.A. Clippers' owner Donald Sterling is showing more bias then Len on a cocaine binge:

The Justice Department on Monday filed a discrimination suit against Los Angeles Clippers owner and real estate mogul Donald Sterling, accusing him of favoring Korean tenants while seeking to exclude African Americans and families with children from his apartment buildings in Los Angeles County....Here in Los Angeles, where housing is already at a premium, it is imperative that no one be denied housing simply because of their skin color, ethnic background or because they have children," said Debra Wong Yang, U.S. attorney in Los Angeles. (Emphasis added.)

Racism is idiotic in every sense of the word, and not only that, but it makes bad business sense to turn away good potential renters (who may want to be owners) simply because they don't look like you. The SoCal housing bubble is one of the most thoroughly dissected and covered in the nation, and everyone from Marinite to the vacationing David can tell you that it's hardly the days of cheap land and available credit out on the left coast.

Sterling needs to get his head right and his ass out of the renting business if he's going to practice such bad behavior, or he's going to get....nah, I've already said it, but it's still true. :)

Posted at 02:44 PM | TrackBack

digg this story

August 06, 2006

Buying a home is a roll of the dice in even the flattest seller's market. There are so many variables that can turn the locked deal into a nightmare in less than an instant. And in today's market, with extreme prices at one end and declining consumer power at the other, there's more of a need for assistance and building mixed markets than ever before.

The New York metro area is taking a number of novel approaches to the "workforce housing" conundrum--building units affordable enough for middle-income families to live in, but not branded with the stigma of "subsidized welfare" projects that have plagued the issue in the past. The struggle that Long Island is going through is a welcome illustration of how hard a project like this can be--you have to negotiate everything from water rights to NIMBY exurbanites. This requires a lot of horse-trading and delicate negotiation:

Mr. Elkowitz of the housing partnership said making affordable housing profitable for a builder requires creative financing using public funds, often garnered by the housing partnership, and the cooperation of several forces: town zoning boards, mortgage banks and county spending on infrastructure.

Mixed housing isn't just great from a cultural and infrastructural process, but it's good for business as well. Getting the rich and poor to live together can build new markets, new communities, and hopefully more business. Naive, I know, but it's not beyond the realm of the possible. After all, no one thought that Chicago's Cabrini Green could be rehabbed:

He and Peterson are convinced – along with many scholars of the culture of poverty – that people learn by example. Living among people who go to work every day and seek to improve their families' lives rubs off on welfare mothers.

Let's hope that NYC mayor Michael Bloomberg's big affordable housing gamble reaps equally positive returns and doesn't come up snake eyes. :)

Posted at 03:21 PM | TrackBack

digg this story

August 01, 2006

Some say that the definition of insanity is doing the same thing over and over again and expecting a different result. If that is the case, then the recent statements by new Treasury Secretary Hank Paulson are a prime example:

Paulson made no changes in U.S. policy, saying that a strong dollar is in the national interest, and calling on China to embark on structural reforms that would create more flexibility in its currency and allow for greater domestic consumption. He said the fiscal deficit is improving, but its long-term stability depends on reforms in entitlement spending. Asked if the economy faces a recession in the near term, Paulson declared, "Absolutely not."

Not only is Paulson apparently on the same well-trod path that John Snow took before his unceremonious exit, right down to the "Get China into debt" philosophy, but he's seriously drunk the Kool-Aid and thinks that reforming Social Security is our most pressing problem:

He offered no new ideas on how Social Security could be reformed to meet the financing needs of 78 million baby boomers, but he said a solution must be found soon.

"The longer we wait to fix this problem, the more limited will be the options available to us, the greater the cost and the more severe the economic impact on our nation," he said.

And in other news, the "no recession" economy continues to demonstrate its resilience to shock...or not:

"By now, it is evident that consumer spending is showing the strains of elevated gasoline prices and a slowing housing market, while for debt-laden consumers higher interest rates have increased the burden of monthly debt service payments," said Stu Hoffman, chief economist for PNC. "With little relief from any of these factors likely in the near term, consumers are becoming increasingly reliant on wage growth to support spending."

As long as prices outstrip wages, and interest rates continue to rise, consumers will pull inward and spend less. Debt keeps consumers from spending, and the more they are pushed into debt, the less they have to leverage. This is rapidly becoming a zero-sum game, and (hopeless that I am at the prospect) Paulson needs to stop playing politics and face the facts.

(Image courtesy of Transcription Gear.)

Posted at 03:14 PM | TrackBack

digg this story

July 30, 2006

The Real Estate Journal has a really cool anatomy of a real estate investment from the 28th. This is the kind of thing we need to see more of--nuts and bolts, in-depth calculations of exactly what it will take to make a profit off investing in property. I particularly like this one because it illustrates both the downers and uppers of the modern market.

Downer: His main reason for trying to sell the property, Mr. Klein says, is that the interest rate on his mortgage eats into his profit... His mortgage rate might increase in late December 2007 -- to 13%. Even if he raises the rents, he might not be able to make an operating profit on the property.

Upper: Mr. Klein does not anticipate paying listing fees, as he is marketing the home as for sale by owner.

I can't stress enough how important that "upper" is...Klein is potentially saving himself a good chunk of change simply by applying his own hard-earned knowledge (including the mistake of using an ARM) and bypassing the realtor protection racket.

Actually, there's an interesting debate going on over at Inman's blog about the virtues and vices of an open MLS system. Money quote:

Consumers have options now. This open MLS is like doing a ballor initiutive to have Mercedes build a $9800 car. If you want one buy a KIA. If you want FSBO go to one of the thousands of FSBO sites. If you want to be on the MLS pay for it. This is not negative, this is commerce.

That's really the key right there. The data has to be accurate, and MLS sites still have the stranglehold in terms of most accurate valuations. Having FSBO, discount lender, and other such listing services nip at their heels works more from a transparency and openness perspective than it does accuracy...for now, anyway. But the best of all three is the way to go. This seems to be the model that Zillow is favoring, and it's certainly one we here at Housing support.

Posted at 05:28 PM | TrackBack

digg this story

July 28, 2006

I never thought I'd see the day when Reverend Moon's personal newsletter would know its head from its arse when it came to the bubble:

"It was like the greater fool theory -- there has got to be a fool out there who's willing to pay even more than me for this house. At some point, you run out of fools," he said. Mr. Cruise, a former television reporter, credits a nationwide rash of publicity a year ago warning of a housing bubble for prompting people to stop and think more carefully before buying.

Every bubble blogger in the world should be getting cramps from all the back-patting right now.

It's interesting to note, living in D.C., that the condos are still going up, the office development is still coming hot and heavy, and there's a massive parking lot downtown to accomodate all the new business we'll be getting...and yet, there are signs of a sort of "anti-bubble" market on the rise as well. Take this interesting ad from a "renovated" apartment-building-turned-condo called The Grant.

$189,000 for condos in D.C.? Sounds amazing. But note, that's for the studio. You could probably have a closet, maybe a kitchen, and a hammock if you're lucky. Not to mention that there's NOTHING interactive about the site. No property views, no pictures, no nothing. Having seen the building in question, I think it's safe to say there's a reason for that.

There will be a time when $189k is considered high-end for D.C. again...it's inevitable. Too much inventory, too little sales, too much fear of the entire economy crumbling. The cycle will come around again. Hindsight is 20-20, but it only works if you can actually SEE, and too many people nestle their brains in the wrong part of the anatomy to pay attention to what's really going on.

Posted at 05:11 PM | TrackBack

digg this story

July 25, 2006

The June numbers for existing home sales are out, and as you might expect, they are nothing to crow--or meow--about:

The 1.3 percent decline, which was in line with expectations, represented the third drop in a row and the eighth in the past 10 months as the nation's once-booming housing market has shifted to a slower pace in the face of rising mortgage rates.

By region of the country, sales fell 3.5 percent in the Northeast and 2.3 percent in the South last month. Sales were unchanged in the West and the Midwest.

I'll be very interested to see the new home and building order data for Midwest markets. It's interesting that consumer confidence continues to hold steady, even in the face of a literal mountain of economic data that points to some really bad news in the offing. Money quote:

We have no choice. That fact that we are selling off the US piece by piece because we have to (not because we want to) is further proof that our current consumption binge is not sustainable.

For now foreigners have been willing to finance our deficits for a mere 5% interest rate. While I suspect this can continue for a while it is a big mistake to assume this arrangement will last forever. The only solution will be to sell off more US assets, stop spending, or hope to god the rest of the world gets as crazy as we are about buying stuff on debt. The latter will only help us if we have a manufacturing base in the US.

Amen!

Oh, if you ever wondered what the term dead cat bounce meant... :)

(Note: Mish's article is really long, but watching him dismember the Motley Fool is akin to the "Best of Ridley Scott" fast-forwarded--just awesome. All killer, no filler.)

Posted at 04:05 PM | TrackBack

digg this story

July 17, 2006

is apparently Fort Collins, Colorado, according to a CNN Money poll. Other winners include perennial HAWT real-estate destination Scottsdale, Arizona, Ellicott City/Columbia, MD, and the former home of Sprint, Overland Park, Kansas.

Interestingly, though all the major destinations are exurbian/Midwestern/rural heaven, CNN also claims that cities are hot again,
further substantiating the societal trade theory I put forth--families continue to move to the 'burbs, while singles, retirees, etc., flock back to the urban enclaves. But that much-heralded crime spike will follow, because the net incomes of new city dwellers are rising, and as poor people are gentrified out of their homes, crime naturally rises. Follow the money, as they say.

Here's an interesting article from the Fresno Bee on what's being done to maintain affordable housing. When's the last time you saw $120,000 for a condo anywhere outside of the flattest flyover state, eh? Money quote:

"Historically, condos have done very poorly in this market. There was plenty of affordable housing," said Mike Harter, senior vice president with Grubb & Ellis Pearson Commercial in Fresno. "Clearly, that's not the case today. Affordability is a real issue today for people trying to buy homes, and condominiums are a good alternative."

It's a devil's bargain--pay through the nose for privacy and ownership, or end up at the whims of a tyrannical homeowners' association fief for affordability. Excellence of execution, indeed.

Posted at 05:41 PM | TrackBack

digg this story

July 03, 2006

Patrick.net pointed me to this article from the San Jose Mercury News on the increasing pain of homeowners as mortgage rates rise.

While this is depressing in and of itself, I wanted to address the attitude a good number of housing blog commenters (and some writers) take towards people who find themselves in this position. The consensus often seems to be that they deserve what they get for taking such a risk, and that they should have educated themselves financially. They get called "FBs" (as in "F$%ed borrowers"), "homedebtors," and all manner of fun things. The tone is often dismissive, condescending, and downright mean.

I don't think this is fair. Does America's savings rate suck? Absolutely. Do we lack basic financial education? Absolutely? Should parents, schools, and the workplace teach people the necessary knowledge to buy homes, invest smartly, etc.? No doubt.

What you have to remember is that the system is gamed to play on people's ignorance. Credit cards, "creative mortgage," unscrupulous auto lenders, etc.--these are all built to screw you if you don't know what to do. And many people simply don't have the time to find the knowledge they need to make smart decisions. They have families to raise, bills to pay, etc. And--let's be blunt--not everyone is an MBA or financial wizard. Should we then say that you don't deserve to own a home if you don't pay micro-level attention to gold futures or derivatives?

I know that I, as a neophyte housing blogger, learned much of the game from reading the works of everyone from David to Ben Jones to Tim Iacono. The knowledge is out there for everyone to take advantage of, but it's still an uphill battle against a complacent media and the publicity machine of the realtor and financial industries. Shocker of shockers, the blogosphere is not the be-all and end-all.

You shouldn't buy a home if you don't have all the facts at hand and haven't done all your research. By the same token, you shouldn't scorn and dismiss people who got scammed by flippers, shady lenders, etc. Save your condemnation for those who truly deserve it in this game, and stay focused on spreading the knowledge to help those in need, and level the real estate playing field.

(Image courtesy of Rescue Mission.)

Posted at 03:41 PM | TrackBack

digg this story

June 27, 2006

A fellow blogger tipped me off to this great USA Today story about the horrific levels of price inflation in the housing market, specifically San Diego--but applicable to the country as a whole. Of course, if you're a smart and savvy housing blogger myself, you already know that prices are beginning to avalanche, but they're still so far above the mean that it will take years for them to truly flatten at affordable levels.

Money quote:

Cortney Henderson is one of the faces of America's housing affordability crisis. She never could have qualified for a mortgage here — where the median home price is $607,000 — had she not had the $27,000 she made as an egg donor to use as "reserves" in her bank account.

What does it tell you about the state of our distended, bubblicious, and brutally overpriced market that an intelligent, educated woman not only needs constant financial help to maintain her mortgage, but had to sell her eggs to make the cash for the down payment?

Talk about borrowing from our children to pay for our parents, eh?

Posted at 06:23 PM | TrackBack

digg this story

Another day, another housing slump report from the National Association of Realtors. Now, let's see if we can puzzle this out:

New home demand is slacking, but new home construction is rising.

The Commerce Department recorded a spike in new home demand for May.

And now the NAR says that existing home demand is slumping. So, what have we got?

It literally doesn't make sense. Homebuilders are flooding the market with inventory, but demand for new and existing homes is dropping, except when it isn't. We need some serious macro-level economic analysis to make heads or tails of these insanely conflicting reports. Luckily, Mish's Global Analysis is on the case:

U.S. MAY NEW HOME SALES UP 4.6% TO 1.23 million VS 1.15 million EXPECTED
U.S. NEW HOME SALES down 5.9% in past 12 months
U.S. April NEW HOME SALES revised lower to 1.180 million

One must use caution in interpreting the above sales data. The data does not include cancellations yet cancellations have been skyrocketing at many homebuilders lately. In addition we have been seeing housing inventory numbers go up month after month. More and more people “want out”. It simply is not possible at these prices. This will just add to price pressures down the line. For now, local economies are still being supported by all this construction activity but when it ends, the jobs will go with it. Add it all up and talk of a "soft landing" is pure nonsense. Let's see where we land first, and then we can talk about how soft it was.

True indeed. It pays to know all the facts, now more than ever. That means parsing all the data you can find and doing comparisons the same way you would when purchasing a house itself. Take no one source as gospel, and don't let anything or anyone claim that they are the authority when it comes to real estate. Homebuilders want the boom to continue, because as long as those contracts don't get canceled, they make money. Realtors want to deny the existence of a slump, just as flippers, speculators, and hoodwinked owners do.

But the other shoe is ready to drop, and it'll come down like Fat Man and Little Boy.

Posted at 02:10 PM | TrackBack

digg this story

June 18, 2006

It's heartening to hear that, as in the case of any disaster reconstruction, real estate is fueling much of New Orleans' recovery. And even if the Louisiana-run insurance costs more, that means more dollars going into state coffers, as opposed to private pockets.

Still, there's something a little ghoulish about statements like this:

"To use a terrible analogy, it's like watching 'Gone with the Wind' for the fifth time," said Arthur Sterbcow, president of Latter & Blum Inc., the 90-year-old real estate firm based in New Orleans. "It's completely predictable. The market reacts the same way each time. It's like watching a football game and having the play book in your hands."

I don't think even the most well-worn playbook accounts for the failures of the levees due to incalculable stupidity, but hey, I've been wrong before.

On the other hand, despite Haley Barbour's alleged ins with the GOP, the fables of the reconstruction in Mississippi don't seem to be going so well:

At minimum, says Rand, the Coast needs 27,000 affordable housing units. “It’s a crisis,” says Mark Bernstein, leader of the four-member Rand field team that spent most of the last eight months in the stricken area.

I think if people stopped yelling about the admittedly egregious misuse of FEMA money and started focusing on what still needs to be done to rebuild, we might actually make some headway. But that would involve putting aside boilerplate cliches and thinly veiled racist diatribes to really get some work done.

Can't have that. Not when there're much more important things to do.

(Image courtesy of Katrina Destruction. Well worth looking at.)

Posted at 01:23 AM | TrackBack

digg this story

May 17, 2006

Oh, man, where do we start today? The Dow dropped like a thirteen-year-old's testicles on the CPI increase, even without (as they constantly remind us) factoring in food and energy prices. Speaking of the CPI, said index also hit a three-month-high today. In case you were wondering how this affects housing:

One of the things the Fed will be keeping close tabs on is how energy prices affect inflation and economic activity.

Energy prices can make inflation worse. They also can crimp overall economic activity by forcing consumers and consumers to pare their spending and investment. Or, high energy prices can result in both scenarios — which would be an tricky position for the Fed to deal with. To counter inflation, the Fed would be inclined to boost interest rates. To treat economic weakness, the Fed would want to leave rates alone or in more serious cases, lower them.

Now, couple this with the continuing rises in interest rates (as eloquently explained by Jared Bernstein over at the American Prospect), and you have a recipe for disaster if you're stretched on your payments in any way.

Some people are just choosing to toss the keys away and let the bank take their home back, as evidenced by the weed growth around foreclosed homes in places like Michigan. Interestingly, Inman tells us that foreclosure rates dropped in April. Perhaps the warm weather got more buyers out in specific regions of the country.

Other homeowners are hearing "buyer's market" and are literally throwing the kitchen sink into the mix in order to get people closing the deal on their property. And realtors are becoming equally aggressive--thanks to a nice little find from a comment on Ben Jones' blog, I think we've found the most (ahem) nakedly honest realtor yet, in Wendy Heath:

I'd make a comment about "buying that for a dollar," but it's Long Beach, so I'd probably have to spend two.

Posted at 04:08 PM | TrackBack

digg this story

April 23, 2006

Thanks to FEMA's monolithic incompetence, thousands of hurricane survivors from both Katrina and Rita who got money they didn't need are going to have to pay it back.

How much do you want to bet that those notices are going to go to people who DID need the aid and are just being squeezed to pay for the Iraq war, eh?

Let's be clear: Everyone who spent their $2,000 debit card allotment on strip clubs or Louis Vitton bags should pay up. But as the AP article notes, a good portion of those incorrect payments were due to mistakes FEMA made in the processing. To be fair, the agency was monumentally overworked and relying on untrained volunteers to process all of these claims, but if they'd had more transparent oversight, there would have been a lot less in the way of fraud.

I especially love the whole IRS-esque "set up a payment plan" nonsense. These guys KNOW most of these people won't have the dough to pay that money back immediately, and even at 2 percent interest, if it compounds daily, you're looking at an extra $100 a month, each month, not including penalties. Good luck getting that off your jacket.

And how's all that FEMA money being spent? Well, apparently people who have been begging for trailers are getting left out in the cold, while unused trailers sit vacant and FEMA can't be bothered to move them.

Your tax dollars at work:

Posted at 07:53 PM | TrackBack

digg this story

April 19, 2006

A news header on CNN this morning read "Crying Wolf About Housing?" Interestingly, CNN's own financial reporting seems to show that Grandma may, indeed, have something to worry about. MSNBC has a more thorough roundup of the state of the market.

Although no official word has come from Helicopter Ben and company as of yet, word has it that the Federal Reserve may put a halt on increased interest rates....and then again, perhaps they won't. This whole schema for the CPI is ridiculous, I might add...the two most serious cost inflation areas right now are gas prices and food costs (due to higher gas prices themselves), and yet they're not counted because they're "too volatile." Yeah, because that Gap V-neck T-shirt is the deal-breaker that's keeping me from filling up my $50 a tank SUV.

Here's a line that's worth noting: Fed officials are counting on a slowing U.S. housing market to keep the economy from overheating -- and there have been numerous signs a long housing boom is simmering down.

I saw it commented somewhere that the Fed's rate-hike marathon is designed to pop the bubble gently, not abruptly, and then turn around and crow about how we didn't need to provide new public works or government jobs to combat wage stagnation and price explosions. Interesting theory, to say the least.

Peep the discussion about the perfect housing storm over at the Daily KOS. As one commenter put it, the change will happen slowly. There's probably not going to be any single massive trigger that suddenly makes nationwide housing prices drop like Kirstie Alley's dress size. But as long as short-term-minded developers keep churning out hyper-expensive McMansions, prices will have to drop in the long run, because eventually, there will simply be too much inventory to make value of anything.

I've been wrong before, but will I be this time? YOU MAKE THE CALL!

(I wish I'd had a picture of Wolf Blitzer I could've used for this, 'cause that would've just been great. :) )

Posted at 03:48 PM | TrackBack

digg this story