Real Estate Crash thread

[timvwcom]

OP (& one more) quoted for proof of Benny's omniscience...

Well, it's official, because Greenspan sez so, by announcing last week that the boom is over in a post retirement speech. Soooo.....soft landing?.....nah, I don't think so. It's going to be rough for a few years.

From the NYT Real Estate blog:

"Thomas M. Stevens, president of the National Association of Realtors, said in the news release: “Inventories levels have come up to balanced levels between home buyers and sellers, so the pressure has come off of home prices and most owners can expect steadier gains in home values for the foreseeable future.”

Except where they drop. Here’s something we haven’t seen for a long time in the NAR report: “The median existing-home price in the Midwest was $166,000, down 1.2 percent from a year earlier.”

Ian Shepherdson, chief United States economist for High Frequency Economics in Valhalla, N.Y. said he wasn’t surprised by the decline in sales volume, but added: “The rest of the report is awful.” What’s got him bothered?

He said that the year-over-year increase in unsold inventory of houses of 42.1 percent is the fastest recorded since data collection began in 1982. “No wonder price gains are slowing,” he told clients. “Expect outright declines over the summer.”"

"The next big thing to worry about: foreclosures. It doesn’t seem like a source of anxiety yet, but the numbers are climbing. Keep the scale in perspective as you look at some of these articles from across the country. We are coming off a low base.

Sacramento: “We’re not seeing a lot of people at that foreclosure stage yet, but we’re sure seeing a lot of people who are headed that way,” said Jeff Tarbell, president of Sacramento-based ATM Mortgage.

Las Vegas: “Assistant Clark County Recorder Charles Harvey calls the spike in foreclosures significant. He said, ‘As the interest rate increased, we have seen an increase in the number of foreclosures.’” (Tip courtesy of Ben Jones at the Foreclosure Report blog. )

The economists I’ve talked to say that the bulk of adjustable-rate mortgages don’t start to trigger until next year. That’s when the nail-biting begins."

[DisArray]

I hear this all the time now. There's only a itsy bitsy amount of homeowners in trouble, speculators, blah blah. We're forgetting that trillions of dollars have been extracted from home equities over the last decade, and those people, in other words, most homeowners, are pretty much in the same boat. If you borrowed on your home, THAT amount is what you paid for your house, not the original purchase price. All those Lexuss (Lexi?), Range Rovers, Viking ranges, Vail trips, Vegas debauchery, is coming due.

Oh I don't disagree with you. I was commenting on what I have seen on the foreclosures. This thing is going to take longer to work itself out than people think for this reason, especially if the government give in to political pressure to start bailing out people who made bad decisions. Thats what happened in Japan in the 1990's and its took them over 15years for them to fully recover from that. We are in a similar situation today.

[Toadman]

Hillary in a speech today says the prez should form "an emergency working group on foreclosures" ... and should be led by ... experts such as Robert Rubin, ... and former Federal Reserve chairmen Alan Greenspan and Paul Volcker.

Comments? I'll start with the obvious, some of these guys were in the drivers seat, at the Fed most recently, when the makings of this mess were in their infancy.

Well Greenspan is blaming the lenders and bankers for not using good judgement, which led to the sub-prime mess. Not that Greenspan didn't think it was great that all this lending was going on. Greenspan also said in a speech over in London, that he hopes that the subprime mess doesn't lead to more bank regulation. Markets need to be free and unregulated and other good all warm and fuzzy stuff.

I suppose you could say just because Greenspan reduced rates doesn't mean it was his fault that all these lenders were going ape shit to lend money to bums on the street and then re-sell it to Joe Blow Hedge Fund. But the fact that he advocates for minimum regulation doesn't bode well.

[Benny Profane]

But the fact that he advocates for minimum regulation doesn't bode well.

He always had, though. He was/is an Ayn Rand libertarian. Was actually an acquaintance of hers.

http://en.wikipedia.org/wiki/Atlas_Shrugged

[Benny Profane]

CNBC just told me that 30% of sales in Southern California in February were foreclosures.

[Spats]

Well Greenspan is blaming the lenders and bankers for not using good judgement, which led to the sub-prime mess.

HA!

Greenspan is not a dumb man. He knew exactly what he was doing when he caused the tech stock and housing bubbles by lowering interest rates. He knew exactly what he was doing when he advised homeowners to take on ARMs when interest rates were at historic lows, which is the worst possible financial advice anyone could have given anyone else at the time.

What he was doing was transferring wealth from the poor and middle class to the upper class, of which he is a member.

The current wave of financial destruction will take out those on Wall Street who played it too close to the edge, but in the long view, it will result in a gigantic transfer of American property from individual homeowners to the surviving banks and other large financial entities, such as the "House of Morgan" Rontele mentions. This transfer will be subsidized by the government, meaning you and me.

Also watch for cash-strapped local and state governments selling off water, roads, utilities, and other public services to raise money.

The end result will be another big step towards South America-style oligarchy, where a few large families and corporations control the water, the roads, the land, and everything else. The reason they can do this is because people don't understand money. Hint: if you didn't vote for Ron Paul, you don't either.

"If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them [around the banks], will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered." -Thomas Jefferson

"I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a moneyed aristocracy that has set the Government at defiance. The issuing power should be taken from the banks and restored to the people to whom it properly belongs." -Thomas Jefferson

[Rontele]

Spats, you're a fucking kook who rides a recumbent bike, but that doesn't mean I don't disagree with you on everything (just most things)

I suggest you read Chernow's book on the House of Morgan.

[Nobody Famous]

CNBC just told me that 30% of sales in Southern California in February were foreclosures.

Interesting statistic. But a natural response, where the bubble was inflated the most, the corrective actions are and will be the most pronounced?

[mitch buchannon]

Perhaps this discussion is better-based in reality rather than encouraging people to vote for Ron Paul.

I think the guy's a brilliant economist, but he's not going to be elected president. It's probably time to get over it.

[Cono Este]

666 is a bad number

[Benny Profane]

Greenspan is not a dumb man. He knew exactly what he was doing when he caused the tech stock and housing bubbles by lowering interest rates. He knew exactly what he was doing when he advised homeowners to take on ARMs when interest rates were at historic lows, which is the worst possible financial advice anyone could have given anyone else at the time.

Aw, c'mon. Don't simplify things like that. The tech bubble was just another in a long line of speculative bubbles in capitalist history, up there with oil, railroads, and tulips. His policy on interest rates had nothing to do with that. Tech stocks weren't bought on margin, after all. And he didn't advise or help anybody buy a house, other than keeping interest rates low. As we found out, the financial institutions, or, better yet, our "shadow banking system", created this mess by creating new instruments that they could profit from, and loosening whatever standards existed to lend money to the average schmoe. Hell, I'll bet that if you tried to explain some of these little games to him, he'd scratch his head, just like some very learned and smart people are doing right now, trying to figure out this mess.

[4matic]

HA!

Greenspan is not a dumb man. He knew exactly what he was doing when he caused the tech stock and housing bubbles by lowering interest rates. He knew exactly what he was doing when he advised homeowners to take on ARMs when interest rates were at historic lows, which is the worst possible financial advice anyone could have given anyone else at the time.

Not really.. Over that period and for the last 22 years an ARM has been the the lowest cost choice for a mortgage. My HELOC has dropped from 7.25 to 4.25 in six months. An ARM would have a similar adjustment if based on COFI or LIBOR.

[skier666]

666 is a bad number

Not always...thats not that bad of a credit score

[Danno]

Greenspan was a mortgage advisor?

[spindrift]

Certain bubbles are natural market phenomena. Others are more architected. IMO the tech bubble was more the former (there really was huge new real value being generated - the challenge was discerning where it was). OTOH, the housing bubble was created as part of voodoo economics. Something Greenspan seemed happy to participate in as long as it allowed him a fancy title, prestige, and a smug feeling when testifying before congress...

[Benny Profane]

March 25, 2008
Index Shows Home Prices Fell by Record 11.4% in January

By THE ASSOCIATED PRESS
Filed at 9:04 a.m. ET

NEW YORK (AP) -- The Standard & Poor's/Case-Shiller index shows U.S. home prices fell 11.4 percent in January, its steepest drop since S&P started collecting data in 1987.

The decline reported Tuesday means prices have been growing more slowly or dropping for 19 consecutive months. The index tracks the prices of single-family homes in 10 major metropolitan areas in the U.S.

The broader 20-city composite index is also down, falling 10.7 percent in January from a year ago. That is the first time both indexes dropped by double-digit percentages.

[Rontele]

Interestingly, property values in my new neighborhood rose 12% last year.

[CUBUCK]

Interestingly, property values in my new neighborhood rose 12% last year.

Curious which neighborhood? Somewhere in Denver?

[kokomas]

i do a little work with this and think the case shiller index is a little too weighted towards subprime for two reasons, it excludes certain areas where they don't have good data and these happen to be places like houston where prices haven't fallen much, and because subprime lenders make up more of the selling right now than those types of homes actually represent in the housing stock. likewise the ofheo index has issues, it only includes transactions where both the purchaser and the seller had a conforming, agency backed mortgage on the property at some point (i.e. excludes subprime).

we are using a simple average of the two measures for a better picture of aggregate reality. conclusion: prices are falling across the country but not as fast as the alarming case shiller index implies.

[Benny Profane]

Curious which neighborhood? Somewhere in Denver?

More like in his dreams.

[Rontele]

Curious which neighborhood? Somewhere in Denver?

Platt Park in Denver. Mind you, this was told to me by my realtor. I have not seen actual black and white numbers to confirm this.

[Stu Gotz]

[mcsquared]

Platt Park in Denver. Mind you, this was told to me by my realtor. I have not seen actual black and white numbers to confirm this.

A good source for that data is this thing they have at denverpost.com
http://www.denverpost.com/graphics/ci_6797508
My neighborhood (Highland) rose 0.7% last year. Platt Park had a slight decrease. So I guess Benny missed his chance to shop for my house. And I am up 50-60% in 5 years. And I measure that by the unsolicited offer I got on my house from a investor looking to buy up properties in this "downturn". And the property I sold back in december for the highest $/sqft yet on my block.

[Rontele]

A good source for that data is this thing they have at denverpost.com
http://www.denverpost.com/graphics/ci_6797508
My neighborhood (Highland) rose 0.7% last year. Platt Park had a slight decrease. So I guess Benny missed his chance to shop for my house. And I am up 50-60% in 5 years. And I measure that by the unsolicited offer I got on my house from a investor looking to buy up properties in this "downturn". And the property I sold back in december for the highest $/sqft yet on my block.

Thanks! Admittedly, I was a tad dubious of that figure.

We have a new construction on Pearl that is still in a neighborhood which has older houses slated for redevelopment. I don't doubt that five years from now, I'll look back on this as a solid purchase.

[Benny Profane]

And I am up 50-60% in 5 years.

Take out any loans on that?