What Housing Bubble?

[Yukon Cornelius]

the loans that are going to be affecting everyone are the ARM's and the sub-prime deals that had a 2 year fixed period...

yup those suckers are going to kill alot of folks

[Yukon Cornelius]

actually, "clean" coal is making a comeback

yup

[wiegie]

Interesting article on housing prices:

 

Can’t Sell Your Home? Maybe It’s Priced Too Low

By DAVID LEONHARDT

Published: July 11, 2007

 

Given that the real estate market is supposed to be in free fall, some strange things have been happening recently in Mill Valley.

 

It is one of the expensive suburbs of San Francisco just over the Golden Gate Bridge, and much of the housing market there seems to be doing just fine. One three-bedroom house sold for $1.4 million last month without ever being officially put on the market. The seller accepted a pre-emptive bid — $20,000 above the asking price — from somebody who had heard that the house was about to be listed for sale.

 

“The homes that are having a hard time selling are the average-priced homes,” said Vanessa Justice, a real estate agent with Pacific Union GMAC in the Bay Area, where the median house price is about $750,000. For upper-end homes, she said, “it’s actually pretty crazy right now.”

 

It has been a while since real estate agents used the word “crazy” in a positive way, but Ms. Justice is onto something here: the high end of the market is surviving the slump much better than any other segment. Even as foreclosures keep rising and overall sales continue to plummet, more expensive homes have staged a bit of a comeback in recent months. They’re spending less time languishing on the market than others, and their prices appear to be holding up better.

 

This split in the market helps explain why the sales of Manhattan apartments, some of the priciest homes in the country, have remained fairly strong. The national trend has gone largely unnoticed, though, because neither the federal government nor the National Association of Realtors — the main sources of housing data — report statistics for different price segments.

 

But after just about every home sale, documents must be filed with a local government office. A research firm called DataQuick Information Systems gathers these records, and a New York Times analysis of them shows that the story of today’s real estate market is really two different stories.

 

In the Boston area, for instance, the number of homes selling for at least $1 million plummeted to 619 in the first five months of 2006, from 773 in the period in 2005, according to DataQuick. But the number jumped to 711 in the first five months of this year.

 

In the New York region, sales at the top end — that is, homes in the most expensive 5 percent of the market — have also been rising, while they have been falling in the middle and bottom of the market. The same is true in the San Jose, Calif.; Seattle; Denver; and Houston areas. In San Francisco, Los Angeles, Phoenix and Miami, high-end sales are down but not by nearly as much as sales in other price segments.

 

Separate statistics from the California Association of Realtors also show million-dollar-plus homes to be selling better than others in that state.

 

The high-end market is far from booming, to be sure. Many houses would still sell for less today than they would have a year ago. But the market has stayed strong enough to catch a lot of buyers and sellers off guard. They keep hearing about a real estate meltdown and then finding a different reality when they go to make a deal.

 

A three-bedroom apartment around the corner from the Guggenheim Museum, on 88th Street near Fifth Avenue, was recently put on the market for $2.8 million, and the first bid came in slightly lower than that. Ten days — and nine bids — later, the seller accepted an offer about $500,000 above the asking price.

 

In Brookline, Mass., near Coolidge Corner, a big Victorian house went on the market for $1.4 million this spring — just as it had in 2006, without selling. “I thought it was still overpriced,” said Chobee Hoy, the seller’s real estate agent. Yet the house ended up selling for about $30,000 more than the asking price.

 

There seem to be three main causes of the split in the market. The first is that affluent families continue to do better than others, thanks to healthy income gains and a rising stock market. “To some extent, it is the rich getting richer,” Andrew LePage, an analyst at DataQuick, explained. “The folks who don’t rely solely on a weekly or monthly paycheck seem to be doing better.”

 

The upper end of the market has also been helped by an influx of well-off foreign investors whose buying power has grown with the recent decline of the dollar. Hard as this may be for an American to imagine, New York, San Francisco or Miami can now seem like a bargain, compared with London, Moscow or Sydney. Jason Haber, an agent with Prudential Douglas Elliman in Manhattan, said he had recently taught himself how to convert square feet into square meters — you divide by 10.8 — because of all of the international buyers traipsing through New York apartments.

 

Finally, both the recent rise in interest rates and the problems in the mortgage market have had a much bigger effect on low-income and middle-class buyers than affluent ones. It’s become harder to get a subprime mortgage, while the uptick in interest rates this year has added about $100 to the monthly payment on an average fixed-rate 30-year mortgage.

 

As Mark Zandi, chief economist of Moody’s Economy.com, summed up the market: “The low end is getting creamed. The middle is struggling. The high end is running on its own dynamic.”

 

It’s tempting to conclude, then, that the top of the housing market has somehow become bubble-proof. And some real estate agents will doubtless make this pitch to buyers who are on the fence. But it is almost certainly wrong.

 

In fact, the very top of the housing market — the sprawling vacation homes and 10,000-square-foot mansions — seems to be doing considerably worse than merely expensive homes. Ines Hegedus-Garcia, an agent in Miami, recently looked at sales volumes there and found the market for homes that cost $1.2 million to $2.5 million to be holding up decently. The situation was much worse for those priced above $2.5 million.

 

There are also a couple of areas, like Washington and San Diego, where the high end of the market, broadly defined, is already doing about as badly as everything else. So perhaps the recent comeback won’t last long in other cities.

 

Remember, it’s not as if the wealthy are immune to irrational exuberance. Just think back to the 1990s — or the 1920s. Any asset can end up becoming overvalued. Right now, though, there is a bit more of a rational explanation for home values at the high end of the market.

[CaP'N GRuNGe]

A stratification of the economic classes in a Bush economy? I'm shocked. Shocked I tell you.

[Yukon Cornelius]

A stratification of the economic classes in a Bush economy? I'm shocked. Shocked I tell you.

are we moving to a cast system??? GW and the texans are smarter than i give them credit for

[muck]

Here in NYC the housing market will never stagger. To many people and little real estate.

 

Never? You must have forgotten when all NYC real estate was in the crapper about 15-20 yrs ago (iirc).

[dmarc117]

Single-family starts to fall again in 2008: Realtors

By Rex Nutting, MarketWatch

Last Update: 10:31 AM ET Jul 11, 2007

 

WASHINGTON (MarketWatch) -- Construction of single-family homes will probably decline for a third straight year in 2008, according to the latest monthly forecast from the National Association of Realtors.

The group's July forecast, released Wednesday, is more pessimistic than its June forecast in nearly every aspect.

"With profit margins coming under pressure, homebuilders will limit new construction well into 2008," said Lawrence Yun, senior economist for the NAR, in a press release. "This should help the overall inventory level to move steadily into a more balanced state."

Housing starts are expected to drop 20.6% in 2007 and rise 0.6% in 2008, Yun said. Starts for single-family homes are expected to fall 23.3% this year and 1.3% next year. A month ago, the Realtors were expecting single-family starts to rise 1.6% in 2008.

Sales of existing homes are expected to fall 5.6% this year and rise 4.2% next year. Sales of new homes are expected to fall 17.7% this year and rise 1.4% next year.

Total spending on residential construction is expected to fall 14.2% this year and rise 1% next year.

The median sales price of an existing home is expected to fall 1.4% this year and rise 1.8% next year. The median sales price of a new home is expected to fall 2.6% this year and rise 2.2% next year.

The realtors' press release was headlined "Home prices expected to recover in 2008 as inventories decline" -- even though the forecast median price for existing homes in 2008 was unchanged from last month's at $222,700.

[Dr. Love]

Interesting article on housing prices:

I think that your article basically explains that the real estate market boomed to the point where lower to upper middle class people paid beyond their means to buy homes in an inflated market and that the market is correcting itself. Rich people, due to their richness, really didn't exceed their means, so you don't have this glut of foreclosed rich people housing on the market right now. It makes sense to me, and it has more to do with the fact that housing isn't a major expense for those that are independently wealthy than it does any sinister Republican plan. (I know you didn't imply that, but the responses certainly did).

 

A stratification of the economic classes in a Bush economy? I'm shocked. Shocked I tell you.

 

 

are we moving to a cast system??? GW and the texans are smarter than i give them credit for

You know, as much as I don't like Bush, can either of you point out exactly what he has done to institute a "caste system" or "make the poor poorer"? Bush has taken almost no action for domestic economics. There are lots of reasons to not like him, but I don't think that this is a reasonable one.

[cliaz]

In my neck of the woods it has burst big time. Used to be homes wouldn't even sit on the market more than an hour before contracts were all over it. Now we've had 4 homes on our street sit for at least 3 months and besides my neighbors who just moved and sold their house in 2 days no one in my city seems to be selling at all. Housing prices have dropped almost 50k and in my neighborhood alone [266 homes] there are 28 homes for sale that haven't moved.

[Yukon Cornelius]

You know, as much as I don't like Bush, can either of you point out exactly what he has done to institute a "caste system" or "make the poor poorer"? Bush has taken almost no action for domestic economics. There are lots of reasons to not like him, but I don't think that this is a reasonable one.

spent my kids earnings, and there kids earnings on nothing

[CaP'N GRuNGe]

I think that your article basically explains that the real estate market boomed to the point where lower to upper middle class people paid beyond their means to buy homes in an inflated market and that the market is correcting itself. Rich people, due to their richness, really didn't exceed their means, so you don't have this glut of foreclosed rich people housing on the market right now. It makes sense to me, and it has more to do with the fact that housing isn't a major expense for those that are independently wealthy than it does any sinister Republican plan. (I know you didn't imply that, but the responses certainly did).

You know, as much as I don't like Bush, can either of you point out exactly what he has done to institute a "caste system" or "make the poor poorer"? Bush has taken almost no action for domestic economics. There are lots of reasons to not like him, but I don't think that this is a reasonable one.

 

Have you really forgotten about the Bush tax cuts already?

[Missoula Griz]

1/3 of my customers request I/O loans. I try to push them towards a 30 year fixed with a 10 year interest only option. A 10 year time frame gives them a better opportunity to build equity.

[CaP'N GRuNGe]

http://www.azcentral.com/business/homesale...rices11-ON.html

 

But...in the comments section...

 

jim9648 | ProfilePosted: Jul 11, 2007 at 9:23 AMReport a violationDon't be fooled by this cut and past job done by the AZ Republic. They omited an improtant peice from that AP article....Here it is ................................................................. ................................................................. ................................................................. .........."But Paul Kasriel, chief economist with Northern Trust in Chicago, questioned the Realtors' assessment that this is a good time to enter the market, saying weak sales and prices suggest that potential buyers are smart to be sitting on the sidelines right now. "No one is buying into their Kool-Aid; that's why prices are falling," he said. "It could be that they're going to fall a lot more. The Realtors tend to be overly optimistic. Eventually they'll be right about prices turning around. I don't know when prices are going to stabilize but I suspect they'll fall more than they think this year. It may be a much better time to buy six months or a year from now."............................................................ .............................................................here is the link to the entire article.......http://money.cnn.com/2007/0... _forecast/index.htm?postversion=2007071111

 

I couldn't get the money.cnn link to work...

[Dr. Love]

spent my kids earnings, and there kids earnings on nothing

I agree that the craptacular spending spree that the government has been on for the last 25+ years is not good. That really has nothing to do with making a caste system, though.

 

Have you really forgotten about the Bush tax cuts already?

Again, I agree that this is financial mismanagement. However, it did nothing to create a caste system or make the poor poorer. The tax cut upped the child credit significantly and I believe that it upped the EIC, too, though I'm not sure of that. Yes, it benefited people who get a good portion of their income from dividends (who tend to be loaded), but there are good things about not punishing investors for getting dividends versus long-term capital gains. Regardless, my point was that economics has not been a Bush priority over the entirety of his eight-year term, and that the little that has been done has not harmed the lower classes, which was implied.

 

http://www.azcentral.com/business/homesale...rices11-ON.html

 

But...in the comments section...

 

jim9648 | ProfilePosted: Jul 11, 2007 at 9:23 AMReport a violationDon't be fooled by this cut and past job done by the AZ Republic. They omited an improtant peice from that AP article....Here it is ................................................................. ................................................................. ................................................................. .........."But Paul Kasriel, chief economist with Northern Trust in Chicago, questioned the Realtors' assessment that this is a good time to enter the market, saying weak sales and prices suggest that potential buyers are smart to be sitting on the sidelines right now. "No one is buying into their Kool-Aid; that's why prices are falling," he said. "It could be that they're going to fall a lot more. The Realtors tend to be overly optimistic. Eventually they'll be right about prices turning around. I don't know when prices are going to stabilize but I suspect they'll fall more than they think this year. It may be a much better time to buy six months or a year from now."............................................................ .............................................................here is the link to the entire article.......http://money.cnn.com/2007/0... _forecast/index.htm?postversion=2007071111

 

I couldn't get the money.cnn link to work...

I would tend to agree with that assessment, though I don't have a lot of data. Housing prices were irrationally high, and still are (to some degree). A correction was/is needed to restore balance to the force.

[Kid Cid]

This is the key. When I bought my first house, I ran the numbers and came up with a "max" that I could borrow for a home. When I went to the bank, they did the same thing and came up with a number that was over double what I came up with! How dumb do you have to be to spend 75% of your take-home pay on one bill?

Agree, the max we "qualified" for was almost double the max of our budget calculations. We stuck pretty close to our budget but had to compromise in other areas. Like a 1.5 hour commute for the wife. 20 minutes from the nearest grocery store. Those sorts of things. But in the end, it works out because that is a small price to pay instead of foreclosure and bankruptcy.

[Coffeeman]

A stratification of the economic classes in a Bush economy? I'm shocked. Shocked I tell you.

 

And so another thread takes the inevitable turn to politics. It's like the 6 degrees of separation game around here all the time, but it's only 1 or 2 degrees. I think Cap'n made it in one. Bravo.....

[Kid Cid]

And so another thread takes the inevitable turn to politics. It's like the 6 degrees of separation game around here all the time, but it's only 1 or 2 degrees. I think Cap'n made it in one. Bravo.....

Right, take the politics elsewhere.

[Yukon Cornelius]

Right, take the politics elsewhere.

[Dr. Love]

Right, take the politics elsewhere.

Yeah!

 

 

[McNasty]

We're seeing houses on the market longer and a lot more of them. Prices haven't started dropping right but if this continues, they will.

 

+1 for Northern Cali. I know a lot of people that bought more house than they should have with ARMs and are sweating bullets right now on meeting their mortgages.

[CaP'N GRuNGe]

And so another thread takes the inevitable turn to politics. It's like the 6 degrees of separation game around here all the time, but it's only 1 or 2 degrees. I think Cap'n made it in one. Bravo.....

 

 

Right, take the politics elsewhere.

 

 

Yeah!

 

If commenting on how governmental economic policy can contribute to changes in societal distribution of wealth is considered to be "just politics" than please forgive me.

[detlef]

The Triangle as a whole is still quite strong. Trendy areas of Durham are getting 97% of asking on average and staying on the market for less than two weeks. In addition, homes in those areas are appreciating 10-20% per year. We live in a sleepier part of town and have seen a more pedestrian increase (5%) but an increase none the less. We actually almost listed our house a few months ago but decided that we liked too much about it and would rather just upgrade so we didn't get a chance to truly test it.

[Kid Cid]

If commenting on how governmental economic policy can contribute to changes in societal distribution of wealth is considered to be "just politics" than please forgive me.

It's not that the comment isn't warranted, it's just that it degenerates into a mud slinging match within 5 posts. I'd prefer not to see this one locked or deleted, that's all.

[detlef]

+1 for Northern Cali. I know a lot of people that bought more house than they should have with ARMs and are sweating bullets right now on meeting their mortgages.

That's why we left when we did. I was talking to a former colleague from out there about one of my restaurant projects and when we got to price point, he was surprised that I was able to charge essentially the same prices they get out there.

 

People make money out here, they just don't spend 40% of their income on their mortgage. He was singing the blues about how slow they were and I'm convinced it is because you have people making $60K-$100K a year living in $500K homes. My wife and I live in a nice house, with a big yard, in a safe neighborhood and our mortgage is about 12% of our pre-tax income. It has afforded us many luxuries.

[McNasty]

That's why we left when we did. I was talking to a former colleague from out there about one of my restaurant projects and when we got to price point, he was surprised that I was able to charge essentially the same prices they get out there.

 

People make money out here, they just don't spend 40% of their income on their mortgage. He was singing the blues about how slow they were and I'm convinced it is because you have people making $60K-$100K a year living in $500K homes. My wife and I live in a nice house, with a big yard, in a safe neighborhood and our mortgage is about 12% of our pre-tax income. It has afforded us many luxuries.

 

Yeah, I can understand that. I wouldn't even consider buying a house out here right now... wish I had my shiate together when I first moved out in 1994... I'd have made a boatload of cash. Sadly, much as I love it out here, I'll probably be forced to leave just so I can afford a house and some property.