Tuesday Open Thread
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21 comments:
If Australia's housing market is any indicator, we may not be near the end of this boom (or at least the crash will not be as severe as most "bubbleheads" think). Particularly in areas like Seattle where the run-up has not been near the levels of the CA run-up.
http://www.iht.com/articles/2006/08/22/business/aushousing.php
**85%** of loans in Australia are variable rate, their run-up was even greater than ours, and they STILL haven't seen a crash after 2+ years of flattening.
The PI real estate blog is just getting silly. Phoenix Rudner has a post up about public perception. There was a bearish counter to his argument of "negative spin" by the media, complete with links to facts-like 42% drops in Sydney real estate.
What did he do instead of debating it? He deleted it.
Dude just took his ball and went home.
The lack of ethics on the part of these real estate agents blows me away.
If he scrubs posts from his blogs, imagine what he hides from his poor, unsuspecting clients?
We know.
I just heard something on the radio that defies comprehension.
Perhaps it was the paint fumes, but I thought I heard someone advertise a $400K loan for less than $100/mo.
OK, so if we do the math on this (as un-American as that may be), that works out to $99/mo for the first 5 years. They are advertising around 7%, so at the 5 year mark, they will owe $556,813 on a $400K loan. If mortgage rates only rise 3% in the next 5 years, they will adjust to a monthly P&I of $5060/mo.
Now, THAT is payment shock!
The company that is advertising this calls this a "cash flow loan."
Cash flow loan? WTF?
The company will loan up to 70% of the value of the house. That means the house must come in at $571,500 on the appraiser's sheet, which is LESS than what the loan will be at the adjustment point.
I assume the "cash flow" aspect of this is to market to FLLs that can't make their payments when the rents are half of what their monthly nut is. You know that the average dim bulb in the market will take this and BUY MORE PROPERTY, or cut his rent even more to keep his houses full.
This is like curing alcoholism with heroin.
This goes nowhere toward curing the underlying problem in the market - lowering cap rates, or overextended borrowers.
This is not a loan. Money is literally falling out of the sky. The fact that housing is going up in value, should shock nobody.
Tell me this is anything other than a financial coffin.
anon 09:36, I'm not sure what disney-land side of the internet you've been trolling but Australia's a friggin' catastrophe of epic financial proportions...
Lethbridge Park, near Penrith, recorded the second highest fall, when a townhouse that sold for $257,000 in 2003 was resold by mortgagees for $156,500, reflecting a roughly 40 per cent fall.
Yikes! 40% haircuts not a crash? Wow, that's some depression era ruminescing if you don't mind me saying... what a REAL crash look like?
**85%** of loans in Australia are variable rate, their run-up was even greater than ours, and they STILL haven't seen a crash after 2+ years of flattening.
The adjustable rate loans aren't the problem - it's who they're going to. If Australians have been using ARMS for a long time, no doubt the consumers are used to the concept.
The weakness in the US lending system is that subprime borrowers with poor financial skills are being given ARMS to qualify them on houses they could not otherwise afford.
And this quote from the IHT article...
They argued that a downturn in housing would have a far greater impact on U.S. consumption than in Australia because U.S. consumers had largely used equity withdrawn from their homes to fund spending...
Me's thinks you read that article with bull-colored glasses on... Aussie's maybe seeing hurrendous haircuts in their psuedo-fortunes but it won't sink our economy like its going to do here. 60% of the US economy's tied to consumer spending, no more free housing ATM's and you're going to see a recession with inflated interest rates, a snowball affect....
Matt, check out the other story on that page...
Home owners find equity a spent force
Australians were spending equity much the same way we are.
Matt, Synthetik, dukes, plymaster, billrubin,
As anyone knows, Japan has had a housing recession since their go-go days of the late 80s.
I think this has some application to our new bankruptcy laws.
Stick with it for a minute. It is worth it.
Thanks Richard...
Now many families who bought housing near the property market's 2003 peak are facing negative equity - the value of their home has fallen below the amount they borrowed to buy it.
Ewww... looks like housing bust circles the drain in the same way it does no matter the hemisphere...
"There was a wave of people punting on the expectation of constant price rises until well into 2004, even after the three interest rate rises of late 2003. There has been significant price deflation and many now have negative equity in their homes.
"There are some sad stories. But we have to show the sellers the comparable sales and say honestly this is where the market is realistically at."
Ziprealty is showing the June-July sales numbers AND median to be down.
Seattle Washington Home Sales July 2006
Here's what I like to call "fun with excell"... basically its a statistical sampling showing how you can have increasing inventory, diminishing sales and increasing median home prices.
One of the caveats is that I used the same exact sampling of home prices being offered month over month... not realistic but I think it proves a point...
-----------------------------------
mon1 mon2 mon3 mon4 mon5 mon6 mon7
s300 u300 u300 u300 u300 u300 u300
s350 s350 u350 u350 u350 u350 u350
s400 s400 s400 u400 u400 u400 u400
s450 s450 s450 s450 u450 u450 u450
s500 s500 s500 s500 s500 u500 u500
s550 s550 s550 s550 s550 s550 u550
s600 s600 s600 s600 s600 s600 s600
s650 s650 s650 s650 s650 s650 s650
s600 s600 s600 s600 s600 s600 s600
--------------------------------------
A --- -89% -88% -86% -83% -80% -75%
B 500 525 550 575 600 635 650
C --- 100% 50% 67% 75% 80% 83%
KEY:
A = MOM %sales volume
B = Median Price Sold that Month
C = MOM % Inventory Increase
s500 = sold house at 500K
u300 = unsolde house at 300K
sorry... last line should be...
s700 s700...
not s600 s600...
again, sorry, should be %increase of unsold inventory...
Anon 9:36-
re: Seattle's market has not seen the run-ups of CA.":
The Seattle median is only slightly (less than 100K) behind San Diego.
And San Diego is falling fast.
synthetik,
I'm glad someone enjoyed it. Sometimes, I think we all get wound too tight - especially yours truly.
I would love to host a US game show, called "FB." Contestants would be first time borrowers, people in some stage of the foreclosure process, people in BK, and anyone that thinks that RE always goes up.
The format would be essentially like the Japanese Tea Bag Smasher, but I ask questions about mortgages, interest rates, demographics, or anything else that NOBODY considers in today's environment.
E: "FB #1, what happens to the price of a house as interest rates rise and home payments are held constant?"
FB #1: "Uuuhhhh, goes up, because RE always goes up."
E: "Sorry. Assume the position."
E: "FB #2. If lending standards become more stringent, how will that weigh on the local housing market?"
FB #2: "Prices will be reduced."
E: "That is correct. Now, your bonus question...For $50 and the smacking of the opponent of your choice...What is a neg-am/interest only/no doc loan?"
FB #2: "Something I wouldn't touch with a 10 foot pole."
E: "Correct, again. FB #1, assume the position."
Move over Pat Sajak, I think I have found my calling.
Richard-
thnks for the Zip link. I use Zip all the time but never think to check that part of it.
Nice to see they use price per square foot and even nicer to see it's going down!
Ziprealty is showing the June-July sales numbers AND median to be down.
Those are average prices...not median prices.
Average prices fluctuate wildly MOM...the median is a much better indication of what is going on.
From the Wall Street Journal:
Housing slump proves painful for some owners and builders
In some other parts of the country, notably Texas and the Seattle area, local housing markets remain robust. Texas' low housing costs are attracting new residents and investors, while Seattle's strong job market and shortage of homes have kept prices rising.
Meshugena, that's looking in the rear view mirror. HAVE kept prices rising is PAST TENSE. Just regurgitation of the same party line we've seen for months. Reported statistics are always a month or two behind reality. What will really be informative is what we see reported over the next 6 - 12 months. I think the verbiage will change as Seattle joins the hangover everyone else is experiencing.
Were Not Texas. Isn't it that in Dallas Texas they have about the same average wage scale as here in Seattle & about 35-30% less cost of living without even counting housing costs? which are about 3 times as times.
And isnt it Dallas with there low cost of living thats experiencing Record Forclosures? beyond I beleive of that in the last major real estate downturn.. not stating there having one yet. However forclosures being so high hast to start weighing on housing at some point.
im willing to bet without the appreciation of housing prices Here in Seattle maybe we could be a little more like Dallas Texas on the forclosure numbers.
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