04.11.2007 - Wednesday Open Thread
This is your open thread for Wednesday, April 11, 2007. You may post random links and off-topic discussions here.
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44 comments:
My feeling about the rise in the median prices lately is that it is likely an effect of the subprime tightening, which has restricted sales of the lower-end properties and thus shifted the sales distribution up towards more expensive homes.
Everybody here (bull-wise) predicted a spring bounce. Historically, almost all housing markets have experience a brief rally every spring, even throughout times of a downturn. Every rebound probably provides a glimmer of hope that the bust was/is over, but in each case, prices went on to sink to new lows until the correction finally ends.
The fact of the matter is that spring home price rallies don't appear to have a whole lot of predictive value.
Nor have we even seen the beginning effects of the mortgage tightening. Citigroup only just now has announced their tightening of standards.
t,v&mrb, I think Seattle will get hit harder than many areas specifically because of this entrenched ignorance about the bubble. The mentality seems to be similar to West LA and much of the the Bay Area, where the jobs are high-tech, and everyone wants to live here, and we're so much smarter than those rubes in Phoenox and Florida. It's an arrogance that runs through these communities, and the irony is that the bubble has helped fortify this nuclear smugness. You look around, and everyone drives a nice car (I'm the only Anglo who drives a Corolla on the Westside), and lives in a big house, and goes on fantastic vacations - it must be immune to economic downturns, right? I'm guessing that as in West LA and the Bay Area, there's a racial component involved too. All these places are very white, and I suspect that subprime will not be as big a problem as Alt-A once this thing unfolds. I'd mentioned to an acquaintance of mine that Memphis had experienced an overwhelming number of foreclosures lately, and you could see that it didn't register with her as relevent to her life. The subtext clearly was, well, they're black. The only difference between Memphis on the one hand and West LA and the BA and Seattle on the other is the scale of the purchases. This friend bought a house in Marina Del Rey for 1.4 million. She and her husband do pretty well, but that's a ton of money. I think these centers of smugness are in for a big, big surprise.
A Word of Advice During a Housing Slump: Rent
Finally, an article grounded in reality:
"By the Realtors’ way of thinking, it’s always a good time to buy. Homeownership, they argue, is a way to achieve the American dream, save on taxes and earn a solid investment return all at the same time.
That’s how it has worked out for much of the last 15 years. But in a stark reversal, it’s now clear that people who chose renting over buying in the last two years made the right move. In much of the country, including large parts of the Northeast, California, Florida and the Southwest, recent home buyers have faced higher monthly costs than renters and have lost money on their investment in the meantime. It’s almost as if they have thrown money away, an insult once reserved for renters."
I think that as well...most of the time. But then I have doubts that this area will wake up any time in the near future.
At the same time, I realize that this increase in house prices are the DIRECT result of speculative buyers and loose lending practices. when that will stop, I have no idea.
Anneccdotedly, there are stories on each side, houses dropping price, and then they sell at a much reduced price, but looking at median numbers does not reflect that. It only says such and such houses sold for such and such an amount. It could have been 50-100k less than what they originally listed for.
I see inventories increasing substantially YOY and even to the amounts of several years ago, but what does one find when looking at these homes? a POS that has no potential to live in without a lot of work and $$. and at an exhorbitant price of which I have no desire to entertain.
I am also seeing forclosures around here for not only the low and mid-level priced homes, but the million plus homes as well. Very interesting.
"Options speculators are apparently expecting bad things from Washington Mutual (WM). It will report earnings on 4/17. Today more than 10,000 April 35 puts have traded vs open interest of just over 7,400. More than 14 thousand April 37-1/2 puts have traded vs open interest of 19.7k. KBW recently stated, “WM which has a large share of production in Alt A products and, in our view, has a large share of its balance sheet exposed to mortgage.”
Uh oh.
yeah, I had a stock broker friend of mine tell me after the stock melt down that WAMU would be a good buy as they were hit by the overflow of the fallout. I just kinda laughed at him and told him that in my opinion, that would be a particularly good short. You should have seen his face when I said that.
He the pro gave this idiot a look like I was the biggest dumb-ass in the world. I do not expect a call from him anytime soon.
The mentality seems to be similar to West LA and much of the the Bay Area, where the jobs are high-tech, and everyone wants to live here, and we're so much smarter than those rubes in Phoenix and Florida.
Seems like they were right....actually, even FL and AZ still have flat or only very, very slightly declining prices. Far from a crash at this point.
S&P/Case-Shiller Shows YOY Appreciation for:
Phoenix: -.73
Miami: 4.6
LA: 1.03
S.F: -1.4
Portland: 8.5
Seattle: 11.14
And look at appreciation over 3 years:
Phoenix: 73.9
Miami: 69.53
LA: 51.78
S.F: 35.8
Portland: 47.3
Seattle: 47.8
I would hardly call the slowdown in CA,AZ,and FL a crash. None of them are experiencing less the -1% depreciation. Overall, they're flat right now. If these "troubled" markets aren't even seeing any real declines, how could we? We're still cruising along with double digit appreciation.
The fact of the matter is that spring home price rallies don't appear to have a whole lot of predictive value.
This is hilarious since just about everyone here was saying that Spring 2007 would be the end for Seattle. But we've had a huge bump in activity which resulted in double digit price gains. Appreciation at that level is a signal of a booming market. It's hard to deny that...
The fact of the matter is that spring home price rallies don't appear to have a whole lot of predictive value.
If you look at the records, Spring is when the vast majority of the appreciation happens. So Spring actually is THE predictive value. Even if prices go flat for the rest of the year...a couple good months in the Spring send prices flying again.
Shug, your YOY stats are just overwhelming. You're right, I'll stop renting and jump in now! Thanks!
Oh, wait, but you're ignoring affordability. CA is at about 1-2%. That's not so hot. I mean, if only 2% of the population can actually afford a home, that's probably not too good a sign for long-term prices.
I don't quite understand your persistent ignorance on this larger, framing issue, Shug. Numbers could go rocketing up, and I'd still understand them only as a result of fraud, loose lending and speculation. People can't afford those houses.
Theoretically you could stretch income to price beyond 4X or 5X (Cali right now is 11.5 X!!!!), but that would seem to limit your ability to buy anything else, and, uh, that might just negatively impact one's economy. 30% of cars bought or leased last year in CA were purchased through MEW. What happens when that spigot if shut off? I sure wouldn't want to be selling high-end cars next year. Especially if I'd just bought a house based on my rising income.
Hey, The Tim. Love the blog, and my wife got a kick out of pricedoutforever.com. I'm currently living (renting) in rapidly deflating Northern VA but am consideriIt's interesting to see that Seattle hasn't quite figured the bubble thing out yet, since the blood is in the streets around here. Some of the houses we've been looking at are asking well over 100k below their last sale prices, according to tax records. Houses that sold for around $700k going begging in the mid-high 5's, that sort of thing.
Lionel, the funny thing is the idiots who keep quoting numbers based on Medians that don't reflect the price drops people have had to make in Phoenix, LA, SD et. al after having been trying to sell their home for 6-9 months.
Yeah, Phoenix looks hot right now!
From Housingdoom:
Phoenix Home Sales: Worst March in Five Years
While sales are tracking around 2002 levels, inventory is not. Total inventory was at 27,702 in March 2002. With over 50,000 in total listings at the end of March 2007, there were about 80% more properties on the market- which is going to make for a lot of disappointed sellers.
Shuggybabe,
Stop throwing the around the word 'crash'. 99% of the posters on this blog never predicted a Q2 2007 'crash' nor even used that word.
I know you are a little new to this, but real estate does not crash. It deflates over a long period of time. All the signs for this deflation are now upon us. PHX is just starting its deflationary cycle. If this does not mean anything to you, I can't really help. How about you start posting some new angles? You usual crap is getting a little boring.
Lionel, the funny thing is the idiots who keep quoting numbers based on Medians that don't reflect the price drops people have had to make in Phoenix, LA, SD et. al after having been trying to sell their home for 6-9 months.
Are you calling Robert Shiller, one of the most respected economists alive, an idiot? These #s were quoted from his index which is considered the most accurate barometer of prices.
This sort of denial is pretty typical around here....when every possible indicator we have shows prices are rising...there's still people who swear they're not (again, remember our good friend SeattlePrice Drop, where is he now?). Usually they saw one overpriced undesirable house, drop it's price and they're convinced the markets crashed. Sorry, I don't think so.
I have friend there that I spoke to about a year ago and he mentioned about putting his house on the market. I told him to do it as soon as possible. Just got an e-mail from him saying that he had wished he had listened to me. 8 months, priced dropped twice..still no offers. I will have to let him know that Phoenix is OK and not to worry, It's only "flat or just a slight decline."
Shug, you can't use Schiller to back your position and then ignore Schiller's overall prediction: 30% price decline in bubble areas.
Same with the Economist. Yesterday, you used it to bolster your point, again ignoring that the Economist has been the biggest bubble watcher of all the major econ mags. Two weeks ago they devoted an entire issue to the bubble.
peckhammer, thanks for that link, nice read. I wonder how the shugs of the world would manipulate that tool to show renting is worse than buying? I put in 2k for renting and 450k for buying 20% dwnpymt and it showed that I needed 15 years before I would see a gain as a buyer.
I remember some info a while back on Seattle housing being over valued, but what affect does this fraudulent appraisals have on the over valuing? Any way to factor that?
http://www.nytimes.com/2007/04/11/realestate/11leonhardt.html?_r=1&oref=slogin
(again, remember our good friend SeattlePrice Drop, where is he now?).
Someone with this username is still active on HBB. I saw a comment from him on a thread the other day that he quit posting over here because he got sick of people posting the same crap on every thread.
not sure who he was talking about.
Fruadulent appraisals have a HUGE impact on increased prices. The Seattle Appraiser on MSNBC? ithink it was? who complained about the pressure from the mortgage companies and realtors is only the tip of the iceberg.
Thanks for the first laugh of the morning, deejayoh.
"National Association of Realtors said tougher lending standards will slow the recovery in the U.S. housing market and data showed a fourth-straight weekly decline in U.S. mortgage applications."
WHAAAATTTT???????? NAR actually sees something that isn't rosey as hell? Wait a minute!!! what do they mean, "slow the recovery"? what recovery? how can you have a recovery if things have already been good as the NAR has stated over and over again?
Oh GOD!!! things must really be bad if NAR is even hinting things are rosey.
tv&mrb, it's even worse than that:
A real-estate trade group lowered its forecasts for U.S. home sales this year, while projecting what would be the first annual decline in the median national existing home price since it began keeping records in the late 1960s.
In its latest forecast for the real-estate market, the National Association of Realtors projected that existing home sales will fall 2.2% this year to 6.34 million, compared with its previous forecast of a 0.9% decline. The NAR said new home sales are likely to fall 14.2% to 904,000, compared with the prior forecast of a 10.4% drop.
...
The national median existing home price will likely slip 0.7% to $220,300 in 2007, following a 1% gain last year ...
San Francisco is doing great!
Bubbles always take much longer to unravel than originally thought and are usually more severe and much longer than expected. We have all seen this. The rumblings start long before the start of any demise but has there ever been a case where there were so many people believing something would happen when it didn't? I can't think of any. The earth is round? Just curious.
Bloomberg/LA Times poll shows most Americans see a recession hitting this year. What a treat for builders and realtors!
http://tinyurl.com/26tb3y
As far as the spring bounce, there's a couple of great charts that Rich Toscano posted a couple of months ago here.
Looks like Spring is a great time for a dead cat bounce. Of course, that's just in San Diego, which as everybody knows is a miserable, rotten place to live.
jason:
Thanks for the link to
I have been trying to find out statistics for the bust in Tokyo and also Los Angeles in the late '80's early '90's.
The Seatle RE market feels ripe for a correction.
Well, it looks like we've got a good case of Stagflation coming down the pike. the worst of ALL possible scenarios. The Fed won't be able to move one way or the other.
"Well Ollie, this is a fine mess you've got us into THIS time!"
"Lucy! jyou got sum splainin' to dooo."
Mortgage mess spreads to Alt-A segment:
Subprime turmoil ensnaring companies that lend to people with good credit
Minutes from todays Fed meeting:
a number of "weaker-than-expected" economic indicators increased the threat that the economy would grow less strongly than had been expected.
But at the same time, the minutes described various inflation readings as "uncomfortably high."
Surely Seattle is immune to stagflation.
Pink ponies don't stagflate.
reminds me of the optimistic kid when he came across a huge pile of horse dung and jumped in gleefully and started throwing it around. When asked what the hell he was doing, he replied;
"With all this horse-shit, there's got to be a pony in here somewhere!"
Shrug. looks like you're covered in it.
Very funny video;
New strategy to sell your overpriced home – use pheromones!
When Comedy Central starts spoofing housing bubble related subjects - you know the subject is real and has gone mainstream.
Colbert Report
I’m having trouble making a link work, so here is how to navigate all the way to video
Comedy Central
Colbert Report
Most Recent Videos
Bears and Balls; Home
The next Bears and Balls Colbert Report is supposed to be on creative financing. I can't wait!
I think it should be illegal to use the word "Stagflation" until Inflation and Unemployment are both at least 7%...
Currently Real Inflation (none of this 2.4% CORE Inflation crap the fed tells us) is 3% - 4% and the Unemployment rate is 4.4%!
When Prices rise and economic growth slows, = stagflation. The levels fluctuate in terms of severity, but that doesn't mean it doesn't exist, even if you want to make the word illegal if it is not at a certain "Finance Guru" predisposed level.
I don't think we're going to see unemployment or inflation jump to those levels, if for no other reason than if it does, the government will just redefine the statistics.
Stagflation is any case where inflation and economic growth are trending in opposite directions - and as a result, whether the Fed adjusts rates up or down will make one of those numbers worse.
Jeez, you guys...in order for "stagflation" to exist, there have to be so many Pink Ponies running around that you can't swing a rolled up mortgage without hitting one.
I know that Seattle is special, but we aren't that special!
For your reading pleasure an article about the 2200 complex from the Stranger.
http://tinyurl.com/2lkzbc
and if you guys haven't been reading the www.2200life.blogspot.com blog you don't know what you are missing.
The oracles have spoken again:
http://tinyurl.com/2zsk3d
Seattle
Median Price: $399,000
Mortgage % income: 31
Increase % over last 5 years:62.8
Worst year decline %: -7.8
Worst year: 81-'82
Forecast increase 07-08: 0.6%
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