How big is the real estate bubble? Continued

[JMJ]

I thought I would bring this discussion back to life

http://www.dnforum.com/showthread.php?t=158787&highlight=real+estate

Single-family house sales in July slumped 25.3 percent, while house prices declined 3.5 percent, the Massachusetts Association of Realtors said today in its monthly housing report. The median price in July was $361,750, compared with $375,000 in July 2005.

The condominium market began its downturn earlier but sales slumped dramatically last month: Condo sales fell 21.4 percent, pushing the median condo price down by 4.1 percent. The median price in July was $276,000, compared with $287,900 in July 2005.

The steep declines in sales volume follow a June report that sales that month for houses and condos fell 16.6 and 14.3 percent respectively.

http://www.boston.com/business/ticker/2006/08/state_real_esta.html


Houses currently on the market are at an all time high 4,000,000+. Seems the bubble is in rapid deflation. 4% drop in one month at this rate by the end of the year prices will be down 25%. I can see the headlines now. "6 years of a Bush bandaid economy disappears in 6 months."

 

[hamerz]

Any one interested in buying my home in Boston???

 

[JMJ]

Get out while you can. Much better selling a bit below the market now rather than taking a huge hit 6 months from now.

 

[hamerz]

We are actually looking to rent it to a friend to cover expenses - not that I wanted to become a landlord.

 

[Duckinla]

Mogul, your whole post is about one regional market. If we pull up single market stats to prove a point, the discussion will go back and forth for weeks. What are the stats for the whole country in that same time-period? I'm not sure, but I think they are quite different.

 

[JMJ]

The newscast I saw had roughly the same figures on the national average this just happened to the an article online I found. Here's another quoting the same from The Natioal Associaon of Realtors

"Existing-home sales fell a steeper-than-expected 4.1% in July as the inventory of houses on the market hit a record high, signaling further trouble for homebuilders trying to sell new homes.

The National Association of Realtors said Wednesday that total existing home sales came in at a seasonally adjusted annual rate of 6.33 million for July, the lowest sales in two years. The number was below the downwardly revised pace of 6.6 million in June, and 11.2% below the 7.13 million mark in July 2005. "

http://www.thestreet.com/_googlen/n...347.html?cm_ven=GOOGLEN&cm_cat=FREE&cm_ite=NA

I can tell you that I live in one of the hottest markets in my entire county and the house across the street has been up for sale for months now.

 

[hugegrowth]

Right now the huge baby boomers population is 40 to 60 years old. In ten years they will all be 50 to 70 years old. In twenty years, they will all be 60 to 80 years old. The theory is that over the next 10 to 20 years many of the boomers will be selling the huge homes they raised their families in, and moving into smaller condos or retirement homes. There aren't enough people in the younger population to buy all these homes, so prices will drop like any other commodity that is in big supply with little demand. I don't know if that's what starting to happen now, but it makes sense over the longer term. There are always markets that will be hot, and interest rates and immigration could change things, but this explains the general future trend.

 

[jdk]

I thought I would bring this discussion back to life

http://www.dnforum.com/showthread.php?t=158787&highlight=real+estate

Single-family house sales in July slumped 25.3 percent, while house prices declined 3.5 percent, the Massachusetts Association of Realtors said today in its monthly housing report. The median price in July was $361,750, compared with $375,000 in July 2005.

The condominium market began its downturn earlier but sales slumped dramatically last month: Condo sales fell 21.4 percent, pushing the median condo price down by 4.1 percent. The median price in July was $276,000, compared with $287,900 in July 2005.

The steep declines in sales volume follow a June report that sales that month for houses and condos fell 16.6 and 14.3 percent respectively.

http://www.boston.com/business/ticker/2006/08/state_real_esta.html


Houses currently on the market are at an all time high 4,000,000+. Seems the bubble is in rapid deflation. 4% drop in one month at this rate by the end of the year prices will be down 25%. I can see the headlines now. "6 years of a Bush bandaid economy disappears in 6 months."

I saw the same thing on the news this evening.

 

[Duckinla]

Numbers of homes being sold have fallen a bit, but home prices nationaly have not fallen yet. That can't be taken to mean that the bubble has burst. Even the fall-off in home sales is so small that this will still be the 3rd biggest year ever for home sales.

I'm not saying there won't be a falloff in prices, but until that happens you can only come to the conclusion that this is a still a very strong housing market. The media is making a story of collapse, but the numbers just don't show anything like that.

We've all got houses in our neighborhoods that have been up for sale for several weeks. But the prices being asked are 2-3 times what they would have asked a few years ago. That's not a buyers market.

 

[JMJ]

"The median price in July was $361,750, compared with $375,000 in July 2005."

A sales price decline is a home value decline since current sales prices are valued upon prior comparable sales prices. Same goes for your mortgage. If you bought at and inflated price and borrowed 100% or even 80% losing $20k on a 100K house doesn't make those attractive interest rates so attractive any more.

Imagine if you were a new home buyer over the past year. You ploped down $20,000 on your first home because this was the time to buy. Great interest rates! A year or two down the road your $20,000 is gone. You just lost your job as a construction worker, or were a realtor..

 

[Duckinla]

Again, that's Boston. Nationwide, we have not yet had a drop in median home price. It probably will happen in the next month or two. As it well should. But don't confuse a reasonable fall of in home prices with a collapse of home prices. If I own a store that has sales growths of 20% per year for several years, it wouldn't be unreasonable that I would drop back a couple of points in the following year. That's not a collapse.

If interest rates stay reasonable, you will be surprised you many buyers will rush in at 10-15% discounts from todays prices.

 

[JMJ]

I hope for the economies sake your finger crossing works. Sure cash heavy buyers are going to buy when the bottom falls out. Problem is you leave a bunch of people empty handed if not in the negative. As far as the interest rates are concerned the only reason they didn't get raised is due to the upcoming elections.

 

[DryHeat]

Existing-home sales plunge to a two-year low
..............Inventories of unsold homes rise to 13-year high
...........WASHINGTON (MarketWatch) - July was dry for the U.S. real estate market, as sales of existing homes plunged 4.1% to a two-year low, prices stagnated and the number of homes on the market soared to a 13-year high, according to a report from the National Association of Realtors released Wednesday.

http://www.marketwatch.com/News/Sto...7-FE88-4257-849E-79F720503BDC}&siteid=myyahoo

Existing home sales tumble
........ Sales of previously owned homes dropped 4.1 percent in July, the largest monthly decline in more than a decade, as inventories rose to a record 3.856 million homes, according to figures released today by the National Association of Realtors.

http://www.usnews.com/usnews/biztech/articles/060823/23sales.htm

So, its not just the Boston area...

 

[WhoDatDog]

All assets that appreciate more than their underlying fundamentals eventually lose back that gain. There were a number of reasons for this latest housing mania and it will end badly. When people think of houses as an investment then they are in trouble, and when people think of houses as a roof over their head then they usually do ok.

The botton line is that it will end much more badly than most anyone can imagine. Nobody on the planet predicted the Nasdaq would go from 5,000 all the way 1,000....nobody...and it only took two years. They all said "it won't go up as much as it has in the past...blah...blah...blah, and "in the long run".

I'll be buying in about 5 years here in Los Angeles.

 

[Duckinla]

as sales of existing homes plunged 4.1% to a two-year low

This is what I have a problem with. A 4.1% reduction is not a "plunge" particularly when prices are still going up. And particularly when there have been abnormal gains in the previous year.

I'm not arguing against a correction. I'm arguing against the manipulation of words and statistics to make a return to normalcy look like a big story. Rising interest rates and tighter credit are the only things that will truly drive down home prices. I'm not saying that won't happen. I'm just saying it hasn't happened the way the news articles are presenting it.

This is different than the Nasdaq. People don't need to own stocks. People do need to have a place to live. And if interest and inflation go up, rental prices will go up as well.

 

[labrocca]

Correction is the right word here. The market could slow dive 20% over a year and it would still be UP from the past 3-4 years. I paid over $100k into my house and I plan to live here 10-15 years. If the market drops 20% or even 30% I still did fine. I love my house.

Those that bought with adjustable rates and no money down...I pray for ya. Get out while you can.

Also home builders can easily adjust and slow down their home building or offer more incentives. It's like any other market. It adjusts.

 

[JMJ]

The problem is the market was falsly inflated primarily to the rapid reduction in interest rates. It was then compounded by the rising costs of materials due to natural disasters namely Katrina.

When I left the mortgage business late 2000 I could pretty much nail any houses value in my area at $65 sf. Now it's double that atleast. Some might even be $150+. What is driving the market in my particular area is the younger generation moving in wanting to be closer to the city and the older generation selling out. The downside of this is these are the same people who have large student loan debts, credit card debt and they likely just ploped down every bit of savings they had on a hugely overpriced home or didn't have anything to put down at all and bought at 100%. Again at a largely overinflated price.

Now a time comes very soon when you have out of work construction workers, out of work real estate agents, etc, etc.. Less money being spent at the retail chains, less money spent at the local restaurants and this results in more people without jobs. More or less a recession. Interests rates aren't even high now and foreclosures are already on the rise. Imagine 6 months to a year from now.

 

[JuniperPark]

I attended a party last week mostly attended by arrogant people from the real estate and mortgage industry, and they proved yet again what an arrogant, ignorant bunch of a-holes they are collectively. They think they are all geniuses because they've made a big chunk of money over the last few years, rather that realizing they made the money by selling loans/homes to people that can't afford them and their 'clients' will soon be in foreclosure, and they created/invented NOTHING, they were just in the right place the right time playing off greed.

Heck, just go to Match.com and read the profiles of women in the real estate industry, that blabber about how they 'are extremely successful in the real estate business' and 'cannot consider dating a men not her equal, 150k annual salary as a minimum'. I'm not kidding, women are putting their arrogance in writing these days!

The good part is many of these people bought their own BS, and bought property recently, and are just noticing this 'blip' that they are luck to sell at 2004 prices. To them, every shack in a bad neighborhood is worth $700,000.

Here in San Diego home inventory is up 500% over a year ago, sales plummeting, prices already back to 2004 levels, foreclosures have already doubles, and rents are also falling as people get despirate... and the party has JUST STARTED! Most predict a multi-year crash as balloon payments hit the people who cannot sell and the foreclosures hit the market.

Remember, real estate is the #1 revenue source for newspapers, so expect extreme spin on all stories, such as calling a 500% inventory increase a "softening of the market" instead "hard crash in progress, get out now!".

I read a very funny statistic: There are more licensed Realtors in California than there were home sales last year! How bloated can an industry be??

And yes, we still have agents on TV saying "now is the time to buy"!

 

[JMJ]

Those RE agents that you speak of are the very reason for me leaving the mortgage business. I could see all of this on the horizon and couldn't stand the thought of spending years running around like a chicken with my head cut off for real estate agents who want to dictate to me how much money I should make as a loan broker on a deal. I'm not sure what they teach them in those classes but every RE agent I have ever met seems to have 1% on the brain for everyone else and 6% for them.

 

[Preoccupy]

I guess if sugar land RE bubble pops, then all RE bubble pops! Please refer to the below article!

"Sugar Land Real Estate Bubble Has Not Popped", ?

http://www.prweb.com/releases/2006/8/prweb427580.htm :flame:

I thought I would bring this discussion back to life

http://www.dnforum.com/showthread.php?t=158787&highlight=real+estate

Single-family house sales in July slumped 25.3 percent, while house prices declined 3.5 percent, the Massachusetts Association of Realtors said today in its monthly housing report. The median price in July was $361,750, compared with $375,000 in July 2005.

The condominium market began its downturn earlier but sales slumped dramatically last month: Condo sales fell 21.4 percent, pushing the median condo price down by 4.1 percent. The median price in July was $276,000, compared with $287,900 in July 2005.

The steep declines in sales volume follow a June report that sales that month for houses and condos fell 16.6 and 14.3 percent respectively.

http://www.boston.com/business/ticker/2006/08/state_real_esta.html


Houses currently on the market are at an all time high 4,000,000+. Seems the bubble is in rapid deflation. 4% drop in one month at this rate by the end of the year prices will be down 25%. I can see the headlines now. "6 years of a Bush bandaid economy disappears in 6 months."