How big is the real estate bubble? Continued

[lordbyroniv]

A year later and we see how fast the tide changed

 

[JuniperPark]

A year later and we see how fast the tide changed

It's just TOO funny... especially people that were trying so hard last year to say 'there is no bubble', now eating their shorts. A lot of very desperate scam artist ... er, I mean 'Realtors' and 'Mortgage Brokers' out there looking for new jobs right now. A female freind last night was telling me how a guy she's dating won't take her to dinner any more, just 'come over for another backyard BBQ' dates. I asked what he does for a living -- mortgage broker. Well DUH!

The curve of the crash is now steeping into a full-on nosedive, and yet the idiot "Realtor Professionals" are still saying "great time to buy!". Prices are dropping nearly upwards of $1,000 per DAY... sweet! Yeah, let me throw a half million dollars into THAT hole!

Looks like 2010 will be the time to buy some great houses for pennies on the dollar. That will be the trailing edge of the adjustables, with enough time for people to default on those $5,000 per month mortgage payments they signed up for.

 

[JMJ]

Yeah I know a few Realtors back to waiting tables again as well. There are a few others sitting around the house hoping it will change soon. They were the ones smart enough to set some money aside. I just went to a clients office (mortgage broker) last week split up their databases (partners were going off on their own) and setup their computers at their homes because they couldn;t afford the office space anymore.

May also note that Duck hasn't been around much lately talking up the Bush Admin and the great economy..

 

[Poker]

Not to pat myself on the back...wait that's exactly what i'm doing...just went back to see what I had said before. I was actually getting concerned back in late 05, but none of my friends in Vegas wanted to believe me...

http://www.dnforum.com/f31/has-housing-crash-arrived-thread-217328.html#post1124077

http://www.dnforum.com/f31/has-housing-crash-arrived-2-thread-217328.html#post1124575

http://www.dnforum.com/f31/has-housing-crash-arrived-2-thread-217328.html#post1124754

 

[jasdon11]

Looking back at some of the arguments there (saying the bubble wouldn't burst), you can see how some people try to make a set of circumstances, fit their ideal end result.

No need to over analyse it - when property prices move up faster than wages, and interest rates are static, decreasing, or generally low, you create a financial valley. Sooner or later as interest rates flucuate (which is inevitable) upwards, the valley floods and people are in over their heads.

 

[QuantumBeam]

Some are saying we will see home prices the same as the year 2000 by mid summer of 2008

 

[Gerry]

Some are saying we will see home prices the same as the year 2000 by mid summer of 2008

It is all cyclic.

Builders will suffer as new construction will be slow to move. It is hard to continue building in the same neighborhood that you were getting $125-$150 per sq foot summer of 2006 but now that $150.00 sq ft priced home is now selling for $90-100 sq ft home. It is time for a correction all the way around...housing prices, wages, profit margin, and materials.

Years ago when my father-in-law built houses, the formula was double the cost of goods and add 20%. So a house that cost 50K in materials was built for $120.00. Today, it has very little to do with cost of materials. It is about attitude...how much I can get. We were considering building a house on a piece of property. When I approached a builder in the area to get an estimate or arrange a meeting to review plans, he said just figure on $150.00 sq. ft. I told him that was crazy. He said that is what he is getting and he wasn't going to change his prices for me. I asked him if he needed to look at plans first. He said no, he didn't need to look at plans. That was his price.

That is a very steep price in the market I live in.

There is no shortage of the golf communities and the McMansions. There was certainly no shortage of homes starting in the $450's.

But now there is no shortage of vacant houses, existing homes, and new homes on the market for that $90 sq ft. Already we are seeing about a 30% decrease in price because there is such a glut.

Overall, bad news abounds:

Price tag of mass foreclosures: $223 billion
Report predicts total property values, taxes lost as more lose their homes
http://www.msnbc.msn.com/id/21774024/

Federal Reserve Chairman Ben Bernanke told lawmakers in Washington last week that nearly 2.3 million subprime mortgages will reset at higher rates — and often dramatically higher monthly payments — through the end of next year.

The above item just deals with Foreclosures, a person's inability to pay the loan.

But this is even more staggering. This is the estimates of Bank loses from falling prices...in other words, loaning (for example) $200K for a house now worth $150K

Subprime Losses May Reach $400 Billion, Analysts Say
http://www.bloomberg.com/apps/news?pid=20601087&sid=a3fCFxLIgT2s&refer=worldwide

Nov. 12 (Bloomberg) -- Losses from the falling value of subprime mortgage assets may reach $300 billion to $400 billion worldwide, Deutsche Bank AG analysts said.

Wall Street's largest banks and brokers will be forced to write down as much as $130 billion because of the slump in subprime-related debt, according to a report today by New York- based credit analyst Mike Mayo,. The rest of the losses will come from smaller banks and investors in mortgage-related securities.

Citigroup Inc., Merrill Lynch & Co. and Morgan Stanley led more than $40 billion of writedowns as record U.S. foreclosures plundered asset prices. Estimates are rising with Lehman Brothers Holdings Inc. last week predicting losses linked to U.S. mortgages may reach $250 billion over the next five years. Zurich-based Credit Suisse Group in July forecast $52 billion of costs related to mortgage-backed securities.

Morgan Stanley analyst Anil Agarwal in Hong Kong today cut his rating on the stock of HSBC Holdings Plc to ``equal-weight'' from ``overweight.'' The London-based lender's $2.1 billion of provisions against its $45 billion mortgage services business may be insufficient, he said.

Subprime borrowers are likely to default on 30 percent to 40 percent of debt,
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Was this all unexpected and unforeseen? Not at all.

You don't need to be a financial genius to pick up the warning signs and see the writting on the wall.

http://www.dnforum.com/post33-post-1124642.html
http://www.dnforum.com/post53-post-1125461.html
http://www.dnforum.com/post37-post-1124747.html

How big is the real estate bubble?

Getting back to the original question posed.

It is enormous and we have only been dealing with the consumer and home buyer and home builders dealing with this issue at present.

Just wait until you see the high dollar multimillion dollar developers and builders.

Housing Woes Hamper Florida Landowner
October 10, 2007 · The slump in the housing market is affecting the largest private landowner in Florida. The St. Joe Company plans to cut or transfer hundreds of jobs, and will push to sell more than 100,000 acres.

Condo Auction a Symptom of Ailing Housing Market
by Scott Horsley

October 5, 2007 · Nervous homebuilders were eyeing San Diego last weekend to see just how soft the real estate market has gotten.

One of the nation's largest homebuilders, DR Horton, auctioned off more than three dozen condos that had previously gone unsold. The condos went for an average of 30 percent below the peak price previously advertised.
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Just wait until builders and developers start walking away from $450 million high rise projects. How many of those can the banks suffer?

 

[JMJ]

We're almost two years in now and the US tax payers are now the proud owners/backers of 50% of the old and 80% of the new mortgage loan market.

"It is the leading market-maker in the U.S. secondary mortgage market, which helps to replenish the supply money for mortgages and enables money to be available for housing purchases. As of 2008, Fannie Mae and the Federal Home Loan Mortgage Corporation (Freddie Mac) own or guarantee about half of the U.S.'s $12 trillion mortgage market. As a result, the corporations were particularly affected by the economic downturn in late 2007 and early 2008. Although they guarantee or own only half of the mortgage market, because the subprime mortgage crisis has caused almost all other lending sources to pull out of the market, they are responsible for more than 80% of new mortgages being made in 2008."

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

And we are now responsible for 100's of billions of dollars in sour debt if not possibly in the trillion/s. From just Fannie and Freddie alone.

http://www.bizjournals.com/dayton/stories/2008/09/08/daily1.html

Thanks GW!