i can't imagine how the housing market/economy would be doing today if we didn't have to fight Terrorists and inflation AND the RATS... AND the MEDIA!!!
Posted on 11/29/2005 7:03:30 AM PST by SoFloFreeper
Actually, I think the Maryland suburbs are what's holding the DC market up right now. While N. Va has been skyrocketing, the Maryland suburbs seemed more controlled (at least the prices were/are somewhat more reasonable). It's booming in Maryland, but the N. Va market has been unbelieveable.
I've been watching Alex/Arlington/Fairfax and some DC. Everything's falling. Haven't seen quite that reaction in Maryland. I'm thinking it's more N. Va moderating. (although, for full disclosure, the first "price reduced" signs I saw were in Maryland)
i can't imagine how the housing market/economy would be doing today if we didn't have to fight Terrorists and inflation AND the RATS... AND the MEDIA!!!
New Homes Sales May Signal Speculator Buying and Last Hurrah
Here are the new home sales numbers. "Sales of new homes soared at a record pace in October in what could be a last hurrah for the booming housing market. The Commerce Department said that sales of new single-family homes shot up by 13 percent last month, the biggest one-month gain in more than 12 years."
"The increase confounded analysts who had been predicting that new home sales would decline by 1.8 percent. The rise in new home sales was accompanied by an increase in prices, with the median price increasing by 1.6 percent from September to $231,300 in October."
"The concern of some economists is that the booming housing market could have a bigger downturn, with sales and prices plummeting in the nation's hottest markets. The worry is that activity in recent years has been pumped up by investors buying homes and condominiums in hopes of quick gains. If they suddenly decide to dump those properties, it could cause a glut on the market that would further depress prices."
Some of the details from the Commerce Department report suggest speculative buying. Of the 111,000 new homes sold in October, 46,000 haven't been started and 40,000 are under construction. Only 26,000 homes sold were completed, even though 105,000 new homes were completed and for sale at the end of September. Totals don't add up due to rounding.
There were 501,000 homes for sale at the end of October, which is a new record I believe. That's compared to 431,000 at the end of 2004 and 371,000 a the end of 2003. The 'not started' segment was at 102,000 compared to 68,000 in December 2004 and 51,000 at the end of 2003. The number of homes 'under construction' stood at 293,000, whereas numbers for the past two years ending were 260,000 in 2004 and 236,000 in 2003.
The Fed has raised rates 12 times in the past 20 months, yet you can still find a 30-year mortgage for 6%. Low unemployment doesn't cause inflation. Inflation is caused by the devaluation of our currency.
...and many many people are positioning themselves for catastrophe when that happens by taking out interest-only loans on overvalued real estate
How will an increase in the number of homes for sale push interest rates higher?
It is the limit of potential borrowing which will do so. Almost all the money that could be lent at acceptable risk has already been done, the only way to lend more money in the face of negative savings rate will be to make even riskier loans, which will have to be at a higher interest rate to cover the risk premium.
Manhattan had an amazing rise in land values attributable to quality of life improvements under GOP mayors (mostly Giuliani). Because it is such a unique place, very rich people the world over want RE there.
The bubble that keeps on giving.
If this is true, then how is it I can still find a 30-year mortgage at 6%? The 30-year mortgage is based on the expectation for future inflation. I'd say, by virtue of this rate, that there is little expectation for inflation in the future or concern over your alleged increase in risk.
..the only way to lend more money in the face of negative savings rate
The problem with the rate of savings in this country is the method in which the government calculates the rate of savings. It does not reliably track the myriad of ways Americans save. The claim that Americans aren't savers is all myth. Government methodology understates income and overstate expenses mostly because it does not count capital gains from the sale of stocks or homes as part of disposable income, but it does count capital gains taxes as expenditures.
The U.S. Treasury data shows that Americans have earned more than $3.5 trillion in capital gains since 1997. This is more than the combined gains of the preceding 20 years.
In a recent Bear Stearns report on savings, David Malpass (NRO financial writer and Bear Stearns chief economist) shows per capita assets in the U.S. of $89,800 that make us the top saving country in the world. (Japan is second at $76,900 per head.)
We are experiencing massive capital inflows into the U.S. at very low interest rates. A recent 10-year Treasury auction saw such strong demand that the yield on the 10-year bond actually dropped. Core inflation is holding steady at about 2% and the price oil keeps dropping as the dollar strengthens.
If you look at historical information, it's a dubious assumption that a big increase in mortgage interest rates will trigger a nationwide decline in home prices. National housing prices did not fall in the past when mortgage rates rose to even twice their current level. Even if we do enter a period of rapid inflation, that will not hurt housing prices. Inflation will increase the value of tangible assets like real estate.
Yep, DC area is nuts...house I bought in '95 is appraised at four times what I owe on the mortgage...but you have to live somewhere....
Don't tell Ex-Texan...
LOL! snicker.
Actually, those are the two places I expect would get hit the hardest.
Unfortunately I work right off Rte 3 in Concord.
My commute takes me down rte 2 in the morning which is WORSE
I think many economist of dubious distinction and a questionable agenda have been calling for the bubble to burst for a year now. Prices nationwide are still appreciating. But the MSM and the "I prefer a plasma screen and Prada shoes" type 20 something renters have been gleefully cheering any wisp of bad news. If you're waiting for prices to fall in any but a few very small very inflated markets you'll be waiting a long time. As long as the stock market is flat, negative 1.00% AML mortgages with ridiculous payment rates and housing demand is high, prices will be continue to rise. How do I know this "Bubble" theory is full of crap, all the local South Florida papers keep reporting on their front page, they are a perfect reverse barometer.
You know, houses are going to double in value every five years for the distant future. The 400K ranch in No. Va. today will be 800K in 2011, needing new carpet and an A/C system to boot. Wages will be stagnent however, but that doesn't matter, probably some real estate investor from Sweden will keep the ball rolling then. Makes sense to me.
The kind of people who buy real estate in those places are the least likely to be significantly affected by an economic downturn.
I think part of the new housing growth is due to people moving from high priced areas to lower priced areas. People who couldn't possibly afford a home in California and some metro areas have moved to more rural or lower cost cities. They have been taking their equity to these places and affording a home; bigger homes, cheaper in many cases.
The most important statement in the article came at the end:
"Historically, 1 percent of all first and second mortgages go into default," he said. "We haven't approached that much for three, four years now. It could be what we're seeing here is as simple as a return to norms."
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