Posted on 10/14/2006 9:48:44 AM PDT by GodGunsGuts
'The US housing bubble will disappear'
By Laurie Osborne, Editor
Published 11th Sep 2006
That the US housing bubble will disappear someday is a certainty. That it will blow up catastrophically is a fair bet, warns The Daily Reckoning's Bill Bonner.
Observing recent statistics, Bonner calls the evidence "formidable".
The total value of residential property in developed countries rose by more than $30 trillion, to $70 trillion, over the past five years – eclipsing the combined GDPs of those nations.
Consumer spending and residential construction have accounted for 90 percent of the total growth in the American GDP over the last four years, and more than 40 percent of all private-sector jobs created since 2001 have been in housing-related sectors, including construction and mortgage brokering.
America made some of its biggest gains this past year, with average prices of homes rising 12.5% in the year and prices in Florida, California, Nevada, Hawaii, Maryland and Washington, DC, rising more than 20 percent, while in Palm Beach County, Florida, it rose over 35%. Sales of existing homes in the US set a new high at 7.18 million in April.
Some foreign countries showed bigger gains than the US in the last year, with prices up by 23.6 percent in South Africa, 19 percent in Hong Kong and over 15 percent in Spain and France. But average house prices have actually fallen by 7% in Australia since 2003; Sydney's bubblicious prices have plunged by 16%. In Britain, sales have contracted by a third from last year and have also slowed down in Ireland, the Netherlands and New Zealand. In Britain and Australia, these declines followed what were only very modest interest rate increases.
23 percent of all American houses bought last year were for investment and in Miami, one speculation hot spot, 70% of condo buyers are investors/speculators.
Last year, 42 percent of America's first-time buyers – and 25 percent of all buyers – put no money down.
In California, 60 percent of all new mortgages this year are interest-only or negative-amortization.
House prices in relation to rent have hit all-time highs in the US, Britain, Australia, New Zealand, France, Spain, the Netherlands, Ireland and Belgium. In the US, the ratio is 35 percent above its 1975-2000 average. The price to rent ratio is a cardinal indicator of over valuation.
Only wussies put sugar in coffee.
But you can't handle being refuted at every turn.
BTW, what do you call it when YOU call in others?
At least Petronski called in those whom YOU defamed; but, as usual, you did, yet again, ignore to place their nics in the header.
FR has its own lexicon...please go look it up and what just what FR and FREEPERS consider a troll to be.
And FWIW, the land BOOMS in Florida predate the 20th century.
We finally agree on something! I am a firm believer that when it comes to coffee (or iced tea), the less polution the better!
All of these doom&gloom threads are always filled with exaggerations and broad brush strokes.
It will probably drive you to sugar. LOL!
I'll say this too. It sure looks like the Federal Reserve is on a major campaign to squelch inflationary expectations and keep interest rates down and no doubt a big reason for this campaign is concern about ARM's resetting to much higher rates and putting a lot of people in a financial bind. We'll see what happens here. Mortgage rates have dropped about 0.4 points in the last two months and that will help.
Man you have got to get off this thread for awhile. You seem to be on here 24/7.
Somebody said this before, but another thing to keep in mind is that only a small percentage of homeowners bought houses near the peak of prices in 2005. The vast majority of people bought at lower prices before 2005. If somebody borrowed too much in home equity loans from a sub-prime lender based on an appraisal last year and spent it, then all I can say is: that was a dumb thing to do, but I don't think it affects more than a few percent of all homeowners nationwide.
You could always tap your home equity and buy a new one. :-)
As noted, the article claims "Last year, 42 percent of America's first-time buyers - and 25 percent of all buyers - put no money down."
The first part, at least, is correct, see http://www.realtor.org/fedistrk.nsf/3921d4b155894b4f86257142005f7061/013f0cdb0f0bc12285257192005e24c7?OpenDocument
In 2005, 43% of first-time homebuyers financed 100% of their home.
It's important to understand the context of those numbers as shown in the rest of the paragraph:
55% of homebuyers who financed with a zero-downpayment loan in 2005, had incomes less than $65,000; 24% of those who used a zero-downpayment product were minorities; and 52% of people who financed 100% of their home purchased homes priced at less than $150,000
These statements were made as part of a pitch to sell congress on the idea of having government compete with subprime lenders by allowing FHA to offer 100% loans (currently they can only offer 97% although in reality it becomes 100% with downpayment assistance charities some of which are thinly disguised subprime lenders).
Here's GAO testimony on alternative mortgage products http://banking.senate.gov/_files/ACF84D8.pdf
From 2003 through 2005, AMP lending grew rapidly, with originations increasing threefold from less than 10 percent of residential mortgages to about 30 percent.
AMPs are interest-only or flexible payment mortgages, not necessarily with zero downpayment. As noted in the document these are mostly being used in the high priced markets in CA and in the vicinity of DC and NYC. So it looks to me like there are two dynamics here, first people with no money getting relatively small loans on cheap houses in crappy locations and second, people with more money (or who think they might have more money) getting large flexible loans in good locations. The former will be impacted by a general recession which may or may not be in the cards (I am betting not), and the latter has already seen significant drops (20% in my DC area market, probably similar in the others) and there is no blood in the streets. I believe prices are firming somewhat in those markets although another 10% drop would not surprise me.
I understand the need for you to defend yourself against a few posters. You should climb out of the mudslinging though.
If you dont "they" will get you banned sooner or later and I dont want to see that happen. I enjoy reading your posts and I enjoy learning when others debate the merit of them.
Keep up the good work.
Something interesting I just heard on the news. This is just an FYI so folks can take it or leave it, I'm just repeating it.
Few stores seem to be open in Hawaii (or at least the parts worst hit).
And those stores that are open are letting in only a limited number of people.
And most of those stores are taking...
CASH ONLY!!!!
I just thought this was an interesting study in psychology.
Fiat money only? LOL!
GGG, if a bond speculator puts $1,000,000 into the bank, how much can the bank lend out?
I guarantee you having one single Liberty Silver dollar in your pocket would get you to the front of the line quicker than you can post a tedious rebuttal.
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