Home Sales Plummet in 38 States in 3Q

Yahoo Finance ^ | November 20, 2006 | Lauren Villagran

[Pelham]

That's kinda funny: I can remember the Fed using 18% as a hedge against inflation....The Idiots who wrote and edited this article really NEED a lesson in basic economics, but what do I know?

You probably know just enough to be a bit confused. The Fed didn't set those 18% rates back in the '80s. Those weren't short rates, and short rates are the only rates the Fed has the ability to set.

Long rates, like those 18 percenters, are determined by the action of the world's bond traders, who in the aggregate have more firepower than the Fed. Long rates are a function of anticipated inflation plus a real return on capital.

[Pelham]

Not enough to offset the buying power of some newly rich Indians and Chinese.

[Brad from Tennessee]

I'm no economist but I would think the dynamic of a boom is that it begins with demand and ends when the demand has been met. People, even in the richest country can't keep buying new homes indefinitely. Whatever inventory is left over will be sold at a discount or a loss. Then in a few years it will begin to pick up again.

[TheLion]

I missed this last gold rush....unfortunately. Read an article in a June issue of Forbes about all the billions of dollars that was poured into stocks of mining companies that were not producing anything. I think there could be a big bubble here.

[JerseyHighlander]

I just heard that this will be the 3rd best year ever for the M&A market. Wall Street is expecting a near record year for performance payout bonuses. That means another shot upward for real estate in the tony sections of the city for at least several more months from just internal demand.


Back on topic: The slowdown in condo sales in central Florida is the most amazing real estate event I've witnessed in my life. (I'm only in my late 20's). Developers who sold out entire multi phase condo complexes are now having to try to resell condos in the now built phase 1 area before even attempting to build phase 3, or 4 or whatever. The condos have just now last month fallen below the pre-construction builder's prices for existing units, AND the cost of building new phases has substantially increased post-Katrina. Which means the value of existing units should hold steady as new inventory won't be made available as fast.

The people who bought into later phases are in for more surprises, even after the surprise 3 to 6 month delays for some new condo complex completion dates. Phase 1 units are now selling for slightly less than unbuilt phase 3 units were sold for, phase 3 buyers locked in a contract that is an immediate loss for them, and no way to sell the condo without accepting a larger loss, because the average # of days a condo is on the market has increased drastically. Herd mentality got these people into this fine mess, and the herd running for the doors is going to exaggerate the downward pressure on the market there.

[staytrue]

Most people do not own 224,000 dollars worth of stocks which is the median price of a home.

Down 1.2 percent is more like down 3 percent if you add in inflation which on 224,000 is a 7,500 dollar loss.

[Pelham]

Disposable income is your after-tax income. Discretionary income is what remains of your disposable income after you pay for the essentials- food, clothing, housing, medical care, and so on. It's your spending money, or savings, whichever you choose.

[staytrue]

Maybe some of the illegals will go home.

If you have unwanted house guests, I guess burning down your house is one solution to getting them to leave.

[Pelham]

Depends on where you live, of course. The median price of a house in southern CA is more like $600,000.

[staytrue]

the bubble wouldn't have gotten so big

The fed has been near perfect. When the 2000 stock market bubble deflated, we lost 8 trillion in market value and then came 9-11. We needed a housing bubble to offset that without a depression setting in. Now stocks have stabilized, it is time to let the air out of the housing bubble.

[Proud_USA_Republican]

Watch for the markets like Seattle, where prices have basically flatlined since the begining of May for median and below median homes after massive gains the past couple years. Realtors have labeled it one of the cities that will never see major price corrections. Seattle is scheduled to have some massive condo tower projects coming on the market in 2007. Thousands of units in downtown Seattle and downtown Bellevue. There was lots of pre-sale action in the begining of this year with these projects. Lots of speculators looking for a quick flip once construction was complete. Now that prices have flatlined for this long, wonder how many flippers are starting to sweat.

http://housing-watch.com/regionview.aspx?city=Seattle&pct=50&g=m

http://housing-watch.com/regionview.aspx?city=Seattle&pct=25&g=m

[staytrue]

As the Baby Boomers reach retirement age, they are fleeing in droves to low or no tax red states. Trust me on this. It's not a prediction, it's happening now.

I'm considering this. Why the hell should I pay and extra 5% when I can move to Florida with no income tax ?

[Pelham]

I think so too. If you want to buy gold, I'd wait awhile. If the housing/mortgage market tanks we could see both a credit crunch and consumer spending dry up. Which could cause a bit of a global slow down. Gold might be a good deal cheaper in such an environment.

[Blue_Ridge_Mtn_Geek]

A decent summary of current trends, whether you agree with the conclusions or not.

http://www.investorsinsight.com/thoughts_va_print.aspx?EditionID=423
The Coming Collapse in Housing
by John Mauldin
11/17/2006

Introduction

What Will Collapse Housing Prices?

The Grand Disconnect

89 Booming Cities

Where's The Unemployment From Housing?

Two Price-Break Triggers

The Fed to the Rescue?

Some Observations on The Big Easy

Disclaimer

Introduction

This week I am in New Orleans at the annual New Orleans Investment Conference and quite frankly with so many good friends that I have given myself permission to not write a letter this week. But you will be getting an even better writer than me for this week's letter.

I arranged for good friend Gary Shilling to condense his 40 page letter on the housing market for you. While this letter will print long (for those of you who print the letter out), it is mostly charts, which Gary excels in. Gary argues that housing prices are not in for just a small decline but a material drop. I have argued that it is housing that will be one of the main causes of the next recession sometime next year. So without adding too much more copy, let's jump right into Gary's analysis. If you like this type of work, you can subscribe at http://www.agaryshilling.com/insight.html.

[ByDesign]

"If the idiotic Fed had paid attention to what the price of gold was saying (nearly tripled in 5-6 years), the bubble wouldn't have gotten so big, and other costs wouldn't be rising so much."

That's not what fueled this bubble - toxic loans to people making 24K a year to buy $500K overpriced crap is what fueled it. The real estate industry, banks, and mortage houses have made out like bandits off it, and are still pimping the Koolaid.

[Proud_USA_Republican]

They are pumping the Koolaid, at the same time, they have been laying of workers like crazy that deal with the mortgage side of the business.

I work for one of the biggest mortgage lenders/banks in the US. Trust me. They know the ride is over and are already adjusting their hedges and strategies. I see it all over the place at work and in the industry.

[GodGunsGuts]

Excellent summary of the coming housing bust.

[GodGunsGuts]

If you have a ping list on housing I'd like to be on it. You seem to be uniquely situated to keep us posted on what's going on in the mortgage/real estate industry.

[GodGunsGuts]

Thanks for the update and charts.

[Southack]

Speculators in real estate can quickly be slaughtered. If you want to watch some carnage over the next 18 months, go here: http://www.perdidobeachcondos.com/PerdidoKeyListingsbyCondo