Housing Boom a Bust?

National Post ^ | 5/13/ 2006 | Jacqueline Thorpe, Financial Post

[NOLBRLS]

Reality Check! Your home will be worth 4 times what you paid for it when you have the escrow check in your hand.

[JasonC]

"An estimated 25% to 50% of all U.S. jobs have been connected to the housing industry in recent years"

Um, nonsense. I think it meant to say "net new jobs". Construction is $550 billion a year, all real estate (including sales, rental, etc) is $1,375 billion. That's about 4% and 10% of the economy, respectively.

[Polybius]

The big difference between the real estate market and the stock market is that housing supply and demand varies tremendously based on location.

Prices also vary wildly if you are buying either stocks or real estate with money that you can afford to spend or if you are buying real estate or stocks at speculative prices you cannot afford except by buying on margin or with interest only loans.

You will always have a differential on value. However, you should not allow that to blind you into paying twice what the true value is just because Guido the Loan Shark is handing you $600,000 to buy a $300,000 house that speculators say will sell for $1.2 million next year.

[Wilhelm Tell]

This property "flipping" reminds me of the day trading craze just before the dot com bubble burst. The difference is that overvalued property is still worth something while imaginary companies are worth nothing. Still, a lot of people have "flipped" themselves into property they will have to sell at a loss.

[ex-Texan]

You are forgetting about all the banking, mortgage, home owner insurance, title insurance, legal and other jobs directly related to real estate. Also, because people used their homes like ATM machines to access cash, other jobs not directly related to housing includes: auto sales, auto insurance, retail sales, restaurant, newspaper advertising, credit card biz, and the list goes on and on.

[Sometimes A River]

"Nobody" wants to live in Miami??

LOL, tell that to Jorge Perez, with his projects 100% sold.

Broward is far more left wing than Dade, and a worse place to live.

[italianquaker]

insurance is crazy but taxes are really low, total opposite then nyc

[I still care]

A. Don't call names, it's rude.

B. I wasn't go by zillow, I was going by the county appraiser. The houses in my immediate area in my square footage are selling for at least $30,000 than they were last year. And some quite a bit more.

[I still care]

At least $30000 less. I left a word out.

[Dinsdale]

You can get a house for $90,000? (25% reduction = $30,000)

Where?

One thing you got to admit you were'nt in a bubble area.

[I still care]

Maybe my math is off. Actually, it probably is. But I can tell you houses right near me that went for over $210 last year are now going for low $160's. What does that work out to? I don't feel like multiplying today.

[JasonC]

Um, by that standard, every job in the country is "related to" banking, because nobody pays for things via the barter system. It is just a silly comment.

[GBA]

You make some great points that I agree with, but zillow.com is NOT an accurate estimator of value where I live and work as an agent. I just ran several address I know well, including my own. One was a good ballpark estimate, the rest were just barely in the parking lot.

[ex-Texan]

Most economists agree that nearly 45% of all jobs created since 9-11 were housing related in the broadest sense. It is very clear to me that they know what they are talking about. Ameriquest Mortgage is closing all its retail offices across the country, laying off 3,800 workers. Washington Mutual severely cut its mortgage staff in 2003 and just cut another 2,500 jobs this year. Other mortgage companies are making similar cutbacks. If you do not choose to believe the evidence, there is nothing I can do about it. Wait until the end of the year. It is going to be very grim for mortgage brokers.

[Dinsdale]

I don't feel like multiplying today.

That's good. Because what you've got to do is divide.

Is this a new debate tactic. Claim 25%, claim to back it up with real data. Then say 'Sorry I skipped 4th grade math, I don't do percentages' (along with new data). Nice trick if you get away with it.

[I still care]

Unless of course you do it algebraically.

I'm tired of this. If you can't see that the difference between 210 and 160 is substantial, and you want to argue percentages with me, go ahead. I've got better things to do.

Have it your way. My house value is just fine, thank you, and selling a house for 210 suits me just as fine as selling it for 160. No difference at all. Geez. Good bye.

[dakine]

Cereal...

[JasonC]

Net new jobs does not equal jobs - it is a change off a broad base, not the base itself. And a few thousand is peanuts, the economy adds a million net new jobs every year. Mortgage brokers live from refinancings, and obviously low rates encourage those. These days, people refinancing ARMs to lock in long rates while they are still reasonably low, is about the only sensible refinancing trade, and there isn't much sign of it yet. It is also a tiny business in employment terms. The large employers in real estate are (1) construction to make new stuff, because it takes a lot of labor, (2) realtors selling existing houses, because it is all so local and (3) to a lesser extent, management of existing properties, simply because there are lots of them.

The whole sector is less than 1/7th of the economy and might see changes at the margin of 20% at most. Nobody outside the sector will notice that very much. People will notice less cash coming out of refinancings, which is simply the knock on effect of higher interest rates and the whole reason the Fed is tightening to start with - because that easy-money gusher was setting off general inflation. That's sort of the point.

[TheOracleAtLilac]

Why doncha wait till after immigration reform is enacted.

Several million leaving the golden state should free up some rental property & start Cal. R.E. values to tank.

[Swordfished]

I wouldn't hold my breath on that! Politicians don't have the guts to do the right thing and you'll soon find that out.

I would think residential real estate downtown (LA) would be more stable than in the outlying areas.

But a big terrorist attack would definitely bring prices down for awhile.