Wednesday, June 22, 2005
When will the Bubble Pop?
There are growing indications that there is a slowdown occuring now. It is quite likely that we will see an increasing amount of stagnation throughout the summer. By October, the price stagnation in many areas will become price declines. It will be clear by then that the price appreciation of the past is not happening. Selling will follow as investors speculators and others try and get a peak price. For the most part they won't be able to get the 'peak price' . Inevitibly, they will start lowering prices. The bubble is nearing its end.
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Homes in Menlo Park and Palo Alto, CA are on the market much longer these days. Quite a difference than a few months ago...
ReplyDeletethanks for your report. Its great hear reports from the field.
ReplyDeleteHello,
ReplyDeleteI just bought into a Condo in Tampa, and half of the units are owned by flippers... I moved in and there is hardly anyone actually living there!! I am selling while I can and getting out before the bust. The bust is upon us!!!
Here in the north bay area of CA (Marin and Sonoma is what I look at) the number of listing are huge. About double what they were this time last year.
ReplyDeleteHouse prices for 1 mill and up are down but that was the case last year too. The below 1 mill mark seems to be showing only small price reductions.
Here in the Hartford CT metro area, from what I have seen single family homes and condo's are not selling as quickly as 6 months ago. In my small condo comples of 24 townhouses, properties listed, where sometimes sold within a week. With price increses of 15% since the beginning of the year, properties are not moving so fast, and inventory is a bit higher. There seems to be some resistance at rising prices. There has been a unit here listed for going on about a month- still unsold.
ReplyDeletei'm anxious to see these professional flippers get slaughtered. i've thought there's a bubble for a long time and i sold my condo. 2 weekends with 100 people stopping buy total...only 2 bids. the agent said she was shocked. what shocked me was the moron that bought paid 5% down with an option ARM on the remainder with a 6.75% coupon! i'm just glad he made it to the settlement table. i'm happy i rang the register and i look forward to buying a home at a nice discount after these speculators get annihilated.
ReplyDeleteI believe we will see some bobbing before the fall. As prices start to fall people who have been waiting for the bubble to burst are going to start to buy (what will look like a discount), which will increase the demand again and keep the prices high (though probably lower than they are now). I think October is too soon for the big bubble burst, unless interest rates go up a lot between now and then or a depression starts to occur, neither shows signs of happening between now and then. It will probably take at least until next October before the big burst.
ReplyDeleteDebbie
"I think October is too soon for the big bubble burst"
ReplyDeleteI am NOT predicting significant price declines by October. There will be some price declines by October in certain cities. I think October will be the inflection point between price stagnation and price declines.
I recently posted a poll on my blog followsteph.com asking what the state of the real estate market is today (booming, stagnating, busting).
ReplyDeletePlease feel free to visit and place your vote now.
Regards,
Stephane Grenier
http://www.followsteph.com
ReplyDeleteI am NOT predicting significant price declines by October. There will be some price declines by October in certain cities. I think October will be the inflection point between price stagnation and price declines.
Exactly what I am thinking. I believe there will be a financial crash sometime in October that will "officially" mark the downturn.
I don't think there will be a "bob" (upward) in the housing market as the price drops initially.
ReplyDeleteWe are rapidly approaching exhaustion. Price appretiation is slowing. Flippers need high price appretiations to pay for all the closing costs, etc. We are rapidly approaching the point where the price appretiation needed for flipping is prohibative (they will lose money).
With all the negative press latley, I would have to assume the flippers are getting nervous and their fingers are on the trigger(s).
I believe we are already past the peak, based on all the info coming out the last two months, sales volume down, prices slightly up (slowing appretiation), longer on the market, etc. However, we are still in the flat part of the curve (bell shape). Most people won't recognize the downturn until the curve starts to sharpen its decline. We are rapidly approching that part of the curve.
My prediction is a slow downward trend, for a year or two until the rising tide of foreclosures caused by those who are upside down swamps Fannie or Freddy into insolvency. That will be the Katy bar the door moment when interest rates will shoot up, possibly to mid 80's double digit levels.
ReplyDeleteIt has already started to pop here
ReplyDeletenorth of Boston.This past Sunday in the local paper there were 15 and a half pages of real estate listings.That is a lot for this area.Many homes I walked by last year are still up for sale.I believe Mass. home sales were down 11% in May y/to/y.
Why would the Fed raise rates to double digits?
ReplyDeleteWith the economy struggling, and low inflation (no housing inflation certainly), rates will need to be kept low to avoid a 1929 style crash.
The fed does not directly target asset classes. It lets the market sort it out on its own.
I'm In L.A Area, just sold my 2 year old townhouse, lots of walk-in but only 2 offer, totally shoking. My neighbour toll me "bad move !!,you are never gonna be able to buy it back with this price !" Yeah right we'll see
ReplyDeleteThe bubble has already burst; hasn't anyone noticed. Many areas of California and Florida have dropped 15-20%, and 40% is projected by economic indicators and the rising forclosure rate continues. Many areas like Miami have about a 3-year inventory of property on the market, and parts of Hawaii are even worse. Other indicators are also suggesting that we have entered a recession and will not have any "real" upward movement for 3 to 6 years.
ReplyDeleteRental prices in Miami are getting hammered as new condo developments are completed. Many developers are offering condos below pre-construction prices and also offering to rent the same units at prices substantially below market rents for the area.
Bill Eatock
OptionArmExpert.com