Friday, July 28, 2006

BubbleSphere Roundup

Another week, another BubbleSphere Roundup. Let us get started!

Boston's New Curse?
reports Paper Money Blog. Also check out June Market Wrap for more Massachusetts housing data!

The Baltimore Housing Bubble Blog has a post 'Christmas in July?! Thanks, Hovnanian...'. Up to 100K off of new homes. Recent flippers are in real trouble!

Soft Landing? What Soft Landing? at Marin Real Estate Bubble

Calculated Risk discusses New Home Sales and Recessions. Solid piece. This is one of my favorite blogs!

The blogroll has been updated. I added Global House Price Crash and Vancouver Condo Info.

If any of my readers know of any solid blogs please post in the comments section. Thanks!

41 comments:

  1. David,

    Wonderful posts the last few days. Great info, if nothing more than seeing the trolls get down right nasty.

    As things start cooling off, more data please! I just found about this link (via a local poster, thanks) from paper money:

    http://www.paperdinero.com/Inventory.aspx

    My area is not covered by ziprealty and other “useful” MLS databases (i.e. ziprealty shows price reductions, DOM ect) So, any numbers that I can get my hands on are helpful.

    Thanks to:
    DC_Too, Sarah in DC and uknowwhoiyam for the tid bits.

    And to

    MyTwoCents for sticking around.

    Long weekend. I’ma gonna go fish’n.

    ReplyDelete
  2. Thanks for the link David, I will return the favour today, I did notice you have used the raw URL, you may use http://www.globalhousepricecrash.com
    thanks again
    regards
    consa

    ReplyDelete
  3. Redskins and others who think they should be able to buy a middle-class condo for something like $150,0000, affordable housing in DC as defined as being between $200,000 and $350,000 per a Washington Post article today.


    Deputy Mayor Stanley Jackson, Williams's chief adviser for planning and economic development:


    "Jackson said the construction of low-cost housing is only one of redevelopment's benefits. Citing examples in Southeast, he said boarded-up buildings that were a bastion for "prostitution, drugs and stolen cars" have been reborn as townhouses "that are available to low income and working class residents." He defined affordable units as costing between $200,000 and $350,000."

    www.washingtonpost.com/wp-dyn/content/article/2006/07/27/AR2006072701769.html

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  4. ""Jackson said the construction of low-cost housing is only one of redevelopment's benefits. Citing examples in Southeast, he said boarded-up buildings that were a bastion for "prostitution, drugs and stolen cars" have been reborn as townhouses "that are available to low income and working class residents." He defined affordable units as costing between $200,000 and $350,000.""

    how much does a low income and working class households make?

    low income in DC up to 35K?
    working class 35K to 60K?

    ReplyDelete
  5. The median household income in 2003 was 43k and some change. In order for someone to buy a 200k house, they would need to have a household income of at least 66k, well above the median, and hardly low-income or working class.

    http://quickfacts.census.gov/qfd/states/11000.html

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  6. "affordable housing in DC as defined as being between $200,000 and $350,000 per a Washington Post article today."

    Passive sentence... defined by WHOM?

    Median household income in DC in 2004 was something like 47K (at most). Let's say it's 60K now (being generous to you).

    The low end of the "affordable" range there is still more than three times current MEDIAN household income. At BEST, I would say $200,000 would be the upper limit for affordable housing in DC. 200K is affordable for people right around the median, if they stretch. For about half of households in DC, though, 200K is NOT affordable under conventional, pre-bubble standards.

    $350K is probably around six times median DC household income. Calling that "affordable housing" is ludicrous.

    A Redskins fan

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  7. "$350K is probably around six times median DC household income. Calling that "affordable housing" is ludicrous"

    Agreed! A two parent working household with one child making 60K should not be taking a loan out for 350K.

    ReplyDelete
  8. "low income in DC up to 35K?"

    I'd love too see how a lower income family could get close to afford their own home at 200K.

    No 20% downpayment, no savings in the bank..ect. Without first time home buyer the market just spins it't wheels. Prices are coming down. The simple fact is, the first time home buyer is needed by the market for the market to work.

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  9. "Agreed! A two parent working household with one child making 60K should not be taking a loan out for 350K. "

    True. They should be taking out a gun and shooting themselves.

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  10. "True. They should be taking out a gun and shooting themselves."

    No they should rent until prices decline enough, so they can buy.

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  11. A two parent household should become financially stable before they have kids. If you don't know how babies are made or aren't responsible enough to keep it from happening you shouldn't expect to ever own a home.

    Only in the greatest country in the world, could such pathetic losers expect to ever own property.

    ReplyDelete
  12. anon asked:
    ""how much does a low income and working class households make?

    low income in DC up to 35K?
    working class 35K to 60K?"

    It will of course depend on who defines it, but in all cases it will vary by size of household. I disagree with your working class range of only $25K ... I think most organizations/govts/etc use a much larger range ... more like $100K. I mean in this area, $100K/yr (individual or family) is still very much middleclass even if they are living fairly better than those earning under $50K. I agree with you that $35K for a family would be the poverty level. I don't think it would be for a single individual. As I illustrated for David the other day, such an individual could even afford to buy a $200K condo ... and people in poverty can't afford to buy. INHO, for a family of 4, you probably need to be earning at least $175K household income to not still be middleclass ... For a single person ... maybe something like $125K. Of course these terms are all relative. I think Redskins posted something the other day about the distribution of incomes in the different jurisdictions around here. It would be helpful if he could repost.

    ReplyDelete
  13. anon asked:

    "Passive sentence... defined by WHOM?"

    reread the post ... it says it right there:

    "Deputy Mayor Stanley Jackson, Williams's chief adviser for planning and economic development"

    ReplyDelete
  14. Here is the link for Montgomery County in 2004:

    http://factfinder.census.gov/servlet/ADPTable?_bm=y&-geo_id=05000US24031&-qr_name=ACS_2004_EST_G00_DP3&-ds_name=ACS_2004_EST_G00_&-_lang=en&-_sse=on

    But if you go here:

    http://factfinder.census.gov/servlet/ACSSAFFFacts?_event=&geo_id=05000US24031&_geoContext=01000US%7C04000US24%7C05000US24031&_street=&_county=Montgomery+County&_cityTown=Montgomery+County&_state=&_zip=&_lang=en&_sse=on&ActiveGeoDiv=&_useEV=&pctxt=fph&pgsl=050&_submenuId=population_0&ds_name=DEC_2000_SAFF&_ci_nbr=null&qr_name=null®=null%3Anull&_keyword=&_industry=

    and type in another county (or DC) you can get data for them. There is not 2004 data for every DC-area county, but Montgomery, PG, Fairfax, and DC itself are all there.

    A Redskins fan

    ReplyDelete
  15. DAvid said:
    "Agreed! A two parent working household with one child making 60K should not be taking a loan out for 350K. "

    The plain truth is that they should not be having a child. PERIOD. The fact that two individuals whose combined income is only $30K have gotten married also makes you question whether they have the maturity level to be married. Most people earning that little would put off marriage until they'd been better established in their careers.

    ReplyDelete
  16. * correction "whose combined income is only $60K ... "


    also, Redskins, thanks for posting the stats.

    ReplyDelete
  17. lance wrote,

    "The fact that two individuals whose combined income is only $30K have gotten married also makes you question whether they have the maturity level to be married."

    Are you saying poor and working class people should not get married?

    ReplyDelete
  18. I think this has been discussed in the past, but there is an unfortunate class divide in DC, thus creating a similar divide in housing prices. People flock to relatively nice urban areas in DC proper, thus driving up the prices and depressing even further the very poor areas. I think Lance is correct when he says how many six income households there are in the city (especially considering two-income homes). At the same time, many people -- especially the mid-20s and the vast majority of the minority community -- are definitely squeezed by the insane prices. When I bought in early 2004 I thought it was crazy, but even in this depressed market we are way above 2004.

    One thing I think we forget -- especially in the rental market -- is that out of towners tend to pay a premium to ensure a nice location. I imagine many of you that rent have been here for a while, and are savvy about choosing a location. Unfortunately for newer people to the city, they pay a premium for location. That's why I think we'll still see really strong rental prices in the good areas of DC even if it's overbuilt.

    ReplyDelete
  19. Robert-- Thanks! Your comments have been much appreciated.

    David, I agree with a previous poster. Don't turn off comments altogether. Just make everyone register. That should make it a lot easier to give the obnoxious ones the boot.

    I think you can also do what Ben had to do for awhile on http://thehousingbubbleblog.com/ -- don't allow immediate posting, look them over and remove the insulting and obscene ones before they go up.

    ReplyDelete
  20. "I think you can also do what Ben had to do for awhile on http://thehousingbubbleblog.com/ -- don't allow immediate posting, look them over and remove the insulting and obscene ones before they go up."

    I don't think Ben's approach is a good example, since he censors many posts that don't fit his narrow agenda, not just insulting and obsene posts. The result is a small group of like minded persons continually congragulating each other for being more intelligent that stupid "flippers". Its boring and pathetic.

    ReplyDelete
  21. Cheerleaders are welcome at Ben's site, personal insults and foul language are not.

    ReplyDelete
  22. What's interesting about the link Redskins Fan posted is the vacant housing units line. Arlington, Montgomery, Fairfax, Loudoun - the bubble markets all have roughly a third of the vacant units compared to the national average. Only DC matches it.

    Vacant units is a much better measure of inventory than homes listed for sale. The recent price hikes are more likely from a local imbalance between supply and demand than a irrational speculative bubble detached from fundamentals.

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  23. If you're wondering why housing is so affordable in Baltimore, it probably has something to do with the nearly 17% vacant housing units.

    Or to use "bubble math": The vacancy rate is 400% higher than in the metro DC area!!!!!

    ReplyDelete
  24. Data Miner -
    That is all well and good if inventory / vacancy were the only consideration, but prices have skyrocketed, especially in the DC area, partially because of unconventional lending, which has allowed those who could normally *not* compete in a tight-inventory market to push past the price limitations and outbid others. In other words, unconvential lending has - until recently - fueled the inventory crisis, whereas traditional lending would have calmed it somewhat (you couldn’t fake your way over your head with 20 down and 30-year fixed).

    That is where the real danger lies, especially when potential buyers, like myself, refuse to rely on what I consider dangerous financing to compete for a home. I don't think I'm unique in this, and I imagine those who were going to buy with non-conventional loans already have done so. That leaves the market relying on those who *have* to buy (people moving into town and selling "back home," e.g.), while all first-time buyers are simply sitting by the sidelines. Or moving to less expensive areas like North Carolina. A 20k annual pay cut doesn't hurt as much when cost-of-living drops tremendously.

    ReplyDelete
  25. Data Miner,

    Do you have historical figures on vacancy rates? If they haven't changed substantially over the past 6 years than the low inventory number loses it's strength as an argument.

    If however, numbers are down dramatically, you have a very strong argument.

    My $0.02.

    ReplyDelete
  26. To clarify, vacancy rates over the past 6 years (the boom more or less) have to be substantially different from prior periods.

    My $0.02.

    ReplyDelete
  27. "The recent price hikes are more likely from a local imbalance between supply and demand than a irrational speculative bubble detached from fundamentals."

    Why have rents been flat for five years? What explains "panic buying" when there is no housing shortage, demonstrated by flat rents? What explains 54% of 2005 buyers in DC using Interest Only financing? What explains 40% of purchases in the "second home" category? Why are waiters and cab drivers so heavily represented in "investor" profiles? Why did Time magazine choose June, 2005, for its cover story on housing?

    To be fair, we know the answer to the last question. Time's record of marking bottoms with stories of despair and tops with stories of euphoria is unparalleled.

    ReplyDelete
  28. lance said... I disagree with your working class range of only $25K ... I think most organizations/govts/etc use a much larger range ... more like $100K.

    From Redskin's link to census data ( http://tinyurl.com/ra7an ) we have a median household income (2004) in Montgomery County (which does not have nearly the amount of poverty as DC) of $82,971. Median, as I hope you recall from math classes, means the point at which half of the people have more and half have less. So you are contending here, Lance, that well over half of the population is working poor or working class? If so we have dropped mighty fast from a prosperous, middle class society to one of falling living standards, where only the top few percent can expect to benefit from rising productivity.

    We also seem to have made a sharp turnaround from respecting hard work to lauding lottery winners and idolizing heirs.

    Neither, I would say, bodes well for this country's future. Not even, in the end, for the lottery winners and heirs themselves.

    ReplyDelete
  29. Here's a tinyurl for the Census data for Washington DC:
    http://tinyurl.com/jjhqs
    As you can see, Lance, the median income for DC is $46,574. So by your lights, a family would have to make over twice the median income just to be considered working class! Do you begin to see how skewed your thinking is here?

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  30. Sarah in DC,

    Why do you argue against points people have not made? Lance was making the exact opposite point you're trying to pin on him.

    ReplyDelete
  31. anonymous 10:56, are you the same anonymous that said a two parent working household with one child making 60K should shoot themselves? Or the one that said that such 'losers' shouldn't have children? If you re-read Lance's post you'll see that he agrees with you (though, granted, he uses somewhat more sophisticated language). I don't. And I pointed out that over half the families in DC have incomes under 60K.

    I won't bother asking how pointing out the facts is trying to 'pin' something on anyone. It's pretty clear that you're just trying to confuse the issue in the usual anonymous way by saying, "That's not true," to whatever is posted.

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  32. "If so we have dropped mighty fast from a prosperous, middle class society to one of falling living standards, where only the top few percent can expect to benefit from rising productivity."

    This is what people have been arguing on this site for a long time. National statistics also support this trend too.

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  33. There's no question that lending innovations have had a role in supporting rising housing prices.

    The question, at least with respect to future housing prices, is whether additional innovations will continue to support these prices.

    What if 50 year mortages (recently introduced to Cal. become prevalent? Wouldn't this innovation, which would greatly reduce monthly payments, continue to support price increases?

    I look at the London market. It had huge appreciation during past decade. Many people predicted a crash. But it hasn't happened. Instead, it appears that the Brits have possibly achived a permenantly high platau for prices, basically because of an ever increasing number of innovative financing.

    A more recent innovation is a shared ownership, where a "tenant" obtains a mortgage to buy half of an interest in a house, lives in the house, and pays rent to the "landlord" for the other half interest in the house. The goal of the shared owner "tenant" is to someday build up enough equity in the house to buy the other half of the house from the "landlord". This arrangement has allowed 20,000 pound per year office workers to "buy" a 300,000 pound flat, and has helped keep prices at the high levels.

    If it's happened there, why can't it happen here?

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  34. A two parent household should become financially stable before they have kids. If you don't know how babies are made or aren't responsible enough to keep it from happening you shouldn't expect to ever own a home.

    Only in the greatest country in the world, could such pathetic losers expect to ever own property.


    Hello guys,

    I thought _I_ was a right winger. Can you imagine if these standards were applied to the majority of the democratic party electorate (especially in DC?)

    ReplyDelete
  35. You really need to move to CO where the whole environment is much "redder". Or do you enjoy suffering? And again, a superior white male in the Seven Corners area? Your blood pressure must be through the roof.

    ReplyDelete
  36. "There's no question that lending innovations have had a role in supporting rising housing prices."

    That is an astute observation, Anony. Except that, there is no such thing as "lending innovations." It's called "easy money," generally.

    There is no "innovation" in extending credit to begin with. Less so if the "innovation" du jour involves extension of credit under terms that the borrower may ultimately fail to satifsy. Woe to the lender whose collateral is insufficient to cover a loan default.

    The history of lending dates to the beginning of recorded human history. "Innovation" in lending is impossible to identify, historically, except, perhaps, in the aftermath of hastily made loans that were never repaid.

    ReplyDelete
  37. You might consider adding this blog:

    http://boulderrealty.blogspot.com/

    to your regional list. It's for the Boulder CO area. We're not as inflated out here in CO as some other areas, but there are certain towns where inventory is up, prices flat, foreclosures up, etc. The blog content seems solid. Note: I do believe it is written by a local realtor but for the most part the writing seems balanced & informational.

    ReplyDelete
  38. You really need to move to CO where the whole environment is much "redder". Or do you enjoy suffering? And again, a superior white male in the Seven Corners area? Your blood pressure must be through the roof.

    I thought Denver was a liberal stronghold and where Clinton got his transportation secretary.

    You missed my point about how while the left likes to claim that they are the ideology of the masses, they also love to consider themselves superior to them. These two defining traits are often at odds with each other. Falls Church is far more ethnically diverse than, say, Georgetown or SE DC as one officer was reprimanded for pointing out in public (P.C. dogma demands that people don't say hateful things especially when they're true. Makes Catholic dogma seem relaxed by comparison.)

    Politically, it is suffering a bit to be the 7th Republican to vote in our polling place in the last primary. Aside from that though, I like our area. There's all these nice Korean and Vietnamese shopping centers and as you know, Peruvian chicken!!!

    ReplyDelete
  39. "I thought Denver was a liberal stronghold and where Clinton got his transportation secretary. "

    Interesting how what you think and what reality is like can be so divergent.

    Besides, since when is Denver, "Colorado"? Is Winchester, "Virginia"?

    Sounds like you need to hook up with Sarah in Arlington, err, Sarah in DC.

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  40. Besides, since when is Denver, "Colorado"? Is Winchester,"Virginia"?

    ?!?!? I was responding to this comment: "You really need to move to CO where the whole environment is much "redder"." So that's why I brought up Denver as an exception to the rule.

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  41. anon above talked about England's "innovation" in selling 50% ownership interests in houses. Here, we've "been there and done that" in the late 80's and early 90's.

    Have none of you heard of an "equity share" agreement or a SAM (shared appreciation mortgage)?

    The more I read here, the more I realize how little people know.

    ReplyDelete