Saturday, March 24, 2007

No Spring Bounce in The Bubble Markets

The spring is here. Many in the housing industry are preaching that the spring buying season will save the housing market from its continued decline. They are preaching and praying for a 'spring bounce.'

Spring is the busiest season for real estate. "Indeed, April through July outpace the balance of the year in sales, historic data at the National Association of Realtors indicates. So there'll surely be more home inventory and variety then. But you better move fast, because that's just what other home hunters are doing (Bankrate)."

Back in Janurary, David 'the Shill' Lereah, was predicting a spring bounce, warning buyers to buy now or have to deal with less inventory:

"Conditions for buyers have improved because sellers are flexible now and mortgage interest rates are near historic lows. The market promises to be more balanced between buyers and sellers by early spring, supporting future price growth"

Faithful cheerleader, Blanche Evans, editor of Realty Times, wrote "home prices and sales expected to rise again in the spring. (Realty Times, Nov 3, 2006)" Alexis McGee, president of ForeclosureS.com said:
“Although it’s impossible to know exactly when we hit the bottom on the price correction, I firmly believe that when the market heats up again this spring, we’ll look back at this winter season as our best buying opportunity in six years”
Clearly some in the housing industry are hoping spring will reverse the current sales and price declines occurring in most bubble markets. They predict that with the spring season a large amount of buyers will swoop in, raise demand, and bid up prices. This will not happen.

Last year, some in the housing industry were promoting the spring boom. Realty Times Editor, Blanche Evans wrote:

"What about housing? There's a lot of positive news that suggests that housing may have had its "rest." Spring might catapult housing into another record year."
As we now know, last spring's selling season was a bust and did not stem the tide of the housing decline. Mr. Lereah another housing cheerleader, who is predicting a strong spring season, has already called the bottom of the housing market four times.

This year we can expect a surge of inventory coming on the market as desperate sellers try again to sell housing units that have been delisted, foreclosures increase and recently built housing units are completed. In a research note titled: "Not So Fast" by Credit Suisse (hattip to Calculated Risk):

• Record new inventory could get worse: According to our channel checks, despite the soft markets, the pipeline for new communities remains full with an 11% median increase in community count expected for next year. In fact, 63% of respondents expect to increase the number of open projects. We are dubious that the increased supply won't heighten the need for incentives and aggressive pricing in the spring.

• Existing inventory could run up again in spring: With both real homeowners and forced investor sellers looking to the new year to test the market, we expect the pressure from resales to resurface in the first quarter.
Meanwhile, on the demand side the speculators will have a minimal impact as they have largely existed the market. The meltdown in the subprime mortgage industry has reduced the ability of marginal buyers to obtain mortgages. Thus lowering demand.

"Lennar CEO Stuart Miller said the spring selling season, when homebuilders usually get the bulk of their orders, failed to materialize, just two months after telling investors this year would be as good or better than 2006 (Bloomberg, March 26)" There will be no spring bounce to rescue currently overpriced houses.

The spring will bring out more buyers but also more sellers (then winter months). Inventory will increase significantly in most bubble markets. In most bubble markets prices will remain flat or fall slightly during the spring months. This year's spring selling season will be very disappointing for sellers expecting a spring bounce.

74 comments:

  1. David, why are you posting opinions that run counter to facts? ALL facts out there point to the complete opposite of what you are saying including Friday's release of numbers that show that the sale of existing home is way up! Is this the storm before the dawn? That short period of time when you wish in vain before acknowledging that the Bubblehead theory was based on assumptions that have been totally disproven?

    ReplyDelete
  2. I think that the only thing that has reached a new low is this Blog's author. David J.'s predictions and pronouncements rival only David L.'s in terms of baseless extremes.

    If you want regional numbers comparing 2005 to 2006, just read today's Washington Post. Numbers don't lie or mislead. We've already examined current inventory vs. a year ago. No crisis looming there either.

    David J. has been calling for an immenent depression - like fall in house prices for close to 2 yrs now. It's time for him to quit shaking his black 8-ball over and over again and hoping for the answer he wants to appear.

    I've got no crystal ball. I can, and have, relied on past RE cycles to puzzle together a guess about what the next few years will hold.

    David J. needs to open his eyes and mind, take a step back, a deep breath, and return (start?) some rationality to this site.

    Based on the D.C. data in today's paper, it appears an apology is owed, by many of you, to Lance.

    ReplyDelete
  3. lance, you really are without a doubt one of the stupidest trolls I have seen on an internet messageboard.

    Last year you were going on and on about how the district was "special" and the houses there wouldn't decline in price.

    Now, here you are a year later after significant and continuing price declines, trying to claim that you were right...

    Yes, sales picked up... it is the start of the spring season. Sales ALWAYS pick up. They picked up last year as well... even as the market was finally nosing over.

    Prices are dropping, inventory is rising, and credit is tightening. There is no way this is over with. It will be YEARS before housing recovers.

    That is what the "facts" support.

    ReplyDelete
  4. Funny, it doesn't look good to me either. We were at an Open House last weekend ( In spanky Lansdowne, Loudoun Co) We could hardly pry overselves away from the listing Agent who was practically begging us to make his owner an offer. It seems he owns 2 houses and he's hurtn' bad. I think I'll let him hurt bad another 60 - 90 days and see how low he'll go. I want another 100k off that one and if it sells, so what- There's so many houses listed to buy in this neighborhood I would go blind reading all the listings! No, the Spring ain't gonna Spring for resales, only for Builders that are offering sweet incentives !

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  5. David,
    Nice overview of the continuing stream of misinformation being provided to us.

    And Lance, that was NAR spin at it's finest. Sales were down where it counts, which is year over year. What is the significance of comparing month-to-month numbers? I mean, if you compare Feb's sales to, say, June sales, they sucked, but it's a irrelevant comparison. Plus, prices continue to fall as sales also fall--that's no recovery or dawn or any other trite cliche you care to use.

    ReplyDelete
  6. http://tinyurl.com/2jzthf

    This is an NAR press release from 2004--do you see any mention of month to month price changes as prices were leaping? I thought not. When it's the best number and the only positive number in the whole report, of course they headline with it. But hey, why bother to actually read the report? That's what the NAR relies on, and Lance obliges every time.

    ReplyDelete
  7. Wow I'm on a roll, but stand corrected. That press release does indeed have monthly comparisons, and lots of them. I'm not sure what I thought I linked to. However, I still stand by my assertion that the headlines are intentionally misleading to avert attention from the real and best true measure of the market, which is the YoY comparison.

    ReplyDelete
  8. Poor lance... living in a dream world...

    "At the same time, sales volume has dropped as investors have fled the market. After selling more than 3,000 new condos each quarter of 2005, developers in the Washington area sold 1,629 units in the first quarter of this year. At that sales velocity, it would take about three years to get rid of that inventory, Delta's report said. "

    http://www.washingtonpost.com/wp-dyn/content/article/2007/03/22/AR2007032202400.html

    "In the Washington region, the cancellation rate for new homes hit 11.4 percent in January, up from an already high 9.3 percent at the same time last year, according to Hanley Wood, a research firm that tracks construction of new and proposed homes. The number of contract closings dropped 33.3 percent that month to 947, from 1,419 in January 2006."

    http://www.washingtonpost.com/wp-dyn/content/article/2007/03/23/AR2007032300922.html

    Lets see... condo sales down almost 50% from a year ago...three years of condo inventory on the market with more being produced all the time. Cancellations on new homes now running over 11% and still rising. New home sales down a THIRD from a year ago. Prices are still falling rapidly putting more and more people underwater...

    This is all with the subprime fiasco not yet affecting the market... yeah clearly everything is fine.

    Lets all go buy houses with IO loans like Lance because it is never a bad time to buy.

    ReplyDelete
  9. Lance, real estate is not going "way up" nor will it. It think housingheads need to give us a new name, like thebubblebusters.

    If I'm not mistaken NAR removed the phase "soft landing" out of their statements. Why, because it was a crash landing.

    ReplyDelete
  10. Lance, the MSM reported that month to month sales were "way up". Every idiot knows that when you do a comparison on sales of real estate you look at YoY inventory. Of course sales are higher in February than in January. We're heading toward the "spring selling season". So natrually the closer we are to spring, the more inventory will move. Look at the YoY comparables.... it doesn't paint a rosy picture, but honestly it doesn't paint a doom and gloom scenario either.... yet.

    ReplyDelete
  11. there have been several "Lance knows better" posts on this forum. i am going to start a new blog under that name. here is another "tidbit" for your consideration. borrowed from Richard Daugherty, i present the thoughts of Jimmy Rogers. but then Lance knows better!

    " And apparently it is not just me that is bummed out here lately, as Riccardo sent the Reuters report that "Commodities investment guru Jim Rogers stepped into the U.S. subprime fray on Wednesday, predicting a real estate crash that would trigger defaults and spread contagion to emerging markets", and that "It's going to be a disaster for many people who don't have a clue about what happens when a real estate bubble pops."



    This is exactly akin to flunking the mid-term exam because, instead of studying, you were out all night, partying down with The Mogambo, you got stuck with the check, and now your car smells like somebody barfed in a brewery. And although your future is thus destroyed by your own laziness, ignorance and incompetence, you at least now know the value of education and the wisdom of choosing your friends more carefully.



    Mr. Rogers isn't interested in any of that, and coldly predicted that "Real estate prices will go down 40-50 percent in bubble areas. There will be massive defaults" and that this time a bursting bubble will "be worse because we haven't had this kind of speculative buying in U.S. history."



    And how bad will it all get when the housing bubble and the stock market bubble finally collapse? Well, he says that the example of Japan, whose real estate and stock market bubbles popped in 1990, is that "stock prices went down 85 percent despite the country's high savings rate and huge balance of payment surplus", neither of which, he ominously points out, the U.S. has with which to cushion the blow of any sanity at all returning to the stock, bond or housing markets.



    Seeing the blank look on my face, Mr. Rogers realizes he was too vague, and a moron like me needs a lot less theory and a lot more precision, hopefully with numbers so small that I can count them on my fingers. So, he says "Some emerging markets will go down 80 percent, some will go down 50 percent. Some will most probably collapse." Yikes! Too much precision!"

    ReplyDelete
  12. When I used to email Blanche, she was pretty cocky and sure that the market would not tank. But I recently emailed her and she is silent. That is because she is exposed. Fact is, the speculators and the low end buyers are gone. They are the ones that pumped up the market. Local real estate, national credit crunch.

    Lereah is the boy moron who cried "wolf" a few too many times. He is so unethical, IMO.

    ReplyDelete
  13. The Resale Inventory is following it's annual pattern of meteoric rise in the Spring Season.

    Look at this Graph Resale Inventory.

    The 2007 inventory is rising in parallel to steep rises of 2006 and 2005.

    The homes that were taken off the MLS in the last few months of 2006, will come back on the market with a vengeance, as the Spring Selling Season progresses .

    March resale inventory could very well set a new record.

    David, I came across a great blog about the Billings, MT Housing Bubble.

    I think we should encourage the blogger by linking him in our blogroll.

    ReplyDelete
  14. "If you want regional numbers comparing 2005 to 2006, just read today's Washington Post. Numbers don't lie or mislead. We've already examined current inventory vs. a year ago. No crisis looming there either."

    You menan this, Investor?

    "For almost anyone selling a condo, 2006 was a bleak year. Condos bore the brunt of the housing slump: Inventory was high, sales were down, buyers pulled out of contracts, and prices in most places either stagnated or dropped."

    Investor, Lance owes everybody an apology for being constantly wrong and never acknowledging it. He's a useless tool, and so are you for hitching your wagon to that moron. And you guys still lost your only chance to be right about anything by coming back here after you said youw ere going away forever. You're so lame, you can't even make a prediction come true. Yep, I'm going to keep hammering you on that, you pathetic troll.

    ReplyDelete
  15. Fact is, Investor and Lance, had anybody been stupid enough to listen to a pair of useless old sagging fart fools like you, they'd be poorer now, and they're richer for having listened to David J. I've diagreed with david J myself on some things, but he's been righter than you useless sad pathetic bloviating trolls.

    Deal, losers.

    ReplyDelete
  16. "David J. has been calling for an immenent depression - like fall in house prices for close to 2 yrs now. "

    And they fell. You = done.

    ReplyDelete
  17. I think va_investor's real estate holdings have reached a new low and we aren't even near the bottom.

    Oh well, can't blame you for wishful thinking, which is what it is. Oh, but you think you're so smart.

    ReplyDelete
  18. "Based on the D.C. data in today's paper, it appears an apology is owed, by many of you, to Lance."

    Investor is right, here's my apology to Lance.

    Lance, I'm sorry I keep pointing out facts and evidence, which then destroys your wishful thinking.

    Lance, I'm sorry I point out your total self-contradictions.

    Lance, I'm sorry I point out when the enws stories that you cite say the exact opposite of what you claim they say.

    Lance, I'm sorry I don't show more compassion for your desperation in trying to convince yourself of something that isn't true.

    Does anybody else have apologies for Lance?:)

    ReplyDelete
  19. Oh, I forgot one:

    I'm sorry that Lance and Investor are so compulsive about their desire to come back for more and more intellectual punishment that they couldn't even make their own prediction come true by leaving forever like they said they would.

    I'm sorry I keep hurting their tender self-esteen by pointing that out.

    ReplyDelete
  20. All,
    First of all, the real big news is the 7.6% decline in median home prices since July 2006 (from $230k to $212k)... That's $18k in equity up in smoke... So no, the market is not healthy, despite the "numbers" reported by NAR (See below)

    Check out my blog (I'm writing it to give us all a fair shot at understanding what the data mean) to read about how the NAR manipulates data... The current housing numbers are NOT WHAT YOU THINK THEY ARE. The actual numbers are "seasonally adjusted..." That's how they get the high number... Check out the "not seasonally adjusted" numbers on their website (they provide an excel or PDF file for you to see), multiply that by 12, and see how much "Kentucky Windage" goes into the "top-line" number that they report... very subject to interpretation. We'll get a much more accurate set of numbers in the coming months.

    A link to my blog is below...


    http://financeguru-eternitus.blogspot.com/

    ReplyDelete
  21. Even if nominal prices are flat, real prices are down. There is this little thing called inflation that chips away at your dollars every day.

    On a $600K house a real decline of what ever the current inflation rate stands at is a serious loss - approximately $25K of real value at 4% inflation.

    ReplyDelete
  22. Va_Investor said:
    "Based on the D.C. data in today's paper, it appears an apology is owed, by many of you, to Lance."

    Thank you Va_Investor. More importantly, I think David owes his readers an apology. We are beyond the point where there is any possibility that David's predictions will come true. David is smart enough to realize that. He owes it to his BH readers to indicate such. Doing otherwise is to do exactly what he accused David L. of doing enabling harmful and self-injurious actions by the believers of the now clearly discredited bubblehead faith. It's over and David owes his BH followers the truth. They are rationalizing that which they cannot accept.

    ReplyDelete
  23. ...Oh good, four bottoms and counting in housing...maybe we haven't hit the bottom in dot com stocks either...

    I'm gonna go call Kozmo or Webvan and get a snack and movie to my newly purchased spec home !

    ReplyDelete
  24. It is amazing how lamos like Investor and Lance will latch onto any little life raft and decalre "game over" and tell David J. to hang it up, even when their cited "evidence" actually supports David J.

    This is not the behavior of confident people.

    Generally, when I'm certain I have an airtight case, I don't go to the websites of those who disagree with me and beg them to agree with me.

    Lance and Investor just get more and more desperate....they're circling the drain...

    ReplyDelete
  25. I think we have already seen the excuses that we will see this selling season.

    (I am not referring to the real dunderhead excuses, like sales went up in Feb over Jan... I don't have much to say to anyone who says that under the old maxim about what happens if you argue with a fool).

    The more "sophisticated" excuse will be that inventory is down YOY (it may turn out to be down very slightly in the DC area) or up only slightly. Of course, inventory will be probably double or more what it was in 2005, but that fact will be ignored.

    Another excuse will be that since prices haven't totally collapsed yet, the bubbleheads were wrong. (This also ignores that real prices are probably down 10-20% since 2005, so those of us who called for 40-60% price reductions a couple years ago are already one-third of the way there).

    From driving around a little this weekend, though, there were a LOT of for sale signs.

    A Redskins fan

    ReplyDelete
  26. Lance said...
    “David, why are you posting opinions that run counter to facts? ALL facts out there point to the complete opposite of what you are saying including Friday's release of numbers that show that the sale of existing home is way up!”

    Hummm remarkable, prices fall, sales go up. What a concept. Simple. Want to sell your house? Drop the price. Be sure to tell others “Lance”.

    ReplyDelete
  27. I am posting again what I posted a couple of threads ago. Let there be a real debate about this:

    The cover story of the latest Economist: The trouble with the housing market

    Check out "Cracks in the facade"

    http://www.economist.com/finance/displaystory.cfm?story_id=8885853

    For a decade, the fastest growth in America's mortgage markets has been at the bottom. Subprime borrowers—long shut out of home ownership—now account for one in five new mortgages and 10% of all mortgage debt, thanks to the expansion of mortgage-backed securities (and derivatives based on them). Low short-term interest rates earlier this decade led to a bonanza in adjustable-rate mortgages (ARMs). Ever more exotic products were dreamt up, including “teaser” loans with an introductory period of interest rates as low as 1%.

    Higher payments and negative equity are a toxic combination. Mr Cagan marries the statistics and concludes that—going by today's prices—some 1.1m mortgages (or 13% of all adjustable-rate mortgages originated between 2004 and 2006), worth $326 billion, are heading for repossession in the next few years.

    The harshest year will be 2008, when many mortgages will be reset and few borrowers will have much equity.

    By many measures, America's house prices are still too high. David Rosenberg of Merrill Lynch points out that the ratio of income to housing costs is still some 10% worse than its historical norm and 20% worse than levels at the end of the last housing downturn in the early 1990s. Take out a chunk of potential borrowers; add in some repossessed homes and house prices could be hit hard. If falling prices raise the rate of default, that could in turn worsen the credit crunch, putting yet more pressure on prices. Wall Street's gloomiest seers think average house prices could fall by 10% this year. If so, the economy could well enter a recession.

    ReplyDelete
  28. Robert said:
    "Hummm remarkable, prices fall, sales go up. What a concept. Simple. Want to sell your house? Drop the price. Be sure to tell others “Lance”."

    Robert ... open your damn eyes! I looked at a couple open houses today in the District. Prices are up by a high degree. Houses that last year were going for $1.0 to $1.2 million are now just under $2.0 million ... That is a HUGE increase ... in only a 12 month period. And we aren't talking about McMansions ... just your average rowhouses in nice areas. And no, I'm not saying these homes are for everyone ... just that the "leading indicator" properties are going through the roof in price ... imagine what that means for "median" home prices. The Bubblehead theory is dead ... without question. And those that listened to David and waited are now screwed.

    ReplyDelete
  29. Lance said...
    “Va_Investor said:
    "Based on the D.C. data in today's paper, it appears an apology is owed, by many of you, to Lance."

    Thank you Va_Investor. More importantly, I think David owes his readers an apology. We are beyond the point where there is any possibility that David's predictions will come true.”


    Yea “Lance”, nothing to see here, move along: (hey, I though they were not making any more of that stuff)


    http://www.washingtonpost.com/wp-dyn/content/article/2007/03/23/AR2007032300922.html

    - Builders Weighed Down by Houses and Land

    By Dina ElBoghdady
    Washington Post Staff Writer
    Saturday, March 24, 2007; Page F23
    Trouble in the mortgage market threatens to add to an already long list of worries for home builders this year.
    Since the real estate market softened, builders have been stuck with too many houses and too much land, in part because jittery buyers canceled contracts at a frantic pace last year. The cancellations kept coming at the beginning of this year.-

    ReplyDelete
  30. Now this was a bubble:
    http://www.nni.nikkei.co.jp/AC/TNKS/Search/Nni20070322D22JFF01.htm

    Look at the chart. 5-10% drops year-on-year for about ten years. I think it's worth noting that no one thinks we're in for anything remotely like that. The worst case estimates I've seen are on the order of a one-time 10-15% correction, and with the recent data, it's not even clear we'll get anything close to that in our market. If we're in a bubble, it's nothing like the one in the article above.

    ReplyDelete
  31. "Prices are up by a high degree. Houses that last year were going for $1.0 to $1.2 million are now just under $2.0 million ... That is a HUGE increase ... in only a 12 month period."

    Lets see... according to lance house prices in the district are up ~100% YoY.

    According to every credible measure they are down significantly YoY and still falling.

    Who to believe? I am torn... I am really going to have to spend some time thinking it out. I mean... lance says prices are up 100%... but all the statistics say down...

    lance is probably right. I am going to go out and buy one of those $2 million dollar houses quick before they hit $4 million. I wouldn't want to be priced out forever. Anyone know where I can get a zero money down IO loan for $2 million?

    ReplyDelete
  32. Well, I didn't see any (maybe one; that countered by adding some inflation) comments that addressed the Sunday Article in the Post to which I referred. I thought that this was a "regional" blog? Let's not let facts get in the way of David's editorializing.

    Does Keith ever have an original thought? It seems that all his comments (and many of the rest of yours') are schoolyard taunts directed at Lance. Keith, if you don't want me or Lance to post, then just skip over our comments. That can't be too difficult, can it? I, largely, ignore you. Why not show everyone that you actually have something intelligent to say and that your sole purpose in life is not to troll around after Lance (or me)?

    Talking to the anon BH who thinks we should compare 2005 inventory to today - not 2006. That would make a ton of sense. Yes, compare an irrational market to today's market that is in the midst of a normal correction. Sounds very logical and statistically sound to me. Yes, compare a time of 6,8, or 10 multiple offers to today.

    How about a comparison to a normal market (98-2001), adjusted for population growth? Or, compare it to a bad market (1992-95)?

    Oh, I know the new mantra is "subprime meltdown". I guess everyone has either forgotten or completely discounted the regional stats of last week. What were are regional numbers on defaults? Less than 1/2 the national average?

    Perhaps two people are making kool-ade - David L. and David J. Each have their blind loyal followers; but reasonable, rational observer's see that the middle ground may be where we are headed (on average - we already know, those of us who can read and comprehend, that is, that even within regions there will be differences). Lance's neighborhood appears to be fairing quite well as compared to, say, Loudoun. Prince Georges is up significantly.

    Is it possible that, as a region, we drop 10 or 20%? Sure. Is it likely we drop 40 or 50%? Now that would be unpredented and, absent some severe blow to the economy that brings on an all-out depression, highly improbable. House prices didn't drop over 30% even during the Great Depression.

    The more likely scenario is one we have seen before. Prices, generally, drifting lower, follwed by some years of stagnation. I sure wouldn't bet on a crash. But then, I don't have David J.'s (or David L's, for that matter) crystal ball or economic acumen.

    ReplyDelete
  33. When I read va_investor and lance's posts, I feel like I'm in some bizarro world where up is down and wrong is right. These two are the Baghdad Bob twins of this blog. Despite record high inventory, tightening credit, defaults and foreclosures approaching record highs, and home prices bleeding (albeit slowly) about 10% from peak levels in DC and NOVA, these two INSIST that there are absolutely no problems in the housing market and that David J. is wrong for saying there will be no spring bounce.

    And now Lance claims that DC rowhouses selling for $1m last year are going for $2m this year (a 100% increase in one year for the mathematically challanged). I've never seen anything so bizarre.

    -John Fontain

    ReplyDelete
  34. Geez, sorry (especially to Keith) for posting so soon. But I just had an epiphany. I see the explosion in inventory argument and understand it. Let's see; the foreclosure rate skyrockets and these displaced homeowners don't need a place to live. They won't rent a house or apartment. None of this new inventory will be absorbed and prices will plummet.

    I can see it now. The Elipse will become a tent city. Parents will take their children by the hand and pitch a tent. Rents will not increase to become more in line with prices. I get it now.

    What I also just realized is that the massive unemployment that would cause all these foreclosures will ONLY affect homeowner's. Renter's will continue their daily commute to their nice offices and high-paying jobs (side-stepping the poor, homeless foreclosuree's). There will be Blood in The Streets! But it will only affect the stock portfolio's of Homeowner's.

    Renter's will swoop in and buy at 60% off. All perfectly logical.

    ReplyDelete
  35. Va_Invester/Lance,

    You will forgive David, I'm sure, if he holds his apology in abeyance for the time being:

    From today's WSJ:

    New Home Sales Drop Unexpectedly
    By JEFF BATER
    March 26, 2007 10:27 a.m.

    WASHINGTON -- New-home sales unexpectedly fell in February, dropping a second month in a row to the lowest level in nearly seven years as the housing sector showed more weakness.

    Sales of single-family homes decreased by 3.9% to a seasonally adjusted annual rate of 848,000, the Commerce Department said Monday. It was the lowest level since 793,000 in June 2000.

    Prices rose last month and inventories grew. January new-home sales plunged 15.8% to an annual rate to 882,000, a figure revised down from an earlier estimated 937,000. The median estimate of 10 economists surveyed by Dow Jones Newswires was a 6.7% increase in February sales to a 1,002,500 annual rate.

    Year-to-year, new-home sales were 18.3% lower. The housing sector went into decline and hurt overall economic growth after a long boom. Recovery from the slump could be hampered by the subprime-market mess. Delinquency rates for subprime-mortgage loans rose at the end of last year. Wall Street is worried tighter lending standards for borrowers with less-than-sterling credit could slow home sales in the future. David Lereah, chief economist of the National Association of Realtors, has predicted subprime problems could reduce sales of new and used homes by 100,000 to 250,000 annually over the next couple years.

    Keeping new-home sales from falling farther last month was demand in the West, which soared 24.6%. A month prior, sales in the region plunged 25.8%. Elsewhere, new-home sales in February fell 26.8% in the Northeast, 20.0% in the Midwest, and 7.0% in the South.

    The average price of a home last month increased to $331,000, up from $310,100 in January. The median price was $250,000, higher than $243,200 in January.

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  36. Today's new home sales report: Demand down over half-a-million homes since 2005. Contractor bankruptcies loom. http://infohype.blogspot.com

    ReplyDelete
  37. Caveat Emptor said...
    "Va_Invester/Lance,

    You will forgive David, I'm sure, if he holds his apology in abeyance for the time being:

    From today's WSJ:

    New Home Sales Drop Unexpectedly
    By JEFF BATER
    March 26, 2007 10:27 a.m."


    The word you missed was new home sales as in new housing being constructed. This is a bad thing for bubbleheads, a very bad thing. This means the one event that overtime can give any credence at all to Robert's diresive argument that "they aren't making any new land" is false, isn't happening. I.e., an ever increasing number of buyers are stuck with competing among themselves for existing housing ... and it's finite supply.

    Also from the article you reference:
    The average price of a home last month increased to $331,000, up from $310,100 in January. The median price was $250,000, higher than $243,200 in January.

    ReplyDelete
  38. Ah yes... it is always refreshing to see Lance's "thinking" on things.

    If builders are throwing up huge numbers of new houses... that is a sign of strong demand and well they still aren't making any more "land" so house prices will go up and it is a good time to buy.

    If sales drop nearly 20% YoY at the start of the spring selling season causing builders to continue to rush to cut production... well that just means that prices are about to go up and it is a good time to buy.



    I have an amusing idea for a contest.

    Lets all post our guesses for how long it will take lance to show the data on a row house in the district that was for sale last year for ~1million and is for sale this year for ~$2million. It shouldn't be hard for him to do:

    "And we aren't talking about McMansions ... just your average rowhouses in nice areas. "-Lance

    Hop to it lance, lets see you find us an "average rowhouse" that has gone up 100% in 12 months.

    ReplyDelete
  39. va_investor said . . .
    Let's see; the foreclosure rate skyrockets and these displaced homeowners don't need a place to live. They won't rent a house or apartment. None of this new inventory will be absorbed and prices will plummet . . .

    Ah but you forgot one little tiny issue in your myopic world.

    Investors/Speculators.

    How many houses/condo purchases in the last few years of the bubble were speculators?
    That's what makes a bubble a bubble - - - speculators come in by up supply-supply gets low, prices go up - - - until the spec. has no more money to burn/got in too deep/prices get above what a normal family can afford. Then they come down.

    My wife works for one who "owns" prob. 7-10 houses. Does he live in them all--- no he lives in just one and rents the others. Yet if he started getting behind on his payments he would default, possibly go into foreclosure and possibly have to find another job.

    Those 7-10 he "owns" (or "rents" from the bank) would be sold . . . and oh my goodness just possibly they could be sold to the people who are renting from him---but now at a cost they can afford and not fork over 50% of their income to housing costs.

    Va also said . . .
    massive unemployment that would cause all these foreclosures will ONLY affect homeowner's. Renter's will continue their daily commute to their nice offices and high-paying jobs (side-stepping the poor, homeless foreclosuree's). . . .

    Ummmm, it's called living within your means and saving for a rainy day. Because I rent, I have been able to save enough to live for over a year. I could lose my job today and I would be fine for more than a year (i.e. my standard of living would not change one iota). I couldn't do that if I had bought in 05.

    ReplyDelete
  40. The comment above regarding Lansdowne was interesting to me. My family has been looking in that area to buy, also. We have seen a couple homes sell pretty quickly there recently -- both outside of our price range -- but we were surprised to see them go so quickly. The other item of interest there is speculation and foreclosures. According to our realtor, there's a chap who owned seven homes in one of the sub-sections of Lansdowne. A quick perusal of one of the many foreclosure sites out there had something like 15 of the first 20 homes in the list in the Lansdowne neighborhood ...

    ReplyDelete
  41. ANON (who is afraid to use his/her name said):
    "Hop to it lance, lets see you find us an "average rowhouse" that has gone up 100% in 12 months."

    Look up MLS# DC6334022 from Coldwell Banker. It is at 1329 R St NW and for sale for just under $2M. Next go into the existing sales data at DC.gov and look up 1632 Riggs Place which sold for $1,135,000 in 2005. Similar type houses. The one for sale now is in Logan Circle. The one sold in 2005 for slightly over $1 Million is in the more desireable Dupont Circle neighborhood. Like I said, prices are skyrocketing. David was wrong. Very very wrong. And the bubbleheads will be the ones paying the price now.

    ReplyDelete
  42. Va_investor said
    "The more likely scenario is one we have seen before. Prices, generally, drifting lower, follwed by some years of stagnation."

    This I agree with as the best case scenario. Va_investor is a bull that at least posts with some common sense, unlike lance. He has been proven wrong every turn yet still says he is right.

    lets see...
    7 months of existing family home price declines.
    New home sales lowest in 6 years.
    Most banks now require 5-10% down payment.

    Please, are you seriously trying to say this will have no affect on the market?

    40% of all loans in DC over the past 3 years were subprime. Subprime is gone. Try and rationally tell me how eliminating 40% of the housing demand will have no affect on a growing inventory. Oh yea, go look at housingtracker and see how the inventory is starting to explode. I really do want some housing head to provide some reason why even buying a house you are planning to live in for 10 years is a good investment right now. Cause, I think its not..... Of course, I am basing my decision on my head and not my heart.

    ReplyDelete
  43. Anony said:
    "Va also said . . .
    massive unemployment that would cause all these foreclosures will ONLY affect homeowner's. Renter's will continue their daily commute to their nice offices and high-paying jobs (side-stepping the poor, homeless foreclosuree's). . . .

    Ummmm, it's called living within your means and saving for a rainy day. Because I rent, I have been able to save enough to live for over a year. I could lose my job today and I would be fine for more than a year (i.e. my standard of living would not change one iota). I couldn't do that if I had bought in 05."


    Reading comprehension --- or lack thereof --- seems to correlate with ones ability --- or inability --- to understand what makes real estate prices what they are. You somehow managed to completely misunderstand what Va_Investor said. She started with the words "massive unemployment that would cause". I.e., the point of her post was that the BH theory relies on the belief that there is going to be massive unemployment BUT only for homeowners and not for renters ....

    ReplyDelete
  44. Anon 8:58AM

    Re: my "myopic world"

    Wow! A crescendo of misforture for your wife's boss. First he is negative on his rentals. Second, he is upside down on his mortgages. Third, he has no savings or assets to see him through. Fourth, his income is inadequate to fund the shortfall or, if it is adequate, he will lose his job and not find another at comparable wages. Talk about a "perfect storm".

    Massive foreclosures cause prices to plummet and current tenants become homeowners. People like me or huge private funds (that are currently being formed to buy foreclosures) will not simply become the new landlords. A house for everyone and a chicken in every pot. Interesting.

    All of the speculators (not "true" investor's) I know are simply going to take an affordable hit if they sell in a down market. Where you get the notion that smart renters like you are the only one's with assets is beyond me.

    Studies indicate quite clearly the general disparity in net worth between renters and owners. You think renters, as a rule, can hold on longer than owners if both were to lose their jobs? Interesting.

    What is the regional foreclosure rate? Unemployment rate? I understand that every BH thinks every owner is heloced to death and has massive debt obligations, but that is very far from accurate. But....whatever supports your conclusion.

    ReplyDelete
  45. va_investor said:
    "Talking to the anon BH who thinks we should compare 2005 inventory to today - not 2006. That would make a ton of sense. Yes, compare an irrational market to today's market that is in the midst of a normal correction. Sounds very logical and statistically sound to me. Yes, compare a time of 6,8, or 10 multiple offers to today.

    How about a comparison to a normal market (98-2001), adjusted for population growth? Or, compare it to a bad market (1992-95)?"

    Yes, why don't you, and don't forget to adjust for all the new construction too. What you will find in comparison to the normal 98-2001 market, when I bought, is prices that far, far outstripped inflation, historical norms, income growth, etc. The market since then has been year on year increases of 20%, which is one of the main reasons bubbleheads say this is a bubble.

    Call the correction normal, since you do. But a lot of correction is needed, either in terms of prices stagnating for many years, income and/or inflation taking off, or a drop in prices before prices are in line with historical norms and the realities of the market.

    condocritic

    ReplyDelete
  46. va_investor said:
    "The more likely scenario is one we have seen before. Prices, generally, drifting lower, follwed by some years of stagnation. I sure wouldn't bet on a crash. But then, I don't have David J.'s (or David L's, for that matter) crystal ball or economic acumen."

    I agree with your assessment, but to me, especially if the stagnation is 5 years or so, that's a crash.

    ReplyDelete
  47. Lance said...
    “Look up MLS# DC6334022 from Coldwell Banker. It is at 1329 R St NW and for sale for just under $2M. Next go into the existing sales data at DC.gov and look up 1632 Riggs Place which sold for $1,135,000 in 2005. Similar type houses.”


    So, “Lance” has gone from “Prices will not drop”:

    In NoVa
    In DC
    In DC proper
    Not in my zip code
    Not on my street
    Not on my block

    And he’s now gone from using YOY data to Month to month data,

    Now, “Lance” has gone from sold price, to asking price to gauge the market.

    ReplyDelete
  48. http://efinancedirectory.com/articles/
    90_Percent_of_Appraisers_Feel_Pressure_to_
    Inflate_Home_Values.html?ref=patrick.net

    -90 Percent of Appraisers Feel Pressure to Inflate Home Values

    Mar 23, 2007 -- Inflated home appraisals helped drive up home prices across the country to levels that couldn't be sustained. A new study finds that 90 percent of appraisers now feel pressure to inflate home values. Some are even being asked to turn in appraisals without looking for a home. Those who don't cooperate face negative ramifications from clients and employers alike.
    A recent national survey conducted by October Research Corp. found that 90 percent of appraisers feel pressure to turn in inflated home appraisals. This includes appraisals for both new home purchases and refinances. The number is up from 64 percent in 2003.
    The October Research Corp. Study also noted that 75 percent of the appraisers surveyed say there are 'negative ramifications' if they refuse to provide a higher valuation or alter an appraisal.-

    ReplyDelete
  49. "Look up MLS# DC6334022 from Coldwell Banker. It is at 1329 R St NW and for sale for just under $2M. Next go into the existing sales data at DC.gov and look up 1632 Riggs Place which sold for $1,135,000 in 2005. Similar type houses. The one for sale now is in Logan Circle. The one sold in 2005 for slightly over $1 Million is in the more desireable Dupont Circle neighborhood. Like I said, prices are skyrocketing. David was wrong. Very very wrong. And the bubbleheads will be the ones paying the price now."


    Out of curiosity lance... do you consider 2005 "last year" ?

    Here is your original assertion:

    "I looked at a couple open houses today in the District. Prices are up by a high degree. Houses that last year were going for $1.0 to $1.2 million are now just under $2.0 million ... That is a HUGE increase ... in only a 12 month period."

    You said both "last year" and "12 month period."

    How about you go find us the data that supports that assertion, you know, data from March 2006 or later.

    Thanks in advance!

    ReplyDelete
  50. Yeah, Investor's a freak. He/she.it agrees with David J., but apparently her bitter hatred of people who choose to rent won't let he/she/it admit it.

    ReplyDelete
  51. Lance,

    1329 R St NW is 3631 sq ft (complete with a rented-out in-law suite) while 1632 Riggs Pl. NWis only 2460 sq ft. Given that the new listing is 50% bigger than the house that sold 2 years ago, I don't think that you can call these "Similar type houses". We also know nothing about the state of repair of the house that sold.

    Also know that the asking price is not what the final sales price will be. Seller's can ask whatever they want for a house, but they may not get it.

    Add in the fact that you're giving a house that sold 2 years ago, but making statements about what's happened in the last "12 months".

    Please find 2 SALES of comparable houses with a time difference of only 12 month. Or restate your claim to something like, "Rowhouses that are 50% bigger than rowhouses that sold 2 years ago are selling for a lot more!"

    ReplyDelete
  52. Lance failed. He couldn't find a rowhouse that went up, so he treated two completely different rowhouses as comps.

    The one on 1329 R sold for 1.35 Mil on 6/30/04.

    https://www.taxpayerservicecenter.com/RP_Detail.jsp?ssl=0239%20%20%20%200802

    In addition, any addition in assessment has come from improvements and not land value...it looks like this seller has sunk a lot of money into the house... and his asking price is still just that, asking, not selling.

    Well, the one on 1632 Riggs sold for 1.135 Mil on 5/10/2005.

    https://www.taxpayerservicecenter.com/RP_Detail.jsp?ssl=0178%20%20%20%200019

    So, according to Lance's "logic" of treating these two as comps, prices fell 15% from June 04 to May 05...

    Poor Lance, doesn't even know what a comp is...

    Once again, Lance loses.

    ReplyDelete
  53. Anon 12:12

    One man's crash (who bought a condo in 2005 or 2006, maybe 2004) is another man's correction (who bought anytime prior). The point is that RE is long-term. If you are worried about YOY, you may as well rent.

    ReplyDelete
  54. Keith,

    I see you still have nothing to add to the discussion(?). Am I wrong here?

    ReplyDelete
  55. "The one on 1329 R sold for 1.35 Mil on 6/30/04.

    In addition, any addition in assessment has come from improvements and not land value...it looks like this seller has sunk a lot of money into the house... and his asking price is still just that, asking, not selling.

    Well, the one on 1632 Riggs sold for 1.135 Mil on 5/10/2005.

    So, according to Lance's "logic" of treating these two as comps, prices fell 15% from June 04 to May 05...

    Poor Lance, doesn't even know what a comp is..."

    OUCH!

    I didn't even think to check that.

    That is pretty funny actually. Our global economy guru sure makes a lot of really really stupid mistakes.

    We don't have to worry though. Lance said that the 1 million->2 million in the last 12 months price increase is not limited to special cases, but rather are "just your average rowhouses in nice areas."

    That tells me he won't have any problem coming up with several examples of "average rowhouses" that have gone from $1 million to $2 million in the last 12 months.

    Afterall... he said he toured a couple of those houses personally just this last weekend...

    All he needs to do is remember where he was and show us the data.

    (you know, or do the impossible, admit he was wrong and lying again)

    ReplyDelete
  56. Yes, Investor, going and using actual real estate assessment data to check somebody's unfounded assertions about real estate sales on a blog discussing real estate is adding nothing to a discussion about real estate.

    ReplyDelete
  57. "I see you still have nothing to add to the discussion(?). Am I wrong here? "

    I think he added quite a bit to the discussion. It is important to keep things more or less factual for everyone's mutual benefit.

    Imagine if some new reader who had just found this blog for the first time today read this thread and didn't realize that Lance was full of crap?

    They might actually believe that "average rowhouses" in the district are up 100% YoY...

    ReplyDelete
  58. Anon 3:45 PM

    Wow. Your post is so funny I can hardly contain myself. Well...OK, you show us the comps (including address and MLS) that prove your proposition. OK? Get to it pal.

    ReplyDelete
  59. "Am I wrong here?"

    Usually.

    ReplyDelete
  60. Keith said...
    "Yeah, Investor's a freak. He/she.it agrees with David J., but apparently her bitter hatred of people who choose to rent won't let he/she/it admit it."

    Sorry Keith, you're the freak ...Not Va_Investor. She understands that even when prices "stagnate" homebuyers are making out in a multitude of ways that renters aren't ... including tax breaks. And what advantage do renters get by waiting out the stagnation period? The possibility of higher interest rates and/or a sudden and unexpected rise in prices. See ... You're the freak ... You see what is happening, but react 180 degrees different from what an intelligent person would do.

    ReplyDelete
  61. Wow, this is hilarious. The FIRST time Lance posts data of ANY sort and this is what happens. No wonder he rarely posts any statistics. Lance just forget it and go back to "its a good time to buy anytime, BHs should understand... blah blah blah" chime. That suits you much better than posting real information.

    ReplyDelete
  62. Well...OK, you show us the comps (including address and MLS) that prove your proposition. OK? Get to it pal.

    I am surprised DC doesn't have these kind of blogs. In Orange County, CA there are plenty of blogs that compare existing home sale/asking prices to what they sold for earlier. Some that I read are:

    http://www.irvinehousingblog.com/
    http://www.oc-fliptrack.com/

    From what I can see prices in OC are back to around 2005 levels, which to clarify to Lance is not 1 year but 2 years ago. I have a feeling they will drop further to around 2003 levels when all the loose lending really started.

    ReplyDelete
  63. Keith said...
    “Yes, Investor, going and using actual real estate assessment data to check somebody's unfounded assertions about real estate sales on a blog discussing real estate is adding nothing to a discussion about real estate.”

    Stay tuned, up next “Lance” and Va will be analyzing belly button lint for market indicators.

    ReplyDelete
  64. "Wow. Your post is so funny I can hardly contain myself. Well...OK, you show us the comps (including address and MLS) that prove your proposition. OK? Get to it pal. "

    You want me to prove the negative?

    That there are NO rowhouses in the district that sold for $1 million a year ago and are now selling for $2 million 12 months later?

    That is quite a bit harder than simply finding one "average rowhouse" that has done what lance claims they have.

    It is his assertion. It is his responsibility to provide some support.

    So why don't you sit back, relax, and let lance give us the numbers.

    You should be 100% confident that he knows the exact addresses of those "average rowhouses." He walked through a couple himself just days ago didn't he?

    Didn't he?

    Of course he did... the alternative is that he was just ...

    ReplyDelete
  65. Lance said...
    “Robert ... open your damn eyes! I looked at a couple open houses today in the District. Prices are up by a high degree. Houses that last year were going for $1.0 to $1.2 million are now just under $2.0 million ... That is a HUGE increase ...”

    “Lance”, I have opened my eyes; to a handful of rather nice homes going into foreclosure. I’ve lowballed a couple and after a few choice words from the sellers, just went directly to the attorney(s) handling the case. Let’s just say I’m now on their mailing list (and I’m not talking Christmas Cards). No need to rush, plenty more going on the market (or foreclosure, whichever).

    How about you opening your eyes to the data Keith was kind enough to track down for ya’ on your row houses with “huge” increases?

    ReplyDelete
  66. lance said "BH theory relies on the belief that there is going to be massive unemployment BUT only for homeowners and not for renters"

    Yes lance, I know that was her point. If a recession hits (and its likely it will unless of course we can prop. up the U.S. econ. w/ more debt) unemployment will strike both homedebters and renters alike.

    MY point was that if there is massive unemployment it will not affect me b/c I have saved for it . . which I could not have done by buying a house in 05. If I had bought in 05, I would not be able to have saved a tenth of what I have now.

    Do I believe that renting is stupid over the long haul (i.e. 30+ years). YES!. Do I believe buying now is stupid. YES!

    va_investor . . .
    you think renters, as a rule, can hold on longer than owners if both were to lose their jobs?"

    No, I did not say that. I said that if I had bought in 05 I would not be as financial secure as I am now. I believe that as a rule, someone who truly owns their home will absolutely hold out longer. However over the past 5 years, and more particularly the last 2-3 we've had 100-200% price increases in 5 years. . . did incomes suddenly go up 200%??? Now it is not smart to buy.

    Speculators (who fancy themselves as investors) believed they can get 100-200% increase just b/c they held onto a property for 2 years. They made minimal improvements, put some crappy bs Home Depot parts in the house, make it look nice and try to sell it to joe schmo as a "like new" house, meanwhile the room leaks and the house has serious structural faults in it

    At this point, with the cost of owning a house 3x+ the cost of renting. I believe taking person x making y amount he will last longer renting than buying. That won't hold true forever, it's just true in the short term.

    No I don't believe every owner or investor is heloced to death. There are some really smart ones out there and they do just fine and make lots of money. However, when you see books on how to make money in real estate take over the investing section of Barnes and Nobles, you know the boom time is nearing it's end.

    And my wife's boss . . . I always know when things are getting a little tight since she doesn't get as much work.

    "his income is inadequate to fund the shortfall or, if it is adequate, he will lose his job and not find another at comparable wages"

    Well, considering the fact that I made clear he is an investor that real estate IS his income. Yes since real estate is bad he doesn't make as much money---well except for the fact that he keeps borrowing more and more money from other banks/investors/friends/relatives etc. to keep him afloat for right now.

    Multiple people I know have gotten out of real estate/mortgage/brokers/etc. until "the market gets better" and have taken other jobs.

    Oh another ancedotal . . my wife's boss does what you implied you do . . .buy up foreclosed properties . . yet he is still feeling the heat.

    People that think real estate will always go up (way faster than incomes - like 4-5% more) just need to think about the implications of that. That means in 50-100 years people will be spending their entire life and maybe the entire life of their children just to buy a place to live. We already see 40 year mortgages . . . what's next intergenerational loans??

    Literally a slave for four walls and a roof.

    ReplyDelete
  67. "Sorry Keith, you're the freak ...Not Va_Investor."

    Hey lance... you forgot to post the data that shows "average rowhouses" in the district have gone from $1 million to $2 million in the last 12 months.

    Don't worry though, we will keep reminding you.

    I wouldn't want you to miss your chance to prove that you aren't a liar no matter how bad it looks right now.

    ReplyDelete
  68. "Stay tuned, up next “Lance” and Va will be analyzing belly button lint for market indicators. "

    That is pretty unlikely. They would have to pull their heads out first.

    ReplyDelete
  69. "How about you opening your eyes to the data Keith was kind enough to track down for ya’ on your row houses with “huge” increases?"

    Lance doesn't need to struggle to find data. Read the quote of his in your post. He looked at a "couple" of these houses personally just days ago!

    Without a doubt he will shortly post the data that supports his assertion. The only alternative afterall would be for him to admit he was lying again.

    ReplyDelete
  70. Va_Invewstor,

    You didn't add anything to the discussion. What's the point of attacking other people presenting FACTS? Looks immature. Just leave...

    B747

    ReplyDelete
  71. Anon B747...er Keith,

    Thanks for your contribution to the discussion.

    David should put an end to the Anon comments. These people can never be held accountable for anything these. There is no way to see their past remarks or who is saying what. It's ridiculous.

    ReplyDelete
  72. "Just leave..."

    Again...

    ReplyDelete
  73. Since 1997 I have lived in northern VA Just outside Fairfax Co. in a very respectible and sought after community.
    I have watched T.Hs escalate in price from mid $100K to a peak of $425K for several T.Hs in 2005.
    In the spring of 06 more than 5 T.Hs were for sale on my street, there they sat for the better part of a year,asking prices of between 380-390K after many reductions later, they are listed for 329-340K the last 2 have just sold this year. My next door neighbor just put his T.H. on the market and has listed it for $315K he wants a quick sale. In 05 he would have easily received $380K inside a month.
    My question is this, 1990-91 housing in the Wash-metro area was flat for 7 years,after a 15-20% decline. How many people would be willing to mortgage $500K payments of $3300-$3900w/tax for 60+ months spending over $234K and not making a dent in their mortgage, all of it going to the bank, were is the value in that? One last thought, Japans R.E. has declined for over 15 ys straight, they have more people than land and rates were .25% for many years, every bubble in history,Fla,RE 1920s, Tulip Bubble 1600s, Stock M 1929,Nasdaq 2000 etc, have all deflated to pre bubble prices.

    ReplyDelete
  74. The only thing positive about housing these days is the falling dollar that allows rich foreigners to buy cheaper. I will just move to somewhere foreigners aren't buying. Simple - and I'd rather live around Americans anyhow.

    ReplyDelete