Source: NYTimes, September 26, 2007
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Bubble Meter is a national housing bubble blog dedicated to tracking the continuing decline of the housing bubble throughout the USA. It is a long and slow decline. Housing prices were simply unsustainable. National housing bubble coverage. Please join in the discussion.
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The best way to get the housing market thriving again is to drop prices to the point where supply equals demand. Home sellers might not like it, but it's good for buyers and it's great for Realtors.
For Realtors, the best way to make more money is to sell houses quickly, and the best way to sell houses quickly is to convince the seller to drop the price.
For Realtors, the best way to make more money is to sell houses quickly, and the best way to sell houses quickly is to convince the seller to drop the price.
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2007
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September
(11)
- Housing Graph. Case Shiller Index (Inflation Adjus...
- NAR Spins Data Once Again
- Case Shiller Index Way Down; Washington, DC Down ...
- David Lereah Says "They Were Wrong Too!"
- Question For Ben Bernanke
- Alan 'Froth' Greespan: "We Had a Bubble in Housing"
- US Dollar Is Eroding Value
- Bernanke Cuts by 1/2
- Best of The Bubble Sphere
- Chasing The Market Down
- Lawrence Yun Spins Pending Home Sales
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September
(11)
Too bad the NYT didn't think to put a couple of lance's quotes about it being a good time to buy throughout 2006 on the chart...
ReplyDeleteNOW is a GREAT time NOT to buy a house!
ReplyDelete-dcandout
Jim Cramer of Mad Money said on the TODAY show this mornig, "...Do not buy a house right now."
ReplyDeleteLet me just point out that this graph is a bit misleading because it doesn't start at zero. Also, changing the width and height of any graph can make changes look bigger or smaller. My graph is basically the same graph, but it doesn't look quite so scary.
ReplyDeleteDavid,
ReplyDeleteI presume you saw that new homes sales were really weak. Ouch!
For the first time in... forever, August sales were less than July's.
New homes selling at 795,000 year. And the sales trend is nearly linear down. :(
Homes being built at (IIRC) about 1.2 Million a year.
Oh... I worried about the supply drying up. ;)
Builders are laying off to cut production 33%. That would get production down to sales leaving a huge overhang of already built inventory... so soon they will have to cut production again. :(
Got popcorn?
Neil
Looks like a long way down. So good to be a renter. I'll save for a nice down payment and have my pick of some fine properties at great prices. Thanks Lance for help talk things up, the decline will be that much harder and the bargains bigger. Way to go.
ReplyDeleteI found this article very interesting: Think Housing's Bad? You Ain't Seen Nothing Yet. It uses the CME housing futures to predict how far nominal house prices are going to fall through 2011. Inflation-adjusted prices, of course, would be lower.
ReplyDeleteAGAIN, for those of you who are a bit dense, I NEVER said it was a "good time to buy". On the contrary, I said it was a difficult time to buy, but that that would not deter a smart buyer willing to do their homework.
ReplyDeleteWaiting for the real estate market to collapse to buy what you need is a cop out. Especially since if the real estate market really did collapse, it's doubtful that you'd find it easier to buy. Don't believe me? Look around now with just a slight turbulence. Yes, it's a great time to buy if you have a lot of cash to put down and do need to worry about higher interest rates ... But for the average bubblehead, the slight drop in prices we've experienced are already far more than offset by the higher mortgage rates for anything over $417K (which is about "rock bottom" in price in this metro area), AND it's far harder to qualify and you need to bring a lot more dollars to the table. I'm sure there's more than one bubblehead on this blog saying to himself/herself "I sure wish I'd listened to Lance and not believed in the increadible promises the other BHs made to me!"
Nice Chart. Thanks for sharing it with us.
ReplyDeleteI love this video going around the blogs.
ReplyDeleteThe best quote, from August: "Real estate is at a bottom and will recover from here."
Bummer that was August 2006. Case-Shiller is showing quite a drop since then... 7.2% in DC. Gulp!
http://www.cnbc.com/id/15840232?video=534767113&play=1
What amuses me is that the bloggers will be arguing with each other when the bottom will be. That's a good thing. That is a normal healthy market. When you buy a home with some thought and some hesitation due to the huge investment.
I'll tour open houses again this weekend. I'm curious what I'll see...
Got popcorn?
Neil
David,
ReplyDeleteIf you haven't seen this report from the Kansas City Fed then you are missing out!
Warning PDF.
http://www.kansascityfed.org/publicat/sympos/2007/PDF/2007.08.03.Leamer.pdf
Great Report which you should share with your readers.
EricInDC
David,
ReplyDeleteDid you see that most of the rise in consumer spending was gas and food? Ouch. Not all... But spending went up 0.6%, incomes 0.3%... Is not helping that negative savings rate.
Got popcorn?
Neil
AGAIN, for those of you who are a bit dense, I NEVER said it was a "good time to buy". On the contrary, I said it was a difficult time to buy, but that that would not deter a smart buyer willing to do their homework.
ReplyDeleteActually, you clearly did. In fact I'm just being too lazy to search through David's archives where you commented on how the condos going up would be a good starter home for certain young families.
You might want to change your tone. Nothing wrong with admitting an error. I've admitted I thought this would happen a year earlier than it is. Cest la vie.
Since the consumer continues to increase the rate at which they spend above income... it will happen hard.
And those condos are still coming onto the market. Think its bad now? Wait. I talked to a guy from Cleveland yesterday; they have a complete meltdown there. He's selling a home he bought in 1993 for $200k for $180k. OUCH!
Today is the last day of the home selling season. Good thing inventory isn't above normal levels. ;) Good thing its going down like it normally does after mid-September... oh wait a second. Its going up! At a greater slope than before. Hmmmm... My job involves reading a lot of charts and figuring out what the heck is happening. Plot RE inventory and it tells an interesting story.
So let's see... Cleveland is melting down. So is Detroit. So is Florida. So is most of California with only SF and LA holding out with a low Case-Shiller drop in prices. Las Vegas has layoffs...
And somehow the bears are WRONG?
Nope. We tried to warn. We tried to stop this. No one would listen.
Got popcorn?
Neil
ps
my blogger party is tonight. :)
It will do you little good if a collapse of the housing market takes down the economy. The price of housing will fall dramatically, but you might be out of a job, or forced to take a much lower paying job. On the other hand, if you have a secure job and a lot of cash, then wait for the inevitable price correction. But bear in mind that desirable housing usually sells quickly in any market short of an actual depression. I saw this happen in the mid 1990s in Northern California. Desirable properties sold immediately at a good price. The junk hung around for years, in many cases sitting empty. I was looking to buy at the time (for cash), and was astounded by the stupidity of the sellers. One piece of junk was especially memorable. It was overpriced and did not sell. The owner took it off the market, and spent $100k on a new improved retaining wall. Then he listed it at a $100k increase in price. My realtor brought me back to the property thinking I would be so impressed by the new retaining wall I would want to buy it. I eventually found a good property at a good price just before the bubble. I sold it at the peak. Real estate has been good to me, but it required a lot of patience, and a business-like non-emotional approach to house hunting. In general it helps not to have a wife with you.
ReplyDeleteLance said...
ReplyDelete"there is never a bad time to buy"
July 28, 2006 3:14 PM
oh wait a second. Its going up!
ReplyDeleteGreat point. Look at the NOVA inventory stats on VirginiaMLS.com. They're at an all-time high for the year:
http://www.virginiamls.com/charts/index.htm
"And those condos are still coming onto the market. Think its bad now? Wait. I talked to a guy from Cleveland yesterday; they have a complete meltdown there. He's selling a home he bought in 1993 for $200k for $180k. OUCH!"
ReplyDeleteI'm sure your good friend from Cleveland would be glad to know you're happy about that.
James, your chart would be more graphically useful of you used a year in the past as the base year rather than 2007, even though the same point is made (just not as obviously).
ReplyDeleteToday's real prices are far above the historical current prices. Your's says past real prices were far above the nominal price. While they both are the same thing, one is clearer than the other.
Dave,
ReplyDeleteDid you see what the Stock Market did today? Do you still think the problems of a relatively few over-extended mortgagees are going to cause a recession?
I'm sure your good friend from Cleveland would be glad to know you're happy about that.
ReplyDeleteHappy? No. You completely missed the point. When markets go weak, they can get very weak.
And as far as job security... better to rent with a well invested nest egg than be stuck with a home that cannot be sold when a job (better job?) is but a short move away.
Bulls... instead of trying to win a point by name calling (that doesn't work after grade school), why don't you talk to your banker friends? They might have something interesting to say. Mine sure do.
I'm sure everyone is looking at the September preliminary statistics coming out. OUCH! Can we say debt exhaustion?
Got popcorn?
Neil
"James, your chart would be more graphically useful of you used a year in the past as the base year rather than 2007, even though the same point is made (just not as obviously)."
ReplyDeleteSince the point of the graph is to show people what today's houses were worth in the past, the current year must be the base year. Most people think in current (2007) dollars, so that's what the graph reflects.
Furthermore, I am restricted by the data I have access to. Because of new house construction, today's houses are different from 1987's houses. I don't have the value of 1987's median-priced existing single-family home, so I can't honestly use 1987 as the base year. I only have 1) today's median-priced single-family home as reported by NAR, 2) the Case/Shiller Index, and 3) the CPI. What you are suggesting might make a pretty graph, but the data would be completely fictional.
If I were only reporting the Case/Shiller Index, then I could use 1987 as the base year. However, I believe most visitors can conceptualize the bubble better if they see dollar values, rather than abstract index values. Since I do have the 2007 median price, but not the 1987 median price, I must use 2007 as the base year to have an honest and accurate graph.
James,
ReplyDeleteIn the past real prices were always higher than nominal prices on your chart. Doesn't that mean this is a buying opportunity?
"In the past real prices were always higher than nominal prices on your chart. Doesn't that mean this is a buying opportunity?"
ReplyDeleteNo, it doesn't mean it's a good buying opportunity. You don't seem to have a good understanding of how inflation-adjustment works. It doesn't matter at all which line is above which. The only line you should really care about is the real prices line.
If I drew a graph of toothpaste prices using the current year as the base year, then the real dollars line would be above the nominal dollars line. However, if I drew the graph of toothpaste prices with the first year as the base year, then the real dollars line would be below the nominal dollars line. Really, the only thing you should care about is the inflation-adjusted (real) price of toothpaste over time.
The same goes for housing. The only thing you should care about is the inflation-adjusted (real) price of housing over time. Since the real price of housing is higher today than it was in the past, it means that a buyer today would pay more for the house than they would have in the past. I drew the nominal dollars line for housing just to give people more information. I assume most people understand what they are looking at.
One caveat: once you start using financial leverage (e.g. a mortgage), then nominal price changes do start to matter, because leverage accentuates your percentage gains and accentuates your percentage losses. However, nominal price changes only matter during the time you own your home. As the saying goes, buy low, sell high. People buying today would be doing the opposite.
Lance said...
ReplyDelete"Did you see what the Stock Market did today? Do you still think the problems of a relatively few over-extended mortgagees are going to cause a recession?"
I think David was wrong in his prediction of a recession. While the odds of a recession in the next 12 months are higher than normal, the odds are less than 50/50.
Here is a little tool to help predict the odds of a recession in the next 12 months. To use the tool correctly, you need the Federal Funds Rate (4.75%) and Treasury Bond Yields, available here.
Lance said...
ReplyDelete"Did you see what the Stock Market did today? Do you still think the problems of a relatively few over-extended mortgagees are going to cause a recession?"
----------------------------------
Lance, you often criticize "bubbleheads" for jumping on any one-day news story and basing long range claims/predictions on it. As you can see from today's news, the stock market did well in spite of housing that day, not because housing is getting better. Housing prices will likely continue to decline whether there is a recession or not. Of course, a recession would make it worse (or better, depending on your point of view.
-From today's WSJ-
A Day After Dow's Record,
Investors Take a Step Back
By PETER A. MCKAY
October 3, 2007; Page C1
The stock market suffered a mild hangover after the boisterous party Monday that ended in a fresh record for the Dow Jones Industrial Average.
The Dow finished yesterday off 40.24 points, or 0.3%, at 14047.31. It is still up 12.7% this year.
Investors' mood was damped by weak housing data and crude oil's rebound from a sharp early selloff to remain above the psychologically important price of $80 a barrel.....
Anon 6:10 said:
ReplyDelete"As you can see from today's news, the stock market did well in spite of housing that day."
David has repeatedly stated that a "declining real estate market" will cause a recession. As the Wall Street article makes clear, the economy can continue to do just fine in spite of the effects of being in the downside of a real estate cycle. Thanks for helping me make my point!
Though our "discussions" here seem to drift sometimes, I think most would agree the real point of this blog is housing prices and whether they will decline. If your point, Lance, is that you can say "nah, nah, Dave was wrong" about what will cause a recession and whether a recession will happen, but housing prices do in fact continue their decline, that isn't much of a victory. Oh, what's that, Lance? You say, "but if David was wrong about that, he is wrong about housing prices too?" Again, you are clinging to the little you have left to argue with.
ReplyDelete"Though our "discussions" here seem to drift sometimes, I think most would agree the real point of this blog is housing prices and whether they will decline. If your point, Lance, is that you can say "nah, nah, Dave was wrong" about what will cause a recession and whether a recession will happen, but housing prices do in fact continue their decline, that isn't much of a victory. Oh, what's that, Lance? You say, "but if David was wrong about that, he is wrong about housing prices too?" Again, you are clinging to the little you have left to argue with."
ReplyDeleteI think it's fair to point out that David is an idiot.
Hey, comment moderation is off.
ReplyDeleteAnon 12:00 pm,
ReplyDeleteIf you don't understand that David was wrong about prices declining in the fashion he'd thought they would, then you don't understand what a bubble is. The marginal declines you are seeing in marginal exurban and transitional neighborhood markets is just "business as usual" in the downside of a real estate market. It isn't a "bursting bubble". David knows that too. If he didn't, why would he keep predicting "continuing declining house prices. He needs for prices to continue to decline by a lot for his bubble to have burst. And it's just not happening ... even after all these years.
This comment has been removed by the author.
ReplyDelete"then you don't understand what a bubble is."
ReplyDeleteThis from the dunce that spent most of last year trying to redefine the word "bubble"... lol
Hey, why don't you get on the phone and call Greenspan, he has been talking about a bubble in real estate and according to lance's definition it is impossible to have a bubble in real estate!
Oh, and David, I looked for an e-mail address for you but couldn't find one - - thank you so much for getting rid of moderation! The lag times for reviewing and approving comments seemed to retard the dialog a bit..
ReplyDeleteLance's quote:
ReplyDelete"The marginal declines you are seeing in marginal exurban and transitional neighborhood markets is just "business as usual" in the downside of a real estate market."
Oh yeah, tell that to those who lost their homes or home equity in the state of Florida or the state of California or the state of Arizona etc.
Still you will insist it can't happen in DC, but much like the way darkness follows the sun's setting, give it time, give it time.
"you will insist it can't happen in DC"
ReplyDeleteIt may happen but it has not happened yet.
Anybody have an updated shiller inflation-adjusted graph? I can't seem to google one out. Thanks!
ReplyDeleteAnonymous said...
ReplyDelete"Anybody have an updated shiller inflation-adjusted graph? I can't seem to google one out. Thanks!"
Robert Shiller's web site with data is here.
Shiller's publicly available data for the past century is only annual data. Since 2008 is still not complete, that means you can only get data through 2007. I have a graph of the annual data here.
I have a graph of quarterly data for the past quarter century here.
History has not been kind to this Lance idiot. It is now march of 2009. I'm laughing so hard right now. Let me say it again. Lance, whoever you are, you are a twit.
ReplyDelete