“The markets are becoming aware that the decline in U.S. housing prices is not stopping. It is at an unprecedented pace compared to the last 50 years,” Greenspan told a financial audience in the Norwegian capital.
"He said the housing bubble had burst and the market was “a good deal away” from its selling climax — a point at which sellers ultimately lower their prices to match lower bids.
He said central banks should concentrate on alleviating the economic fallout from burst asset bubbles because they had few methods to prevent them and “lean against the wind.”“There doesn’t seem to me that there is very much evidence that we can do much about them,” said Greenspan, who oversaw Fed policy during the dot-com bubble and the start of the present housing bubble.
“Irrespective if we could identify them, we could not do much to defuse them,” he said of asset bubbles.
Greenspan could have pulled a Volcker (raise interest rates tremendously) which would pop the housing bubble. Not that I would support that. In retrospect, Mr. Greenspan allowed interest rates to be too low, for too long.
Posts
"Greenspan could pull a Volcker (raise interest rates tremendously) which would pop the housing bubble."
ReplyDeleteI thought Greenie was retired. Isn't he just rambling, no different from any blogger?
I thought this blog was focused on the DC Let's focus on the DC market as all real estate is local. With that said, you bubbleheads must really be fretting. Winter is here. The market is in turmoil. Yet, the DC housing market has held up rather well. For those of you that thought you'd be able to swoop in and buy an overpriced home in DC once it fell to 200K are still waiting. And waiting. Maybe Lance was a bit over optimistic. But you bubbleheads should concede that you were a bit too pessimistic.
ReplyDelete"Isn't he just rambling, no different from any blogger?"
ReplyDeleteUm... he is the former federal reserve chairman. He may no longer have the power he once did but when he speaks people still listen.
Not that I expect someone like you would understand.
I agree with nathan. In the end, the correction in this (cyclical) market will be somewhere in the middle. No one can call the bottom except in hindsight.
ReplyDeleteAs far as RE being local; it's extremely local. Certain zips are getting hammered, while others have been relatively unscathed. I believe that investors will soon start entering certain areas in PW county and put a floor on the declines. Some neighborhoods are getting close to break-even on rentals. I'm well past the stage in my life where I want to acquire rentals, but for those wishing to accumulate an investment portfolio the numbers are beginning to look good.
But, there is a trade-off. Lower priced areas have always produced better cashflow, but with that comes more intensive management.
As far as wanting to buy a personal residence in a desireable area, the price drops will not be nearly as great. So...unless you want to live in Manassas or Woodbridge, etc., don't hold your breath.
I hope Neil's popcorn doesn't contain too much butter and salt as I'm beginning to get concerned about his health.
va
" Winter is here. The market is in turmoil. Yet, the DC housing market has held up rather well. For those of you that thought you'd be able to swoop in and buy an overpriced home in DC once it fell to 200K are still waiting. And waiting. Maybe Lance was a bit over optimistic. But you bubbleheads should concede that you were a bit too pessimistic."
ReplyDeleteYay, another strawman from one of lance's sock puppets...
Why don't you show me some people who predicted that they would be able to buy a DC house for 200k by Nov 2007?
The informed people here never expected the bubble to pop overnight and we still don't. This will take years to unfold.
I thought this blog was focused on the DC Let's focus on the DC market as all real estate is local. With that said, you bubbleheads must really be fretting. Winter is here. The market is in turmoil. Yet, the DC housing market has held up rather well. For those of you that thought you'd be able to swoop in and buy an overpriced home in DC once it fell to 200K are still waiting. And waiting. Maybe Lance was a bit over optimistic. But you bubbleheads should concede that you were a bit too pessimistic.
ReplyDeleteLet's reserve final judgement for when the market has bottomed. And no, it is not close to bottoming yet.
http://www.reuters.com/article/ousiv/idUSN1235621120071112
"I believe that investors will soon start entering certain areas in PW county and put a floor on the declines. Some neighborhoods are getting close to break-even on rentals."
ReplyDeleteThat would be a really really dumb idea. That whole area is ridiculously overbuilt and the price declines are showing no sign of slowing.
Take a look at the inventory and months of supply numbers for Manassas and PWC, they are at or near all time highs...and it is nearly Dec.
Rental rates are dropping like a rock out there along with sales prices. A smart investor would hold off until at least next fall before seriously contemplating jumping into that market.
There is much greater downside risk than is usually the case with rental purchases because a large portion of PWC is likely to turn into ghettos before this mess has worked itself out.
anon 7:41 said:
ReplyDelete"This will take years to unfold"
It's good to see that we will have a consistent base of renters for the next 5 or 10 yrs. Put your life on hold if you believe that is the more prudent avenue. I wish that I had a crystal ball.
I'm not looking to enter the market or exit the market, so I don't have the same concerns as some of you. I bought as soon as I could. Was it optimal? No. It was 1981 and we were transferred 4 months later. Good thing that we bought under market. We broke even. We were 22 and the house we bought was in foreclosure and just needed cosmetics.
If you want a safe bet, I don't know what to tell you. If you require a safe bet, buy treasuries. If you want a house to live in long-term, it's kind of like the stock market - don't sweat the ups and downs.
Whatever your perspective, it's YOUR decision. There are risks and rewards; but if you are not an "investor" who cares?
You do realize that when financial planners estimate what you need to retire comfortably they NEVER include the value of your personal residence.
As far as I can tell, locally, the only places down significantly, are places the vast majority of you would not consider living in.
va
Interesting read:
ReplyDeletehttp://ezinearticles.com/?Real-Estate-Bubble---The-End&id=189078
All those illustrious ‘bubbleologists’ out there are not going to like this one bit: not all real estate bubbles burst. Some of them actually sink – just like The Titanic ...
Here's an interesting quote from former U.S. Treasury Secretary and current Harvard economics professor Larry Summers:
ReplyDelete"Even if necessary changes in policy are implemented, the odds now favour a US recession that slows growth significantly on a global basis. Without stronger policy responses than have been observed to date, moreover, there is the risk that the adverse impacts will be felt for the rest of this decade and beyond.
"Several streams of data indicate how much more serious the situation is than was clear a few months ago. First, forward-looking indicators suggest that the housing sector may be in free-fall from what felt like the basement levels of a few months ago. Single family home construction may be down over the next year by as much as half from previous peak levels. There are forecasts implied by at least one property derivatives market indicating that nationwide house prices could fall from their previous peaks by as much as 25 per cent over the next several years.
"We do not have comparable experiences on which to base predictions about what this will mean for the overall economy, but it is hard to believe declines of anything like this magnitude will not lead to a dramatic slowing in the consumer spending that has driven the economy in recent years."
"Not that I expect someone like you would understand."
ReplyDeleteI thought there was a rule against snide remarks in this blog?
"http://ezinearticles.com/?Real-Estate-Bubble---The-End&id=189078"
ReplyDelete= written by a real estate agent, based in Canada, who supposedly has a degree in economics (he doesn't say from whom, but we'll give him the benefit of the doubt), who posits that U.S. Commerce & BLS stats indicate that the consumer has the income and assets to keep the party going. Kind of suspicious that he didn't mention the savings rate over the past year (uh, negative)or inflation-adjusted real income over the past five years (flat). Notably absent from the "article" are the words "subprime" and "foreclosure rates." Oh well, gotta keep those houses moving. Guy does have a cool name, though.
http://ezinearticles.com/?Real-Estate-Bubble---The-End&id=189078
ReplyDeleteThat was written by a freaking real estate agent! = useless wishful thinking by someone about to have a new job ringing a bell while taking care of a Salvation Army Kettle. Damn, lance, you need to scrape the barrel to find anything to prop up your pipedream.
"It's good to see that we will have a consistent base of renters for the next 5 or 10 yrs. Put your life on hold if you believe that is the more prudent avenue. I wish that I had a crystal ball."
ReplyDeleteLets review, some idiot shows up and posts that because the closer in sections of the city haven't yet been hit as hard as the outer areas the various idiot housing pumpers were somehow "right."
He gets corrected that just because those areas haven't yet fallen doesn't mean they won't. (This same "it hasn't happened yet therefor it won't" argument has been used for at least the last couple years by the various housing pumpers.)
Then... you offer your wonderfully cliched advice about "putting your life on hold" and how that is good for landlords blah blah blah.
It doesn't take a crystal ball to see where this market is heading. You can act like it takes some sort of supernatural power to figure it out, but the fact is that anyone with a little bit of critical thinking ability has known where this market was heading for at least a year.
"All those llustrious ‘bubbleologists’ out there are not going to like this one bit: not all real estate bubbles burst. Some of them actually sink – just like The Titanic ... "
ReplyDeleteI'm confused -- is it better to burst or sink?
If you want a house to live in long-term, it's kind of like the stock market - don't sweat the ups and downs.
ReplyDeleteYou can definitely choose this route if you wish. However, when a stock is falling off a cliff, has disastrous fundamentals, and a recovery is obviously nowhere in sight, it's a bad time to buy. You can put yourself in a fantastic financial position by holding off a few years.
But you bubbleheads should concede that you were a bit too pessimistic.
Wow, end of the 2nd inning, you're down 5 runs, and you're declaring victory?
It is kind of unsettling to read and hear what Greenspan is saying now as opposed to his speech during his time on the job. I wonder what Boom Boom Bernanke would say right now if he could tell the truth.
ReplyDeleteNathan: you are right. Let's focus on DC.
ReplyDeleteHighland Park Announces Retail Tenants, Conversion To Rental :
Donatelli Development and Gragg and Associates announced today they will convert their Highland Park building, nearing completion at the southwest corner of 14th and Irving streets in the Columbia Heights neighborhood of Northwest Washington, from condominium to rental.
“In light of recent shifts in the condominium market, we decided that we would be in a better position to serve the Columbia Heights market with a luxury rental building,” stated company president Chris Donatelli, “since the balance of residential offerings in the neighborhood had been trending so heavily toward condominiums.”
Nathan, ever even drove through Columbia Heights? Do you think there is a market for Luxury rentals on 14th and Irving?
Why wouldn't people just rent up the street at Thomas Cirlce and chose NOT to get stabbed?
Real estate local? That NAR propaganda isn't working. This ia a national credit bubble unfolding. Too many in DC own speculative property elsewhere anyway. Coworkers from all over the nation are talking foreclosures. Florida, California, and yes... DC. They are also talking about their friends at lunch getting laid off. Unless you're in oil services or video games, this isn't a good market for anyone.
ReplyDeleteHave you ever heard of so many banks having cash flow problems? Real estate doesn't recover in a "V" pattern. Its a long flat, the so called "L" pattern. Since the maximum appreciation was about 2.5%/month in DC, that is about the maximum depreciation we should expect in DC. As others have noted, real estate doesn't follow the stock market pattern. Its more symmetrical rather than a saw blade.
Inventory to monthly sales... is comforting to those of us not interested in interring the market.
Hey, tomorrow is the release of the Case-Shiller data. That should prove interesting. I'm thinking a 1.1% to 1.3% decline (overall). Bummer Libor (what we borrow at) and the Fed funds rate are getting a bit disconnected...
Got popcorn?
Neil
va,
ReplyDeleteYou can't dollar-cost average a house to live in.
I'm taking my landlord to court over my security deposit. He bought the house in NoVA in 2005 and moved away -- he gave up $160K between purchasing it and selling it this year. So he took our security deposit to make himself feel better.
Yes, renting sucks, and so do landlords. But prices have fallen significantly, and you sound ignorant to state otherwise. The house the guy lost $160K on was in a very upscale neighborhood.
You must be desperately underwater or you wouldn't be goading people into buying into an obviously falling market.
"You must be desperately underwater or you wouldn't be goading people into buying into an obviously falling market."
ReplyDeleteNah, she is just your classic one trick pony, assuming she is telling the truth at all.
Maybe she really did make some money in RE over the years, it isn't difficult to believe, but hat doesn't change the fact that her advice today is utterly brain-dead.
She has been pushing people to buy throughout the bubble even at the absolute top using all the standard cliched bits of advice and numerous outright lies.
Anyone that can't see through her at this point is beyond help.
Yes, renting sucks, and so do landlords. But prices have fallen significantly, and you sound ignorant to state otherwise. The house the guy lost $160K on was in a very upscale neighborhood.
ReplyDeleteLandlords in many instances are f'd borrowers- the so called "accidental landlord". They bought as an investment 2-3 years ago, and now can't sell without losing major $$. So they rent out. These landlords are losers by nature and not very smart. I am renting from one of these right now. He bought 8 homes on my block in the District, all as investments. I rent my home for about 1/3 of his mortgage costs, he has one other rented as well under similar terms. His other properties have sat empty for over a year, all with "for lease" signs. No takers. When my lease was up 7 months ago, he tried to raise my rent, and I said "sorry". So he backed off. I'm pretty fiendly with his maintenance guy, who has been having more trouble finding work lately. He is very responsive when I have an issue, and I know he enjoys getting paid from my landlord.
Yes, it must be great to be a landlord investor right about now. I wish I had been so smart to buy 2 years ago too.
Yes, it must be great to be a landlord investor right about now. I wish I had been so smart to buy 2 years ago too.
ReplyDeleteOh yeah, one other thing. 3 of his houses have been broken into and vandalized by crackheads so they are now boarded up and unrentable. He has not fixed the houses for some reason. Money?
The only thing that might affect me is if he goes bankrupt or defaults on his loans. At worst, I might have to find another place. I have seen many other places similar to mine at a similar price, so I'm not too concerned.
"The only thing that might affect me is if he goes bankrupt or defaults on his loans. At worst, I might have to find another place. I have seen many other places similar to mine at a similar price, so I'm not too concerned."
ReplyDeleteYeah, moving like that is no big deal. I've been pushed out of 5 places over the last year because of foreclosures. Yeah, it's not always easy packing up and getting everything moved out before the agents start rolling through with buyers. But luckily my mom lets me use her basement for storage while I look for a new cheap place. And the car isn't really all that uncomfortable to sleep in. The kids actually like "playing" hide and go seek in the trunk. (It keeps quiet too for when the patrol cars come by during the night.) I'm so pleased with myself! I'm living dirt cheap and putting away lots of money for a downpayment when prices drop down to 1990 levels. And my mom let's me keep all my savings in her basement. She says the piggy banks are "pretty"!
Hi lance!
ReplyDeleteThis is anon 9:36. I forgot to mention that my ex-wife is one of those FBs. Yep she's a homedebtor alright! She's been paying that mortgage now since 1999 ... the year she left me. I can't understand why she left. What a fool she is. Someday I'm gonna have a 5 bedroom spread with a 3 garage bay and a built-in swimming pool! (The kids will like that ... more fun than playing in the trunk). Meantime ... all she has is a 3 bedroom house ... and a new huband and kids. She's fcuked and doesn't even know it! What a fool all those homedebtors are! But then again, not everyone can be as smart as us bubbleheads.
ReplyDeleteWow 9;36, I feel your pain. I think your best bet would be to rent out a basement "apartment" in an owner-occupied condo. Write a bum check for the security, and don't pay your rent. When your "landlord" tries to evict you,file a housing complaint. You'll get at least three months of rent-free livin', and the city will relocate you at the landlord's expense. Enjoy!
ReplyDeleteYeah, moving like that is no big deal. I've been pushed out of 5 places over the last year because of foreclosures. Yeah, it's not always easy packing up and getting everything moved out before the agents start rolling through with buyers. But luckily my mom lets me use her basement for storage while I look for a new cheap place. And the car isn't really all that uncomfortable to sleep in. The kids actually like "playing" hide and go seek in the trunk. (It keeps quiet too for when the patrol cars come by during the night.) I'm so pleased with myself! I'm living dirt cheap and putting away lots of money for a downpayment when prices drop down to 1990 levels. And my mom let's me keep all my savings in her basement. She says the piggy banks are "pretty"!
ReplyDeleteSucks to be you. Fortunately your situation is far removed from mine. I've been in my place for a year and a half, and I don't have any kids. My mom is dead, but I have a swell attorney that looks out for my rights. And I already have enough money to pay cash for a home right now without saving any further even at the still inflated prices, I'm just not stupid as to pay an inflated price for a shithole. Besides, my conservative investments and home builder shorts have paid quite nicely. Yes, a home is such a great investment.
"Yeah, moving like that is no big deal. I've been pushed out of 5 places over the last year because of foreclosures. Yeah, it's not always easy packing up and getting everything moved out before the agents start rolling through with buyers. But luckily my mom lets me use her basement for storage while I look for a new cheap place. And the car isn't really all that uncomfortable to sleep in. The kids actually like "playing" hide and go seek in the trunk. (It keeps quiet too for when the patrol cars come by during the night.) I'm so pleased with myself! I'm living dirt cheap and putting away lots of money for a downpayment when prices drop down to 1990 levels. And my mom let's me keep all my savings in her basement. She says the piggy banks are "pretty"!"
ReplyDeleteYou are obviously being sarcastic because your situation does not actually happen in real life. But what is real are multi-billion dollar losses and so-called homeowners losing their homes. The above anonymous poster is doing much better financially than the people losing their homes right now to foreclosure.