NAR & Lereah: Full of Contradictions

The National Association of Realtors (NAR) is busy disputing the 'Housing Bubble Theory.' They make the preposterous claim that 'new analysis of 130 markets by NAR shows no support of a housing bust.' Let us examine some of David Lereah's recent statements. David Lereah is the chief economist for NAR stated

• 'The air is coming out of the balloons" ( Late August)


• "'The boom is showing some signs of tiring" ( October 31st )


• "'Some markets are more susceptible to interest rate risks and shock,' he said. 'I cannot guarantee that there will be no hard landings.'""


• '"The country is really unbalanced when it comes to the price of a home. The boom has really discriminated across America. The biggest risk I see right now in California and other parts of the U.S. is the element of risk introduced by adjustable-rate mortgages and interest-only loans and negative amortization loans,' he said."

It is time for the NAR and David Lereah to get their story straight. The hypocrisy is quite apparent.

Lereah on the Proposed Mortgage Changes

The Realtors association’s chief economist, David Lereah, called the proposal “irresponsible” and the timing “terrible,” since the real estate market, while far from taking a nosedive, is slowing noticeably. “When you combine the long-term effects of the hurricanes with rising interest rates, such a plan would do severe damage across the board,” he said. (RISMedia 11/14

Update: 1668 Oak St NW

On October 22, 1668 Oak St NW was blogged about. It was listed at 621K. I t was just reduced to 599K. Sounds familiar.

Flippers Becoming Worried; Trying to Sell

Some of the more 'rational' flippers who have been caught up in this speculative episodes are worried. They are worried because they boughy in the last year or so and realize that inventory is exploding and prices are falling. These 'rational' flippers are trying to sell. Nick818 over on The Housing Bubble Blog reports:

Sounds like full swing flipping action going on.

Same with a friend, he bought a 2500sq beautiful tract house in Palm Springs area with upgrades for $620K in April 2005. He was initially going to keep it for spring of 06 to make a few bucks, but now with all that is going on,he's got cold feet, so just after 6 months, he put it up for sale, asking 689K.

As of 1 month, no one even has inquired about the place, so he reduced the price to 669K now, still no inquiries as of yesterday. The problem is the fact that in a matter of 3 weeks, there have been about 30 similar properties listed in the same walking distance area, not one has gone in escrow.

Guys, if you think flippers are coming in the market, give it another 3-4 months, it is going to be scary.

As for my friend, even if he sells now, he will probably just break even, but my senses tell me he will not be able to get more than what he paid for if he waits that long.

What cracks me up is the fact that these flippers still think time is on their side, total mistake. The longer they wait, the tougher it will get, especially when uncle Greenie raises rates another couple of quarter points.

Or check out this flipping property in the DC area. I posted about it on November 7th. Then the add listed it for 520K. Guess what? I just found this post on Craigslist.

$490000 - 20,000 in closing help.

Seller says sell, lets make a deal. Semidetached townhouse three bedrooms One and a half baths. Two levels with a back yard. Lots of new development goin on in the area. Close to Union Station. Short walk to the night life on the Hill. Close to the red line Metro. New shop opening in the next year or so. Buy Now before value rise and you miss out.

605 I ST NE

It has not been sold and the price has been reduced again. Remember, it was bought at 450K on 5/25/05. 20K in closing costs is offered. If they sell at 490K - 20K closing costs then they will be actually losing money on this property. The flippers are becoming more desperate.

Simulated Inventory Boom in Fairfax County

Housing Inventory for sale is up an incredible 122% in Fairfax County, VA ( DC suburb) in one year. The below images simulates the dramatic inventory rise in suburban DC. Please note that red dots do NOT represent actual location or the actual numbers of houses for sale.

Fairfax County, VA: October 2004
( 100 housing units for sale = baseline )

Fairfax County, VA: October 2005
( 222 housing units for sale = up 122% from October 2004 )

Falling Leaves, Falling Prices II

The house located at 8300 Hartford Avenue in Silver Spring, MD ( DC suburb) has still not sold. I blogged about it on October 9th. Then it was listed for 599K; now it has been reduced to 579K.

Its competition is another house just up the block on Hartford Avenue ( 8406). The house was originally listed for 679K; then reduced to 649K, then 629K, and now 599K. See my blog post about 8406 Hartford Avenue.

Leaves are falling,
Prices are falling.
Buyer are baiting,
Sellers are waiting;
Sales are stalling.

Bankrate 'Mortgage rates hit 26-month high'

Mortgage rates rose for the ninth week in a row after bond investors were scared over evidence that wage earners are making more money.

The benchmark 30-year, fixed-rate mortgage rose 5 basis points to 6.42 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.32 discount and origination points. One year ago, the mortgage index was 5.76 percent. Four weeks ago it was 6.1 percent.

The benchmark 15-year, fixed-rate mortgage rose 5 basis points, to 5.96 percent. The benchmark 5/1 adjustable-rate mortgage rose 4 basis points, to 5.94 percent.

The 30-year fixed rate hasn't been this high since Sept. 23, 2003, when it was 6.47 percent.

The Coming Recession

As the housing market continues to weaken it will have serious ramifications for the overall US economy. "The collapse of the housing bubble will throw the economy into a recession, and quite likely a severe recession," warned a July report by the Center for Economic and Policy Research. Furthermore, Lehman Brothers report, "[A] turn in the housing market is central to our economic forecast. " As reported by the AP:

A downturn in housing could mean more than 1.3 million lost jobs, Goldman Sachs Group Inc. predicts, bumping up the national unemployment rate by 1 percent and the unemployment rate in house-mad California by 2 percent. Those numbers don't include likely job cuts in housing-dependent businesses, such as banking, furniture and building materials.

The Center for Economic and Policy Research predicts worse, saying a bubble burst would mean the loss of 5 million to 6.3 million jobs.

The housing run-up has financed consumer spending, creating more than $5 trillion in bubble wealth, the center estimates. Consumers have used "cash-out" mortgages to pay for everything from new kitchens to college tuition.

On August 12th and then Septmeber 29th, this blog warned about the coming recession. The current economic predicament is simply unsustainable. The double digit price appreciation of the housing boom years has come to an abrupt end. Once the housing bubble pops, a recession is almost inevitable. Here are the factors that will contribute to a future recession:

• High Energy Costs
• Federal Debt & Deficit
• Coming Housing Bust
• High Consumer Debt
• Large Trade Deficit
  
• Continued Offshoring
• Security Costs
• Rising interest rates
  

For the past 4 years the US economic 'recovery' has been too dependent on cheap credit and the housing boom. The boom is fast becoming a bust. The convergence of the housing bust with other important factors will almost certainly put the US into a recession by late 2006.

Bubble Meter Blog Mentioned in Consumer Affairs

The Bubble Meter blog was mentioned in Consumer Affairs:

Whatever the outcome, the housing market pundits are watching and waiting to see what happens next. According to the "Bubble Meter" housing bubble blog, the days of the bubble are coming to an end.

"Falling leaves and falling prices are now occurring in many of the bubble markets," the blogster said recently. "The days of double digit price appreciation are long gone."

Thanks. :-) It is always neat having your blog mentioned in the media. Lots of traffic coming.

Washington Post 'Housing Market Cooling, Data Say"

As has been reported on the housing bubble blogs "home sales in the Washington region have declined sharply, the inventory of unsold homes is up significantly, and prices have flattened and, in some cases, fallen." The Washington Post continues to get high marks for covering the local housing market.

Today's article primarily relies on the MRIS ( Metropolitan Regional Information Systems) for inventory and sales data. The trend of rising inventory and small price declines is most evident in the Northern Virginia component of the DC metro market.

In the two counties and three cities that make up the Northern Virginia market, more than twice as many homes were available for sale in October as in the same month one year ago -- 7,122 homes, compared with 3,254 -- and sales are off 28 percent.

In the District, listings are up 62 percent and sales are down 28 percent.

In Montgomery County, listings are up 49 percent and sales are down 8 percent.

In Prince George's County, the listings are up 45 percent. But home sales have remained fairly stable, dropping only 2.6 percent

With the rising inventory and the fall season slowdown prices in much of the DC Metro area are falling.

( Click on image for larger version)

In the District, the median price -- the point at which half the houses cost more and half cost less -- was $425,000 in October, down from a high in August of $435,088. In Fairfax County, the peak was in July, when the median price was $503,000; in October, it was $489,450. The peak in Montgomery County was also in July, when prices hit $460,000; the median price in October was $429,000

The below chart shows the median prices in the sub markets that make up the DC market.

So what happens next? Some bubble naysayers are saying that the small price declines in much of the DC area are a result of a 'seasonal slowdown.' However, inventory is rapidly rising in the metro market last fall. The rising inventory will continue to lower prices in the coming months.

Many local real estate agents say the market is returning to normal. "We're rebounding in terms of evolving to something close to a balanced inventory," said David Howell, a past president of the Northern Virginia Association of Realtors and executive vice president and managing broker at McEnearney Associates Inc. in McLean. He said the true aberration occurred from 2003 to early 2005, when the number of listings fell to record lows, causing what he called "unbelievable and untenable" increases in appreciation

Housing experts say the slowdown is occurring for several reasons. In the past few months, a lot of homeowners put their places on the market speculatively, hoping to cash in, creating a surge in housing supply. Many investors, whether speculators or landlords, have done the same, either because they believe the market has peaked or because they cannot make enough money in rent to support the mortgages.

They are finding fewer buyers because the double-digit price appreciation of the past few years has priced many people out of the market. The recent rise in mortgage interest rates, which causes monthly payments to rise, adds to price pressures. And now, with fears that the market has peaked, more people are simply afraid to buy.

Meanwhile, new construction is inflating the housing supply, as condominium developers rush projects to market. According to a recent report by Delta Associates, 47,000 units in dozens of projects are hitting the local market in the next three years, which is about five times as many condo units as were sold last year.

The boom has ended in the DC area. The huge price appreciation is a thing of the past. Currently, housing inventory is surging, prices declining, and the 'speculative fervor' is thankfully over.