Foreclosures Up 25% Year Over Year

Millions of Americans overextended themselves during the housing boom years. Now, foreclosures are up from one year ago.

Foreclosures rose to 272,109 nationwide in the second quarter, marking a gain of 25 percent from the corresponding period in 2005, according to RealtyTrac, Irvine, Calif.

Rick Sharga, vice president of marketing at RealtyTrac, an online database of foreclosure properties, anticipates higher foreclosures during the remainder of the year and through 2007.

Sharga expects that rates on more than $2 trillion in adjustable-rate mortgages will jump during the next 18 months to two years, boosting monthly payments by upwards of 50 percent.

RealtyTrac CEO James Saccacio, however, says low unemployment and steady home-price appreciation have kept foreclosures reasonably low.

Source: Milwaukee Journal Sentinel, Michele Derus (07/28/06)

The foreclosure rate will continue rise as home prices decline, unemployment rises and the economy heads into a recession. It terrible to see so many naive first time home buyers being suckered into this speculative episode, some of whom will end up in foreclosure.

Angry Phoenix Realtor Verbally Attacks Fellow Housing Bubble Blogger

An angry Phoenix Realtor verbally attacks Housing Panic. Gregg Swanson over at BloodHoundBlog writes:

HousingPanic, a particularly vitriolic BubbleBlog which is saying something
asks:

Realistically, how overvalued are Phoenix home prices?

Obviously, I consider this a profoundly silly question, but to lurk among the BubbleBloggers and their seething commentariat is to acquire an education in a slice of America invisible from this side of the sewer gratings. Notwithstanding the idiotic economic analysis, which is really no worse than the static-market fallacies paraded as profundities in the pages of the Arizona Republic, these sites and not just HousingPanic are infested with a cult-like fever to inflict suffering at second hand, to be sure on people who are in fact guilty of nothing except failing to have drunk the BubbleBlogger KoolAde.

That's all one. I don't care. The whole of the last century was dominated by the bad behavior of viciously angry wretches, but look where it got them. The BubbleBloggers will someday bawl balefully in private, but they will never, ever admit that they have been very publicly very foolish. You will know and I will know and in the secret chambers of their hearts they will know they were wrong all along. But as long as you don't hold your breath waiting for that contrite admission of error, you should be fine.

That was Gregg's first post. Housing Panic responded with:

This "attack the messenger" stuff will just get worse and worse I'm afraid. Where the bubble bloggers may even take some blame for the economic meltdown and people's misfortunes.

I think HP does good - at least for anyone who listened starting a year ago, and for first time home buyers a few years from now who'll be able to afford a home. I blog to warn others, and to expose the corrupt and powerful REIC, pure and simple.

Here's the attack by "bloodhound realty" (nice name). Feel free to respond on their site, make the author look like the ignorant fool he is, but play nice.

BloodhoudBlog responded with a second attack on the bubbleheads who left many posts his blog arguing that a significant decline will occur in Phoenix:

The BubbleBrains swooped in en masse today, having only just now discovered my 21 reasons to bank on the Phoenix real estate market. Courage, confidence and competence are often found together in a solitary soul, but cowardice, cowering and impotence these are the attributes of character of men who run in packs. I am more than libertarian enough to let them go to hell in their own way, but it seems only common courtesy to point the way. So I sent them hither and thither blithering Bubbleheads lathered up into a dither. Now that's just good, clean fun.

Bubble Meter Blog proudly stands with Keith and others who are fighting to reveal the reality of the very significant decline occurring in the US bubble markets. The housing boom is a speculative episode, and like other speculative episodes, it will end badly. I will continue fighting for the truth, while taking on those corrupt, manipulative and deceptive elements in the housing industrial complex.

Email To Recent Centex Home Buyers

"Greetings to our current and Former Fair Chase Home Owners. I hope this email finds all of you in good health. I wanted to let you know that I am now selling in our New Bristow Village community. We are building beautiful single family homes that range in size from 2900 to 3800 sq. ft. We have 10 homes that will be ready to move into by the end of September, and management has given us unbelievable prices and mortgage incentives for those that can take advantage.

As an example, our Preston model features 3250 sq. ft plus a finished lower level with a 2 car garage and is loaded with interior upgrades. We have this home priced at $525,000! ($100K in price reduction). In addition, we will provide a 30 year fixed rate loan at just 5.75% and also pay 4% towards closing costs.

Please let me know if you would like to schedule an appointment this weekend to review the homes that are available.

Warmest Regards,

XXX XXXXX

Community Sales Representative

Cell Number 703-XXX-XXXX

Referrals are vital to my success and they are greatly appreciated"

The Grant in Washington, DC

A big hattip to Housing.com Blog for finding this condo conversion project located in downtown Washington, DC at 1314 Massachusetts Avenue NW. The condo name is The Grant. Their website says "Some things are best left in the rear-view mirror. Like adolescence, high school, living at home, renting and roomates. Sooner or later you've got to put them behind you." You can read the rest at their website.

Picture of the building before renovation. Studios start at 189K. How well will these units sell?

Galbraith on Speculative Episodes

In John Kenneth Galbraiths's book A Short History of Financial euphoria he writes:

A further rule is that when a mood of excitement pervades a market or a surrounds an investment prospect, when there is a claim of unique opportunity based on special foresight, all sensible people should circle the wagons; it is the time for caution.

Caution indeed. Galbraith's book has much wisdom and understanding.

US GDP Growth Slowing Significantly; Recession Coming Soon

US annual GDP growth rate for the 2Q 2006 slowed dramatically and stood at 2.5%. Bloomberg reports:

The U.S. economy grew at a 2.5 percent annual pace from April through June, less than expected, as business investment in equipment fell for the first time in three years and consumers reined in spending.

The government's first estimate of the quarter's gross domestic product, the value of all goods and services produced in the U.S., compares with a 5.6 percent gain in the first three months of the year, the Commerce Department reported today in Washington. A measure of core inflation accelerated.

Economists expected a 3 percent gain in GDP last quarter, according to the median estimate of 74 estimates in a Bloomberg News survey. Estimates ranged from 2 percent to 3.8 percent. Housing Slowdown

Consumer expenditures rose at an annual rate of 2.5 percent last quarter, as a slowdown in the housing market discouraged spending, compared with a 4.8 percent pace in the previous three months. Economists expected a 2.1 percent gain, based on the survey median. Consumer spending growth has averaged about 3.4 percent a quarter the past 30 years.

The dramatic slowdown in GDP growth is noted. The US economy will be in a recession in the coming 12 months.

Just Take Out that HELOC!

Just take out that HELOC!

BubbleSphere Roundup

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

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

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

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

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

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

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

June 2006 New Home Sales Data

The US Census Bureau and HUD in a joint study released (pdf):

Sales of new one-family houses in June 2006 were at a seasonally adjusted annual rate of 1,131,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 3.0 percent (±12.0%)* below the revised May rate of 1,166,000 and is 11.1 percent (±9.8%) below the June 2005 estimate of 1,272,000.

The median sales price of new houses sold in June 2006 was $231,300; the average sales price was $290,600. The seasonally adjusted estimate of new houses for sale at the end of June was 566,000. This represents a supply of 6.1 months at the current
sales rate.

In June, sales declined in every section of the country except the West, which posted an 8.2 percent increase after a decline of 7.3 percent in May. Sales fell 11.3 percent in the Northeast and were down 7.9 percent in the Midwest and 6 percent in the South."

June New Home Sales: 1.131 Million Annual Rate (Calculated Risk)
New Home Sales Fall, Record High Inventory (The Housing Bubble Blog)

The median price of a new home was $231,300 in June, which was up by just 2.3 percent from a year ago and was down by 1.5 percent from May. The number of new homes for sale in the US in June 2006 was 566,00 which represents a 24% increase from June 2005 when the new homes for sale stood at 455,000.

It's The Inventory Stupid!

Housing inventory has been steadily increasing across the US. Nationally, the inventory of existing homes for sale has increased by 39.1% year over year from 2,678,000 in June 2005 to 3,725,000 in June 2006 according to data published by the National association of Realtors.

In the bubble markets, inventory has increased at an even faster pace then the national picture over the past year.

In San Diego County, housing inventory started off at 13,916 on January 1st 2006 and has risen by a full 67% and was 23,259 as of July 24th (Zip Realty, Bubble Markets Inventory Tracking).

In Los Angelos County, housing inventory started off at 24,463 on January 2nd 2006 and has risen by a full 82% and was 44,757 as of July 24th (Zip Realty, Bubble Markets Inventory Tracking).

In Sacramento Metro area, housing inventory started off at 9,513 on January 2nd 2006 and has risen by a full 80% and was 17,200 as of July 24th (Zip Realty, Bubble Markets Inventory Tracking).

In the Phoenix metro area, inventory spiked from 10,748 on 7/20/05 to 51,557 on 7/5/06 according ZipRealty and Bubble Markets Tracking Inventory. This represents an incredible increase of 379% year over year.

In Loudoun County (DC suburbs), see image to the left, the inventory has exploded going from ~1600 to ~4600 active listings from June 2005 to June 2006.

In Northern Virginia, a part of the Washington DC metro area, the number of active listings was 4061 in June 2005, which increased by 197% to 12,096 in June 2006 (MRIS).

In the Orlando area, inventory had exploded from 13,533 on January 7th, 2006 to 23,773 on July 21st 2006 (HousingTracker).

As Jim A wrote in a comments section of the The Housing Bubble Blog:

It'’s all about the inventory, stupid. Back when there was no inventory to speak of, say the '‘03-'’04 timeframe people in the market to buy a house would have the repeated experience of having houses that they looked at go under contract before they could decide to buy or not. Low inventories create a "“buy now or it's gone"” frenzied atmosphere.

But prices have risen far above the cost of construction, so that builders have put huge inventories of new homes (especially condos)on the market. With these large inventories, buyers don't have to jump immediately just because a nice house is for sale. They can take their time, if one house sells, there are plenty of others on the market to choose from. They'’re no longer pressured to meet the sellers price immediately or lose the chance at the house. They can offer less and see how desparate the seller is. This is why the idea that we have reached a new plateau of prices where forever in the future people will pay a higher percentage of their income on housing is so absurd.

The dramatically increasing number of housing units for sale in the bubble markets has and will continue to change the housing market. Meanwhile, demand is also declining albeit at a much slower rate then the increase in inventory. The dramatic increase in supply, coupled with the moderate decrease in demand is causing price declines in most bubble markets. As summer turns into fall this year, the declining housing market will become even more pronounced in the bubble markets.