Tuesday, January 31, 2006

Greenspan Retires. His Legacy.

Federal Reserve chairman Alan Greenspan retires today after a 18 year reign. Despite only two mild recessions during his tenure as Federal Chairman, Greenspan leaves as the economy faces huge negative imbalances.

  • A Massive Trade Deficit (~ 700 billion a year)
  • Housing Bubble
  • Federal Debt & Huge Deficits
  • Negative Personal Savings Rate

Faults in Greenspan's Tenure:

I. Very Low Interest Rates For Too Long & Lax Credit Standards

In recent years Greenspan dropped short term interest rates to the incredibly low rate of 1%. He kept the rate at 1% for a long time.

The above graph shows the roller coaster ride that was short term interest rates over the past 5 years. So much for laissez faire economics. The cheap money supply and easy credit in large part caused a credit bubble that contributed to:

  • The Housing Bubble
  • Negative Personal Savings Rate
  • Trade Deficit

Without the incredibly low interest rates and the lax credit standards the housing bubble would not have happened. The cheap easy credit was the gas that inflated the housing market to bubble status. Sure, there were other contributing factors, but the cheap and lax credit standards were crucial in creating the bubblicious housing market.

"There are some of us who believe he aided and abetted some asset bubbles," said Paul Kasriel, chief economist of Northern Trust Co. in Chicago

II. Support For Partisan Policies

The Fed chairman has also faced fire for stepping into areas that had nothing to do with monetary policy, offering support for Bush administration tax cuts in 2001 and private retirement accounts in the government system.

Moves like those outraged Democrats and fueled the sort of scorn that led Senate Democratic leader Harry Reid to last year label Greenspan "one of the biggest political hacks we have in Washington." (Reuters, Jan 30)

III. Unrealistic Remarks on the Economic Situation

Despite the fact that Greenspan coined the term irrational exuberance. Greenspan often is overly optimistic about the economy. For example in today's FOMC statement "Although recent economic data have been uneven, the expansion in economic activity appears solid." Appears solid? What about the trade deficit, the budget deficit, housing bubble negative personal savings rate and credit bubble? Greenspan was a Johnnie-Come-Lately to recognize 'froth' in the housing market.


Sure, being a Federal Reserve chairman is tough job and we have the benefit of hindsight, however this does not excuse Greenspan's mistakes. The economy is facing unprecedented negative economic imbalances that were in some part fueled by Greenspan's policies. These huge economic imbalances have been glossed over by Greenspan using Greenspeak. To be sure, these huge negative imbalances will lead to a recession this year. Of course, Greenspan will no longer be there to lead as the torch has been passed to Ben Bernanke.

FOMC: + 1/4 Point to 4.5%

"The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points to 4-1/2 percent."

"Although recent economic data have been uneven, the expansion in economic activity appears solid. Core inflation has stayed relatively low in recent months and longer-term inflation expectations remain contained. Nevertheless, possible increases in resource utilization as well as elevated energy prices have the potential to add to inflation pressures."

"The Committee judges that some further policy firming may be needed to keep the risks to the attainment of both sustainable economic growth and price stability roughly in balance. In any event, the Committee will respond to changes in economic prospects as needed to foster these objectives. "

WashPost: 'Reports Indicate Glut of Condos in D.C. Area'

The WashingtonPost is reporting: "MetroStudy's Kenneth Wenhold, director of the company's Virginia-Maryland division, predicted in an interview that so many condos are under construction or planned, particularly in Arlington and Fairfax counties, that "there is a very significant problem" of overbuilding and the potential for projects to go bust."

"Arlington and Fairfax have 14,156 units under construction and almost 28,000 planned or proposed, Wenhold said. "But in the same area, last year we only sold 4,001 condos." In 14 counties in Maryland, including those around the District and Baltimore, Wenhold said, 3,901 condo units are under construction"

"MetroStudy's fourth-quarter analysis of the area said listings of all types of housing for sale have doubled since July and new-home inventory for sale has jumped from 6.6 months of supply to 12.2 months. But much of that jump is due to the flood of condos. "If you remove the thousands of condominium units that are being built in Arlington County, Va., housing inventories drop to a much more reasonable 7.6 month supply," according to the report."

The supply is jumping like a mad man in the DC area. Expect the supply to continue to climb in the spring as more properties flood the market. Properties will be moving slowly in the normally busy spring season. The only way the supply is going to come down is when suppliers (sellers) lower their prices.

Update: 3015 Baltimore Avenue, Baltimore, MD

The lovely renovated rowhouse is still for sale at a reduced price of 349.9K. Back in October it was listed for 367K [To see more pictures click on previous link].

Will it sell at the reduced price?

Most Probably Not. It needs to be reduced much more. Despite its lovely renovation it is still only 2br and it is located on the gentrification frontier.

BubbleSphere Roundup

A relatively new site called The Massachusetts Housing Market has very valuable information about the housing situation in that state. Lots of great graphs here.

At Marin Real Estate, the post with a picture Iraqi Saddam's spokesman saying 'I assure you there is no housing bubble' was laugh out loud funny. Keep up the terrific reporting.

Seattle Bubble has insightful information. Be sure to take a look!

Across the border, there is the Vancouver Housing Market Blog. The coverage of the condo market is particularly well covered. :-)

Don't forget Out at The Peak. as investment information about high return savings accounts.

Monday, January 30, 2006

Bubblicious Quote of the Day

Don Foster Scoggins who works for Appraisers of Las Vegas .com had this to say about the Las Vegas Real Estate market in a company press release:

Scoggins warns that Las Vegas real estate investors should expect a lower rate of appreciation (at least compared to the red-hot pace of the last two years). "But, this is not a collapse, it’s just Las Vegas growing pains. To those who bought homes at the tippy top of the market, I’m sorry. Those homes have dropped a little because they were overpriced. But, overall, prices are higher and higher year after year," Scoggins said.

Las Vegas is more likely to be destroyed by fire and brimstone than have a collapse of housing prices,” Scoggins concluded.

Santa Barbara Association of Realtors Refuse to Release Sales Data

As reported in the Santa Barbara News-Press the realtors over at the Santa Barbara Association of Realtors refuse to share their sales information. During the housing boom times the realtors were glad to share their extraordinary sales. Now, as the housing bubble pops in Santa Barbara the realtors group is refusing to share their sales data.

Over the past several years, the News-Press has obtained sales and median price data for the South Coast from the Santa Barbara Association of Realtors. The group recently told the News-Press that it now refuses to make this data available to the newsroom. Other associations of Realtors across the county willingly continue to share sales and price information with the paper.
Pathetic. There is no law that says that they have to release their data. An independent source of the data gathered from city /county or state records needs to be compiled.

Potential buyers should contact the Santa Barbara Association of Realtors and inform them of their dismay at their decision. Tell them also that their actions make it more likely that they will use a real estate agent that is not a member of the association. The Santa Barbara Association of Realtors should do the right thing and release the market statistics as soon as possible.

UPDATE US Government Exceeds Debt Ceiling [ NOPE ]

"In a shocking development, the Treasury Department website is openly stating that as of January 24, 2006 our national debt stood at $8,185.3 billion and on January 26th at $8,190.5 billion. Yet the US national debt ‘ceiling’, the maximum amount of debt the US government may hold at any one time, stands at $8,184 billion – a full $5.5 billion less. Although called upon by John Snow, Congress has not yet passed an expansion of the debt ceiling and so the US government is now operating in technical default ( Financial Sense 1/27/06)"

Also, check out this post over at HOUSING BUBBLE? Much bigger than just a housing bubble!

Bureau of Public Debt

This was posted on Angrybear

EDIT / CLARIFICATION: The US is not in default. (Vorpal noted this in the comments) Not all of the National Debt counts against the Debt Ceiling and, in addition, the Treasury Secretary can play some accounting games as Treasury Secretary Robert Rubin did in '96 ... from SF Chronicle:
... in his Dec. 29 letter, Snow said that while the debt limit "will be reached in mid-February 2006," he could delay default for a month using "available prudent and legal actions."

These actions, MacGuineas said, would include putting IOUs instead of cash into federal retirement accounts -- a tactic that Clinton administration Treasury Secretary Robert Rubin first employed in 1996, when Republican lawmakers balked at raising a debt ceiling then at $4.9 trillion.

Back then, some lawmakers in the Republican-controlled House of Representatives called for Rubin's impeachment, saying his action usurped the powers of Congress. But in 2002, when the Bush administration was about to hit the $5.95 trillion debt limit it inherited from President Bill Clinton, then-Treasury Secretary Paul O'Neill employed Rubin's tactic to buy time until Congress raised the debt ceiling to $6.4 trillion in June.
I found this amusing, but the US is not in default.

Sunday, January 29, 2006

Bubblicious Alert: in Silver Spring, MD

It is totally bubblicious along, Georgia Ave (97) between downtown Silver Spring and Wheaton. On almost every street corner there are either one, two or more signs pointing to housing units for sale or for rent. Many of them are hosting open houses today. It is really a site to behold.

Highlighted red line is Georgia Avenue between downtown Silver Spring and Wheaton.

Update II: 716 5th Street ,NE - Reduced Again

The large renovated rowhouse located at 716 5th Street ,NE in Washington, DC has still not sold. Originally it was listed at 975K, then reduced to 925K, and now it has been reduced once more to 850K.

Original Bubble Meter Post (9/25/05)

Updated Bubble Meter Post (12/29/05)

Latest Craigslist Post

The Craigslist Post reads "PEN HOUSE, SUNDAY, JANUARY 29 2PM - 4 PM
SUCH A STEAL! This 6 BR, renovated home has mulitple bedrooms, parking, granite kitchen, original floors, and a 1 BR rental in basement. If you need the room, this house has it! Central Air, Radiator Heat, 3.5 baths, private patio, and room, room, room, ROOM! Right off of H street, where the next big renaissance is happening ( check out all the new business/ residential/ community plans!) REDUCED TO $850,000. Per Square Foot, THIS is the BEST VALUE ON THE HILL! "

So will it sell at the reduced price of 850K?

Possibly. I bet the reat estate agent is becoming increasingly desperate to sell this property.

The weird thing is this property is being listed by THE SMITH BROTHERS REALTORS who are the same people who listed the property at 1817 D Street SE (see below post). These properties are in nearby neighborhoods. This property was reduced a significant 75K ( from 925K to 850K), in contrast to the other property that was reduced a mere 9K ( from 599K to 590K).

Update: 1817 D Street SE

The price on 1817 D Street SE has been lowered by a whopping 9,000 dollars to 590K. That is a price reduction of less then 2%.

Original Bubble Meter Post

Update Post on Bubble Meter

New Craigslist Posting

So will it sell at the new price of 590k?

NOPE. There is an open house today between 2 - 4pm.

Saturday, January 28, 2006

Condo Project in Mount Vernon Square Neighborhood in Washington, DC

The picture shows a new condo project called Mount Vernon Court located near the new convention center. The address is 426 M Street NW.

A new 10-unit condominium is being built in the historic Mt. Vernon Square area. Residences include a mix of flats, duplexes, and penthouse triplexes. Units feature soaring ceilings, floor to ceiling windows, custom-designed Italian kitchen cabinetry, high-end appliances including Subzero refrigerators and Wolf stoves, spa-styled baths, and private exterior terraces and balconies. Originally priced from the high $400's to mid-$900's. Designed by Arcadia Design Services.
Units are still available for sale even though the delivery date is scheduled for February 2006. The condos are not selling nearly as well as condo projects that were completed in 2004 or 2005. The market for condos in DC has declined significantly from the 'glory' days of past years.

Friday, January 27, 2006

Mention in the Washington Post Express

The Washington Post Express is a free hand out newspaper given to commuters in the morning in the Washington, DC area. It mentioned my blog:

"The housing bubble is just another form of gambling" bubblemter.blogspot.com ISN'T SURPRISED THAT LAS VEGAS' CONDO MARKET HAS TURNED SOUR ON INVESTORS"

Thanks for the mention. The speculative episode has gone on long enough. Have a great weekend!

New Housing & Economic Numbers Released

New housing and economic numbers have been released. For more information see Record New Home Inventory, Prices Tumble over at The Housing Bubble 2.

Speculator Exits Early at a Loss

Back in November of 2004, a speculator put down a 50K deposit on a to be built single family house located in Fairfax , VA ( Northern Virginia, DC suburbs) . Stanley Martin is the homebuilder for this development. The 50k deposit included the usual deposit plus extra money for special options. The home would be built and settlement would occur in September 2005 for 1 million dollars. The plan was to then sell it a solid profit.

September 2005 came and the speculator realizes that the housing market has radically changed. The speculator came to his senses and decided NOT to settle (buy). Instead, he lost the 50K deposit.

Despite the 50k loss, it was still a wise decision to exit early. A 50K loss is better than a larger loss.

Thursday, January 26, 2006

Update from the Washington DC Area

The Washington Post reports "Real estate groups in the Washington area have also reported declines to varying degrees. The Northern Virginia Association of Realtors, for example, said December sales were down about 24 percent from December 2004 in an area that includes Alexandria, Arlington and Fairfax counties. In Loudoun and Prince William counties, sales were down roughly 14 percent. Prince George's County sales fell about 5 percent."

"Candy Clanton, an associate broker in Fairfax, has seen just how much the landscape has changed over the past several months. She listed a four-bedroom house in Woodbridge -- with new siding, windows and driveway as well as a renovated kitchen -- for just under $350,000. It was among the least expensive in the neighborhood, Clanton said, but last week, after three months, her client took it off the market. "I think the buyers who do have money . . . are all waiting to see what is going on," she said. "My phones are not ringing and my houses are not selling."

Time: 'Vegas Condos Go Cold'

Time Magazine reports that 'Vegas Condos Go Cold.' "Now that several high rollers in the Las Vegas condo-hotel game, including luxury properties linked to Michael Jordan and Ivana Trump, are either folding or selling their holdings, a growing number of players are losing their taste for big bets on high-rise, residential real estate development."

"Over the past two years, as high-rise fever spread across town, prices for the luxury apartments ballooned, fetching as much as $500 - $1,000 a square foot or up to $1.5 million for a one-bedroom— at the peak. Buyers, mostly interested in flipping them for quick profits, eagerly anted up five-figure down payments, while developers planned more than 70 luxury towers holding a total of about 43,000 units on or near the Strip and downtown. But the intense competition for the city's limited supply of contractors sent construction costs skyrocketing 30% last year, just as lending policies tightened, interest rates climbed and sales started to slow."


"“It'’s another case of irrational exuberance," says John Restrepo, head of a Las Vegas real estate and economic consulting firm. "“There is a market for high-rise condo hotels here; but it'’s not as deep as people thought it was. The days of the two guys from the East Coast or Canada coming into town and promoting a condo development with a website and a dream are over."

Las Vegas is a gambling mecca. The housing bubble is just another form of gambling. Las Vegas is especially vulnerable to a popping, due to its strong reliance on the housing market and tourism industry as economic engines.

Wednesday, January 25, 2006

New Decemeber 2005 from NAR

The December 2005 numbers are out from the National Association of Realtors (NAR).

Existing-home sales declined in December but easily set an annual record, according to the National Association of Realtors®.

Total existing-home sales – including single-family, townhomes, condominiums and co-ops – were down 5.7 percent to a seasonally adjusted annual rate1 of 6.60 million units in December from an upwardly revised pace of 7.00 million in November. Sales were 3.1 percent lower than a 6.81 million-unit level in December 2004

There were 7,072,000 existing-home sales in all of 2005, up 4.2 percent from 6,784,000 in 2004. This is the fifth consecutive annual record; NAR began tracking the sales series in 1968

So what does David 'Soft Landing' Lereah have to say about these numbers?

David Lereah, NAR’s chief economist, expected the monthly sales decline. “This is part of the market adjustment we’ve been discussing, with a soft landing in sight for the housing sector,” he said. “The level of home sales activity is now at a sustainable level, and is likely to pick up a bit in the months ahead. Overall fundamentals remain solid, driven by population and employment growth as well as favorable affordability conditions in most of the country, so we expect the housing market to remain historically high but lower than last year’s record.”

What about National Median Price?

The national median existing-home price2 for all housing types was $211,000 in December, up 10.5 percent from December 2004 when the median was $191,000. The median is a typical market price where half of the homes sold for more and half sold for less.For all of 2005, the median price was $208,700, up 12.7 percent from a median of $185,200 in 2004.

Regionally, the West saw the largest decline in existing home sales where they "fell 11.4 percent to a pace of 1.40 million in December, and were 11.4 percent below a year ago." Of course, these numbers are all regional or national. The numbers for many of the bubble markets are significantly worse.

Speculators Looking to Get Out!

A reader sent me this most bubblicious picture from Northern Virginia and wrote: "These signs are out front of a condo conversion that sold in 2004. Something tells me that there might be some investors looking to get out...

The complex is the "Gates of Mclean." It is located more or less at the intersection of 123 and Scotts Crossing at the edge of Mclean and Tysons Corner. This complex might be a little bubble all by itself.

Gates of Mclean Site

Keep up the good work"

Bubble Meter Blog Mentioned By CBSNews

The Bubble Meter Blog was mentioned in a story by CBS News:

Are housing bloggers prematurely crying, "The sky is falling"? One blogger thinks so. Also, chatter heats up over ads on a new science blogging network, and a young entrepreneur blogs his fall from grace.

Sorry To Burst Your Bubble…

If you follow real estate news – or track real estate blogs – trying to read the housing market tea leaves may appear to be about as useful as asking a Magic 8-Ball to Pedict whether the bubble will burst.

Does anyone really know?

Many bloggers think they do. For example, Bubble Meter, “a blog dedicated to the premise that there’s a housing a bubble in many locales in the USA,” features a photo from Northern Virginia with for-sale signs lining the street outside a condo Cnversion that sold in 2004. Wende Feller’s ominous Making a Killing in Real Estate blog tracks her progress as she writes a novel incorporating the housing bubble into the great American murder mystery. And numerous sites like The Bursting Bubble and Housing Panic are devoted solely to guessing when the housing bubble will burst.

But this week, bubble bloggers are being taken to task for their irrational exuberance ... or, “blogbooberance,” over the housing market.

The blogger pleads, “Please, the Fed, raise the blogging interest rates or constrict the blog money supply now.

Longorshortcapital bemoans “the emerging bubble in housing bubble blogs. These blogs, devoted to detailing the demise of the housing and refi boom, have begun to proliferate more quickly than Freedom Loans or all those anacondas I let loose in the Everglades in the 80’s.”

The Irrational Blogbooberance must stop now.” It might be a losing battle.

It is great to be mentioned in a news story by a large media operation. The proliferation of bubble blogs is a true reflection of the bubblicious situation occuring in many locales across the USA.

Home with Mercedes Included

Buy this home for $1,189,000 and receive a "limited edition Mercedes" Here is the Craigslist Post "Brand new 5,800 sf home on 1/2 acre with 5 bedrooms, 5 bathrooms, breakfast room w/ vaulted ceiling, gourmet kitchen w/ granite counters and walk in pantry, finished LL with berber carpets and fireplace. Home has a three car garage and to purchaser the home will be complete with a limited edition Mercedes. Call for details. Price reduced and also for rent/ with option to purchase."

The house is located in Ashburn, VA which is an outer suburban area of Washington, DC.

Thanks to the reader who informed me of this 'gem'.

Tuesday, January 24, 2006

Relatively New Housing Bubble Blog

Check out the relatively new housing bubble blog called South Bay Beaches Housing Bubble . The blog description has "Hello, Bearmaster here, your humble reporter is standing with jaw wide open watching the astronomical bubbleminiums being built in the South Bay area of Los Angeles, with bubbleminium prices to match. I'll do my best to capture the real estate mania in my neighborhood."

Maybe there is a bubble of housing bubble sites?

Nah. Just a true reflection of the bubblicious situation occurring in many markets.

Welcome to the housing bubble blogosphere!

Is it a Good Time to Buy?

Some are now claiming it is a good time to buy in the bubble markets. Real estate agent Jackie Alexander out of suburban San Diego writes over at Realty Times:

This is a great time to buy in La Jolla! The market has slowed to a normal market so there aren't multiple offers to worry about and sellers are showing some flexibility when it comes to price.
Inventory is increasing, and prices are generally falling in the bubble markets.

Is it a good time to buy?

It certainly is a better environment to buy now then at the peak (generally at the end of the summer) because there is indeed more inventory available and lowball offers might be accepted by certain sellers. However, prices will continue to decline in the bubble markets for many years to come. The typical housing unit located in a bubble market will decline more then 20% in real dollars [inflation adjusted] over the course of 3 years from the peak price.

Many bubble markets will experience real price declines much greater then 20%. Some markets may experience price declines of 60% in real dollars over the next 3 years. Of course in some markets prices may decline for more then 3 years.

It is very hard to predict when the real dollar price bottom will occur in a bubble market. But in most bubble markets we are a mere 4 or 5 months from the peak price. It will take many years for prices to reach bottom. There are still large price declines ahead in the bubble markets. Now is NOT the time to buy in the bubble markets. Be patient. Prices will continue to fall.

Monday, January 23, 2006

Keyword Analysis

Here are some of the keywords that people searched for to arrive at this site:

  • bubble meter
  • bubblemeter
  • bubble meter blog
  • mcmonster
  • recession 2006 2007
  • recession 2007
  • housing bubble 2006
  • deflation 2007
  • speculative homebuilding
  • housing bubble major metro
  • washington dc housing bubble
  • washington, dc northern virginia housing market 2006
  • northern virginia real estate bubble
  • will home prices drop in 2006 virginia
  • bubble blog dc
  • neighborhood appreciation graph
  • real estate bust dc prices drop
  • home prices decrease boston cleveland cnn
  • housing market forecast chicago
  • florida's housing bubble and january 2006
  • january 2006 housing bubble boston
  • eya urban real estate
  • california association of realtors housing inventory
  • 2006 bubble markets
  • mortgage fraud toll brothers
  • 50 year loan
  • rent-to-price ratio

Sunday, January 22, 2006

For Sale By Owner in Silver Spring, MD

The house is listed on the MLS ( MC5465375 ) for 510K. It has 4br 2bath. It was built in 1947. It is located about 2/3 of a mile from downtown Silver Spring. The neighborhood is alright. It is located next to some slightly rundown apartment buildings.

So the owner has decided that it needs to be sold they put up signs stating 'Open House, House to be Sold Sunday, To Highest Reasonable Offer'

Handout flyers were even placed on cars in the neighborhood. In the flyers it said the house was open on Saturday and Sunday and that on Sunday night it would be sold to the 'highest reasonable offer.'
  • So how much will they be offered for the property?
  • What will they consider a 'reasonable offer'?
P.S. This house is just about 5 houses down from 8300 Hartford Ave. Should be interesting.

Weekend Roundup

Northern New Jersey Real Estate Bubble Blog - Reaches 100,000 hits. This is a huge accomplishment. Super blog. Lots of great information. Keen observer of the bubblicious episode. Keep up the solid work.

Housing.com Blog - The chatty style of this blog is terrific. The blogger writes " Thankfully, MSNBC's Bob Sullivan lays the smackdown. A bad loan is a bad loan no matter what part of the country you live in. One can only hope that the boom in the Midwest doesn't get all bubblicious," Why are there no comments allowed on this blog?

Marin Real Estate Bubble - Over here, Marinite takes a political stand over the issue of an open Multiple Listing Service (MLS) with a post titled
Power to the People. Marinite writes "this blogger supports the Open MLS Initiative. It's about time we put the power back into the hands of We The People. It would make more transparent the selling history of any address and thereby help reduce realtor shenanigans and general misuse of the MLS."

The Boy in the Big Housing Bubble - Has a great piece A Los Angeles Sampler. "I was on the west side this week and picked up a sheet advertising various "hot picks for '06. I've included some of the quotes from it here. However, I do not do so to prove how expensive housing is, but rather, to show the lengths that sellers have to go to in an effort to move these houses. These places are gems that not long ago would have been snapped up without the agent posting so much as a photo on a website. Now they buy newspaper ads, offer upgrades, and circulate fliers with photos. If there was any doubt, dispel it. LA is not a seller's market anymore"

Overvalued - A recently started blog. Great graphs showing housing prices in selected metro areas compared to inflation. Solid.

Saturday, January 21, 2006

Blogging Guidelines

Here are some blogging guidelines that I try and follow:

  • Cite and link to your source.
  • Always use spell checker
  • Read each post over at least once
  • Stick to a regular posting schedule ( i.e. if you are a daily blog, post at least daily, if you are a once a week blog the post once a week; occasionally days can be missed)
  • Allow and encourage comments. Interactivity from the readers is critical. Thank you readers.
  • Link to other similar blogs.
  • Collaborate with other bloggers
  • Pictures can sometimes tell 1000 words.
  • Don't be afraid to criticize the 'experts' if you think they are wrong

Friday, January 20, 2006

Boarded up Rowhouse in Washington, DC

This boarded up rowhouse, located along 1st Street NW near downtown Washington, DC will probably be rehabbed in the coming years as this neighborhood continues to gentrify.

MSNBC: Go to the Midwest, young man! It's cheaper!

In the MSNBC article: "California or bust!" That's been the mantra for generations of Americans who wanted to ride the wave of westward migration. Now, the tide may be turning, as families turn back to their Midwestern roots, searching for a more affordable lifestyle for themselves and their children. "

"The average cost of a house in the suburban Midwest costs anywhere from $100 to $120 per square foot. On the East coast, you can pay from $300 to $325 a square foot. If you want to live on the West coast, some areas run as high as $500 per square foot."

"Taxes are another big reason that families are moving away from coastal properties. "

Wednesday, January 18, 2006

Federal Reserve: Beige Book Report on RE

The Federal Reserve had this to report about the residential real estate market:

Many Districts reported moderation in residential real estate activity, although from high level. Boston, New York, Cleveland, Richmond, Atlanta, Chicago, and Minneapolis reported some cooling in real estate markets. While some of the hottest markets in the San Francisco District have cooled--for example, Southern California and the San Francisco Bay Area--other areas, such as Oregon and especially Hawaii, have reportedly heated up further. Kansas City and Dallas continued to see strong housing markets. And construction and repair work remained brisk in Louisiana and Mississippi.

The link to the Beige Book Report.

Market Numbers from Northern Virginia

(Click on image for larger version)

Inventory Comparison between December 2004 and December 2004

For single family homes we see that in December 2004 there were 1,286 active listings in Northern Virginia. By December 2005 that number had almost tripled and reached 3,816 or a 196% increase in active listings.

For condos & coops we see that in December 2004 there were a mere 359 active listings in Northern Viginia. By December 2005 there were five times as many listings, reaching 1,842 or a 410% increase in active listings.

Home Sales Comparison between Decemeber 2004 and December 2004

For all housing units in December 2004 there were 2,801 sales. In December 2005 that number had decreased by 24% to 2,131.

Price Comparison between December 2004 and December 2004

For all housing units in December 2004 the average price was $476,941. In December 2005 that number had increased by 15% to $552,621. Please note that the price appreciation happened in the spring and summer and not in the later months of the year.

The spring numbers will be very interesting. I'll be watching closely. Stay Tuned.


* EDITOR'S NOTE: Figures are based on data extracted from the Metropolitan Regional Information System, Inc (MRIS). Figures include data collected from the counties of Fairfax and Arlington, and the cities of Alexandria, Falls Church, Fairfax, and the towns of Vienna, Herndon and Clifton. The information is deemed reliable but not guaranteed. Data maintained by MRIS may not reflect all real estate activity in the market.

New Site: Sacramento Land(ing)

Sacramento Land(ing) is just getting started. "Is the Sacramento housing market headed for a soft or hard landing?"

There are a growing number of regional bubble sites. :-) Bubble Meter welcomes the new sites. If there are sites that I am missing please inform me.

The Mouse on the Bubblepad

Tuesday, January 17, 2006

North County Times: Housing Bubbles and the Web sites that love them

The North County Times has this piece about the housing bubble sites.

No, the homes aren't selling as quickly as they have in the past, but they are selling, which implies that for every seller who believes there is a housing bubble, there are buyers who either disagree or don't care.

Or maybe the buyer just doesn't know about the housing bubble. Until about 4 months ago the media did a pathetic job of informing people of the housing bubble. Now the media is playing catchup.

This difference of opinion has fostered a booming topic for online blogs and Web sites.

That's right. Praise be for the web and the blogosphere.

Everybody's favorite investment topic gets dozens of related blogs on blogspot.com, a site where anybody can launch their own pages with little or no skill, risk or expertise in the position they are advocating.

There's http://bubbletracking.blogspot.com/, http://housingpanic.blogspot.com/, http://bubblemeter.blogspot.com/, http://ushousingbubble.blogspot.com/, http://thehousingbubble.blogspot.com/ and even http://thehousingbubble2.blogspot.com for those who didn't get enough doom and gloom from the first site.

People can indeed launch blogs with little skill or expertise in the field they are blogging about. However, these housing bubble bloggers have spent countless hours examining and thinking about the complex issues involved. The so called 'experts' that the media often interview are usually paid shills like David Lereah or real estate agents who have a vested interest in keeping the bubble expanding.

Some folks feel so strongly about the subject they start whole sites dedicated to persuading you to sell now before it's too late. They include http://patrick.net/wp, http://www.housingbubblebust.com/, http://housebubble.com/ and the perpetually popular Professor Piggington's Econ-Almanac for the Landed Poor at http://econo-almanac.com./ Note, each includes plenty of ads offering to help you sell that nest egg-killer of a home of yours.

Grim posted in the comments section of the article "Last time I checked newspapers were full of ads as well. In fact, a quick glance at my local Sunday paper gives me at least a pound worth" Indeed, the mainstream media have profited handsomely from the housing bubble.

Flippers Exiting in Baltimore

Patterson Park is a gentrifying neighborhood located a few miles east of downtown Baltimore. This part of the neighborhood has just begun gentrifying. It has been a hotspot for flippers, rehabbers and speculators.
131 South Curley is available for sale for 229K.

The current owner just recently bought the property for 170K on 10/28/2005.

The posting on Craigslist states "The home still needs someone to finish the rehab. My estimates are of 20-23k to finish the job. The 2 upstairs baths have just been completed and boast jacuzzi tub and porcelin tile. This house is a large 2 bedroom 3 full bath home w/ central air, recessed lights, exposed brick, new windows, high cielings, columns, deck off guest room, and a partially finished basement. The sheet rock is new but needs to be taped and spackled, the kitchen needs new counters and cabinets and the carpet/ hardwood needs to be installed. Comps here are now pushing 400k amd w/ the spring pop 400k is achievable. This is a great opportunity at 229k to turn a nice 50-70k profit or more"

If there is so much profit potential then why is the seller selling?

According to the seller, I can buy the property at 229K and put in 23K which adds up to 251K. Then "w/ the spring pop 400k is achievable" even with commissions and holding costs a profit potential of 130K is realistic.

So why is the seller selling now?

Maybe the seller is really afraid of a different kind of spring 'pop.' A negative appreciation type of pop. Its all very popilicious.

Monday, January 16, 2006

San Diego is Crashing

The Union Tribune has this important news. "San Diego County resale house prices tumbled last month by the biggest number in 18 years of record-keeping and contributed to the smallest year-to-year rise in overall prices in six years, DataQuick reported Monday. The median resale price for existing single-family homes dropped $15,000 from November to December to stand at $550,000, the largest month-to-month decline since DataQuick began keeping records in 1988."

"Last year was the first time since 2001 that the number of home sales fell from the previous year. The total sold last year was 55,366, down 9.1 percent from 2004's 60,886. This also was not a surprise, since monthly sales reports from DataQuick have showed a decline in activity on a year-over-year basis for 18 straight months."

"The total number of listings has been growing, reaching a peak of just over 15,000 listings in November, about five times more than at the peak of the buying frenzy in spring 2004. Consequently, sellers report few if any bidding wars for their properties, and buyers say they have more time to consider their choices."

San Diego is farther along the bubble curve then most other bubble markets. San Diego is a leading indicator as to what is likely to happen in other bubble markets.

Great Falls Park

Today, is Martin Luther King Jr Day so work was cancelled today. The weather was pleasant ( 45 high,sunny, not windy) so I headed to Great Falls Park, on the Maryland side. It was lovely there. :-)

Bubbles in The Potomac River

Sunday, January 15, 2006

CNN: 5 slow-market strategies

CNN offers this advice for selling housing units in a slow market. "Sellers are having a harder time getting good prices for their homes. Even in the hottest markets, getting top dollar is a challenge when you don't have 20 buyers battling it out in a bidding war." It offers five basic pieces of advice to selling in a slow market:

  • Check your home's "curb appeal."
  • Clear the clutter inside
  • Don't skimp on look and feel
  • Adios Fido ( Clear bad smells , use air freshener"
  • The right person for the job
Perhaps the 'top dollar' that you expect is no longer realistic in the declining bubble markets. Reducing the price is a great option. Chasing prices downward is a losing strategy.

My Date Believed in the Florida Housing Bubble

Last Saturday night, I had a wonderful date with a woman who grew up in Southern Florida. On first dates I do not mention my 'radical' housing bubble beliefs. I told her about the young married couple who both went into real estate in St. Petersburg - Tampa, Florida area despite having degrees in something unrelated. I explained how it is unwise to have two married people pursuing a new career in the same unstable field.

She said there is a housing bubble in Florida. Right on! She got points in my book. :-)

Saturday, January 14, 2006

DC Home Prices

DCHomePrices is a terrific Google Mashup that allows one to view home sale prices and date in Washington, DC by geography. Very neat.

Housing Developers Using Deceptive Names

Housing developers sometimes use deceptive names and tactics to market housing developments. For example the developers of Capitol Hill Tower are using the name 'Capitol Hill' which is the neighborhood right around the US Capitol. However, Capitol Hill Tower is not located in the Capitol Hill neighborhood, but rather is located in the Southeast Waterfront neighborhood.

Friday, January 13, 2006

Chief Economist of the California Association of Realtors is Wrong

Leslie Appleton-Young, who is the California Association of Realtors Chief Economist, delivered her forecast for the 2006 housing market at the Trump National Golf Course in Rancho Palos Verdes. As reported by the Press-Telegram:

The forecast confirmed what she and other housing prognosticators have been saying for the past year: The market is on course for a soft-landing, with slowing housing appreciation and falling home sales, and that there is not a housing bubble waiting to burst.

"There is a bubble a bubble in the number of articles about the housing bubble," Appleton-Young said of the "hype."

She added, "The median price of a U.S. home has never declined."

Hold on. The National Association of Realtors has this too say:

Home price declines are very rare to begin with. In fact, the national median home price has not declined since the Great Depression.

The two bold statements are in direct contradiction. Who is right? The National Association of Realtors is indeed correct that the "national median home price has not declined since the Great Depression." Leslie Appleton-Young, who is the California Association of Realtors Chief Economist is wrong. She is either lying or does not know her facts. The housing cheerleading clowns who are running the California Association of Realtors are pathetic.

Wednesday, January 11, 2006

Update: 8300 Hartford

The house located at 8300 Hartford in Silver Spring, MD still has not sold. It has been reduced once again to 550K from 559K. The house was originally listed at 599K.

See previous posts:

8300 Hartford Avenue - December 12
Still Not Selling in Silver Spring - November 30
Falling Leaves, Falling Prices II - November 13
8300 Hartford Avenue, Silver Spring, MD - October 9th

Will it sell at this new reduced price?

The seller seems to be chasing the market down.

NAR: Housing Market to "Normalize" in 2006

The National Association of Realtors ( NAR) is saying the market will 'normalize' in 2006. The Bubble Meter continues to bash NAR for their misleading information. The press release states:

The key word for the housing market in 2006 is balance, with a return to a more normal rate of price growth, according to the National Association of Realtors.

David Lereah, NAR's chief economist, said current trends in the housing sector are healthy. "We don't need to break a record every year for the housing market to be good, in fact, cooling sales are necessary for the long-term health of this vital sector," Lereah said. "A modest slowdown in home sales, coupled with improvements in housing inventory, means the market is in the process of normalization. That will help to bring balance between home buyers and sellers, yet sales will remain historically strong."


"A lot of demand has been met over the last five years, and a modest rise in mortgage interest rates is causing some market cooling. Along with regulatory tightening on nontraditional mortgages, there will be fewer investors in the market this year," Lereah said. The 30-year fixed-rate mortgage is likely to trend up gradually to 6.7 percent during the second half of the year. "This will preserve generally favorable affordability conditions and keep the housing market at a more sustainable sales pace."

NAR President Thomas M. Stevens from Vienna, Va., said price appreciation should be at more normal levels across most of the country. "Buyers are no longer competing for a tight supply," said Stevens, senior vice president of NRT Inc. "That means home prices generally will rise much closer to long-term norms, which is the overall rate of inflation plus one or two percentage points. Lower price appreciation will keep the door open to first-time buyers while preserving the investment advantages of homeownership for sellers. "

The national median existing-home price for all housing types, projected to jump 12.9 percent to $209,100 for 2005, is forecast to rise 5.1 percent to $219,700 this year. The median new-home price, which should be up 4.6 percent to $231,300 for 2005, is expected to increase 6.0 percent this year to $245,200.

Inflation as measured by the Consumer Price Index is projected to rise 3.4 percent for 2005 and 3.0 percent in 2006. Inflation-adjusted disposable personal income is forecast to increase 1.3 percent for 2005 and 4.6 percent this year.

Growth in the U.S. gross domestic product is likely to be 3.6 percent for 2005, with GDP seen at 4.0 percent this year. The unemployment rate is expected to drop to 4.8 percent by the end of the year.
Interesting. The GDP will not grow 4.0 percent this year. GDP growth will be much lower due to changing economic conditions as the unsustainability of this debt ridden twighlight economy finally catches up.

Furthermore, the soft landing that the NAR is touting will NOT occur in the bubble markets. There will be significant declines in real dollar prices over the next few years in the bubble markets as the bubble pops.

Tuesday, January 10, 2006

Northern Virginia MRIS Numbers Out

The new numbers for December 2005 are out from the Northern Virginia Association of Realtors.

Basically, in the Northern Virginia ( DC suburbs):
  • The number of sales are way down in Dec 05 compared to December 04
  • The inventory is way up in Dec 05 compared to December 04
  • The median and average sales price was higher in Dec 05 compared to December 04

The bubble continues to pop in the DC area.

The Coming Late 2006 / Early 2007 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 on Nov 11:

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 September 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 other factors that will contribute to a future recession:

  • High Energy Costs
  • Federal Debt & Deficit
  • Continuing Housing Bust
  • High Consumer Debt
  • Large Trade Deficit
  • Continued Offshoring
  • Security Costs
  • Rising interest rates
Billionaire speculator George Soros said he did not expect the United States to fall into recession in 2006 - but he does the following year.

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 significant economic factors will almost certainly put the US into a recession by late 2006 or early 2007.

Monday, January 09, 2006

Housing Related Sites

Bubble Info - The insider's guide to North SD County real estate. Just started.

Real Estate Advisor - A real estate google mashup. Pretty Neat.

Real Estate Decline - Lots of stuff on main page. Not well organized. New.

Outer Banks Real Estate - Ronnie is mortgage broker based in the Outer Banks. He agrees with me that 50 or 60 are a bad idea. :-)

Over Valued Blog - Lots of graphs. New Site.

Sunday, January 08, 2006

Townhouse in Leesburg, VA

For 489.9K you can buy this spacious townhouse in Leesburg, VA.

"OPEN SUN 1/8 1-4:30 PM!!STUNNING 3 LVL TH RIGHT OUT OF THE PAGES OF A POTTERY BARN CATALOG! Three Bedroom, 2 Full Baths, 2 Half Baths. Sunfilled Main Level boasts custom paint,custom window treatments, molding & palladium windows *Roomy kitchen has HWs,island* Cozy Family room & Bfast room off kitchen leading to private deck* Expansive Master W/ vaulted Ceilings, His/Hers walk-in closets, linen closet, large soaking tub."

Craigslist Listing

The townhouse was built very recently. However, the townhouse is located all the way in Leesburg, VA which is about 35 miles from downtown Washington, DC. There are many jobs in much nearer suburbs. Traffic is pretty bad heading from far out bedroom communities like Leesburg, VA towards job centers in closer in suburbs located along the Dulles Corridor.

Will the townhouse sell at 489k?

Probably not. Despite being a large recently constructed townhouse, one is still paying 489K for a townhouse located in the way outer suburbs. There is a huge amount of inventory out in that area that is for the most part just sitting.

On the left the graphs show the inventory and sales trend in Loudoun County, VA ( Leesburg is a part of) for SFH. Tumbling sales and growing inventory is the story in the far western suburb of Washington, DC. ( the graph is from the Northern Virginia Association of Realtors )

Young Married Couple Caught up in Housing Bubble

A young recently married couple who I know recently graduated from the University of Maryland, Colleg Park. The wife has a degree in teaching, the husband has a degree in environmental science. Their original plan was to head south from Washington, DC to somewhere in Florida. She would teach and he would do water quality type environmental work down there. They arrived in Tampa / St. Petersburg area and became caught up in the real estate boom. They are now both residential real estate folks.


Friday, January 06, 2006

Popilicious in DC

FOUR rowhouses available along MacArthur Blvd in DC.

ARMS and Fixed Rate Mortgages Converging

The interest rates on a 5/1 ARM and a 30year fixed rate are converging.

Thursday, January 05, 2006

Interview with Young Potential DC Buyer

I interviewed a young 25 year old who currently rents in the Washington, DC metro area. He works in Information Technology.

I understand you currently rent. Have you considered buying?

I think about it every once in a while. But, I don't think I can afford to buy a house anywhere on one income without being married. A house ties you to one place, with the uncertainty of the housing market I don't know if its prudent to buy a house as a temporary place. The Baltimore market is undervalued. At the same time I am worried if I don't buy now in the Baltimore area, I will miss the train.

Have you considered a condo?

No prices for condos are outrageous and you still have to pay condo fees. [ If you buy ] you have to hope prices keep on appreciating. A condo is not something to live in the rest of your life. You are forced to sell when you need a bigger house. Condos are not a good investment in the DC area.

How often do you keep up with housing prices?

I hear people talk. I stopped looking for listings along time back because it was far out of my price range.

Do you feel pressure to buy from friends, family, and/or coworkers?

My grandmother, bless her soul, calls every week and asks me when I'll buy.

If prices were to decline significantly in the Washington, DC area would you buy? If so where?

Yes I would in a safe neighborhood along the Metro ( train system ).

Many homeowner have made a boatload of money during the housing boom as prices became unaffordable to young professionals. Are you a bitter renter?

As the rolling stones say "you can't always get what you want." There is nothing to be bitter about.

When do you think you will be buying a home?

Well looks like I'll be marrying an Occupational Therapist (OT). Based on that I'll have to wait till divorce then marry someone a little more like a doctor or lawyer. I don't understand where all this money comes from there are only so many lawyers. Who is buying a rowhouse for 4,000 a month in the ghetto.? The average professional couple takes home 3,000 per person per month ( after taxes ). They bring home 6K a month. Pay 4K a month in mortgage which only leaves 2,000 a month for everything else. It requires women to work for the rest of their lives. They can't afford to take a year or two off for children. Therefore if want the wife to stay home a little bit you cannot consider a home for 600K. If one loses a job it is very tight. That is why not even after marriage I would buy such a house. I am not buying in the city. I might buy in the far suburbs or in Baltimore. Hopefully, the Baltimore market will not go through the roof as it very well may

New Condo Next to Metro Station

On my way to work this morning I snapped the above image of a new condo development abutting the Takoma Metro Station.

In this condo development owners who bought are selling 2br 2.5 bath units for 459K. MLS #DC5468486 .

Will it sell at 459k?

Probably not. It is a convenient location. But 459K is huge amount to pay for a condo in an alright area.

Wednesday, January 04, 2006

John Murcell & the 50 or 60 Year Loan

The desperation of the Bubble Cheerleaders is growing. Some of them have drunken the Kool Aid, others bubble cheerleaders are professional liars ( David Lereah ) .

Many rich and powerful people have benefited tremendously from the housing bubble. Some of them want it to continue at unreasonable costs. As reported by Inman News, 01/04/05:

Just as folks are getting used to the idea of 40-year mortgages, securities issuers are upping the ante, talking about possible amortization schedules of 50 years, according to industry professionals.

"It's a good idea for consumers," said John Marcell, president of the California Association of Mortgage Brokers. "There's nothing wrong with a 50- or 60-year

Nothing wrong? Even if you are 25 years old and take out a 50 year loan you will finish paying off the loan at age 75. The other major problem is the monthly savings on 50 year or 60 year loan compared to a 40 year loan is negligible.

300,000 Mortgage Loan, 6.5% Interest, Fixed,

Monthly Payments
1756 = 40 year
1691 = 50 year
1658 = 60 year
(Source: Bankrate Mortgage Calculator)

So if one decides to takes out a 60 loan they would save less then $100 a month over a 40 year loan ( 6.5% fixed rate).

John Marcell is a bubble cheerleader and a professional liar. Clearly, there is something wrong with a 50 or 60 year loan. Challenge these 'experts.'

Major Metro Appreciation Graphs

Major Metros Appreciation Graphs

Thanks to the Housing Bubble Bust!!

Tulipmania vs. Housing Bubble

Tulipmania was much more bulbilicious then any housing bubble market in the US. Nevertheless, the bubble markets are in for significant price declines over the next few years.

Tuesday, January 03, 2006

Higher Credit Card Mnimum Payments in 2006

The new law requiring higher minimum credit card payments is now applicable. Here is an excerpt from Bankrate's Article:

If you're one of the 7 percent of Americans who make only the minimum payment on their credit card bills each month, things are about to get worse for you.

In the past, credit card companies required customers to pay an average of just 2 percent of their total credit card balance, which meant constant debt for many consumers. The 2 percent minimum payment only covered interest and other fees, so it could often take a lifetime to pay off the principal balance

Now, federal banking regulators are trying to save consumers from themselves by issuing guidelines to credit card companies and banks stating that monthly minimums should cover interest, any fees or extra charges and at least 1 percent of the principal amount.

This comes at a particularly bad time for Americans who are facing both higher interest rates and the new bankruptcy law that makes it harder for consumers to write off their unsecured debts.

The squezing is continuing. More pressure. Pressure pops bubbles.

Monday, January 02, 2006

Chicago Market Update & Forecast

Reporting Live from Chicago:

The Chicago market is quite fascinating. According to the OFHEO 3Q 2005 Report the 5 year price appreciation for homes in the Chicago area was 47% and the one year rate stood at 9%. Chicago's price appreciation rate is strong but not stratospheric like many metro areas in California or Florida. Like many other parts of the country job and wage growth over the past five years has been anemic (weak). The price appreciation rate is quite varied depending on the neighborhood and type of property.

Condos have sprouted like weeds in the metropolitan area. The above picture is of a new condo development in the Lakeview neighborhood.

In the past few months the Chicago residential market has declined in terms of sales. According to the Chicago Tribune:

And in Chicago, a North Side real estate agent confirmed the trend in his territory.

"Even adjusting for the weather, home sales have been slower than normal the last three months," said Mario Greco of Rubloff Residential Properties' Lincoln Park office.

"A lot of people have been fence-sitting. Some have been worried about the talk of a bubble, but it won't happen in Chicago," Greco said.

He noted that resale prices in North Side areas like Lincoln Park, Bucktown and Wrigleyville are rising at a lower rate than the national average of 13.2 percent in November.

In the Chicago area the median price of a single-family home rose 11.2 percent from November 2004, to $267,000, while median condo prices increased 7.8 percent, to $208,000, according to the Illinois Association of Realtors.

"But sales should bump up in the traditional spring market because of pent-up demand. After all, mortgage interest rates of 6 to 6.5 percent are not bad rates," Greco said.

Home sales dropped 0.9 percent statewide from November 2004. But despite the decline, sales were headed for a record for the fourth year in a row, according to the Illinois Realtors.

But while condo sales were up 7.4 percent in the Chicago area, sales of single-family homes fell 3.1 percent.

The slowdown in sales, however, may not apply to all areas around Chicago, particularly the southwest suburbs.

"The area that includes Plainfield, Joliet and Aurora is one of the 15 hottest markets in the nation. We're not seeing a slowing," said Judy Gardner, who owns a real estate firm in Joliet.

"Some prices have increased $30,000 to $50,000 in the last eight months. The average home sells in about 30 days, but others have gone in a day or two, even just after Christmas," Gardner said.

Based on the rate of business now, she predicts that 2006 "is going to be a banner year. Even if mortgage rates go higher, people will buy because of the creative financing that's available."

In Chicago, though, the picture is less rosy.

"In the resale market, people have inflated expectations about what their property is worth. They may have to bring prices down a bit. But there will be no big slippage in prices," he predicted.
So what will happen with prices in the next 3 years? Is Chicago a bubble market?

Overall I do not think the Chicago metro area is a bubble market. The typical house is unlikely to decline in price by 20% in real dollars from its peak price in the next 3 years. However, condos especially in the city itself are likely to fall by over 20% in real dollars within 3 years. Certain 'hot' neighborhoods that have experienced very strong price appreciation may fall more then 20% in real dollars. Chicago, is certainly not as bubblicious as San Diego, nevertheless declining real prices will be a reality for the Chicago metro area in the coming years.

Falling Sign, Falling Price

'New Price' = Reduced Price

Despite the sellers arrogance the house has not sold. The price has been reduced and is now priced at 699k. The house in located in Skokie, which is a nice inner suburb of Chicago. The house has 3br, 10 rooms total. MLS ID#: 05198734. Zipcode 60076

So will it sell at 699K?

No. Despite its price reduction it is significantly overpriced. They should reprice it to 625K and see if it will sell.

Sunday, January 01, 2006

HouseHunt: 'Sharp Increase in Average Time Needed to Sell a Home'

On average, the length of time required from listing to contract has increased dramatically in the U.S. in the past six months, according to HouseHunt'’s latest national “Current Market Conditions” home sales activity survey.

Seventy-five percent of respondents said it'’s now taking more than 30 days. Of that figure, 30% said itÂ’s taking more than 60 days.

Three months ago, 52% of survey respondents said the average time on the market required for a home to sell was more than 30 days. Six months ago, only 35% said it was taking more than 30 days as buyer frenzy continued unabated.

HouseHunt, Inc. is a consumer-oriented Internet firm that provides free information to thousands of homeowners, home buyers and home sellers through its two primary Web sites, www.Househunt.com and www.moveUp.com.

Multiple offers down. Currently, only 50% of respondents report multiple offers. This is down from 70% in the second and third quarters of this year.
More confirmation of the declining residential real estate market. The bubble is popping in the bubble markets despite the reassuring rhetoric of housing cheerleaders who proclaim it is merely a 'slowdown'.

Happy New Year!

Wishing everyone a happy 2006. :-)