Wednesday, May 31, 2006

Federal Reserve Minutes from May

The Federal Reserve released the minutes from May's FOMC Meeting. Here are the highlights:

In addition, favorable weather boosted housing construction early in the quarter. Later in the quarter, however, the pace of consumer spending moderated, and housing starts retraced their earlier run-up.


Ongoing increases in home prices and additional gains in the stock market, however, further boosted household wealth during the first quarter. Measures of consumer confidence remained consistent with moderate increases in consumer spending.

The underlying pace of residential activity seemed to moderate in the first quarter. After unseasonably warm weather allowed a high level of single-family housing starts in January and February, starts fell in March to their lowest level in a year. New permit issuance for single-family homes also fell in March, continuing its downward trend. Multifamily starts recovered a bit in March from their low rate in February but remained well within their historical range. Home sales also declined, on net, in recent months. Although sales of existing single-family homes edged up in February and March, the level of sales for the first quarter as a whole was notably below the record high in the second quarter of last year. Sales of new homes also moved up in March, but their average in the first quarter was down substantially from the peak in the third quarter of last year. House price appreciation appeared to have slowed from the elevated rates seen over the past summer. Growth in the average sales price of existing homes in March, versus a year earlier, decelerated sharply, and the average price for new homes in March fell compared to a year earlier. In addition, other indicators, such as months' supply of both new and existing homes for sale and the index of pending home sales, supported the view that housing markets had cooled in recent months.


In the household sector, consumer credit continued to rise slowly, and the growth of household mortgage debt was thought, based on limited data, to have moderated somewhat in the first quarter against a backdrop of higher mortgage interest rates and some signs of a deceleration in house prices.


That cooling was especially noticeable for high-end homes and for houses in markets that previously had experienced the steepest appreciation. Data on home sales, permits, and starts on the whole likewise suggested that activity was gradually diminishing. Some reports indicated that speculative building of homes had dropped off considerably, but inventories of unsold homes still seemed to be expanding. Although fresh comprehensive data were not available, home prices on average appeared still to be rising, but at a slower pace than over the past few years. Going forward, growth in consumption spending was likely to be supported by gains in employment and personal income. But slower appreciation of home prices and the effects of the increases in energy prices and interest rates that had already occurred would likely act to restrain consumption spending somewhat. Certain features of recently popular nontraditional mortgage products had the potential to cause financial difficulties for some households and erode mortgage loan performance for some lenders. Nonetheless, the household sector seemed likely to remain in sound financial condition overall. On balance, consumption spending was viewed as most likely to expand at a moderate pace in coming quarters.

On future rate increase then FOMC had this to say:

Although the Committee discussed policy approaches ranging from leaving the stance of policy unchanged at this meeting to increasing the federal funds rate 50 basis points, all members believed that an additional 25 basis point firming of policy was appropriate today to keep inflation from rising and promote sustainable economic expansion. Recent price developments argued for another firming step at today's meeting. Core inflation recently had been a bit higher than had been expected, and several members remarked that core inflation was now around the upper end of what they viewed as an acceptable range. Moreover, a number of factors were augmenting the upside risks to inflation: the surge in energy and commodity prices, some recent weakness in the foreign exchange value of the dollar, and the possibility that the apparent increase in inflation expectations could, if it persisted, impart momentum to inflation. In addition, the economy appeared to be operating at a relatively high level of resource utilization and had been growing quite strongly, and whether economic growth would moderate to a sustainable pace was not yet clear. At the same time, members also saw downside risks to economic activity. For example, the cumulative effect of past monetary policy actions and the recent rise in longer-term interest rates on housing activity and prices could turn out to be larger than expected. Still, it seemed most likely that, with modest further policy action, including a 25 basis point firming today, growth in activity would moderate gradually over coming quarters, pressures on resources would remain limited, and core inflation would stay close to levels experienced over the past year.

Given the risks to growth and inflation, Committee members were uncertain about how much, if any, further tightening would be needed after today's action. In view of the risk that the outlook for inflation could worsen, the Committee decided to repeat the indication in the policy statement released after the March meeting that some further policy firming could be required. However, the Committee agreed to emphasize that "the extent and timing of any such firming will depend importantly on the evolution of the economic outlook as implied by incoming information." Members debated the appropriate characterization of inflation expectations in the statement. Low and stable inflation expectations were key to the attainment of the Committee's dual objectives of price stability and maximum sustainable economic growth. However, the apparent pickup in longer-term expectations, while worrisome, was relatively small. They remained within the range seen over the past couple of years, and the increase could well reverse before long. Accordingly, it appeared appropriate to characterize inflation expectations again as "contained."
More analysis to come later. Chat Away!

Zillow: David Lereah's Home is Declining

David Lereah's home is declining in value according to

David 'soft landing' Lereah's condo investments located in the Wasgington, DC metro area are also starting to depreciate in value at an even faster clip. [Zillow still has a some inaccuracies, but this valuation looks right]

Tuesday, May 30, 2006

Washington Post Express Quotes Bubble Meter

It's The Inventory Stupid

Housing inventory has been steadily increasing across the US. Nationally, the inventory of existing homes for sale has increaed by 36.7% year over year from 2,474,000 in April 2005 to 3,383,000 in April 2006 according to data published by the National Assocation of Realtors.

Nationally, the number of unsold new homes increased 27% from 445,000 to 565,000 between April 2005 to April 2006. In April 2004 the unsold new home inventory stood at 383,000. [US Commerce Department Data]

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

In San Deigo County, housing inventory started off at 13,916 on January 1st 2006 and has risen by a full 45% and was 20,617 as of May 20th (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 49% and was 36,689 as of May 20th (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 52% and was 14,478 as of May 20th (Zip Realty, Bubble Markets Inventory Tracking).

In Phoenix, inventory spiked from 10,748 on 7/20/05 to 43,900 on 5/02/06 according ZipRealty and Bubble Markets Tracking Inventory.

In Prince William County (DC suburbs), see image to the left, the inventory has exploded going from ~1000 to ~4500 active listings
in the past year.

In Northern Virginia, a part of the Washington DC metro area, the number of active listings was 2,983 in April 2005, which increased by 241% to 10,038 in April 2006 (MRIS).

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 supply of housing units in bubble markets across the country 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.

So, when that Phoenix Realtor tells you to offer the full 350K asking price for a house which was bought 2 years ago for 220K, just respond "It's the inventory, stupid" and "You're fired!"

Monday, May 29, 2006

30 Year Fixed Rates Rates Continue to Rise

"Rates on 30-year mortgages climbed this week for the eighth time in the past nine weeks, hitting the highest level in nearly four years."

"Freddie Mac, the mortgage company, reported Thursday that rates on 30-year, fixed-rate mortgages averaged 6.62 percent, up from 6.60 percent last week."

"This week's rate was the highest since the week ended June 20, 2002, when 30-year mortgages were at 6.63 percent." (Washington Post 6/27/06)

Yesterday's Trip: Berkley Springs, WV

Yesterday, a friend and I, traveled to Berkeley Springs, West Virginia and the surrounding area. We toured the town and went to the nearby Capacon State Park.

It was a lovely Sunday as we drove about an hour and half from where I live in the Washington, DC metro area.

As we were driving in the northern limits of the DC metro area we saw a large amount of houses for sale. These were both new homes and existing homes. These pictured signs were clustered near Georgia Ave (97) and interstate 70.

We continued and drove interstate 70 west and took that all the way to 522, which took us through Berkeley Springs, WV. Berkeley Springs is a rural community where there is a solid tourism base. We noticed 4 real estate companies and a bunch of for sale and for rent signs. It certainly appeared to be bubblicious.

Brand new office housing a mortgage and homes building company

GPS Device @ top of the mountain overlook @ Capacon State Park

Mountain overlook @ Capacon State Park

Business in Berkeley Springs

Having fun assessing the real estate boom.

Small water pool in Capacon State Park

Bubble Sphere Roundup

Another week, another Bubble Sphere Roundup. :-) Why do I do the weekly Bubble Sphere Roundups?
  • There are so many informative postings on other housing bubble blogs out there
  • Bubble Meter gets tired of reading his own posts. ;-)
From our good friends up north, there is now the Calgary Contrarian. Welcome to the bubble sphere. Great Blog! While we are on the topic of Canadian housing bubble blogs , I should mention the superb Vancouver Housing Market Blog.

Southern California Blog has a wonderful post A Banquet Partaken in Anxiety

Jersey Shore bubble has a post titled 'I Knew I Saw More Boats for Sale' in which

Hawaii Housing Bubble is missing in action (MIA) as the blog has not been updated since April 19th. Too bad. :-( Also, not sure what happened to the OverValued and OverpricedDC Blogs. If anyone know please inform. Tubguy, presumably a troll, writes regarding the loss of Over Priced DC "ANOTHER ONE BITES THE DUST: ... Hahahaha, say goodbye, bubbleheads!"

Known for its, dramaticism and its excellent use of pictures, Housing Panic is sure to inform and get the message across. Thanks Keith. :-)

Check out a superb spoof of Freddie Mac's newspaper ads. Very Funny!

That is all folks!

Sunday, May 28, 2006

Google Video: "The California Economy: Housing Boom or Bubble?"

Google Video has this wonderful 58 minute video about the housing market by David Thornburg who is a senior economist with the UCLA Anderson Forecast. The speech was given on February 16, 2006.

In one segment, David Thornburg is talking about all these subprimes which are headquartered in US 405 in Orange County, CA. He asks "Is Orange County different? Yes they are going to get hammered."

During minute 38 of the video, Mr. Thornburg attacks Greenspan and the National Association of Realtors. Another great line is "Boomers have been terrible savers"

During minute 45 he asks "When will this end?" I highly recommend this outstanding video.

David Lereah & Irving Fisher: A Comparison

The roaring boom in the stock market in the 1920's was a a gigantic speculative episode.
The most prominent and most to be regretted of the academic sages was Irving Fisher of Yale - as already indicated, the most innovative economist of his time. Heavily involved in the market himself, he too surrendered to the basic speculative impulse, which is to believe whatever best serves the good fortune you are experiencing. In the autumn of 1929, he gained enduring fame for the widely reported conclusion that "stock prices have reached what looks like a permanently high plateau." (A Short History of Financial Euphoria, John Kenneth Galbraith)

Back in December of 2005, David Lereah had this to say:

David Lereah, chief economist at the National Association of Realtors, expects home sales next year to be the second-best in history. He called the recent slowdown a "tapping of the brakes" on a red-hot market. "Home sales are coming down from the mountain peak, but they will level-out at a high plateau, -- a plateau that is higher than previous peaks in the housing cycle," Lereah said.

Sure, nominal homes sales are likely to fall to a "plateau that is higher than previous peaks in the housing cycle" due to a significantly larger population and a larger 2nd home market. However, if one looks at residential construction as a percentage of US GDP there will be no 'high plateau."

Unlike the post 1929 stock market collapse, the US is NOT headed for a depression type situation in the next few years. A recession? Yes. A depression? NO.

Just like Irving Fisher, David Lereah also owns speculative shares, in the form of multiple condo units. The parallels in history are really fascinating.

Friday, May 26, 2006

David Lereah on Existing Home Sales

Yesterday, the National Association of Realtors (NAR) published their existing home sales (pdf) data for April.

Total existing-home sales including single-family, townhomes, condominiums and co-ops slipped 2.0 percent to a seasonally adjusted annual rate1 of 6.76 million units in April from a downwardly revised level of 6.90 million in March, and were 5.7 percent below the 7.17 million-unit pace in April 2005.

David Lereah, NAR's chief economist, said the decline was expected. "“Our leading indicator for pending home sales was trending lower, and our forecast model is showing a modest decline for the second quarter with sales leveling out before rising in the fourth quarter,"” he said. "Higher interest rates are slowing home sales, but we see this as another sign of a soft landing for the housing sector which remains at historically high levels."
David Lereah still seems solidly in the 'soft landing' camp. This is what Mr. Lereah had to say in response to the new numbers:
"This may be the bottom. It appears May is a little better." - David Lereah 5/25/05
The bottom? The boom lasted about 5 years. It has been less then a year from peak in the bubble markets. We are certainly, not at the bottom.

Thursday, May 25, 2006

One Year anniversary

Today, is the one year anniversy of the Bubble Meter Blog. :-) Here is my very first post:


The bubble will burst soon

Behold the bubble is about to pop. The bubble will pop (price declines) within the next 12 months.

1) People are stretching to their limits to buy (look at how many IOs and ARMS)
2) Lending practices will tighten given Fed's reccomendations
3) Greenspan just used the term 'bubble'
4) The foriegn buying of loans is slowing
5) More public awareness of the housing bubble situation. See the increasing number of articles referencing the bubble (use a Google or Lexis Nexis news search)


Blogging will continue as the housing market continues to decline.

Thanks for reading!

New McMansion in Washington, DC

Newly Constructed McMansion in Northwest Washington, DC

Blog Rules

In order to create a more perfect blog, these are the rules that will be followed. Additional rules may be added as necessary.

1) I shall be the final decision maker as to what comments are acceptable on this blog.

2) Any personal insults directed at me or commentators on this site will be deleted. Calling me or others 'stupid', 'moron', 'pathetic' is NOT allowed. Ad Hominem attacks are not allowed against me or commentators. [However, one can call a particular comment 'pathetic', 'moronic' etc if they give a reason.]

3) Any comment that is entirely unrelated to the post is highly likely to be deleted. [If the post is about foreclosures and you comment about conditions in the Chinese prison system]

4) Any comment which uses foul language such as 'f*ck', 'sh*t' is highly likely to be deleted.

5) Commentators often ask for more evidence when I post. This is acceptable. Please bear in mind that I have a full time job and can't answer everyone's questions or requests. Attacks against me for not responding to a question or comment are prohibited.

6) I do indeed welcome opposing opinions on this blog as long as they follow the blog rules detailed in this post. [If someone would like to construct a well reasoned post on why there will be a soft landing or why the boom will start up again I will post it].

7) Statements that clearly are false will be deleted. [China has less land mass then Singapore.]

8) If there are any questions regarding blog rules please email me at .

Wednesday, May 24, 2006

Open Forum

Comment Away. :-) [Unfounded accusations and name calling of me or other commentators will be deleted].

April US New Home Sales Data

The US Commerce's April New Homes Sales numbers (pdf) are out. Market Report reports:

U.S. new home sales rose 4.9% in April to 1.20 million units, the second straight monthly increase and the highest level of the year, the Commerce Department estimated Wednesday. The rise was unexpected. Economists expected sales to fall to 1.15 million given the general weakness in the housing market. The inventory of unsold homes on the market rose by 2.4% to 565,000, representing a 5.8-month supply at the April sales pace, down from 6.0 in March. The median price of a new sold home rose 2.8% in April to $238,500 from the previous month. Median prices are up just 0.9% in the past year.
New home sales are increasing because of the price discounting on more expensive homes (in the bubble markets) and large incentives being offered by homebuilders. These incentives include decorating and landscaping allowances, loan points/closing costs paid, and gift certificates

Price discounts on homes in the bubble markets have brought some new home buyers to the table [this hardly affects the median price much because in most bubble markets the vast majority of new homes are priced well above the median]. This has TEMPORARILY increased the number of new homes sold (the longterm trend is down). Furthermore, new home sales are also taking sales 'away' from existing home sales.

[These initial US Commerce New Home Sales numbers are subject to large errors. The Commerce Department writes "Since a “sale” is defined as a deposit taken or sales agreement signed, this can occur prior to a permit being issued]

Calculated Risk
says "I expect April sales to be revised down too. This report shows that the housing market continues to slow down."

From the Commerce Department PDF; US New Home Inventory. (Ben Jones' Housing Blog)




The year over year increase in unsold new homes was a full 27%. Meanwhile, home sales are down 5.7% compared to April 2005.. The April New Homes Sales report does not contradict the reality of a steadily declining housing market.

Mortgage Applications Continue to Downward Trend

Bloomberg reports 'U.S. MBA's Mortgage Applications Index Fell 6% Last Week'
Mortgage applications in the U.S. fell last week by the most since February as higher borrowing costs damped home purchases and refinancing.

The Mortgage Bankers Association's index of applications to buy a home or refinance an existing loan dropped 6 percent to 552.6 from 588 the prior week. The gauge of purchases fell 7.1 percent, also the biggest decline in three months, to 396.4.

Yet more evidence of a declining market. The mortgage index will continue to fall in the coming months,

Achieving Excellence Conference

In the mail, I received a complimentary invitation to the Achieving Excellence Conference. "Because you were referred to me, I wanted to personally invite you as my VIP guest to hear Joe Theismann, Super Bowl Champion Quarterback ..." Reed West is the president of the financial conference.

"At this once in a lifetime financial conference you will learn how to: 1. Regularly buy real estate for 31% - 57% below value. ..... 5. Retire in 2 to 5 years with an additional cash flow of 9,100 a month"

A sucker is born every minute. It might be interesting to attend.

New Realtor Ads

The National Association of Realtors has launched a new ad campaign called 'Realtors are the Business Owners Next Door'.

People across the country might be surprised to see a Realtor® from their own community on national television, as the National Association of Realtors® launches a new television advertising spot, “Entrepreneurs,” during the Realtors® 2006 Midyear Legislative Meetings & Expo this week in Washington, D.C. The new ad features an all-Realtor® cast who explains their commitment to helping their neighbors achieve the American dream of homeownership.
For many recent home purchasers who used exotic mortgages, the 'dream' of homeownership will become their American nightmare. Their interest rates will adjust upwards at the same time when they have to start paying principal.

One of the Realtors® in the commercial is Josephine Gleason from Roswell, Ga. Josephine has been living and working as a Realtor® in her community since 1979. “Helping people find a piece of the American dream is the best job in the whole world,” she said.
Pass the kool aid. :-( Josephine, Have you ever warned someone that using an interest only ARM as a means for 'affording' a house is a bad idea?

Other Realtors® in the commercial are Alma Alden from Dallas; Kevin Borman from Grand Junction, Colo.; Barb Cooper from Austin, Texas; Taylor Jernigan from Montgomery, Ala.; Pollyanna Snyder from San Clemente, Calif.; and Larry Spiteri from San Ramon, Calif. “I’m a small businessman just like the owner of the coffee shop on the corner,” said Larry. “Being a Realtor® is the all-American job.”
All American job? Puhlease! Soon, Realtors® may be as popular as used car salesman.

Tuesday, May 23, 2006

OFHEO Report on Fannie Mae

The Office of Federal Housing Enterprise Oversight (OFHEO) 348 page report on Fannie Mae is out (pdf). An overview press release regarding the report has also been published (pdf).

Washington, DC - James B. Lockhart, Acting Director of the Office of Federal Housing Enterprise Oversight (OFHEO), today released its Report of the Special Examination of Fannie Mae. The report details an arrogant and unethical corporate culture where Fannie Mae employees manipulated accounting and earnings to trigger bonuses for senior executives from 1998 to 2004. The report also prescribes corrective actions to ensure the safety and soundness of the company.

‚“The image of Fannie Mae as one of the lowest-risk and 'best in class' ’ institutions was a facade," said Lockhart. “Our examination found an environment where the ends justified the means. Senior management manipulated accounting; reaped maximum, undeserved bonuses; and prevented the rest of the world from knowing. They co-opted their internal auditors. They stonewalled OFHEO" Lockhart said.

“Fannie Mae's executives were precisely managing earnings to the one-hundredth of a penny to maximize their bonuses while neglecting investments in systems internal controls and risk management," Lockhart said. “The combination of earnings manipulation, mismanagement and unconstrained growth resulted in an estimated $10.6 billion of losses, well over a billion dollars in expenses to fix the problems, and ill-gotten bonuses in the hundreds of millions of dollars."

OFHEO's report on Fannie Mae's accounting procedures is chilling. Larger parts of the housing industrial complex iceberg have now been uncovered.

As we posted this morning, Mortgage giant Fannie Mae will announce today that it has agreed to pay more than $400 million as part of a settlement with the government to resolve allegations of accounting misdeeds. (WSJ Law Blog)
It is encouraging to see the government beggining to reign in the housing industrial complex. However, it is too little, too late. :-(

David Lereah Interviewed

David Lereah was interviewed by Business Week, where he sounded more confused then ever.

Now he says the housing market is just taking a breather. "We're going to drop significantly, but it's not a balloon bursting," Lereah says. "This is a soft landing for the housing markets." He expects total home sales to drop to 6.62 million in 2006, from 7.07 million in 2005. Meanwhile, he thinks prices will continue appreciating this year, but only by around 5%, compared with 12.5% during 2005.

Median prices are already falling. In Q4 2005, the median sales price for a single family home in the US was 225,300 which declined to 217,900 in Q1 2006. These are numbers from the National Association of Realtors where he is their chief economist.

Why do you think prices will continue rising?

The economy is growing and there are job gains, so consumers have the financial wherewithal to purchase homes. Sure, the rise in rates has been inhibiting buying recently. A lot of the boom markets that boomed over the last several years are cooling off and home sales are dropping. But if the economy were in a recession, this would be worse. And mortgage rates aren't rising too high -- they're only going up to 7% by the end of the year.

What supports the housing markets are income gains, job creation, consumer confidence, and mortgage rates. We have all of the above still supporting us. Meanwhile, the demographic trends are wonderful. You have boomers buying homes and retirees living longer. The boomer children are now first-time home buyers. Everything still points to strong demand for home buying.

Are you worried about the drop in non-owner-occupied real estate values in certain cities, such as San Diego?

That's not going to spread. The health of a local economy tells us whether a real estate market is in good shape or bad shape, and most of those are very healthy. If you go to Miami, Washington, Chicago, or Los Angeles, those are healthy economies, and they're not going to be affected by what happens in San Diego. And prices are too high in San Diego because it's not an affordable city. The economy there isn't thriving, so it's hard to keep up there right now.

Why do you think mortgage rates will go to 7%?

I don't see the Fed taking rates up higher. They have to worry about the housing markets and the economy slowing too much. Even though there's a little pressure on them from inflation, it's still under control. With the exception of oil, I don't see a scenario where rates can go higher.... But if the price of oil goes up from where it is today, it's a risk for every sector of the economy, not just housing.

Do you think the housing market could ever crash?

I'm getting tired of all these doomsayers. We live in houses, and our houses are not going to crash. This isn't the stock market.... Local economies are relatively healthy. There's job creation -- this isn't a scenario where bubbles burst. Can there be one or two or three or several local markets where prices actually go down? Yes. But to generalize for 30 markets or the whole real estate marketplace -- that's absurd.
Is David Lereah calling us housing bubble bloggers and people like Robert Schiller, John Talbott , Paul Krugman and Warren Buffett doomsayers? As a professional misleader, David Lereah is becoming more confused and defensive. Keith, of Housing Panic wrote "Boy, this guy changes his tune every day, sometimes within the same session. I think what's happening is he's having a tough time staying 'on message' "

Bubble Sphere Roundup

Great graphs from Sacramento Land(ing) showing median sales price and YoY median sales price appreciation rates.

The Northern New Jersey Real Estate Bubble continues to offer compelling reasons to visit an outstanding blog.

A brief update on the report on the Santa Fe, NM market

Single digit appreciation in Southern California's housing market? But the weather is so beautiful. Plus it is surflocked. :-)

DC Bubble reports on the increasing inventory in DC proper. Solid chart.

Mish's Global Economic Analysis writes an interesting piece taking apart Michael Mandel's article called Ostrich of Omaha.

Monday, May 22, 2006

Selling Housings Units @ the Shopping Mall

Over the weekend, I was at the Mall in Columbia which is located in a well off suburban area between Washington, DC and Baltimore.

Townhouses being advertised in mall.

Century 21 real estate kiosk in mall.
Are these getting more common in malls across the USA?

Plaza Residences in Columbia, MD
2br 2ba condo from 600K.

Open Forum

Post Away! :-) [I will delete unfounded accusations]

Housing Bubble Bailout

The speculative episode that is the housing market has created huge excesses in the lending industry and banking system. The US financial system has become increasingly unstable in the past few years due the housing boom. Already we have seen the collapse of some sub prime lenders including Acoustic Home Loans and the massive layoffs that are happening in the lending industry including at Ameriquest Mortgage.

Foreclosure rates have risen significantly since 2005 and will continue to rise as an increasing amount of ARMs adjust to their higher interest rates. Meanwhile, consumers are getting squeezed on many fronts as the price of gasoline, electricity, food, medical costs and other consumer goods and services are increasing much more then people's salaries.

As the housing market continues to decline many financial institutions will be hurting. Some financial institutions may ask for a federal bailout. Perhaps, a large group of individual home purchasers may also demand a bailout in a few years as they are underwater on their mortgage loans and facing a lifetime of debt.

Will there be a massive federal bailout like the S & L crisis which culminated in the 1980's?

The Bubble Meter Blog stands strongly against any federal bailout of the excesses of the housing boom, unless there is solid evidence that the US financial system is facing likely collapse. At this point, it appears very very unlikely that the US financial system will collapse as the boom turns to bust. The speculative nature of the housing market should have been curtailed by the federal government a few years ago.

Sunday, May 21, 2006

More Pictures

The Fillmore

Condos under construction (blue building)

Condo Constuction near 14 & U Street NW in DC

The Beauty and the Beast
[the beast has lots of potential]

Friday, May 19, 2006

Number of Milllion Dollar Homes Sold Skyrockets

The number of million dollar or more homes sold in the US has skyrocketed in the past 5 years due in large part to the housing bubble.

Real estate markets may be cooling around the country, but they were hot enough last year to send million-dollar home sales through the roof. The number of homes sold for $1 million or more quadrupled between 2000 and 2005, according to DataQuick Information Systems, to 109,113. (Of 8 million sales overall last year, the median sales price was about $213,000.).
California accounted for 48,666 of the 109,113 million dollar plus homes sold last year. That represents almost 45%. Yikes!

Money Trees Do Exist

Ben Bernanke does not need to use the infamous helicopter to prevent deflation. He can just give people money tree seeds. Dropping money from helicopters is far too dangerous.

Picture: The money tree my sister received for her birthday from my parents.

My parents have a large one in the backyard. Unfortunately, with the depreciating dollar the money tree is less valuable as it only produces US dollars. The money tree is an ongoing joke in my family. :-)

Thursday, May 18, 2006

Open Forum

Chat Away! :-)

Bernanke on Housing

Following a speech about proposed banking regulations, Ben Bernanke had this to say during a question & answer session:
"It seems pretty clear now that the U.S. housing market is cooling," Bernanke said in a question-and-answer session following a speech he delivered on banking in Chicago. He noted that home sales are slowing as is housing construction.

"Our assessment at this point ... is that this looks to be a very orderly and moderate kind of cooling," Bernanke said

"In combination with rising interest rates affordability is becoming much more difficult and therefore as you would expect you are seeing some cooling in those markets,
The term 'cooling' which Mr. Bernanke uses to describe the housing market is a euphemism. It is an inappropriate term as it implies pleasant connotations. It is not pleasant for the housing industrial complex or recent home purchasers. The correct term should be 'declining' or 'falling.'

Furthermore, does Bernanke really believe that "this looks to be a very orderly and moderate kind of cooling"?

It is NOT an 'orderly and moderate kind of cooling':
  • The surging number of homeowners who are being foreclosed on
  • Flippers who are trying to sell there recent purchases
  • For thousands of mortgage brokers who have been fired in recent months
  • The real estate agents whose transactions are declining
  • For the many construction workers who are about to get fired
  • This is just the start of the decline. The boom lasted 5 years. The decline has only been about 9 months.
Ben Bernanke will NOT admit the extent of the declining housing market. He is afraid that if he does it would trigger a panicked market.

Mortgage Rates Continue to Rise is reporting that rates for 30 year fixed mortgages are continuing to rise.

Mixed news on inflation drove the 30-year, fixed-rate mortgage to its highest rate in almost four years. Short-term adjustable-rate loans got a bit of relief.

The benchmark 30-year fixed-rate mortgage rose 6 basis points to 6.73 percent, according to the 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 0.34 discount and origination points. One year ago, the mortgage index was 5.78 percent; four weeks ago, it was 6.57 percent.

The 15-year fixed-rate mortgage rose 3 basis points to 6.33 percent. The 5/1 adjustable-rate mortgage fell 2 basis points to 6.33 percent.

The last time the 30-year fixed-rate mortgage had a higher rate was June 12, 2002, when it was 6.74 percent. The week after that, it fell to 6.6 percent and remained below that mark for 200 weeks. It looks like those days are gone.

The long term trend has been up. Although, there are some in the housing industrial complex who are dismissive.

"That sounds kind of bad, but Michael Carliner, chief economist for the National Association of Home Builders, isn't freaking out yet.

"I wouldn't base it on one month," says Carliner, who is a strong advocate for the position that a single event doesn't make a trend. "If we continue to see prices rise, I think this is outside the Fed's comfort zone. If this is not a single-month spike -- a fluke -- then I think they're going to keep raising rates, and that also the long-term market is going to be influenced by it as well."

Higher interest rates; less purchasing power for buyers; lower prices.


For sale signs in Washington, DC suburbs

Two townhouses for sale, right next to each other.

Crispus Attuck Park in DC [for you Bryce]

Wednesday, May 17, 2006

Northern Virginia Charts

New April 2006 charts for Northern Virginia (metro DC area) are out.

Great charts. Keep up the solid work!

Who is Reading

Bubble Meter Blog uses Statcounter to track visitors to this site. It can tell from which organizations many of the readers are coming from.

Below is a partial list of which organizations readers came from:

Mortgage Industry
  • Countrywide Home Loans Inc
  • Federal Home Loan Mortgage Corp
  • Capitol Mortgage Services Inc
  • United Financial Mortgage Corp
  • Vitek Mortgage Group
  • E-sec Lending Llc
  • Sallie Mae
  • Fannie Mae
  • Freddie Mac
  • Ctx Mortgage Company Llc
  • Provident Partners Mortgage
General Financial Industry
  • Visa International
  • City National Bank
  • Deloitte & Touche
  • Barclays Bank Plc
  • Bloomberg Financial Market
  • Avesta Capital
  • Raymond James Financial Inc
  • Capitalsource Finance Llc
  • Bank Of America
  • Moody's Investors Corp
  • The World Bank Group
  • International Monetary Fund
  • Mastercard International Llc
  • Suntrust Service Corporation
  • Painewebber Group Inc
  • Citizens Bank
  • Lehman Brothers
  • Hsbc Bank Canada
  • National Association Of Securities Dealers Inc
  • Goldman Sachs Company
  • Kpmg Llp
  • Deutsche Bank
  • Us Chamber Of Commerce
  • Union Bank Of California
  • PaineWebber Group Inc.
  • Credit Suisse Group
  • Pension Benefit Guaranty Corp
  • University Of Chicago
  • University Of Maryland At Baltimore
  • East Tennessee State University
  • University Of Wisconsin
  • Villanova University
  • University Of Texas
  • Columbia University
  • Rice University
  • University Of New Mexico
  • Gallaudet University
  • Florida Atlantic University
  • University Of Phoenix
  • American University
  • University Of California Santa Barbara
  • Duke University
  • University Of Texas At Austin
  • University Of Illinois At Chicago
  • University Of Pennsylvania
  • Yale University
  • Georgetown University
Home Builders / Developers Etc.
  • Hovnanian Enterprises Inc
  • Peterson Companies
  • Pulte Homes
  • National Association Of Home Builders
  • Centex
Government Etc

  • Information Systems U.s. House Of Representatives
  • Federal Reserve Board
  • U.s. Securities & Exchange Commission
  • Library Of Congress Information Technology Services
  • U.s. Senate Sergeant At Arms
  • Internal Revenue Service
  • Us Dept Of Justice (I hope you are investigating some of the fraud)
  • U.s. Environmental Protection Agency
  • U.s. Department Of Education
  • Bureau Of Labor Statistics
  • Bureau Of Economic Analysis
  • Bureau Of The Census
  • U.s. Patent And Trademark Office
  • Texas Legislative Council
  • National Institutes Of Health
  • Smithsonian Institution
  • Library Of Congress Information Technology Services
  • Federal Reserve Information Technology
  • Federal Reserve Board (is that you Ben?)
  • Us Govt Hud Ofheo
  • Fema
  • Congressional Budget Office
  • The Pentagon
Real Estate
  • Access Reality Group
  • Realty Information
  • Alexandria Real Estate
  • Marcus Millichap Real Estate Investment
  • Weichert Realty
  • The Washington Post
  • Usa Today
  • The New York Times
  • Gazette Newspapers Inc
  • The Kansas City Star
  • Gartner Inc
  • City And County Of Denver
  • State Compensation Insurance Fund (California)
  • Booz Allen And Hamilton
  • The Urban Institute

Mortgage Loan Ad

Those ARMs are dangerous!

Tuesday, May 16, 2006

The Roller Coaster

It was so easy to ride the roller coaster. The housing industrial complex was cheerleading people to get on board. Realtors, lenders, appraisers, home builders, were involved in it's promotion.

Cheap and easy credit was extended allowing anyyone to ride. You could even ride the roller coaster with your ARMs flopping everywhere. Al Greenspan designed the interest rate portion of the roller coaster. The housing industrial complex made huge sums of money from the roller coaster.

Now the ride is almost over, and the damage is apparent. Many people are already vomiting from this crazy roller coaster. More people will vomit as they go into foreclosure. It is time to clean up this sad mess.

U.S. Housing Starts Fell 7.4% in April to 1.849 Million Rate

The US Commerce Department reported (pdf) the new residential construction data:

Builders in the U.S. broke ground on the fewest homes since November 2004 as higher borrowing costs eroded demand, a government report showed.

Housing starts fell 7.4 percent in April, the third straight drop, to an annual rate of 1.849 million from 1.996 million. Building permits, a sign of future construction, fell 5.4 percent to an annual rate of 1.984 million, the Commerce Department said today in Washington. (Bloomberg 5/16/06)

These numbers are subject to large degrees of uncertainty. The initial residential numbers are certainly a disappointing measure for the homebuilders.

Bubble Sphere Roundup

Marin Real Estate Bubble had April RE data for God's country (aka Marin County).

Check out this chart that shows what percentage of listed housing units that have reduced their asking price. Nice job Crash2006. Data was compiled from ZipRealty.

A 22 story condo tower is planned in the Phoenix metro area. It will be located right near a runway. This project is unlikely to fly.

Overpriced DC reports on about this brainiac who has this speculative idea of living of "that we could make a living by buying condos, living in them for two years, selling for a big profit and repeating. The appreciation would be more than we could make by working and the profits would be tax free. What could be better, right? The RE party is over. Time to take away the kool aid.

Episode 2 Not just the Bloggers anymore discusses the 'mainstreaming' of the housing bubble talk. Right on.

That is all folks.

Monday, May 15, 2006

National Building Museum: My Favorite Building in DC

The National Building Museum is my favorite building in Washington, DC. "The Museum was designed in the 1880s by Montgomery C. Meigs to house the Pension Bureau. The building's exterior dimensions are 400 feet by 200 feet, and 75 feet high to cornice level."

Highly recommended!

Spring Season 2005 vs 2006 in Northern Virginia

The spring season has been a real bummer for the housing industrial complex in Northern Virginia. Northern Virginia (NVAR) includes according to the MRIS "County, Fairfax City, Arlington County, Alexandria City, & Falls Church City, VA (NVAR) "

In Nothern Virginia, the 2006 spring selling season has been very weak. Whereas, in 2005 median selling price rose 4.4% from March to April, in 2006 median prices fell .3% between those same two months.

Historically, March and April are very strong months for median price growth. If the median price numbers are declining or basically stable in the spring season, it will most probably mean large price declines in the weaker fall and winter months.

These are the Virginia inner suburbs of Washington, DC. Statistics from the Metropolitan Regional Information Systems, Inc (MRIS).

Lereah @ Boca Raton

The Boca Raton News had this to report on the latest statements by David 'soft landing' Lereah.

Lereah was quick to make his message clear: "You don't need a boom for real estate to roar. The real estate boom is over but the real estate expansion is still here." Although homes are not selling as quickly right now, prices are still up. "There are no real estate bubbles, only balloons that expand and contract," he said
David Lereah is basically saying slow appreciation. There will not be slow appreciation in bubblicious Boca or other bubble markets in the coming couple of years.

"Forty percent of all home sales in 2005 were second homes - investment properties and vacation homes - compared to about 9 percent 10 years ago," Lereah said.

This should scare the sh*t out of any flipper or specuvestor who bought in the last 2 years in a bubble market.

"Real estate is not an irrational investment, but speculators purchased irrationally during the boom, especially in areas like Miami. This drove prices up, and many speculators took out interest-only loans. This produced a vulnerable real estate market," Lereah explained. "In 2006, we are cleansing the market of speculation."

In 2007, Lereah believes that the real estate market will continue to expand even if mortgage rates increase to 7 percent. "That is still low," he said.

Sure. There will be no expansion in prices in 2007 in the bubble markets.

Buying real estate has advantages, too. "It is the most leveraged asset and there are tax advantages"Real estate needs to play a role in your investment and retirement portfolio. You should diversify," Lereah said.

He added that he is bullish on Florida, Arizona and Nevada because of even greater population increases. "The law of supply and demand works."
Wow, now he is really going out on a limb. Remember the fundamentals. But can they afford the overpriced housing units?

All of Lereah's real estate investments are in condominiums and townhomes because he doesn't want to be involved in maintaining them. "If you're Mr. Fix It, then it's okay to invest in a single-family home," he said.

Lereah also pointed out that he has invested in several condominium conversions. "Condo conversions are good because the property is already there."
Looks like he may lose money as well during the bubble. I wonder how much money Mr. Lereah has invested in RE.

Google Fight Comparison

Currently, housing boom has 10.9 million hits and housing bubble has 8.5 million.

However, back on July 28, 2005, 'housing bubble' had 986,000 hits on Google and 'housing boom' had 1,770,000 hits.

'Housing boom' grew by 515% but 'housing bubble' grew even faster at 762% during the past 9 months. Sure, housing bubble is still behind housing boom but it is growing at a much faster rate. Interesting. :-)

Sunday, May 14, 2006

RIP: Bubblicious Bench

The bubblicious bench is no longer the mecca for bubbleheads. Picture taken 5/14/06. It has a mere 3 lockboxes left.

What happened?

Perhaps it has something to do with fact that the Washington Post mentioned the bubblicious bench in a front page article. The management or developer company may have asked the sellers to remove their lockboxes from the bench. Any ideas?

Rest in Peace, bubblicious bench. You are missed. :-(

Nevertheless, there are still dozens of condo units available for sale at the Halstead at Dunn Loring. It is still infested with flippers, specuvestors and their ilk.

Mention in Washington Post (4/22/06)
Bubblicious Bench Update (4/11/06)
Live Housing Chat on (4/5/06)
Bubblicious Bench & Flippers (3/26/06)
Bubblicious Bench (3/21/06)

Open Forum

Recently, there has been many more comments for each post on this site. I truly do welcome comments. That being said, I will be providing open posts where housing market related topics can be discussed. Please try and keep comments on other posts related to the post at hand.

Press Release from High Tower Realty in Central Florida

Check out this press release from High Tower Realty in central Florida. The press release is titled " What Bubble? Florida's Vacation Home Market Defies Predictions of Falling Prices:

The latest figures show selling prices of vacation homes in Central Florida have not fallen during the last twelve months. Buyers are coming back, and we are seeing the first signs of a return towards a normal market. The predictions of the 'Housing Bubble' advocates don't hold up to scrutiny.

Orlando, FL (PRWEB) May 11, 2006 -- For the first time this year there are unmistakable signs of a return towards normality in the Central Florida vacation home market. Hightower Realty ( has been looking since the beginning of the year for an improvement in the weak market that followed the frantic sellers market of the previous two years. Until recently there was little cause for optimism, but now everything is starting to change. Agents throughout the area are reporting more requests to show homes for sale. Offers are starting to come in for some of the more realistically priced homes. And over-priced homes are disappearing from the market or being reduced in price down to more sensible levels.

Despite earlier predictions, it is becoming clear that selling prices for vacation homes have held up remarkably well throughout the recent strong buyers market, disproving the alarmist predictions of the 'bubble burst' advocates. The latest statistics show that recent market problems have had nothing to do with values, and everything to do with the absence of buyers.

Many reports over the last year have talked about the housing bubble bursting in the Central Florida market and in particular in the market for vacation homes. In our view there never was a bubble to burst.
The best line is "The latest statistics show that recent market problems have had nothing to do with values, and everything to do with the absence of buyers." Why is that? Perhaps because the price is too high to attract a reasonable amount of buyers.

Pictures From Washington, DC

Abandoned part of DC General Hospital

In alley near Potomac Ave Metro Station

Cemented up rowhouse in SE. Near K & 3rd Street SE.

Bling Bling. Use HELOC to purchase!

Two rowhouses for sale. In DC.
The house I'm standing next to for rent.
400 block of 15th street NE

Boarded up rowhouse near 16th Street and Rosedale NE.

New rowhouses under construction
649 16th Street NE
647 16th Street NE
621 16th Street NE
Right near the above boarded house

Two rowhouses under construction at:
1233 F street NE & 1235 F Street NE

Friday, May 12, 2006

1013A Constitution Ave NE

The yellow alley house located at 1013A Constitution Avenue NE in Washington, DC is for sale at 399,000.

It has 2br, 1ba. MLS #: DC5387658

"New skylight & fresh paint!! Southern light fills this historic carriage house. Imagine the pleasure of unique space--love the look & the lure of brick flrs & two loft brs. Eloquent $ open: soaring ceiling w/wraparound loft. Superb storage! Has been held off mkt resolving title issue. Please settle @ eastern market/monarch title. Strictly limited edition!!"

I was there today and found this boarded up alley house located right next door. Those alleys must be great at night. According to ZipRealty it has been on the market for 239 days with no price reductions. Yikes.

Will it sell at 399K?

No way. The price needs to be reduced significantly.

The Declining Dollar

The dollar has been declining against a basket of foreign currencies over the past few months.

How will a declining dollar affect the US housing market?

Thursday, May 11, 2006

Sales Declining in DC Area

April 2006 Year over Year (YoY) Housing Units Sold in Locales in Washington, DC Metro Area

  • Alexandria City: -27.82
  • Arlington County: -20.3
  • Fairfax County: -21.44
  • Howard County: -20.83
  • Loudoun County: -38.55
  • Montgomery County: -14.18
  • Prince George's County: -12.02
  • Prince William County: 19.12 (positive)
  • Washington, DC: -17.47

YoY Price Appreciation in Washington, DC Metro Area

[Click on image for larger version]

Notice how in some of the locales the year over year (YoY) price 'appreciation' for April 2006 is less then inflation. In these locales, real dollar price declines are a reality.

Rehabbed Property along North Capitol Street in DC

Gentrification: A rehabbed property along North Capitol Street in DC.

Half A Million Page Views

The Bubble Meter Blog has now received half a million page views. The blog was founded in late May of 2005. The blog was started for these two reasons:

  • I am being an 'economic activist' in the sense that my writings in a very small way help influence people's actions. I am no longer just sitting on the sidelines and watching. The truth about the housing bubble needs to be revealed to a wider audience. The destructive nature of the housing boom has lasted too long. It is time for some economic reality.
  • It is really a fascinating topic
By my measures, the Bubble Meter Blog has been a tremendous success. The blog has been mentioned and/or quoted in the Washington Post, Washington Post Express, Washington Times, NY Times among others. It has made its rounds among the blogosphere.

Thank you to all the visitors who read this blog. :-)

A double thank you to all the commentators who comment on my postings. The citizen reporters who email me bubblicious tips are especially thanked. Keep it coming.

A real special thanks to my fellow bubble bloggers. You are truly an amazing group of people.

Blogging will continue as the housing market continues to decline. So much more is left to report, discuss and digest in the coming years.

Wednesday, May 10, 2006

Fed Raises Rates by 1/4

A expected the the Federal Reserve Board once again raised rates by 1/4 percent.

The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points to 5 percent.

Economic growth has been quite strong so far this year. The Committee sees growth as likely to moderate to a more sustainable pace, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices.

As yet, the run-up in the prices of energy and other commodities appears to have had only a modest effect on core inflation, ongoing productivity gains have helped to hold the growth of unit labor costs in check, and inflation expectations remain contained. Still, possible increases in resource utilization, in combination with the elevated prices of energy and other commodities, have the potential to add to inflation pressures.

The Committee judges that some further policy firming may yet be needed to address inflation risks but emphasizes that the extent and timing of any such firming will depend importantly on the evolution of the economic outlook as implied by incoming information. In any event, the Committee will respond to changes in economic prospects as needed to support the attainment of its objectives.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Susan S. Bies; Jack Guynn; Donald L. Kohn; Randall S. Kroszner; Jeffrey M. Lacker; Mark W. Olson; Sandra Pianalto; Kevin M. Warsh; and Janet L. Yellen.

In a related action, the Board of Governors unanimously approved a 25-basis-point increase in the discount rate to 6 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Dallas, and San Francisco.

The LaLawyer said on The Housing Bubble Blog "Bottom line: more increases, but no promise that next meeting will be an increase (but probably will). " Agreed.

Great Historical Housing Charts

Take a look at the site Is there a housing bubble?. Many great historical housing charts.

Check out the chart for San Deigo. Look at the inflation adjusted lines on the graph.

You can even download the data as excel spreadsheets. Super :-)

David Lereah's Latest Quote

"It's going from a seller's market to a buyer's market," said David Lereah, the chief economist for the National Association of Realtors. In March, "price appreciation went down to 7.4 percent, from over 10 percent," he added. "That most probably reflects that sellers are bringing their prices down."

Lereah is right that 'seller's are bringing their prices down.' It may no longer be a seller's market in the bubble markets, but it is certainly NOT a buyer's market. In the bubble markets it is a greater fool's market.

Tuesday, May 09, 2006

The Spring Boom That Isn't

Spring is the busiest season for real estate and typically when prices rise the most. Some real estate agents are hoping that a spring boom will reverse the current price declines that are occurring in most bubble markets. The hope is that with the spring season a large amount of buyers will swoop in, raise demand, and bid up prices. Real estate 'guru' Blanche Evans wrote on January 23rd "What about housing? There's a lot of positive news that suggests that housing may have had its "rest." Spring might catapult housing into another record year."

While it is still somewhat early in the spring selling season, so far it has been a disappointment for the housing industrial complex in the bubble markets. Inventory continues to increase in the overwhelming of the bubble markets as prices are either declining slightly or remaining flat.

For example, in metro Sacramento on March 20th there were 11,560 properties which increased by 2001 (16.9%) to 13,521 on May 6th [about 1.5 months]. Meanwhile, if we compare the year over year (YoY) for sold inventory we see 2,489 properties sold in metro Sacramento in March 2006 down 7.7% from 2,965 in March 2005.

In Washington, DC the median price selling price in February 2006 was 400,000 which then declined slightly (-0.75%) to 397,000 in March 2006. If you compare that to the same months in 2005 when the median price jumped (+5.5%) from 379,000 to 400,000 between February and March (Source: MRIS).

The false hope of the 'spring boom' is being shattered by the harsh reality of a declining housing market. The spring boom is dead on arrival (DOA).

Bubble Meter Blog Mentioned in Washington Post Express

The Bubble Meter Blog was mentioned in the Washington Post Express yesterday.

Monday, May 08, 2006

Months Supply Is Rising in Northern Vriginia

[Click on image for larger version]
[*Feel free to copy the image to other sites. Please credit. ]

As inventory has swelled across Northern Virginia (part of the Washington, DC metro area) while sales are down significantly, the months supply of housing units has increased dramatically. It is a remarkable turnaround from April 2005. The data comes from the MRIS.

Bubble Sphere Roundup

Welcome to all the readers from Wonkette. :-) Thanks for the mention.

Crash2006 reports that another mortgage firm bites the dust. Merit Financial clearly did not have enough merit to stand up during a housing bubble bust.

Is David Lereah like Charles Ponzi? Is the housing bubble a giant Ponzi scheme?

The Baltimore Metro Area Housing Blog has a great post about a house that is having massive price reductions. The speculator clearly won't make as much as they had hoped for, but probably will turn a tidy profit on the property.

DC Bubble reports that the amount of inventory and the percentage of housing units where prices have been reduced has increased in DC proper. It bubblicious here.

Northern New Jersey Real Estate Bubble
has a great find about how 'Land Value Increases In Japan, First Time In 15 Years'

Finally, SocketSite continues to offer solid coverage of the San Francisco housing market.

Sunday, May 07, 2006

Recognizing an Asset Bubble

"While Mr. Greenspan happily puts himself out there as the leading economic forecaster and wise man, he also contends that bubbles can't be recognized until they burst. That's like saying you can't tell that your house is on fire just because smoke is billowing from the windows; you have to wait until it bursts into flames. The truth is bubbles are easily recognizable well in advance of bursting, but we cannot know when they will burst." [the Demise of the Dollar, Addison Wiggin]

Last year we bubbleheads saw the smoke and correctly inferred that the house was on fire [there is a housing bubble]. Now, the flames are apparent in the bubble markets. Still, many in the housing industrial complex refuse to see the flames that are engulfing the house.

New Home Cancellations Significantly Up over 2005

The Washington Post reports that cancellations for new housing units are significantly up from last year.

As the housing market cools, builders are reporting that more people are walking away from contracts and from tens of thousands of dollars in deposits.

Wall Street analysts say the Washington market is among those seeing the highest percentages of buyers abandoning ship -- more than double last year's rate, according to one research firm, and perhaps as high as one in three new-home buyers in some places. And nationally, some big builders are beginning to report cancellation rates upward of 25 percent.

In the Washington, DC metro area there is this information to report:

Hanley Wood Market Intelligence, a home-building research firm, this week said that its latest survey of builders showed that the can cellation rate for the Washington area in March more than doubled from a year earlier, jumping to 12.7 percent from 5.1 percent.

The survey shows the cancellation rate locally highest in Fairfax County, at 30.9 percent, compared with 0.8 percent a year ago.
As expected "People who are buying for investments rather than residences are the most likely to bail out, experts said. They reason that it would be better to lose a deposit than to go ahead with an investment that could lose value, particularly if builders are cutting prices in the same or nearby projects."

Indeed some specuvestors ( investors who are really speculators) are losing huge amounts of money in the housing market.

Despite the pain of giving up that much money, some buyers are canceling to cut their losses because builders are pricing the same houses for so much less, Alexandria lawyer James C. "Beau" Brincefield Jr. said.

"I have seen people literally walk away from $125,000 deposits rather than go forward with the closing because the value of a house identical to their own was being sold by the builder for $100,000 less," said Brincefield, who is preparing litigation for buyers who want to sue builders to get their deposits back.

Finally, "Credit Suisse First Boston stock analyst Ivy Zelman this week said big builders nationally are reporting cancellation percentage rates in the mid- to high 20s, compared with the mid- to high teens of a year ago. Executives from Pulte Homes, for example, said in an April 27 conference call with analysts that cancellations reached 27 percent in the most recent quarter, vs. 18 percent a year ago"

"Hanley Wood's survey showed the Sacramento area with the highest cancellation rate, 28 percent, up from 2.6 percent in March 2005. Rates in Las Vegas, Denver, Phoenix and Orange County, Calif., also were higher than those in the Washington area."

Friday, May 05, 2006

Speculative Episodes

Speculative episodes result in spectacular gains and spectacular losses.

"The technology-heavy NASDAQ Composite index peaked in March 2000, reflecting the high point of the dot-com bubble." [From Wikipedia Internet Bubble article]