Foreclosures Up 25% Year Over Year

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

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

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

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

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

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

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

Angry Phoenix Realtor Verbally Attacks Fellow Housing Bubble Blogger

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

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

Realistically, how overvalued are Phoenix home prices?

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

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

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

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

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

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

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

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

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

Email To Recent Centex Home Buyers

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

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

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

Warmest Regards,

XXX XXXXX

Community Sales Representative

Cell Number 703-XXX-XXXX

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

The Grant in Washington, DC

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

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

Galbraith on Speculative Episodes

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

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

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

US GDP Growth Slowing Significantly; Recession Coming Soon

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

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

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

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

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

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

Just Take Out that HELOC!

Just take out that HELOC!

BubbleSphere Roundup

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

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

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

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

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

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

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

June 2006 New Home Sales Data

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

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

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

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

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

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

It's The Inventory Stupid!

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

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

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

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

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

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

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

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

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

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

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

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

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

Washington Post: After 5 Years of Growth, Home Prices Drop

The Washington Post reports about the declining housing market in the Washington, DC area.

In what may be the most telling sign yet that the real estate market here has shifted downward, median prices of homes in several parts of the Washington area have declined when compared with the same time last year.

In Loudoun County, for example, the median price of homes sold dropped 1.2 percent last month, compared with June 2005, according to Metropolitan Regional Information Systems Inc., the area's multiple listing service. In Fairfax County, prices fell by half a percent in May and a tenth of a percent in June.

Joe Sixpack is quickly learning that "Prices only go up!" is clearly false.

Blog Rules Updated

Recently, commentators on the blog have stepped over the line. Blog rules have already been implemented.

Someone has been posting comments in my name 'David.' This is unacceptable and any comments under the name 'David' that I did not write will be deleted. If your name is in fact also David, please use something else like 'David B' or 'David 321.'

Currently, my most recent posts are in 'lockdown mode' as the comments became out of control. Post will go into 'lockdown mode' when comments reach a certain threshold of obnoxiousness. It will not be toleated. Both, Housingheads and Bubbleheads are not allowed to launch personal insults at each other. These comments are highly likely to be deleted.

Blog Rules

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. Or everyone in China is wealthy.]

8) If there are any questions regarding blog rules please email me at bubblemeter@gmail.com .

Thanks for visiting. Please enjoy yourself on the blog.

Two Houses Next to Each Other For Sale

Two houses right next to each other for sale along North Capital Street in Washington, DC. The one on the right has balloons attached to the sign. Balloons can pop! The addresses are 2120 North Capitol Street NW and 2118 North Capitol Street NW. The one on the right (address 2120) is available for 799K; MLS # DC6083360.

NAR's Playbook on Home Buying

Over at the The Housing Bubble Blog commentator Chris from Jacksonville FL wrote this:

The NAR’s underlying message is….drum roll please…

Last year, “Home prices are increasing…..its a good time to buy”

Now, “Home prices are leveling off…its a good time to buy”

Next year, “Home prices have fallen……its a good time to buy”

Very well put!

June Existing Home Sales Data Shows Declining Market

The National Association of Realtors just released their June 2006 existing home sales data.

Existing-home sales were down modestly in June, and home prices were up slightly from a year ago, according to the National Association of Realtors

Sounds pretty decent. Hold your horses there are many negative numbers in this month's data.

Total existing-home sales – including single-family, townhomes, condominiums and co-ops declined 1.3 percent to a seasonally adjusted annual rate of 6.62 million units in June from an upwardly revised level of 6.71 million May. Last month'’s sales were 8.9 percent below the 7.27 million-unit pace in June 2005.

Home sales last month were down basically 9% compared to last year across the US. In the bubble markets the decline is even greater.

The national median existing-home price for all housing types was $231,000 in June, up 0.9 percent from June 2005 when the median was $229,000.

Technically the .9% increase in the median sales price for existing homes is 'up.' In real dollars, adjusted for inflation, the median sales price has declined from June 2005. Let's look at housing inventory or housing supply.

Total housing inventory levels rose 3.8 percent at the end of June to 3.73 million existing homes available for sale, which represents a 6.8-month supply at the current sales pace. By contrast, in June 2005, there was a tight 4.4-month supply on the market.

Nationally, inventory up is 39.1% year over year which is a fast pace. In most bubble markets, inventory is exploding. Home sales:

Single-family home sales eased 0.9 percent to a seasonally adjusted annual rate of 5.81 million in June from an upwardly revised 5.86 million in May, and were 8.2 percent below the 6.33 million-unit pace in June 2005. The median existing single-family home price was $231,500 in June, up 1.1 percent from a year ago.

Existing condominium and cooperative housing sales fell 5.5 percent to a seasonally adjusted annual rate of 805,000 units in June from a pace of 852,000 in May, and were 14.6 percent below the 943,000-unit level in June 2005. The median existing condo price was $226,900 in June, down 2.1 percent from a year earlier.

In real dollars the median sales price of both condos and single family homes declined year over year. The numbers for the condo market, for both pricing and number of sales, were weaker then the single family housing market. As the bubble bloggers have been saying, the condo market is more bubblicious then the single family housing market. Looking regionally:

Regionally, existing-home sales in the Midwest were unchanged in June, holding at a level of 1.52 million, and were 6.2 percent lower than a year ago. The median price in the Midwest was $175,000, which is 1.7 percent below June 2005.

Existing-home sales in the West also were unchanged, at an annual pace of 1.41 million in June, and were 17.1 percent lower than June 2005. The median price in the West was $342,000, the same as a year ago.

Existing-home sales in the South eased 2.3 percent to a pace of 2.57 million in June, and were 5.5 percent below June 2005. The median existing-home price in the South was $191,000, down 0.5 percent from a year earlier.

Existing-home sales in the Northeast declined 3.5 percent to an annual sales rate of 1.11 million units in June, and were 9.8 percent below a year ago. The median price in the Northeast was $298,000, up 7.2 percent from June 2005.

This what GAIN Capital had to say in their comments about the existing home sales numbers:

Looking at the breakdown of existing home sales data two key points emerge: 1) inventory of homes for sale has increased to 6.8 months from the 9-year high of 6.4 months in May; and 2) the average price increased only 0.7% MoM, the smallest increase in a long time and well below the 4-5% annual increase over the last six months. So despite the smaller than forecast decline in June existing home sales, the underlying market foundation is likely eroding more quickly than expected and this points to outright average home price declines in the coming months as inventories of unsold homes continues to increase.

Here is More Information data:

National Existing Home Sales (pdf)
Existing Condo & Coop Data by Metro Area (pdf)
"Buyers Market With Plentiful Supply"’: NAR (The Housing Bubble Blog)
NAR: Existing-Home Sales Flattening, Prices Cooling (Calculated Risk)

The NAR chimed in on their findings. NAR President Thomas M. Stevens from Vienna, Va., said opportunities have opened for home buyers:

"Relative to the five-year housing boom, this year is a buyer'’s market in much of the country with plentiful supply, along with interest rates which remain historically favorable, so it'’s a good time to buy a home."”

In the bubble markets prices have doubled to tripled what they were just five years ago. It is always a good time to buy according to the dribble from the National Association of Realtors. They have lost their credibility by cheerleading homebuying at near peak prices.

Condo News

Chicago: Condo market feels a chill
Washington: Who'd Want To Live There?
San Deigo: Condo Conversion-Conversions

Bubble Meter Criticism of the National Association of Realtors Quoted in Washington Post Express

Bubble Meter was quoted in today's (pdf) edition
of the Washington Post Express.

---------------------Washington Post Express Piece---------------------

Renters Will Get Ebola!

"Is there really anywhere in the U.S. where annual rent costs more then seven times what owning costs? Not sure how they come up with these numbers. This pure deception ..... The National Association of Realtors is a harmful organization."

BUBBLEMETER.BLOGSPOT.COM THINKS A NEW BROCHURE BY THE NATIONAL ASSOCIATION OF REALTORS URGING PEOPLE TO BUY HOMES HAS A LOT OF FUNNY MATH.

--------------------------------------------------------------------------

Bubble Meter will continue fighting the National Association of Realtors, as they need to be exposed for their deceptive ways. Bubble Meter will continuing fighting the good fight!

BubbleSphere Roundup

If there is one post you read about the housing bubble this week it should be Ghost Housing Market. Incredible post.

There is the Sacramento Real Estate Statistics Blog which offers what it promises. The author just launched a spin off blog titled Sacramento Area Flippers In Trouble Blog. It shows dozens of properties that have been bough recently and are now being offered at less or the same as the previous purchase price. Some flipper already have negative equity in their property. It will be ugly as the housing prices continue to decline in the bubble markets. The blogger blogs "If you ever needed proof that itÂ’s possible to lose money on real estate, I'’ve got it for you."

Bubble Markets Inventory features posts about Henderson, NV (Las Vegas suburb) and Poway, CA. Solid blog.

NAR Releases Deceptive Rent vs Buy Brochures

The National Association of Realtors (NAR), just released a deceptive brochure "To Buy Or Not To Buy; NAR Consumer Brochure Answers The Question." In the press release for the brochure it is written:

WASHINGTON (July 19, 2006) – Renting can cost more than seven times annually than owning, according to a newly revised consumer education brochure from the National Association of Realtors®. The brochure, “Why rent when you can buy?” challenges certain assumptions about renting versus buying and helps Realtors® evaluate with their clients and customers whether homeownership is right for them.

Is there really anywhere in the US where annual rent costs more then seven times what owning costs? Not sure how they come up with these numbers. This is pure deception. The NAR goes on to say:

The Federal Reserve Board estimates that homeowners have a net worth nearly 36 times more than that of renters. Over the past 10 years, the cost of rental housing in the United States has increased an average of 3 percent per year; average rents are projected to rise 4.1 percent this year alone. With a 3 percent annual increase, a current rental payment of $1,000 per month would increase every year and amount to $137,567 after 10 years, with no wealth accumulation.

In contrast, a $210,000 home purchased today with a downpayment of $10,000 and a 30-year fixed rate mortgage at 6.5 percent would cost a steady $1,100 per month and yield a net worth of $138,521 after 10 years, assuming an historic 4.5 percent annual appreciation rate.

This is also misleading for many reasons. First of all, if one buys there are taxes, insurance costs, and maintenance costs that are NOT mentioned and that are NOT 'steady,' Here is the page where you can purchase the NAR Brochure:


"Are your clients still on the fence about buying a home? Then tell them what they need to know! Homeownership is easier and less expensive than renting" Pass the Kool Aid!

The National Association of Realtors (NAR) is a harmful organization that has been cheerleading the housing bubble which is a speculative episode. The housing bubble is putting millions of Americans in financial harms ways. The behavior of the NAR is absolutely despicable.

Chief Economist of the California Association of Realtors Changes Tune

In 2005, Leslie Young Appleton, the chief economist for the California Association of Realtors (CAR), was busy publishing power point presentations mocking the housing bubble theory.

PowerPoint presentation by the California Association of Realtors, in 2005.

Now, Leslie Appleton-Young is "at a loss for words" to describe the declining housing market. Here are excerpts from the LA Times:

Leslie Appleton-Young is at a loss for words.

The chief economist of the California Assn. of Realtors has stopped using the term "soft landing" to describe the state's real estate market, saying she no longer feels comfortable with that mild label.

"Maybe we need something new. That's all I'm prepared to say," Appleton-Young said Thursday.

The shift in language comes as debate over the real estate market is intensifying. The long-awaited drop-off is happening, but there's little agreement about how brutal the landing will be.

For real estate optimists, the phrase "soft landing" conveyed the soothing notion that the run-up in values over the last few years would be permanent. It wasn't a bubble, it was a new plateau.

The Realtors association last month lowered its 2006 sales prediction from a 2% slip to a 16.8% drop. That was when Appleton-Young first told the San Diego Union-Tribune that she didn't feel comfortable any longer using "soft landing."

"I'm sorry I ever made that comment," she said Thursday. "When I get my new term, I'll let you know."

Appleton-Young had no qualms about predicting a hard landing here: "We're expecting a fairly significant shakeout."

You know its bad when the chief economist for the California Association of Realtors is apologizing for using the term 'soft landing.' She also said "Maybe we need something new" to describe the housing market. Patrick.net has a discussion for new terms. Here are some of my suggestions:

• Painful Landing
• Tough Landing
• Rough Landing
  
• Hard Landing
• Crash Landing

Ms. Young Appleton has recognized the very signifcant decline that is occuring in the housing market. So when will David Lereah, the chief economist for the National Association of Realtors stop using the term 'soft landing?'

Housing Market Index Falls To 1994-95 Levels

The Housing Market Index is low. It is now in line with reading from the 1994-95 period. New from Mortgage News Daily:

The two monthly reports that measure the health of the home construction industry were released this week. The U.S. Census Bureau and U.S. Department of Housing and Urban Development issued its report on housing starts in June and the National Association of Home Builders in conjunction with Wells Fargo published their monthly Housing Market Index (HMI) for July. Taken together the two reports are a good indication that the real estate market is definitely slowing and that builders are not optimistic that things will get better soon.

The HMI is derived from a monthly survey in which builders are asked their perceptions for current single-family home sales and their expectations for sales over the next six months as either "good," "fair," or "poor" and asks them to rate current buyer traffic from very low to very high. Any total score over 50 indicates that more builders view conditions as good rather than poor.

In June 2005 the HMI was at a recent high of 72. By May of this year it had slipped to 42 and this month it is down three more points to 39. All three of the survey components slipped but most notable was the decline in the index for sales expectations over the next six months which fell five points to 46. The index gauging current sales was down four points to 43 and the index gauging traffic of prospective buyers dropped from 29 to 27.

Builders in the Western region recorded the biggest dip in confidence, a decline of 9 points to 51. That region had kept a high level of confidence for some time and, even with the recent drop its builders were still more optimistic than those in the Northeast (36), the Midwest (21) and the South (50). The South was actually up two points since June.

The National Association of Home Builders Chief Economist David Seiders said that builders were concerned about the eroding affordability of home ownership and the withdrawal of investors and speculators from the marketplace. But he also said that builders fear more tightening of monetary policy by the Federal Reserve that could drive up interest rates even further.

"In terms of historical comparison, the HMI's movement is essentially in line with readings from the 1994-95 period when the Federal Reserve tightened monetary policy and a fairly orderly cooling-down process occurred in the nation's housing markets," Seiders observed. "That is what our forecasts anticipate happening in the current period, provided the downside risks of rising interest rates and a bail-out by investors/speculators do not become too pronounced.

The market will continue to decline for the homebuilders, especially those building mainly in the bubble markets.

Inventory Overload in Tampa, FL

Inventory overload in Tampa, Florida.
Picture from Martin Weiss' Safe Money Report.

Shooting Located Where Two Houses Are For Sale

With so many homes for sales in the Washington, DC area, is not so surprising that at one of the shooting locations there were two houses for sale right there. Thanks to the reader who sent this one to me.

Two Townhouses For Sale Next to Each Other

Two Townhouses For Sale Next to Each Other In Downtown Silver Spring.

One of them is listed at 679K. "Beautifully maintained 4 level townhome at cameron hill in the heart of fabulous downtown silver spring and just steps to the silver spring metro, rest., shops, afi silver/cinema, and the new town center*large lr/dr*ts kitchen w/state-art-appl*upgraded hardwood floors thruout main level*master suite w/bay window,w/i,cathedral ceiling*large deck*garage & carport *3br/2 1/2 ba*rare opport.*gorgeous!" MLS # MC6098230.

Ben Bernanke On Housing

Federal Reserve Chairman Ben Bernanke testified at Congress before the Committee on Banking, Housing, and Urban Affairs. At which he again used the term 'gradual cooling' to describe the housing market. Here is an excertpt of what he had to say on housing:

Outlays for residential construction, which have been at very high levels in recent years, rose further in the first quarter. More recently, however, the market for residential real estate has been cooling, as can be seen in the slowing of new and existing home sales and housing starts. Some of the recent softening in housing starts may have resulted from the unusually favorable weather during the first quarter of the year, which pulled forward construction activity, but the slowing of the housing market appears to be more broad-based than can be explained by that factor alone. Home prices, which have climbed at double-digit rates in recent years, still appear to be rising for the nation as a whole, though significantly less rapidly than before. These developments in the housing market are not particularly surprising, as the sustained run-up in housing prices, together with some increase in mortgage rates, has reduced affordability and thus the demand for new homes.

The slowing of the housing market may restrain other forms of household spending as well. With homeowners no longer experiencing increases in the equity value of their homes at the rapid pace seen in the past few years, and with the recent declines in stock prices, increases in household net worth are likely to provide less of a boost to consumer expenditures than they have in the recent past.

At least publicly, Ben Bernanke is solidly in the 'soft landing' camp. Where is his credibility when he says?

Some of the recent softening in housing starts may have resulted from the unusually favorable weather during the first quarter of the year, which pulled forward construction activity, but the slowing of the housing market appears to be more broad-based than can be explained by that factor alone.

Appears? The 'slowing' housing market certainly is much more then weather alone.

PaperMoney - A US Real Estate Bubble Blog

Check out this most excellent housing bubble blog titled Paper Money - A US Real Estate Bubble Blog. There is much material here. This blog is a very worthy addition to the BubbleSphere.

Welcome. :-)

CondoFlip.com

From the FAQ at CondoFlip.com:

By now, you may have seen some of the press that we have been getting about our Condo Flip™ website (http://www.condoflip.com). We've been written about in THE WALL STREET JOURNAL, USA TODAY, THE NEW YORK TIMES, FORTUNE and a host of other publications. We know that the word FLIP is not always used in a positive way. Well, we're going to re-brand the word FLIP to simply mean the "re-selling" of preconstruction condos.

After all, it's the word that buyers and sellers use most often. Don't forget that MONSTER is no longer a scary creature, it's a JOB HUNTING site. AMAZON is no longer a river, it's an ONLINE SUPERSTORE. YAHOO is no longer what you scream when you strike oil, it's a SEARCH ENGINE. So, FLIPPING is no longer the desperate attempt of a condo buyer to resell their unit, it's what a curious buyer does to see how much they can sell their condo for. It's as simple as that.

That is a major task to rebrand the word flipping. CondoFlip's website also claims that "Bubbles are for Bathtubs." We will see how long this internet based condo flipping company lasts. This gives a whole new meaning to dot condo.

BubbleSphere Roundup

Vancouver Housing Market Blog has a piece about interest rates in Canada. Excellent blog.

The housing market has significantly declined in Sacramento since last summer. Sacramento Landing is doing a fantastic job in keeping up with the situation. There is a great piece about a desperate seller using radio ads to sell her house.

The Seattle Bubble has a post titled "King County To Middle Class: Rent Or Leave."

Track inventory @ Bubble Markets Inventory Tracking.

BubbleTrack reports on the homebuilders and how they are doing financially.

Economic Thoughts

You have been predicting a recession in the near future. Given the 5.6% GDP growth for 1st Quarter 2006 in the US, do you think a recession will happen soon?

Despite the strong 5.6% 1st quarter GDP growth in the US, a recession is looming. The declining housing market coupled with a drop in consumer spending are the two main factors that will lead to a recession within the next 12 months. By the end of this fall, the economic news will be sour. Get ready, a significant recession is coming.

What will happen with short term interest rates as set by the Federal Reserve?

Interest rates will reach 5.5% this year. They may even reach 5.75%. It is unlikely that the Feds will raise further given the coming recession.

What will happen with the housing markets in the coming months?

By the end of fall 2006, bubble markets throughout the US will be in bad shape. Inventory will be at record highs, prices will be falling, and layoffs will be spreading in the housing related industry. By December, Joe Sixpack will be well aware of the significant declines occurring in the bubble markets.

How will the 2006 Christmas shopping season fare?

It will be bad. Consumers will be pulling back and spending significantly less in real dollars than in 2005. Retailers will be disappointed.

Is There a Realtor Bubble?

Members of the National Association of Realtors (NAR) are called Realtors. As of 6/30/2006 there were 1,327,425 Realtors. The above graph only shows full years, thus 2006 is not graphed.

The number of Realtors has grown tremendously over the past 5 year. This corresponds precisely with the housing bubble years. Is there a Realtor bubble?

Price Index for Average Selling Price for Housing Units in Northern Virginia

The above graph shows the a price index for the average selling price for all housing units sold in Northern Virginia. The graph is meant to show how the last 12 months has been very different from the 2 prior years. The housing boom is clearly over in Northern Virginia.

The divergence between the three series begins in the month of December. [I will also make a graph using the median price]. The data comes from the MRIS (Metropolitan Regional Information Systems, Inc. - MLS Resale Data).

9 1/2 Street NW

Looking along the 1900 block of 9 1/2 Street NW in Washington, DC. Note: 9 1/2 Street is only one block long.

Joke

How many flippers does it take to screw in a light bulb?

One, but its a pointless endeavor, as the electiricty has already been turned off by the utility company.

Price Reductions on House in Skokie

This house in Skokie still has not sold. Back on January 1st, 2006 the house was priced at 699K after a price reduction. I had written at the time "Despite its price reduction it is significantly overpriced. They should reprice it to 625K and see if it will sell."

The price was reduced from 699K to 649K on 5/11/06 and subsequently reduced from 649K to 599K on 7/02/06.


It located at 3821 Sugar Loaf in Skokie, IL. [Chicago suburb] MLS number of 06003346. According to ZipRealty it has been on the market for 190 days. No one has been living in the house for many months as the owners live in one of the Carolinas.

Previous Posts:

Falling Sign, Falling Price. (1/1/06)
Update: House For Sale in Skokie, IL (3/10/06)
Update: Seller Refuses to Lower Price (4/16/06)

Will it sell at 599K?

Probably not! They should reduce it once more to 549K and see if it sells.

BubbleSphere Roundup

Calculated Risk is a fantastic blog. Check out the recent post about the May Trade Deficit.

Price Reductions in Marin County as of July 8, 2006 @ Marin Real Estate Bubble

"Friday's labor report was a bit of a disappointment. For the third month in a row, the total number of jobs created came in well below 150,000, the level generally believed necessary to keep pace with a growing population. However, the really bad news was not the number of jobs gained, but the type of jobs that are now being lost." So writes The Mess That Greenspan Made.

Its wonderful when my fellow bloggers take on the National Association of Realtors (NAR). I was pleased to see the Northern New Jersey Real Estate Bubble blog call the NAR on its downard revisions of existing home sales numbers. Grim writes:

I have to admit, I do find it entertaining to watch the NAR change their forecast with every press release they issue. Month after month their forecast is revised downward and further downward still. While the overall change has been minor, it's most certainly something I'm going to keep my eye on.

Super. We need more eyes and ears watching the NAR. :-)

National Association of Home Builders Fails To Update New Home Sales Statistics Page

When the numbers looked disappointing, The National Association of Home Builders (NAHB) decided to stop updating their new homes sales statistics page in February 2006.


Hat tip to Curt on The Housing Bubble Blog who found this gem. Here is what he wrote:

the National Assoc of Home Builders used to put ou a handy year by year summary of sales and months of inventory

http://www.nahb.org/generic.aspx?sectionID=131&genericContentID=341

But, as you can see, when the numbers started looking dismal, the data stopped flowing in Mar of 06. Wonder why?

There are blog readers who come from the National Association of Home Builders. Care to respond?

Federal Reserve Likely to Raise Rates

The Federal Reserve Board is meeting again on August 8 to decide what to do with short term interest rates. Currently, rates are standing at 5.25%.

Reasons to Raise

• Fight inflation
• Keep the dollar from tanking
• Reload the 'gun' so can lower rates for upcoming economic downturn without significant risks.
  

Reasons to Lower or Pause

• Economy is already slowing. Don't want to overshoot and cause a recession.
  

[In my humble opinion, a recession in the next year is almost inevitable]. So what will the Federal Reserve Board decide on August 8th?

They will very likely raise rates by 25bps (1/4). At the next meeting after August, the Fed's will likely pause.

Condo, Condos, Condos

Condos under construction on the edge of downtown Washington, DC

Ventana Condo

Ventana Condos in downtown Washington, DC

WashingPost Live

Check out the WashingtonPost Live Chat about Real Estate. This was my favorite Q & A:

Ashburn, Va.: I'm so mad at my neighbor. I bought my new home here in Ashburn last summer and plan to sell it next year (after holding two years to avoid taxes) to make a nice return on my investment. The problem is my neighbor is trying to sell his house (very similar to mine) right now and he keeps lowering his asking price. Each time he lowers his price, I see my potential profits next year getting squashed. Doesn't he realize he's hurting the comps for all of his neighbors by doing this? I don't think he is acting very "neighborly" by doing this. I want to say something to him and tell him he should stop putting his interests ahead of his neighbors. Its people like him who are ruining the market for the rest of us. If he would just refuse to lower his price, we could maintain our comps and everyone would benefit. What can I do to stop him?

Kirstin Downey: Wow. Interesting question. There's nothing you can do. It's his house, of course. It's frustrating, to be sure. One word of advice: Don't resort to violence.

Seriously, he may just be desperate to sell. Perhaps he has an adjustable rate mortgage that is rising, or maybe an option ARM that is resetting to a much higher monthly payment. Maybe he's getting a divorce or has lost his job and doesn't want to talk about it. Or maybe he wants to move to Tahiti. (I do sometimes, don't you?)

I hear from many, many buyers and sellers each month, and many sellers are finding the only way to sell a home amid this growing inventory is to cut the price. Perhaps last year's prices were just illusory after all

The Live Chat transcript is well worth the read. Some readers respond to this question as well. Good stuff. :-)

UPDATE: I originally wrote at the beginning of this post that "This was my Q & A:" What I meant to write was "This was my favorite Q & A:" My apologies for the confusion. I did not ask that question on the Live Chat session. Furthermore, I DO NOT falsify information or mislead people. I truly am sorry for any and all confusion caused by my ommission of the word 'favorite'.

BubbleSphere Roundup

Housing.com Blog is doing a superb job covering what is going on in the Hurricane Katrina ravaged areas.

Some of the blogs are about to be removed from my blogroll as they have not been updated in over a month. :-(

DC Housing New is up and running. Great potential. :-)

100,000 page views for Sacramento Landing. Congratulations! Very well deserved.

The spinmeisters at the NAR report that Pending Home Sales 'Leveling Out'.

High Oil Prices

Oil prices continue to rise. Reuters reports:

Oil stayed within sight of a new record high beyond $75 on Thursday as investors fretted over gasoline supply in the United States, where drivers burn 40 percent of the world's motor fuel.

Prices have climbed more than $5 a barrel over the past two weeks, fueled by signs that U.S. pump prices near $3 a gallon have yet to pinch the wallets of motorists in the world's biggest energy user.

These high oil prices are bad news for the housing market. We are likely to see 4$ gasoline prices in expensive gasoline markets sometime this summer (with the hurricanes or international developments). Tough times ahead.

Bubblicious Planter

The Bubblicious Planter located along the 1400 block of Church St NW
in Washington, DC

Mortgage Credit and Consumer Credit Relative to Disposable Personal Income 1965 - 2005

Chart from Federal Reserve Board's Report to the Congress on Practices of the Consumer Credit Industry in Soliciting and Extending Credit and their Effects on Consumer Debt and Insolvency (pdf) p8

Available Inventory Exploding in Northern Virginia

Inventory is exploding across Northern Virginia. On the MLS the number of available listings in Northern Virginia has increased from:

• June 1st 2006: 20,675
• July 1st 2006: 22,959
  

The increase represents an 11 percent increase month over month. (Source: Virginia MLS).

Happy 4th!

Happy July 4th! :-)

My Rent is Increasing 3.3%

We just received our rent lease renewal for next year, our landlord is seeking to raise our rental rate by 3.3% from 2,300 a month to 2,375 a month. We rent a very nice single family residence.

I am not a bitter renter!

Not a problem!

Reasonable. :-)

Mica Condo Studio for Rent

A flipper bought a studio at the Mica Condos in downtown Silver Spring. The studios sold for between 230K. Now, the flipper is trying to rent the studio out for $1700 a month. See this Craigslist Post:

$1700 - New Luxury Condo at Silver Spring Metro for Rent

Newly renovated studio condo for rent featuring:

Walking distance to SS Metro, Discovery Channel and Downtown SS.
Brand New club room, media center and swimming pool.
Security system, snow and trash removal and on-site maintenance.
Upgraded kit. - Maple cabinetry, stainless steel appl. and granite countertops.
Upgraded bathroom - Ceramic floor, granite countertop.
Washer and dryer in unit.
42" Plasma TV included!
Parking space also provided

The problem is that studios in downtown Silver Spring generally rent for between $800 to $1000 a month. There is NO way this flipper will be renting this place out for $1700.

Even, if the flipper could rent it out for $1100 a month, the flipper would still be losing significant money each month as the cost of the mortgage, taxes, condo fee and maintenance would add be more then the rent potential.

Monthly traffic Statistics at Bubble Meter Blog

Thanks to all the readers for making this blog a success.