- Greenspan & The Feds for short term interest rates that were too low for too long [corrected from before, my terminology before was faulty]
- Parts of the Housing Industrial Complex (David Lereah and other shills)
- Irresponsible Lenders for lending to people who really can't afford it. All those toxic mortgages.
- Fannie Mae & Freddie Mac
- Asian Central Banks & GSE for buying all these bundled loans
- Speculators & Flippers ( for being greedy and fueling this mania)
- Some HomeBuyers for buying beyond their means and being ill informed.
- Parts of the Media for not informing the public about this issue sooner (finally they are communicating this)
- Others ( yet to be determined, please discuss)
Tuesday, August 22, 2006
Who Is To Blame?
As the housing market continues to experience significant declines in many bubble markets, we are again returning to the question of who is to blame for the housing bubble.
Subscribe to:
Post Comments (Atom)
Posts
David,
ReplyDeleteWith re Specualtors and Fliipers being "greedy":
That is an unfortunate value judgement on individuals acting in their own best interest.
the invisable hand sometimes is broken
ReplyDeleteAdam Smith,
ReplyDeleteYou're right. Usually individuals who act only in their own best interest are called "selfish."
(The part of me that is joking is inversely proportional to the % decline expected in home prices.)
(If you are still reading; yes, I'm still mostly joking.)
H
There are many factors, but I'd go with two -- the incredibly low interest rate and available housing:
ReplyDeletehttp://money.cnn.com/2006/08/21/real_estate/Fastest_growing_housing_markets/index.htm?cnn=yes
Rhode Island added just 1,505 homes, a 0.3 percent increase, the lowest rate in the nation. Washington, D.C., which added 1,175, was the lowest in terms of sheer numbers, but its rate of growth was 0.4 percent, just nosing out "Little Rhody."
Robert Kiyosaki
ReplyDeleteIt was an unfortunate confluence of circumstances where a natural upswing in the real-estate cycle happened at the same time when interest rates were abnormally low, and a large amount of investment dollars were looking for safer investments post the stock market crash.
ReplyDeleteAlso, it is the fault of a financial system where the actual lender of money has no stake in the money they are lending out. They can simply pass on the risk to the stock market or corrupt beuracratic institutions such as Freddie Mac/Fannie Mae. This kept the speculative fire burning far longer than it should have.
I think it's just a normal cycle for a "hotspot" like DC. It's happened before, it will happen again. The cheap money made it worse than usual.
ReplyDeleteAs a society, our tendency toward excess continues to grow, so the harsher nature of this particular cycle is understandable, but it's still just a cycle.
I would have to vote for "everyone". I think that the blame for the atrocious housing bubble can't be placed on any one player. If anything, I think that the average home-owner is more to blame than anyone else. Rather than blaming the Fed, brokers, appraisers, or brokers, I blame the average home owners who have been salivating over their new-found wealth. I am just AMAZED at how many average people have been caught up in this frenzy (even the ladies in my wife's mother's groups keep yacking about how much their homes are worth).
ReplyDeleteWe only have ourselves to blame for this...
My view is that this is just a part of human herding behaviour. We all key off of one another and go through mass emotional states. This is why bubbles occur (i.e. the herd starts getting manic), and why we have busts (i.e. when the herd panics).
Maybe we shouldn't blame anyone, and just chalk it all up to the natural course of human behaviour. Just the process of look for someone to "blame" presumes that the bubble could have been prevented, and that there is something we could do better in the future to avoid similar problems. I suspect that there is simply a natural pattern to human behaviour that runs on a generational level, where we have to re-learn the experiences of the past for ourselves. When you get far enough removed from severe economic problems (e.g. 2 or 3 generations from the last depression), you will inevitably have another one because people no longer believe such bad things could happen again.
In other words, as soon as people think we have conquered a particular issue (be it war, recessions, depressions, etc), that is the time when we will undoubtedly have another one.
mikhail,
ReplyDeleteWell said. I agree completely.
David,
ReplyDeleteWouldn't it be more appropriate to wait and see if there are significant declines before asking this question? The under 5% decline in median prices you are seeing in some very localized areas is hardly significant. Now, an across-the-board 50% to 70% decline like the bubble heads have predicted would indeed be a significant decline.
Critical questions to answer:
ReplyDelete1. How many housing units are vacant in the DC area?
2. How many people are holding adjustable loans that they will be unable or unwilling to afford if interest rates go back to historical norms? (About 9-10%)
3. How many of those people are unable or unwilling to convert these loans to fixed interest loans?
4. How many people need continuous home price appreciation to bail them out of paying too much?
5. How many people have over-allocated housing and real estate as an asset class, and will need to realize gains to fund needs like education or retirement?
6. How many properties are being held by speculators and rented out in cash-flow negative positions?
7. How many new construction projects are going to be completed in the next few years?
8. Did builders overestimate the demand of the market and overbuild this time?
9. How will the added leverage on recent purchases play out? Leverage has been an exacerbating factor in all bubbles and busts.(Historical leverage was 5X on a 20% down loan.. with 3% down we're at 33X.)
10. Will a slowdown in the housing market trigger a larger slowdown?(Basically, will unemployed RE Agents, developers, mortgage brokers, construction workers, etc. put downward pressure on the labor market? Does anyone have the figure for what percentage of the economy is employed in the RE industry?)
Can anyone make an attempt at drawing the demand and supply elasticity curves for housing in the DC area? I realize they are not static, and it's an imperfect analysis, but I'd be curious to see someone feed sales data into a model and see what they come up with.
How about some real discussion instead of hysterics?
Teaparty
lance, please stop saying "50% to 70% decline like the bubble heads have predicted "
ReplyDeleteI only know of maybe one poster who did this. It would be more appropriate to say 30-50%, but most people have posted a numbe somewhere around 30%.
to the question at hand
realtors, not responsible, its their job.
housing organiazation, not responsible, its their job.
fed, our economy was head into the tank thanks to arabs, they had to do something to get it going quick.
banks, not responsible, its their job to make loans and compete.
the only people responsible for this mess are the people who thought they could get rich quick off of housing, but, they will pay for their mistakes.
the real bob
The Census Bureau will release it's data from the 2005 American Community Survey for housing (vacant, median value) on October 3, 2006.
ReplyDeletehttp://www.census.gov/acs/www/Products/users_guide/2005%20ACS%20release%20schedule.pdf
If the daily Treasury yield rate keeps dropping, mortgage rates are going to fall,week by week as they have been. Sad but true.
ReplyDeleteOf course, it's ridiculous that prices might decline 50-70%. After all, the doubling and tripling and sometimes quadrupling of prices over 2001-2005 was completely rational; any expectation that prices might return to previous trend is completely delusional. Whatever.
ReplyDeleteMoreover, I think we did some calcs on here a few months/weeks ago, and found real prices already were down something like 10% from a year ago. I don't remember exactly. Regardless, the fun is just beginning.
I think David's list of the culpable is very comprehensive. I think there has been one group that has been particularly vulnerable though: 'A' students. I know a lot of bright people who deign to associate with me, and I find them especially prone to buying and drinking the koolaid to boot. When all these authorities (the media, etc.) start proclaiming constantly that housing "never goes down," most 'A' students will trust the authorities rather than say, their own experiences with the stock market bubble, and especially more than the internet.
In other words, people who trust authority are going to be, or already are, the biggest victims, if I am right.
A Redskins fan
One other comment about a 50-70% decline... let's say someone (let's call him "Handomse") predicts a 50-70% real decline, and someone else (let's call him "Homely") predicts a flat to low price increase. Five years later, real prices are down 40%.
ReplyDeleteWho was closer to being "right"?
I would say Handsome was.
A Redskins fan
"(e.g. 2 or 3 generations from the last depression)"
ReplyDeleteIf this nation enters into another depression (making it this nation's second such economic disaster), we will all have MUCH more to worry about than housing values. Wake up and realize that a national economic depression, with unemployment at 30% or more, is going to be a disaster of GLOBAL proportions. Wars will likely erupt over natural resources, since commerce and free markets will no long be able to efficiently allocate those resources. Get it?
From what I'm seeing reported, the lending/housing industry turned into a giant used car industry, only on a scale 1 to 2 orders of magnitude higher.
ReplyDelete"What sort of payment are you looking to make" is one thing when it's a used car. You're duped into 5 years of overpaying for a car to the tune of several thousand dollars.
It's near criminal when you do the same to the tune of hundreds of thousands of dollars on a home loan. I know not all lenders are unscrupulous but how quickly did the ranks of lenders swell? Because they could make a lot of money fast?
My $0.02.
"Wars will likely erupt over natural resources, since commerce and free markets will no long be able to efficiently allocate those resources."
ReplyDeleteOh, that is: unless nothing has changed on both national and worldwide scales in the last 80 years. (like billions in population growth, interdependent international trade, and rogue nations with advanced military strength) In which case, we'll just have another quaint depression ala Hoover.
You forgot to put Lance on the list of people to blame.
ReplyDeleteMy Gramma Gertie still cannot afford to retire becaue of Lance.
David,
ReplyDeleteYou seem to have confused interest rates with the money supply. The money supply is not low; quite the opposite. Some argue that one reason banks have so much money to lend is because there is too much money in the economy.
Bill Fleckenstein on MSN Money argues that what we've seen in the past five years is not so much a housing boom as it is a lending boom. Here's the article: http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/FaceItTheHousingBustIsHere.aspx
I'd say that low interest rates and a large money supply built the bandwagon, but homebuyers were the ones eager to jump on it.
"You seem to have confused interest rates with the money supply. The money supply is not low; quite the opposite. Some argue that one reason banks have so much money to lend is because there is too much money in the economy.
ReplyDelete"
What I meant was the money supply for home buying is too cheap i.e interest rates too low
Lance wrote,
ReplyDelete"Now, an across-the-board 50% to 70% decline like the bubble heads have predicted would indeed be a significant decline"
Very few bubbleheads are predicting nominal price declines of 50% to 70% in the bubble markets. I am predicting real dollar (inflation adjusted) price declines of between 20% to 65% in the bubble markets.
Note: If Lance continues to falsy insist that bubbleheads believe X which is not true his comments will be deleted.
If the interest rate go's up, yep the sky will fall. Meaning, 3.0-4.0% increase. This entire bubble was brought on by low interest rates.
ReplyDeleteA Redskins Fan said...
ReplyDelete"Moreover, I think we did some calcs on here a few months/weeks ago, and found real prices already were down something like 10% from a year ago. I don't remember exactly. Regardless, the fun is just beginning."
I think the most recent NAR data and the HPI disagree with you.
A Redskins Fan said...
"I think there has been one group that has been particularly vulnerable though: 'A' students."
I take it you didn't do too well in school?
Anonymous said...
"If this nation enters into another depression (making it this nation's second such economic disaster)"
Um, the GREAT Depression was not America's only depression. It was just the worst.
Buyers. Nobody forces you to sign the papers. Personal responsibility is something we need more of.
ReplyDelete"(inflation adjusted) price declines of between 20% to 65% in the bubble markets"
ReplyDelete'Skins Lover routinely spouts 30%-70%, and you're blaming Lance for repeating that? Perhaps you should consider educating 'Skins Lover about mainstream bubblehead beliefs rather than threatening Lance. Talk 'Skins Lover down from his extremist views.
By the way, by saying "20% to 65%" declines, you essentially ecompassed (and thereby endorsed) 'Skins Lover's extremist point of view. 20-65% encompasses all but 5% of the extremeist viewpoint.
"Um, the GREAT Depression was not America's only depression. It was just the worst."
ReplyDeleteUm, Jeffersonian-era depressions are irrelevant today. Unless you are endorsing the notion that a lack of pervailing winds keeps wind-powered sailing vessels from bringing affordable goods to America's shores; as it keeps America's exports down because we don't have enough wind power to reach Europe.
'Skins Lover: "Oh, when will the trade winds blow favorably again?"
Rational Person: "Probably when condos in nice neighborhoods within walking distance to metro stations fall to sub 100K prices."
Anon 11:41,
ReplyDeleteRedskins Fan always attributes his number to his personal preference.
Lance attributes a single extremist viewpoint to the entire group that disagrees with him.
The former is one person's position. The latter is a willful misrepresentation.
I agree that following up with an "indignant statement" that includes up to 65% declines is rather silly.
My $0.02.
Certainly many bubbleheads have predicted (hoped for) 50 to 70% declines. David, why not delete their remarks?
ReplyDeleteH,
ReplyDeleteBased upon previous cycles, I have stated that drops of up to 25%SFH and up to 40% condo could occur.
We have already seen some of those drops in the areas I monitor: 10 to 20% off peak for condo's and 5 to 10% for single family.
10% in condos is already here, my friends. You can rely on the statistics if you want, but as someone who was in the market last year, pulled out, and is in it again, I trust what I see in listing prices now vs. what I know about sales prices from last year. Stay tuned for more.
ReplyDeleteMany condos went down 35% or so (yes, based on anecdotal evidence but I knew the owners) in the late 80s before they flattened and stayed flat for several years.
You can bet there is more to come. Condos are going to take a big hit.
And if this crime wave continues in DC, there is no telling how bad it will get.
"By the way, by saying "20% to 65%" declines, you essentially ecompassed (and thereby endorsed) 'Skins Lover's extremist point of view. 20-65% encompasses all but 5% of the extremeist viewpoint."
ReplyDeleteThe extremist are talking about nominal price declines, not inflation adjusted (real dollar).
"Certainly many bubbleheads have predicted (hoped for) 50 to 70% declines. David, why not delete their remarks? "
ReplyDeleteThey are stating their view. Lance is putting words in people's mouths that they didn't say. Lance, I am monitoring you.
"Based upon previous cycles, I have stated that drops of up to 25%SFH and up to 40% condo could occur.
ReplyDeleteWe have already seen some of those drops in the areas I monitor: 10 to 20% off peak for condo's and 5 to 10% for single family."
Agree with va_investor for this.
None really knows how much the RE market will drop in the next 2-5 years.
The people who predict a 50%-70% drop are most likely first-time buyers or the ones who can not afford to buy the houses right now. They are just DREAMING to buy houses at that low price in the near future. They do not have any evidences to support their DREAM.
If I had to pick only one person or persons to blame it would be the lenders who would give a mortgage to anyone with a 580+ credit score and a pulse.
ReplyDeleteH,
ReplyDeleteAbsent any "shock" to the economy, I don't see how, or why, this will be any different than previous cycles.
Anonymous said...
ReplyDelete"Um, Jeffersonian-era depressions are irrelevant today. Unless you are endorsing the notion that a lack of pervailing winds keeps wind-powered sailing vessels from bringing affordable goods to America's shores; as it keeps America's exports down because we don't have enough wind power to reach Europe."
First, your original statement that another depression would be America's second is still wrong.
Second, nineteenth century depressions weren't due to sailing vessels. They were due to boom-and-bust cycles before Keynesian economics became the norm. (Keynesian economics doesn't get rid of boom-and-bust cycles; it just moderates them.)
Third, the word is "prevailing" not "pervailing".
Anon 12:23,
ReplyDeleteAbsent any support for "it's different this time" long term trend lines based on the last 30 years of NVAR stats for northern VA indicate that prices are some 50% over valued.
These are non-inflation adjusted (nominal prices) so the slope of the long term line includes appreciation from both inflation and intrinsic value.
Do you see any fundamental changes that would justify a step up from this long term trend?
Source: http://www.nvar.com/market/history.lasso
My $0.02.
"Third, the word is "prevailing" not "pervailing"."
ReplyDeleteFirst, when you are enumerating topics like this, you've got anger issues.
Also, when you're correcting someone's spelling on a blog - you've got esteem problems. Oooops, I mean "Eeesteam" problems.
Oh, and Jeffersonian-era depressions are irrelevant. Period. Thanks for confirming that.
The sailing-ship reference was for entertainment value. And yes, I got a kick out of writing it.
See any spelling erros? 'Cause I ain't goin' back and looking for none.
I think ultimately the people who should be blamed are the folks who decided that it was ok for lending institutions NOT to be held financially responsible for making questionable (e.g., "toxic") loans. If they were financially responsible then they would have to literally pay the price of lending to someone who defaults. Therefore they would not have made the loan in the first place and we would still be living in a world where 20% down, 1/3 income goes to mortgage is normal and people look forward to paying off their mortgage.
ReplyDeleteBring back booyaa guy and ihateyuppies.
ReplyDeleteWhere is Lance? David, did you block some people?
ReplyDeleteIf this nation enters into another depression (making it this nation's second such economic disaster),
ReplyDeleteNitpick: as noted by James and others,
The US had other depressions. The 1873 to 1986 is very analogous to this economy:
http://en.wikipedia.org/wiki/Long_Depression
1. Huge fraction of the labor force in one industry (or related). Then: Railroads, now: real estate (construction, sales, and financing).
2. Weak banking markets at the mercy of one bad event. Then: the Vienna Stock Exchange. Now: Can the economy take a dropping stock market and home ATM?
Fogcutter: You have a very good summary for your numbers.
However, I'm more bearish. I see homes dropping 30% to 60% It all depends on how the rest of the economy reacts to the loan defaults... Hence the large range.
As to whom to blame?
1. Fed for not tightening credit and issuing guidelines to the markets earlier.
2. Anyone who fed the "buy now or be priced out forever" BS. Ok, now we answer the question, "what happens when homes aren't affordable to most people." I'm sorry, but single digit affordability means that practically everyone is priced out. And I don't buy the revised numbers either.
Of course, we have one nasty parallel to the 1929-1941 "Great depression."
That was the only other time where a large fraction of homes had an expected increase in downstream payments. Think about that for a bit...
Neil
"now: real estate (construction, sales, and financing)."
ReplyDeleteOn the construction side; if the work drys up, the unemployment numbers will not be proportionally impacted. Why?
Take a good look at the demographics of the workers at the next condo construction site you see. Better yet, look at this:
Herndon Approves Day Labor Center
Immigration Called 'Out of Our Control'
By Lisa Rein
Washington Post Staff Writer
Thursday, August 18, 2005; Page A01
The Herndon Town Council last night approved the creation of a formal, taxpayer-funded gathering spot for day laborers, saying the chaos in a 7-Eleven parking lot where the workers now gather would only worsen if it did nothing.
http://www.washingtonpost.com/wp-dyn/content/article/2005/08/18/AR2005081800050.html
"First, when you are enumerating topics like this, you've got anger issues."
ReplyDeleteSorry, no anger or self-esteem issues here. I enumerate to clearly separate my points.
"Also, when you're correcting someone's spelling on a blog - you've got esteem problems. Oooops, I mean "Eeesteam" problems."
If it's a typo, I completely understand. People make mistakes. But I got the sense that you didn't know how to spell a fairly common word.
"Oh, and Jeffersonian-era depressions are irrelevant. Period. Thanks for confirming that."
All U.S. depressions are irrelevant because even the Great Depression began before Keynes wrote The General Theory of Employment, Interest, and Money.
"David,
ReplyDeleteIf you keep deleting Lance for merely referring to bubblehead "doom" predictions, you will lose all credibility with me.
p.s. what was that quote from Animal House...something like Super secret double probation?"
Lance was deleted because he accused all bubbleheads of predictintg 50 - 70% and cheering it on.
"Where is Lance? David, did you block some people?"
ReplyDeleteNo. Lance has not been blocked forever. A few of his comments have been deleted.
This comment has been removed by a blog administrator.
ReplyDeleteFew bubblehead says that there will be a 40-50% price correction in the immediate future (i.e., today, tommorrow, next month).
ReplyDeleteWhen housing bubbles deflate price corrections go on for years, 3-5 being the average (in some cases longer), with an average price deflation of 35%.
Appendix "C" of the following contains the relevant data on price corrections:.
http://www.globalinsight.com/gcpath/1Q2006report.pdf
"Sorry, no anger or self-esteem issues here. I enumerate to clearly separate my points."
ReplyDelete"Sorry? Why such a strong emotional reaction (sorrow) if there are no emotional issues on your end?
Or do you not understand the appropriate context in which the word "sorry" is used?
One or the other: you choose.
"All U.S. depressions are irrelevant because even the Great Depression began before Keynes wrote The General Theory of Employment, Interest, and Money."
ReplyDeleteSo at first the Great Depression was a valid example of what *might* happen (see above), and now it is irrelevant?
Fear, fear, and more fear comes out of the bubblehead camp. Remember the movie "The Shining", where the elevator doors open and the blood comes rushing out? Is that what you guys mean when you talk about "blood in the streets"? I'm just trying to gauge whether or not to wear my waders.
Oh, and Lance? I bought a home, and then my washing machine broke down. NOW what am I supposed to do!? This is all your fault.
"Sorry, no anger or self-esteem issues here. I enumerate to clearly separate my points."
ReplyDelete"Sorry? Why such a strong emotional reaction (sorrow) if there are no emotional issues on your end?
Or do you not understand the appropriate context in which the word "sorry" is used?
One or the other: you choose.
I think I found myself a troll.
So at first the Great Depression was a valid example of what *might* happen (see above)...
I never made such a claim, Troll. I just pointed out that the U.S. has had more than one depression. Apparently you take offense at being corrected.
I think the real thing to blame here is the securitization of mortgages. When the person writing the loan is not the one collecting the payments and holding the ultimate liability if the borrower defaults, it creates a moral hazard for the broker to write good quality loans with good risks. The broker can write more loans if they have no standards, since they are going to sell the loan as a private label MBS, or sell the loan to Fannie Mae who will in turn sell the loan as an MBS.
ReplyDeleteGuidelines requiring banks to retain a portion of their originated loans, and to eat their own cooking could go a long way to reigning in this behavior.
I don't think that brokers would be lining up to write the aggressive mortgages we've seen if they had to hold onto the loan. My gut tells me there is probably a lot of sub-prime debt that is being packaged as prime.
Teaparty
You didn't choose, Jim. I'll choose for you: You have an esteem problem.
ReplyDeleteDavid,
ReplyDeleteYou are being too heavy-handed on that delete button. It is difficult to follow the discussion when one-third of the comments are deleted.
Do you live in a lighthouse, Jim? Or is it just a dream?
ReplyDeleteTeaparty,
ReplyDeleteI think that there is some recourse on bad loans. I remember back in the late 80's early 90's, banks and s&l's were being sued over bad loans. Bank Officials were being sued personally.
New Mortgage Product:
ReplyDeletePerpetual Mortgages:
http://www.dailymail.co.uk/pages/live/articles/
news/news.html?in_article_id=401839&in_page_id=1770&ico=
Homepage&icl=TabModule&icc=NEWS&ct=5
http://www.dailymail.co.uk/pages/live/articles/news/news.html?in_article_id=401839&in_page_id=1770&ico=Homepage&icl=TabModule&icc=NEWS&ct=5
David, it is a little silly to delete Lance for his (admittedly false) claims. You should've let him hang himself with his own rope, as he always does. As it is, you'va made yourself look bad and you've created the appearance that you're afraid of what he has to say. That's likely not the effect you were looking for.
ReplyDeleteI'd recommend being easier on Lance and tougher on Anonymous.
ReplyDeleteAmazing! ... My only comment on this thread is simply that the "falling" median price reductions we are seeing in a few places can hardly be considered "significant" by anyone's standards ... bubblehead or housing head! David, the only reason I can suspect for your wanting to delete this simple and non-judgemental observation is that you cannot counter it. If you can, than I dare you to leave this post on ... and counter it. If it disapears like the last similar ones, then I'll know you can't.
ReplyDeleteSeveral of my comments have been deleted today.
ReplyDeleteLance wrote:
ReplyDelete"the 'falling' median price reductions we are seeing in a few places can hardly be considered 'significant' by anyone's standards ... bubblehead or housing head!"
I have to agree so far. The bubble has been growing for at least five years. I fear it may take a decade or more to deflate.
va_investor,
ReplyDeleteYes, there were some lawsuits, but that was after the damage had been done. The bad loans drove the crisis, regardless of the eventual outcome. Lawsuits cannot hope to recover the real damage caused. It took a federal bailout to right the S&L industry. While I realize that the current situation doesn't exactly mirror that one, there are some lessons that can be observed. Likewise in Japan, where banks still have some of the bad loans from their speculative period in the early 90s on their books.
In the past 5 years, there has been no such thing as a bad real estate loan. The appreciation always bailed the lender out. If a borrower defaulted in a year, the asset was worth 12% more anyways. Some very odd things happen when appreciation rates outstrip interest rates. What happens when things get back to normal, when interest rates are higher than appreciation?
http://www.satyacenter.com/library-archive-shadycustomershow.html
http://www-tech.mit.edu/V112/N60/s-and-l.60w.html
http://www.nysscpa.org/cpajournal/old/08135520.htm
When I/O arms reset , let the investers / speculators crash and burn. Good riddance & look forward to seeing ya all in Bankruptcy court!!!!
ReplyDeleteWell, those comps in Buckinghamshire England sure do affect home values in Cranberry, PA, USA.
ReplyDeleteThanks for posting.
va_investor said...
ReplyDelete"Several of my comments have been deleted today."
I don't know what va_investor may have said to get his posts deleted, but I will point out that whether you agree with him or not (I generally do not), he is still one of the most knowledgeable commenters on this blog.
Lance's comments, on the other hand, range between well-thought-out and nonsensical.
RE Significant Declines:
ReplyDeleteI think a more appropriate thing to focus on is the swing in % appreciation. What was it from 2004 to 2005 v/s 2005-2006? Going from a 15-25% yoy gain to a 5 or 10% loss is significant. It is most significant when it comes to consumer psychology and the wealth effect. The wealth effect is disappearing as we speak, and that will have huge impact on everything that the homeowner does.
Ultimately, the consumer bears most of the blame, for being uninformed, for falling asleep during history and economics classes, for trying to keep up with the neighbors (who are like them - uninformed, slept through class, indebted to the eyeballs, etc.) at any cost, for risking everything for instant gratification, for desperately trying to get rich quick, for every stupid decision they made already discussed here. If there were some magic bullet that led to instant riches, humankind would have discovered that centuries ago and everyone would follow that recipe and be rich today. DUH! Caveat Emptor!
ReplyDeleteWe can argue about what caused the housing bubble, but I can definitely say who the bagholders and FB's will blame: everybody and everyone but themselves:
ReplyDeletehttp://www.socketsite.com/archives/2006/08/a_big_bad_lawsuit_at_the_beacon.html
If you read the original news articles cited, it becomes obvious what's going on.
For those of you who wish to blame the lenders, at least you i/o mortgage holders should feel better knowing that your lender is looking out for you:
http://www.baltimoresun.com/business/realestate/bal-bz.re.harney18aug18,0,3179443.story?coll=bal-realestate-headlines-1
godat,
ReplyDeleteYou are right about the psychology. That is the most important factor. There have been no real economic reasons for the fall-off in demand. Economic affects will follow and perpetuate the sentiment.
"My only comment on this thread is simply that the "falling" median price reductions we are seeing in a few places can hardly be considered "significant" by anyone's standards ... bubblehead or housing head!"
ReplyDeleteWhat I meant and perhaps did not say so well in my post was that the price declines may be small (for now) but they are significant because last year the median sales prices were rising by double digits in most bubble markets.
"There have been no real economic reasons for the fall-off in demand."
ReplyDeleteExcept that prices were at unsustainable levels.
David,
ReplyDeleteI'm not sure I would 'blame' anyone or anything for recent run-up in prices. As several have noted here, real estate is cyclical and 'cyclical' can be synomous with 'bubblicious' but, each cycle is different with the one constant being human nature.
Last time, the bubble was fueled by boomers buying houses and and banking de-regulation, which led to massive overbuilding through speculation. Boomers entered their homebuying years and their purchasing power increased with women entering the workforce. Together demand, with the ability to pay, drove up prices.
Massive oversupply occurred when the new deregulated banks got into the speculative development business. This drove prices down along with poor management of a relatively new product the "condo". I'm not sure when the first condo came into being being, but the 80's saw a huge supply built, and then mismanaged.
Now we have a new combination, with some of the old players back again.
The Boomers are at the age where they more disposable income, because they are "empty nesters'.
Women have continued increasing their participation in the workforce, perhaps finally reaching the maximum percentage in just the last couple of years. The dual income couple that was still a novelty in the 80's is now the norm.
Financially, low interest ratres have made everyone feel extra wealthy. And while the 'exotic' loans may or may not be new, their use has moved from the financial elites to being advertised on primetime TV.
Finally, supply. Many areas have have greatly increased land use controls since the last boom. We are nowhere near running out of land to build on, but in areas like the DC MSA, the local jurisdictions have raised beaurecratic barriers like never before. Supply has not kept up wih demand and I believe the 2005 Census ACS numbers will support my claim.
All of these elements have come together in different combinations in various locations to create the bubble. Each market and submarket is different. For example, the District seems to be very encouraging to most development and particularly condos. I think DC is a good candidate for oversupply in condos. That's probably not true in Arlington, despite what a quick look at listings or construction sites might show today.
The one constant is human nature. People see other people doing something and they will follow along without fully analyzing their decision. It's the herd mentality. And it's the one factor that is hard to control for when analysing the overall market.
How will it end? I don't know, but demographics say that in many areas, including DC, there will be demand to keep the bottom from getting very low. And as I said above, I think the latest Census numbers will show there is not an oversupply of houses.
Keith,
ReplyDeleteI think what VA Investor was getting at is that interest rates, job growth, and economic contraction were not responsible for a fall off in demand.
Demand has dried up of it's own accord. People are beginning to realize that the massive gains have been made. Losses are starting to be real likelihoods.
Throw in an actual economic reason - surging interest rates, a recession, or significant job losses, and you'll quickly exacerbate the market mentality that housing is not the place to be (with your money).
My $0.02.
Found on Craigslist tonight. (For real)
ReplyDeleteWhy can't I find an apartment?
Reply to: pers-197575144@craigslist.org
Date: 2006-08-22, 8:20PM EDT
Let me start off by saying that I am a person who can acclimate to various environments. I can go with the flow like the best of them. But these days my blasé attitude is becoming harder and harder to possess.
I live in an old barrack style apartment in what is now a "primo" location. I am near a metro and shopping. Sounds wonderful, right? It used to be! I felt so lucky to have scored such a find so many moons ago! Last fall the apartment complex was sold to what I have termed a ghetto lord. This winter I did not have much heat, so I acclimated by sleeping in multiple layers. When telling others of my "lifestyle" they would look at me like I was nuts. They would ask how I could live like that. Well the more I think about it, I must be! None of my friends or colleagues live like that. I have been told to sue, but you know that takes $$$. I have been told to complain to the various legal boards, but that will not change the situation at hand.
I make a decent salary so I figured looking for a new place to call home would be easy. Well, chalk that up to being naive. I spend my evenings as of late, searching through listing upon listing to find nothing. I have seen the construction crews come in, create craters in the ground and then raise these huge monstrous apartments. Why is finding housing so hard?
I am not a high maintenance type of person. My only real desired amenity is that I would like to have a cat. It turns out that to live anywhere near the city, you need to pay an obscene amount of money for what is barely larger than a jail cell. I have visited Lorton when it was still an active prison so I do know the dimensions. I'm just feeling so defeated.
I am not one of these people who feels any sense of entitlement. I work my arse off day in and day out and just want a safe place to live that I can actually afford. It's getting to a point where if you are single in this city you must resort to living in a place that is either ridiculously far away or a place that is too small to sleep and watch tv in separate rooms.
Where do the normal people live? Anyone has an idea please share! Thanks.
* this is in or around Arlington
* yes -- it's ok to contact this poster with services or other commercial interests
and a response:
ReplyDeleteRE: Why can't I find an apartment?
Reply to: pers-197601503@craigslist.org
Date: 2006-08-22, 9:30PM EDT
I agree. I get raped each month with the amount of rent I must pay to live in my box with a dog. It is getting to be near impossible to live in a good location as a single person unless you are willing to pay $3000 a month.
It frickin sucks.
* this is in or around dc
* no -- it's NOT ok to contact this poster with services or other commercial interests
"I think DC is a good candidate for oversupply in condos. That's probably not true in Arlington, despite what a quick look at listings or construction sites might show today."
ReplyDeleteHighrises are possible in Arlington. They are not a possibility in DC. Yet VA's supply will be tight? That's a lot of demand; and if it is true, it will soak up some of the supply in DC.
data miner,
ReplyDeleteVery interesting analysis. Hope you are right.
Anon 7:30,
ReplyDeleteHeight does not always equal density. Tyson's Corner is an excellent example. Very tall buildings, lots of "open space", not much density. You'd be hard pressed to find a place to build in Fairfax County with a FAR of more than 3.0. DC has FAR's of 3.0 all over the place. Downtown FAR's go up 10.0 I believe. Arlington is mid-way between Tyson's and Downtown in terms of density. Arlington has also recently become overloaded with bureaucratic/regulatory hurdles, so while it may have some areas with a potential 12.0 FAR, the regualtory requirements and "proffers" make that unobtainable from an economic standpoint. FAR's of 3.0 - 4.0 are much more common. Bureacratic burdens and high land prices will slow down Arlington's supply long before it becomes over built.
It is getting to be near impossible to live in a good location as a single person unless you are willing to pay $3000 a month.
ReplyDeleteGeez, talk about exaggeration. You can rent a townhouse all over No.Va. for half that. I guess that doesn't qualify as a "good location," though.
Hey, you folks missed an important comment that another person brought up.
ReplyDeleteRates are going down on the Treasury notes; which will affect mortgage rates. Now, to me it is indicative of our friends the PPT -- you know, the guys who step in time and again when the stock market is on the verge of falling apart with their patented "Hail mary" pass comebacks.
Just in the nick of time , how fortuitious, timely & sleazy. But I digress.
How much impact on the housing market would a plunging interest rate have? In what ways would it impact it? Where would it be ineffective?
in the Northern Virginia counties of Fairfax and Arlington and in nearby towns, near Washington, averaged $537,731 in July, down 3.9% from a year earlier, according to the Northern Virginia Association of Realtors.
ReplyDeleteDreamers tstill think RE doesn't drop.
Booooooooyaaaaaaaaaaa!
There are plenty of FBer condos to rent. And they are cheap too.
ReplyDelete"Very tall buildings, lots of "open space", not much density. "
ReplyDeleteIf you work in one of the highrises in "downtown" Tyson's, you'd know that this isn't true. Perhaps there isn't much *residential* density; but the workforce density is more than the surrounding streets can bear.
boooooooooyaaaaaaaaa,
ReplyDeleteA one year snapshot is worthless and not indicative of the long-term propects for appreciation.
No one would look at the stock market for a one year period and draw any conclusions.
Real Estate is cyclical, but over time has always increased. Sure, we very well may be on the downside of the cycle for the next few years, but if this is your time-frame, anything but cash would be a foolish move.
"in the Northern Virginia counties of Fairfax and Arlington and in nearby towns, near Washington, averaged $537,731 in July, down 3.9% from a year earlier, according to the Northern Virginia Association of Realtors."
ReplyDeleteI bought years ago, in the $300k's. And the average home is worth only $537k today? Oh no. There is blood in the streets.
Funny how we always want to blame someone for stuff. People have to take on some responsibility for themself.
ReplyDeleteWith low interest rates, the demand was just high. Now that rates have climbed a bit, it's not as cheap as it was.
Anyway, as an appraiser, I have noticed about a 10% drop in prices since last year.
You can't use the median home price as a good gage since it's not the same number and type of homes. e.g. Median home prices for 2005 - 100 homes sold for an average of $250,000. Median home prices for 2006 - 10 homes sold for a price of $245,000. Who knows what 100 homes sold in 2005 and what 10 homes sold in 2006. THis is just an example.
You can make numbers say what you want, but you have to look at Comparable homes to get a real indication of the values.
Folks that want to know what the real difference is in their home value, order an appraisal from a licensed real estate appraiser.
Comps? You want comps for the DC metro area? One only needs to look at what is happening in Australia and Great Britain to understand what is happening in DC.
ReplyDeleteOh, and suburban Cleveland, too.
And now the banks are getting hit:
ReplyDeletehttp://tinyurl.com/lr92o
With the exception of New England and the Middle Atlantic states, banks in all regions of the country experienced double-digit increases in nonperforming residential mortgages.
Since this is a DC blog... its good news so far for your region. Although if Chase has to pull back due to non-performing loans... DC will be slightly effected. Out here, with WAMU, and Wells fargo starting to hit a wall... yikes! Not to mention the well publicized problems the nations #1 mortgage broker Countrywide is having... If you cannot resell loans on the secondary market... eventually the ability to originate new loans... stops.
Neil
Oh, PS
ReplyDeleteI was admittedly too pessimistic on the Home sales numbers. I didn't expect to underpredict by 5%... Hmmm... 6.33 is a good rate for July.
Neil
Dave,
ReplyDeletePlease post and discuss this WSJ article:
http://tinyurl.com/gp46w
PAGE ONE
Click to email this article Click to email this article Click to format this article for printing Click to format this article for printing View a list of most popular articles on our site
INTERACTIVE TOOL
• Use an interactive tool to search the latest data on housing inventories and price trends in 26 real-estate markets, at RealEstateJournal.com.
advertisement
TODAY'S MOST POPULAR
• Paramount Ends Deal With Cruise's Company
• Failed Hedge Fund Haunts Celebrities
• Housing Slump Proves Painful
• The Entitlement Panic
• A New Way to Use the Force
COMPANIES
Dow Jones, Reuters
Toll Brothers Inc. (TOL)
PRICE
CHANGE
24.27
-0.93
11:04a.m.
Countrywide Financial Corp. (CFC)
PRICE
CHANGE
33.36
-0.14
11:04a.m.
Washington Mutual Inc. (WM)
PRICE
CHANGE
44.06
-0.02
11:04a.m.
KB Home (KBH)
PRICE
CHANGE
40.97
-2.22
11:04a.m.
D.R. Horton Inc. (DHI)
PRICE
CHANGE
21.01
-0.52
11:04a.m.
* At Market Close
RELATED INDUSTRIES
• Real Estate
Personalized Home Page Setup
Put headlines on your homepage about the companies, industries and topics that interest you most.
After the Boom
Housing Slump Proves Painful
For Some Owners and Builders
'Hard Landing' on the Coasts
Jolts Those Who Must Sell;
Ms. Guth Tries an Auction
'We're Preparing for the Worst'
By JAMES R. HAGERTY and MICHAEL CORKERY
August 23, 2006; Page A1
HERNDON, Va. -- For years, real-estate brokers and home builders promised that the soaring property market eventually would glide to a soft landing. These optimists predicted that home prices, which had more than doubled in parts of the country between 2000 and 2005, would continue to rise, but at a more normal pace of 5% or 6% a year.
It isn't working out that way. The rapid deterioration of the market over the past 12 months has caught many homeowners and builders off guard. Some are being forced to cut prices far below what their homes could have fetched a year ago. It's too early to say how hard the landing will be, but at a minimum it will be bumpy for many people who need to sell homes. And the economy as a whole, buoyed in recent years by the housing frenzy, could suffer.
WALL STREET JOURNAL VIDEO
[go to video]
David Seiders, chief economist for National Association of Home Builders, forecasts a cooling housing market.
The pain that homeowners and home builders are now feeling follows a raging national house party. As Americans soured on the stock market after the tech bubble burst in 2000, they poured money into real estate, spurred on by the lowest interest rates in four decades and looser lending standards. Surging demand created home shortages in California, Florida and the Northeast. Over the five years ending Dec. 31, average U.S. home prices jumped by 58%, according to a federal housing index.
But mortgage rates began rising and surging inventories of homes for sale finally caught up with demand. Though economists had been predicting a slowdown in housing for years, many homeowners and builders were surprised by how fast the market changed. "It's just like somebody flipped a switch," says Lynn Gardner, a real-estate auctioneer who works in Northern Virginia.
[hard]
"It would be difficult to characterize the position of home builders as other than in a hard landing," says Robert Toll, chief executive of luxury home builder Toll Brothers Inc., which reported yesterday that net income fell 19% in the third quarter ended July 31. (See related article.)
In his 40 years as a home builder, Mr. Toll says, he has never seen a slump unfold like the current one. "I've never seen a downturn in housing without a downturn in employment or... some macroeconomic nasty condition that took housing down along with other elements of the economy," he says. "This time, you've got low unemployment, you've got job creation, you've got a stable stock market and relatively low interest rates."
Joan Guth is one homeowner who was taken by surprise. Last September, she put her stately five-bedroom home in Herndon, Va., on the market for about $1.1 million. She was confident she would get something near that price, and planned to use the proceeds to buy a retirement home in Florida. But her home in the Washington suburbs attracted few serious lookers, and in March, she cut her asking price to $899,900. Still there were no takers. Finally, on the advice of her broker, she called in an auction firm, beginning a process that would eventually reveal to her just how weak the Northern Virginia market had become.
In much of the country, property markets began cooling rapidly in the second half of last year. Home builders were still turning out houses at a rapid clip, and the surge of new and previously occupied homes on the market convinced buyers there was no need to hurry. Over the past year, the number of previously occupied homes listed for sale nationwide has risen nearly 40%. In some metropolitan areas, including Orlando and Phoenix, the supply has quadrupled.
Investors who during the boom had been snapping up properties from the outskirts of Phoenix to the slums of Baltimore began dumping them on the market, hoping to get out with a profit before it was too late.
The resulting slump, thus far, is being felt mainly on the East and West coasts and in Florida, where home prices had soared beyond the average working family's ability to pay. In California's San Diego County, the median home-sale price was $487,000 in July, down 1.8% from a year earlier, according to DataQuick Information Systems, a research firm in San Diego. Prices in the Northern Virginia counties of Fairfax and Arlington and in nearby towns, near Washington, averaged $537,731 in July, down 3.9% from a year earlier, according to the Northern Virginia Association of Realtors.
[hardland]
Joan Guth, outside the Herndon, Va., home she agreed to sell earlier this month.
In some other parts of the country, notably Texas and the Seattle area, local housing markets remain robust. Texas' low housing costs are attracting new residents and investors, while Seattle's strong job market and shortage of homes have kept prices rising.
Nationwide, the median sale price of previously occupied homes in June was 0.9% higher than it was a year earlier, the smallest year-to-year increase since May 1995, according to the National Association of Realtors, a trade group. Over the next few months, the median price may decline from year-earlier periods, a spokesman for the association says, something that hasn't happened since February 1993.
The market may be weaker than the Realtors' widely followed monthly reports suggest. The group's data don't reflect the latest transactions. Its report on July home sales, for instance, due today, will mainly reflect sales that were agreed upon in May or June and closed in July. Moreover, when the market turns down, many home sellers initially let their homes sit instead of cutting prices enough to entice buyers.
Allen Sinai, chief economist at Decision Economics Inc., a New York research firm, contends that housing is poised for something "harder than a soft landing but softer than a hard landing." The weaker market will hurt the economy by eliminating jobs in construction and other housing-related fields and by reducing the ability of consumers to finance spending by borrowing against their home equity. Mr. Sinai predicts these factors could shave as much as a percentage point off economic growth over the next year or so. Taking that into account, he expects the economy to grow at a relatively sluggish annual rate of 2.5% to 2.75% in 2007, compared with 2.5% in this year's second quarter and 5.6% in the first quarter.
In a speech yesterday, Michael Moskow, president of the Federal Reserve Bank of Chicago, noted: "While we factor a housing slowdown into our outlook, there is some evidence -- such as higher rates of cancellation in home-building contracts -- that the slowdown could be more extensive."
With fewer consumers applying for home loans, some big mortgage lenders are already retrenching. Countrywide Financial Corp. last month announced plans to reduce costs by $500 million. Earlier this year, Washington Mutual Inc. eliminated 2,500 jobs at loan-processing centers.
Builders, who were optimistic about prospects until a few months ago, are cutting back too. KB Home, a big home builder based in Los Angeles, has eliminated 7% of its work force, or 440 jobs. In July, U.S. home builders started construction at an annual rate of 1.45 million single-family homes, down 20% from the January peak.
Last August, when Horsham, Pa.-based Toll Brothers reported that its quarterly profit had doubled, Mr. Toll boasted: "We've got the supply, and the market has got the demand. So it's a match made in heaven." Since then, Toll has cuts its guidance four times on the number of homes it expects to close on, and its share price has fallen by more than 45%. Yesterday, the company said orders for new homes in the third quarter were down 48% from a year earlier.
Mr. Toll blames a "drop in confidence" among prospective home buyers, who he says are worried about "the direction of America" and the situation in Iraq. The retreat of speculators who were buying and "flipping" homes also hurt the market, he says. Such speculative buyers, who Mr. Toll estimates accounted for about 10% of demand one year ago, are now sellers.
Even so, Mr. Toll contends that new household formation, immigration, job creation and rising affluence are currently producing a pent-up demand for housing. Once Americans believe that home prices have bottomed, he argues, they will rush back into the market, although he is unwilling to predict when that will happen.
At D.R. Horton Inc., the nation's largest home builder by units built per year, executives said late last year they were confident that quarterly earnings would continue to increase even during a housing-market slump. In July, Horton reported a 21% decline in net income for the third quarter ended June 30, the first quarter in 28 years in which it didn't report year-over-year profit growth. Horton's chief executive, Donald Tomnitz, said the surge in home prices had priced many people out of the market.
"Every time we've gone into a downturn in the home-building industry, they've always been longer and deeper than we've all imagined," Mr. Tomnitz told analysts in a July 20 conference call. "So we're preparing for the worst, and we think this one will be longer and deeper than just the last six months."
For some homeowners who bought as the market was peaking last year, the downturn is already creating a financial pinch.
In April 2005, Jennifer Bloom paid about $229,000 for a condominium in Yarmouth Port on Massachusetts's Cape Cod, where her son planned to live. After his plans changed, Ms. Bloom, a software specialist for a computer company, decided early this year to sell the condo. She initially listed it at $229,000, and then gradually shaved the price to $199,000 as the market weakened. Earlier this month, she gave up on finding a buyer at a price she could bear to accept. Instead, she is renting out the condo for $1,000 a month, which she says is more than $200 below her monthly costs for mortgage payments, insurance, taxes and other items. She says she intends to hold off on selling it until the market improves.
The slump has been particularly harsh in Northern Virginia, where in recent years, large home builders have turned open fields and wooded lots into new subdivisions. Inventories of unsold homes here have risen 147% over the past year, compared to a 40% increase nationally.
DC suburbs have tripple the inventory expansion of unsold homes (I assume new build unsold homes per the article) than the typical US location. Oh boy...
Its the front page article for those who don't have an electronic subscription.
Any guesses what this does to the DC market sales rate? ;)
Neil
On Yahoo! finance's front page:
ReplyDeleteWall Street fell for a third straight session Wednesday as fresh signs of a housing slump triggered concerns that the economy is slowing too fast and could erode corporate profits.
Housing slump? You think?
What's sad is this is the reaction to a very lagging indicator.
This is going to get ugly. Not depression ugly, but definately recession ugly.
david's mom let Lereah eat her smelly pussy.
ReplyDeletedavid's mom let Lereah eat her smelly pussy.
ReplyDeletedavid's mom let Lereah eat her smelly pussy.
ReplyDeletedavid's mom let Lereah eat her smelly pussy.
ReplyDelete$3,000/month?!?
ReplyDeleteWow! How many single people can afford that?!?
Here in LA we can still hire single people as the rents are still affordable. Experienced 30 to 50 somethings? No way, not at the current prices of homes.
Did everyone read the articles on Ben Jones on how Florida real estate prices have started crashing? I doubt any area of the nation is going to be more than six months behind.
I fear what this will do to our financial markets. If bondholders get bitten too hard... it will be decades before we have a healthy secondary market for mortgages again. :(
I'm one who predicts 20%+ down payments are coming back with a vengence.
Neil
Coast to Coast AM blackballs Housing Bubble story. Read about my experience.
ReplyDeleteAs I sat in the Costco food court, sipping a coke, a visual image along with a feeling came into my mind. I saw my wife and I at some future date having a despaired discussion. A feeling of hopelessness hung like a pall over the scene. We were cleaned out and unable to make a house payment. The money we had put down was gone and we had nothing. The American dream had become a noose around our necks. I sensed that this was at least a nationwide thing and that there was pain everywhere. I sensed the tragedy of murder suicides occurring in some instances as families lost everything.
This was back in March of 2006. I had watched the housing market and was contemplating purchasing a house. Something didn’t feel right so I was trying to tune in. I have always felt that I had some level of intuition but also have had a lot of doubt about my ability to “bet the farm” on that intuition. I heard that the conscious mind is the intuition’s biggest critic, so I decided to open the door and listen, but to back that up with LOTS of research.
I discovered that astute analysts have been warning about the housing bubble for at least two years and that the warnings have gotten louder in the last several months. The mass awareness of the bubble broke wide open yesterday, August 23rd when the bubble was the lead story on ABC, CBS, NBC, and The Drudge Report. The domino effects of this process will be admitted into the mass awareness later and with great resistance.
From the moment of this intuitive impression, remote viewing, whatever you want to call it, I began doing massive research. My analysis went up-down-left-right as my mind was batted around by all the information and commentary I took in. I started sending emails to friends with links from the news and analyst’s commentaries. My sister, whose family is heavily involved in real estate, began blocking my emails.
Several weeks ago, I laid this story in the lap of George Noory of Coast to Coast AM radio fame. He could have run with the story and been out ahead of most of the media. He proceeded to blackball and ignore this subject. On August 23rd, when this story broke wide open and was the lead story everywhere, George refused to even mention the story during his review of the day’s news. Later that night when his guest brought up the subject of the bubble, George quickly changed the subject. I have no explanation for his behavior. My only motivation has been to warn my neighbor. This is a huge story and it makes no apparent sense that George would not run with a plum story.
This made me sad. I have listened for over 15 years and believed the Coast hype that we are a smart audience, calling us the Coast family. I sat in the Coast classroom for many years laughing and listening intently, telling my family that Coast time was my time and that I wanted to listen. It seems that we are being patronized and that hurts. I was right when I told my friends that a little cartoon short on the Tracey Ullman show would be big and I believe I’m right when I say that Coast is on the downslide.
I’m the canary in the coal mine. I believe that the ratings may be high, but that the quality of the show is deteriorating. The ratings will eventually catch up.
I have other useful inputs, but you know what they say about caring for your pearls.