Friday, October 27, 2006

Bubble Sphere Roundup

Geenspan and Today’s New Home Sales Report (Paper Money)

A most excellent comparison post: Percentage of Reduced Listings Per Market @ Bubble Markets Inventory Tracking. The sellers are really competing against each other in some of the bubblicious markets.

Ryan Homes Offering to Pay Realtor Commissions ( Baltimore Metro Area Housing Blog )

HousingPanic and other housing bubble blogs were attacked in the mainstream media (MSM) "Blogs such as are helping to confuse buyers about everything from rumors to “bubble” theories." We housing bubble bloggers were ringing the alarm bells while people were busy engaging in bidding wars in summer of 2005. On May 25th 2005, I wrote "Behold the bubble is about to pop. The bubble will pop (price declines) within the next 12 months."

Tommorow morning's 3Q GDP prediction: 1.7%
Update: Actual 3Q GDP: 1.6%


  1. Sorry, MSM there first

    Did HP invent the internet, too?

  2. lex,

    A very small portion of the media surely was ringing the bells. The vast majority of the MSM was not warning people about the dangers of the housing bubble. They were in fact busy cheerleading the bubble with thier quotes from Lereah, Watts and other RE Shills.

  3. David,
    do you have links to the MSM attacks on the HBBs? I would love to read the rest of the articles.

  4. "do you have links to the MSM attacks on the HBBs?"

    I updated the post and put the link into the aarticle. Thanks for pointing that out!

  5. polishknight said:
    "I'm worried more about the temporary effect on rents: It was reported on drudge a few days ago in a double link showing decling prices and rising rents in the bay area that rents were shooting up as buyers waited out the housing bubble.

    This doesn't make too much sense since logically homes put on the market as rentals should offset demand by sit-out buyers/renters. Yes?"

    At first glance, your logic seems correct. But thinking about it more, I started to realize that one problem with buyer's waiting it out is that builders stop building, so while demand continues to rise ... that rising demand can only partially be met by existing housing being converted to rental housing as you say. After all, there are always new people requiring a place to live who before didn't because they were living at home with parents, in dorms, with friends etc. OR are new immigrants to this country. Also, it's important to remember that some people will prefer to keep their properties empty while they wait out the price slump rather than have to deal with tenants who could make the places harder to sell and generally force them into landlord duties they may not want to undertake. You and I may not be in a position to do this, but there are lots of people who are ... Especially among those who were able to buy these properties as short term investments to start with. The bottom line is that when there's a slump in economic activity, everyone suffers. And as is the case in life usually, it is those at the bottom of the heap who suffer worse. You see I so vehemently hate to hear these bubblehead predictions because I've been around long enough to know that were everything to happen that the bubbleheads wish for, it wouldn't help them one iota ... It would actually make things worse for them. And that isn't good. So, when I hear people hoping for an armagedon for prices to drop, I hear them saying "I hope my neighbors end up in the poorhouse ... even if it means I'll end up there too."

  6. Thanks for the link. I find it funny that the comment about HP and HBBs is listed under "fast facts." Really? This qualifies for fact?

  7. Oh bother.

    lance - Builders are continuing to build - because the sunk costs are too much for them to stop. Besides, with profit margins of 50-100%, they can afford to mark the house down by 30% or more and still do just fine.

    Rents are up because people with ginormous mortgages on homes they hoped to flip now realize they can't sell and so they are trying (unsucessfully) to rent at the price of their mortgage.

    Beyond that - if rents rise - so what? I seriously doubt the homeowners I rent from (who purchased in the 1980s and probably make 100% over their mortage payment) are suddenly going to turn greedy and demand 50% more. Sound selfish? So does Lance's "Prices will decline everywhere but my zip code in Dupont, so neener, neener" spiel.

  8. The progenitor of the housing bubble debate was not the blogosphere, but

    A little more MSM?

    and Calpundit was invisible.

    I didn't want to get into an argument over this, but I do have
    a visceral dislike the self-important.

  9. Quick check on Ziprealty.

    Arlington, VA. $200K to $500K properties.

    477 are for sale.

    Of these 477, 240 have reduced prices.

    In other words, half of the sellers have reduced their asking prices and the properties now!

  10. " I started to realize that one problem with buyer's waiting it out is that builders stop building, so while demand continues to rise ... "

    Uhm... you seem to make a very freshmen error on your analysis here. You seem to be confusing long-term analysis and short-term analysis.

    In the long term, it is probably trivially true that demand will increase (as demand of that good is a function ofp opulation change). Yet, in the short term, we do not know a priori that the demand for housing will increase... since there must exists factors that are held constant....

    And in the short term, the builders will NOT decrease their production in some sort instantenous reaction. They behave in the margins and each firm will decrease its production given its contraint in the short term.......

  11. I own four homes in Mesa Az and have raised the rents this year from:

    $850 - $1025
    $900 - $1025
    $950 - $1025
    $950 - $1075

    And the way things are looking I will be able to up the rents again in 2007 by at least another $50 on each property.

  12. Nothing anyone says, good or bad, about the housing market, has any long term affect on the market. The market ultimately will determine where it should be, all by itself, given the fundamentals.

    That being said, good information about where we are now will empower people to make good financial decisions, and not go blindly to the slaughter.

    We are currently in a suckers market, with falling home prices. The potential to loose tens and hundreds of thousands of dollars in deprecation is currently a fact.

    The foreclosure victims will not be entering the buyer pool again any time soon. Buyers will not re-enter the market until the prices come down to what their incomes can afford, without toxic mortgages. The sky-high prices, is what killed the market. Catching a falling knife is not in the buyers best interest. The amount buyers can afford is gross income X 3, for 90% of buyers.

    Get used to it folks, the mother of all corrections, is underway.

  13. "It's apparent that inventory is GROWING"

    No, inventory hasn't been growing for half a year in the DC area. Don't let the facts get in the way of your bubble party though.

  14. POLISHKNIGHT said:
    "I didn't think about this and largely dismiss it as a factor because building has inertia and doesn't explain rent spikes that are just a few months old. (Please feel free to dispute this.) How long does it take to build a house from planning to finish and how would that impact rents if most of these are targeted towards buyers anyway?"

    Prices are effected by expectations. Yes, it's going to take a while for the houses/condos already under construction to be finished and as such it'll be a while before we see no new housing show up. However, it's already known to us (including landlords) that there is going to be a stop to the flow from this "competition"/alternative supply. Landlords will thus price accordingly.

    On a related note, the former neighbor I've mentioned before (i.e., the one who sold her condo at the same time as me and is now "waiting it out" renting) just received a notice that when renewal time comes in February, her rent will be going up by close to 20%. She's now thinking of looking to buy again.

  15. "
    The bricks are still falling in the condo market. We won't see the bottom for a while, then it will take even longer for prices to actually recover, unless of course it is "different this time." And every month the interest piles up, the insurance, the taxes, condo fees, upkeep, etc. etc."

    As usual, the MSM and most of the masses are behind the curve. All the air that was going to come out of the housing market is out. Inventory has been stable in the DC area for half a year and interest rates are going to trend down. That will be that.

    "Rent could double and still be cheap."

    You'd better hope so.

  16. "You see I so vehemently hate to hear these bubblehead predictions because I've been around long enough to know that were everything to happen that the bubbleheads wish for, it wouldn't help them one iota ... It would actually make things worse for them."

    See, if you don't make stupid finanacial decisions, and if you point out that many people are making stupid financial decisions, then you're evil, and there's no way you could benefit from being smart with your money. So just go ahead and make stupid financial decisions, so Lance will like you.

  17. "When those people wake up, the rental market will be FLOODED with increasingly cheaper rentals by buyers desperate to "wait out" the "temporary" price decreases because of other lances telling them that the RE market is going to pick up anytime, right? "

    Keep telling yourself that.

  18. Fogcutter said...
    "Bold words. The first leg downward is behind us. The blind optimism is draining out of the system. Sellers are hunkering down and renting to wait out the decline."

    Locally, I've seen a spike in rentals on the market. Looks like there trying to get the renter to fully support the mortgage. Yep, those rentals are sitting too, even as the number of rentals are increasing. Two mortgages, throw in a few ARM re-sets, yea, nothing to see here, everything’s swell.