Thursday, December 28, 2006

Signs For Condos

Signs for Condos for Sale in DC: 555 Mass and City Vista
Notice the appropriate red light above each condo sign.

BubbleSphere Roundup

BNN (Bubble News Network) has some wonderful video footage of the housing bubble. Highly recommended.

NAR's blog has NOT been updated since December 13th. Taking a break for the holidays or are they just too busy spinning the news?

Bubblicious Sign #13,424: 'Million-Dollar Condos, With a Soup Kitchen Below' (Washington Post). But, now you really can be one with the urban environment!

Florida Paradise Lost updates us on the meltdown in Florida.

November Existing Home Sales (Calculated Risk) Mr. Risk writes "As I've noted before, usually 6 to 8 months of inventory starts causing pricing problems and over 8 months a significant problem. With current inventory levels at 7.4 months of supply, inventories are now well into the danger zone and prices are falling in most regions. Nationwide prices were off 3.1% from November 2005." Lovely graphs here too!

Wednesday, December 27, 2006

This Blog is Not About Me, It Is About the Housing Bubble

After yesterday's Wall Street Journal article many commentators have left nasty comments on my blog accusing me of being "a bitter renter" or other things.

Here are some choice comments left.
  1. what a loser. 27 years old and renting part of a townhouse? get a life. do you even have a girlfriend?
  2. Wow. Now it becomes clear why David has been so angry and bitter for the past 2 year
  3. I'm sorry you missed the boat on housing. I'm sorry you think that at your age you are entitled to a particular kind of house or living style. I'm sorry you have to share your home with a bunch of people in order to pay the rent. I'm sorry you've spent the past 2 years of your life fostering and nurturing bitterness and resentment.
As the article states, yes I am 26 and I do rent part of a townhouse with some friends. I am not bitter that I rent. I do not think at my age I am entitled to owning a housing units. In fact, I am really happy with my current living arrangement. I have plenty of room, cheap rent, a safe neighborhood and great townhousmates. :-)

In the article, I merely stated that a couple of years ago I started looking at buying a condo or a townhouse (where I would rent out a room). After studying the market in the Washington, DC area I came to the conclusion that there was a housing bubble. That is that real dollar prices had inflated to unsustainable levels and that real dollar prices would fall significantly in the Washington metro area.

One commentator wrote regarding my blog that "It's all about how unfair it is that some people have done very well in real estate and how come others have missed the train?" This blog is not here to complain about the fairness that some people have done extraordinary well in real estate during the boom years and others have not. The term 'fairness' appears zero times in my blog. In fact the term 'fair' ONLY appears six times in the whole blog and four of those times it used where I reference what others have said. In the two times I use the term fair it is not in anyway talking about the fairness of a housing bubble.

This blog is NOT about my personal decision to rent or buy, but rather it is a blog:
dedicated to the premise that there is a Housing Bubble in many locales in the USA. With a particular focus on the: When will it pop? Why will it pop? How will it pop? Where will it pop? Who is responsible for the bubble? Also the DC Metro Area bubble. Please join in the discussion.
That is the purpose of the this blog. The housing industry has been cheerleading the speculative bubble that is the housing market. As we know from history, speculative episodes do NOT end well. They leave many people financially devastated. If the speculative episode is large enough it will lead an economy into a recession.

Tuesday, December 26, 2006

David Lereah Watch Mentioned in The Wall Street Journal

In today's Wall Street Journal in an article titled 'Renters Gloat Over Housing Slump,' my other blog, David Lereah Watch was mentioned and I was interviewed.

David Jackson, a 26-year-old information-technology specialist, has been railing against the housing industry for two years -- ever since he made a vain attempt to find an affordable town house or condo in Silver Spring, Md. Unable to understand why prices were so high, he began researching the real-estate market and, he says, "came to the conclusion that there was a massive housing bubble." So Mr. Jackson decided to remain a renter. He pays $645 a month for part of a townhouse.

Now that the housing market is slumping, "I feel vindicated," Mr. Jackson says. "But I'm not looking forward to the coming recession." He believes that the housing slowdown and the effects of "a mountain of debt" on consumers will pull the entire economy into a slump.

Mr. Jackson blames what he calls "the housing industrial complex" in general and Mr. Lereah, the Realtors' economist, in particular. Since last year, Mr. Jackson has maintained a blog ( devoted entirely to vilifying Mr. Lereah.

The blog recently offered a $75 cash prize for an essay containing "the most scathing criticism" of Mr. Lereah. Sample submission: "Dr. Lereah is a lying snake with the ethics of a dope-dealing pimp."

Mr. Lereah says he doesn't object to the blog. "There are people who believe it's the end of the world" for housing, he says. "They blame me for being positive."

Mr. Lereah resorts to putting words in my mouth when he says, in reference to my blog, that "There are people who believe it's the end of the world" for housing. I have never claimed it is the end of the world for housing. I claimed that from peak the "Prices declines in the bubble markets are very likely to vary between 20% - 65 in real dollars."

By putting words in my mouth, Mr. Lereah, attempts to make me out as a housing extremist. He uses a straw man (Fallacy Of Extension) argument. Mr. Lereah cannot be trusted because of his history of deception and wrong predictions.

Monday, December 25, 2006

Monitoring The Realtor Bubble

The number of Realtors (pdf) fell .06% during November . This is the first time membership in the National Association of Realtors (NAR) has fallen during the month of November since 1999.

Leading the decline were states like:

State: # Lost % Change
Florida: 839 -.54%
New York: 206 -.32%
Illinois: 478 -.82%
Virginia: 1562 -4.12%
Nevada: 213 -1.04%

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

See: Is There a Realtor Bubble? (September 20th, 2006).

Wednesday, December 20, 2006

Realtors Association Concerned over Rising Rate of Defaults and Foreclosures

In a press release the National Association of Realtors (NAR) "is concerned over the rising rate of defaults and foreclosures occurring in many areas around the country, and many Realtors believe that some families don't understand the risks of taking out "exotic" mortgages." A big hattip to Calculated Risk on this story.

The foreclosure rate is rapidly increasing in much of the country as housing markets decline and toxic mortgages adjust. DataQuick reports:

Residential foreclosure activity in California surged to its highest level in more than four years last quarter, the result of slower home sales and flattening prices, a real estate information service reported. Lending institutions sent 26,705 default notices to homeowners in the state during the three-month period ending in September. That was up 28.3 percent from 20,812 for the prior quarter, and up 111.8 percent from 12,606 for 2005's third quarter, according to DataQuick Information Systems.

In response to the rapidly increasing default and foreclosure rate the NAR said in their press release that:

NAR President Pat Vredevoogd Combs urged consumers to make sure they understand the risks and rewards ofall types of mortgages before they make a decision on a loan. She also advised consumers to consult with a Realtor and to participate in mortgage education programs sponsored by Realtors before they buy ahome

We are committed to helping people buy -- and keep -- the home of their dreams, and an educated consumer really can make the best decision,"said Combs, of Grand Rapids, Mich., and vice president of ColdwellBanker-AJS- Schmidt. "Realtors(R) help Americans achieve the dream of homeownership. We work to ensure that homebuyers have access to the proper information so they can fulfill their homeownership goals.

These Realtors are partly to blame for the unacceptable foreclosure rate. A large percentage of Realtors have been promoting exotic (read toxic) mortgages as an affordable method to buy now (or forever be priced out (BS)). For example real estate agent Joe O'Hara was pushing toxic mortgages when he sold a property in Washington, DC.

Or we have David 'Paid Shill' Lereah, NAR's cheif economist who promoted perpetual mortgage debt. He said during the peak of the housing bubble:

"If you paid your mortgage off, it means you probably did not manage your funds efficiently over the years," said David Lereah, chief economist of the National Association of Realtors and author of "Are You Missing the Real Estate Boom?" "It's as if you had 500,000 dollar bills stuffed in your mattress.

"He called it "very unsophisticated." (Los Angeles Times Aug 28th, 2005)
The Realtors are partly responsible for the fiasco that is the rapidly rising and high mortgage default and foreclosure rate. Their behavior has been despicable as they cheered on homeownership at almost any cost. Wait, it will get worse going into 2007 as more toxic mortgages reset, housing sales and prices continue to decline and the economy takes a turn for the worse.

Tuesday, December 19, 2006

To Buy or Not To Buy That is The Question

The housing market has changed dramatically in the bubble markets over past year and a half. Back in the summer of 2005 bidding wars were common and inventory was very low in the bubble markets across the USA. Those days are a sweet memory to the legions of stuck flippers.

Today, a new reality faces both buyers and sellers. Its the Inventory Stupid! Inventory has increased dramatically in most bubble markets in the last year and a half. In Phoenix, inventory rose from 10,748 on 7/20/05 to 51,998 on 12/10/06 according ZipRealty and Bubble Markets Tracking Inventory. The inventory of houses for sale in Massachusetts has "now risen for 18 consecutive months" (Warren Group).

At the same time the number of housing units sold has fallen dramatically in the bubble markets compare with a year ago. The number of housing units sold in Northern Virginia (Washington, DC suburbs) has fallen - 23.6% compared to November 2005.

Some real estate agents are claiming that is now a 'buyer's market' due to the increased inventory, lack of bidding wars and the small reductions in prices. Blanche Evans , Editor of Realty Times thinks it is a good time to buy. “You can get a better price on a better home that will pay off when the slump ends.”

On the front page of the National Association of Home Builders (NAHB) website they write 'It's a great time to buy.' and 'making today's economic environment the perfect one in which to buy a home.'

So is it a good time to buy in the bubble markets?

In many bubble markets, the peak price was reached late summer 2005. Real prices will continue to decline in the bubble markets for many more years. Prices declines in the bubble markets are very likely to vary between 20% - 65 in real dollars (inflation adjusted) from peak to bottom (it may take up to 8 years). Most of the real dollar price decline will occur in the first 3 years of the housing bust. Indeed, the huge price appreciation that occurred in the bubble markets over the past 5 years or so was a speculative episode.

Just as importantly, monthly rents are generally cheap compared to buying in the bubble markets. Buying in the bubble markets generally costs 1.25 to 2.5 times the cost of renting ( for a similar property; assuming 30yr fixed, solid credit, property taxes, and typical interest rate tax deduction). Each month hundreds if not thousands of dollars can be saved and invested if one chooses to rent as opposed to owning.

Buying now in a bubble market does not make financial sense. As the housing inventory continues to rise and prices decline there will be lots of buying opportunities in the future. Additionally, an economic recession in very likely to occur in the US within the next 7 months. If you earn a reasonable income it is an absolute fallacy that you need to "Buy now or be priced out forever." This is not a small temporary 3 months dip like Mr. Lereah suggested. In the bubble markets, this is a multiyear housing market bust. In the Bubble Markets, renting and waiting is fiscally prudent. Don't be fooled.

Friday, December 15, 2006

Bubble Sphere Roundup

The housing bubble's poster boy of fraud, Casey Serin, ponders whether or not he should file for bankruptcy. The authorities need to charge him for fraud.

Paper Money is a wonderful blog. What’s In a Word? in this case the word is 'substantial,' as the Federal Reserve board opined that there is a 'substantial cooling of the housing market.'

Median Sales Prices are down 8% in Sacramento and even more in some of the nearby counties. Sacramento Land(ing) posts that Double-Digit Price Declines for Placer & Yolo; Sacramento Down 8%.

And just to cheer you up during this holiday season. Nouriel Roubini posts: Economic downturn is still fully underway. He writes "The housing recession is not bottoming out (see collapsing housing starts and building permits); the housing recession has now led to a total stall of non-residential construction. The auto sector is in a recession; the manufacturing sector is in a recession; inventory adjustment is cutting Q4 growth; and now real investment by the corporate sector is sharply falling (see October durable goods)." A general US recession is most probably coming within 9 months.

Tuesday, December 12, 2006

Realtors' Ego Ride

More ego boosting from the Realtors which appeared on their blog. Here is the offending post:

Realtor® is to Real Estate Agent as Mercedes® is to Car

Recently, some journalists reported results of a Harris poll in which real estate agents were perceived as one of the least prestigious occupations in a list of 23 professions. Too bad they didn't include Realtors'® on the list.

Realtors'® are distinct from real estate licensees. In addition to completing mandatory quadrennial Code of Ethics training, Realtors® also have access to educational opportunities and training in real estate specialties that are not available to other licensees. NAR's Public Awareness Campaign educates consumers about these and other distinctions, and after nine years, the campaign's effects are evident.

In the past three years alone, NAR research has shown that the number of consumers who say they would be more likely to use a Realtor' instead of a real estate agent who is not a member of NAR has risen by nearly 20 percent, to three out of every four consumers. Over the past six years, the percentage of consumers who believe that Realtors'® are more qualified to promote the sale of a home than real estate agents who are not Realtors' has risen dramatically, from 54 percent in 2000 to 73 percent in 2005.

Realtors' are real professionals who have the opportunity, experience, and privilege of helping people achieve the American dream of homeownership. What could be more prestigious than that?

The National Association of Realtors (NAR) has become a pathetic organization that is desperately manipulating the housing market. They spread misinformation to unsuspecting consumers through their 1.3 million members and through the mainstream media (MSM). Now, they are lobbying the US Congress to keep theicommissionse commisions.

NAR's New President: Pat Vredevoogd Combs

NAR's new president is Pat Vredevoogd Combs. Ms. Combs has a blog. She appears to be as much of a shill as David Lereah. On a recent blog posts she writes "The National Association of REALTORS continues to show just how influential the Voice for Real Estate has become – in communities across the United States and around the world. As the news media took special note of NAR’s Metro Home Price Report last week, we managed to send a clear message that the “soft landing” is both expected and sustainable and that 2006 will still be a great year for real estate."

It appears she is learning from David 'Paid Shill' Lereah. She can learn how to decieve, spin, maninpulate facts, and cheerlead the housing market.

Friday, December 08, 2006

National Association of Home Builders (NAHB)

National Association of Home Builders, National Housing Center located in Washington. Part of the Housing Industrial Complex.

On the front page of their website they write 'It's a great time to buy.' and 'making today's economic environment the perfect one in which to buy a home.'

For the home builders it is always a good time to buy. According to them has it ever been a mediocre time to buy?


Saturday, December 02, 2006

BubbleSphere Roundup Blog reports on the DOJ versus the Realtors. He opines that "The collusive practices of realtors have contributed to an environment where buyers and sellers don't have the information they need to make the best decisions possible. Given how easy it is to become a real estate agent, and how the Internet enables such wide and open sharing of information, realtors need to adapt to a flat-fee structure or get ready to share some quality time with the dinosaurs."

Deceptive Realtors? I'm schocked, schocked I tell you. Southern Maryland Housing Bubble News reports on How To Screw Homebuyers And Doctor Statistics - A Re/Max Educational Series.

Calculated Risk tells about the Housing Optimists. "In spite of the steady stream of bad news for housing, there are a growing number of forecasters and stock analysts that are bullish on housing and housing stocks."

Nouriel Roubini explains his predictions for a US recession in early 2007.