Bubble Meter was quoted in today's (pdf) edition
of the Washington Post Express.
---------------------Washington Post Express Piece---------------------
of the Washington Post Express.
---------------------Washington Post Express Piece---------------------
"In most bubble markets prices will remain flat or fall slightly ..... This year's spring selling season will be very disappointing for sellers."
BUBBLEMETER.BLOGSPOT.COM HATES TO RAIN ON THE TRADITIONAL SPRING SELLING PARADE, BUT MARKET CONDITIONS, TO THE BLOGGER SEEM FAIRLY GRIM
BUBBLEMETER.BLOGSPOT.COM HATES TO RAIN ON THE TRADITIONAL SPRING SELLING PARADE, BUT MARKET CONDITIONS, TO THE BLOGGER SEEM FAIRLY GRIM
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Bubble Meter will continue seeking the truth about the housing market. Bubble Meter will continuing fighting the good fight!
Posts
Wow, your unsupported assertions, conjectures, and speculation are really gaining an audience. Soon your ESP will be front page news.
ReplyDeleteDavid,
ReplyDelete*Thank you* for the link to my Northern VA Bubble Fallout blog. I decided to create it to prove that the "median" statistics were a bit misleading, and that in some cases same-house sales were losing a lot more money than the statistics report.
I have been an avid reader of your blog for two years. Keep up the good work! (Blogging takes a lot of time).
Harriet
a.k.a. "Arwen U." at Ben's Blog
I am quite sure that spending by consumers will be down with lack of appreciation in home prices. It is just a matter of time before we see a recession IMO.
ReplyDeleteI don't understand why the new home builders are still holding onto the sentiment of building luxury TH's near or above the 400k mark still. And they continue to offer these huge 3000 sq foot single families for 500,600, 700k. When will they stop the insanity themselves, and create a price point that a middle class incomed family or single person can buy?
ReplyDeleteCampers,
ReplyDeleteonce again, for your conisderation.
my newest post for my up and coming blog "Lance Knows Better". A quick quote from Sir John Templeton (Sold out his interest in the Templeton fund for $900,000,000). In a 2004 interview when asked if real estate was in a bubble:
"Q: Do you think there is a real estate bubble in the U.S.?
John Templeton: Yes. Real estate is very different from the stock market because it's so local and separate in terms of type. But in many locations and many types of real estate, prices are dangerously high right now. And in real estate it's easier to say what's dangerously high. You just look at what it costs to rebuild. Right here in the Bahamas, I have recently seen people pay four or five times for a house what it would cost to rebuild.
But then again Lance know better. Keith keep up the good work. LOL!
Campers,
ReplyDeletefor your final consideration (for the Lnace Knows Better Blog) of the day, please take note of the comments of Warren Buffet (Lance, VA do you knkow who he is?) If not (as I suspect) I will assist you with reference material. When asked about real estate at a Berkshire stockholders meeting:
"In his answers to shareholders' questions, Buffett made it clear that he remains concerned about the trade deficit and the U.S. dollar, although he is bullish on the long-term strength of the U.S. economy. But he and Munger issued stern new warnings about the residential real estate "bubble," the destabilizing effect of hedge funds on the financial markets, and the possibility of another terrorist strike against the United States. \
But then once again, Lance knows better! LOL
anon 11:10 asked:
ReplyDelete"When will they stop the insanity themselves, and create a price point that a middle class incomed family or single person can buy?"
Builders build what is needed and is profitable. They are not going to build something for a loss. The economy is changing. There are more people in the higher income brackets and those people are making more money then ever. Conversely, the lower income brackets have seen far less growth in real income over the last several decades. At some levels, incomes have actually declined. The builders are simply responded to where the need (and the resources)are. Like Eterintus correctly pointed out in his Fireside Finance blog, there is a far larger incentive for the upper brackets to buy a home (for tax reasons) then there is for the lower brackets.
"there is a far larger incentive for the upper brackets to buy a home (for tax reasons) then there is for the lower brackets. "
ReplyDeleteEver heard of the AMT?
"There are more people in the higher income brackets and those people are making more money then ever. Conversely, the lower income brackets have seen far less growth in real income over the last several decades. At some levels, incomes have actually declined. The builders are simply responded to where the need (and the resources)are."
ReplyDeleteWow... what a relief...
Here I was worried about the possibility that speculators and loose lending had something to do with the run-up in prices. It is good to know that this is simply a case where every house and condo in a 50 mile radius became twice as expensive in a five year period without wages doing anything similar.
I read about this blog today on my way to work in DC.
ReplyDeleteI do remember the Buffet comments about the real estate trend in money.cnn.com.
Like some one said when the builders going to realize the real truth about building townhomes for $500,000 which most of us cannot afford
I am looking to buy a home for last three years. But never did buy one afraid of the bubble. It is interesting to read this blog.
Keep the good work ...
David,
ReplyDeleteMortgage Interest is still deductible under the AMT (at 26 - 28%). (Actually, it is one of only two deductions allowed, the other being charitable contributions.) So, under current tax law, the balance of the home-ownership incentive is still skewed to a great degree toward the higher-income group. However, I'm not sure that this is the primary reason builders are building big (but I'm sure it does stimulate demand disproportionately... so it is one out of many reasons).
I've been on the opposite side of the fence from Lance on almost every argument, but I think he makes a good point here: House builders are for-profit enterprises, and it was simply much more profitable for a builder to build a huge mansion. This end of the market was even more insanely distorted than and disconnected from the rest... the reason "fix-and-flip" could net huge profits beyond compensation for the time and construction necessary to do the deed. Further, there was enough demand for the biggies that they generated plenty of sales volume without dipping into a more reasonable price range... (a "can't lose" attitude and easy credit that led many to stretch for houses they couldn't afford stimulated demand). Speculation was probably large on this end of the market, too, as the McMansions seemed to provide the greatest potential for dollar gains. (5% of 300,000 is greater than 5% of 200,000).
I think economic forces (huge supply of McMansions, limited demand vs. lower supply of reasonable houses, greater demand) might just lead builders to ratchet-down the size of the homes they build as the opportunity for profit at the high end diminishes.
The decline in the "middle class" and the growth of the "wealth gap" is widely documented in economic literature... I'm sure there is a grain of truth that structural changes in our economy lead to a greater market size in the high end... but these changes have been going on for the last half-century, and predate the current housing frenzy, where this phenomenon has become even more pronounced. (I do believe, anecdotally, that more large homes are being built now, as a percentage of total homes, simply due to these structural changes, but I have no data on the matter).
Well, fortunately for all of you, I don't have time to finish.
eternitus
Congrats on the mention David. :)
ReplyDeleteAs I look at the discussion on affordability above, I cannot help but recall Buffet warning that this time high end real estate would drop the most. When he said it, about nine months ago I didn't see what he was saying (but I'm not about to bet against Buffet, even knowing about his textile investments).
Now... its pretty obvious that the affluent are over-invested in real estate. I cannot tell you when, but eventually they will need to free that cash for other investments. I have quite a few friends who would *never need* to sell. But eventually they'll want to do something with their money that is tied up in real estate.
To think, all of today's news was based on the previous tightening of mortgage credit... Since on April 1st there is another tightening per the investment banks... it will get only more interesting.
Got popcorn?
Neil
I refuse to pay half a million dollars for a used house. They slap 0.50 ceranic tile down and talk about it like its porcelin tile. They hack in a slab of granite in the kitchen on top of press board cabinets. They put in some lousy faucets and light fixtures that only are sold at HomeDepot. They lay the cheapest carpet without replacing the pad, and then highlight it in the advertisment. You could knit a sweater from all the cat and dog hair on the furnace filter that has not been changed in a year, which will need to be replaced because its NEVER had maintainence. They have the original construction grade appliances which are so cheap that they are not even offered to the public by a store for fear of being ridiculed. The roof is 20 years old and has the original 15 year old shingles. The owner offers that 5 gallons of deck stain, that he has never used, and so the deck is rotting out. Theres no tyvec wrap on the house. Theres insulation in the walls, but only half of what it needs. The windows look like they were taken from a trailer. OH, and "fresh paint", which means they are trying to cover up that mold smell that eminates from the basement. There are notes by all the light switches demading you shut off the lights before leaving and they have shut the water off completly to save money, but you look on Zillow and they stand to clear 150,000 off the deal.
ReplyDeleteNO THANK YOU
john
20% of all wage earners take home 60% of all the income in the entire country. The other 80% of wage earners get to divide up the 40% of income that's left.
ReplyDeleteSome how, I don't think those 80% of wage earners, taking home only 40% of all the income earned in the entire country, will be able to sustain the current high cost of housing.
The price of 80% of the roofs needed to shelter those people will come crashing down because, the wages given to 80% of the population, do not support current prices.
The Real Bob said...
ReplyDelete"john said" but you look on Zillow and they stand to clear 150,000 off the deal."
This always got to me also. However, if you ever get an honest real estate agent they will tell you that the person has about 150k in credit card debt. Not all people are introuble by heloc, some have the plain old fashioned debt."
DO I detect bitter envy in both these statements? What other explanation would there be for anyone to care what supposed "profit" one has made in their home. And I do want to emphasize supposed since even by the BHs own analyses it is clear that there are a lot of costs involved in maintaining a home over the years AND inflation itself devalues the real value of this "profit." Again, BHs proving to me and the world that their whining antics aren't so much related to their really want a house for the purpose of having a home but rather for the purpose of making a profit ... I.e., they are wannabe flippers withput the finicial wherewithal to flip. Hence the bitter envy exhibited. And it's funny how I've yet to read one BHer try to counter this observation ...
the real bob said:
ReplyDelete"YOU LOST GREATER THEN 10% OF THE VALUE OF YOUR HOME SINCE YOU BOUGHT IT."
Sorry to disappoint you but neither I nor anyone who owns a home like mine would sell it to you or anyone for that 10% loss in value that you've formulated in your little mind. Based on what neighboring houses are and have sold for, I would take out much much more than I brought in ... Somewhere between $200Kand $300K more ... But that is not the point as I have no intention of selling. I bought it as a home. And that is the point you are missing. Those sellers that keep their house on the market for a year as you claim ... and THEN rais the price on it? ... Did you ever stop to think that they CAN hold out forever as such because they have other uses for that property ... For instance for use as a place to live ... And where are YOU living while you wait out your unearned windfall? ... In someone else's property ... under their house rules, and at their mercy as to whether you stay or leave ... It's funny how even when you try to cover up your envy, it comes right back out ... Face it, you screwed up trusting David ... He led you to a blank wall and you followed willingly and unquestionningly ... Like sheep to the slaughter. Now you'll be living in some place such as Gainesville ... with roomates ... many of them ... forever!
Oh no... once again... we have all been priced out forever.
ReplyDeleteLance just doesn't learn does he? His stupid scare tactics mean nothing to those of us who are educated to see them for the BS they are.
Prices are falling lance, get with the program.
And while you are at it...
post the data on those "average rowhouses" you visited last weekend that went from $1million to $2million in the last 12 months.
First time on this sit - because the Baltimore blog in now in CHINESE!! (anyone know why?)
ReplyDeleteThis girl 'Lance' is a real trip!
Lancie - what will you say in 2009 when homes are at 1999 prices?