BubbleSphere Roundup

SacramentoLand(ing) reports about Sacramento Region Median Prices - August 2006. Median sales price in Placer County again leads the way down with a double-digit decline. Yikes!

Keith says HP message to the REIC - kiss my blogger butt. For those who don't know REIC = is the Real Estate Industrial Complex.

Mortgage & Loan: Focused Like A Lazear @ Housing.com Blog.

The most informative Paper Money report that Home prices are being SLASHED! In Massachusetts. Perhaps a bit dramatic, but the blogger blogs "Ouch! You can chalk another mark up in the column of total housing collapse in Massachusetts."

Banks more exposed to residential real estate. Oh my!

To Buy or Not To Buy That is The Question

The housing market has changed dramatically in the bubble markets over the last year. 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 past 12 months. In Phoenix, inventory rose from 10,748 on 7/20/05 to 54,441 on 9/23/06 according ZipRealty and Bubble Markets Tracking Inventory. The inventory of houses for sale in the San Fernando Valley (the Los Angeles area) has more than doubled since August 2005 (DataQuick).

At the same time the number of housing units sold has fallen dramatically in the bubble markets compare with a year ago. The California Association of Realtors reported that housing sales decreased 30.1 percent in August 2006 compared to August 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.”

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 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 9 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.

What happens if I just walk away

On the AllForeclosure Message Board, there is this message posted about a condo in San Diego:

We made an extremely bad investment 4 years ago when we bought our condo. There are several foreclosed units in our community, making it impossible to sale. We're asking 30% less than we paid and can't even get buyers to look at our property. The neighborhood is going downhill fast. I have personally witnessed drug deals, gang activity and people fornicating in park cars outside our house.

We want out, right now we have good credit and are current on all bills. But I am willing to throw it away to get out.

As a last resort we are considering buying a new house while our credit is still good and waling away from the condo. Anyone have any thoughts? What would happen if we just cut our loses now and let the bank take it back.

In their subsequent post the desperate seller writes:

I forgot to mention a few more key points that are leading us to explore this idea.

The property is in colorado, the builder walked away from the property 6 months ago with 3 buildings left to build. The builder ran out of money to pay his subs so the subs posted leins againt the entire community. It think that about sums it up

Thanks for your input

Looks like they bought a newly built condo in a marginal neighborhood. Despite buying 4 years ago and listing it at a 30% less then they paid, they still are having trouble selling. This condo project must have been an absolute disaster. Yikes!

ARM Adjusting on Condo, owe more than it's worth

On the AllForeclosure Message Board, there is this message posted about a condo in San Diego:

I bought a condo in April of 2005 in San Diego with zero down, we got a 2 year ARM loan, so in April of next year it will adjust. We also have a heloc on the 2nd that started at 8%, but has gone up to over 10%. My neighbor is trying to sell for roughly the same price we bought ours and is having no luck. I enjoy the place, but really don't care if I lose it. I am married, but I am the only one on the loan. My credit was good, so it gave us a better rate to just have me on the loan. When our loan adjusts, I will still be able to pay the loan, but almost all of our income would be going to it. What happens if I just walk away. I don't even care that much if my credit is screwed up, because we can just go rent a place using my wifes credit. Will I owe the difference on the loan if I just walk away and have the bank sell it?

People are hurting. The housing bubble, which is a speculative episode, is causing hardship across the United States.

Housing Inventory in Northern Virginia Down Slightly in Past 3 Months

Housing Inventory For Loudoun County (part of Northern Virginia)

In Northern Virginia (Alexandria City, Arlington County, Fairfax City, Fairfax County, Falls Church City, Loudoun County, Manassas City, Manassas Park City, Prince William County) the active inventory has declined slightly during the past few months. On September 25th the inventory stood at 20,064 which is a 6% decline from July 1st, 2006, when active inventory was at 21,336. Source: VirginiaMLS.com

Housing Bubble Continues To Go Mainstream

National Median Sales Price Falls Year over Year

The National Association of Realtor's released its national existing home sales number for August 2006.

Sales of previously owned homes in the U.S. fell in August to the lowest since early 2004, and prices fell from year-ago levels for the first time since 1995.

Purchases declined 0.5 percent last month to an annual rate of 6.3 million, from 6.33 million in July, the National Association of Realtors said today in Washington. Sales fell 12.6 percent compared with a year earlier.

The median sales price fell 1.7 percent to $225,000 from a year earlier, the first drop since April 1995, David Lereah, chief economist for the Realtors, said at a briefing. Federal Reserve policy makers, who last week held interest rates steady for a second month, expect housing will cool gradually to slow the economy and help curb inflation.

The supply of homes for sale increased to 3.918 million, a 7.5 months supply that was the highest since April 1993, up from 7.3 months at the end of July. (Bloomberg)

David 'soft landing' Lereah, stated that "We've been anticipating a price correction and now it's here. The price drop has stopped the bleeding for housing sales. We think the housing market has now hit bottom.'' Think Again!

NAR: Sales Down, Prices Down, Inventory Up (Calculated Risk)
FLASH: Used home sales fall again, bogus price number shows first year-over-year price decline since 1995, Lereah predicts market has hit bottom (Housing Panic)

Mortgage Bankers Association Celebrates Exotic Mortgages

Robert Broeksmit of the Mortgage Bankers Association defended exotic mortgages. "I strongly believe the market'’s success in making these nontraditional products available is a positive development, not a cause for alarm,"

It is disgusting that the Mortgage Bankers Association is busy celebrating their toxic mortgages. They should be very alarmed by these ticking time bomb loans.

Fed Reserve is Trapped

The Federal Reserve Board decided to leave rates unchanged at 5.25%. This was the second meeting in a row where they decided to pause.

Reasons To Raise Rates:

• Inflation Worries. As "readings on core inflation have been elevated, and the high levels of resource utilization and of the prices of energy and other commodities have the potential to sustain inflation pressures."
• Attract Inflow of Foreign Capitol.
  

Reasons To Lower Rates:

• Recession Fears "The moderation in economic growth appears to be continuing"
• Don't want to cause a meltdown in the housing market. As there is already "a cooling of the housing market.
  

The Federal Reserve Board is trapped. They are in a very tough position. I don't blame Ben Bernanke as it was Al Greenspan who created this conundrum.

Is There a Realtor Bubble?

Members of the National Association of Realtors (NAR) are called Realtors. As of 8/31/2006 there were 1,354,468 Realtors. The above graph only shows full years, thus 2006 is not graphed. [I posted this post earlier this year]

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