housing crash

[jem]

Oh, that article was about as good as the articles I read 4 years ago.

I better sell now. Oh wait I did listen to these clowns and sold way to early in San Diego. Luckily, I bought back into what has turned out to be the strongest market in the country when I realized I was wrong.

You do not want to know how much of a buffer I now have aginst a turn down in the market. But lets just say, I am glad I realized that it is very easily to call for a top in the housing market, if have not done your research.

Wow that is a shithole for half a million.

Then your dutch relatives come over with Euros and say relative to Holland right now that is cheap for a nice warm wheather home.

You see there is always a new reason for the prognosticators to be wrong. And history has to repeat itself for them to be right.

 

[vitajex]

http://www.kentucky.com/mld/kentucky/business/11351514.htm

Buy energy with caution; watch for collapse in real estate

By Bill Deener
KNIGHT RIDDER NEWS SERVICE

Energy and home building stocks have levitated into the heavenly spheres, but now some on Wall Street think they are headed for a serious fall.

Increasingly, the two sectors are characterized as white-hot and overbought. Unfortunately, this is the point where many investors are tempted to lash themselves to the rocket.

"I know it's tempting, but don't do it," cautioned James Stack, editor of InvesTech Research. "There is a difference between a healthy rally in a stock and speculation. With-real estate in particular, I think we are heading into a speculative fever."

It's difficult to distinguish a bubble from a solid rally. It becomes obvious only after the fact, when stock prices have collapsed. But either way, the share prices of oil companies and home builders have soared, and potential investors should be extremely cautious.

Shares of Exxon Mobil Corp., for example, have climbed from about $40 to just below $60 over the last year. Most of the energy-related stocks are up anywhere from 30 percent to 50 percent.

"I don't know if oil stocks are in a bubble, but you can certainly say they are fully valued," said Bob Cordiak, senior vice president/investments at RBC Dain Rauscher in Dallas.

Home builders such as Ryland Group Inc. and many real estate investment trusts have hit all-time highs. Ryland shares started 2004 at about $40 and hit $70 recently. The share price of Toll Brothers Inc., which builds luxury homes, went from $40 to $90 over the last year before falling back recently to the mid-$70s.

The average REIT rose 163 percent from March 2000 to December 2004.

Some analysts are drawing comparisons between the run-up in energy and real estate stocks to the Internet bubble of the late 1990s. That's probably an unfair analogy, especially for energy companies. If oil prices pull back, say, 10 percent to 20 percent from current levels, energy stocks will retreat, but they aren't likely to collapse.

Barry Ritholtz, chief market strategist at the Maxim Group in New York, said that although oil prices have gotten "a little goofy," the share prices of energy companies aren't apt to drop 80 percent to 90 percent like the dot-coms did.

Real estate could be a different story. Signs of a bubble abound. Stack says home prices are being driven higher as much by speculation as by real demand. The National Association of Realtors reported recently that investors bought 23 percent of the homes sold last year.

The scariest thing of all is that many real estate investors are convinced that home prices will always rise -- the classic sign of a bubble, Stack said.

 

[QQQBALL]

in Socal there is no doubt, its crazy! so now the basis of the real estate boom is currency arb? i remember well the haircut the japanese took in Socal real estate after the 1986-1989 run-ups. checkout the article on the internut about illegals buying houses. no money, no citizenship, no income, no problem! guys like buffet stood aside during the internet mania, they seem to have survived... its okey not to hit the top or the bottom. except for my residence (which also has rentals on it), im outta Socal real estate (8/2004)... maybe i was early? i do expect hot chinese dough to push markets like vancouver BC and selecet socal markets in areas like San Gabriel Valley, but at some point businesses will leave and so will employees.

i looked at a place recently and the cap rate was under the mortgage IR? that means folks are anticpating that all of the yield will come from appreciation, unless they think rents are gonna jump bigtime. so in this real estate market, the more you leverage, the lower the equity yield rate.... sorry, does not compute. everything is cyclical, real estate included.

i do ackowledge that i could be wrong, so ive kept one place (F&C) here.... i saw many who bailed in the last depression, but they couldnt get back in to socal r.e. estate when PHX, PDX, ABQ and the rest provided less hospitable than envisioned.

basically, i sold out and im glad i did.

 

[SteveD]

Exxon: Their earnings have increased substantially!!!

Only a truly brain dead idiot would compare Exxon to the Dot.coms, LOL.

One has a 100 year history of real earnings and the other was nothing more than a glorified business plan. My guess would be that Exxon's one year earnings would exceed ALL of the dot com companies actual earnings.

Homebuilders also sell at a PE that is below the S&P average??? Why is that??? Please understand, that what happens to the house after they build and sell it does not affect their earnings to any great degree.

If one market gets over built they just close down and move on. They are like a mobile manufacturing company. Manufacturing a product that you have to have!!!

SteveD

 

[onewaypockets]

The next few months are "do-or-die" for housing. It's time...

 

[onewaypockets]

http://www.afxpress.com

April 14, 2005

WASHINGTON (AFX) - Credit card companies and other lenders were poised to score a long-sought legislative victory Thursday as the House of Representatives prepared for a final vote on a bill that will make it tougher for consumers to avoid repaying debt by filing for bankruptcy

Passage is seen as virtually assured. The House will be voting on a measure identical to a bill that passed the Senate last month, sending it on to the White House. President Bush has said he's eager to sign the legislation

The Republican-controlled House Rules Committee, in a party-line vote Wednesday night, rejected Democratic calls for an "open rule" on the debate, which would have allowed Democrats to bring amendments to the floor. The "closed rule" adopted by the committee allows an up-or-down vote on the bill and bars any amendments

Democrats complained that Republicans were ramming the bill through the chamber without adequate debate

"The House has adopted a new modus operandi," said Rep. Alcee Hastings, D-Fla. "If the House leadership deems legislation important ... it's willing to push through the [Senate's] legislation without debate in the people's House." House Judiciary Committee Chairman James Sensenbrenner, R-Wis., dismissed the complaints, saying bankruptcy legislation has been debated extensively over the past eight years, including numerous committee-level hearings and other deliberations

The House has passed bankruptcy bills "on eight separate occasions. Likewise, the [Senate] has repeatedly expressed its support for bankruptcy reform," Sensenbrenner said

Lawmakers had planned to take up the bill last week, but action was delayed as several House members left town to attend the funeral of Pope John Paul II. The Senate passed the bill in a 74-25 vote last month. Proponents say the bill will force wealthier debtors to pay back a larger share of their debts. Opponents say it preserves some of the biggest loopholes for the well-off, while cracking down too hard on poorer workers and families whose financial woes stem from layoffs or health problems. The bill's key feature is a means test that supporters say will make it more difficult for wealthy consumers and persons attempting to game the nation's bankruptcy laws to avoid repaying debts. Filers with income below the median level of their state would be allowed to file for bankruptcy under Chapter 7, which allows the discharge of debts after the forfeiture of some assets. A filer with income above the median could be required by a judge to file under Chapter 13, which requires the repayment of debts under a court-ordered plan. Credit industry analysts say the bill should boost major credit card issuers, especially those that service the high end of the market. The bill also includes provisions sought by auto lenders, real-estate firms and others. The legislation would require auto loans to be repaid in full under Chapter 13; otherwise, the automobile would be repossessed. Under current law, only the present market value must be repaid. The bill also contains several provisions sought by the real-estate industry that would make it more difficult for residential tenants to avoid eviction by declaring bankruptcy. It's also designed to prevent bankrupt tenants from putting off decisions on whether to accept or reject a shopping center lease, by requiring a decision within 120 days. The biggest obstacle to passage was cleared when the Senate defeated a controversial, abortion-related amendment that opponents said had derailed past attempts at changing the bankruptcy code

 

[kiwi_trader]

"real-estate firms and others. The legislation would require auto loans to be repaid in full under Chapter 13; otherwise, the automobile would be repossessed. Under current law, only the present market value must be repaid."

So now, after you get ripped off and bankrupted trying to repay the (now higher interest rate) loan .... you will have to pay the original price of the property even if its 50% higher than what you could now sell it for?

I wonder if anyone caught up in the greed will actually perceive an increase in risk.

 

[onewaypockets]

http://www.ocregister.com/ocr/2005/04/15/sections/business/business/article_482169.php

"Friday, April 15, 2005

Frenzy feeds on itself
Experts say homebuyers, scared that prices will rise, rush into market, making prices rise.

By JEFF COLLINS
The Orange County Register

Three months of house-hunting taught Shaun Seales and a college friend how to compromise.

To find a house with a decent-size yard for their dogs, Seales and his buddy agreed to a higher price, smaller rooms and a longer commute.

After getting outbid on one other house, the two jumped at a chance to go in together on a three-bedroom home in Orange.

Price tag? $679,000.

"We made a lot of adjustments in our criteria," said Seales, 23, an annuities salesman for MetLife Investors in Newport Beach. "The market is still kind of quick. If you don't come in at the asking price, other people will get it."

It turns out Seales and his housemate were shopping in Orange County's most expensive seller's market yet.

Pushed by surging buyer demand, the median price of an Orange County home galloped to a record $565,000 in March, DataQuick Information Systems said Thursday.

That selling price is up 16.5 percent in a year – a dizzying $80,000 more than in March 2004.

More than 28 percent of March's buyers paid $700,000 and up, with most shoppers using jumbo-size down payments and creative financing to close their deals.

Four years ago, just 6 percent of March buyers paid more than $700,000.

"After you start talking about it in these terms, it starts to be funny money," said Lynne Brez, an agent for Winkelmann Realty in Fullerton. "It's not real."

THINKING SMALL

Sales volume jumped in March, too, ending an 11- month string of sales declines. DataQuick reported that buyers took possession last month of 5,033 houses, condominiums and townhomes.

Several agents said buyer interest shot up at the start of 2005 as shoppers began to fear that prices would soon be out of reach. Some experts predict that prices will continue rising through June.

Local real-estate agents, alternating between glee and exhaustion, say the recent homebuying surge is occurring because of relatively low interest rates and a lack of moderately priced homes.

In essence, high prices occur in part due to high prices: Homeowners stay put rather than pay the heavy cost of a move-up house. That leaves buyers scrambling over the limited inventory of starter homes, agents said. DataQuick says residences smaller than 1,000 square feet got the steepest appreciation – up 19 percent in a year

"I've had more (buyers) in the last year become real agitated (about prices). I've had people get really unnerved," added Winkelmann Realty's Brez.

"My job is to tell people, 'We'll get you through this, and you will find a house.' It's just gotten harder."

RATE WATCHERS

"A lot of people just don't feel that prices are going to go down," said Charles Folcke of North Hills Realty in Tustin. "People still are scrambling to buy while interest rates still are relatively low."

The weekly average interest rate for a 30-year fixed loan with a one-point fee was 5.74 percent this week, up from two months ago but still below the rates paid last spring and early summer, according to the National Financial News Services.

An adjustable-rate mortgage with a two-point fee edged up to 3.59 percent, also below last spring's rates.

"If rates went up to 7 (percent) or 8 percent, that would have a tremendous effect on buying power," Folcke said. "People don't look at the price but at what the mortgage is going to be."

The typical March homebuyer will be making a record monthly mortgage payment – $2,458, up 14 percent from a year ago, DataQuick reported.

To keep that payment in check, almost eight out of 10 buyers are using adjustable- rate mortgages to gain initial cost savings.

In addition, half of the loans allow borrowers to skip paying down their mortgage balances.

Former pro surfer Ken Caldwell, 27, is selling two investment properties and using an adjustable, interest-only loan to afford a three-bedroom San Clemente home within walking distance of relatives, friends and some favorite surf spots.

"(Homes in) the area I wanted to buy in never come on the market in the range I wanted to pay," said Caldwell, an auctioneer. "And it was getting higher and higher, so I wanted to get in the market before it was too late."

 

[vitajex]

Oldie but goody, from last year...

http://chinese-school.netfirms.com/Sir-John-Templeton-interview.html

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.

 

[onewaypockets]

http://www.thestreet.com/_yahoo/comment/detox/10220902_2.html

"..... The housing market has gone from nerve-wracking to downright horrifying. It's got to the point where there is simply no defense left for skyrocketing house prices.

First, even at today's very low interest rates, mortgages are eating up the biggest proportion of income since the early '90s. In the fourth quarter, mortgage payments were equivalent to 10.12% of disposable income, the highest reading since the first quarter of 1992 (and of course in many mortgage-paying households, the share will be much higher -- a fact that is lost in highly aggregated national numbers).

Here's the stunning difference between now and 1992. Back then, the interest rate on a conventional mortgage was 8.5%. Today, it's just under 6%.

In addition, the market value of residential real estate is at a record high in relation to after-tax income, Paul Kasriel, chief economist at Northern Trust, points out. Again on a nationwide basis, the market value of real estate is close to 200% of disposable income now. That ratio's previous high was in the late '80s, when it climbed close to 160%. A ratio close to 200% cannot last more than a few months. It is the equivalent of Nasdaq trading over 5000.
Sore ARMs

One of the defenses the housing bulls always made was that once a borrower locks in a 30-year mortgage rate, higher interest rates won't hurt that borrower, because the cost of the loan is fixed. But in one of the most worrying developments of late in the lending sector, the amount of adjustable-rate mortgages, or ARMs, has soared. "

".....In other words, to save a few bucks now, borrowers are taking on more interest rate risk just as interest rates are going against them. That shows just how unaffordable mortgages are right now to most people, and second, it shows that the blind speculative fervor of the last eight years is still a force to be reckoned with.

Considering the low level of interest rates, there hasn't been marked improvements in the health of the credit industry so far this year. Indeed, there are signs of stress. The large credit card lender MBNA (KRB:NYSE - commentary - research) missed the market's first-quarter earnings forecast because its borrowers are paying down loans more quickly than expected. Again, that shows that borrowers are balking at higher rates, but it also shows two other worrying trends. First, other credit card companies are likely charging lower rates than MBNA and taking away business. But that's foolishness, not competitiveness, at this point in the credit cycle. This is not the time to be taking share by driving down rates.



Second, it suggests that the borrowers are still borrowing on their homes' equity to pay down more expensive credit card debt. But when house prices cool off in the very near future, the luxury of cheap home-secured credit won't exist.

Given how sensitive the credit market is to changes in rates, there doesn't have to be a big catalyst to floor the U.S. economy. The Fed will of course try to forestall the inevitable by pushing the theory that the economy can grow its way out of its overleveraged state. But the only way the Fed thinks the economy can sustain its growth is by keeping rates low. What that does, however, is blow more air into the credit bubble, making the ultimate crunch much worse.

When the history books get written, the corporate crooks of the '90s will have a certain lasting notoriety -- and deservedly so. But the villain of our era will most certainly be the man who created and then sustained the biggest bubble the U.S. economy has ever had to deal with -- Detox's old friend, Fed Chairman Alan Greenspan. "