Housing Rolling Along 2

Quote from DrChaos:

What is not Greenspan's fault:

1% interest rates. There were significant deflationary forces, and low rates (short term) were a good idea.

China's peg of USD to the Yuan and Japan's soft peg (to compete) resulting in massive dollar reserve increases and economically irrational low long-term rates, resulting in housing bubble.

What was Greenspan's fault:

Failing to use more specific tools to prick outrageous asset bubbles than basic interest rates. The Fed ought to be more than just the short-term rate-setting FOMC.

Specifically: failure to seriously increase the margin requirement on stocks during the bubble. The argument that hedgies etc had other means of borrowing doesn't stand up---the increase in margin would ripple through the whole banking and financing.

The second one is the Fed's failure to crack down on underwriting standards for mortgage loans recently, especially in bubble areas. If everything had been 20% down 30 year fixed with sane debt to income ratios there wouldn't be a bubble and the upcoming recession/depression.

The world and finance industry is not only about interest rates and it will really suck when normal people who didn't do anything foolish get screwed and lose their jobs in the upcoming big recession.
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deflation? everyone is paying more for goods yet cpi numbers were limp. there wasn't any need to drop rates by a ton.

greenspans answer to everything was to pump money into the economy. it was the wrong answer and keeps getting worse
 
Hey, is it too late to squeeze out the door? lol...OWP

http://www.signonsandiego.com/news/business/20060116-1132-bn16sales.html
"San Diego County resale house prices tumbled last month by the biggest number in 18 years of record-keeping and contributed to the smallest year-to-year rise in overall prices in six years, DataQuick reported Monday. The median resale price for existing single-family homes dropped $15,000 from November to December to stand at $550,000, the largest month-to-month decline since DataQuick began keeping records in 1988."

"However, last month's figure was still ahead of what it was in December 2004 by $25,000, or 4.8 percent. The yearly appreciation rate also represented the biggest slowdown from one year to the next in DataQuick's records. The next biggest slowdown occurred at the start of the last big real estate bust, when the annual appreciation rate went from 16.6 percent in 1989 to only 3.7 percent in 1990."

"Last year was the first time since 2001 that the number of home sales fell from the previous year. The total sold last year was 55,366, down 9.1 percent from 2004's 60,886. This also was not a surprise, since monthly sales reports from DataQuick have showed a decline in activity on a year-over-year basis for 18 straight months."

"The total number of listings has been growing, reaching a peak of just over 15,000 listings in November, about five times more than at the peak of the buying frenzy in spring 2004. Consequently, sellers report few if any bidding wars for their properties, and buyers say they have more time to consider their choices."
 
Quote from jficquette:

I rented a house here in Carlsbad from a policeman. Get this, this guy owned 10 newly bought houses(in last couple years) and was renting them.

He was all ear to ear smiles as he was telling me his secret. He simply bought dirt in new phases and after the house was built he already had a profit. He told me I should look into doing it. I told him in May 2004 that he better sell all he had. He looked at me like I was crazy.

Here is a guy who make maybe $80k a year with 10 mortgages. There must be hundreds of people who control thousands of houses here in SoCal.

Thanks for your comments

John
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He might be OK if he can afford to rent them for less than the market rent. Sure he paid too much, and it might take him many, many years to get the equity back, but he'll be receiving increasing cash flows and nice tax breaks. This all assumes he used fixed rate notes.

SM
 
http://passport.ocregister.com/regi....com/ocregister/money/abox/article_949773.php
"A yellow warning light is shining on the Orange County real estate market's dashboard. The number of delinquent property tax payments has reached the highest level in a decade. This worrisome trend may be evidence that high purchase prices and burgeoning payments on popular adjustable mortgages as interest rates rise may finally be taking a toll on the budgets of local property homeowners."


http://passport.ocregister.com/regi....com/ocregister/money/abox/article_949763.php
"A coastal strip of Newport Beach gained the distinction of being the only local area where everyone who bought a home last year used an adjustable-rate loan (ARM). Adjustable mortgages, which start with a low interest rate and then track market rates after a set period, were also widely used in Santa Ana and Anaheim. ZIP codes in those cities accounted for seven of the top 10 ranked by ARM usage. In four Santa Ana ZIPs, about 86 percent to 88 percent of purchasers used an ARM."
 
yeah housing is slowing, but at market tops you get weak breadth. some areas will be hitting new highs, some areas, like SD will be dying off...might want to wait til the summer time to pull the trigger on housing based shorts...
 
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