Housing Rolling Along 2

Quote from onewaypockets:

Perhaps Florida really is different. This comment below must have been right after all! "A totally new economic model"...haven't we heard that somewhere before??? OWP

"In Miami, Ron Shuffield, president of Esslinger-Wooten-Maxwell Realtors, predicted that a limited supply of land coupled with demand from baby boomers and foreigners would prolong the boom indefinitely."
‘’South Florida,'’ he said, ‘’is working off of a totally new economic model than any of us have ever experienced in the past.'’
– Motoko Rich & David Leonhardt, “Trading Places: Real Estate Instead of Dot-Coms” (New York Times, March 25, 2005)
More...

Don't put words in my mouth. I didn't say "this time is different". I am just wondering if the price run is taking a breather and still has legs based on what I've been seeing locally. Points to ponder:

I know that when I bought my house in 1997, I would have LOVED to get the interest rates that are STILL available today.

My returns on rental property are still kicking the snot out of anything that I could have made in a mutual fund. Not to go on a tangent here, but I am so concerned about the effect of baby boomers retiring, cutting consumption, and selling mutual funds (instead of systematically buying them) that I truly believe the stock market may stagnate for more than a decade at some point. (Can I get my doom and gloom club secret decoder ring now?)

With the economy continuing to pick up steam, you have more folks looking for housing.

Consider that the cost of labor and materials are up, in part due to a weak dollar. When you start considering replacement costs, in my "fly-over area", prices aren't too out of line. I have to wonder how the cost of building a house now, vs. building a house 3 years ago would compare in "real" terms. I just recently bought two townhouses for about 30% less than it would cost to build them because they were small and materials, labor, and permitting costs are high. Does that mean they have room to increase in price?

Further, consider that many folks would rather wait out a price drop than take a loss....some can't afford the loss and will have no choice...this keeps supply off of the market. This is the inherant "stickiness" in any sour real estate market.

Couple that with the fact that the FED gave any reasonably literate person ample chances to get out of variable debt by increasing rates slowly so they would move over to fixed rates. I know that many folks didn't, but many did.

Again, I'm not saying "this time is different". I am simply saying what I observed directly, and in light of counter-balancing economic forces, I personlly am not so sure that one can so easily call a top to the market.

SM
 
The Big Glut

http://online.barrons.com/public/ar...Eh91cHB9ztnP2LoC2XKx8g_20060626.html?mod=mktw

"IT WOULD SEEM TO HAVE IT ALL: four bedrooms, a guest house, a pool and a rock waterfall. But the vacation home in Naples, Fla., hasn't been drawing much interest from buyers, so the seller recently threw in that most modern of amenities: the $1 million price cut. That's brought the asking price down a full 25%. "If you want to sell, you've got to go back to '04 prices," says Chip Harris of Coldwell Banker Previews International, which is handling the property."

A $1M discount in prices of high end second luxury homes...
 
now you can trade them;

http://www.cme.com/trading/prd/contract_spec_HNG18558.html

ME Housing Index Futures Futures
Trade Unit $250 times the S&P/Case-Shiller Metro Area Home Price Indices
Point Descriptions 1 point =$250.00
Contract Listing February, May, August and November
Strike Price Interval N/A
Product Code CUS=Composite Index
BOS=Boston
CHI=Chicago
DEN=Denver
LAV-Las Vegas
LAX=Los Angeles
MIA=Miami
NYM=New York
SDG=San Diego
SFR=San Francisco
WDC=Washington, DC
Trading Venue: CME® Globex®
Hours Mon/Thurs 5:00 p.m.-2:00 p.m. CT the next day
Listed All listed series.
Strike N/A
Limits No Limits
Minimum Fluctuation Regular 0.20=$50.00
Calendar Spread 0.10=$25.00
 
Quote from nkhoi:

now you can trade them;

http://www.cme.com/trading/prd/contract_spec_HNG18558.html

ME Housing Index Futures Futures
Trade Unit $250 times the S&P/Case-Shiller Metro Area Home Price Indices
Point Descriptions 1 point =$250.00
Contract Listing February, May, August and November
Strike Price Interval N/A
Product Code CUS=Composite Index
BOS=Boston
CHI=Chicago
DEN=Denver
LAV-Las Vegas
LAX=Los Angeles
MIA=Miami
NYM=New York
SDG=San Diego
SFR=San Francisco
WDC=Washington, DC
Trading Venue: CME® Globex®
Hours Mon/Thurs 5:00 p.m.-2:00 p.m. CT the next day
Listed All listed series.
Strike N/A
Limits No Limits
Minimum Fluctuation Regular 0.20=$50.00
Calendar Spread 0.10=$25.00
More...

That's great. Can you see it on IB yet? There has been a lot of talk but finally now there's real specs. thanks for the link.
 
Here's food for thought. Some argue that a "crash" will occur. Some argue that the "bubble" will deflate, and then price appreciation will continue.

With higher costs for labor and materials brought on by a weakening dollar, (still) relatively low interest rates and (a new development) rapiclly rising rents which is the substitute for buying, how do we know that the "correction" or "bubble bursting" isn't already over and done with?

Note that I agree that a lot of hot spots, such as California, South Florida, and coastal areas had price drops that were painful to many who must sell...

But is this "correction" still going on?

Now that I'm looking for it, and trying to separate out the stale data, I'm seeing anecdotal evidence that prices are rising and buying is increasing...

Comments?

SM
 
real estate has hell to pay.

the equity bubble was transferred to the housing bubble, they will feel extreme pain as dollar goes south and interest goes up. only a matter of time.
 
Quote from Smart Money:

Here's food for thought. Some argue that a "crash" will occur. Some argue that the "bubble" will deflate, and then price appreciation will continue.

With higher costs for labor and materials brought on by a weakening dollar, (still) relatively low interest rates and (a new development) rapiclly rising rents which is the substitute for buying, how do we know that the "correction" or "bubble bursting" isn't already over and done with?

Note that I agree that a lot of hot spots, such as California, South Florida, and coastal areas had price drops that were painful to many who must sell...

But is this "correction" still going on?

Now that I'm looking for it, and trying to separate out the stale data, I'm seeing anecdotal evidence that prices are rising and buying is increasing...

Comments?

SM
More...

I think this whole "national" rents rising rapidly crap is a ruse designed to try and save what's salvageable of this rapidly eroding "real estate market". Find me an area in this country where the supply of properties on the market is LESS than it was a year ago. Now, add to it hundreds of thousands of new spec properties hitting the market over the next year. Tell me, how do rents rise appreciably with all of that overhang?

I could virtually guarantee that anyone willing to "kick the tires" a bit in any of these heavy supply areas could be renting cheaper than a year ago. But then again, that would take a bit of research and due diligence.
 
I live in Alberta, Canada, and our local real estate markets are starting to get more than a little frothy. I make a point of talking to many people about the state of housing, and pretty much everyone seems to feel that continued price appreciation is a guaranteed thing. Apparently nobody reads Shiller...
 
Drove out of my complex this morning to grab breakfast and there was a guy on the corner holding a sign that said "PLEASE BUY MY CONDO". He looked a little more than desperate.

The end is near. :)
 
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