Housing Rolling Along 2

oh my!

http://www.sacbee.com/content/homes/re_news/story/14143134p-14971606c.html
"Sales of new homes in Sacramento, Placer, El Dorado and Yolo counties plunged 57 percent in the last three months of 2005, compared with both the previous quarter and fourth-quarter 2004, according to the Gregory Group, a Folsom-based industry research firm. Sales of existing homes in December fell 30 percent from a year ago."


http://online.wsj.com/article_email/SB113876196684961752-lMyQjAxMDE2MzA4MTcwNjExWj.html
..."FirstFed Financial Corp., a Santa Monica bank with a $1 billion stock-market value. Its main business is option adjustable-rate mortgages. Option ARMs let customers choose how much to pay each month, including a small minimum. It's just like a credit card, with the same catch: The unpaid interest is tacked onto the mortgage and the balance grows larger."

Last week, it reported that the amount of interest that customers are rolling into their mortgage balances, known as 'negative amortization', rose $25 million in the fourth quarter to $63 million for the year, up from $6 million a year earlier."


Wait, did he say from 6 million all the way up to 63 million??? OWP
 
Here is some Canadian perspective on this:

Housing starts, home sales and prices will decline this year, CMHC predicts
Posted 1/31/2006

OTTAWA (CP) - Canada's home-building industry will slow by 7 1/2 per cent this year and a further 6 1/2 per cent in 2007, Canada Mortgage and Housing Corp. predicted Tuesday.

And house price increases, after hitting 10 per cent in 2005 - the biggest surge in 16 years - are forecast to moderate to 5.5 per cent this year and 3.8 per cent in 2007.

The federal home-loan-insurance Crown corporation said housing starts this year are expected to total 208,700 units, down from 225,481 in 2005. Starts in 2007 are forecast to decline to 194,800, ending five consecutive years above 200,000.

"The housing market will continue to moderate both this year and next as demand for home ownership eases toward more sustainable levels," said Bob Dugan, chief economist at CMHC.

"Higher mortgage carrying costs due to strong house price growth and modest increases in mortgage rates will contribute to the slower pace of new home construction."

Sales of existing homes, which hit a record 481,900 units in 2005, are expected to ease about four per cent to 461,500 this year.

CMHC also said the average urban rental apartment vacancy rate, steady at 2.7 per cent in October, will rise to 2.9 per cent next year as renters continue to be drawn into home ownership.

Solid home-building activity is forecast for Alberta and British Columbia, while a resurgence of immigrants in Ontario "will be partly offset by Western Canada's energy-based economy which will continue to attract migrants from Ontario."

Quebec's housing starts will weaken amid "a sluggish provincial economy coupled with the slight rise in interest rates," CMHC said.
 
I wonder if this is a sign of things to come if the market drops off substantially for home prices. You know someone will have to be blamed for an inevitable slow down (not saying Ameriquest did not deserve this though).



Ameriquest to Change Appraisal Ordering Procedures in Wake of $325mil Settlement

A key provision of the recent Ameriquest Mortgage Co. settlement, in which the company was accused of deceiving borrowers, includes centralizing property appraisals so loan officers can't influence appraisers to inflate home values. In addition, it requires the use of outside agents to close mortgages to ensure borrowers aren't pressured by their loan agent into signing final papers. Overall, Ameriquest will appoint an independent monitor to ensure compliance and new rules forcing loan agents to clearly disclose mortgage terms to customers throughout the approval process.



Ameriquest agreed to a $325 million settlement of allegations that it deceived borrowers, used high-pressure sales tactics, falsified loan documents and pressured appraisers to overstate home values. As part of the settlement, the company, which admitted no wrongdoing, along with two affiliates, agreed to overhaul their lending practices.

The settlement applies to Ameriquest Mortgage, Town & Country Credit Corp. and AMC Mortgage Services Inc., all subsidiaries of Ameriquest Capital Corp. The three companies' immediate parent, ACC Capital Holdings Corp., is a party to the agreement as well. The companies specialize in higher-cost mortgages to borrowers unable to qualify for bank loans, prompting industry analysts to speculate that rival companies in the subprime market will be driven to adopt similar standards to avoid legal challenges from regulators and consumers.
 
http://www.realtor.com/FindHome/Hom...054144927&fh=on&lnksrc=feathome&poe=homestore

nope.. no bubble.. $620k

315475a.jpg
 
Another bubble article...oh wait, this was two bubbles ago. OWP


December 8, 1984
THE DAY LOS ANGELES'S BUBBLE BURST
By BENJAMIN STEIN ; BENJAMIN STEIN'S LATEST BOOK IS ''FINANCIAL PASSAGES.''

My pal Jerry P. just bought a condominium in Century City, in Beverly Hills, for 60 percent of what it sold for in 1980. Down the street from me here in the Hollywood hills, four houses have been on the market since 1981. The asking prices now are about one-third less than they were three years ago. Up and down Sunset Boulevard in West Hollywood, apartment houses that were converted to condos lie empty, boarded up, not one unit sold, in bankruptcy, with banks holding title.

New Yorkers do not like to believe they could learn anything from California, but perhaps in this one case they might try.

The Southern California residential real estate boom began in about 1974. It was not just a boom. It was a superboom, with miserable bungalows in Santa Monica running up from $40,000 in 1974 to $400,000 by 1980. Two-story colonials in Beverly Hills went from $200,000 to $800,000 and then over a million. One-bedroom condos in Hollywood were built and sold for $100,000 - what a house in Beverly Hills had been five years before. Every day, home buyers would look at the prices and say, ''It can't go on.'' But every day, for five years, it did go on. Middle-class families were priced out of the market, and the brokers said, ''But the rich will always be able to buy.'' Ordinary rich people were squeezed out of the market in some areas, but the brokers said, ''Never mind, the music business people will buy anything.'' The music business fell into a depression in 1979, and the brokers said, ''The foreigners are buying. Compared with Paris or Teheran, real estate in Holmby Hills is a bargain.''

Everyone wanted to get in to the game, get the down payment on a house, somehow struggle with the payments for a year, then sell out and get rich quick. Inflation pushed housing prices into the stratosphere. But even when inflation stopped, brokers said, ''The prices have nothing to do with inflation. Everyone on earth wants to live in L.A. The price will go up forever here, no matter what else happens in the rest of the country.''

Then the music stopped, some afternoon in 1980. As if a spell had fallen over the city, suddenly things began to stay on the market for three months, six months, a year, two years. Buyers disappeared. Asking prices stayed high, but nothing sold.

The great Southern California real estate boom was over. Prices had gotten so high that they could no longer be justified by inflationary expectations, or the influx of foreigners, or the climate, or for any other reason.

Now, four years later, those brokers who are still in the game tell sellers to expect that their houses will be on the market for two years. Other brokers have sold their BMW's and are now working as ''financial planners'' or public-relations people, dreaming of the days when they worked for 6 percent of infinity.

Not long ago, I was in New York City looking at co-ops, talking with recent buyers, would-be buyers, brokers. The conversation is eerily familiar. Listen to the buyers: ''Of course, we'll take two extra jobs and avoid having kids to buy this studio apartment facing an airshaft for $150,000. Next year, it'll be $250,000.'' And the brokers: ''Of course, there aren't many Americans who can afford to buy here any longer. But there will always be rich foreigners. New York is the most exciting city in the world. New York is unique, and two bedrooms on the West Side should cost half a million dollars.''

Do not believe it. Trees do not grow to the sky, and the great New York co- op boom will eventually go the way of the great L.A. bubble. Yes, New York apartments were underpriced for years. Yes, New York is an exciting place. Yes, there are a lot of rich people who like New York. Yes and yes and yes. But no real estate bubble ever goes on forever, and the day when everyone agrees that it will go on forever is usually the day it ends.

Maybe this boom will go on a little longer. Maybe, as some of my banker friends tell me, it has already started to totter. Who knows, exactly? But when buyers consider tying themselves in knots to get onto the housing merry-go-round, in the certain belief that they have a sure thing by the tail, they might remember the housing boom in L.A. and the shuttered condos in West Hollywood. The only thing certain about housing bubbles is that they never last. B
 
Quote from onewaypockets:

Another bubble article...oh wait, this was two bubbles ago. OWP


December 8, 1984
THE DAY LOS ANGELES'S BUBBLE BURST
By BENJAMIN STEIN ; BENJAMIN STEIN'S LATEST BOOK IS ''FINANCIAL PASSAGES.''

My pal Jerry P. just bought a condominium in Century City, in Beverly Hills, for 60 percent of what it sold for in 1980. Down the street from me here in the Hollywood hills, four houses have been on the market since 1981. The asking prices now are about one-third less than they were three years ago. Up and down Sunset Boulevard in West Hollywood, apartment houses that were converted to condos lie empty, boarded up, not one unit sold, in bankruptcy, with banks holding title.

New Yorkers do not like to believe they could learn anything from California, but perhaps in this one case they might try.

The Southern California residential real estate boom began in about 1974. It was not just a boom. It was a superboom, with miserable bungalows in Santa Monica running up from $40,000 in 1974 to $400,000 by 1980. Two-story colonials in Beverly Hills went from $200,000 to $800,000 and then over a million. One-bedroom condos in Hollywood were built and sold for $100,000 - what a house in Beverly Hills had been five years before. Every day, home buyers would look at the prices and say, ''It can't go on.'' But every day, for five years, it did go on. Middle-class families were priced out of the market, and the brokers said, ''But the rich will always be able to buy.'' Ordinary rich people were squeezed out of the market in some areas, but the brokers said, ''Never mind, the music business people will buy anything.'' The music business fell into a depression in 1979, and the brokers said, ''The foreigners are buying. Compared with Paris or Teheran, real estate in Holmby Hills is a bargain.''

Everyone wanted to get in to the game, get the down payment on a house, somehow struggle with the payments for a year, then sell out and get rich quick. Inflation pushed housing prices into the stratosphere. But even when inflation stopped, brokers said, ''The prices have nothing to do with inflation. Everyone on earth wants to live in L.A. The price will go up forever here, no matter what else happens in the rest of the country.''

Then the music stopped, some afternoon in 1980. As if a spell had fallen over the city, suddenly things began to stay on the market for three months, six months, a year, two years. Buyers disappeared. Asking prices stayed high, but nothing sold.

The great Southern California real estate boom was over. Prices had gotten so high that they could no longer be justified by inflationary expectations, or the influx of foreigners, or the climate, or for any other reason.

Now, four years later, those brokers who are still in the game tell sellers to expect that their houses will be on the market for two years. Other brokers have sold their BMW's and are now working as ''financial planners'' or public-relations people, dreaming of the days when they worked for 6 percent of infinity.

Not long ago, I was in New York City looking at co-ops, talking with recent buyers, would-be buyers, brokers. The conversation is eerily familiar. Listen to the buyers: ''Of course, we'll take two extra jobs and avoid having kids to buy this studio apartment facing an airshaft for $150,000. Next year, it'll be $250,000.'' And the brokers: ''Of course, there aren't many Americans who can afford to buy here any longer. But there will always be rich foreigners. New York is the most exciting city in the world. New York is unique, and two bedrooms on the West Side should cost half a million dollars.''

Do not believe it. Trees do not grow to the sky, and the great New York co- op boom will eventually go the way of the great L.A. bubble. Yes, New York apartments were underpriced for years. Yes, New York is an exciting place. Yes, there are a lot of rich people who like New York. Yes and yes and yes. But no real estate bubble ever goes on forever, and the day when everyone agrees that it will go on forever is usually the day it ends.

Maybe this boom will go on a little longer. Maybe, as some of my banker friends tell me, it has already started to totter. Who knows, exactly? But when buyers consider tying themselves in knots to get onto the housing merry-go-round, in the certain belief that they have a sure thing by the tail, they might remember the housing boom in L.A. and the shuttered condos in West Hollywood. The only thing certain about housing bubbles is that they never last. B
More...

Nice! Do you have any more of these types of articles?
 
There is a huge difference between 1980 and today and dissimilar circumstances. Back then Volker is credited with ending stagflation by limiting the growth of the money supply and abandoning targeted interest rates. Thus the squeeze on interest rates and the subsequent slow down of the real estate market.

http://www.federalreserve.gov/releases/h15/data/m/fedfund.txt

Today the fed has favored a different policy of allowing inflation at the expense of devaluing the dollar so as not to slow down the economy. Under present day politics, we may not see much more tightening of the money supply or increase in the interest rates. The fed would rather see inflation than a slow down of the economy. Conditions which are all favorable for mortgage rates and real estate.

Will there be a real estate bust or just a slow tapering off of real estate prices and activity? Whenever the correction happens it will probably be due more to the revaluation of Arms and interest only mortgages. But I would not expect the severe correction seen in 1980.
 
Quote from Chagi:

Nice! Do you have any more of these types of articles?
More...

Not on me, but I understand you can go to The Los Angeles Times website and do a search. Someone on another forum did that, they got articles from the last bust...1990-1995 time frame with key word "real estate", etc.

Let us know if you find something interesting...OWP
 
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