Sizing the Housing Bubble

[califdreamer]

A few quick facts from today's paper re San Diego housing market:

- median price in May of all new and existing homes was 490k, up only 0.4% from May 2005 and down 3% from April

- May's median of 490k down 5% from SD County's record level of 518k set in November 2005

- May's sales were fewest of any May in 10 years

- New-home median price fell 4.5% this May compared to last May

 

[audreyh1]

"Amy wasn’t thrilled about moving, but my sense is she will look back on our sale and view it as a good one. In the end, the fundamentals should win out. "

My sense, honed from some experience with women, is that Amy with the help of the courts will have Mark cash her out. She will look back on Mark, and view him as good any vehicle to get where she wanted to go, but she henceforth will prefer going without ol' Markie.

Yeah - I caught that "Amy wasn't thrilled...." bit too.  I bet Amy's thinking "WHAT!!! He expects me to live in an APARTMENT! - What kind of life is this!  I want my nice beautiful house back!!!!"

Hmmmm - seems you better be careful about lifestyle changes (which are the true "fundamentals") when it comes to your spouse.  Not all life decisions are simple financial trades.......

Audrey

 

[johnlw]

I live in South Florida. A year and a half ago, when a for sale sign went up, the house sold in a matter of weeks. I now see for sale signs that have been up for months, and the number that I see are increasing.

I have 3 friends who are realtors. They all tell me that nothing is selling. In addition, the Fed will probably keep raising rates.

Draw your own conclusions.

 

[kaudrey]

I live in VA, just outside of DC. My townhouse development right now has about 10 units for sale (out of 100), and they are not selling very fast. And the prices being asked for are down about 5-8% from this time last year.

Glad I plan to stay put for awhile!

Karen

 

[lazygood4nothinbum]

i think south florida now has about an 11-month inventory and i suspect we're a bit spoiled. for the last few years in my area, houses sold before signs went up. now the sign sticks in the ground for a while. sometimes because the owner is advertising their hopeful future price instead of their realistic current one.

i walk through town most evenings. i do not notice many more signs on single family houses here but the ones i see have been there for a while. of those, i notice some belong to long-time residents. there are two residential lots on my block for sale which belong to a church and have not been offered for sale likely in the last 30 years. so i do not get a sense of panic selling.

catty-corner to my area is a redeveloped section which 5 years ago was mostly hud housing at best. now it is mostly new townhouses selling at about $400k & up with some converted 1/1 condos at the $250k level. here i see a barrage of real estate signs. usually at least one outside most buildings. some buildings have a collage of up to 5 signs.

so my sense from observation matches what i've been reading. single family is still, for now, pretty stable. but condos might tank some in the near future.

 

[Eagle43]

Cool.  Lets all move to texas!!

Please don't. Y'all inflate everything everywhere!

 

[cute fuzzy bunny]

So what you're saying is "Please dont move here and make my house worth twice as much"?

 

[REWahoo]

Cool. Lets all move to texas!!

Please don't. Y'all inflate everything everywhere!

Now, now Eagle43. Don't be so inhospitable. Here's some new Texas waterfront property Californians should be encouraged to buy. Make em feel like they never left home!

http://www.cnn.com/2006/WEATHER/06/19/texas.rain.ap/index.html

 

[veritasophia]

I would not want to be in this poor guy's situation:

In 2002, Christopher Jones, 32, refinanced into a hybrid ARM with plans to refinance again when the rate started to readjust. At the time, his downtown Atlanta house appraised for $108,000.

Now, his monthly payments have shot up, but Jones can't sell his house for more than $84,000 and he can't get an appraisal for more than $85,000.

The appraisal firm told Jones that the value of houses in his neighborhood have fallen victim to a cooling market. With no other options left, Jones has decided to pack it in and foreclose on the house.

"I'm just going to take the loss," he said. "That's all I can do."

And this is in Atlanta, not nearly as inflated as SoCal, which also has the highest percentage of ARMs in the nation. Something tells me this will be happening to a lot more people very soon.
link

 

[justin]

I would not want to be in this poor guy's situation:

"In 2002, Christopher Jones, 32, refinanced into a hybrid ARM with plans to refinance again when the rate started to readjust. At the time, his downtown Atlanta house appraised for $108,000.

Now, his monthly payments have shot up, but Jones can't sell his house for more than $84,000 and he can't get an appraisal for more than $85,000."

And this is in Atlanta, not nearly as inflated as SoCal, which also has the highest percentage of ARMs in the nation. Something tells me this will be happening to a lot more people very soon.
link

Just add a zero and you have SoCal!

My big bad scary ARM is getting ready to readjust up to a whopping 4.75% for the next two years. Not sure how I'm going to handle the extra $79 in monthly payments... I may just have to pay off the mortgage!

 

[Jay_Gatsby]

I live in VA, just outside of DC.  My townhouse development right now has about 10 units for sale (out of 100), and they are not selling very fast.  And the prices being asked for are down about 5-8% from this time last year.

Glad I plan to stay put for awhile!

Karen

Honestly, I hope prices keep dropping in Northern Virginia. They have a long, long way to get down to a realistic range again.

 

[d]

I hope prices keep dropping

... no doubt a prospective home owner

 

[bpp]

When Dora Angel of DeSoto, Texas bought her first home in 2003, she paid $141,000 for the brand new three-bedroom, two-bath home. At the time, her mortgage payment was $1,400 a month.

DeSoto originally thought that she had a fixed-rate loan. But about five months ago, she noticed that her monthly payment kicked up to $1,900.

Unbelievable. I was going to make some incredulous comment about how people could expose their homes to a bet on interest rates, but for those who don't even know what kind of loan they have, I guess it is a moot point...

I have sympathy for the confusion facing a first-time buyer, though I would expect a little more aggressiveness in checking the terms of the loan than this from anyone. And isn't the bank required to explain at least the basic terms some time before the signing?

 

[ShokWaveRider]

You just know there IS a bubble and that it WILL burst, maybe small with a "poof" or big with a KABOOOM!

Why, if you talk about it enought, brood about it enough, it WILL happen.

During the last 6 months the talking heads on CNN, FOX HeadlineNews etc. have been pitching some kind of decline, and has been newsworthy nearly every day.

Also, you should have seen the article in out local paper. Inventories up over 300% since this time last year.

SWR

 

[Alex]

I am not sure what all the fuss is about ARM's? Maybe a case of non-homeowners schadenfruede?? I live in So-cal and I have a neg-am adjustable rate mortgqge - and I have had it for about 4 years.- during that time I have saved (and invested) over $100,000 that would have gone to interest payments versus a fixed rate loan. When I first got the loan it had a start rate of 1.00% , and a mortgage balance of 640K. I never made more than the minimum payments during that time. Now after 15 or so consecutive rate increases my mortgage balance has ballooned all the way to 643K.. : Seriously, speaking only for myself, I can easily afford much higher payments if I had too- I simply choose not to. My income is high and I live well below my means. For me the savings over the last 4 years were well worth the interest rate risk. My home appraised a few months ago at over 1.250 million - so I am not worried if the loan balance increases and the value of real estate drops 10 or 20 percent, not worried at all. To be honest with you folks, since everyone seems to think rates are going higher and that we are in a bubble - I am convinced rates are going lower and prices of homes higher! I have found that the herd is almost ALWAYS wrong. I say: Bubble Schmubble!!

 

[REWahoo]

I am convinced rates are going lower and prices of homes higher! I have found that the herd is almost ALWAYS wrong. I say: Bubble Schmubble!!

What's the name of that river running through Egypt...?

 

[bpp]

What's the name of that river running through Egypt...?

What was it, the It'sDifferentThisTime River, or the ItCan'tHappenHere River, something like that?

I am not sure what all the fuss is about ARM's? Maybe a case of non-homeowners schadenfruede??

More like Schadenangst, I suspect. If mass defaults occur, a lot more people will end up suffering, due to knock-on effects, than just the homeowners. For someone in your financial position, ARMs are fine. You can't really get hurt. For someone who got wedged into something the risks of which they didn't really understand, like the woman in the article above, it is a landmine.

 

[Alex]

hows about the 'I am not selling and dont care' about short term results in the housing market' river..... sounds like a pretty good river to me

 

[lazygood4nothinbum]

south fla business journal reports may results for broward county florida (greater fort lauderdale area) http://tinyurl.com/pxh7g

The median sales price for a single-family home was $365,000 in May, up 4 percent from $350,000 at the same time last year...The median sales price of a condominium-townhouse in May was $209,250, up 11 percent from May 2005, when the median price was $188,000.

Association researchers said 9,537 single-family homes were available in May, up nearly 300 percent from 2,412 in the same month the year before. The condominium-townhouse inventory was 12,297, up 383 percent from May 2005 when the market had 2,547 units available.

in related stories the paper also shows single family up in april 4% while march was up 17% over same months of prior year.

 

[Sam]

http://tinyurl.com/pxh7g

The median sales price for a single-family home was $365,000 in May, up 4 percent from $350,000 at the same time last year...The median sales price of a condominium-townhouse in May was $209,250, up 11 percent from May 2005, when the median price was $188,000.

Association researchers said 9,537 single-family homes were available in May, up nearly 300 percent from 2,412 in the same month the year before. The condominium-townhouse inventory was 12,297, up 383 percent from May 2005 when the market had 2,547 units available.

This doesn't sound right.  How can price goes up (albeit by a small %) when inventory has tripled?  Playing with numbers to downplay the severity?

Sam

 

[Sam]

My sister and her husband live in Irvine, CA.  They brought a house there 8 years ago.  Today the house is worth 3 times as much.   How can I convince them to sell the house and pocket the profit?  Should I even try?  The profit from that house would be at least twice as much as their combined saving today.

I have the feeling that they would think of me as a negative, pessimistic person.  Worse, they might think that I'm trying to stop them from being even richer (some of their neighbors are already millionaires based on the equity of their house.)

Sam

 

[Nords]

How can price goes up (albeit by a small %) when inventory has tripled?  Playing with numbers to downplay the severity?

If logic applied to real estate sales then only Vulcans would have real estate licenses.

We see that in Hawaii, too.  Prices continue to rise for a few months after the inventory explodes.  Part of that lagging indicator is caused by sales closing 30-60 days after the price is set, and part of it is caused by inventory jumping up the very next day after a price increase as fence-sitting homeowners say "Golly gee, Mabel, look what we can get for this piece of crap beyootiful homestead!"

These situations have a way of showing their true colors between Thanksgiving & Christmas.

My sister and her husband lived in Irvine, CA. They brought a house there 8 years ago. Today the house is worth 3 times as much. How can I convince them to sell the house and pocket the profit? Should I even try? The profit from that house would be at least twice as much their combined saving today.
I have the feeling that they would think of me as a negative, pessimistic person. Worse, they might think that I'm trying to stop them from being even richer (some of their neighbors are already millionaires based on the equity of their house.)

Your instincts are sound. At best you'll be an annoying bean-counter, at worst you'll piss them off.

Our home has doubled in value, but while we might realize a huge profit from its sale there's no way we can benefit from selling it. What would we do, go through the hassle of moving only to end up paying higher rent for the next decade? Or leaving Hawaii with our equity profits only to end up buying a home in Texas?

We can't duplicate this home, in its location & ambiance, even at its current price. When I die I want my spouse to bury my cremated remains right here in our compost pile, where my true fertilizing benefits can finally be spread far & wide!

 

[Sam]

At best you'll be an annoying bean-counter, ...

I can only hope that Irvine will not see what Florida is seeing.  But I know that's not realistic.

Sam

 

[justin]

This doesn't sound right. How can price goes up (albeit by a small %) when inventory has tripled? Playing with numbers to downplay the severity?

Sam

The stats are also year-over-year increases. If the "peak" of the bubble was in November 2005, then you won't see the decreases in year over year prices till ~ november 2006.

Looking at month to month stats would be more appropriate if you wanted to check the current market trends in real-time.

My theory as to why prices remain high in spite of ever-growing inventory is the sellers who are in denial that the party is over and their house is now "worth" less, however they refuse to lower prices. Eventually they find a buyer that will pay what they are asking. In the meantime, units are sitting on the market for a long time.

There may also be a panic sell as people realize that they need to sell while the selling is still good (and this would further flood the market, forcing prices down).

This thing will take years to unwind.

 

[Sam]

My theory as to why prices remain high in spite of ever-growing inventory is the sellers who are in denial that the party is over and their house is now "worth" less, however they refuse to lower prices.  Eventually they find a buyer that will pay what they are asking.  In the meantime, units are sitting on the market for a long time. 

Makes sense to me.

Sam