Real Estate Bust

Great article this afternoon from the Associated Press, which sums up some of the latest developments in the much-commented on bubble burst.  Interesting vignettes abound... some highlights:

• On a recent conference call, Ara K. Hovnanian, the president and chief executive officer of homebuilder Hovnanian Enterprises Inc. said that real estate investors "have largely pulled out. Investors were a bigger part of the market than many thought, including ourselves," said Hovnanian, whose company builds primarily in the Northeast. Would-be flippers are not only not buying new properties, they're selling what they already own, adding to the record number of homes already on the market.  With land prices falling in some areas, Hovnanian has walked away from about $5.6 million of deposits on land parcels it had options to buy, lopping 5 cents a share off the company's second-quarter earnings.
  

• Wachovia last week cut its rating on builders including Pulte Homes Inc., KB Home and DR Horton Inc., citing a sharper more rapid downturn in the market than expected.

• The Fed's target short-term rate is currently 5 percent. If it passes 7 percent, "then things get very tricky," a commenter said. "Many home owners will have trouble making payments. We'll see significant mortgage credit problems develop." By the end of 2004, 35 percent of buyers had adjustable-rate loans, up from 18 percent the previous year, according to the Federal Housing Finance Board's interest rate survey. Those buyers could see a steep increase in their monthly payments if interest rates spike. That, in turn, could cause increased defaults and foreclosure sales at low prices.

Posted by RE Bust at 04:06 PM | Permalink | Comments (0) | TrackBacks (0)

John Talbott was the individual that warned back in 2003 about the impending bust, when he wrote the best-seller The Coming Crash in the Housing Market. A former Goldman Sachs investment banker who sold debt for clients including Fannie Mae, Talbott criticized the managements of the housing-finance giant and rival Freddie Mac for enabling non competitive forces to boost home prices.

In a follow up book this year entitled "Sell Now! The End of the Housing Bubble, Talbott says "We are in for a fairly rough ride in the housing market for the next five to seven years."

Recently, Business Week Online did an interview with Talbott, who definitely had some interesting views on the impending bust (for real this time) Excerpts below with more after the jump. 

What do you think is happening to the housing market right now?

The smart money is getting out. The inventory of homes for sale is increasing dramatically across the country. That's typically what happens before you see price declines.... The investors who are flipping homes for profit, like non-owner occupied condominiums, those are the people you would expect to sell first. You're already seeing that happening.

In San Diego, for example, the homebuilders themselves are getting out. I know a condominium developer in San Diego who had properties he was building, and he made offers for people to take them out of the market. He hadn't even completed the building yet, but he was selling the condominiums for ridiculously low prices like $190,000 if the buyer would just come in and finish the floors. He was minimizing his exposure for the downturn. In San Diego, condos are off around 30% -- that's huge. Prices normally trade off 1%.

Continue reading "John Talbott: "Housing Bubble at its End, Sell NOW"" »

Posted by RE Bust at 08:48 PM | Permalink | Comments (0) | TrackBacks (0)

This according to Mike Barofsky, CEO and President of Value In Land, Inc.  He goes on to say:

"Over the past few years, there were 10 buyers for every 3 newly built home. Those numbers have reversed. Currently you are in a market that has 10 new houses for sale and only 3 buyers. Rising mortgage rates and the increase in gas prices are keeping many buyers out of the market."

Continue reading ""Declines of over 30% in some areas"" »

Posted by RE Bust at 05:20 PM | Permalink | Comments (0) | TrackBacks (0)

According to this article on MarketWatch this morning, existing home sales are up over 15% in the aforementioned states and down 22.2% year-over-year in Arizona, 19.2% in California, 18.2% in the District of Columbia, 15.7% in Florida and 15% in Nevada.  Also noteworthy:

Home price appreciation cooled in all four regions. In the West, prices are up 12% in the past year compared with an 18.9% gain the previous quarter. Prices are up 6.7% in the Midwest, 6.6% in the South and 6.6% in the Northeast.

For sellers out there, slowing appreciation is considerably better than a YoY declines (evidence of which we are always on the lookout for)

Posted by RE Bust at 03:41 PM | Permalink | Comments (0) | TrackBacks (0)

A recent article discusses the bubble bursting prospects for 10 cities, namely:

Las Vegas, Sarcaremento, Phoenix, Boston, L.A., Miami, Naples, Edison/Newark, NJ, and Suffolk/Nassau Counties.

Full details after the jump...  

Continue reading "10 Cities Where the Bubble will Burst" »

Posted by RE Bust at 03:47 PM | Permalink | Comments (0) | TrackBacks (0)

Having a million dollar home ten years ago meant something... today? As this Forbes slightshow will show you, it doesn't buy you much.

 "According to a Census Bureau survey published in 2005, the number of million-dollar, owner-occupied homes in this country has nearly doubled since 2000. In fact, this segment of the housing market has grown so large that the Census changed its top home-value category from "$500,000 or more" in 1990, to "$1 million or more" in 2000.  Topping that Census list was the state of California, with 4.1%--almost one out of every 25--of its homes priced at or above the $1 million mark."

Posted by RE Bust at 11:37 PM | Permalink | Comments (0) | TrackBacks (0)

From the New York Times this morning, an article about the way that buyers are wrestling control away from selling in recently-hot areas such as Marin County, San Mateo, and Mercer County, New Jersey.  The situation is not entirely bleak, though, as sellers have regained control in some markets and prices have not declined year-over-year, mainly "growing less." 

"Thus far, prices have not fallen in any of the 375 largest American cities tracked by PMI Group, a company that monitors risk in the real estate market for mortgage lenders. Many are showing a sharp deceleration in price increases, among them Las Vegas; San Diego; Elmira, New York; and Lebanon, Pennsylvania. But cities where prices are drastically accelerating - St. George, Utah, Binghamton, New York; Boise, Idaho; Naples, Florida; and most cities in Arizona - outnumber them. "We'd expect a soft landing in prices because, naturally, the economy is strong," said PMI's chief risk officer, Mark Milner. Unless a recession hits and people begin to lose jobs, house prices will fall slowly, most economists say."

Full Article

Posted by RE Bust at 11:43 AM | Permalink | Comments (0) | TrackBacks (0)

With all this talk of a housing bubble, one analyst at FBR Securities believes that much of the bubble discussion is overblown.  He states in the current Business Week that, among other things, that there is no such thing as a "normal" housing market so there can't be a bubble.  He goes on to say that there MAY be bubble, though, in 75 of the 379 cities he studied. 

Cities likely to rise and fall this year and full article details below:

Link

Posted by RE Bust at 11:36 AM | Permalink | Comments (0) | TrackBacks (0)

Warren chimes in on the real estate market, mortage financing and other topics.  Day traders moving into condo flipping?  Only in the US. 

From CNN.com:

Buffett: "What we see in our residential brokerage business [HomeServices of America, the nation's second-largest realtor] is a slowdown everyplace, most dramatically in the formerly hottest markets. [Buffett singled out Dade and Broward counties in Florida as an area that has experienced a rise in unsold inventory and a stagnation in price.] The day traders of the Internet moved into trading condos, and that kind a speculation can produce a market that can move in a big way. You can get real discontinuities. We've had a real bubble to some degree. I would be surprised if there aren't some significant downward adjustments, especially in the higher end of the housing market."

Continue reading "Warren's take on the housing bubble" »

Posted by RE Bust at 11:49 PM | Permalink | Comments (0) | TrackBacks (0)

This past Friday, 6/6, Primetime had a special about the current state of the real estate economy.  Much of it was devoted to the current cool down in the real estate market acrross the U.S. with a specific focus on South Florida.  Stories of buyers of new construction condos seeing more recent buyers pay $100K less in the same building are becomming increasingly more common.  Here is the link to more details of the special

20/20 Website

Posted by RE Bust at 02:36 AM | Permalink | Comments (0) | TrackBacks (0)