Real Estate bubble bust may be worse than Dot Com bubble bust

My expectation at the moment is that, although I think prices will ease in the housing market by an average of maybe 15%, there won't be a total collapse of housing prices. Despite speculative froth, most people still live in their houses, so the market tends to get sluggish instead of prices collapsing. Rather, I expect inflation to continue to heat up in food and fuel prices and to spread throughout the economy more and more generally - with no offsetting increase in wages.

The erosion of the dollar will make this trend the worst in the USA, where even the prices for manufactured goods will start to inflate (finally), but the status of the dollar as world reserve currency will mean inflation will spread to the global economy, too. I look for the official inflation rate to go double digit in the USA by 2010.

Just my gut hunch.

don't worry, the amero will save us.

I believe steve shasta might be pointing out that housing has stabilized at what is apparently the new "floor" for urban real estate prices is kind of like saying the music isn't getting any quieter, at least the silent parts.

I'm missing a clause in there but the point stands that the "under 300k market" "stabilizing" is just more sticky-upwards pricing phenomena while buyers continue to wait for the bottom to drop out.

local newspapers bragging about it is a sign the bubble is still at work in your area more than it's a sign of anything else, and yeah sure go ahead and buy something to live in at a fixed rate you can afford but you had better be DAMN sure you aren't interested in real estate as an investment, because if you hadn't been around at the time, 1992 fucking sucked and this is going to only get worse. sup.

If I know anything about market psychology, the bottom will fall out within 24 hours of this thread being revived with a simple 'LOL' after prices have climbed another 30%.

Thanks for clarifying Steve's point.

Also, I'm talking about buying a foreclosed house to live in, not purely as an investment.

x-post

get an appraiser and a building inspector to look at anything. the appraiser will tell you a lower number, the real estate agent may tell you an even lower number than that (they only get paid if they move things) and the mortgage broker will cry because they really need you to take it for the posted price or they're going to miss the payments on THEIR adjustable rate.

the building inspector will be able to tell you if the thing was even built to code in the first place and may be able to give a ballpark figure on any improvements that need to be made in order to get it up to code.

It's great in Ireland... for ages it was "OH NOES House Prices are rising, the government must do something", but now suddenly it is "OH NOES House Prices are falling, the government must do something". Which is it, guys?

The other annoying this is that Portland is about the only coastal city that is not experiencing declining prices in the housing market. The whole thing is kind of depressing.

VISIT ONE NEW YORK CITY ;__;

(xpost)

yo, and the NYC metro area is STILL the land of $800K cape cods, and $500K+ piece-of-shit vermin-infested walk-ups that were crackhouses in the not-too-distant past condo conversions & luxury condos across the street from the PJ's.

shit ain't popped yet.

Yeah, I guess not. WTF - these "national" predictions don't seem to be jiving with any markets, it seems.

Well, I'm not sure what you mean by that - the national predictions jive pretty well with most places in the country.

As for NYC, I've heard a variety of explanations, all of which probably contribute - strong earnings and bonuses for wall streeters, demand is international, prices have long been too high for sub-prime loan folk, there's been a shortage for a long time, etc.

Strangely, I'm not seeing much evidence that the continued boom is spilling over into Jersey City (new condos are moving at a moderate but not especially impressive pace here), though it may be preventing a steeper decline. I guess New York is New York for most people.

in England: Mortgages eat up half the wages of some first-time buyers
http://business.guardian.co.uk/story/0,,2118670,00.html

in the US: Sales of existing homes drop to lowest level in 5 1/2 years
http://business.guardian.co.uk/story/0,,2118081,00.html

asking prices

selling prices

not the same thing

that's deep

I spend nearly half my wages on rent :( I'd be happy to spend half on a mortgage, at least then I'd own the bastard place.

at this point i don't even care if a property loses some value. i just want my rent money back at the end.

Countrywide loses http://www.latimes.com/business/la-fi-countrywide27oct27,0,4849832.story?coll=la-home-center.2 billion in the third quarter.

Whoa, that's ugly. Anyway, the link works.

Countrywide, the nation's largest mortgage lender, said it was now focusing on plain-vanilla mortgages. Those are safer and salable if far less lucrative than exotic loans had been at the giddy heights of the housing boom.

Ya think!

Rolling US Economy Into The Shitbin Thread

Thanks, I was trying to remember the title of that!

ILX, i present for your review a picture of angelo mozillo, the CEO of countrywide:

http://latimesblogs.latimes.com/laland/images/2007/05/24/mozilloreutersfacing_right.jpg

who's about going to become as ubiquitous as kenneth lay, dennis kozlowski, and bernie ebbers (though infinitely less pasty than any of the foregoing).

my bad, it's moziLo (only one L, not two):

http://images.forbes.com/media/lists/12/2007/7G33.jpg

Hahah, out of central casting or what?

his father was frank sinatra, and his mother a lobster.

Harry Belafonte called; he wants his skin back.

Are there any reliable statistics on how many foreclosures/defaults stem in part from outright fraud or malfeasance on the part of mortgage brokers? This is a part of the equation that I don't hear discussed often enough - usually this just gets turned into a debate over whether or not the borrowers should be "held responsible" for taking loans they couldn't afford, and I'm wondering what percentage of borrowers were literally swindled into taking those loans.

you'll likely never find a valid number on that, unless somebody wants to do a really intricate survey on it for their socioeconomics dissertation or something

and even then of course said research would have its methods excoriated by the banks

agreed with Tombot -- there's no method to quantify mortgage fraud on the part of mortgage brokers of which i am aware (maybe insurance companies have some in-house metrics, but i don't know if that's true at all and even if it is whether they're at all accurate for the market as a whole). it may be something that one would have to make a rough guesstimate based on (a) insurance claims related to such fraud; and (b) revelations from either private law suits or governmental actions related to such fraud.

Is housing in the US getting cheap because of this? In Australia we're long-term rooted if we don't already own something.

FWIW, the lead story in every edition of the South Florida Business Review these days is about the mortgage meltdown. The condominium market is in freefall in Miami, far worse than most other places. I don't think we'll see improvement for another 3 years.

On the other hand, the aggressive overdevelopment will eventually be okay -- maybe good -- for Miami. Foreign investors are already discussing sweeping up built condos (sometimes buying out the few people who have bought units in a given building), renting out all the units until the market turns (so, say 2010), at which point they'll -- slowly -- begin bringing them online as condominiums. It could work if the retail and infrastructure in the downtown community is rapidly developed.

For a good buzz phrase to search for, go for "predatory lending"

"Fog's getting thicker"
"And Leon's getting laaaaaaaarger"

For a good buzz phrase to search for, go for "predatory lending"

Indeed.

Foreign investors

I could see this at first, major US downturn, other countries complacent. But those foreign investors are going to be finding it harder and harder to raise the money themselves as their own countries start running into the same problems

ie, this isn't a US problem..it merely surfaced in the US first

n Australia we're long-term rooted if we don't already own something.

thats what they used to say here as well. they thought that in the UK as well. And Ireland and Spain and Denmark. And Norway. I think they still say it in Finland but not for much longer

already own something.

you might consider this as mere semantics but in all these countries home ownership has increased over the last 100 years...but

1. What about actually owned outright homes as opposed to mortgaged homes. ie who actually owns the home until the last payment is made? This has gone down over the last 100 years. So we own more homes than we used to but we own progressively less of them. Or to put it another way do we really own outright any more homes than before the 'home ownership boom' of the 20th century?

Which means...even if prices never came down...is this statement really true?

long-term rooted if we don't already own something

The way prices are here atm, yes it's very true. The cost of ownership (unless you're way out in the country) is far more than is manageable for most people who don't already own something. This, in contrast to 5-6 years ago when houses were roughly a third the price they are now.

Our problem is partly a shortage of supply, and this is not being addressed.

home ownership rates in nz have been dropping for some time. i think the intuitive thinking on buying a home still holds - for strong economic and social reasons even with the wage/house price gap as it is, tho it looks like a global correction is finally kicking in.

why is it true? if we're not really owning the houses we 'own', and every year we own 'less' than we used to (as a percantage of how much of a house we own compared to what is owed), then why does it make sense to 'own' at all? every year prices go up mortgages go up with them (logically) but percantage wise the percentage of our house that we own goes down and the percentage owned by the banks goes up. the more we buy the less we actually own!

It could work if the retail and infrastructure in the downtown community is rapidly developed.

pffft hahaha

ie, in 1926 or 1964 what percentage of houses were mortgaged? and how much actual 'equity' in each house actually existed? who is really owning the houses here? why are mortgages longer than they used to be? why do we spend the majority of our earning lives not owning them at all?

does it make sense to spend $500,000 on a $250,000 house?

thats what they used to say here as well. they thought that in the UK as well. And Ireland and Spain and Denmark. And Norway. I think they still say it in Finland but not for much longer

Australia's a bit different than these other countries though because it's riding a huge raw materials export boom at the moment, so there is a lot of money washing around in the economy. Of course, if Chinese growth stalls...

tracer OTM

the rest of you could stand to do a little reading because I'm tired of giving other people links to money blogs that have already been linked on these kind of threads five or six times each

in other words, check u refs b4 u ref yourself

but for charity's sake, here you go:

oh wait, you all can look up "calculatedrisk" and "bigpicture" on your own time. god forbid the actual news. g'night

retail is not going to be going up anywhere anytime soon

neither is australia