Real estate

Top 888. Dec 22, 2005 3:11 PM

» Jas_Jain - Housing: History Ignoramuses Keep Making Ridiculous Arguments

Housing: History Ignoramuses Keep Making Ridiculous Arguments

1% deflation is worse than 2% inflation, says who? History ignoramuses and the Crooks at the Fed and on Wall Street. There are so many product areas where we have deflation all over the world and those businesses are booming and consumers are enjoying. Oh, deflation is bad because we have TMD (too much debt). Then, the problem is TMD and has nothing to do with deflation. Deflation rewards honest and hardworking people and would punish the wicked and the Crooks, that much is certain. Despite what people think, Bernanke’s ability to push more debt will be severely tested and would fail once the Housing Bubble, the biggest source of pushing debt, bursts.

Now we have the same kind of history ignoramuses saying: “Yields will then go down. This will reinflate the housing boom…” The housing prices peaked in Southern Californica in March 1990. For the next 42 months the yields on the 10-year Treasuries dropped by 3.5% and the housing prices kept dropping with the interest rates.

The current Housing Bubble in the US, once it bursts, will not be stopped by the drop in rates even if the rates go down to zero! Why? Because the housing burst will be due to the largest supply of empty housing units and due to prices that are ridiculous by any historical standards. Oh, BTW, real estate prices in Japan fell for 13 years in a row despite falling rates that reached near zero percent. History is useless for most people, it seems, or they must be ignorant of history.

Jas

-- posted by Jas_Jain

Top 889. Dec 23, 2005 8:21 AM

» Jas_Jain - “Builders R Bldg TOO Many Houses;” “Gates Of [Housing] Finance R

December 23, 2005

“Builders R Bldg TOO Many Houses;” “Gates Of [Housing] Finance R Wide Open”

These are just two of the many comments on Bloomberg regarding the OVER SUPPLY and OVER-FINANCING of housing in the US. I CANNOT feel any better, not that it makes me happy, about my prediction of a Deflationary Depression to begin as early as in 2006.

Let me remind everyone that every major depression in the US was caused by preceding OVER-FINANCING. In our economic system, as Schumpeter noted, the mischief is caused by the bankers!

The ONLY thing that the Federal Reserve, mischievous bankers, of course, can do to forestall an over-financing led depression is to make it worse and worse, by over-over-over-financing, until it leads to a financial catastrophe. That is where Bernanke’s eyes are set. He wants to create an economic catastrophe that will surely kill the US political system. Why? He must have some better political system in mind that is theoretically superior. That is what you get from an academic. As if Woodrow Wilson didn’t do enough damage to the world while trying “to make the world safe for democracy.”

What part of over supply and over-financing are bad for the future prices don’t you get? If you are not bearish on the US housing, based on the above facts, then do you understand the economic fundamentals or you just want to believe what feels good? It is doing what feels good, without thinking of the consequences, that gets too many people into troubles!

Well positioned to profit from the bankers’ mischief,

Jas

PS: For most people, being safe is plenty well positioning. No need to get greedy. Greed should be left to seasoned speculators.

-- posted by Jas_Jain

Top 890. Dec 23, 2005 10:00 AM

» permabear - Housing affordability hits 14-year low

Housing affordability hits 14-year low
Thursday, December 22, 2005

By Ruth Simon, The Wall Street Journal

Soaring house prices and higher mortgage rates have put homeownership out of reach for more people than at any time in more than a decade.

Housing affordability in October sank to its lowest levels since 1991, according to the National Association of Realtors' Affordability Index, a widely followed measure of the average household's ability to buy a home at current interest rates. In some areas, including New York City, Los Angeles, San Diego, San Francisco and Miami, housing affordability has dropped to levels not seen since the early to mid-1980s, according to mortgage giant Fannie Mae.

Affordability has long been a problem for low-income home buyers. But as home prices have marched steadily higher in recent years, many buyers with healthier incomes also are being squeezed. Declining affordability mainly affects whether first-time home buyers will enter the market, but in some markets people who already own a home are finding it tough to trade up.

There are signs that the growing costs of homeownership are also beginning to take a toll on the housing market. "There's a systematic erosion of affordability," says David Seiders, chief economist of the National Association of Home Builders. That decline is "the main reason ... the market is starting to cool." Mortgage applications fell to an 11-month low last week, the Mortgage Bankers Association reported Wednesday, as applications to purchase homes declined.

Despite the drop in affordability, the percentage of households that live in a home they own is at near-record levels. Mortgage rates, though edging higher, are still relatively low by historical standards. And lenders have helped to offset declines in home affordability with creative mortgage products, such as interest-only loans, that allow borrowers to stretch into a more expensive home, while keeping their monthly payments down. But rising short-term interest rates are eroding the effectiveness of many such mortgages.

Housing affordability fell nearly 9 percent in the third-quarter from the same period a year earlier, according to an analysis prepared for The Wall Street Journal by Moody's Economy.com, a unit of Moody's Corp., which adjusted the NAR Affordability Index for seasonal variations. Affordability dropped by more than 20 percent in nearly two-dozen markets, including Phoenix and Tucson, Ariz., Spokane, Wash., and Orlando and Lakeland, Fla., according to the study. "You have to go back 25 years to find a decline that is as significant on a percentage basis," says Mark Zandi, chief economist of Moody's Economy.com.

In Tucson, where affordability has fallen 23 percent over the past year, buyers in all price ranges are feeling the pinch, says Kevin Freadhoff, an agent with Long Realty Co. Mr. Freadhoff says he's currently working with eight couples who would like to buy their first home but have been priced out of the market and a dozen others who already own a home, but are having trouble trading up.

In Seattle, declining affordability is forcing many home buyers to accept longer commutes, says Jane Powers, a broker with Ewing & Clark Inc. It's also fueling price increases in outlying areas such as Bremerton, where affordability has fallen nearly 22 percent in the past year. And in Bergen County, N.J., where most starter homes are priced above $400,000, "prices have gone up to a point where it's pushing the first-time home buyer out of the market," says Margaret Foudy, manager of the Weichert Realtors office in Tenafly. That creates a "domino effect" as people who already own a home find it tougher to move up, says Ms. Foudy.

In 57 of 379 metro areas nationwide, homes were so expensive in the third quarter that a family earning the median income couldn't afford the median-priced home based on traditional lending standards, according to Moody's Economy.com. Sixteen markets have joined the ranks of unaffordable areas over the past year, according to the analysis.

To be sure, affordability isn't a problem in many parts of the country, including Winston-Salem, N.C., and Pittsburgh. The National Association of Realtors' Affordability Index has declined to 115 from this year's peak of 131 in January, according to Moody's Economy.com. The higher the number the more affordable homes are. Still, the index is above 100, a level that indicates the median-income family has the exact amount needed to buy the median-priced home, assuming a 20 percent down payment and a traditional mortgage.

"It's not like the yellow flag is out," says David Lereah, chief economist at the National Association of Realtors. But the decline in affordability is "a growing concern." Nationwide, mortgage rates would have to rise above 7 percent for the NAR's Affordability Index to drop below 100, he says. Rates on 30-year fixed-rate mortgages currently average 6.41 percent versus 5.83 percent a year ago, according to HSH Associates in Pompton Plains, N.J.

Meanwhile, the homeownership rate stood at 68.7 percent in the third quarter on a seasonally adjusted basis. That's down slightly from a record 69.4 percent in the second quarter of 2004, according to the U.S. Census Bureau.

Another major analysis of affordability, by the National Association of Home Builders and Wells Fargo, shows that just above 43 percent of all new and existing homes sold in the third-quarter were affordable to families earning the median income. That's the lowest level since the index was first released in 1992 and compares with 50.4 percent a year ago.

Some factors have helped offset the decline in affordability. Many borrowers have embraced creative mortgage products, such as interest-only loans, mortgages with teaser rates of as low as 1 percent and "piggyback" loans aimed at buyers who don't have the money for a down payment. In the third quarter, borrowers could boost their purchasing power by 26 percent by taking out an interest-only mortgage, which allows a home buyer to put off repaying principal for several years, instead of a standard mortgage, according to Moody's Economy.com.

In Tucson, roughly 60 percent of first-time home buyers make no down payment and instead now use 100 percent financing to get into the market, up from 30 percent two years ago, says Renee Booker, president of Long Mortgage, the mortgage arm of Long Realty.

In Spokane, where affordability fell more than 28 percent over the past year, many first-time home buyers are using piggyback loans and 40-year mortgages, which have smaller monthly payments than traditional 30-year mortgages, to get into the market, says Laraine Hunter, a managing broker with John L. Scott Real Estate. "We're getting creative with helping people get into homes," she says.

But rising short-term interest rates have made many affordability mortgage products more expensive and the flow of new, creative mortgage products has begun to lose steam. On Tuesday, bank regulators proposed controls that would limit the mass marketing of some creative mortgage products.

As affordability declines, many first-time home buyers are being forced to lower their sights. In Phoenix, double-digit price increases are pushing many of these buyers to condominiums, to outlying locations or to blighted areas targeted by developers for renewal, says Bill Jilbert, president of Cendant Corp.'s Coldwell Banker Residential Brokerage in Phoenix.

In Orlando, young couples are being squeezed by rising home prices, says Barry Carnes, broker-owner of Century 21 A.A. Carnes Inc. Christine Cullum, a nurse, and her fiance, a salesman, recently made an unsuccessful bid on a $175,000 home in an Orlando suburb. They've since put in another bid on an older and smaller house in a different neighborhood.

And renting remains a bargain in many parts of the country. Stephan Vrudny, an engineer who lives in San Diego, sold his three-bedroom condo to an investor in June for $405,000, then rented it back for $1,500 a month. Mr. Vrudny figures the arrangement is saving him $430 a month, even after taking into account the lost mortgage-interest deduction. "We'll be homeowners again when it makes sense again as an investment," says Mr. Vrudny, who had purchased the unit for $345,000 last year.

-- posted by permabear

Top 891. Dec 23, 2005 12:08 PM

» Jas_Jain - Re: Kirk...

Sorry, Kirk, I hit the post button by mistake.

If you read Schumpeter closely:

Bankers' Mischief ==> Depression (or "Catastrophe" to use one of the terms used)

Therefore, all investments that do well during a depression are candidates for speculation. Specifically, between buddies, the LEAPS on XLF are very cheap. Look into Jan'08 Puts on XLF and see what you like. I usually place several orders at ladder prices to accumulate. More? I am short Sep'06 1400 Calls on S&P500; Mar'06 1800 Calls on NDX; and Jun'06 11,600 Calls on DJIA! I am also short lots of Sep'06 105 Puts on 10-Year Notes and Treasury Bonds, i.e., I am bullish on Treasuries. And don't forget GOLD, the safest currency in troubled times; it is not an inflation hedge.

Good luck.

Jas

-- posted by Jas_Jain

Top 892. Dec 29, 2005 10:44 AM

» Jas_Jain - Housing Data: Santa Clara Valley (SCV) Mkt Seems to be “Collapsi

December 29, 2005

Housing Data: Santa Clara Valley (SCV) Mkt Seems to be “Collapsing”

For those who don't know, SCV is home to Silly.con Valley.

Below are the data recorded over the past 19 days for Singly Family Homes and the slide during such a short period is something I have never witnessed, or would have expected.

In my little town, the average escrow period is slightly over two months and there is no reason to believe that it is less in SCV. That means that Sales Pending are sales that took place, on average, over a two-month period. Another important measure of the life in the market is the ratio of Active Listings to Sales Pending. A ratio below 2.0 is a sign of a lively market and above 4.0 is a sign of a dead market because this means that it takes 8 months to sell a home. In my little town the ratio went from 1.1 in the spring to 2.9 in November-December. In SCV, in the summer of 2004 this ratio was 1.5 and now it is 4.2.

Date_______Pending Listings ___Ratio Median Price of Sales Pending

10-Dec-05 498 2,136 4.29 $740,000
16-Dec-05 514 1,955 3.80 $735,000
22-Dec-05 440 1,787 4.06 $720,000
26-Dec-05 426 1,750 4.11 $712,000
29-Dec-05 404 1,694 4.19 $700,000

The estimated sales during the 19 days is 125, while the number of listings have dropped by 442 and we don't know hom nay new Listings came to market. This means that there are mass expirations and withdrawals of Listings. Also, the median price of homes sold during 10/10/05-12/09/05, approximately, was $740,000 and those sold between 10/29/05-12/28/05 is $700,000. What does this say? The Median Price of those sold between 12/10/05 and 12/28/05 must have been lot lower than $700,000. Could it be in the $625K-650K range? The peak price was close to $750K. We shall find out when we get data for January, or February, when these sales are closed and recorded.

Jas

-- posted by Jas_Jain

Top 893. Dec 29, 2005 7:20 PM

» Jas_Jain - SEVERE Cases of DEFLATION, Up To 100%, In Housing Costs For Many

December 29, 2005

SEVERE Cases of DEFLATION, Up To 100%, In Housing Costs For Many Smart Californians

Among the people I know and their family:

Case#1. I sold my home and with the proceeds from the sale I paid rent for few months, bought my current residence, made improvements, paid all taxes, and still have some money left over. I had a modest mortgage on my previous home. So, what is my cost of housing for the past 3+ years and next many years?

Case#2. One of my best friends sold his home and from the proceeds built himself a big home with a big hanger in a sky park away from the city areas (he flies to work, now). He had a mortgage before and none now.

Case#3. A family acquaintances sold their home at such a high price compared to what they paid, after living in it for some 5-6 years, that their total cost of housing for the past ten years is nil or negative! Their decision to sell was strictly because of huge appreciation in the price.

Case#4. Another close friends bought a lot on the ocean some 25-30 years ago, built a big home, lived in it for some twenty years, sold it, moved inland, traded couple of homes. If I were to estimate their cost of housing for the past 25 years it is minimal because they sold their beach home for a very dear price and the net cost of the current inland home, after trading twice, is a small fraction.

Case#5. A Friend’s son sold his home for some $800K more than the 45K he paid and is moving to some island where his wife’s family is from. What is his cost of housing in California all these years?

I have heard of many cases where people have moved out of state to much cheaper areas of the US. They pay cash for their new homes and live mortgage free.

HUGE Inflation in housing costs for dumb Californians, who bought in the past two years and couldn’t resist, and SEVERE Deflation for smart Californians who understood the opportunity presented. All bubbles create winners, usually smart, and losers, usually dumb, when one looks back after the bubble is burst. Those who buy an expensive home, with a large mortgage, near the top have many years of regret ahead.

What housing cost inflation for homeowners in California?!

Jas

-- posted by Jas_Jain

Top 894. Jan 3, 2006 4:19 AM

» Jas_Jain - Treasury Yield & Housing Prices -- Re: Price Deflation...

January 3, 2005

Treasury Yield & Housing Prices -- Re: Price Deflation...

Jas stated: All signs point to the resumption of the falling inflation, led by the bursting of the Housing Bubble, and the only question is: How rapid a fall? My prediction is: 70% chance of outright Price Deflation in 2006 and 95% chance of before the end of 2007. The 10-Year US treasuries will fall below 3% some time between 2006Q3-2007Q2. Then, below 2% before the end of 2008.

Kevin asked: How will the housing bubble burst if 10 year treasury yields fall to 2%?

Hello Kevin,

I am guided only by history. Two examples should suffice:

1. The housing prices in Southern California peaked in March 1990. For the next 3.5 years the yield of 10-Year Note declined 3.5% and housing price kept declining with the decline in the yield.

2. The Japanese 10-Year, JGB, have been yielding bet.1-2% more than a decade and the real estate prices declined for 13 years in a row!

When Treasury yields decline in a Depression, or anticipating a Depression, should housing prices go up? When 20% population is unemployed, counting those who stopped looking for a job or permanently discouraged, should housing prices go up? MOST IMPORTANTLY, WHEN THE NUMBER OF EMPTY HOUSING UNITS IS AT HISTORIC HIGH, SHOULD HOUSING PRICES KEEP GOING UP?

One has to be an economic ignoramus to believe that the housing prices in the bubble areas of the US will not go down substantially. A very easy prediction: THE PERCENTAGE DECLINE IN THE HOUSING PRICES IN CALIFORNIA WILL EXCEED THE PERCENT DECLINE IN 10-YEAR NOTE YILED! When the yield goes below 2%, California home prices will be down between 60-80%. And I am being conservative! I can't wait to find out: How long economies supported on fraud, notably those of Manhattan and Silly.con Valley, hold up? The housing prices in the economies supported on fraud WILL turn into rubble.

Jas

-- posted by Jas_Jain

Top 895. Jan 3, 2006 6:19 AM

» axolotl - LAS VEGAS PROPERTY

I saw the individual in Vegas in the news again recently. He has a shack near the strip and wants over a million for it - it has not sold and the picture shows the Stratosphere in the background. Anyone interested may be able to Google map around the Stratosphere and see this property.

-- posted by axolotl

Top 896. Jan 3, 2006 4:42 PM

» axolotl - 19 YEAR HIGH NO. HOMES FOR SALE...........

It has to be the speculators and those who want to cash in before prices fall. Greenspan - Bernanke should be pleased since end of the BUBBLE is what they wanted? I recently read that about 200,ooo Germans have emigrated around the world due to economic conditions in Germany and some chose S. California. In fact, the latest figures show several hundred thousand per year growth in Calif. population. More housing demand to help prevent a housing bust in prices.

-- posted by axolotl