Wednesday, May 25, 2005

Buyers, Builders, Lenders May Get "Burned"

Atlanta Federal Reserve Bank President Jack Guynn added to the housing bubble debate with these comments. "'There are some local markets, especially in coastal Florida, where I've heard stories for more than a year about behavior that's got to be characterized as nothing other than speculation,' Guynn said it response to questions after his speech."

"'It makes me very uncomfortable. Some buyers, some builders, some lenders are going to get burned, could very likely get burned, in some of those local markets,' he said."

"The U.S. Federal Reserve is not yet done raising interest rates, but the central bank will watch economic data closely in an uncertain time for monetary policy. 'Given the current outlook for the economy, my personal view is that we've not yet reached a neutral policy stance,' Guynn noted."

40 Comments:

At 4:31 PM, Blogger John Law said...

everyone will get burned, some more than others.

 
At 4:34 PM, Blogger Ben Jones said...

John,
Am I glad to hear from you! I thought this blog was never going to get back up.

Those are pretty strong words from Guynn.

 
At 4:35 PM, Anonymous Anonymous said...

The Top !!!

 
At 4:45 PM, Blogger desi dude said...

http://abcnews.go.com/GMA/MellodyHobson/story?id=787157&page=1

This is also good one

 
At 4:48 PM, Anonymous Anonymous said...

"some, some, some, some..." Jeez, talk about parsing words and tapdancing around it. Just say it man: THIS THING IS HUGE, IT'S GONNA BLOW, AND EVERYBODY ABANDON SHIP!!!

 
At 5:05 PM, Blogger flat said...

after the fall- now they comment- I told you so's better weigh in
anyone have MLS numbers for Cape Cod? that's where it folded first last time 87

 
At 5:26 PM, Anonymous Anonymous said...

Sorry for the server problem. I thought the Realtors might have taken out a "hit" on you.

NBC nightly news ran a story on the "bubble" tonight. Same stuff that is on the blog, but dumbed down for the masses in mild language so as not to set off a panic.

 
At 5:27 PM, Blogger goleta said...

Why the RE bubble is global and why the bust will be global too? Because
the world is flat, by Thomas L. Friedman.

 
At 5:29 PM, Anonymous Anonymous said...

I think it's going to be quite humorous to see the smarty pants IO guys get annihilated. I think it's just a matter of time before we start seeing short-term IOs taken out a few years ago at extremely low rates resetting. I think it's going to be very nasty. Glad I sold my place.

 
At 5:44 PM, Anonymous Anonymous said...

this thing defies gravity, there are plenty of people who can care less of fundamentals and I'm freaking tired of waiting before it goes back to normal. I'm so tired that I might soon join the herd, I know I'm gonna lose money, but until I buy it ain't going to drop; I'm a very lucky guy..

 
At 5:58 PM, Blogger Tim said...

There was also a piece on ABC Evening News last night about the housing boom -

ABC News Story

 
At 6:14 PM, Anonymous Anonymous said...

I'm so tired that I might soon join the herd, I know I'm gonna lose money, but until I buy it ain't going to drop

I hate to say it, but I thought the same thing earlier. I've thought this thing was out of control for the past five years and yet, it just keeps going and I keep running around working my ass off as an attorney when I could have been a wealthy real estate investor. My common sense approach to the real estate market just isn't working when any and everybody is loading up on IO loans and paying two, three, four, etc. times as much as some dump is worth.

 
At 6:14 PM, Anonymous Anonymous said...

good article, though it really inspires those mechanics to bid up prices even more; there soon be nobody to fix your car, to teach at school, to write software..
America will trade realestate and everybody will be rich stinking rich; I'm working like a dog to make 100k while the dumbest can make 60k for nothing, practically nothing; Greenspan is an idiot, he should have let dot com bubble to burn, instead he revived those that speculated in stocks, nurtured them, gave them free money, our f^*&*ing money and told them how to get rich! man I hate this whole rotten system. this empire will fall like Romans once fell, if the whole country is not doing anything, but trading real estate it is bound to fail, which is very very sad. I'm going to start larning chinese, third language I heard is easier to learn.

 
At 6:29 PM, Anonymous Anonymous said...

yes, there is no common sense, just dumb luck and a mass readyness to go back and return the keys to the nasty FED and greedy lenders who made it way too easy; Greenspan said we aren't saving enough, who on earth, besides me and a few like me would want to save in this environment? my bank just recently paid me 0.25%., before I kicked their ass, now they pay be fat 2.5%; who would want to save, anyone? while RE agents are making 3x of what people with Masters degrees make?

 
At 7:15 PM, Anonymous papermoon said...

(There was also a piece on ABC Evening News last night about the housing boom )

And on NBC, CBS, PBS, CNBC, the NYTimes, WSJ, LATimes, every newspaper, every magazine, etc.

Yet last week's Gallup Poll shows that 77% of Americans had never heard of "the housing bubble". That's not 3 out of 4 who disagree that there is a housing bubble, but 3 out of 4 who have never heard a peep about housing prices getting a wee bit frisky.

Jeebus H. Kee-riced!

Are 3 out of 4 people illiterate or simply don't read or watch the news? Now we know why the ratings for American Idol and Desperate Housewives are so high.

 
At 7:44 PM, Anonymous Anonymous said...

The market will not fall just because you wish it to

The Chinese can probably breathe easier as the USA would be cutting its own throat if they forced revaluation on China as China buys US securities

Greenspan ---well he should have been retired 20years ago. While he would like to be well regarded by future generations he is a realist and enjoys being the centre of attention in the here-and-now. He is a public servant and really has nothing to lose. His crazy impulsive interest rate reductions fuelled the first world's RE bubbles. One thing is certain as the USA is number 1 militarily we can bet that the rest of the world will suffer more than the USA.

The message of the BubbleMedia may be "Dont take the risk" - but a decoding being : "get out of my way so I can buy".

 
At 7:51 PM, Anonymous Anonymous said...

It's very hard to turn a big ship. Everyone from the government (taxes) to builders and lenders right down to the guy on the corner now have a stake"in the biggest bubble ever".

With that kind of momentum it will be interesting to see how it pans out.

I have a feeling my 2 year old will be studying this in Harvard Business school one day(yes, i think education and earning power still matter)

 
At 9:02 PM, Anonymous Anonymous said...

I give up. I've been waiting years for the top, but maybe I'm just a sucker. They won't let housing collapse ever. I've seen tech stocks crash 60%, gold stocks 70%, but I've never seen anyone take a Real Estate loss of any significance.

So I'm going to do like that dude in Seattle and quit my job to go full time speculator. I'm in Oregon and the Oregon coast is dirt cheap compared to California. Pacific City, OR and Lincoln City, Oregon has tons of potential. They'll be the mass appreciation. We're talking beachfront. I'll be buying up the Oregon coast for pennies on the dollar for what I'll sell in 2 years.

And with the Salmon run, Californians leaving their overpriced area for the closest states, I can't lose.

 
At 10:08 PM, Anonymous Anonymous said...

What is stopping an "investor" to switch from I/O to 30 yr fixed...rates are close. Bust may not be that close yet!

 
At 10:35 PM, Anonymous Anonymous said...

It is not because of the rate most people choose IO. It is because of the amortizating portion of the payment that people want to forgo.

Moreover, FRMs will always carry a premium over ARMs, assuming no prepayment penalties. This is because of the ability for borrowers to refinance. This option-like feature is always going to cost something.

 
At 11:07 PM, Anonymous LET'EM BURN said...

I have been watching the SoCal situation for some time now and I'm about to throw in the towel and leave California for good. I grew up here (dad moved the family here in 69' from Michigan). I went to school here, college, started my career (engineering), got married and started my family here. I feel really fortunate to have lived here and taken advantage of the many opportunities California offered.

In the 70's and 80's, California public education was the shining standard for the nation. Community Colleges were $50 a semester and California State Universities were $440 a semester. Industry (not just tech), was everywhere in California. That combined with exceptional weather and low crime, you had it made. You know what was the most amazing thing? It was affordable for everyone. You could be blue collar, four kids and mom could (and usually did) choose to stay home. That's what made California the Golden State.

Something happened, but I can't determine when. Now our public schools are among the worst in the nation. University tuition has sky rocketed and much of industry has gone overseas or left to other states. Crime has also found its way into most cities and towns that had not seen it before. Guess what? Something else got turned upside-down as well, affordability.

So, I had to ask myself, what are we paying more for (I'm not taking about inflation here). We went from being the land of milk and honey to something far less desirable, yet we pay through the nose for it. Why? Is life so much better here still than those RED states. Not in my book. I recently had the opportunity to live in a RED state from 10/01 to 9/04. I returned to California in 10/04 for what I thought was a personal career move. I now am convinced I need to have my head examined. This state is living off its old reputation, but my California is long gone.

I really enjoy my career, but I'm not willing to pay the outrageous price for housing, taxes, utilities. When you are paying over $5,000 a year in property taxes and you are afraid to send your kid to the public school system, then you too buddy need to have your head examined. When car jackings and robberies start happening in your $500,000 neighborhood, yes , you need to have your head examined. What exactly are people paying $300,000 in Compton for?

I can't believe we are still debating whether there is a "bubble" in California. At best, prices will go flat for many years (not likely in my book). I have very little faith in my fellow Californian. When the time comes, he will not do the right thing. Everyone is living large and doesn't realize the light at the end of the tunnel is really a train. This will not unravel overnight. Sadly, it will probably take years (4-7). I can't wait that long and I need to get on raising a family.

I have great anger for the ones who have affected so many. Some are priced out, but the ones that joined the herd that shouldn't have will be leveled. The rest will survive, but with many wounds to lick. The guilty will escape the justice they desperately deserve. I'll watch the train wreck, but I don't plan on having a front row seat. Maybe I'll return. When you ask? (I'm stealing another bloggers line here) When Joe Six-Packs American dream turns into his worst nightmare.

 
At 6:24 AM, Blogger deb said...

It's official the Los Angeles area is now the most unaffordable in the WORLD!!! If my husband weren't in the entertainment biz, we would be out of here in a nano-second!

ttp://www.demographia.com/dhi-rank200502.htm

 
At 6:31 AM, Anonymous Anonymous said...

From the ABC News Article:

"If you can rent it for less than the mortgage payment, the house is overpriced"

Wow, some sage advice there that nobody is listening to.

 
At 8:17 AM, Blogger Ben Jones said...

I'm not sure what is happening with my blog, but until it is resolved, I will be blogging here:

http://thehousingbubble2.blogspot.com/

Thanks for your patience!

 
At 8:31 AM, Anonymous LET'EM BURN said...

I have been watching the SoCal situation for some time now and I'm about to throw in the towel and leave California for good. I grew up here (dad moved the family here in 69' from Michigan). I went to school here, college, started my career (engineering), got married and started my family here. I feel really fortunate to have lived here and taken advantage of the many opportunities California offered.

In the 70's and 80's, California public education was the shining standard for the nation. Community Colleges were $50 a semester and California State Universities were $440 a semester. Industry (not just tech), was everywhere in California. That combined with exceptional weather and low crime, you had it made. You know what was the most amazing thing? It was affordable for everyone. You could be blue collar, four kids and mom could (and usually did) choose to stay home. That's what made California the Golden State.

Something happened, but I can't determine when. Now our public schools are among the worst in the nation. University tuition has sky rocketed and much of industry has gone overseas or left to other states. Crime has also found its way into most cities and towns that had not seen it before. Guess what? Something else got turned upside-down as well, affordability.

So, I had to ask myself, what are we paying more for (I'm not taking about inflation here). We went from being the land of milk and honey to something far less desirable, yet we pay through the nose for it. Why? Is life so much better here still than those RED states. Not in my book. I recently had the opportunity to live in a RED state from 10/01 to 9/04. I returned to California in 10/04 for what I thought was a personal career move. I now am convinced I need to have my head examined. This state is living off its old reputation, but my California is long gone.

I really enjoy my career, but I'm not willing to pay the outrageous price for housing, taxes, utilities. When you are paying over $5,000 a year in property taxes and you are afraid to send your kid to the public school system, then you too buddy need to have your head examined. When car jackings and robberies start happening in your $500,000 neighborhood, yes , you need to have your head examined. What exactly are people paying $300,000 in Compton for?

I can't believe we are still debating whether there is a "bubble" in California. At best, prices will go flat for many years (not likely in my book). I have very little faith in my fellow Californian. When the time comes, he will not do the right thing. Everyone is living large and doesn't realize the light at the end of the tunnel is really a train. This will not unravel overnight. Sadly, it will probably take years (4-7). I can't wait that long and I need to get on raising a family.

I have great anger for the ones who have affected so many. Some are priced out, but the ones that joined the herd that shouldn't have will be leveled. The rest will survive, but with many wounds to lick. The guilty will escape the justice they desperately deserve. I'll watch the train wreck, but I don't plan on having a front row seat. Maybe I'll return. When you ask? (I'm stealing another bloggers line here) When Joe Six-Packs American dream turns into his worst nightmare.

 
At 9:12 AM, Blogger goleta said...

The 10%/week increase in the numbers of foreclosed + pre-foreclosed + BK+ FSBO home in 3 states with the most significant technology companies, CA, WA, and TX, might be the reason NASDAQ is having a small run now.

It's likely a sign people start realizing there is very little gain to be made in the RE market and they are now hedging their saving in a market they are familiar with.

 
At 10:11 AM, Anonymous Anonymous said...

Which one will blow first?
a: Bank of America
b: Washington Mutual
c: Citi?

My guess is that a hurricane will be the excuse- call it August 15.

 
At 3:51 PM, Anonymous Anonymous said...

Ben, is the site down again?

It is quite possible that it is under attack by the other camp.

 
At 6:03 PM, Anonymous Anonymous said...

Uggh.. Can't believe blogger is still wasted a day later! I need my housing bubble fix.

 
At 6:28 PM, Blogger goleta said...

guys, please move to Ben's new blog
http://thehousingbubble2.blogspot.com/ until this one is fixed.

 
At 8:55 PM, Anonymous Anonymous said...

Expensive housing both good news, bad news for [Colorado]

http://www.rockymountainnews.com/drmn/real_estate/article/0,1299,DRMN_414_3806688,00.html

 
At 10:52 PM, Anonymous Anonymous said...

The Wall Street Journal ran a front page article on Thursday about yuppies buying run-down fix-up properties in the City of Baltimore in high crime areas. Many of these new buyers originate from higher prices cities, and Baltimore just looks cheap to them

On situation describes a "social worker" by the name of Terrence Trader, who started buying old properties a few years back - and now is unloading these, some only partially renovated, to yuppies. The story shows a recent sale of a 6 bedroom he bought last year for 77k and recently sold to a yuppie couple for 300k who "plan to live there"

Mr Trader says he employs various "neighborhood junkies" to carry out many of the renovations.
The Wall Street journal has a picture of the 300k house, and its looks like a tear-down at least on the outside. Perhaps inside its better. Mr Trader has faith in the area, despite someone having intentionally killed his dog recently

Small problem with this 300k house is its still boarded up, surrounded by drug dens, and has been at various times looted of fixtures and other things

Having been to Baltimore in the past, anyone venturing past the fancy waterfront zone at night, is basically taking their hands in their lives. Even the late Charles Bronson (i.e. Paul Kersey in Death Wish) would be at risk in these neighborhoods

Another example of market excess.

 
At 10:52 PM, Anonymous Anonymous said...

The Wall Street Journal ran a front page article on Thursday about yuppies buying run-down fix-up properties in the City of Baltimore in high crime areas. Many of these new buyers originate from higher prices cities, and Baltimore just looks cheap to them

On situation describes a "social worker" by the name of Terrence Trader, who started buying old properties a few years back - and now is unloading these, some only partially renovated, to yuppies. The story shows a recent sale of a 6 bedroom he bought last year for 77k and recently sold to a yuppie couple for 300k who "plan to live there"

Mr Trader says he employs various "neighborhood junkies" to carry out many of the renovations.
The Wall Street journal has a picture of the 300k house, and its looks like a tear-down at least on the outside. Perhaps inside its better. Mr Trader has faith in the area, despite someone having intentionally killed his dog recently

Small problem with this 300k house is its still boarded up, surrounded by drug dens, and has been at various times looted of fixtures and other things

Having been to Baltimore in the past, anyone venturing past the fancy waterfront zone at night, is basically taking their hands in their lives. Even the late Charles Bronson (i.e. Paul Kersey in Death Wish) would be at risk in these neighborhoods

Another example of market excess.

 
At 10:55 PM, Anonymous Anonymous said...

correction s/b "taking their lives in their hands"

 
At 11:33 AM, Anonymous mmr said...

check this out:
http://www.nytimes.com/2005/05/27/opinion/27krugman.html?hp

Even the NYT is saying the emperor has no clothes.

 
At 4:20 PM, Anonymous Anonymous said...

This blog is broken go to the backup here

 
At 7:39 PM, Anonymous Anonymous said...

[It's likely a sign people start realizing there is very little gain to be made in the RE market and they are now hedging their saving in a market they are familiar with] You have got to be kidding, the stock market blows. I have made 900k in 2 years by investing in RE. Florida has been very good to me, considering i'm a bum with no education. The greedy ones will get caught in the end,i'm not one of the greedy ones.

 
At 2:48 PM, Anonymous Anonymous said...

IO loans question:

How new are "Quicken IO Loans"? Lots of ads for these guys.

Also, Countrywide seems to have an ad every commercial break "Homeowners, need cash?", "Homeowners, listen up"

 
At 9:27 AM, Blogger Voltaire said...

Well everyone will be paying for the credit orgy created by Doctor Frankenstein: Miste Greenspan. Welcome to Brazil, Argentina. It will probably finish in another world war, thanks to this stupid central banker.

 
At 5:01 PM, Anonymous Anonymous said...

Go fuck a pig.

 

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