"Correction Inevitable, Could Be A Doozie"
The Australian has a report out with more details of the speech by Fed honcho Jack Guynn. "He was especially concerned about reports of speculators buying homes and condos 'just to flip them for a quick profit' and that banks and other financers are taking big risks in the area."
"'It seems like every week brings new stories about aggressive financing arrangements that encourage and enable such real estate transactions,' Guynn said."
"New data overnight showed sales of new US homes edged up 0.2 per cent to a seasonally adjusted annual rate of 1.32 million, an all-time record."
"Diane Swonk, chief economist at Mesirow Financial, said, 'The concern is the further we go, the more risk we run of a significant long-term correction."
8 Comments:
A DOOZIE and "one for the record books" too
MORE SIGNS OF A SUPER-BUBBLE in the Boston region, a bubble now so bad that its changing the fundamentals of the old rule: "when real estate prices go ballistic, building an addition to an existing house is usually less expensive than upgrading to a newer house, because its land prices that are really inflating, not building costs per se"
As an an example of just one situation, consider:
Person A in yr 2003/04 adds a 2nd story (full back dormer and roof pitch change)to split-entry house. Cost around 100k
Person B goes to same builder 1.5 yrs later, requesting estimate on the same job for a similar house, same neighborhood - and builder says it will now cost 150k. Builder says material costs and workman's comp insurance have forced a 50% rise in price
Now materials and workman's comp have gone up, however it doesn't account for this kind of inflation It appears instead that the broder-based housing bubble (fueled by low interest rates and continually ballooning equity) - is driving a 2nd parallel bubble in the major renovation sector
In the Boston region, most builders who do major additions, in fact are now so tied up with regular work and sidejobs building spec houses - that it can take weeks to even get estimates
Many are estimating a 30% drop for home prices in the Boston area.
I find that hard to understand. That would mean that a $450k average home will drop to $315K.
That just makes no sense. No way prices will drop by that much. Maybe a 10% at most, and even that is too much.
Again, you can thank the 13 interest-rate reductions by the Federal Reserve in combination with changes in the tax laws in 1997 for this gigantic financial bubble. Debt as a percentage of GDP is now rounding 400-1! Those who are heavily in debt or even have major investments in stocks and real estate clearly do not understand what the words deflationary depression mean. They will understand after the collapse of the U.S. credit bubble.
It's going ot be fun to watch the greedy bastards burn
keep the yankee dollars out of florida, the locals can't even afford a place in the freaking ghetto!!!!!!!!!!!!!!!!!!!!!!!!!!!!11
>what's really scary is that these interest only loans are more like lease options than purchases, since they pay off no principal
Home futures? If it's so risky, why are there so many ads for Quicken easy Interest only loans. You know the ones with the two houses side by side. Marketing sells.
Well USA loves agressive stuff. Call it RAMBO or TERMINATOR or DIRTY HARRY agressive financing probably acommpanied with creative and agressive accounting. Anyways who cares about the real numbers. They are made up. Long Harry Potter. You did'nt know. He works as real estate broker. No kidding.
Ben's a dick
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