Thursday, May 19, 2005

The Dallas News Series Continued

The next piece on the Dallas market from Danielle DiMartino is online. "Richard Fisher, president of the Dallas Federal Reserve, noted that many areas of Texas have seen resurging economic growth. Dallas was not one of them. 'The weakest spot is North Texas,' Mr. Fisher said, 'largely because of the hit that telecom, technology and aviation took.'"

"And yet 'builders just keep building,' said David Houston. 'The risk is not so much the prices of the homes themselves, it's the loans being made on the homes. The danger I see here is that people are buying so much more home than they can afford.'"

If that is the case, it is strictly a function of the easy money. "Jim Pearson of Pearson Appraisal Co., 'This is where you're seeing a lot of the problems, where irresponsible or downright fraudulent lenders are trying to find unethical appraisers to work with them.'"

"What will happen when those loans are stress-tested, if the local economy doesn't improve, if the national economy falters, if interest rates rise?"

18 Comments:

At 7:30 PM, Blogger JLP said...

Ben,

I am of the mind that we are headed for a fall. Lately, everywhere I turn, people are talking about real estate. The June issue of Money magazine is all about Real Estate. I know enough to know that when EVERYONE is talking about something, it is time to GET OUT!

JLP

AllThingsFinancial

 
At 7:38 PM, Blogger Ben Jones said...

JLP,
Hey, I've been to your blog before. Cool, well welcome. And you right, people know in the back of their mind, things ain't right. Thanks for commenting.

 
At 7:40 PM, Blogger John Law said...

it's ironic, the problems dallas are experiencing now is because they don't have a bubble!

 
At 7:55 PM, Blogger JLP said...

Thanks for the welcome.

Yeah, I've been blogging since October of last year. It's been a blast. I have been following your blog for some time now but just posted a link to it from my blog today.

JLP

AllThingsFinancial

 
At 7:58 PM, Blogger desi dude said...

do you think the bubble officially arrived

http://www.fortune.com/fortune/information/currentissue

 
At 8:10 PM, Blogger JLP said...

Desi,

THAT is exactly my point. Money has done the same thing in their June issue.

JLP

 
At 9:00 PM, Blogger John Law said...

I've stayed in SD and watched the planes comes in. you won't believe it till you see it. those planes are low! they must fly right over parts of Balboa park.

 
At 9:44 PM, Anonymous Anonymous said...

Conundrum lives...rates dropped again, and more than likely they will stay low for a long time...two pieces of drywall will kepp going up.

Is it possible that we were all wrong is it possible that our mistake is that we tried to think rationally and with reason, is it possible that idiots are rewarded in todays society...

 
At 9:55 PM, Blogger goleta said...

At 7:40 PM, John Law said...

"it's ironic, the problems dallas are experiencing now is because they don't have a bubble!"


There is no housing shortage in Dallas, but in light of what's happening in the rest of the country. it's only natural to follow rat mentality to buy and build houses as much as they can.

 
At 10:14 PM, Blogger goleta said...

"Is it possible that we were all wrong is it possible that our mistake is that we tried to think rationally and with reason, is it possible that idiots are rewarded in todays society...



I've been asking myself the same question too. For people who don't have much saving, easy credit like it is availabe now doesn't come along often. Why not use all the money and live like the Rich for once? They will never be able to pay back the loans, but they have nothing to lose and there are so many of them to share what's going to come. Be it a burst or bigger bubble.

 
At 10:15 PM, Blogger JLP said...

Anonymous said:

Is it possible that we were all wrong is it possible that our mistake is that we tried to think rationally and with reason, is it possible that idiots are rewarded in todays society...

That's a sure sign of a bubble if there ever was one. Think back to the late 90s and early 2000s. Your statement is what sane people were saying about the internet bubble.

JLP

AllThingsFinancial

 
At 10:35 PM, Blogger John Law said...

in reality there are only 3 long-term investments- gold, silver and a home. median home price/gold MHP/silver are all WAY out of whack. that should tell us something. this can't get much crazier.

 
At 5:46 AM, Anonymous Anonymous said...

10 yr treasury: likely will remain low for years! could drop to 3% which is great for new buyers as cost of financing would be low. Bill Gross also subscribes to this view.

housing mania would end even w/ low rates.Krugman etc believe housing is inflated in HOT areas by around 250%. Housing market slump would throw the market in recession (severe). so low rates as anticipated by the bond market ain't an anamoly.

 
At 6:22 AM, Anonymous Anonymous said...

again... who cares about the long term rates... that's not going to pop the bubble... remember, the long term rates are for normal 30 yr. fix mortgages... it's the short term rates that matter... and each time greenie raises the rates it directly hits them and their stupid ARMs and/or I/Os... as has been stated before, nearly 66% of all new mortgages this year are ARMS and/or I/Os... soooo... good luck to all!

 
At 6:59 AM, Anonymous Anonymous said...

in today's WSJ:

"The House Financial Services Committee may vote as early as Wednesday on legislation to tighten regulation of Fannie and Freddie. Mr. Greenspan has been trying to persuade Congress to include a provision that would require the companies to shed gradually the bulk of their holdings of mortgage loans and securities.
............
In a speech to a housing conference yesterday, the Fed chief reiterated that the companies eventually could set off a financial crisis if they keep expanding and taking risks on changes in interest rates. "

 
At 7:09 AM, Anonymous Anonymous said...

Re: 6:59 --
If Fannie and Freddie are ordered to reduce their portfolios, what will they shed, the least risky loans or the most risky? If the least risky, it would seem they accomplish less than nothing. If the most risky, who is going to buy that paper and why? Any thoughts?
Chip

 
At 9:00 AM, Blogger funduniverse said...

I believe we are heading for a fall. I keep wondering what would happen to the real estate market if China were to revalue the yuan and make their cheap loans that finance our budget deficit more expensive? We all know that revaluation is imminent if the economy stays on the same path, but will consequential rise in U.S. interest trigger the housing bubble to burst ? What do you think ?

PDP
www.funduniverse.com

 
At 9:56 AM, Anonymous Anonymous said...

Anon 5.46 and 6.22

We need high rates to pop it, otherwise banks will think of 40 or 50 year loans with no payment for 5-10 years and it will alow people with risky loans to switch to fixed because they will go below 4%.

I think only rates can pop it...and China, but they wont do it only because we arrogantly told them to.

 

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