Mortgage Applications Down
The weekly mortgage applications numbers put out by the MBA included this statistic. "Weekly Mortgage Applications Survey for the week ending April 29..The Market Composite Index..On an unadjusted basis, increased 0.7 percent compared with last week but was down 8.0 percent compared with the same week one year earlier."
14 Comments:
http://www.washingtontimes.com/business/20050504-120931-4097r.htm
Yet another article about the bubble, this time from The Washington Times. It doesn't say anything most of us don't already know....
Does this mean I might be able to buy a home for three times my househould income in a few years?
That's the way it should be.
Anon 7:14
The Washinton Times, wow!.
More bubblementum.
I follow financial news very closely, (I rent) and in my opinion, the RE bubble attention has increased 10x in the last month, from the news web sites, to the papers, to TV and radio, and of course this Blog.
Someone posted on another topic "If everyone is talking about a bubble, how can it be so".
The suspense huh?
Rob,
I don't watch TV so it helps me to hear what's going on the tube. I have considered the contrary aspect of talk about a bubble, etc. But I remember a lot of talk about internet stocks prior to their downfall. Thanks for commenting.
Rob,
kinda makes you wonder if it's going to be one single event that marks the turning point or just a slow agonizing decent.
Or....does this thing just continue to chug along????
Man...where did I put that crystal ball?
"Someone posted on another topic "If everyone is talking about a bubble, how can it be so"
First of all, very few people are talking about this. This story is just now starting to get some traction and even now, for every story suggesting a bubble, you will see several stories talking about how "hot" the market is without even a mention of the possibility of a bubble.
The oblivious nature with which the bulk of the financial media treat this story is almost understandable. The larger the bubble, the harder it is to recognize because nearly everyone (70% anyone?) is INSIDE the bubble. Gives you an idea of how large a problem this will become. I believe it will make the Nasdaq blow-off look like a "soft-patch" by comparison.
Ben:
I should clarify, when I say TV, I mainly mean FOX, that is the only news outlet I watch, and on Saturday morning there are four back to back Financial shows. Cashin In, Bulls and Bears, Forbes on Fox, and Cavuto. They have been increasingly making the housing market more central to many discussions.
Anon 8:19
"The oblivious nature with which the bulk of the financial media treat this story is almost understandable."
I do agree with you as I sold more than a year ago. I am in the second rental, the landlord put the first up for sale, and just recently the one I am in went on the market.
It's the contrarian in me that begins to worry if, not realizing that my view is from a pointy perspective, I begin to believe that many are now noticing the bubble, but has not effected the market. I can't believe the insanity in financing has gone this far. I am sick of moving.
Thanks for kicking me in the butt.
It’s stories like Ron’s that don’t let me and my family sell now and rent. Even sitting on over 200K in equity can’t convince my wife to move. Moving is a royal PITA and something that a household of 3 or 4 doesn’t do too well. I would hate to move into a rental only to have the owner sell the home 3 months down the line.
BTW just out of curiosity, if you have a one year lease agreement and the owner sells 4 months into the lease, does the new owner have to honor that, or is the renter just SOL?
sorry...should be Rob, not Ron..
Anon 9:21
On the first house I had a one year lease, and was there for one year. They put the house on the market after the lease was up and I moved. I kept an eye on it and it did not sell, so 6 months later they rented it again. I wanted to move though because it was too small.
The house I am in now has a one year lease that is up in July. It is getting very little attention, so I think I will be there a while, as it goes month to month after the year is up.
There is a clause in our lease that lets them out if they sell.
I mentioned that I am sick of renting, and moving, and I am, but would not change what I did. The most rewarding experiences I have had in life, required hardship up front.
Maybe that's why they seem rewarding, the relativity of getting over the hardship. Anyway,
good luck to you and your family.
I think using the term 'bubble' might be wrong. Bubble conotes that there will be, at some point soon, a dramatic and huge drop in the price of housing similar to the NASDAQ crash of 2000. When people hear bubble, they think of Nortel stock dropping from $100/share to $2/share in about 12 months.
Real estate prices normally move more slowly than stock prices. The market is less liquid, and even when the buying dries up, and owners in trouble can't sell and stop making the mortgage payment, it takes 6 to 9 months before a property goes back to the lender.
So I think its more likely that we'll see a plateau, then 6 months later the drop will begin.
I live in Denver, and we have not had the runup in prices over the last few years. We did have a huge runup in the late 90s and prices have more or less stayed at those levels, with a bit of appreciation. Foreclosures in the metro Denver area are near record highs, as people who bought in the last 2 or 3 years can't get enough to pay off the loan when they have to sell.
After owning my own homes for 30 years I sold last year and decided to rent an apartment in anticipation of lower prices. Many people have told me I'm crazy. However for $1000/month I am renting a beautiful 1250 sq ft apartment on a park with a spectacular view of mountains and city. If this apartment were a condo it would sell for about $350,000, and, with a small down payment would cost a buyer around $2500/month including taxes and homeowner's fee. If prices were appreciating here, which they are not, I might be able to see it; but I lived here in the mid 1980s and having lived through a very painful real estate crash know prices can and sometimes DO decline.
This is one of the reasons I think we'll see lower real estate prices. The selling prices are completely out of balance with rental prices.
Once the slide down starts, the leverage of 95% to 100% loans will turn into a nightmare of foreclosed properties and a supply of real estate that swamps demand. Many of today's buyers have no significant savings to get them through a recession, divorce, job loss etc. They won't be able to make the payments and won't be able to sell for enough to pay off the mortgage.
This mania is being fueled by shockingly loose credit and ultra low interest rates. Like all manias once the last buyer has been sucked in the market will stall, tip over, and decline.
I expect we're going to see a huge number of foreclosures, especially in the areas that have had the most appreciation. This has rather dire consequences for our economy as a whole I'm afraid. Japan had a similar real estate mania in 1989 and prices then dropped for about 14 years straight, causing a deflation the country is still struggling with.
Thanks Rob,
I know my local market continues to defy gravity (san gabriel valley, southern california). Went to a couple of open houses this weekend around my neighborhood and was totally shocked at what 500k gets you these days.....3 bd 1 bath 1300sq ft that needs a LOT of work. What was even more shocking was the line of people walking through the houses.
At one open house, in the 5 min I was there, no less than 6 families came through.
On the same note, a good friend of mine who is a realtor was talking about a buyer their office was representing bidding on a house in San Marino, CA (avg home above 1MM) and losing to a bidding war with over 60 offers. SIXTY!!! It's clearly not stopping anytime soon here.
anon 9:21
anon 9:21
I looked at some new models last weekend. The wife cried when we left. No pressure here.
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