REIT Insider Has Left The Building
Here is something to think about from Elliott Wave Intl. as we head into a big week on Wall Street. "Barron's magazine last week reported that a top exec at a real estate investment trust sold his shares for $18.3 million."
"There is no question that insiders are selling; during this past March insiders sold 60 times more company shares than they purchased (60:1), close to the most extreme ratio ever. How extreme is this? Historically speaking, a 20:1 selling to buying ratio is considered a bearish indicator; today's figure is 3x as great."
12 Comments:
That Prudentbear analysis is really excellent! It should be required reading for anyone involved in real estate, especially anyone thinking about buying a house right now.
As for Robert Toll...what a sleazebag! I hope the SEC investigates him for stock manipulation.
Good article
On a related note, here is a nice web site that shows the particular gap between income and housing cost by occupation.
www.nhc.org/chp/p2p/
anyone catch tonights premiere of "American Dad" ? by the creators of "Family Guy"
basically the gist of the entire episode was that the wife in the family started making huge bucks as a real estate agent..
then at the end, greenspan raised interest rates 20 points and "overnight, every real estate agent in america is now unemployed"
and then greenspan was attacked in the groin by his pet dog, named "Fannie Mae"
LOL! how mainstream can the knowledge of this bubble be before it finally pops?
"The eventual decline in home prices will follow an all too familiar pattern. As prices fall, the confidence of homeowners and potential buyers will erode and the most recent buyers–especially those that are overleveraged–will be the first to feel the pinch. As prices begin to fall, many would-be sellers who held out for higher prices will list their homes, increasing the inventory of available homes for sale. Prices will slump further as this inventory increases along with the time it takes to sell a home. Banks and lending institutions will then take on more foreclosed homes and try to quickly sell them. Lending policies will tighten, effectively closing the barn door after the horse has left the stable, thus gradually returning the mortgage market to its more old fashioned roots. Larger down payments and less creative financing will be required, which will decrease the size of the potential pool of home buyers. At this point it will be evident that the same reinforcing mechanism which propelled prices higher is now working in reverse to orchestrate their decline."
This is ezactly how the Japanese RE bubble burst. Exactly. I know, I was there. And, like Japan, I expect to see a 75% drop in prices in some markets (like the SF Bay Area) when it's all finished.
Hey Ben, another way to margin into real estate. Don't think we've covered this one on this blog yet:
Pledged-asset mortgages --
http://www.smartmoney.com/home/buying/index.cfm?story=pamortgages
I hope Robert Toll is one of the first they haul in front of the judges when they start to convene the ‘Troikas’… after the revolution.
After reading about this pump-n-dump I'm sure he'll be sentanced to '9 mm'...
7:07 anon:
That's hilarious. You know it's a bubble when everyone agrees it's a bubble and yet it still goes on. I remember U.S. News & World Report had a cover story titled "When Will the Bubble Burst?" back in 1999.
Greenspan, on his last day at work, should go on national TV, announce an immediate 10% hike, and then, gathering an immense gulp of air into his superannuated lungs, lean forward into the microphones and scream: "TIIIIMMMM-BBBBERRRR!!!"
After read the Prudentbear analysis, I feel the house prices CAN not go down, otherwise the entire states will be in big trouble.
I am wondering in order to avoid this dilemma, the Fed will let dollar go down more to sustain RE bubble.
any opinions for this thought ?
"Even when it reaches the bottom, it might stay there for years, the time needed to rebuild confidence."
Agreed, although it won't be difficult to know when the time comes to re-enter the market. Whether 1 year or 10 years, rent as 1% of price is a good signal. Another is 8-10 times annual rent. When the "p/e" of homes is balanced, it will be a safe time to re-enter. Even if RE falls a bit more than this, it will return to this level in short order. The SoCal bust and recovery in the late 80's/early 90's is an example of this.
"I am wondering in order to avoid this dilemma, the Fed will let dollar go down more to sustain RE bubble."
With inflation already gaining momentum, I don't believe the Fed will risk hyper-inflation by lowering/maintaining ultra-low rates. Some on the blog believe that the Fed will risk it in the event of a dollar crises or financial bubble collapse. I guess time will tell...
Pledged-asset mortgages ----
Interesting, I havn't heard of those, but I am never surprised whith what those lttle financial devils can come up with.
---Agreed, although it won't be difficult to know when the time comes to re-enter the market. Whether 1 year or 10 years, rent as 1% of price is a good signal. Another is 8-10 times annual rent.---
If you are correct, prices have a long way to fall in my area in NorCal. The home I rent for $4,500 is worth $2.2M. According to your calculation, it should be worth $430K-$540K. A home down the street just rented for $2,750 and is worth $1.2M. Your calculations say it should be worth $265-$330K.
"A home down the street just rented for $2,750 and is worth $1.2M. Your calculations say it should be worth $265-$330K."
Depreciation of this magnitude sounds crazy, but is it? My brother-in-law owns a house in Redwood City. It's just a regular house, 2,200sf, in a good (not great) neighborhood in the flat area, not the hills. He had it appraised at 1.2M recently and yet his income is about 85K, and his neighbors are all regular workers with similar incomes.
Rent on a 1.2M house should be around 10K, but it won't be anywhere near that in that area of Redwood City.
Post a Comment
<< Home