I TOLD YOU Housing Was In a BUBBLE!!

[The Cleaner]

The housing bubble has popped

Reports of falling sales and investors stuck with properties they can't sell are just the beginning. Property owners should worry; so should their lenders...

The story went on to note that many formerly hot markets in California, Arizona, Washington, D.C., and Florida are now "languishing without buyers or even prospects. Many once-booming markets are seeing double-digit declines in sales." The magnitude of the drop in Florida home prices (once the frothiest market in the country) is striking. Single-family home sales declined 20% in February, year-over-year. Similarly, California sales dropped 15%. Some of the hottest towns in those states were off twice as much.

I loved the point that what seems to be really alarming is how "real-estate agents in some of these formerly red-hot markets have been surprised at how suddenly (my emphasis) market conditions have deteriorated in the past few months." Of course, that's what happens when manic markets and bubbles turn. Prices change radically and, seemingly, for no reason.

Source: http://moneycentral.msn.com/content/P149596.asp

Back in 2000, we were living in Washington DC. That's right around the time when the housing market started going bozonkers. We saw bidding wars, paying above the asking price, and houses selling in two hours. And that was back then.

In just a few months time, a home could add $10,000 in value. What was once affordable in the $250K range became $400K and $500K. We were astonished! How could anyone afford these homes? Not EVERYONE in DC is a lawyer, doctor, or lobbyist! And why, when it's just common knowledge that what goes up must come down, would anyone risk it?

The indicators of a market bubble are ALWAYS the same: greed, irrationality, fear, panic buying, and overvaluation. That never changes. But still, after 1929, after 2000, STILL people haven't learned that lesson.

In the Washington DC area housing market in 2000 we saw:

• If you didn't pay over the asking price for the home, you didn't get the home. Period. Competition was FIERCE and you had to do "whatever it takes" to get the home you wanted.
  
  
• Old, dilapidated townhomes with cracked foundations and in need of gutting out in Northern Virginia going for $200K (mind you this was back in 2000, sounds cheap now).
  
  
• In one townhome, on the first day of listing, an open house. Within two hours of the opening, we saw a realtor and a buyer sitting at the kitchen table already making a deal. Buyer pays over the asking price.
  
  
• Some houses were already sold by the time we got a chance to do a walk through.
  
  
• A house around our block, a dilapidated, un-taken-care-of rambler that looked like it was falling apart was selling for $300K. It had a rough pebble driveway (odd for suburbia) and many "patches" to the aluminum siding.
  
  
• The big decision: Either pay through the nose to get a home just inside or outside the Beltway for a better commute, or move way out to Fredrick (MD) or Manassas (VA) where it's cheaper and have a HELL COMMUTE every day.
  
  
• Realtors claiming this will not end and hey, you gotta live somewhere, right? So better get in on it now before it's too late. And of course, it's not a bubble.
  

But back to the main question: Who were these people, and how - even on 100K salary, could they afford these homes? And furthermore, WHY did they not see that this was a bubble, taking a risk that their payments could SHOOT UP one day as they're doing right now with rising adjustable rate mortgages (ARMs)? Did they think the good times would last forever?

Hate to say it, but I told you so (Not directed at DU per se, but to all those who poo pooed us when we warned them) - I told you it was a dangerous bubble and many will get burned in the end, but nobody listened.
:cry:

[spinbaby]

1. Only on the coasts

Here in flyover territory, housing is still affordable and there is no bubble.

[lumberjack_jeff]

21. Coastal residential property is a constrained resource

Residential property on the coasts will always be more scarce and more volatile in price than in the interior.

I wouldn't be surprised to see a 40% drop in values in some metro markets. Given the fact that those properties have increased 200% in value since 2000, for many it still works out to having been a good investment.

[SmokingJacket]

2. My house has tripled in "value" -- but have wages? No!

It's absurd.

[elehhhhna]

3. "These people" are leveraged out the wazoo, have no money down loans,

can't afford to furnish their homes (or put blinds up) and are living off their credit cards. That's what my sisters mort. broker (Chicago -- same market conditions you describe) says.

What happened to the excellent idea of living beneath ones means? It's worked really, really well for us (except when we were young & stupid and ran up the credit cards...won't do THAT ever again!)

[AlCzervik]

5. you must know my neighbors, they have a 5% down VA loan, so far

they refide 3 times and have almost no positve equity left, no here is the worst part, yes it gets worse, he worked for Intel until 2 weeks ago--he got laid off.

[The Cleaner]

11. I was laid off during the tech crash of 2001

Worked for a company in Vienna, VA that is now completely out of business.

I thought the housing bubble would crash THEN, but surprisingly....not.

[Hugin]

14. People probably continued to maintain their Standard of Living via Credit.

Established before the crash... But, this current crash may be
the 'real one'.

The credit is all gone...

[Hugin]

12. .

Layoffs at Intel?

Interesting...

[AlCzervik]

15. yes, pretty sizable number, we thought he'd be safe but sadly he wasn't

something like 7000 company wide at all levels, he was mid managment in IT.

[Hugin]

20. That explains all of the puff-pieces I've been seeing in the news lately..

I'm wondering if it's an indication of something big ramping up
in the Far East.

Well, that's what happens when a company buys into it's own sales
pitch and discontinues raw R&D.

I'm sorry your friend was caught up in it.

[AlCzervik]

24. the thing is about the news articles that always gets me, the pr hacks

put out the release--deny, deny, deny and then the day i read about the actual number of layoffs coming "In the next few months" was the day my neighbor got the call, yes a phone call on his day off with his family in the car with him. Can you imagine, a fing call, not even in person? Where i live there is a large "Campus" in Folsom, thats where many of the layoffs seem to be happening.

[Hugin]

29. Very poor form!

A phone call to announce layoffs!

It's obvious they're trying the 'divide-and-keep-quiet' PR tactic.

To some degree mass layoffs are an indication of poor management.
But, what else is new in a manufacturing-less America.

[elehhhhna]

32. I'm in staffing & employment...perm & temp. My biz is GONE.

Maybe down 80%. Whenever a Bush is in office, I have no market.

Thank GOD hubs career is solid. I ducked out & am now home with the gals...going on 3 years now. I'll go back when the market wakes up -- which will not happen until we end the "war" on Iraq...if then.

[n2doc]

4. The bigger question is how far prices will drop

Seems like prices would have to drop 50% or more to go back to pre-bubble levels. This would have catastrophic psychological effects there, even if present day valuations are high. I just don't see that happening with most houses/communities. I used to live in California, prices shot up just as much there but each time a bubble ends, prices go down 10-20% and then take off again. My old house, which sold in 1985 for 130K, is on the market for 875K. Prices would have to drop 80% to return to those levels.
People afforded houses there and in DC by 3 means: 1, having equity in another place to put down a big down payment, 2, taking out big loans, or 3, inheritance or loans from family. The ones in category 2 are the ones who will bite out if prices drop a large amount.
I am amazed at how many people seem to have big wads of cash, however. In Texas last year people were buying 600K second homes for cash.

[The Cleaner]

13. That essentially shuts out first time home buyers

who don't necessarily have wads of cash.

I wondered if home purchases in bubble cities were mostly existing home owners looking to buy a larger home. That only makes sense because they'd have all that equity built up.

I'm thinking that because this was such a large bubble and so widespread, this isn't just a minor tick. I don't think prices will rise again anytime soon. When prices hit the ceiling in a bubble and everybody is out of money with nobody wanting to come back in, prices plummet. Fast. That's the way a bubble works.

Look for increasing foreclosures as an added pressure forcing home prices down - it's happening now.

[fleabert]

41. those wads of cash came from selling their overvalued homes in CA

can't tell you how many people I have met here that sold a house in CA and bought in Austin or San Antonio with the cash. some bought two houses on the same street, live in one and rent the other. Since you can buy a great home in TX for under 300,000 and most houses going for at least 600,000 here- it makes sense to do it.

if anyone invested in a house ten or more years ago in the Bay Area, they have more than tripled their investment in most parts. It's crazy. Good friend of mine bought her house 9 years ago for 125,000- it's valued at 750,000 now.

holy crap.

[Nikki Stone 1]

6. Add the housing bubble to the SC eminent domain decision last year

It's about making us all renters. Property ownership has always been essential to democracy. Serfs couldn't own property. Soon, we won't be able to either.

[Sammy Pepys]

7. Well, a good handful of them...

...were flippers.

We just bought in DC (close in a couple of weeks) and many of the houses we saw were recent flips or renovations. The home we just bought was renovated about 3 or 4 years ago.

That all coincided with the Adams Morgan/U street booms, which were a larger product of D.C. gaining a better reputation for livability. And even as the RE boom teeters out, you still have a lot of areas turning the corner and becoming livable. I think D.C. is going to continue to gentrify for several more years.

The final factor: D.C. area incomes are very high, employment is generally very high and the population is very dynamic. People are always coming and going, so the home market around here is somewhat self-sustaining. If you look at a long term chrat, you see steady prices for a couple of years, and the large swings upward, then steady again, then large swings up etc etc etc. There is consistent movement in the housing market around here to sustain prices (because of the incomes and the "residential turnover"), and there always has been.

[The Cleaner]

19. Rosy picture, but perhaps a bit unrealistic.

We were making nearly $100K between the two of us in 2000, and still could not afford a decent home. We had no existing debt either! And quite a bit of cash saved for a down payment. We were very close to purchasing a townhouse but some dummy outbid us.

Point being, you are painting the DC area with a broad brush stroke. Not ALL DC incomes are high. The cost of living is so high there that it eats up your income.

The average tech salary in DC is around $60-65K, hardly enough to readily afford a home anywhere in the area. So while employment may be steady, not everybody in DC is making $150-200K a year which would be consistent with the cost of living.

In summary:
Housing/cost of living: UP.
Wages: Stagnant.

[Sammy Pepys]

34. I think I'm being reasonably fair with regards to D.C.

The fact is that the D.C. area enjoys higher-than-avergae incomes on the whole. I didn't say that everyone has high incomes, but when you consider that D.C., Fairfax and Montgomery counties all sit withing the same 50 mile radius of each other, I think one can reasonable conclude that DC metro is going to be at or near the top the top of most national median income lists. When you have a significant chunk of the local population making high wages, that's certainly going to affect the cost of living upward. Your situation with the dummy who outbid you on a townhouse speaks to that point, I think.

The picture I painted is broad; I intended it to be that way. But I don't think it's unrealistic at all.

[The Cleaner]

43. So my experience was null and void?

I saw what I saw...and we moved to another state because we also saw the cost of living in DC totally eating up our salaries. And if one of us got laid off (as I did) It would have been totally un-doable. A disaster.

Higher incomes mean NADA if the cost of living outpaces wages.

[Sammy Pepys]

46. I didn't say that at all.

And if we're going to play the competing experiences game than we're really not going to get anywhere, because your and mine sound like they were completely different. For the record, my wife and I makes less than $100K, so I don't know what to tell you.

I never made the claim that my analysis was specific to anyone or anything, just a general overview.

[MadHound]

8. When the tech bubble started deflating back in the late '90s, early '00s

Many people took their investment money and switched it into housing investment. By lowering interest rates drastically, Greenspan and the Feds actually encouraged the start of this bubble. Prices started rising, profits accumulated, and with the advent of ARMs and other risky fiscal tools that allowed people to jump in above their means, the housing bubble was off and inflating.

Now with interest rate hikes and rising prices in energy and other sectors, the housing bubble is starting to deflate. This is in reality round two of the recession that we had when Bush took office. Greenspan managed to put it off until now with low interest rates, and by creating a housing bubble. But when it really pops, we're all going to be screwed again, probably worse than if we had gotten this all out of the way at once.

[snappyturtle]

9. It's here---the bubble burst, i.e........

Yesterday we sold our five year old building.......for less than we have in it! Real estate is selling very slowly here so rather than go months until another offer (maybe a worse one) we decided to bite the bullet and get out. At least we won't be paying a mortgage and property taxes on it.The building was professionally appraised for 45K more than we got! So in a few weeks we will be moving to my husband's hometown in Texas and start getting back some of that oil money we're all being soaked for. Oh yes...more good news.....gasoline went up ten cents a gallon today!

When I told my daughter of the sale she said a full-time realtor with Coldwell Banker in her town, Minnetonka (Minneapolis), MN said he's lucky to sell the homes there for what the owners bought them for. Yep, you're right......prices are "adjusting"!

[Rosemary2205]

10. Flippers

If they are buying junk houses they are likely flippers.

That and the interest only loan, 50 year loans, and balloon loans are the norm now.

[oc2002]

16. Washington DC area is a local phenom. prices will go down some..but

not too far, I think. but your right the days of prices rising daily are gone for the foreseeable future.

the main question is how many will abandon the homes in the area if the interests go way higher, how many foreclosures are in the future if the economy hits a major bump..

thats the real question. deflation.

[Sammy Pepys]

37. I think you'll see more movement in seller concessions than prices...

More closing help, more contingencies, stuff like that.

[displacedtexan]

17. I just started a new DC housing bubble blog.

DC Housing News stopped posting, and I'm fascinated by
the housing bubble; so, I decided to start one.

Link

Prices have come down $50K-$100K in the last 2 months here, and
sellers are paying points, closing costs, and even offering
cash back.

There are lots of good blogs. Start with Bubble Meter
and check out his great links in the sidebar.

Also, The Hill Rag publishes actual selling prices of homes, which
are a lot less than the asking prices.

Fascinating.

[CrispyQ]

18. My husband & I barely survived the crash of '87

What worked against us also worked for us - no buyers. We took a significant loss on a big house, but were fortunate to find a small house with a low-down, no-qualifying loan. Back then, those were about the only houses selling. We've seen the market dive & I don't ever want to be at the mercy of the market again. Real estate is a great way to make money, but if you are strapped for cash & the market sucks, if you can't hold out until it recovers, you are at their mercy.

I'm on the front range in Colorado & housing prices are insane. Sometime in '99 we were considering a nice place for about $220k. We decided to stay where we are. That property recently sold for $435k. ~~gasp.

My sister & her husband are grappling with their ARM. In 2000, they both got significant raises, got into a nice property, & have used their new additional income to ramp up their life styles. Now they are hurting. They have a 2 car garage filled with stuff while their cars sit in the drive. I couldn't believe when she told me that they also have a storage unit full of stuff. You can hardly walk through their house there is so much stuff.

I fear there will be many, many people who will wish they had spent their money more wisely when the times were good.

[Hugin]

27. Only last night I declared a personal "Gizmo Moratorium".

My sweetheart was shocked! She knows my love of gadgets... (and has always supported it)

But, I've got too many and I simply don't have time to enjoy any of it anymore. Part of
my joy of gadgetry was learning how they worked and how to use them.

It was a tough decision.

Part of it was driven by the fact my dislike of clutter outweighed anything else.

But, my addiction had never put us in any financial hardship... I would never allow that.

[CrispyQ]

33. Gizmo Moratorium - I like it!

Clutter. That has been our project this year.

I drive a little Toyota pickup truck. We went through our basement with a fine tooth comb & took 7 truck loads of stuff to two of the thrift shops in town. After the first drop off, their eyes lit up when we showed up again & again! We also had lots of outdoor animal stuff, some rabbit cages, fencing, etc. A local wildlife sanctuary took all of it. That was 3 more truckloads. :thumbsup:

Holy crap! It feels sooooo good to lighten your load!! I'm ready to cull some more. My mother recently told me we have the most uncluttered house she's ever seen. ;)

I highly recommend de-cluttering!

[Hugin]

35. When we downsized about a year ago...

We simultaneously moved from a 'growth economy' to a 'maintenance economy'.

I was read the letter of law... "When something comes in something goes out."

The only exception was my 'toys'. But, now that is going as well. (Maybe I need
a physical?)

In the process of downsizing we gave, donated, or liquidated tens of thousands
of dollars worth of stuff. Directing the bulk of the proceeds to the Katrina
victims.

(Except for a mattress box springs... Seems nobody wants them. I do mean NOBODY!
It sat in the garage for 8 months until it was finally hauled off to the fill.
Upon reflection, I should have disassembled it into it's constituent parts. Probably
would have gotten a taker.)

[gristy]

22. Odd post, or did I miss something?

You give no evidence or link to information that shows the bubble has popped. :shrug:

on edit: not to say there isn't any

[The Cleaner]

26. It's been ALL OVER the News lately...

n/t

[displacedtexan]

28. Here's a clue...

* San Luis Obispo mortgage default notices surge 08/04/06
* S.D. mortgage defaults double 08/04/06
* Foreclosure activity up by biggest margin in 14 years 08/04/06
* Painful ARM twisting 08/04/06
* Why are so many properties for sale? 08/04/06
* Las Vegas Housing Market Cools Down 08/04/06
* And the Fed's next move will be ... 08/04/06
* In the heat of summer real estate market running out of steam (Canada) 08/03/06
* Orlando home builders hear sobering news 08/03/06
* Condo saturation but prices yet to drop in R.I. 08/03/06
* Owner calls off condominium conversion 08/03/06
* Condo craze losing steam in Baltimore 08/03/06
* Housing Bust: Just Kidding! 08/03/06
* Facing foreclosure? 9 options 08/03/06
* Mortgage volume falls to 4-year low 08/02/06
* Home loan demand sinks to four-year low 08/02/06
* Senator wants ratings agencies to get tough on GSEs 08/02/06
* Developer sued over size of condos 08/02/06
* The law of gravity trumps speculation 08/02/06
* Helocs from hell 08/02/06
* Why It's Hard To Predict Interest Rate Shifts 08/01/06
* Japan sees first land price rise in 14 years 08/01/06
* The Coming Housing Crash 08/01/06
* Economist proposes taxes to ward off real estate crisis (China) 08/01/06
* Battling the home-buying slowdown 08/01/06
* Adjustable rate mortgages still the choice of many home buyers 08/01/06
* Goodbye, condo mania 07/31/06
* Unfinished houses put people in limbo in Arizona 07/31/06
* South Florida homeowners, economy, both feeling the pain 07/31/06
* 'McMansion' Owners Caught in a Housing Bubble 07/31/06
* A Reckoning With Risk 07/31/06
* In a Slowing Market, Price Is Only the First Step 07/31/06
* Getting real on real estate market 07/31/06
* Rules for a Slowdown 07/31/06
* Housing: It's a Buyer's Market 07/31/06
* Rough landing expected for LA market 07/30/06
* San Diego's economy prepared to weather residential sales slump 07/30/06
* Rates put home investors on a fence 07/30/06
* Hartford Area Home Resales Sink 07/29/06
* House sales still cooling in Phoenix 07/29/06
* Cost of houses dips 07/29/06
* Foreclosures rise 07/29/06
* Winds Of Change’ Hit California’s Housing Market 07/29/06
* Pools, vacations are new lures for homebuyers 07/29/06
* Arkansas Foreclosures Up 07/29/06
* Benton County’s Unsold Homes Doubled From Last Year 07/29/06
* Anchorage home listings at a decade high 07/29/06
* Glut of unsold new homes across US hits record high 07/28/06
* Market shift: Now builders lure Realtors 07/28/06
* DC housing prices at a standstill 07/28/06

link

[Hugin]

30. Wow! I bet there's more where those came from too! n/t

[alarimer]

I have never ever considered buy a house

I am 38, and have never made more than I am making now but it is only enough to afford a small apartment. Rents here are still less than 500 per month. Houses here (I live in Corpus Christi, TX) run at least $120K on average. I would never consider buying with an adjustable mortgage or with one of those "interest-only" loans. And of course Texas has no income taxes so property taxes are quite high. There may be affordable houses (70K) but they are in bad neighborhoods. Every now and then someone tries to tell me I could afford to buy but I don't believe them.

[alarimer]

23. I have never ever considered buy a house

I am 38, and have never made more than I am making now but it is only enough to afford a small apartment. Rents here are still less than 500 per month. Houses here (I live in Corpus Christi, TX) run at least $120K on average. I would never consider buying with an adjustable mortgage or with one of those "interest-only" loans. And of course Texas has no income taxes so property taxes are quite high. There may be affordable houses (70K) but they are in bad neighborhoods. Every now and then someone tries to tell me I could afford to buy but I don't believe them.

[Xenotime]

50. Don't. Houses are not worth it.

You have to maintain the lawn, you all are having a drought in Texas, right? You have to maintain the house and pay the mortgage. I did it for a while and it sucked.

[alarimer]

60. There is that too

Not too big on DIY myself or maybe just not very good at it!

[Blue Diadem]

25. Our values increased alot too, a little rural village in Ohio

however this last year I've seen homes sitting on the market for months, changing realtors and sitting some more. One house in particular was a farmhouse on the edge of town. A local RE flipper bought it, built condos on the acreage, leaving the 100 plus yr old home with a fallen down barn on 1 acre. They put the farmhouse up for sale(now almost a year) for over $225,000..and it has NO KITCHEN OR BATHROOM. The exterior is primed and you can see through that. My son & his fiance were shocked when they walked into the completely empty kitchen and bathroom.

I've heard that some people bought on interest only loans. For those who bought on ARM's..I'm betting many are listed in our forclosure notices. Those people, combined with the unemployed and under-employed make that list pretty long. :(

[The Cleaner]

31. Edited to add link to MSN Money Central Story of Bubble Pop

n/t

[halobeam]

36. I live on Long Island. No one can sell at what they thought they could

so, they are waiting it out.... for sale signs are a permanent fixture on their lawns. Now, my question is this...

Some people say the prices will have to come down, and owners will have to take the hit because it won't go back up for quite a long time, and other people say, the rich are moving the middle class out and will buy the houses, so waiting it out might be worth it.

How does the rich pushing the middle class out of these "wanted" neighborhoods factor in? And by how much does it factor in? Will it absorb some of the punch of the bubble burst in these types of neighborhoods?

I'm lucky... mort is low at 170... this house could've gotten 450 last year, now if I wanted to REALLY sell immediately, I could sell at 350 in a day. Many new buyers here (ones who bought last year and before that) paid over 400 for their homes... What a hell of a mortgage. Most families here are two income families, one major career and the other supplementary income. The higher of that group have two people making about 80,000 a yr. each, but with a mort. at 3500 and taxes at 12,000 and utilities at 800/mth.... doesn't that seems like there will be anything left for them, but their house?

Very interested to get some feed back here, if anyone has the knowledge and can offer the time..

[Hugin]

38. I think it's known as 'house poor'...

"doesn't that seems like there will be anything left for them, but their house?"

Things will probably go back to having multiple generations under one roof.
It's the only way these things are affordable to anyone with Middle (A.K.A. Average)
means.

[The Cleaner]

40. Rich moving the middle class out?

Where'd you get wind of that? Never heard of it before. I don't know why they'd want to...they've got plenty of their own mega mansions.

My late Ma grew up in Bayside, then moved to East Northport...I've been up there a few times, kinda a nice area. Quaint too. She had remembered the bakeries and shops in Bayside and missed that.

[NewJeffCT]

47. Property taxes are that high in Long Island?

A $400,000 home has $12K/year in property taxes? That seems steep, considering that my state of Connecticut is known for high property taxes and our home that is worth around $400,000 has property taxes around $7/year... and, we live in a town with higher property taxes. (for example, if our home was moved to Farmington, CT, we'd likely pay half that in property taxes)

I calculated a $400,000 mortgage (assuming 0 down, or a $500,000 home with 20% down) at 7% for a 30 yr fixed and came up with a little over $2,650 per month in mortgage payments, or almost $32,000 per year. Then, with property taxes at $1,000/month, that is $44,000/year. Then, maybe $1k for home insurance and you have $45,000 of annual expenses, with much of it being tax deductible.

A lot of money, for sure. But, certainly liveable for 2 people making a combined $160,000/year.

[gasperc]

39. FED, still in post 9/11 shock, waited too long to adjust rates

so desperate was the FED to stabilize the economy after 9/11 it let a semi drive through the housing market with low interest loans, which was allowed to continue to spiral out of control for far far too long. Now with average house prices in some areas at $400-$500k clearly prices have out paced salaries that can afford such prices.

I saw this happen in s. Calif. in the 1990's, a couple of years out of school I bought a condo and couldn't sell it after 3years. I eventually dumped it in 1995 for a $13k loss, my entire deposit, gone. I moved to MI and started over, bought a fixer upper and made back my loss 2x over. Here in MI prices did start to get frothy but never to the loony levels of various other markets. Maybe it's a silver lining to the crappy economy and stagnant auto sales that have plagued us here while the rest(most) of the nation has "enjoyed" a recovery. A plunge in house values will have a macro corrosive effect, equity will dry up, home improvements will stall, housing starts will stall because of the glut, secondary business like suppliers and restaurants indirectly tied will all experience a contraction until things stabilize. But with the Bush administration and congress completely oblivious to what is happening is already doing too little too late so stabilization is relative to their interpretation of what's happening and that a roll the dice gambit to bomb Iran and Syria will straighten out the world and war will send America's economy into overdrive,(sigh) like in WWII. They couldn't be more wrong but until they do what they plan on doing and witness the chaos that ensues will they know the error of their ways. our job, and our only job is to work as hard as we can to elect Democrats and put a brake to Bush and this Congress's insane policies.

[Hugin]

45. Not to mention the effects of surging energy prices...

Good analysis in your post.

You've been thinking about this! :thumbsup:

[Blackhatjack]

42. Banks/Mort Co saw this coming, have placed reserves to cover...

... inevitable "mailing in the keys" and rising foreclosures. (Up 67% in Calif).

This is also why the new bankruptcy bill was such an essential. Got to keep those folks paying for years whether they live in and own the house or not.

[The Cleaner]

44. The New Bankruptcy Laws = DUBBLE WHAMMY.

You're right - thanks for reminding me. The new bankruptcy laws force people to pay back a certain amount of the loan whether thay can afford that or not, and whether they still live in the house or not.

There will be MANY, MANY affected by this horrible law. I expect massive outcry within five years.

I too think they passed this law because they knew what was coming.

[sendero]

48. What fueled this market is simple..

... there were two main synergistic factors.

1) easy credit. That's right, just like CC companies handing out CCs to college kids with no job, the mortgage agencies loosened lending requirements to the point where people who were obviously financially unable to afford a home could buy one anyway. Zero down, negative-amortization, adjustable rate (when interest was already at historic lows, idiocy) mortgages made up a huge percentage of the loans made over the last few years.

2) speculation. Everyone and his mother, looking at rising prices, wants to become a residential real esatate magnate. New housing starts selling to "investors" instead of folks who actually want to live in a house. Jacks the prices up for everyone, until the first hint of softness - then all the speculators have to bail at once.

I beleive we're only at the beginning of this still. Although I also believe it will affect the go-go areas a whole lot more than it will Peoria.

[The Cleaner]

49. Then Who will be blamed for the crash?

Greedy companies/real estate agents offering easy credit or the people who knowingly bought beyond their means?

It's an intriguing question really...

[sendero]

55. It wasn't the real estate agents..

... who offered the easy credit. It was GennieMae, FreddieMac, and the banks.

And believe me, it was no accident. It was a last ditch effort to prop us a generally failing economy.

[The Cleaner]

57. Real estate agents are partly to blame though,

for not informing people of the risks inherent in their home purchases. And even a couple of weeks ago, the news had some scoundrel of a real estate woman come on and claim that people are still paying over the asking price for homes here in Dallas area, which is a flat out lie.

I think they are partly complicit in all of this, and I betcha some people are going to be very pissed off at them for their "anything to get a huge commission" attitudes. The realtors are like the scoundrel stockbrokers in market bubbles who continually tell you things are rosy until the very moment we all start smelling the smoke and jump overboard to save our butts.

Not that they're all that way of course, but many are.

[sendero]

58. Yes...

...I will agree with you there. Anyone buying a home should realize that a RE agent is there to make a sale, and they are not particularly concerned with anything other than getting ink on paper - they get their commission whether you pay for the house or not.

I'm in Dallas also, and have lived in the area for a very long time. I've dealt with 4 RE agents in that time, and I'd say about half of them were worthy of trust :)

[The Cleaner]

61. Ah, good to know....

Thanks fellow Dallasite!

Thankfully the bubble didn't hit too hard here, save a few pockets such in North Dallas, West Plano, and some of Frisco and Lewisville. But as far as I know, we never had the major bidding wars and paying above the asking price. In fact, the telecom/tech bust hit really hard here and foreclosures went way up. You've probably seen this.

[sendero]

62. Seen it..

... I'm still smarting from it! Computer programmers in the telecom corridor area got screwed big time in 2001-2002, and it hasn't recovered yet :)

And yes, we didn't have a bubble here as far as I'm concerned, so the let down isn't going to be that bad around here. You can still get a damn nice house in suburban Dallas area for $200k-$300K, less than half what it would cost in a go-go town.

Of course, Dallas is no Boston or LA or San Fran or Vegas either ... :)

[patcox2]

51. YOU and a THOUSAND OTHERS!

So STOP YELLING about it.

[Jara sang]

52. There are over 170 homes on the market in my community.

Most of those are spec houses.

[slackmaster]

53. There are still a few McMansions going up in my neighborhood

Poor suckers are going to get stuck.

In the last cycle someone a block away from me built a 6 bedroom monstrosity and tried to sell it for $850K. After two years on the market the owner gave up and moved his family in.

Everyone is laughing at him for feeling the consequences of his greed.

[Justice Is Comin]

54. It wouldn't have happened under Clinton !

[shanti]

56. in my sacramento neighborhood

there are a few homes that have been on the market for several months without selling. they aren't ramshackle either. i believe the bubble has burst in cali and am so glad i didn't overextend myself when i refied last year.

[Skidmore]

59. Don't forget the re-fi craze that has been going on for the

last several years that has led to many people having much more than their house payment on their loan.

[SammyWinstonJack]

63. No housing bubble in my city.. If only, I would cash out and move to

Belize! :evilgrin: