TRUTHOUT: Housing Bubble Burst & The Coming Recession >

[The Cleaner]

Every day presents new evidence that the housing boom is turning into a housing bust. In the last week we have seen data showing that house sale prices are down from last year's levels in 26 major metropolitan areas, housing starts are down more than 15 percent from their bubble peaks, and applications for home purchase mortgages have dropped by more than 20 percent. A new poll of builders showed industry confidence at the lowest level since the middle of 1990-1991 recession.

At this point there is little doubt that the housing market is headed downward. The question is how low will it go and what will be the impact on the economy. If housing construction and sales prices revert to long-term trends, the decline will be severe, as will be the impact on the economy.

Over most of the post-World War II era, house prices have moved largely in step with other prices, keeping just about even with the overall rate of inflation. In the last decade, house prices suddenly exploded, increasing by more than 50 percent, after adjusting for inflation. This unprecedented run-up in house prices led to record levels of housing construction. The number of homes built in 2005 was almost 50 percent higher than it had been a decade earlier. This huge construction boom was a key factor in pulling the economy out of the recession...

Of course, just like the stock bubble, the housing bubble could not be sustained. In the stock bubble, the supply of new issues of tech stocks eventually exceeded the demand from speculators. Similarly, the record levels of housing construction inevitably led to a glut of housing on the market. For a long time, speculators were willing to buy up anything that was built, but eventually the supply of speculators, or the supply of money to the speculators, reached a limit. Once they stopped buying, inventories began to grow, and the price boom came to an end.

Source: http://www.truthout.org/docs_2006/081706L.shtml

[Virginia Dare]

1. Many of the economic pollyannas are still predicting..

a soft landing. Why, I don't know, because from my perspective it's looking like it's going to be pretty hard at this point.

The next step? Inflation.

Lots of folks will be left with massive debt and a whole lot of crap that's worth nothing.

[BuhByeChimp]

4. Pretty much.

Its a sad reality, but I do hope its a moderate slide.

My local market appears to be safe because we haven't seen the bubble and prices are low. We have actually had a good influx of people move here from the bubble markets because of housing prices.

My other concern is that no one seems to have a savings account anymore. There are many reasons for this, but the gas prices are making it much worse. The credit card is not a savings account.

[SmokingJacket]

9. Savings accounts have like 2% interest.

I have one, but sometimes I feel like it would make as much sense to stuff the cash into my underwear drawer.

[JAYJDF]

11. I vote you take it out of the financial institutions. They are making

20% on bank credit cards and giving you 2%. I say fkm

[elehhhhna]

13. Are you in Texas? We're still very busy new-housing wise.

[ProfessorGAC]

14. There's Already An Inflation Problem

Remember the numbers you read in the paper don't include fuel. The average person buys 700 gallons of gasoline per year. With gas, for the year, 25% higher than last year's average, that absorbs almost $400 of after tax dollars. For a family living at the median household income, they're already taking a >1% inflation hit, not counting the increase in costs of goods in all other areas.

That extra 1% is the difference between normal inflation and high enough inflation to be a net economic drag effect.
The Professor

[Tyler Durden]

18. Remember the Savings and Loan Scandal?

This is the new wrinkle on the rich buying up EVERYTHING again at pennies on the dollar.

SOCIALISM!! BRING IT ON!!!

[snappyturtle]

2. The last sentence of this article....

states that the Federal Reserve Board and members of the economic profession deserve to serve serious penalty for the housing predicament. Just like all the other problems this administration has set upon us, I doubt that penalties will be forthcoming. What has happened to the definition of 'responsibility' today?

I guess I should feel lucky that we have sold our building, only five years old and very energy efficient, for $45K under the appraised value! Housing (residential), lake properties, and commercial sales have plummeted here. Representatives of two banks in town say mortgage applications are way down from a year ago......we didn't need to be told that! In this little tourist town the tourists are all but gone now for this season and the town will settle into a much slower time readying for the long winters here. Bleak.

[Tyler Durden]

3. I little late for my family....

We got to swim in the "BURST HOUSING BUBBLE" shit filled swimming pool last November. We lost over $40,000, another $30,000 in Canada, and Paid an additional $12,500 in Federal income taxes.

The Housing Bubble Blew up like a fully armed and fuel F-16 flown straight into a mountain. LAST YEAR.

[wicket]

5. Jesus, I'm sorry

:( :hug:

[Tyler Durden]

17. Closest I have ever come to putting out a "contract" on my ex.

She did her sob story in front of the "Friend of the C_ _ T" (excuse my vulgarity, but I HAD CUSTODY! What right did they have to refuse ANY change of domicile, ESPECIALLY one that took us CLOSER TO THE BITCH??? I HATE the FOC.) and they refused our request to immigrate to Canada. Therefore our funds used to build the house became TAXIBLE.

I promise you, I will whip it out at her funeral and piss on her grave.

[fed-up]

6. My house has been on the market for 2 weeks, only one potential buyer

has looked at it. In area with over 500 realtors and 590 houses on the market (normal is about 150) only one came to the Realtor's tour yestereday and that is because my realtor offered a $100 drawing for the realtors that showed up. There were 86 houses on the open house list for this week (33 of those were relists with lowered prices).

My house is priced $60K below what it would appraise at.

With all the FEAR MONGERING headlines people are just biding their time and waiting to see if prices drop. Some realtors and the newspapers are convincing people to wait. Lots of investment properties are on the market with more coming on daily.

I found a smaller house that would be perfect, but am afraid to make an offer in case mine doesn't sell....

All I can do is cross my fingers and hope that someoned wants a great house on a great half acre lot for a great price...

Going through the sold listings of the past 6 months in my price range 13/14 sold in less than 90 days and about half of those sold in less than 60 for close to asking prices. Most houses that sold up til June got close to asking and seemed to hold to the 2 1/3 times the price they sold for 5 years ago. (thanks to google I was able to find there selling price if they had sold in the last 5-6 years) The market is NOT as bad as they are portraying, there are just 4X MORE Listings. Did I also say that July had a killer heat wave in California?

Did I say that I hate the media yet???

[Tyler Durden]

16. Got you WAY beat.

The house was reno'd from a 3br/1bath to 1master br/bath 3other br/2 other bath new kitchen 2 sets indoor french doors rebuilt in ground cement pool....

Appraised at $220K. Listed in Feb 2005 for $195K.

After no bites, In MARCH, lowered to $185K.

After not so much as ONE OFFER, in JUNE lowered to $170K.

In September, NOW we are DESPERATE (house on the ground in Canada, but we can't move in...mortgage on house for sale...) listed at $155K

(this house had OVER $90K of Materials in improvements, not counting my sweat equity.)

FIRST AND ONLY OFFER IN EARLY NOVEMBER. $142K with an $8K GIVEBACK so they can make the down payment. Realtor (our person friend) says, in tears, take it. He doesn't know when the next offer would be and he's holding over 6 months inventory.

After paying the $115K outstanding on the mortgage and paying off some debt, plus $10K down payment on another house (we lost the one in Canada: $150K invested, sold for $115K) we break even.

THEN COMES THE $12,500 TAX BILL.

total losses 2005-2006, roughly $90K in cash.

Don't even TALK to me about the "soft landing" of the housing bubble.

[jsamuel]

7. why do so many deny that the same will happen to the oil bubble?

the only thing I can think of is "peak oil" which I have not seen any evidence that it is happening (at least yet)

[enid602]

8. unemployment

And unfortunately, so many of the areas where prices have increased rapidly (Florida, Arizona) also have a higher proportion of people engaged in the homebuilding, real estate and mortgage trades. It's a double-whammy, of falling home prices and unemployment.

[onethatcares]

10. yes, but there were

1000 new jobs created last month. If you count the guys and the cell phone deal, it raises it to 1003. A new world record.

[Bandit]

12. According to my property assessor for property tax my home

went up in value over twenty five percent this last year....My city is needing money badly though. All the US treasury is going either to kill people or to the very wealthy so we common folk need to pay "big time" as Cheney would put it..:shrug:

[meldroc]

15. I'm so glad I don't own a house right now...

I just started a cool new job, and I'm in the process of paying down my debts and saving money in hopes of buying a house two years from now.

So this housing crash may actually be good for me, assuming I don't get caught in the next wave of unemployment...