No Housing Bubble

[powayseller]

This guy says there’s no housing bubble .

Even Steve Forbes says there’s no bubble (hey, didn’t someone else just say Steve Forbes believes oil prices will come down? So much for him knowing anything…)

The chart in the article shows that home sales have barely budged. “The Fed has hiked its overnight interest rate 17 times in a row and we’re still selling almost 7 million houses per year. Meanwhile, median home prices are almost exactly where they were one year ago. All this is because the economic fundamentals that have been driving housing are still driving it.”

Any comments?

[Lickitysplit]

I don’t know anything about this guy, but I have a hard time calling Forbes a politician. Sure, he tried a run at the white house but he wasn’t exactly very good at it. I think we all agree that a bubble exists, at least in some areas, and certainly here in San Diego. I would suggest that not all areas of the country have been similarly overvalued. I don’t know whether or not the extreme hotspots like ours pull the national data enough to argue that a nationwide bubble exists. My thoughs are that our current situation was brought on by speculation and enabled by loose exotic lending. While the loose lending was availible nationally, speculation seems to be more regional, and therefore I feel the bubble is regional, not national.

[powayseller]

The runup in prices is regional, but the drop in prices will be national.

Exotic lending and overbuilding are national phenomena, and they are the fundamental reason behind the impending price collapse in San Diego, besides the fact that all excesses correct.

The recession will further lower house prices, as people who lose jobs will be forced into foreclosure. Even people with 15 year or 30 year mortgages will be forced to sell, and in many cases their home value will be less than their mortgage.

I hope everyone reading this get the point: the housing prices will go down nationwide. Expect a 50% drop in nominal prices in San Diego, a 5-15% drop in places like Omaha, NE and Des Moines, IA.

LicketiSplit, did you read my post about the lady in Georgia in foreclosure? That’s not a bubble region, but it has one of the the highest foreclosure rates in the country.

Foreclosures in the US are up 28% over May 2005. Colorado, Texas, Georgia, and California lead the pack.

QUOTES

“…foreclosure activity in Massachusetts was reaching an epidemic level and clogging the court system. ”

“The problem of home loans going into default has caused Indiana to be dubbed the foreclosure capital of the country, a title it recently lost to Georgia.”

The Kansas City Star has this on foreclosures in that state. “The number of home foreclosures in Kansas has increased over the past year, a new report says. There were 436 mortgage foreclosures in the state in April, slightly more than double the number from April 2005. Through the first three months of 2006, lenders foreclosed on 600 homes, about one-third more than the 440 foreclosed during the same period a year ago.”

“Kirk McClure, at the University of Kansas, said he thinks declining home values in western Kansas contributed to many of the foreclosures. For example, McClure said someone holding a $100,000 mortgage on a home valued at $90,000 has little incentive to keep making payments.”

“‘One of the best tools for our housing market in western Kansas is a big bulldozer,’ he said. ‘We’ve got too many units.'”

“McClure also said lenders offering ‘100 percent financed, no-money-down’ loans haven’t helped people with inconsistent incomes. ‘If we take someone whose income is very low and it’s irregular, and we get them into a home that they can’t sustain two years, three years down the road, we have not done them a service,’ he said. ‘There’s a reason a bank turns somebody down.'”

“Kirk Lowry, vice president of Farmers State Bank in Atwood, also blamed ‘brain-dead finance companies’ for approving loans worth more than the property. The companies, few of which regularly do business in the area, roll fees into the mortgage payment, meaning that if the owner defaults, he or she is left with almost no equity.”

END QUOTES

I think you get the idea: Nationwide housing price drops!!!

I will ask Rich to update his Housing Bubble reports to include the national stuff, because even our well-read piggington members are still in the dark about the national lending bubble and its housing implications. I guess I thought it’s clear, but I’ve had several people the last couple days, who didn’t know about the national housing glut.

[UP IN ARMS]

No bubble in England either 🙂

vocationvocationvocation

[picpoule]

It’s true Colorado has led the nation in foreclosures, but this is because of the type of loans given to people who should not have been getting any kind of mortgages. We did not have a bubble here, though. Just bad lending practices are the reason for the sky high foreclosure rate.

[UP IN ARMS]

The “it’s different here” statements are made even in the middle of Santa Fe, New Mexico. My friend lives in Littleton, CO and just sold his home last month for 10k less than what he paid. Now people think 10k is not that much but to a 180k home it is enough. Especially when you lived there 3 years and at least expected some appreciation. But for sure CA will be hammered more so than CO. You can’t even compare the 2. Especially since 25% of all RE dollars generated in the US comes from CA.

PS. I can not imagine that the 29 foreclosed homes on mocking bird lane are letting the other homes on that block have any appreciation. Foreclosures have a large impact if there is a bunch on one street. Than I think you will start seeing statements like “it can’t happen on my street”. “My streets special”.

[powayseller]

picpoule, that’s what I’ve been saying for months. Exotic lending (which includes subpar borrowers qualifying for morgages) are leading to high foreclosures. You don’t need a housing bubble to lead to foreclosures, just poor lending practices. Whether you are in foreclosure on a $110K house or a $800K house really doesn’t matter. It doesn’t matter that your house appreciated 20% a year before you bought it, only that you cannot make your mortgage payment.

I was getting frustrated with comments on this forum which said that only CA and other bubblicious regions would see price declines. The truth is that any region which used exotic lending will see price declines. Show me an area of the US that did not sell exotic mortgages, and that region would be exempt from a downturn. I don’t know of any. Even my little Midwest conservative town of Omaha, NE is seeing price reductions and rising foreclosures, a new housing glut, and overuse of exotic lending.

However, no one is exempt from job loss in 2007-2008 recession. During the recession, even conservative borrowers will face foreclosure, as they lose their jobs and cannot make their payments. They will be sel

Anyone with a mortgage is susceptible to having to sell into a declining market. If you read this, think about whether your job will be safe in a recession. If not, or if you may be moving in the next 5 years, sell your house now, before your paper profits evaporate. Sell before your job loss forces you to sell into a lower market.

For the life of me, I don’t know why anyone would want to own a house right now. But then again, there is so much I don’t understand.

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