[bubba99]

For the California house add $60,000 to $80,000 for the cost of getting the building permit, sewer permit, water permit and the plans approved. California has more than its share of fees.

[bubba99]

I agree with most of what you have stated as being the most logical and likely progression of housing prices. But the stickiness of prices on the way down has been very strong, and could delay price “equilibrium” for some time. Clearly the must sellers are going to be “very motivated” , but a lot of the market will hold out for years – either staying put, or turning their old house into rentals.

The worm in the apple is demand. There are at multiple people who would like to buy (almost) every house. Items 1 through 12 put limits on the effectiveness of the demand (who can or will buy at what price) but the demand is still there. There will be buyers at each price reduction, not as many as at the height of the frenzy, but buyers creating new “stable” comps.

I have two coworkers who have been waiting to buy a house for years, and now can afford something. One has just closed, and the other is looking hard to find a place “before the price goes up again”. They are both educated enough to understand the likely down trend in prices, but they choose to ignore the obvious to pursue their “dream of owning a home”. This type of thinking, along with the “prices will be back up in a few years” from potential sellers could create a real delay in prices reaching any economic value type of price point.

I knew that prices would reduce quickly after 1st quarter 2006 (when I sold my house and moved to my boat) but the robust nature of the Ca housing market fooled me. Now that I expect prices to decline slowly over the next 3 – 5 years, maybe I will be wrong – again.

[bubba99]

It is odd that the media is only discussing the impact on the subprime lenders. As housing prices drop in response to subprime foreclosures, the “Regular” lenders are also at risk. The zero down, or low down payments used by conventional lenders can leave a homeowner underwater. If the homeowner is deep enough in the negative category he/she may choose to walk away. It will only take a few more percentage point drop in prices to make recent buyers join the exodus. We have probably already seen a 20% drop from the highs of early 2006, and this puts many buyers at a breakeven or negative equity already. Many will try to hold out for some time, but why pay 4k per month when you can rent the same property for 2k

[bubba99]

Daniel,

I think you are dead on. The country needed a boost after combined results of 9/11 and the Tech crash. But they did too much for too long.

The interest rates were one step, but we also had “Liar Loans”, new Negative Amortization Loans, 100%+ loan to value loans. The market suddenly changed by bringing in thousands of previously unqualified buyers. And when the FED should have been raising rates, they were still cutting in June of 2003.

Prices are still sticky today in part because low interest teaser rates are still available along with Liar Loans.

[bubba99]

What happens to the new “2005” development when the prices drop below purchase prices? can be complicated. IMHO It depends on who and how the majority of the houses were purchased.

The homes purchased with large down payments and conventional financing should not be impacted unless the owner is forced to move by other factors. The price drop just erodes equity taken from a previous home. The mortgage is still below current lower price.

Homes purchase with conventional financing by families that do not want to move, nor harm their credit ratings will likewise stay off the market, and the owners will just wait for the market to catch up – at least for the first few years. Even if the amount owed exceeds the current value of the home.

The frenetic buyer who just had to get in on Real Estate and used “creative financing” to make the purchase will run like a rabbit. As soon as the market drops significantly below what he owes, or the financing ballons this buyer will flee the neighborhood. Although this home owner will drive prices down quickly, he will not impact the other two types of home owners they will stay put.

The real impact on a specific area will depend on the mix of these, and other types of buyers.

[bubba99]

I love conspiracy theories, but in the case of 9/11 lets stick to some absolute facts.

First the two planes did bring down the twin towers. With a modern skyscraper, each floor supports the many above it. Like a row of dominos, when one floors steel support structure fails, the millions of tons of material above cause the subsequent floors to drop one at a time. Witnesses said the aviation fuel caused the steel to be heated white hot, causing the structural failure. An unfortunate design flaw of modern building is a mudsill on each floor to make attaching the wall structures easier. The mudsill held in the burning fuel allowing the overheat to cause the steel to fail.

Second, we know the Osama bin Laden (OBL)hated the Saudis for stripping him of his citizenship and family. We know that many of the supposed 9/11 hijackers (9) who were supposed to be Saudi were in fact imposters. The info left in the van (details of the identities of the supposed hijackers left by “late” arriving terrorists)pointed to names of people who had their identities stolen. At least four are still alive. This points to a “get even” ploy from OBL that also taints the Saudi’s as the perps. This also explains why the US govt. worked so dilligently to get important Saudi’s out of the country in the days just after the incident – they were at risk from a mislead public.

Third, the various intelligence agencies did surface the basics of the plot, but were ignored by their own management. Not an executive conspiracy, but standard government ineptitude. There had been talk of plots using hijacked planes back as far as 1996, but no one took any action. Mohammed ATTA the supposed ring leader was on everyone’s radar. Just to be funny, when he applied for his visa to come to the U.S. he used a name that was a joke just to prove how unfamiliar with Muslim names our experts are.

Forth, the supposed perfect hole in the pentagon is a puzzler until you find out the wings of the plane had already come off after contact with the ground. The hole was caused by only the perfectly round fuselage.

The only fact I can find that supports a conspiracy is that
Al Queda has never been able – before or since – to launch an operation of this complexity. Transferring money, getting flight lessons, coodinating 21 peoples movements and living arrangements, planting misleading evidence. This was two orders of magnitude more complex than anything else they have done. Pointing to the possibility that Al Queda was not the criminal. Supporting this assertion is the fact that OBL has disappeared off the face of the earth. If your believe there was a conspiracy, and that a sitting US President would not ever allow such a travesty, then to whom can we look for the ability to perform complex dirty tricks types of foreign operations that had something to gain from 9/11.

[bubba99]

I bought them in two different places. First through my Morgan Stanley account, and directly from my savings account at Credit Suisse in Switzerland. May make since to go to Switzerland and open an account to save on fees. Round trip with 5 days in a hotel is only $1400 US.

[bubba99]

if the value of the dollar falls due to less demand from the foreign exchange market (and not due to excess supply from the Federal Reserve creating too much money) is the outcome still the same, i.e. higher prices?

The answer is it depends. As long as oil is posted in dollars (not adjusted for dollar devaluation) the supply of dollars does not impact oil prices. The big jump comes if OPEC moves to the Euro instead of the dollar, then the devaluation maps directly to inflation in the U.S. But since most of the OPEC nations rely on the U.S. to keep them in the weapons they need to maintain power, it is not likely that OPEC will do anything to anger the U.S. – more than they already have.

The easier part is regular foreigns exchange. It will take twice as many dollars to buy the same goods and service after the devaluation than it did before. Kateras Parabus (all else equal) then the cost of imported goods doubles in the U.S. and becomes 100% inflation. Also not likely, but any devaluation will fuel inflation.

[bubba99]

Yes bub and bubba99 are two different people. Can’t speak for bub, but I have been scared by the FEDS printing of new money for some time. I have put a good deal of my savings into Euro denominated bonds to help prevent the erosion of my dollar savings.

So far it is working well

[bubba99]

powayseller,

Welcome to my world. But keep in mind, that up until lately, the FED’s decisions have been (for the most part) in the best interest of America as a whole. While many of the decisions have favored some other very favored nations, as a whole the process works for the U.S.

[bubba99]

Don’t know if a shotgun would do it, but a pickup would definately help move this pos.

[bubba99]

Don’t know if youall noticed, but according to Datrrell, the median price of a home in Amarillo is $111k. Money magazine has it at $77k. But either way if your were willing to spend 3 times the average home price, you would still be half of the asking price. This put this property (consertively)in the top 1% in terms of price – eliminating 99% of the potential home buyers.

To get the median home price divided by median income we divide median home price by median hh income we get,
77778/38062=2.04 for Amarillo,
493000/59775=8.2 for San Diego. (All numbers from CNN Money Magazine)

But this house in particular is
648000/38062=17.02 or 8 times the average for the Amarillo market, and twice the average for the San Diego market.

No Darrell is wrong on all counts. This house is way overpriced relative to Amarrillo market, and double the multiples by California standards – no bargain for California transplants. Unless you are looking for the most expensive McMansion in Sandhills in a half finished development.

[bubba99]

Remember that most of the main stream R.E. professionals are still telling people that prices are stable, will only decrease by a few percentage points, and still in 2006 have not dropped as much as they went up in 2005 alone.

For many the jury is still out on whether the decline in housing prices will be substantial or just a hicup Although we have seen some declines in R.E. prices, the run up since 2001 is way more spectacular. Most who bought in 2000 – 2003 and maybe early 2004 are still (to the untrained eye) in good shape. Although foreclosures are up to three times last years rate, the higher levels are normal for the years before 2001.

If the homeowners who took out toxic loans in 2004 – 2006 can continue to refinance with new loans (toxic or otherwise) the anticipated shock from foreclosures will not be there to drag down prices next year. If home owners continue to keep their overpriced properties off the market price declines will continue to be modest. If people in mortgage trouble continue to work three jobs to keep up the payments on their houses . . .

Plus I have not seen anything yet that ties R.E. prices to the “value” of the dollar. If the dollar value is declining on the world market, then asset prices in dollars should increase – much like stocks and other hard assets do as the dollar declines – in theory. If this is true then we should be seeing a 10% increase in R.E. due to currency offsetting bubble declines. If housing prices are insulated against world currency prices until inflation takes up the difference in the domestic market, then there will be no currency impact in the short run and . . .

So before you get too angry with family, try to see how fragile any position is.

[bubba99]

The dollar dropping against other major currencies has been discussed in this forum many times. PS did a thread on other major players (China, Japan, UAE) diversifying out of their dollar reserves. China alone had almost a trillion in dollar reserves. They have been saying this for years and now have actually begun to move. In the last month or two the dollar against the Euro has dropped from .78 to .75 and will probably continue dropping.

Along with the diversification out of dollars, we have the FED printing money at the rate of 1.1 trillion per year. The dollar is headed down. How fast is hard to gauge because the FED stopped reporting M3 money supply, the piece that includes all the new dollars to pay US consumer debt. The dollar was a strong currency but now . . .

I am all in Euro bonds – German government and the Netherlands. To date 3% return in that last month because of dollar decline.

[bubba99]

We have talked about M3 in other threads, and yes is a problem. Particularly beginning last month where other governments did not buy the US debt offerings to pay the balance of payments. Although I cannot prove it, the only other way to pay the debt is for the FED to buy US treasuries to pay the bills. This means more dollars in circulation, and less value to those who hold dollar debt in Europe, China, and Japan. The difference comes out in the exchange rate of dollars to euros.

Remember that at the end of 2002, a dollar bought 1.12 euros. Now 4 years later, a dollar buys .76 euros – a decline of 36% in a little under 4 years. So in theory, the price of European goods and services should have gone up 36% because the dollar decline by that much, but they have not. The Europeans, China, and Japan, et al are continuing to eat the losses to keep selling to the US consumers. But not forever.

China which is holding/was holding about a trillion dollars in reserves has said they are going to diversify into other currencies. And last month we saw the result. Not enough foreign buyers for dollar debt. When you wrote the earlier thread about foreign banks diversifying out of dollars (earlier this month, or last month) it was .78 dollars per euro, now it is .76, a loss of 2.56%. The more US debt the FED buys, the faster the growth of M3. Sooner or later out foreign suppliers will need to raise prices to offset the dollar devaluations, and then inflation will hit 10+ percent.

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