House Prices

[sharon sanders]

Re: House Prices

yes, but even more interesting than public perception would
be , what the big investment companies , banks,
insurance companies are doing. They are doing their
own analysis, but keep it secret.
Are they rearranging their portfolios because of panflu ?
Is there already some fear of hyperinflation,crime,civil war and such ?
Also shares of traveling companies etc. but again, this is hard
to estimate since other factors play a role.


here is a link to the daily updated bird-flu-shares-index by Don Luskin:
http://weforum.newsfutures.com/marke...bol=FLUCOUNT06

17 pharma-shares which ~might~ benefit from bird flu

The major players in the world have been anticipating the potential BF scenarios since last Fall. Most of the official "reports" have downplayed the financial risk. One major report was the Marsh McLennan Assesment of Global Risk for 2006 prepared for the World Economic Forum.

http://www.flutrackers.com/forum/showthread.php?t=5

This report and others have helped keep the markets stable.

As to the housing situation, Al is correct in saying that housing is a lagging indicator. It will not be the first sign of an economic problem due to H2H BF.

The first sign, and are you ready GR?, will be gold. Gold is the standard hedge vehicle used for instability.

As to the shares, I am not a "player" in the pandemic market, but some are, and there is quite a lively discussion here:

http://www.flutrackers.com/forum/showthread.php?t=698

Ask your questions and you will get many interesting answers.

[gsgs]

Re: House Prices

yes, I'm aware of the global risk 2006 report.

The house-prices -- I read about it on another webpage.
They suggested that house prices would fall in/after a severe pandemic.
But even when you know a pandemic is ahead and house-prices will fall,
you'd need the house now to hide from the flu !

So we could have the absurd situation that house-prices go down,
but house-renting prices could go up ?!

Gold is psychology IMO. There is no industrial need for gold,
just jewelry and government stockpiling and such.
Why is gold needed in a pandemic ? You are not assuming that
we will have inflation, are you ? Well, then T-bonds should
go down, I think. Or country ratings. Or oil goes up,
although .. travel goes down which is bad for oil-prices.

[sharon sanders]

Re: House Prices

"yes, I'm aware of the global risk 2006 report.

The house-prices -- I read about it on another webpage.
They suggested that house prices would fall in/after a severe pandemic.
But even when you know a pandemic is ahead and house-prices will fall,
you'd need the house now to hide from the flu !

So we could have the absurd situation that house-prices go down,
but house-renting prices could go up ?!"

The situation that exists now in many areas is that housing has had a terrific appreciation in prices. Some areas are at historic highs. All it would take now, without BF, is a rise in the long term rates for the inventory to build. If it costs too much to pay the monthly mortgage payment due to the high interest rate on the loan, less people can afford to buy. If less people can afford to buy, then there is less demand for the existing inventory. This less demand forces prices down if the inventory stays constant. If there are less people to buy and the supply of homes on the market continues to grow then prices can continue to fall.

In a BF situation, it is anticipated that many will lose their jobs. This will keep people from buying houses and also many will be forced to sell. This will cause an increase in the supply of houses at the exact time that many will not demand one. This would be an excess supply of homes for the existing demand. This will cause prices of houses to fall, and maybe dramatically.

So where do these people live? Some may rent, many will move in with friends and relatives, just like they do now when they have "hard times." However, this will not drive the prices of rents up, because at this time in the United States speculators have bought many, many rental properties and these properties will be competing for the persons who still have reliable incomes.

"Gold is psychology IMO. There is no industrial need for gold,
just jewelry and government stockpiling and such.
Why is gold needed in a pandemic ? You are not assuming that
we will have inflation, are you ? Well, then T-bonds should
go down, I think. Or country ratings. Or oil goes up,
although .. travel goes down which is bad for oil-prices."

Sure gold is mostly psychology. I, unlike GR, do not think gold will hold an exceedingly high value during the pandemic. You can not eat it.

I think during a pandemic the most valuable asset wil be your income, followed by certain hard-to-obtain commodities.

[GaudiaRay]

Re: House Prices

Housing in Ojai, California, as of April 21, 2006.
Today, my friend, who has her middle class house, probably $850,000+, on the market, bumped into me at the post office.

As of January, she has not had a single person look at her house. Not one. She has lowered her price, and still, not even a lookie-lu.

Prior to January, she had ONE person look at her house, besides for the brokers' caravan.

As everyone would surmise, I've advised her to sell her house 4 years ago, when the market was hot.

What this means.....
She saw a rise in "value" over the past 4 years. She thought, greedily, that she was the "owner" of that rise in value. Now she is discovering the truth. She not only is not the owner of the rise in value, but she has an asset for which there is no buyer at the current price. She has no assurance of a buyer at any price, back to the price of 4 years ago. And for you who think real estate holds value, I'm confident that if she does not lower her price to that of 4 years ago, to make it appear as if it were a "steal" at this moment, she will be holding this property not only long beyond the time she desires, but be offering the property at prices significantly below those of 4 years ago.

Bulls make money. Bears make money. But pigs get slaughtered. One always, always, always exits a position when the markets are moving in the favorable direction. She didn't. She's in a financial bind.

If she were smart, she would lease the house for 5 years, get whatever assurances and security she can to assure payment, and forget the property...to move on with her life elsewhere. But, she's typical of the standard investor, unwilling to realize a loss.

This is not the only similar story in Ojai. There's another woman I know who too never had an offer and in her case, has purchased a next home, thinking she'd be out of her first long prior. The outcome may be loss of the second home and personal life mental depression over her inability to realize her next dream.

Do you have update stories on the real estate values in your area?

When bird flu comes to town, if she survives the experience, I expect both of those women to be broken people, crushed financially, losing the entire rise in equity value over the past 8 -10 years, carrying unmeetable monthly financial obligations.

Wel'll see.

[Laidback Al]

Re: House Prices

Unfortunately, I live a geographically backward part of the nation, where there is still reasonable job growth and the real estate market continues to rise despite what is happening on the coasts.

Due to smoke and mirrors, I think most homeowners have confused the cost of personal sheltering with the concept of "investment". Personal real estate has become the new "no-lose" investment. In our area, Realtors suggest umlimited upside potential to real estate prices. So, people take out ARMs, buy second homes, or refinance to extract cash from homes. All with the "greater fool" expectation. However, once the music stops, there will be a lot people holding "losing positions" in real estate. Especially factoring in the demographic changes ahead due to our aging society. And as GR alludes, bird flu will absolutely kill real estate prices for many years into the future.

Some one with more smarts than I can comment, but I believe that most of the economic growth we seen over the past few years has been directly driven by the real estate market.

[GaudiaRay]

Welcome to the dead zone

Welcome to the dead zone
Real estate survival guide: The great housing bubble has finally started to deflate, and the fall will be harder in some markets than others.

By Shawn Tully, FORTUNE senior writer
May 4, 2006: 2:15 PM EDT
<!--startclickprintexclude-->
<!-- CONTENT --><!--endclickprintexclude--><!--startclickprintexclude--> <!--endclickprintexclude--> NEW YORK (FORTUNE) - The stories keep piling up. In many once-sizzling markets around the country, accounts of dropping list prices have replaced tales of waiting lists for unbuilt condos and bidding wars over humdrum three-bedroom colonials.
<!--startclickprintexclude--><!--endclickprintexclude--> <script language="JavaScript"> <!-- var clickExpire = "-1"; //--> </script> The message is clear. Five years of superheated price gains rescued America from stock market collapse, put billions in consumers' pockets, and ignited a building boom that bolstered the nation's economy. (To relive the frenzy, see "Riding the Boom.") But it's over. The great housing bubble has finally started to deflate.

You won't find that news in broad national statistics or the upbeat comments from the real estate industry. Thelatest official figures, for example, show both new and existing home sales rising in March, a mixed bag on prices - and a record number of new homes on the market.
<!--startclickprintexclude--> <!--endclickprintexclude--> But FORTUNE's on-the-ground reporting - in what up to now have been some of the nation's hottest areas - paints a very different picture: Contracts are being canceled, deals are drying up, prices are starting to drop. The psychology is shifting even as thousands of new homes and condos join the for-sale listings each day - so the downward pressure will only get worse.
<!--startclickprintexclude--><!--endclickprintexclude--> "The buyers' sense of urgency is gone," says Bob Toll, CEO of luxury builder Toll Brothers (Research), who has long been a housing bull. "They see the market going soft, so they stall."
<!--startclickprintexclude--><!--endclickprintexclude--> Take a deep breath. We're not forecasting a nationwide housing collapse. For one thing, the vast expanse of America between the coasts was never touched by real estate mania and is in no danger of a meltdown. And even some overheated markets - including Manhattan, Los Angeles and California's Orange County - are still simmering.
<!--startclickprintexclude--><!--endclickprintexclude--> But things are suddenly looking very chilly indeed in four coastal cities - Boston, Washington, Miami and San Diego - as well as three Western boomtowns: Phoenix, Las Vegas and Sacramento. So far this year, monthly sales have fallen 11 percent to 25 percent in Miami, Boston, northern Virginia and San Diego, according to local housing experts.
<!--startclickprintexclude--><!--endclickprintexclude--> The prognosis is even worse in Phoenix, where only 4,500 homes sold in the first three months of 2006, vs. 6,100 for the same period last year, and in Sacramento, where new-home sales plunged 57 percent in the first quarter (compared with the first quarter of 2005). In California it now takes six months to sell a house, twice as long as a year ago. (See a slideshow of home prices in all the troubled areas.)
<!--startclickprintexclude--><!--endclickprintexclude--> And what's happening in these areas is a sign of what may be coming in the rest of the bubble zone -- the two dozen or so mainly coastal cities and their suburbs that have seen prices soar in recent years and account for 60 percent of the nation's residential real estate value.
<!--startclickprintexclude--><!--endclickprintexclude--> The problem is as basic as beams and trusses: The triple threat of soaring prices, higher mortgage rates and relentlessly rising property taxes has drastically increased the cost of ownership and put many homes out of reach for a huge number of potential buyers.
<!--startclickprintexclude--><!--endclickprintexclude--> In California, for example, only one household in seven can manage the payments on the median-priced house, now selling for $561,000. It takes an income of $134,000 to afford that home, which might be a modest three-bedroom ranch in a bland subdivision. The affordability gap is driving buyers to the sidelines, replacing the frenzy with a growing void as buyers wait for prices to drop.
Welcome to the dead zone
<!--startclickprintexclude--><!--endclickprintexclude--> With houses hovering beyond the reach of most potential purchasers, formerly frantic markets grow eerily calm. People who rush to list their homes, hoping to grab a fat gain just before prices break, take them off the market.
<!--startclickprintexclude--> <!--endclickprintexclude--> Sales shrink as buyers float low-ball offers, and sellers refuse them. Realtors and mortgage brokers find other jobs. The bubble areas turn into Dead Zones.
<!--startclickprintexclude--><!--endclickprintexclude--> There's no mystery about what it will take to close the affordability gap and bring the markets back to life: Prices will have to come down, and incomes will have to move up. Right now the ratio of home values to incomes in the bubble zones is about 40 percent above its historical average. So the only question is how much of the adjustment will come from rising incomes and how much from falling prices.
<!--startclickprintexclude--><!--endclickprintexclude--> On that point there's reason to be hopeful. In the past, housing declines almost invariably occurred while the economy was suffering through a recession. This time the housing downturn is coming during a period of strength, with GDP surging nearly 5 percent in the first quarter. If the economy keeps chugging along, household incomes should grow at around 4 percent a year.
<!--startclickprintexclude--><!--endclickprintexclude--> Under those conditions one likely scenario is that housing prices would drop 10 percent to 15 percent in the bubble zone over the next 12 months, then remain flat for maybe four more years while incomes catch up.
<!--startclickprintexclude--><!--endclickprintexclude--> But there's another possibility. For the past few years the housing boom has driven the economy, adding jobs in construction, remodeling, and real estate services. And consumers gorged on the equity in their homes, taking out a total of $2 trillion via loans, refinancings, and sales over the past five years.
<!--startclickprintexclude--><!--endclickprintexclude--> Those powerful stimulants, which added a full point to annual GDP growth, will soon vanish. If corporate spending or some other force doesn't come along to pick up the slack, we could go into a recession that would cut income growth to zero. Then inflated housing prices would have to shoulder the entire, wrenching adjustment, falling 30 percent or more over several years.
<!--startclickprintexclude--><!--endclickprintexclude--> In either case, many individual homeowners have nothing to worry about: They can simply stay put and ride out the cycle. The only thing they'll lose is the opportunity to brag about their paper profits. And in some places, appreciation has been so sharp that a seller could see prices plunge 30 percent and still make a hefty gain.
<!--startclickprintexclude--><!--endclickprintexclude--> The real losers will be those who bought recently at inflated prices and are forced to sell, usually because they're taking a job in another city or can't make the payments when their adjustable mortgage rate jumps. And speculators who bought overpriced condos in hope of a quick killing are going to get hosed.
<!--startclickprintexclude--><!--endclickprintexclude--> Next: Unmaking the myths of the housing boom.
<!--startclickprintexclude--><!--endclickprintexclude--> Additional reporting by Matthew Boyle, Nadira A. Hira, Julie Schlosser, Christopher Tkaczyk and Jia Lynn Yang.


http://money.cnn.com/2006/05/03/news...ex.htm?cnn=yes

[Binkerbear]

Re: House Prices

GR asked me to post this chart here:

If we expect this to play out like the NasDaq in 2000, then there's a long, long way left to go on the downside.
For the technicians, this looks like a perfect head-and-shoulders pattern indicating the RE market won't be going back up for quite awhile. This is also (I believe) a perfect entry for "shorts", when the level drops thru the base support on that right shoulder (indicated by the dashed-line).

[GaudiaRay]

ARM Meltdown? We're Probably Already There

ARM Meltdown? We're Probably Already There

Friday, May 26, 2006

Foreclosures are picking up in so many markets, these posts will have to be condensed. "Nationwide, 87,582 residential properties were listed for sale as foreclosures in April, up 14% in a year. More than double that number, 218,935, were headed toward foreclosure, and an additional 326,889 homeowners were in bankruptcy court."

"Wisconsin echoed the upward trend, with 1,024 homes for sale as foreclosures last month, 6% more than a year earlier. But nearly three times that number, 2,898, were headed toward foreclosure and 3,600 homeowners were in bankruptcy court."

"'I'm certainly aware of the spike,' said attorney Peter J. Zwiefelhofer, who runs Milwaukee Bankruptcy Center. 'A lot of people overpaid for their house in this boom and a lot of properties were appraised at unrealistically high prices, mostly by subprime lenders looking to close a deal. Plus, there's a lot of unsophisticated people out there who look at a mortgage as just a payment and say, 'Oh, I can swing that.' But they can't.'"

"Until this year, most financially strapped homeowners could count on a booming housing market to provide them a quick sale at a nice price. But that's over."

"'What's startling isn't just the higher numbers, but who they represent, the affluent, not just the down and out. 'These are the ones with a bigger ability to get money, the executives, businessmen and professionals, buying more than they can possibly afford,' said Brad Geisen. 'They were banking on price appreciation continuing to go up fast, and pulling their money out in time.'"

"'One thing I've learned: The more expensive the house, the more difficult it is to unload,' said Milwaukee bankruptcy attorney Bruce A. Lanser. 'In a case where the house is upwards of $400,000 to $600,000, I used to think, 'Oh, great house.' But those houses are not selling that well anymore.'"

"In the suburbs of Dallas, Bridget Edwards comes home to uncertainty every day. She and her husband, James, are four months behind on their mortgage. The reason? 'We have an adjustable-rate mortgage,' she explains. 'I really didn't know it would change like this.'"

"'The reason homeowners have been buying properties that are probably beyond their means, is that they haven't been looking at what the house costs,' says Rick Sharga, who maintains a database of foreclosed properties. 'They've been looking at what the monthly payment was.'"

"That?s something the Edwardses admit, and now regret. 'I am sad. I'm angry. I'm confused,' says Bridget Edwards. 'I love this house,' James Edwards says."

"Last year, Jolene Garcia was one of the 9.1 percent of San Antonio homebuyers, about 3,500 people, who chose an adjustable-rate mortgage. Garcia's biggest problem, the one keeping her up at night, is a $3,000 property tax bill due in December. Her loan did not include escrow, the estimated property taxes paid monthly in most mortgages, and she didn't realize it."

"'There was some fairly aggressive lending going on. Young people and immigrants who have no background for buying a home can get led down the merry path,' said Jim Gaines, research economist at Texas A&M University. Today's lending landscape reminds Federal Housing Administration commissioner Brian Montgomery of the 1930s, when high-risk and high-interest-rate lending was common."

"'The economy is better today,' he said. 'But now you are seeing these really exotic loans done on a wide scale. Some families were steered towards loans they shouldn't have been.'"

The Memphis Daily News. "A total of 4,616 foreclosure sales occurred between May 2005 and April 2006, according to The Daily News. The number of properties foreclosed totaled 4,665 because, in some cases, multiple properties owned by one person were sold at the same time. Steve Lockwood, who is executive director of the Frayser Community Development Corp., has been keeping track of foreclosures in Frayser since he accepted the post three years ago."

"'It's an epidemic,' Lockwood said. 'Shelby County has the highest HUD foreclosure rate in the country and Frayser has the highest foreclosure rate in Shelby County."

"Valerie Smothers recently lost her Cordova home in foreclosure because she fell behind on her mortgage payments after her boss was late with her paycheck, she claims. In the beginning, her lender understood, but as a couple of weeks stretched into a couple of months, the mortgage company's patience stretched thin. When she finally had things settled at work and went to the mortgage company, officials refused to accept the $1,900 she had. It wasn't enough for her back payment."

"'They told me the adjustable rate had gone up,' she said, meaning she would need more cash."

"April 2006 foreclosures in Massachusetts were 44.35 percent higher than April 2005 and nearly 90 percent higher than April 2004 levels. April 2006 had 1,227 foreclosures started. That translates to more than 60 filings every business day in April."

"Driven by rising interest rates and high levels of debt, foreclosures on homes in the eight-county Chicago metropolitan area are sky-rocketing, particularly in the region's fastest-growing counties. The soaring rate of foreclosures is quickly transforming what has long been a seller's market into a buyer's market."

"'You have a situation now where you have these potential increases in foreclosures, and interest rates are going up, which will populate the market with more properties,' Jeff Metcalf says. 'The real estate market will be slowing the appreciation in prices. We're moving toward a buyer's market. In fact, we're probably already there.'" posted by Ben Jones @ 12:53 PM

http://getforeclosures.blogspot.com/

[GaudiaRay]

Gee, Gosh, like things have gotten worse?! Duh.

Those still holding r/e are in for the ride of their lives. 2 +2 = 4. "But I can't get out; I'm sure it can't be as bad as all that!" Phew. FL1 said, "I'm out", months ago. I just passed on a fab piece of land as this is not the time. My appraiser buddy, who is the bleeding edge, is bleeding as it's much worse than what's reported here. Biz has stopped nearly dead in its tracks. Harken this message. When pandemic flu comes knockin', it will sink debt holders faster than an Israeli bomb can flatten a building, or maybe just as fast. For those who are "in", God Bless. For those who are out, drop on by the "Gold" thread and protect your ass ets.

(Or, is asset switching considered profiteering? Hmm)

As an aside, don'tcha just love it when the MSM reports this stuff as if it's current and "news"? It's old news; it ain't current; and not one whit of forethought from the present forward is offered in this article below from the brainy powerhouse, the NY Times. Maybe the authors could send this over as a writing sample to the WHO?
Regards,
Your friendly profiteer, GR



Housing Slows, Taking Big Toll on the Economy



By VIKAS BAJAJ and DAVID LEONHARDT
Published: July 29, 2006
http://www.nytimes.com/2006/07/29/bu...vct5BrETILh8Ig

The housing industry — which largely carried the American economy through the tribulations of the 2000 stock-market crash, a recession and climbing oil prices — has lost its vigor in recent months and now has begun to bog down the broader economy, which slowed to a modest 2.5 percent growth rate this spring.



That was a sharp comedown from the 5.6 percent growth rate of the first quarter, the Commerce Department reported yesterday, caused in part by the third consecutive quarterly decline in spending on houses and apartment buildings, after several years of rapid growth. [Page C1.]
“It hasn’t slowed down a little bit — it has slowed down a lot,” said Doug McCraw, a developer who has scrapped his plans for a 205-unit condominium tower in a neighborhood just north of downtown Fort Lauderdale, Fla. “Anybody who did not have a shovel in the dirt has chosen to wait till the market settles.”
The housing slowdown is perhaps the clearest effect of the Federal Reserve’s two-year campaign of raising interest rates in a bid to tap the brakes on the economy and reduce inflation. That campaign has been largely successful, with the decline happening gradually while other parts of the economy, mainly the corporate sector, pick up much of the slack.
“Housing is going from being far and away the most important contributor to growth to being a measurable drag, and it’s happening gracefully so far,” said Mark Zandi, chief economist of Moody’s Economy.com, a research company. “But there’s now a growing and measurable risk that things don’t go according to plan.”
The biggest risk, economists say, is that the optimism that fed the real-estate boom will reverse dramatically. The number of homes for sale has surged in recent months, particularly in once-hot markets, like the Northeast, Florida, California and parts of the Southwest. As builders delay land acquisition and construction it could reduce employment and spending in the coming months.
More broadly, just as rising housing prices during the boom added to Americans’ sense of wealth and well-being — encouraging them to spend more on a variety of goods and services — the reverse could dampen sentiment and lead consumers to pull back on their purchases.
While the fate of housing prices has received far more attention recently than real estate’s role as an engine of job growth, the sector has also become one of the country’s most important industries. Residential construction and all the activity that swirls around it — mortgage lending, renovations and the like — account for roughly 16 percent of the economy, making it the largest single sector, slightly bigger than health care.
For much of the last five years, housing — along with health care — was also one of the only reliable generators of jobs. From the start of 2001, when the Fed began cutting its benchmark rate to steady a faltering economy, until early last year, the housing sector added 1.1 million jobs.
The rest of economy lost 1.2 million jobs over the same period, according to an analysis by Moody’s Economy.com.
Housing continued its rapid growth last year, and other industries began hiring in far greater numbers than they had been, creating the healthiest national job market since 2000. In the last few months, though, three pillars of the housing sector — homebuilders, mortgage lenders and real-estate agencies — have stopped adding to their payrolls, and overall job growth in housing has begun to slow.
In South Florida and Las Vegas, where contractors until recently complained that they could not find enough workers to begin work on many projects, developers are scrubbing plans for new condominiums because they cannot sell enough units to get construction financing.
Mr. McCraw, the developer in Fort Lauderdale, said slowing condo sales and a 35 percent jump in the cost of construction materials like steel, copper and concrete convinced him to shelve his project. He is now considering building office space, where demand remains strong, or simply waiting for two years.
In Las Vegas, cranes are still busily at work on new casino projects but dozens of gleaming condominium towers that were slated to sprout up a few miles from the Strip are not likely to be joining the city’s neon-bedecked skyline soon. John Restrepo, a real estate consultant in the city, estimates that only about 7 percent of the 60,000 condominium units that were announced and under construction as of the first quarter of the year are actually being built today.

Among the high-profile projects that were scrapped is Las Ramblas, an 11-building, $3 billion condominium and hotel complex being developed by the Related Companies and Centra Properties and had investors like the actor George Clooney.

“The period of irrational exuberance we saw in ’04 and ’05 and the gold rush fever has gone away,” Mr. Restrepo said.
The Commerce Department said yesterday that housing investment fell at an annual rate of 6.3 percent last quarter, after dropping less than 1 percent in each of the two previous quarters. It grew at roughly 9 percent a year during the previous three years.
Still, building activity for single-family homes, condos, hotels and casinos in Las Vegas is vibrant enough that construction workers are not struggling to find work, said George Vaughn, a business manager for a local of the Laborer’s International Union of North America, which represents almost 5,000 workers in Las Vegas. “The boom is still on,” he said.
The situation is somewhat different elsewhere. An official at the International Union of Bricklayers and Allied Craftworkers said housing work was more difficult to find, but most of its members had been able to find work on commercial building sites.
“If something were to happen with both markets, that would affect us — and everybody for that matter,” said Robert A. Fozio, director of the union’s Northern Ohio district.
On average, real-estate jobs pay somewhat less — about 7 percent less a year on average — than those in other parts of the economy. But real estate has also been one of the only industries creating good jobs for workers without college degrees in recent years, especially in construction and contracting work.
At Hovnanian Enterprises, one of the nation’s largest homebuilders, executives are renegotiating the company’s options to purchase land for future developments, in an effort to delay some transactions and reduce the purchase price on other parcels of land. In April, it forfeited $5.6 million in deposits on property near West Palm Beach, Fla., and Minneapolis, because it was not ready to build in the area.
“It doesn’t make sense to own the land and have it sit there,” said J. Larry Sorsby, the company’s chief financial officer and an executive vice president.
Orders for Hovnanian’s homes fell by 18 percent in the three months ended April 30 and cancellation of existing orders by homebuyers rose to 32 percent from 21 percent a year ago. The company, whose earnings jumped 34 percent to a record last year, is expecting a mere 3.4 percent profit increase this fiscal year.
Mr. Sorsby said the company had not resorted to layoffs, but it had been asking sub-contractors to lower labor costs — with some success.
Going forward, many economists say, the biggest question is whether the orderly real-estate slowdown the Fed has engineered thus far will continue. “Outside the threat of surging energy prices,’’ Mr. Zandi said, “the most significant threat to the expansion is that the housing correction turns into a housing crash.”
The fact that mortgage rates remain low by historical standards offers one reason to doubt that a crash will happen. The average rate on a 30-year conventional mortgage was 6.8 percent last week, up from 5.7 percent a year earlier, according to the Fed.
On the other hand, the boom of recent years has pushed housing prices out of reach for many families along the coasts. Already, some homeowners have resorted to creative loans, like interest-only mortgages, to afford a house, and even modest increases in mortgage rates have the potential to cause a significant drop in demand for new houses.
In either case, housing seems unlikely to continue being the economic powerhouse it was over the last five years.
“Housing is just not going to be what it has been,” said Edward Yardeni, chief investment strategist at Oak Associates, a money management firm. “It could go back to being a significant but relatively small contributor to economic growth.”

[GaudiaRay]

Re: House Prices

OK, I just met with the appraiser buddy for a full day of yakkin' about what's happening in the r/e market of so cal.

The upper end in so cal is still active. There are lookie lu's almost lined up. The market at the top is firm. The inventory of houses for sale is now easily triple what it was 6 months ago. That's not saying much, but as an example that was very surprising, in Brentwood, on Saltair Ave (upper end), there were 3 houses open and for sale all within a block of each other. However, the realtor had just sold his house for 3.7 million and the house next to those 3 had also just sold. And there are dumpsters everywhere as people remodel their homes. Rich people in So Cal are not hurting. The house I looked at for 1.6 million? 1960's slab ranch style cheap construction, middle class housing in a rich neighborhood. It's a tear down. So, the house is selling for lot value. My friend says the market has peaked, last December. It has now declined by about 5% in house prices, which to me means it hasn't moved at all.

The market in the outlying counties, Riverside and Orange, and in poorer communities where interest rate adjustments have impact and where so many bought with zero down, is showing weakness. Sales are down. Prices are not rising. Inventories of unsold houses are increasing.

[Laidback Al]

Re: House Prices

Thanks GR. Interesting comments about the high end of the market in Southern California. But even the rich people will not be able to prop up the real estate market once the ARMs, zero interest, and interest only loans start coming due.

[GaudiaRay]

Re: House Prices

Thanks GR. Interesting comments about the high end of the market in Southern California. But even the rich people will not be able to prop up the real estate market once the ARMs, zero interest, and interest only loans start coming due.

And that's why I wait. I walk by the property I want and linger, ungh.

Do not discount the risk of hyperinflation. 1923 Germany was real. We're not in the US prepping for that. It can't happen here. Right?!

[WildernessRetreat]

Re: House Prices

Other factors besides interest rates have created this mania. Anything to keep the economy looking strong has been the order of the day since Bush took office. 10 million extra illegals entering the country has made a huge impact on housing and the economy in general. Jobs created for the war, while not producing wealth or increasing real GDP are creating massive debt and on the surface appear to be fueling an economy that in actuality is going backwards. My bets are on the House of Representatives on the illegals issue. The loss of millions of renters will pour more water on this fantasy of wealth.
Smart investors took positions in real estate when the capital gains law changed. The fools that have come to the party late and haven't taken their profits yet are in for some rude rude results. I've lived in Southern California as well as places like Kodiak, Alaska. I can tell you for certain that the enjoyment of life is higher in Kodiak than Orange county. It's also safer, has lots of water and seafood to feed about a 100 times as many people as now occupy that island. You don't need to be able to farm to survive if you can bait a hook. It also has plenty of wood to keep you warm as opposed to the danger that occurs when you lose your air conditioning. A house in Southern CA cost about 5 to 7 times as much as the same house in Kodiak.
I see the central bank preventing a total collapse in real estate prices. They can't accomodate all the defaults without incurring a total collapse of our system. Printing of money and inflation will rule. Consider the fact that we have 10 times more dollars in circulation now then we did in 1985 and that our situation is way more scary nowadays. The Fed is all of a sudden hiding M3 for a good reason. Look for 10 times more dollars in circulation in 10 years from now. Boomers that can sell will pocket as much as they can and move to low cost areas. Houses will stay at a million or two in Santa Cruz and less popular areas like Kodiak will continue to rise for some time as the stabilation of values returns, interest rates climb but not fast enough to destroy the perception of an economy growing.
Watch silver and gold go through the roof. IMHO

[Binkerbear]

Re: House Prices

[Laidback Al]

Builder: Oversupply slump worst in 40 years

Builder: Oversupply slump worst in 40 years
Toll Brothers slashes outlook on new homes as orders plunge and revenue misses forecasts.
August 9 2006: 4:15 PM EDT
NEW YORK (CNNMoney.com) -- Homebuilder Toll Brothers said the current slump in residential construction is unlike any it has seen in 40 years as it became the latest to warn of a glut in new homes for sale and a slowdown in the closely watched real estate market.
The builder of luxury homes also reported weaker than expected preliminary results for the just completed quarter and cut its outlook for the homes it will sell in the current period. Toll Brothers (Charts) shares fell 4 percent in premarket trading.
The housing and homebuilding markets have helped drive the national economy during the past few years. Any downturns in these critical sectors could add to the problems of an already unsteady situation.
In a statement, company chairman Robert Toll warned there is a glut of supply of homes for sale in the market, as the building boom of recent years seems to be turning into a bust.
The slowdown "is the first downturn in the forty years since we entered the business that was not precipitated by high interest rates, a weak economy, job losses or other macroeconomic factors," Toll said in his statement.
"Instead, it seems to be the result of an oversupply of inventory and a decline in confidence," he added. "Speculative buyers who spurred demand in 2004 and 2005 are now sellers; builders that built speculative homes must now move their specs; and nervous buyers are canceling contracts for homes already under construction."
Markets where the company recorded big increases in cancellation rates included Orlando, Northern California, Palm Springs, Las Vegas and Phoenix.
The company's reported homebuilding revenues were approximately $1.53 billion in the quarter ending July 31, compared to the record of $1.54 billion a year earlier. Analysts surveyed by earnings tracker First Call had been forecasting a 7 percent increase in overall revenue at the company.
The Pennsylvania-based builder said it expects to deliver 2,500 to 2,800 homes in the current quarter, a cut of at least 14 percent from its previous guidance of 2,900 to 3,300. And the company announced signed contracts in the just completed quarter plunged 45 percent to $1.05 billion from a record of $1.92 billion a year earlier.
The company said it is not under as much pressure as many builders to cut prices because it builds relatively few homes on spec. But Toll said that much of the supply of finished and near-finished product is being marketed using advertised price reductions and increased sales incentives, which in turn is leading many potential buyers to delay their purchase decisions as they wonder about the direction of home prices.
But Toll said the company believes that, as there is a cutback in supply by builders, the housing market should be able get back on the growth track of recent years.
"With many potential buyers on the sidelines right now, we believe there is growing pent-up demand that will come into the market once buyer sentiment improves."
Toll said on a conference call Wednesday afternoon that he expects the slump to last at least through the end of the year, however, adding it could drag on for another two.
"But the market isn't dead," Toll said. "It's concerned with the direction of home prices and if it has reached the bottom. You might argue that this is the best time to buy a home, with comparatively low mortgage rates and incentives. It's very hard to pick a bottom and anyone who tries will probably have a problem."
Toll named some once previously hot markets as underperformers lately.
Florida has been fair or poor, for the most part, not an unexpected assessment during the summertime. Other down markets were Las Vegas and Reno, Chicago, Minnesota and the Maryland shore.
Stronger markets he named were Hoboken, Delaware, Colorado and Phoenix.

Source: http://money.cnn.com/2006/08/09/news...hers/index.htm