There is no Canadian Housing Bubble!

[The Virginian]

What's the market like in your neck of the woods kman and the Virginian??

The housing market in Virginia is not really that bad - We are supported by all the DC government workers in Northern Virginia and by a large Naval and Military presence in the south. We have taken a hit but not nearly to the extent that Florida, Nevada, California, Arizona and Georgia has. But I based my statement on the expectation that 2011 will see many more foreclosures because of the Adjustable rate mortgages coming due. The 5 - 10 years for recovery after that is pure speculation on my part.

[comokate]

Virginian,
I agree. With real estate it's always been about , "location, location, location !! ( and perception!)
My area ( Twin Cities, Minnesota ) has been hit especially hard with concentrated predatory lending ( our state AG is attempting some recovery ) and a housing bubble created by banks, mortgage companies and speculators that was never based in the reality of what the average home buyer here could afford.
We are one of the most highly taxed states in the nation ( property+income+sales tax ), we've lost many of our biggest employers, and the projected job growth for this area is bleak.
So it's all very regional. There will be areas more insulated against the free fall in prices ( government workers guaranteed a paycheck until...) . However , that being said, for *most* Americans, I think they will continue to see a fall in home values.

[neohguy]

For those that might have missed yesterdays National Association of Realtors pending home sales (existing) report for November. Summery by Bloomberg News):
Released on 12/30/2010 10:00:00 AM For Nov, 2010
Prior Actual
Pending Home Sales Index - Level 89.3 92.2
Pending Home Sales Index - M/M 10.4 % 3.5 %

Highlights
The housing sector may be climbing up from the bottom but if so, it looks like the climb is slow. Pending sales of existing homes rose 3.5 percent in November, a respectable rate yet well below the 10.1 percent jump in October that ended a run of declines (October initially reported at plus 10.4 percent). November's gain also doesn't show any breadth. The key region, the South, shows a small decline with the Midwest showing a more sizable decline. The Northeast shows a small increase while the West, the smallest and most volatile region, shows a big jump.

Pending home sales, which are based on contract signings, offer indications on future sales of existing homes, which are based on closings. Today's report does point to a gain for existing homes sales, which jumped 5.6 percent in November, yet it points to a slowing gain. Affordability and still low rates are positives for the housing market where however foreclosures and soft labor conditions still pose major risks.

[frankq]

Bite You! Bite Me! Try 10K! I'm moving to where you guys live!

[neohguy]

Dec 31, 2010 16:39:03 GMT -5 @franktheimpaler said:

There is no historical or empirical evidence for the double dip in housing after a depression in housing

With the amount of liquidity, the push to lend and hire over the next two years...markets will get red hot....and that may be a problem

I don't know why people talk of a double dip. We're still in the first dip.Markets got red hot because of irresponsible borrowing, lending, and speculation. If it gets red hot again that fast then we haven't learned anything.

[Aman A.K.A. Ahamburger]

It's all going to depend on how long bank properties are flooding the market for as far as price goes. Interesting numbers that you posted neoh, thanks I didn't have time for that!
I think it's worth noting that sometimes people just want a new home. With the shape that some of these properties are in. Construction will pick up before the foreclosure mess is completely done with!

[nicomachus]

I am not normally a Peter Schiff fan, but I think his editorial in yesterdays WSJ is basically correct. Historically, housing prices are still too high. They will have to come down a bit to establish economic stability. Of course, that means we will need an economy that isn't fueled by a housing bubbble, or by any bubble at all.

online.wsj.com/article/SB10001424052702304173704575578190261574342.html?mod=googlenews_wsj

www.businessinsider.com/peter-schiff-home-prices-2010-12

[neohguy]

Dec 31, 2010 17:41:51 GMT -5 @nicomachus said:

I am not normally a Peter Schiff fan, but I think his editorial in yesterdays WSJ is basically correct. Historically, housing prices are still too high. They will have to come down a bit to establish economic stability. Of course, that means we will need an economy that isn't fueled by a housing bubbble, or by any bubble at all.

online.wsj.com/article/SB10001424052702304173704575578190261574342.html?mod=googlenews_wsj

www.businessinsider.com/peter-schiff-home-prices-2010-12

Schiff agrees you about the need for a healthy economy. Something that the US has been lacking for awhile now. He summarizes:
"With a bleak economic prospect stretching far out into the future, I feel that a 10% dip below the 100-year trend line is a reasonable expectation within the next five years, particularly if mortgage rates rise to more typical levels of 6%. That would put the index at 114.02, or prices 28.3% below where we are now. Even a 5% dip would put us at 120.36, or 24.32% below current prices. If rates stay low, price dips may be less severe, but inflation will be higher.

From my perspective, homes are still overvalued not just because of these long-term price trends, but from a sober analysis of the current economy. The country is overly indebted, savings-depleted and underemployed. Without government guarantees no private lenders would be active in the mortgage market, and without ridiculously low interest rates from the Federal Reserve any available credit would cost home buyers much more. These are not conditions that inspire confidence for a recovery in prices.

In trying to maintain artificial prices, government policies are keeping new buyers from entering the market, exposing taxpayers to untold trillions in liabilities and delaying a real recovery. We should recognize this reality and not pin our hopes on a return to price normalcy that never was that normal to begin with."

[neohguy]

Dec 29, 2010 21:56:03 GMT -5 kman said:

Ahamburger, The housing market here , is as stable as ever. High taxes,...cheap housing...never really moves in one way or another. I would rather have low taxes and a volital home price . The value of my home is part of my net worth. The taxes I pay..are the taxes I pay.

Where are you at? The reason I ask is sometimes people don't realize how much prices are dropping until they actually try to sell, or buy, a home. Many people trying to sell homes at a "stable" price are disappointed when potential buyers can't get a loan because the lender disagrees with what both buyer and seller think the house is worth. The sale can still proceed providing the potential buyer is able to cough up the difference in the down payment. Usually though, the buyer starts shopping more carefully.

[comokate]

In 2003 my home ( under 1000 square feet but "location location location!" ) was appraised for the insane amount of 265,000 dollars. I owe 130,000. I declined the offers to "cash out" my "equity" because it was a complete sham that my tiny pre-WW2 home was worth that much. I joked with my patients at work that I would be unable to qualify to purchase my own home...
The "rise" in home prices in my area, and many areas around the country, was simply due to fraudulent, predatory lending practices by banks and mortgage companies ( and all associated with those transactions). They were making money hand over fist from all of the transaction fees. Those responsible for initiating this game were only looking out for their own personal short term gain; the hell with everyone else. They took the money, grabbed the golden parachutes, and ran off to begin new scams in new locations. Local governments loved the game because they could "justify" raising property taxes. I pay over 3100 dollars , six times the original amount, in property taxes per year now. For a 975 sq foot, 72 year old bungalow.
Wages never supported the astronomical "rise" in home values here. In fact, for local wages, most homes in my area should be under 110,000 dollars...not the case though.
We continue to lose major employers in the area...and at least one quarter of the homes for sale are bank foreclosures. We have a ways to go-
At least I don't live on the coast...
e360.yale.edu/feature/the_secret_of_sea_level_rise_it_will_vary_greatly_by_region/2255/
As Rosanne Rosanna Danna said, "It's always something!"

[scaredshirtless]

I was just out in SoCal for a week.

Holy cow...

Tell them the bottom is 2011.

Not a chance.

[Aman A.K.A. Ahamburger]

Some interesting points..

A large number of Fund managers think that the USA is a great place to invest in real estate..

CIC Backs Carlyle-Owned Manhattan Tower in U.S. Real Estate Push
www.businessweek.com/news/2011-01-03/cic-backs-carlyle-owned-manhattan-tower-in-u-s-real-estate-push.html

Also..
Construction Spending in U.S. Climbed in November for Third Straight Month
www.bloomberg.com/news/2011-01-03/construction-spending-in-u-s-rose-in-november-for-third-month.html

[comokate]

This message has been deleted.

[kman]

Kate, very interesting points you bring to the board. There is no balance in home prices and taxes from State to State. I pay $5,500 for a 1500 sqft ranch valued at say $150,000. My last house sold for $200,00 3500 sqft, roughly what I paid for it ten years ago...$8,300.00 a year in taxes

If any of these homes had magically appreciated to some ridiculous number , I would have sold and moved to another part of the country to take advantage of this spread.

[comokate]

I'm seriously considering moving out of my area once my youngest is done with school for that very reason

[neohguy]

An optimistic article from Summit (Akron) county, Ohio. Bold by me:
www.ohio.com/news/113155609.html
Housing defaults declining locally
Mortgage lawsuits filed in county fall 10 percent to lowest level in 5 years

The number of mortgage foreclosure lawsuits filed in Summit County dropped by 10 percent last year, mirroring a trend in urban counties throughout the state.

Mortgage lenders and banks filed 3,883 new lawsuits last year in Summit compared with 4,333 in 2009.

Cuyahoga, Franklin, Hamilton, Lucas, Montgomery and Stark counties also experienced a decline — although none came close to the percentage drop in Summit, according to a Beacon Journal survey....The total in Summit was the lowest in five years. It also was the first time since 2005 that the number dropped below 4,000.

...Bob Niemi, executive director of the Ohio Mortgage Bankers Association, attributed the drop partly to the state's unemployment rate declining. Ohio's unemployment fell from 10.8 percent in November 2009 to 9.8 percent in November 2010.

''We know that jobs are central to a homeowner's ability to pay their bills and maintain a household,'' he said. ''Ohio's un
employment rate has lowered each of the last eight months and this should provide some reason for the decline in foreclosures.''

[Aman A.K.A. Ahamburger]

Those are encouraging trends neoh. There are some very encouraging trends forming in some areas. There have also been some good things happening since Dodd-Frank to somewhat restore confidence. IMO we will know by Aug if 2011 will be the bottom or not.

[neohguy]

noir.bloomberg.com/markets/ecalendar/index.html
Released on 1/12/2011 7:00:00 AM For wk1/7, 2011
Prior Actual
Purchase Index - W/W Change -0.8 % -3.7 %
Refinance Index - W/W Change 3.9 % 4.9 %
Composite Index - W/W Change 2.3 % 2.2 %
Highlights
Purchase applications fell a steep 3.7 percent in the January 7 week, a dip that threatens to sink what has been no better than a flat trend. Week-to-week adjustments on the data, however, are severe given the shortened prior week. The four-week average for the purchase index is down 1.0 percent. Refinance applications rose 4.9 percent in the week with 30-year mortgages averaging 4.78 percent, down four basis points in the week.

[comokate]

"Home prices in all 20 major metro areas decreased from September to October, according to Standard & Poor's/Case-Shiller data released this morning (Dec. 28). "The double dip is almost here," says S&P economist David Blitzer. "There is no good news in the October report. Home prices across the country continue to fall....tax incentives are over." San Diego home values declined 1.5% between September and October -- worse than the 1% decline from August through September. However, San Diego prices have risen 3% on a year-over-year basis, one of only four metro areas to experience a gain. The others are Los Angeles, San Francisco, and Washington DC. San Diego values are now down 36.1% from their November 2005 peak."
www.sandiegoreader.com/weblogs/financial-crime-politics/2010/dec/28/home-values-in-san-diego-other-metro-areas-decline/

[usaone]

All those retirees are heading down Frank!!

We wont get a true read on housing until lat spring. ;D

[itstippy]

Am I the only person on the planet who thinks inexpensive, nice houses would be a great thing for America? We "nailed" the home-building and home-remodeling processes. It became really efficient. Modern building materials and techniques, supply distribution chains, etc. made productivity in the housing industry go way up. It's time for Americans to reap the benefits of these advances by having lots of great housing available for cheap.
The only people who suffer from a drastic drop in housing values are those who made big bets on housing values always going up. The folks who over-leveraged hoping to make a killing on appreciation (speculators), or drew out all their home equity and spent it on luxuries (idiots), or saved nothing for the future figuring they would retire "on the house" at a later date (put-all-my-eggs-in-one-basket fools). Most normal Americans who put 20% down and bought normal houses worth 3X their annual incomes are doing just fine. Most homeowners aren't hurt by a drop in the value of their home, since everyone else's home dropped in value too. Sure they have to accept a lower price when they sell, but they pay a lower price for what they buy next. Meanwhile, housing costs take a smaller bite of every American's budget. Yay!
Would Americans piss and moan if great cars started selling for 50% less thanks to advanced manufacturing techniques and productivity gains? Would they be all bent out of shape if a brand-new Cadillac cost $25,000 and they're driving a 4-year-old one that they paid $50,000 for? Dammit, I paid $5K for a Gateway PC ten years ago and now you can get a better one for under $1K. I paid $2K for a flat screen TV three years ago and now you can get one just like it for $1K. No one's hollering that the Federal Government should step in and stop the terrible plunge in home electronics values. What is it about housing that's any different?
We should have let the housing market do its price-discovery thing and let the chips fall where they may. Instead the US Government took on all the bad notes from the speculators and idiots. They bailed out the crooks who loaned money to the speculators & idiots without doing due diligence on their ability to pay it back. I'm on the hook for this mess, and I'm disgusted.

[texasredneck]

This message has been deleted.

[itstippy]

Sorry, I wasn't clear. I mean that we have lots and lots of existing housing that should be much cheaper than it is. We built and renovated too much housing during the boom, and it sold at unrealistic prices. Now a lot of it's sitting around empty, or people are living in it that haven't made a payment in 2 years. Enough is enough. Time for it to go on clearance sale. Working Americans would be able to afford a nice house at a decent price without resorting to some weirdo financing package. That would be great.

[neohguy]

Jan 15, 2011 20:53:03 GMT -5 @itstippy said:

Sorry, I wasn't clear. I mean that we have lots and lots of existing housing that should be much cheaper than it is. We built and renovated too much housing during the boom, and it sold at unrealistic prices. Now a lot of it's sitting around empty, or people are living in it that haven't made a payment in 2 years. Enough is enough. Time for it to go on clearance sale. Working Americans would be able to afford a nice house at a decent price without resorting to some weirdo financing package. That would be great.

Existing and affordable housing is available itstippy. The problem is that it's not available to who it should be available to. homeowners. Foreclosed properties are available at discounts of 50% or more. The problem is banks want a cash sale. They won't wait for a prospective homeowner to acquire bank financing. Many of these properties require that you sign a Fannie or HUD agreement stating that you won't sell or rent them for a year. That eliminates bottom feeding investors. The end result is that the home stays on the market, the asking price decreased every couple of months and this drags down the worth of all the homes in that neighborhood. The result of that is banks are hesitant to grant loans to qualified borrowers who might want to buy a conventional sale, at a 26% reduction, because price discovery is being manipulated.
I understand banks wanting cash for a foreclosure during "normal" times. These are not normal times and we require innovative yet responsible solutions to make these bargain properties available to young families who tend to improve the home and thereby the neighborhood. What we don't need is a bunch of money grubbing landlords that could care less about the neighborhood.

[texasredneck]

This message has been deleted.

[neohguy]

Jan 16, 2011 16:51:15 GMT -5 texasredneck said:

Neo most landlords care about the neighborhood. If the neighborhood improves rents go up and resales are more profitable.

I may have been a little harsh about my comments about landlords Tex. I still think that foreclosed properties should be made a little more accessible to prospective home owners. In my area, they are available for less than 1.5X annual income. A true example would be the following. A house that sold for $111k in 2002 was foreclosed. The owner had replaced the furnace, AC, and hw tank with some decent energy efficient equipment. He also had built a very large 2 car garage. The house finally closed after being on the market for 18 months for $52.5k (cash sale).
If the house would have been available to conventional buyers at 65k with a 10%-15% down payment then the payment of ~$320.00/month would have been very affordable to a single income family @ 45k/yr.
Families buy a lot more stuff for their nest than what landlords buy for tenants.

[neohguy]

The parts that I have highlighted in this article I agree with. If any of our posters feel that housing has recovered in their area (US) then please provide a zip code and I will try to research it.
www.hellenicshippingnews.com/index.php?option=com_content&view=article&id=3997:us-housing-starts-drop-43-in-december&catid=33:world-economy-news&Itemid=97
U.S. housing starts drop 4.3% in December PDF Print E-mail
Thursday, 20 January 2011 11:00
Construction of new homes in the United States fell 4.3% in December as builders grappled with their second-worst year on record, after 2009, government data showed Wednesday. Housing starts fell to an annualized rate of 529,000 last month,
the lowest level since October 2009, the Commerce Department reported.
Economists surveyed by MarketWatch had expected housing starts to drop to 545,000 on a seasonally adjusted basis. Some say the decline may have been exacerbated by poor winter weather in the Midwest and Northeast.
The housing market has wide-ranging influence on the rest of the U.S. economy because so many raw materials and finished goods are required to build homes and furnish them after sale.The market, however, didn’t improve much in 2010 after the industry’s worst year ever. Housing starts rose just 6.1% to an annual pace of 587,600, up from 554,000 in 2009.
At the peak of the pre-recession housing boom, starts rose to as high as 2.07 million in 2005. Until 2009, new construction had averaged more 1 million units annually since the government first began record keeping in 1959.Single-family doldrums
“By any metric, home building continues to hover near historical lows showing no sign of returning to levels of activity that had widely been regarded as ‘normal’ and necessary to house a growing population,” said economist David Resler of Nomura Global Economics.New construction of single-family homes, which account for 75% of the U.S. housing market, dropped 9% in December to an annualized rate of 417,000. That’s the lowest level in a year and a half.
Permits for new construction, a gauge of future building plans, leaped 16.7% in December to an annualized rate of 635,000. It’s the highest rate since last March, when a generous federal tax credit temporarily spurred home buying and building.
Yet economists and Commerce officials said the increase is likely related to pending changes in building codes in three large states — California, New York and Pennsylvania.
Builders may have applied for permits before stricter codes were put in place by those states on Jan. 1. Permits rose sharply in the Northeast and West but were flat or lower in the Midwest and South, where there were few changes in building codes.
If that’s the case, permits could fall sharply in January, economists say.
What’s more, the surge in permits mainly centered on the volatile multi-unit segment. Permits for condominiums and apartment buildings with five or more units rose to an annualized rate of 172,000, the highest level since January 2009.
Single-family-home permits, on the other hand, rose a much smaller 5.5% to an annual rate of 440,000. Single-family permits are viewed as one of the best indicators of future economic health and draw more attention from economists.While new construction is projected to increase this year from 2010’s low level, economists say it could take years before the industry fully recovers — especially if struggling homeowners can’t meet their mortgage bills and foreclosures accelerate. The widespread availability of existing homes at lower prices would dampen demand for new ones.Home builders, for their part, also complain of difficulty in getting financing for projects from wary bank lending officers.The National Association of Homebuilders on Tuesday said its index of builder confidence stood at 16 in January. The NAHB views readings over 50 as an indication that builders are confident.
One thing helping the market is ultralow U.S. mortgage rates. A 30-year mortgage with a fixed rate, for example, is around 4.70%. The rate fell to a 40-year low of 4.17% three months ago.
Still, economists say that hiring will have to accelerate sharply to give home sales a big boost. The U.S. is adding jobs each month, but at a much slower pace than is typical when the country exits a recession. The unemployment rate stands at 9.4% — double the rate of just four years ago.
“Housing is basically at the bottom of a very deep hole and there is no real sign of the industry being able to climb out in 2011,” said chief economist Steven Ricchiuto of Mizuho Securities.

Source: Marketwatch

[bubblyandblue]

If housing prices were in line with what was affordable then we would see a turn around in housing. Aggregate demand has been reduced because of credit standards and forclosures (damaging credit). The cost of land lost contact with reality (bubble). The new codes are always evolving and, having been in construction for a long time, they really don't do much in the way of reducing profit or increasing building costs (if your a legit builder, you have been exceeding code for a long time anyway because you end call backs, defects, losses and reduce liability claims and premiums).
I can still build to identical houses for virtually the same cost - the large difference is the cost of the land and, the land cost should be directly related to the services provided in that particular location (electrical grid hook-up, sewer hook-up, location, fire services, schools ---Taxable public services). Currently land prices (even with improvement) are driven by speculation. Aggregate demand (not the statistical variety) should be very high if prices were in line ie; Millions are homeless while Millions of homes stand empty.

[bubblyandblue]

Just one additional thought and disclosure.
I think it should cost more to do something wrong than it should to do something rite.
Weather by penalty or tax the distinction between wrong and right ought to be clarified.
The current market/financial system has bought havoc to its citizens and this is wrong. However, a possible correction to our impass might be to consider that, since the market encourages fraud, deciept in order to make gains in a destructive manner, taxes and penalties should be encouraged to promote what is rite and, make doing rite less expensive than doing wrong.

[Aman A.K.A. Ahamburger]

The National Association of Realtors said sales of existing homes increased 12 percent last month to a 5.28 million annual rate, the most since May. Claims for jobless benefits fell 37,000 last week, the biggest decline since February 2010, to 404,000, Labor Department figures showed. Building permits jumped 17 percent in December to an annual rate of 635,000, more than forecast, Commerce Department data showed on Jan. 19.