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Mark Hanson Is In "Full-Blown, Black-Swan Lookout Mode" For Housing Bubble 2.0
Submitted by Mark Hanson via mhanson.com,
Speechless: The Kardashian’s are now house flippers
“No more neighbors, friends whose past Real Estate experience is renting an apartment or buying a starter house, or stay-at-home moms flipping houses locally; young, flamboyant Realtors on reality, cable TV shows selling multi-million dollar trophy properties to those from abroad with briefcases of cash that until this year bought a lot relative to the ‘weak’ US dollar; 20-something Silicon-kids paying $2,000/sq ft for a house they could buy 20 miles away for $500; large, institutional private equity firms buying 10s of thousands of single-family houses for rental purposes — sight unseens using computer programs — thinking a 3% yield is acceptable long-term and somehow, someday economies of scale will emerge; or individual / “family-style” speculators committing lending fraud at a pace that rivals 2006 chasing their share of the “easy money” in Real Estate, are needed to prove to me that Bubble 2.0 is not just a monster, greater in intensity and energy than Bubble 1.0, but will end the very same way…”
This week on the Kardashians, Scott Disick, the baby daddy of the oldest sister, revealed he was a new entrant to the house flipping scene with the purchase of a $3.7 million Beverly Hills “fixer-upper”.
When his interior designer flaked out on the job, he asked his Kardashian sister for help. He said he wants to “buy as many houses as he can”.
To his credit, he showed genuine concern when she started suggesting uber-high-end remodel ideas saying (loosely translated) “I am a concerned. The object is to make money”. And then he outright fired her, opting to hire somebody that he had control over.
Seeing common sense prevail in such a way, perhaps if he doesn’t get in over his ski’s with projects, doesn’t fall in love with his houses, and sells quickly to ready buyers when the time comes he has a shot of ‘not’ becoming a famous bag holder. But, with big, longer-term house projects come big liquidity risks that Scott is simply too young to ever have experienced, as he was in his early 20s during Bubble 1.0. Good luck LD. Don’t get greedy, listen to your gut, and always be a seller.
Bag-Holder population is exploding
Real Estate is a highly “illiquid” asset class ‘most of the time’. It always has been and always will be. However, some times, such as now — and from 2003 to 2007 as a prime example — when liquidity is flowing like water, Real Estate’s illiquidity is masked. Speculators can do no wrong. Simply having access to short-term or mortgage capital to purchase Real Estate guaranties a double-digit return. This continues until one day, suddenly, it doesn’t. When capital markets tighten up a bit, or a lot, due to one reason, another, or another, the snap-back to the true, historical illiquid nature of the Real Estate sector happens suddenly and is amplified at first. This creates a snowball effect from which both house supply and illiquidity surge at the same time.
Price then becomes the liquidity fulcrum and will drop, relentlessly ripping speculators faces off, until capital begins to view the asset class as a relative value once again.
In periods of mania, most don’t recognize when Real Estate has once again lost its levitation juice and keep buying even as liquidity conditions turn downright bearish. Some buy all the way down comparing the lower prices with peak, liquidity bubble prices a couple of quarters back thinking they are getting a “great deal”. Quickly, they are underwater, or sinking rehab capital into a depreciating asset.
Then, what seems like “all of a sudden”, a wave of fear engulfs the sector. Supply ratchets higher, as pricing power continues to weaken. Before most realize what’s happening, “month’s supply” of houses is ‘through the roof’, Realtors are telling sellers that their ‘expectations are a bit high’, and Real Estate’s true color — illiquidity — has taken control of the entire sector stranding owners and speculators from their invested capital. This is event horizon.
These “correction” cycles can be tame, moderate, or extreme like from 2003 to 2007. In my opinion the severity of the correction is directly related to the amount energy that preceded it, meaning given the “all-in” global Central Bank monetary and Gov’t debt policies of the past 6-years, the next “correction” has the potential to make 2007 to 2010 look moderate.
Focus is no longer “if”, but “when” and “how much”
My job is no longer to prove a new mega-house price bubble has blown under everybody’s noses, but to time it’s ultimate top and inevitable retracement. I need look no further for evidence of Bubble 2.0 mania nationally, across all price levels. The past several quarters of wild anecdotes piling up on each other serve as icing that caps a couple of years of solid and compelling data collection and analysis all pointing conclusively in the same direction.
No more neighbors, friends whose past Real Estate experience is renting an apartment or buying a starter house, or stay-at-home moms flipping houses locally; young, flamboyant Realtors on reality, cable TV shows selling multi-million dollar trophy properties to those from abroad with briefcases of cash that until this year bought a lot relative to the ‘weak’ US dollar; 20-something Silicon kids paying $2,000/sq ft for a house they could buy 20 miles away for $500; large, institutional private equity firms buying 10s of thousands of single-family houses for rental purposes — sight unseens using computer programs — thinking a 3% yield is acceptable long-term and somehow, someday economies of scale will emerge; or individual / “family-style” speculators committing lending fraud at a pace that rivals 2006 chasing their share of the “easy money” in Real Estate, are needed to prove to me that Bubble 2.0 is not just a monster, greater in intensity and energy than Bubble 1.0, but will end the very same way, as the similarities and drivers to Bubble 1.0 are not just all present, but far outnumber yesteryear in egregiousness.
I am now more convinced than ever before (even in 2006 when I was literally giving lunatic fringe seminars to the mortgage sector on what I believed was an impending mortgage and housing crash) and convicted to my “far out” analysis that US housing — locally, regionally, and nationally — is at the end stages of an epic bubble blow just looking for prick. And as the bubble has blown to epic proportions, armies of pricks have come out of the woodwork.
It simply isn’t different this time around. I am in full-blown, black-swan look-out mode over here. And Bubble 2.0 could end up being a lot more volatile than from 2008-10 due to the sheer amount of capital and liquidity in the sector that blew the bubble in addition to:
- Muscle memory; the second house price “correction” in 7-years will be taken more seriously, sooner, than the last time around causing inventory to rise substantially, earlier in the downturn.
- The record pace of “unorthodox demand with unorthodox capital” by a small slice of the population suddenly going to the “sidelines”, or rather “getting sidelined”, will hit demand much quicker than millions of end-users all changing sentiment over time like at the end of Bubble 1.0.
- The Fed and Gov’t have far fewer rates, stimulus, and modification tools at their disposal this time around.
- An entirely new generation of low-down payment, underwater homeowners created from all of the low-down FHA, Fannie and Freddie purchases done with over-inflated appraisals over the past few years.
- The record supply of non-owner occupied single and multi-fam “investment” props – and fraudulent loans for “vacation houses” that are really flips or rentals — owned by a small slice of the population will hit the supply chain much quicker than millions of foreclosures did from a wide base of the population in Bubble 1.0.
- The Gov’t won’t be able to stop the private house for-sale supply flood like they did last time around vis a’ vi bank and servicer mortgage mods and foreclosure moratoria.
- New, large-scale, well-capitalized demand cohorts rising from the ashes — like institutional and private foreclosure buy-to-renters & flippers and foreigners with cheap relative dollars did post Bubble 1.0 explosion — will be tough to find.
My proprietary Bubble 2.0 analysis of the contemporary housing data are compelling.
- Houses cost far more to the incremental, end-user, owner occupant buyer using the popular mortgage loan of this era versus 2003 to 2007 (SEE 5/3 NOTE COPIED BELOW).
- Hard-core speculation is back – some 40% of all transactions according to my calcs — complete with occupancy and appraisal fraud, process incompetence, willful blindness, and relationship-driven dissonance in lending, just like 2003 to 2007.
- All cash transactions in this era have replaced exotic loans of Bubble 1.0 in bypassing the “mortgage-loan house-price governor”.
- Demand has been extremely weak relative to Bubble 1.0 – end-user, owner-occupied demand more/less flat since 2008 — yet price gains have been far more powerful; a divergence that cannot persist for any great length of time.
- Demand for primarily owner-occupied builder houses has remained far more depressed than resales, which attract a substantial percentage of speculators.
- “Stale listings”, another term for “houses priced too high to sell”, at record highs and a serious house price headwind.
- This end-user, owner-occupied “demandless” house price bubble proves something other than traditional, end-user, owner-occupant fundamentals are driving prices.
Bottom line: This all is big, potential trouble because for prices to remain in a positive trajectory, a wide base of fundamental and permanent demand is always needed and flippers, buy-to-renters, foreigners with volatile capital, high-tech kids, and lending fraud is not a foundation a true ”housing recovery” with “escape velocity” can be built upon.
Note, I have ZERO clue what happens next with housing. Maybe house prices double or triple. Maybe prices get cut in half. Everything here is a derivative of my research and my opinion only. I have been wrong for the past year calling a top but I believe very right about this being a bubble. Note, I was very wrong calling a mega-bubble in 2005/06 as well…for about 18 months.
Excerpt from my 5/3 note… Housing Affordability Far Worse than Bubble 1.0 Peak; Apples to apples comparison of Bubble 1.0 and Bubble 2.0
If 2006 was a bubble, then higher prices, greater monthly mortgage payments, flat income, and a higher unemployment rate today must be as well.
“All-cash”, historic low rates each year, lending fraud etc acting on house prices just like exotic loan did in Bubble 1.0; “mortgage loan house price governor” removed allowing prices to unhitch from end-user fundamentals.
Data used for this bubble 2.0 analysis and comparison is from the most recent month’s housing data….
Bottom line: If versus 2007, it costs the incremental, “end-user, owner-occupant” buyer 13% to 35% more on a monthly payment basis and they must earn 41% to 72% more to obtain a mortgage, then how can houses not be back in a bubble?
House prices are too expensive for the typical end-user, owner-occupant buyer. This is the reason substantial volume has never returned to the US housing market, other than during transitory periods immediately following stimulus events or Fed-induced rate plunges, which create “some” incremental and “a lot” of pulled-forward demand, but never any “durable” demand.
The most recent demand “uptick” following the rate plunge in Q4’14 is simply another “transitory” period of increased demand. And ultimately, it will lead to significant disappointment in Q3/Q4 (sooner if rates continue to increase at the past week’s pace) when everybody realizes that once again this demand spurt did not reach “escape velocity” and was not “durable”. Same movie, different rate plunge.
Bubble 1.0 vs 2.0.
Question: How can house prices be so detached from end-user, owner-occupied fundamentals yet again, especially with mortgage lending so “tight”?
Answer: In this bubble cycle, unorthodox demand with unorthodox capital and occupancy fraud in lending have replaced exotic loans as the instruments that suppressed the “Mortgage loan house-price governor”, allowing house prices to reach levels not supported by local, end-user, owner-occupied fundamentals.
Apples to apples “affordability” 2004 and 2007 vs 2015 “affordability”.
1) Builder house prices in 2015 are up 13% from 2006, yet the total payment is 35% higher and income needed to qualify is 72% greater using the popular loan programs of this era. Thus, the chronically weak demand for builder houses.
2) Resale house prices in 2015 are down 9% from 2006, yet the total payment is 13% higher and income needed to qualify is 41% greater using the popular loan programs of this era.
Resale affordability metrics are measurable better than in the builder segment, but still blown-out relative to 2004 and 2007, which accounts for resale volume performing better than builder volume, but nowhere close to 2004 to 2007.
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Who's Mark Hanson?
Who's Mark Hanson?
Don't know, doesn't matter. There is a lo of truth in that article. I think the next one is going to be worse than the first Housing Bubble. Good news is that I might be able to pick up a Prime Beach Front Property very cheaply.
well the thing that sunk the system last time was banks marking down their loan holdings. I do not think the current environment will see a repeat of that and so it will not be worse, though the actual housing market might go down as much or more. stock markets will collapse for some other reason though.
something else will go wrong. history repeats but not always in iambic pentameter
Mark Hanson was a mortgage broker who made a series of youtube vidoes talking about how the real estate market was going to implode, back in 2008. Now a consultant.
One of his old videos:
https://www.youtube.com/watch?v=kb9byJ2QWcg
Great video and timely for early 2008.
Where I live, houses are cheap, but land is expensive. No point in buying a house if it got no land.
I wish these market geniuses would stop using the term "Black Swan" as it is now utterly and completely useless. It may as well mean "what's going to happen tomorrow" the way it's used these days. Whereas before a "Black Swan" was by definition an unpredicted event, nowadays every douchefag with a financial newsletter is predicting the "next" Black Swan.
Fucking imbeciles.
I am Chumbawamba.
In areas where employment is strong and earnings are high, demand will continue to drive prices higher while interest rates are low. Areas without a strong employment base or growth will not see the big price increases. If and when the stock market takes a shit, then you will see housing prices drop very quickly. As stocks drop there will be layoffs. Between higher unemployment and the hit to stock equity that was used to purchase or borrow against to buy real estate, the money to purchase hiomes will diminish and demand will fall. This will be reflected in prices adjusting downward. Until the stock market takes a dump, things will keep going and maybe level off. But when equities take a shit and the market corrects, then the Fed wil have no more arrows in its quiver to inflate home prices. I have been in the biz for 35 years and got stung bad in 2008. I'm sitting on the sidelines right now waiting to see how our governement and the CB keep our economy propped up.
People are idiots. The obvious answer is that the money's not worth anything anymore. $100M for a house in Mayfair, $180M for a Picasso, $1.5M for a tiny apartment in Sydney, $1.5B for an internet company with no revenues. Confetti.
We have got to be getting close. Saw on the local news last night on the Tee Vee that a few houses sold for MORE than the asking price after being on the market 2 days.
Seller: "I'm asking 300k for this house"
Buyer: 'I'll give you 325k and NOT ONE PENNY less!"
Ditto Portland, OR...anecdotals are they sell in a day and "little guy" buyers priced out, out-bid and ALL CASH buys, Of course Californians historically a factor, but I sure run into a lot more New Yorkers lately
Buying a house in the Portland Metro area right now. Very lucky to be the first bidder.
Being the first bidder is great. The last bidder is the baggie.
Wife works w/lady who just sold house: 22 showings 1st day, 4 offers, accepted offer $15,000 over asking price. (Colorado)
It is insane here. (I sold my house here Feb 27th....I'm currentyl renting.)
Edit: She was going to ask $240k. Realtor sez no, list at $275k. Under contract, $290k.
I am also in the Denver market. It is totally, totally insane here. Tried looking last year with no luck. May try again, but not until there is a price correction of some kind.
It's "The Wile-E-Coyote and the ACME blow-up house Syndrome". This will not end well for most. Beep-Beep baby...
Damn right it's going to be worse. There is no backstop this time.
Making sure I have cash and liquid assets. Will use cash first to get what I need during deflation.
You don't think Yellen Capital LLC will backstop this crap... AGAIN?!
They always let it crash first. It's how the Oligarch Rentier economy is built.
First by inflation, then by deflation...
F'ck beachfront. Cheap rental property. Better yet, government subsidized rental property. Minimum wage debt slaves are going to need to live somewhere. They sure as shit won't be able to afford to buy.
Moar like a wedge of black swans on the way!
I kid thee nott..
All that magic money the FED handed out and the market's are more messed up than ever, who'da thunk it......
The "To Catch a Predator" guy
Whoever he is, it sounds like he belongs here.
Mark is the best out there when it comes to housing. He has been following housing, mortgages, banks and trends for many, many years. His knowledge of the real estate market is second to none and he speaks the truth. Do not dismiss what Mark has to say. His timing may be off as it is for many of us but his facts and outcome are right on. One smart Dude.
Note, I have ZERO clue what happens next with housing. Maybe house prices double or triple. Maybe prices get cut in half. Everything here is a derivative of my research and my opinion only.
Yeah, he sure sounds like the best. Looks like he's just trying to sell "advice" while not actually giving any.
Not trying to give advice Lordy. Just my opinion. I enjoy sucking in data, synthesizing is, and see what comes out the other side. And this note ended up with a bottom line about like the Kung Pao chicking I ate last night.
That must've been BEFORE doing the 2 gigantic rails, huh?
Back then, before housing started to really crash, shit was a hundy a gram too.
Handons pretty sharp on real estate, general all around good guy but has a thing for Abby Joseph Cohen, I think he wants to do her (sorry Mark, had to say that)
EWW DON'T GET ME STARTED ON THE ABBSTER. SHE MAKES MY JUICES FLOW ESPECIALLY WHEN SHE WEARS TAN FLANNEL. OH MAN...HUBBA HUBBA!
Just the way to talks about stocks and bonds makes my lower estremities quiver.
Here is a recent video of Abby on deflation that makes me "inflate"
http://finance.yahoo.com/video/abby-joseph-cohen-giving-deflation-113403...
Sizers, much?
Yes Questions....you still out there, bro?
Of course we are in another housing bubble, home ownership is at 29 year lows. 93 some million not in the workforce, wage growth flat to negative, who the fuck can afford a house these days?
https://www.youtube.com/watch?v=h56UaFEpCOw
RE will not crash this time. You know how I can make such a bold statement? Because I sold my hovel 2 years ago and have been renting ever since with cash in hand ready to buy when it does. That alone will prevent any RE market crash from happening because the Gods would never smile upon me in that fashion. At least in my area. We gave up this spring on our house purchase because RE is way out of control here in NoVa right now. Almost 2006ish in many areas. Waiting game stuck in a nasty rental continues...
Buy now or be priced out forever.
That is the favorite line of unscrupulous real estate agents.
If you've never heard of MH then you weren't paying attention in 2007 and 2008. I started following him right after my hood took a shitnap and started dropping 15% a month in value during the bust. If only I had found him and KD 6 months earlier then I would have sold off at the peak and avoided the nightmare that I lived for 5 years in that section 8/illegal alien infested hood that it became after the bust.
was in your situ a year ago. cash at zirp and watch prices go up and calculating missed opp.
bot and have been double rewarded. 2 for 1 on improvs and 8 percent increase. ie vacant rural acreage prop. could sell in a heartbeat and pocket a nifty 100k with 30k improv cost, but instead heloc'g to raw land.
lots of running around but found a demo at 20 k - 15 acres, almost done. 500 into removal and a shit ton of ugly grueling work, but could be a nice double roll in 6 mos. or build and sell existing.
play the safe side. when it is avail, come out balzing with cash...
former re broker of 20 yrs...
Apples to oranges. If you are not paying any principal down of course your payment will be lower.
Steady, across the board, quality hard asset inflation is probably the result of something other than a bubble.
Hey bro. We're still waiting for China housing meltdown. Let's stay focused, one melt down at a time.
Waiting?
.
Had to start using my toes to keep track of all this shit coming together for our
'autumn(fall) of discontent'.
"Price then becomes the liquidity fulcrum and will drop, relentlessly ripping speculators faces off, until capital begins to view the asset class as a relative value once again."
Been there, done that, lost the tshirt...
All I see here in flyover country are crafty real estate agents whipping their unsuspecting customers into a frenzy to put orders on homes to make sure it doesn't get away.
The last time I saw that was right before my department was downsized and I was without a job. 2007/2008 redux coming soon.
I look at it this way, each 0.25 percent rise in the 30 equates roughly to a 5-8% drop in housing prices as people buy to a payment not to house price. That being said, I know someone who bought way over their head with a no principal 5/1 ARM (no principal the first 5 years) under the assumption that housing will only go up from here, and he will sell at year 4.... I want to see how that works out for him...
Might work out for him. Crash in year 2, massive inflation in year 4.
None of this can be true. Just this morning I saw a sign on a large real estate office that read in big bold letters.
Time to buy a house Real Estate is back.
So for you morons that are still flipping houses good luck because we have reached the top of the hockey stick.
The only thing worse than a boom and bust market is a steady state one.
Deal with it.
Rates are key in here too, which I didn't touch on too much.
If rates pop too much, all the insti spec-vestors looking to beat a 2% 10-year won't find a sub 3% yield in single-fam housing too sweet.
Moreover, all those flippers working on less than 10% margin could get blown out of the water on a 1% rise in rates, as thet takes away 10% purchasing power from those needing a mortgage to buy.
If the dollar spikes again, US houses price denominated is US dollars can sky rocket over a very short period of time making it better for the foreigners to keep their capital at home.
For a real US housing "durable recovery with escape velocity" to occur, demand has to be driven by a wide base of end-user owner occupants. Not all of these stimulus driven yield jockeys.
As such, Unless exotic loans are made “un-illegal”, rates move notably lower, or incomes increase sharply, prices paid by end-user owner occupant -- a cohort that must be in the driver’s seat in order for a “durable recovery with escape velocity” to occur – have nowhere to go but down on any rise in rates or unemployment.
They will call it deflation in financed assets, really its raising rates takes away purchasing power. So while theres a firesale in financed assets cars homes land...ect, everythign else starts the moonshot.
I can hear MSM now.
This is the deflation you were looking for.....
Great article.
RIPS
Only idiots would buy properties that have only 3% net yields. I work for one of the private equity funds that purchased homes to renovate and lease although we are a pretty small player compared to many of the groups out there. Our portfolio is providing a net yield of 6.5% which encompasses every cost including maintenance and turn overs. Our properties are not in bad areas either. 3% yield is about the long term historical yield of rental properties, however, the large drop in prices has made much higher yields possible.
Another area where the article is incorrect is in the analysis of affordability. One of the best metrics for analysis is the cost to rent compared to the cost to own. While the spread has decreased over the past couple years, in many areas it is over $200 a month cheaper to own a property than to rent one. Also, our portfolio wide occupancy rate is slightly over 98%.
Rents are in a mega bubble too.
Well, it is cheaper to buy a tent, than to rent an apartment.
Unless you think wages are in a massive bubble too then you are wrong. While some stupid tenants will rent a property that is up to 30% of their income, the vast majority of people are renting properties that are 10% to 20% of their income.
Mark, love the analysis but I take umbrage with the comparison of the 5/1 arms to the current no-down 3% mortgages.
One, it's clearly not apples to apples.
Two, it was the extra cheap money that fueled the previous bubble (in part). Now, you are claiming that money isn't cheap in order to support your theory of a bubble. That's a poor comparison I believe.
I am looking at this simplistically. That is, house demand and prices are moved by the incremental buyer. Back in the day the incremental buyer could buy -- and up to 25% nationally did -- using pay options. Back in 2003, some 40% bought using 5/1's. If the incremental buyer "could" buy at that price that becomes the monthly payment basis used for comparison. Now, the same buyer who used a Pay Option or 5/1 back then uses a 30 year fixed. That has to be the comp. That is also why rates on a 30 year keep moving lower...to retake a lot of what was lost when high leverage loans went away.
Popping incremental (or outlier) buyers does not pop a bubble. And less free money makes it harder to hit the Mania stage of the bubble frenzy also. And it's still not Apples to Apples because the 5/1 was the marginal buyer. There are 5/1s out there now (still outliers). That comparison would be more appropriate.
Black Swans Matter! Wings up, don't shoot!
Finally some Kardashian kontent!
I can see this coming like an out of control freight train here in Northern Nevada. Housing prices have come up some 70% since the lows of 2010-11, yet there is no wage growth (probably 10% at most since 2010-11). Anyone who cannot see that this is unsustainable is blind.
And I bet you have a ton of insti speculator owned houses sitting vacant looking for renters while the for sale market looks like it doesnt have a lot of supply.
There are plenty of houses in which to love. Simply, a massive misallocation towards rentals, which is one of my grey swans.
Update on my home sale in Northern Nevada. Put the house up at $284,400. Agreed to offer of $280,000, appraisal came in and loan(conventional 20/80) will be funded. Pest and structure inspection today(cross fingers). Close Jun 3rd if all goes well. Was under water big time just a year ago. Because of this mini bubble I will be getting out of this money pit with a little over 10K and no debt monkey on my back, wahooo.
Good for you. That's the way to ride the liquidity wave and jump off right before it crashes into short.
Congratulations. You had the fortitude to sell at the top. Very good decision. (Moving/downsizing is sure a pain, though)
"Moneyshot" Time; groan, keys (key mail) flood all over the Hooker Realtors faces:
mmmmm maybe, we can all invest in a Pillow, houzDOT com platform website and do an ADILT FRIEND LOSER PAGE.
WITH FORECLOSURE, YOU GET EGGROLLS AND RUBBERS. LOL
specualtors, hedge funds, Vegas, LA, Chibroko, NY ewwww yawk, Flawdah (NY with blue hair) cum cum cum in out of the rain. LOL.
Reeeeltors! quick look up witch, dat house falling on your pimp ride Face....smile...Witch.
is the implicit expectation of unlimited subsidized immigration driving up US housing prices?
Absolutely, especially in tech heavy regions.
Bidding wars on some houses. Like the top of the market now.
A realtor I know has said a couple of times that some change is coming to the mortgage industry in August that is going to cause the length of time it takes to get a mortgage will likely double or more.
Anyone have any idea what he is referring to?
Sure. He wants you to buy / sell now. Next question.
hahahaha
This is massive BS. I am in the industry (mortgage lender) and it *may* add 3-5 days max to closings. NO big deal.
As far as a market crash, it's really hard to read. In our area, so cal, tons of offers over asking and tons of cash sales. Plenty of people w/ 10-15% down on 600-700k prices, but, also plenty of FHA 3.5% down buyers that literally will be paycheck to paycheck.
I personally would love to see a nice correction so I can swoop up a current 800k house for 600k w/ 20-30% down and have a manageable mortgage payment.
I suppose when (if) the crash in China goes full swing that will really impact US (west coast at least) prices.
My question though is what is 'it' that he's referring to?
I'm not looking to buy or sell, was just curious what the hell he was talking about.
all the foreclosures, hud homes in my area are asking full market price. Insane.
in 7 years the baby boomer annual death sale pool size will double along with our national debt, worse the New American® population isn't nearly as hard working, educated, skilled or thrifty as the OldAmerican population, it's the difference between 1st world populations and 3rd world populations.
Could someone please write up a similar article for the air-cooled Porsche 911 market.
Easy, keep the same price for the average new home, but replace with "1997 911 Carrera Single Turbo, 20,000 original miles". God, I want one (more than a house).
Bought a 993 in 2007, stolen a year later with over 20k miles added. Insurance gave me more than what I paid. #PorscheWinning
a lot things gonig on at the same time!
foreclosures and HUD homes in Vegas usually start off 10% higher then most comps,,,,
www.ViewLasVegasRealEstate.com
Than Merrill. On the AM radio spots for the past (2) years. That was all the indicator I needed and a quite accurate barometer of what lies ahead.
The mortage rate Implode-O-meter days were fun times Mark...
Mark Hanson aka 'Hedgefundmanip' aka 'Hedgie' was calling the RE crash on various blogs back to 2007 at least. Awesome commentator, and he also tells some hilarious stories about hot tubs and stuff....
Ah, hut tubbin with Abby Josoph Cohen. I miss the good ol days Schwantzie.
Thehousingbubbleblog was registered January 25, 2006. The eventual housing bust was only shocking to the ow my balls crowd.
I always wondered what happened to the MMMBop guys, I guess one of them is now a real estate expert.
The real estate collapse from 2006 bottomed in 2010 but the rally since then is just a counter-trend move that will soon collapse again as this article demonstrates. Just as Hanson alludes, house prices are a long way from the bottom they will eventuall see.
http://www.globaldeflationnews.com/inflation-vs-deflation-part-3how-the-...
yea!
wait till they means test SS and medicare, every senior in America will unload their property for the biggest wealth evaporation in history
Year 3 of renting waiting for the house of my dreams with lots of land to drop in my lap for cheap. Unfortunately those selling will be running from zombie hoards so I'll get what I pay for I'm sure.
Very funny. Bubbles are strange things. They blow and blow and blow until one day they stop. Then for a while they hold their size as the volume traded of whatever asset is in a bubble continues to decline. Then, because volume always precedes price, price catches up to volume. When the volume/price divergence in housing closes it could mean a 30% drop over a short period of time...maybe less than 2 years.
But, you are probably right about the zombie hoards because with the Fed and Govt out of ammo to fight another housing crash, the next one is going to lead to some highly undesirable social and economic outcomes.
Might want to start storing up your rental apartment with seeds, gold, silver, antibiotics and gun powder.
National stats aside, Mark, do you have any hard data on the usual Super-Speculator states like Arizona, Florida and Nevada?
Yes, a lot. I spend most of my time on CA, FL, AZ, NV and TX, in that order. What happens in these five states will happen everywhere else. One important note on four of these fives states, their condos markets are in a state of puke right now with record numbers of units set to hit over the next two years. This is truly 2006 all over again.
This is a strange spring "selling" season in eastern Connecticut, where I'm from. Usually in the spring, a lot of houses are newly put on the market. Not this year - hardly anything is being added to the offered inventory. The banks are trying to unload foreclosures in a more open way, but it looks like regular sellers have given up. Since no-one has the income to buy a place or pay the property taxes, giving up trying to sell would seem rational.
Oh, another strange thing - most of the foreclosures that are for sale have "tenants" who are not to be disturbed. Yeah, that'll really make the purchase a lot more appealing. Are they the former owners, I wonder? Who will subsequently want to contest the title of the new buyer? Or will they just trash the place before they leave? Another thing I've noticed is that the foreclosures the banks are selling are the cheap places; not the costly ones.
enjoyed the article Mark. we sold our condo in N.CA recently- listed place right before weekend, had about 300 people go thru the open house. 7 offers by tues. lowest offer was 20K more than asking; we went with the highest, 90K over asking, w 30% down. no contingencies. there were no cash buyers. all asian- but, not foreign investors- silicon valley workers w lots of money and/or family backing. they all wrote letters saying why having our place would make their lives better/why it was perfect for them. felt like we were looking at applications for college or something. they were young couples. im hoping this is a bubble, and that it pops at some point soon- otherwise, i'm screwed, cuz the rentals (and there arn't many)are pretty much higher than what i was paying in mort+taxes+insurance+hoa, if u can believe it. plus, no further inventory. nuts. it has gone parabolic in last few mo. sure looks like a bubble to me. but, agree w comment that equity prices may be whats driving this train- if s&p blows, it will all fall down....which means, i could be sol, since it apparently will never drop.
I think your timing is exceptional. Perhaps prices go up a few %, or stay flat for another 6 to 12 mos, but in 2 to 3 years I think you will think you were the smartest guy around. Your wife will owe you lots of BJ's.
With respect to NorCal, it's driven more by high-yield, pre-IPO, Nas-100, and/or dollar weakness than macro real estate trends.
And with condos all you own is air. Talk about volatile. In Miami condo demand has literally crashed.
Excerpt from a recent client note...
Several “hot” condo markets around the country are now trending in this direction, but nobody’s talking about it yet. .
Bottom line: Demand has plunged to cycle lows and supply has surged to 12 months with 10s of thousands of units in the early and mid-stage production pipe that can’t be absorbed without a plunge in prices or a fresh tidal wave of speculators.
We know supply here will surge for at least 2 more years based on what’s in the pipe. The question is, what can make demand double or triple, which is needed to prevent a crash?