For Sale Price Reduction

[resinman]

Sellers are offering to pay closing costs

Builders are selling new homes now with washer and dryers ovens freezers and a guard dog


I had did a thread over one year ago about how the housing market was getting ready to burst,,,

Well we have 18 to 24 months till the real bad news comes from the domino effect

When the fed stops raising interest rates,,,thats when you will see the dollar start to crumble


I will keep this thread alive with new posts every few days for the next several months,,,,

The global markets and central bankers have lost confidence in America and the dollar,,,Once the bubble economy begins to correct

The fed will not be able to lower interest rates to save the Economy from a spiral of debt


Since in America we do not swear oaths to defend the government, but to preserve and protect the Constitution, not only is gold ownership financially prudent, it is down-right patriotic.


resinman

[CottonBalls]

The real issue was on 9-12-2001 when GM started the 0 down, 0% financing, 0 payments for a year.
Most automakers followed suit.
The auto industry is the largest industry in the world, it keep everything humming....well, used to anyway.

Even though people got a new car for basically free, the monies had to come from somewhere.
Warranty work (especially on a GM piece of shit) and all of that was money lost by GM (or whatever OEM).

In one brilliant move GM killed the US, not many can see it even now....but the eyes are opening slowly.

If I was a doomsayer it would be easy to see how this all might have been pre-planned.
Have a catastrophy, make people afraid.
Get everyone in a new SUV quick, for next to nothing, make sure they trade in thier old vehicles so they have to rely on the SUV as primary transpo.
Get the oil companies to follow suit and raise the price of oil/gas/propane/LPG/etc.
We can make a very quick buck off of this.

The mind reels.

Everything in the US depends on cheap transportation.
Everything including housing (building materials must be trucked in, workers, etc.).

You know, conspiracy theory my ass.....I think it was planned from the get go.

[OneLegUp]

I've lived through 3 housing booms and 2 major downturns. One of the upswings was the early 70s with its downturn beginning in the late 70s that came with 200%+ increase in oil/gas prices along with 20% interest rates which didn't cause economic collapse. Given those 3 oil, interest rates and housing market falling off the planet and we didn't collapse... it is unrealistic to believe as such now.

What will occur is at most a 20% correction in housing prices downward in ecrtain areas of the country with economic flattening due to construction jobs etc being lost. The later accounts for appx. 14% of the economy of the US. However in the technology sector 07 and 08 look extremely bright thus negating a portion of the construction sectors downturn.

You will see foreclosures up and housing starts down for the next few years. It'll then stabilize as it had done in the early 70s and early 90s..but remain flat or with little expansion for 5 years thereafter.

Your are seeing the start of this now with the transfer of investment money from real estate into the stock market..

[resinman]

evrything in the USA also depends on confidence,,,,the dollar decline that is comming will not collapse america,,,its a healthy correction,,,just goona be painful for some

On a positive note,,,,

The stock market ,,,,well the S&P 500 in the middle of 2001 was valued as a whole @ 41 dollars a share and i believe the index was at 1200


Now at current levels near 1200,,,the S&P current earnings potential is valued at 91 dollars a share,,,Even if we see a 20% decline in capital corporate investment,,,lets even add it to a massive decline of 30%,,,


It still values the S&P @ 60 bucks a share


This P/E compression is a textbook definition of what happens when a new risk is introduced to equity valuation metrics.

And what is the new risk being priced to equities?

Globalization and Islamic fascism -- and the instabilities that result.


so if ya have not made any money in the markets,,,well when the fed raises rates one more time Aug 8th,,,and if he says no more in the foreseeable future,,,

ya better own stocks for at least 3 months,,,certain stocks

resinman

[ViRedd]

The most reliable source historically in predicting the future of California real estate is the University of California at Santa Barbara (UCSB). Their recent prediction for the next five years in my county shows the average price for a single family dwelling rising from its current average of slightly over 700k to over one million in five years. Now then, as OneLegUp said, there will be a correction and its starting right now ... or to be exact, it started about six months ago. This is the start of a market where real estate agents truely earn their money. Only the most creative and experienced survive a declining market. They are the ones who make the money in every type of housing market. The rest return to the machine shops, restaurants, piano moving businesses, nursing, home-making jobs and other nine-to-fivers from wence they came. :)

Vi

[joe6pack]

if the dollar were to collapse the big losers would be china - they hold the most american debt - if the shit really hit the fan and the chinese came looking to collect - we'd have ww3 - they don't want that - they want stability too - and they control their currency so they won't let it go down

[The Cannarchist]

I was reading the Financial times the other day and what did I see? US realty sales dropped by 20% last month ,in what should be the hottest time of the year to sell......The FT was augering some pretty dark news about neative equity situations.....

[joe6pack]

the fed says the real estate market is making an "orderly"
decline... 6% was the number they sited.

yes there are people in negative equity situations, however these are people who over-borrowed against their home - the mortgage companies were a little too creative with valueing peoples houses. people as far as i have seen and read in the northeast (hot market) have not reached the point where their homes are worth less than what they paid. i don't think that will occur in the long term

[resinman]

Meanwhile, in China, Monetary Committee member Yu Yongding is not alone in calling for Beijing to diversify its $875 billion reserves into gold to protect against a tumbling dollar. We quoted him last month, saying: "We need to use some of the reserves to buy other assets such as gold and strategic resources such as oil." More recently, Zhao Qingming from the Chinese central bank's Financial Research Institute and Luo Bin from its accounting department wrote in a note published in China Money Market that using some of China’s forex reserves to buy gold could “maintain and raise the value of China's dollar holdings.” That conclusion seems questionable, but the important thing is that more Chinese officials are jumping on this bandwagon. It’s an idea whose time is coming—soon

Recently, Russian President Vladimir Putin ordered the Russian central bank to raise the gold share of its foreign reserves from 5% to 10%. That’s no small matter, given that Russia's reserves have surged to $247 billion—the world's fourth largest.

Accomplishing the shift to 10% gold would require purchasing 21 million ounces of bullion, which is about one-quarter of the world’s annual mine production. And thanks largely to oil exports, Russia is accumulating additional foreign currency reserves at a rate of about $100 billion per year. With reserves growing so rapidly, just keeping the gold portion at 5% would require Russia to absorb a big slice of the world’s mine output.


In the 19th century England ruled the world
In the 20th century the USA ruled the world
In the 21st century China will become the financial ruler

Every countrys people who ruled the world never believed it,,,always said we are the stongest,,,even back when spain ruled the same attitude existed,,,now the romans would kill all the most powerful and kill all there senators every 150 years or so,,,they always got a fresh start


resinman

[ViRedd]

Up to a year or so ago, mortgage companies were offering 125% financing. For those turkeys who took the bait, the chickens will be coming home to roost. :)

Vi

[knna]

[QUOTE=resinman]Meanwhile, in China, Monetary Committee member Yu Yongding is not alone in calling for Beijing to diversify its $875 billion reserves into gold to protect against a tumbling dollar. We quoted him last month, saying: "We need to use some of the reserves to buy other assets such as gold and strategic resources such as oil." More recently, Zhao Qingming from the Chinese central bank's Financial Research Institute and Luo Bin from its accounting department wrote in a note published in China Money Market that using some of China

[resinman]

Here is a Bullish outlook on the Housing Market,,,,it does seem from other datas in the last few weeks that the Fed will prevail as mentioned.

THE KAHUNA'S RANT O' THE WEEK: The Great American Housing Slump? -- By Tobin Smith


When the real-estate market started to really slow late in the summer of 2005, it was nine months later that we started seeing the breathless accounts of a housing Armageddon hitting the mainstream press.

Bob Toll of Toll Brothers fame came out this week and basically said that in his 40 years he has never seen a downturn in housing without a downturn in employment or some nasty macroeconomic condition that took housing down with the rest of the economy. This time we have low employment, a stable stock market and relatively low interest rates.

SO WHAT'S GOING ON?

Come on people, this is not a tough one to figure out.

The psychology of buyers and sellers has changed. Fear of not getting your offer accepted has been replaced with fear of offering too much or, for sellers, not getting an offer at all. This is the classic end-of-a-bubble mentality, because fear is one of the root causes of bubbles in tradable assets. (A bubble is defined as a rate of appreciation two or more times the standard deviation of long-term asset appreciation trends.)

The fear of not getting your offer accepted in the hottest markets in the U.S. was very well-founded -- the supply/demand balance in the market was imbalanced, with too little supply to meet demand.

This was the same case in the Internet stock bubble -- more demand than supply. Most forget that the IPOs of the Internet bubble brought 6 million to 8 million shares to market at a time when they could have sold 100 million.

The residential housing market was no different -- and neither was the apartment bubble of the early '80s fueled by the new marginal buyer in the market, the real estate tax shelter syndicator.

Where did the extra demand come from for houses, outside of new household formations? Investors. More specifically, new buyers at the margin, just like the new investors in Internet stocks brought new marginal demand to finite inventory of Internet stocks.

With no money down and 100% leverage available to millions of people who heretofore would never qualify for such financing (because it did not exist), both my Town Car driver and my makeup person from Fox News were suddenly real estate tycoons. And yes, I mean this literally -- both own "investment properties" that they bought with 5% down, interest-only mortgages. Both will also likely walk away from these properties with the lender selling their "portfolios" at auction.

Don't believe me? Then do this: open up your e-mail contact list and look at the names -- who do you know that owns at least one "investment" condo or home? It's a scary number. Now add second-home buyers to that list -- an even scarier number, no?

Where has this marginal housing demand gone? Away -- or at least away from the previously hot markets. The pro home speculators have moved to the hurricane-damaged Gulf Coast or to Texas (where there are two shows dedicated to buying and selling real estate on the network that I do my radio show,).

So, sports fans, take away the marginal buyer who was also the most aggressive bidder at the margin and whose eagerness to buy tipped the purchase and sale of anything sold in the market, and you have a lack of demand.

This is what we have today in most real estate markets, a lack of the eager buyer at the margin of supply and demand. Now we have real buyers, as in the people who need homes for actual use as a home. And the removal of the buyer at marginal demand has allowed the real buyer to not make the escalator clause/no-inspection offers that drove real estate prices to over-zealous heights.

Does the end of the investment home buyer -- the "buyer at the margin" -- spell doom for the U.S. economy? Not at all, and I can prove it.

THE OVERSEAS HOUSING BUBBLE

Look at U.K. home prices two years after the end of their bubble. (Yes, they were way ahead of us in their own real estate bubble.) In 2003, more than 40% of homes sold in the U.K. were "bought to let" -- i.e., bought to rent out and then sell. Here we are in 2006 with higher interest rates and, voila -- no crash.

Same thing happened in Australia, where almost 50% of homes sold were to "let" at the apex of their bubble in 2002.

The issues in both of these economies are the same here -- when the marginal buyer disappeared, the actual fundamentals of housing supply reappeared. And the fact of life in most of the U.K. and Australia is like the coasts of the U.S. -- there are more people than houses available in most markets.

Now, our reality is this: As the investment buyers puke up the houses and condos they bought, we will see 10%-20% (and higher) price retracements for homes and condos. The last buyers in will be the first out, with big equity losses. We are in that phase right now, and the areas with the most flippers will have the most equity losses as they walk away from their investments and the auction business goes nuts.

For some people, this will be a financial tragedy, but not for the vast number of homeowners who actually live in their houses, and have for a relatively long time. What we are experiencing is a 10%-20% correction in prices, albeit from much higher prices than 10 years or even five years ago.

But unlike Internet stocks, homes have the most economic utility in the world -- people live in them (at least the ones occupied by homeowners). Most people who own their home just won't sell, which does not add inventory to the market.

When the excess inventory of pre-existing homes is flushed out during the next two to three years (get used to it), we will also find ourselves without a lot of new homes.

And here is the rub: The average house in the United States is old, as in 37 years old.

The reality is that 37-year-old houses suck. Sorry, but in contrast to modern homes built today (with great rooms, wide-open kitchens, 10-foot high ceilings, etc.), there will be a lot of demand for modern-style homes, townhomes and condos. Maybe not right away in some areas, but soon.

If you live in an area where there are large constraints to additional home building, the excesses will work off in a few years. And if that economy is not tied to building GM or Ford cars, you will be fine.

THE EFFECT ON OUR ECONOMY

The slowdown in home building will take a half-point or so out of our GDP, and will take 500,000 or more jobs out of our economy. But our economy has 150 million jobs, so this is not an economy killer, it's merely a rash.

The real issue for the economy is whether this reverse-wealth effect will make homeowners pull in their spending. And also, as the trillions of dollars in variable mortgages reset higher, will the refinancing at 6.5% or so fixed-rate mortgages take too heavy a bite out of discretionary spending?

One point to keep in mind is that a lowering of short-term rates by the Fed (if we get the economy in a stall) would remove much of this consumer brain and wallet damage.

We saved the economy from the crash of the Internet bubble, so why in the world would the Fed throw the U.S. economy under the bus if this very normal and much-needed real estate correction turns into a death spiral contagion?

And this is my final argument -- the housing market in the U.S. is too big to let die on the vine -- the Fed knows this and so do we.

It may be the proverbial moral hazard, but one of the key reasons the Fed felt they had to get short-term rates up so much versus long-term rates, in my opinion, was to have some real ammo in hand if the housing correction turned from soft to a really hard correction.

Bob Toll is right. What he is seeing is different than what he has seen in 40 years of building upscale homes. But it's only different because the cause of the bubble was different.-- the bursting of the Internet bubble and the Fed move to take rates to minus 2% to save the economy was the catalyst.

Mortgage rates for the 20 years preceding the great housing bubble of 2001-2005 were around 8%, so we can handle 6.5% fixed-rate mortgages, thank you very much. That will slow the economy to 2% growth and it won't seem to be cranking as much at the 5%-5.25% unemployment rates that will surely accompany this correction.

But guess what. -- the removal of the "investment home" from the lexicon of most Americans brings back the concept of "investing in stocks."

[ViRedd]

We're starting to see "Short Pay" sales happening now. This means that a seller sells for less than they owe and the mortgage company takes the loss. The mortgage company writes the loss off as a business expense. The IRS, in turn, considers the short pay amount to be income. So, the borrower has to pay income tax on the short amount. Nice world, eh?

Vi