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mikebell
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Housing bubble or "froth"?

May 24th, 2005, 3:38 pm

Just came out today:QuoteApril existing home sales at record highReutersTuesday, May 24, 2005; 10:27 AMWASHINGTON (Reuters) - Sales of existing U.S. homes surged 4.5 percent in April to a record high, and home prices posted the biggest annual gain in almost a quarter century, a trade group said on Tuesday.Sales of previously owned homes rose to a seasonally adjusted annual rate of 7.18 million units last month, the National Association of Realtors said. That figure includes both single-family homes and condominiums.Single-family homes sales rose 4.5 percent in April to a 6.28 million unit rate from a 6.01 million unit rate in March. Condo sales climbed 4.8 percent to a 899,000 unit rate from an 858,000 unit pace in March.The sales surge came as mortgage interest rates dipped."The record was basically unexpected, but low mortgage rates were unexpected as well," said David Lereah, chief NAR economist. "Prices are now becoming a concern. There's a speculative element in home buying now."Analysts had expected overall sales to shade up to a 6.90 million unit rate from the previously reported 6.89 million unit pace.The national median home price rose 15.1 percent to $206,000 from the same month a year ago, the NAR report showed. That price increase was the biggest since November 1980, when prices rose 15.6 percent, NAR said.And Mr Greenspan sez this:QuoteWASHINGTON, May 20 - Alan Greenspan, chairman of the Federal Reserve, suggested on Friday that the red-hot housing market is becoming a little too exuberant for its own good.Skip to next paragraphSpencer Platt/Getty Images"Without calling the overall national issue a bubble, it's pretty clear that it's an unsustainable underlying pattern," Mr. Greenspan told the Economic Club of New York at the Hilton New York hotel in Midtown.Mr. Greenspan emphasized that he sees no sign of a nationwide housing bubble, but he acknowledged concerns over "froth" in the market and pointed to a big increase in speculation in homes - particularly in second homes. As a result, he said, there are "a lot of local bubbles" around the country.The comments of the Fed chairman were the closest he has come to acknowledging the possibility that housing prices may be poised for a fall in some parts of the country.The issue is sensitive for the Federal Reserve, because its policy of keeping interest rates low has helped propel housing prices upward even when the rest of the economy was dragging.But the housing issue highlights an unusual quandary for the central bank: even though it has raised short-term interest rates eight times since last June, long-term interest rates and mortgage rates are actually lower than they were one year ago.The unexpected persistence of low mortgage rates has kept alive the housing boom - in new-home construction as well as in prices of existing homes - much longer than most analysts had expected.Mr. Greenspan has tried to avoid second-guessing the markets. In 1996, he suggested that the stock prices had been pumped up by "irrational exuberance."But after a brief spasm of anxiety, investors drove prices higher for three more years. Mr. Greenspan has been criticized by some for failing to pre-emptively puncture the stock market bubble, which burst in March 2000, and some analysts criticize the Federal Reserve now for creating a housing bubble.Fed officials contend that their primary job is not to influence the price of assets, whether stocks or real estate, but rather to focus on inflation and growth. Trying to puncture a bubble, they say, would cause more problems than it would prevent.Mr. Greenspan repeated many of his past reassurances about the housing market: that any bubbles were local, not national; and that people do not speculate as much on houses as they do on stocks, because they generally live in the houses they buy.Residential real estate prices have jumped at double-digit rates for the last several years in many cities, especially along the East and West Coasts.Prices for existing homes on the West Coast jumped 18.9 percent for the 12 months through March and 14.7 percent on the East Coast, according to the National Association of Realtors.Nationwide, prices of existing homes have risen by 20 percent over the last two years and 29 percent for the last three years, according to Gus Faucher, a senior economist at Economy.com, a research group."We do not see a nationwide housing bubble," Mr. Faucher said, "but there are certainly instances where prices are way ahead of fundamentals."Many analysts have argued for months that evidence of speculative activity has increased over the last year. Much of the evidence is anecdotal, including people buying and reselling houses at developments before construction is even completed.But there has been solid data as well pointing to rapid price increases in second-home markets, reports of many more individuals buying houses and condominiums as investments rather than as places to live, and to the heavy use of interest-only loans and adjustable-rate mortgages that allow purchasers to buy considerably more expensive properties than would otherwise be possible.Mr. Greenspan acknowledged on Friday that many people were "reaching" to finance their purchases.But he predicted that housing prices were unlikely to decline much, if at all."Even if there are declines in prices," he said, "the significant run-up to date has so increased equity in homes that only those who have purchased very recently, purchased before prices actually literally go down, are going to have problems." This can't continue forever. I've read some reports on Bloomberg on various ways that people are financing their new homes and it's quite scary what some people agree to. Tick-tock... tick-tock...
Last edited by mikebell on May 24th, 2005, 10:00 pm, edited 1 time in total.
 
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Cuchulainn
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Housing bubble or "froth"?

May 24th, 2005, 3:43 pm

I agree.This bang has been forecasted by the Economist some time ago as well.For example, a 5 bedroom house in Blackrock, Dublin now costs 1.9 million Euro. In 1990 it was worth Euro 100,000!House prices in Holland are approx. 30% too high.A crash could occur, it did happen in NY around 1980 and in Holland the same time.
Last edited by Cuchulainn on May 23rd, 2005, 10:00 pm, edited 1 time in total.
My C++ Boost code gives
262537412640768743.999999999999250072597198185688879353856337336990862707537410378210647910118607313

http://www.datasimfinancial.com
http://www.datasim.nl
 
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Collector
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Housing bubble or "froth"?

May 25th, 2005, 12:19 pm

I was reading in the mortgage journal 70% off all mortgages in Bay area in San Francisco now are interest only, it used to be around 20%.....people keep increasing leverage. With bond yields down at new lows I guess we can expect bubble to grow short term...but 2006, 2007, 2008 ?? could get ugly
Last edited by Collector on May 24th, 2005, 10:00 pm, edited 1 time in total.
 
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exotiq
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Housing bubble or "froth"?

May 25th, 2005, 1:47 pm

Another reason to believe there is a bubble is that I have yet to find any of my neighbors willing to lend me their flats to sell short, and the combination of easy leverage and tough short constraints are typical of any bubble...The most common argument I hear against there being a bubble are the pointing out of examples of people who said the bubble would burst in Sep '04, then Dec '04, then Mar '04, and so far the prices have continued to climb...There are a few numbers and trends that are hard to ignore...namely what will happen to urban residential property when the boomers, who still seem to prefer living the 'burbs and gated Florida than the inner city, all start retiring. I also laugh when Jim Cramer says that "land is scarce"; perhaps he is not counting all that empty space I see along the highway whenever I get only half an hour outside NYC in any direction? Maybe I overestimate what land is habitable, but I thought that land was one of the most overly abundant resources the world has, second maybe to gold...
 
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Cuchulainn
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Housing bubble or "froth"?

May 25th, 2005, 3:34 pm

QuoteOriginally posted by: CollectorI was reading in the mortgage journal 70% off all mortgages in Bay area in San Francisco now are interest only, it used to be around 20%.....people keep increasing leverage. With bond yields down at new lows I guess we can expect bubble to grow short term...but 2006, 2007, 2008 ?? could get uglySo, when should I sell my property investment? Or am I too late? If I wait too long it will be worthless? Someone help? Anyone like to be my advisor?
Last edited by Cuchulainn on May 24th, 2005, 10:00 pm, edited 1 time in total.
My C++ Boost code gives
262537412640768743.999999999999250072597198185688879353856337336990862707537410378210647910118607313

http://www.datasimfinancial.com
http://www.datasim.nl
 
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Collector
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Housing bubble or "froth"?

May 25th, 2005, 4:55 pm

just cheaper, Chuchulainn with your deep pockets then you just buy more...
 
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Cuchulainn
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Housing bubble or "froth"?

May 25th, 2005, 6:23 pm

QuoteOriginally posted by: Collectorjust cheaper, Chuchulainn with your deep pockets then you just buy more...Thanks Collector, my pockets are deep but it's not money in them As you know I am a struggling writer and trainer. You do have a point. When is the best time to buy? In about 2 years time?
Last edited by Cuchulainn on May 24th, 2005, 10:00 pm, edited 1 time in total.
My C++ Boost code gives
262537412640768743.999999999999250072597198185688879353856337336990862707537410378210647910118607313

http://www.datasimfinancial.com
http://www.datasim.nl
 
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KTE
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Joined: February 4th, 2002, 3:21 pm

Housing bubble or "froth"?

May 25th, 2005, 7:09 pm

There's no doubt there's a bubble in some U.S. coastal markets, probably some inland areas as well. People are borrowing against the equity in their houses to buy rental units with only 10 percent down. Many don't even have positive cash flow and the owners are just hoping for a flip in a short period. I think it will get very ugly in some of these areas. We just don't know when, but probably sooner than we hope.
 
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exotiq
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Housing bubble or "froth"?

May 25th, 2005, 10:04 pm

I've seen several properties on which I can not understand how the landlord possibly makes money, or I figure that to net a return equivalent to the 5-year note would imply a 7-12% annual appreciation of the property.No doubt many of us have pointed out the obvious signs of the bubble (as debated on the similar thread on oil), but apparently (pardon the cliche) the bubble can stick around for even longer than Cuchulainn can remain solvent
 
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Cuchulainn
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Housing bubble or "froth"?

May 26th, 2005, 11:48 am

QuoteOriginally posted by: exotiqI've seen several properties on which I can not understand how the landlord possibly makes money, or I figure that to net a return equivalent to the 5-year note would imply a 7-12% annual appreciation of the property.No doubt many of us have pointed out the obvious signs of the bubble (as debated on the similar thread on oil), but apparently (pardon the cliche) the bubble can stick around for even longer than Cuchulainn can remain solvent Thanks guys. It's good to know that my assets are in good hands.
My C++ Boost code gives
262537412640768743.999999999999250072597198185688879353856337336990862707537410378210647910118607313

http://www.datasimfinancial.com
http://www.datasim.nl
 
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Collector
Posts: 4826
Joined: August 21st, 2001, 12:37 pm

Housing bubble or "froth"?

May 26th, 2005, 1:07 pm

>Thanks guys. It's good to know that my assets are in good hands. When the bubble burst assets will quickely change hands, I am not sure you will consider it good hands, all I know it will be hands with cash, when cash again is King!
Last edited by Collector on May 25th, 2005, 10:00 pm, edited 1 time in total.
 
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Cuchulainn
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Housing bubble or "froth"?

May 26th, 2005, 5:30 pm

I have just read an article from the president of the central bank in Holland that the national mortgage debt is too high. He sketches some scenarios such an interest hike. In 1980 the debt was 29% of income, now is 92% of income. In some cases the mortgage is higher than the value of the house. MikeSee the Economist May31-June 6 2003, a series of articles on the housing market. Will the stockmarket bubble and be replaced by the property-price bubble?Since 1995 house prices have increased 3-fold in Ireland, for example. Some other numbers : the % over-valuation and the % forecasted price fall for some countries:Australai: 31, -20Britain: 34, -25Ireland: 42, -20 Netherlands: 44, -30Spain: 52, -30USA: 15, -10As Collector says, cash is the key word.
Last edited by Cuchulainn on May 25th, 2005, 10:00 pm, edited 1 time in total.
My C++ Boost code gives
262537412640768743.999999999999250072597198185688879353856337336990862707537410378210647910118607313

http://www.datasimfinancial.com
http://www.datasim.nl
 
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TraderJoe
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Joined: February 1st, 2005, 11:21 pm

Housing bubble or "froth"?

May 26th, 2005, 5:38 pm

QuoteOriginally posted by: CuchulainnI have just read an article from the president of the central bank in Holland that the national mortgage debt is too high. He sketches some scenarios such an interest hike. In 1980 the debt was 29% of income, now is 92% of income. In some cases the mortgage is higher than the value of the house. MikeSee the Economist May31-June 6 2003, a series of articles on the housing market. Will the stockmarket bubble and be replaced by the property-price bubble?Since 1995 house prices have increased 3-fold in Ireland, for example. Some other numbers : the % over-valuation and the % forecasted price fall for some countries:Australai: 31, -20Britain: 34, -25Ireland: 42, -20 Netherlands: 44, -30Spain: 52, -30USA: 15, -10As Collector says, cash is the key word.I was looking at a video on www.cantos.com and it is also area specific, e.g. in the UK London house prices won't fall too much whereas N. Ireland, Birmingham and the Northeast may experience corrections of up to 20%.
 
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mikebell
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Housing bubble or "froth"?

May 26th, 2005, 5:54 pm

Daniel, thanks for the tip! Here's a few of those...
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Cuchulainn
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Housing bubble or "froth"?

May 26th, 2005, 6:04 pm

QuoteOriginally posted by: mikebellDaniel, thanks for the tip! Here's a few of those...MikeYou're welcomeThe articles make for interesting reading.Gut feeling is that buying things that you cannot afford and/or speculating on your house (as many have done here) is a bit foolish to say the least. A house that has appreciated 3 fold in 7 years can handle a fall of 30%! In general, if one can weather time then things move back up again.
Last edited by Cuchulainn on May 25th, 2005, 10:00 pm, edited 1 time in total.
My C++ Boost code gives
262537412640768743.999999999999250072597198185688879353856337336990862707537410378210647910118607313

http://www.datasimfinancial.com
http://www.datasim.nl
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