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This is not quite the headline in today's WSJ, but a quick look at the numbers buried in the article show some stunning trends:

New Home Sales Soared 16% As Prices Declined in April

WASHINGTON -- New-home sales soared in April, an unexpected surge marking the biggest climb in 14 years, according to a report that showed declining inventories and signaled hope for the long-suffering housing sector.

This title and lede probably deserve a prize for "most misleading journalism"...

... because the article says this:

Sales of single-family homes increased for the first time in four months, rising by 16% to a seasonally adjusted annual rate of 981,000, the Commerce Department said Thursday. March new-home sales decreased 1.4% to an annual rate to 844,000, a figure revised down from an earlier estimated 858,000. Sales fell 3.8% in February and 13% in January. Year-to-year, new-home sales were 11% lower than the level in April 2006.

i.e. this is just a temporary upward blip in a long downward trend, and sales this April were quite a bit lower than one year ago, a comparison that provides as much, if not more, information than the monthly variations.

But the ncomes the real meat of the article:

The average price of a home last month decreased to $299,100, down from $324,700 in March and $310,300 in April 2006. The median price was $229,100, lower than $257,600 in March and $257,000 in April 2006.

So, average prices are down 8% (on both last month and on a year ago) and median prices are down 11% (on both last month and on a year ago).

Average prices can be distorted by transactions on the high end of the market (which is still buoyant as Wall Street and big corporations rake in record profits and top traders and managers have never had it so good), but median prices (i.e. the prices at which 50% of transactions were at a higher price, and 50% at a lower price) going down means that the whole market is going down.

And median prices going down more than average prices suggests that transactions at the top are hiding even worse declines elsewhere.

So, a big drop in prices. Is it just a blip? Could be. But what makes it worrying is actually precisely what the WSJ spins as positive news: the growing volumes. This means, in fact, that more people are accepting the reality of lower prices when selling, and make is unlikely that the trend will change.

The typical cycle in a house bubble is that transactions first freeze as buyers become unwilling or unable to pay the high market prices. Sellers first refuse to change their requirements, and, as the market slows down, will rather wait than lower their price. Thus the number of transactions will go down before the prices. It is only when people start being forced to sell that prices actually go down, as they need to bring down prices to actually sell. Then transaction numbers will pick up as prices accelerate their downward move. Then transactions will slow down again as prices reach their bottom, with few buyers and few sellers (only those forced to that did not do it previously). As the market regains its footing, both prices and number of transactions will finally start increasing again.

What is uncertain is what kind of an impact the housing slump will have on the economy. There are two ways it could be nasty:

  • the wealth effect: people no longer can withdraw equity from their houses to pay for spending. Thus consumptions drops;
  • the jobs effect: with so many jobs of the jobs created lately being in construction - and the financing of real estate - in recent years, it is likely that a number of them will disappear, and thus push up unemployment rates.

Both of these will further depress the housing market, and may put a number of people in dire financial straits, especially if they have one of the more exotic loans that were offered in the past 3 years.

Bur hey, the number of transactions increased! all is well!

Originally posted to Jerome a Paris on Thu May 24, 2007 at 08:14 AM PDT.

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Comment Preferences

  •  Tip Jar - 24 May (240+ / 0-)
    Recommended by:
    Devilstower, wozzle, Canadian Reader, Lupin, Jett, Alumbrados, Ed in Montana, Erin in Flagstaff, Night Owl, Sean Robertson, Kaina PDX, Upper West, GP, SarahLee, acquittal, gaianne, Trendar, Thom K in LA, Fenric, sphealey, Disillusioned, wu ming, billlaurelMD, Xan, democat, polecat, Woody, TampaProgressive, theran, object16, grndrush, exNYinTX, Vitarai, regis, geordie, RubDMC, jennylou, lgrooney, bara, dhonig, TheMomCat, Hatu, davechen, conchita, TracieLynn, cskendrick, JLongs, Wee Mama, berith, groggy, OCD, HippyWitch, Morague, RabidNation, chuckvw, retrograde, javelina, murphsurf, itsmitch, skwimmer, fumie, antirove, rocketito, malcolm, cathy b, Dube, minorityusa, rcvanoz, TexDem, Dallasdoc, Sycamore, sooner, GW Chimpzilla, cometman, grayslady, 2liberal, NYFM, Catte Nappe, Eddie Haskell, lcrp, cevad, walkshills, bwintx, craigb, jesses, YetiMonk, Clzwld, CanYouBeAngryAndStillDream, bablhous, rebirtha, kd texan, homogenius, AlwaysDemocrat, rmx2630, Marc in KS, sxwarren, sarahlane, davidincleveland, historys mysteries, NoMoreLies, denise b, bellevie, Tami B, el dorado gal, Heiuan, sc kitty, PBen, corvo, Hotspur18, jhutson, MT Spaces, ChemBob, TigerMom, Brooke In Seattle, reflectionsv37, boofdah, eru, Mz Kleen, ocooper, bleeding blue, buckeyedem08, Frank Palmer, EconAtheist, GreyHawk, ladybug53, Ice Blue, QuickSilver, blue jersey mom, paxpdx, rolandzebub, Warren Terrer, rofodem, FightTheFuture, Floja Roja, sodalis, LivesInAShoe, Dania Audax, thiroy, Land of Enchantment, soyinkafan, KuanShiYin, Ian H, Mehitabel9, motherlowman, trashablanca, kraant, highfive, Lance Bearer, Milly Watt, vigilant meerkat, tobendaro, stonemason, Yellow Canary, cookseytalbott, mooshter, Mensor, Loonesta, donnas, blueoasis, Elvis meets Nixon, MJ via Chicago, A Siegel, Skeptical Spectacle, HammClov, PapaChach, NewAmericanLeft, NearlyNormal, BalkanID, armadillo, bleeding heart, Preston S, mhw, myrealname, Something the Dog Said, Turbonerd, murphthesurf, txdemfem, ilyana, rage, va dare, Stripe, means are the ends, Dreaming of Better Days, blueoregon, MadMs, shaharazade, Statusquomustgo, kurious, bstotts, Granny Doc, kidneystones, pseudopod, lemonsieur, PatriciaVa, BentLiberal, pat of butter in a sea of grits, goon 01, lams712, Red Sox, bigchin, One Pissed Off Liberal, Noor B, marykk, Elco B, Papa Joe, Ken in MN, Cronesense, dmh44, possum, godislove, jetskreemr, Queen of Swords, lemming22, The Werewolf Prophet, Duccio, kath25, Dcoronata, greenchiledem, DWG, dolphin777, ca democrat, sowinso, World Patriot, lafemmoi, keikekaze, willb48, Lena, zenobia, nom de paix, Dem in the heart of Texas, davewill, jhritz, JeffW, LightningMan, ScottyUrb, AshesAllFallDown, portorcliff, Remembering Jello, TH Seed, njdon
  •  sales increased because prices dropped? (8+ / 0-)

    for first time homebuyers, this isn't that bad a thing....

    all Along the Watchtower...... blogroll

    by terrypinder on Thu May 24, 2007 at 08:05:47 AM PDT

    •  Apparently the brains on Wall Street (4+ / 0-)

      think this is just great!  Stocks Up on Largest Housing Sales Increase in Decades.  

      What is causing this disconnect?

      "I never meant to say that the Conservatives are generally stupid. I meant to say that stupid people are generally Conservative. John Stuart Mill

      by Granny Doc on Thu May 24, 2007 at 08:11:07 AM PDT

      [ Parent ]

    •  Exactly--now that speculators are leaving (10+ / 0-)

      the market, I see a drop as a much-needed correction to previous insanity.

      I would like people who don't own a home to be able to buy one. Hell, I would like my own children to have a prayer of buying one when they are old enough.

      The secret of home ownership, IMHO, is to buy for a reasonable price, stay in the home as long as practicable, if possible, and ride out the ups and down, just like the stock market.

      Sure,the tech crash depleted our savings, but it was all on paper. It's fine now.  Sure, our house is "losing value", but it's all on paper. We are fine, living in our house....

      This, of course, is of no comfort to those who are forced to move, got junk loans, have pulled too much equity out of their house, etc.

      Of course, we "lost" lots of money, because we correctly assessed the peak of our own particular housing market, looked at each other, said, "We could sell for the most money now, rent a few years, and then buy." But we didn't, because we have kids in school in a good district. In order to get the best profits, we'd have to be mobile, and we're not.

      So we just watch the prices go up,up,up. And then down, down, down. In the SF area, things are still in a holding pattern. Buyers are still holding out for, and getting, most of their higher prices. The future should get interesting......

      •  i wouldn't mind seeing them go down more (2+ / 0-)
        Recommended by:
        Terre, means are the ends

        but it will suck for people trying to sell their homes.

        all Along the Watchtower...... blogroll

        by terrypinder on Thu May 24, 2007 at 08:36:17 AM PDT

        [ Parent ]

        •  Maybe they'll just have to settle for a handsome (2+ / 0-)
          Recommended by:
          esquimaux, means are the ends

          return instead of an extraordinary windfall.

          "Victory is not no violence" -- Commander Guy

          by RudiB on Thu May 24, 2007 at 10:34:16 AM PDT

          [ Parent ]

          •  Those of us who bought long enough ago... (3+ / 0-)
            Recommended by:
            babatunde, means are the ends, RudiB

            were we selling... yeah.  

            Due to circumstances, we had to hold onto one house while we moved and... purchased another.  Scary, scary situation to be in, and I hope not to go there again (unless I get to ride a bubble again, but I wasn't looking for it, and didn't plan on it and won't look for one...).  We held on... scrabbled... and finally sold a year and a half ago.  With a nice profit--not obscene, given how much sweat (and blood--DIY tends to demand human sacrifice...) equity went in.  But it'd be a lot less now.

            This place, now?  The price of what you own ("own") only means something if you are buying or selling (or if the lender's terms permit them to bend you over if the market price becomes lower than the purchase price...).  We had a ridiculous profit--on paper--and still do.  But shit, the house's price was absurd, to our eyes, when we bought, and it could drop 50% and not be back to that, so... yeah.  We're ok.  But then, we're not part of the class that deserves to get reamed--the speculators.

            Nor are we part of the class who WILL get reamed, the folks who scrambled and stretched to get into a home and will get screwed both ways by the Bush economy, and then screwed over again in the new fair-to-corporate-interests bankruptcy laws.

            Those who got into the market, because... they could barely manage, and thought they had to now, or the chance might be gone... are going to bleed.  Particularly if they have to sell.  Which in a tanking economy where decent jobs are scarce and you may well have to move... is pretty likely.

            "I desire what is good. Therefore, everyone who does not agree with me is a traitor." King George III

            by ogre on Thu May 24, 2007 at 10:52:44 AM PDT

            [ Parent ]

          •  yeah they can do that too (0+ / 0-)

            i am just not seeing the horror of the housing crisis compared to things like peak oil and stuff.

            bad i'm sure, but not that bad in comparison.

            all Along the Watchtower...... blogroll

            by terrypinder on Thu May 24, 2007 at 10:53:18 AM PDT

            [ Parent ]

        •  The northwest is staying steady (0+ / 0-)

          I own a condo here in Portland OR, and everything here is not overvalued, everything keeps steadily going up and down and up and down. There aren't huge peaks here, but then again there aren't huge drops either so I'm happy. Plus, everything is selling quick in my neighborhood. I wonder how Seattle is doing? Everything there is over valued but all the homes are selling like hotcakes. I feel bad for the people in L.A. who spent 1 million dollars on homes that are waaaaayyy over valued.

          •  I was just in Seattle (0+ / 0-)

            I live in Portland too, but I lived in Seattle for 10 years. We moved 4 years ago when we thought the job market was peaking, plus we were sick of living there. Going back after 4 years was astounding- the amount of development is incredible. Just outside of our hotel window I could see four large development sites. Last time we were there a few months ago, we stumbled upon an awesome free-to the public party celebrating the ground-breaking for a new condo in Queen Anne. The house we sold four years ago has doubled in price, and they knocked down a neighbor's small house to build a giant new home.

      •  I live in Santa Clara and saw something yesterday (6+ / 0-)

        around the corner from my house.

        A 'Reduced Price' slat attached to the 'For Sale' sign on the lawn of a home in the market.

        When was the last time that happened here?

        The tide has surely turned.

        "We're all in this together" -- Harry Tuttle, legendary plumber

        by bablhous on Thu May 24, 2007 at 08:44:28 AM PDT

        [ Parent ]

        •  The one down the street... (1+ / 0-)
          Recommended by:
          bablhous

          Doesn't say that, yet.

          But it did morph to "Receiving Offers."

          I laughed, bitterly, because of course... that means that they haven't received anything that they were willing to consider--at best.  Equally likely, they're simply announcing "Ok, ok, so make us an offer, then!"

          I'm expecting to start seeing "Seller suffering dangerous rectal bleeding--Please, Someone, Help!"

          "I desire what is good. Therefore, everyone who does not agree with me is a traitor." King George III

          by ogre on Thu May 24, 2007 at 10:40:36 AM PDT

          [ Parent ]

  •  Call it a microcosm of our country's economy: (24+ / 0-)

    And median prices going down more than average prices suggests that transactions at the top are hiding even worse declines elsewhere.

  •  Oy. Again? (10+ / 0-)

    Certainly a bumpy housing market at present in the US.  But the collapse predicted by the doom lobby?  Definitely not here yet.

    A reasonable reduction in the cost of housing -- especially new homes, as cited in the article -- is a good thing.  The previous situation was unsustainable.

    Don't blame me -- I voted for Weicker.

    by LarryInNYC on Thu May 24, 2007 at 08:08:19 AM PDT

    •  I agree (1+ / 0-)
      Recommended by:
      groggy

      If the homes are selling that means an equilibrium has been reached in the market and deals are ready to be made again.

    •  Look at this (5+ / 0-)

      Graph of housing permit numbers - 98-07

      This is an early indicator of where the sector is headed, and it's only going in one direction.

      •  So? (0+ / 0-)

        They were, in fact, overbuilding.  With the dropoff in sales we've seen recently fewer planned starts is the natural result.

        With the increase this month, I think you'll see that trend change -- thus the positive market response to todays figures.

        If you look at your graph, you'll notice a spike from 2002 to 2005.  The current figures, while still trending downwards, have only just passed the historical (pre-2002) level.  If they continue to drop at the same rate for a long time, that would be different.  But if, as I suspect, sometime in the next few months (say eight months or so) they level off and climb a bit, they'll pretty much be back where they "should" have been all along.

        Don't blame me -- I voted for Weicker.

        by LarryInNYC on Thu May 24, 2007 at 08:46:11 AM PDT

        [ Parent ]

        •  True (4+ / 0-)

          but that still means that all the jobs created by that overbuilding will disappear, and that will have a real effect on the economy. As Stated in the diary, most of job creation in recent years has come precisely from that surge in building. Take that out - even without overcompensation, and that's a big chunk of jobs destroyed, which will not be good for GDP or for people.

          •  Money going to Hispanic nations is down (4+ / 0-)
            Recommended by:
            gaianne, Jerome a Paris, Hatu, lemming22

            Way down. A lot of those employed in the construction industry were undocumented alien workers. The big construction companies in our area weren't building houses one at a time. The houses came in easy to asssemble preconstructed units and were put together by unskilled labor, much of it from undocumented workers whose labor doesn't count toward the GDP. Watch for the economies of countries that are dependent on inflow of dollars from these workers to fall.

          •  So are you advocating. . . (0+ / 0-)

            for extending the housing bubble?  If what you say is correct (and I'm not at all certain that it is) then the bubble has been hiding a structural problem with our economy.  If that problem had been evident in, say, October and early November of 2004 then perhaps we wouldn't be in quite the predicament we are now.

            Bad and good come mixed together.  The housing bubble was bad because it distorted the market, made it impossible for many people to buy homes, and caused a lot of poor quality and wasteful building.  On the other hand, it did supply some jobs.

            The end of the housing bubble is good because it will make housing more affordable and end a possible source of weakness in the economy.  It will also cause some jobs and have a negative effect on some of the people who got roped into phony mortgages.

            Hopefully the return to normalcy will happen with the most amount of positive effect and the least possibly negative effect.

            Don't blame me -- I voted for Weicker.

            by LarryInNYC on Thu May 24, 2007 at 09:26:14 AM PDT

            [ Parent ]

            •  Of course not (0+ / 0-)

              but the point is that some of the distortions created by the housing bubble will not be reversed just as easily as the prices go down. Some irreversible effects took place, or some painful to reverse.

              The bubble burst will be painful, but there's little that can be done now. Action should have been taken several years ago. Greenspan did not need to leave the taps open after mid-2003.

        •  the doom lobby (2+ / 0-)
          Recommended by:
          Woody, averybird

          As an unapologetic member of the "doom lobby," let me put my opinion on the table: housing prices, in real terms, will never be as high in this country as they were in the summer of 2005.  Ever.

          •  and that's a good thing (0+ / 0-)

            affordible housing is great for America's families.

            all Along the Watchtower...... blogroll

            by terrypinder on Thu May 24, 2007 at 10:54:35 AM PDT

            [ Parent ]

          •  Define (0+ / 0-)

            what "real terms" means.

            I incline to agree, but I want to be sure I know what I'm agreeing with.

            "I desire what is good. Therefore, everyone who does not agree with me is a traitor." King George III

            by ogre on Thu May 24, 2007 at 10:56:31 AM PDT

            [ Parent ]

          •  Brave forecast (0+ / 0-)

            but like most of the forecasts from the doom lobby it is destined to be wrong.

            The combination of population growth, continued growth in the share of households that are homeowners and second homeowners coupled with growing land use regulations will keep upward pressure on real prices.

            It may take a year or two to get back to the summer 2005 peak, but it will happen.

            BTW, the alleged drop in home prices this month is a phantom. The error on the figure is large and is consistently revised upward.

            •  you forgot one big thing (0+ / 0-)

              Your prediction is a lot more courageous than mine, because it doesn't say where the jobs and income growth needed to support house purchases are going to come from.

              Where I live in Florida, in the last five years, housing prices have doubled, property taxes practically are causing a revolt, and insurance premiums--to the extent insurance can be obtained at all--have tripled and quadrupled.  In the meantime personal incomes went up 3%.  As a lot of people are finding out, just because someone will loan you money to buy something doesn't mean you can afford it.

              It's become an important part of our culture to pretend that everything's all right, that we'll all get rich, and that our best days are ahead of us.  Anyone with good hair saying that loud enough can get his or her own television show.

              •  One word: Immigration (0+ / 0-)

                While the rest of the country is growing at slightly less than 1% a year, population growth in Florida is around 2.4% and likely to accelerate as the Boomers retire.

                If Chavezism spreads to the rest of S America, you will see a big move of wealthy South Americans coming to the US and Florida will be their destination of choice.

                Getting rich in this country is a lot easier than anywhere else in the world. Over 10% of all households in the US have $1 million in net worth.

                Insurance costs are definitely an issue in Florida and will continue to be as long as we continue to have bad hurricane seasons. If the global warming advocates are right and Florida ends up underwater, then the forecast of lower housing prices will be the correct one as it pertains to Florida.

  •  This might show the bottom (6+ / 0-)

    as it seems that buyers found a price point they are willing to pay (and sellers finally came down).  What we will have to look for is the data from the next few months to confirm that the bottom is in hand and the worst is over (although I still think we will have essentially stagnant prices for the first 3-5 years after the bottom).

    •  What about forclosures (3+ / 0-)
      Recommended by:
      bablhous, means are the ends, lams712

      The rumors I hear around here (Minneapolis/St Paul) are that a lot of bad mortgages are going to hit the fan in late '07 early '08 and the bank auctions for these homes are going to send another wave of price declines through the market.

      Thoughts?

      "It is one of the blessings of old friends that you can afford to be stupid with them." ---Ralph Waldo Emerson

      by goon 01 on Thu May 24, 2007 at 08:19:12 AM PDT

      [ Parent ]

      •  Foreclosures *way* up in the SF area. (5+ / 0-)
        Recommended by:
        ogre, groggy, susie dow, bablhous, goon 01

        We've had numerous articles in our paper about the junky home loans that people have taken out over the past several years, and their lack of equity after pulling out too much from their lines of home-equity credit.

        Although real estate is always pricey and scarce here, it seems to be hitting us, too.

        •  some local anecdotal info (7+ / 0-)

          I work in property mngt here in the East Bay area.  A property we were managing went into foreclosure and was auctioned off - this prompted us to call a local atty to explore what our rights & responsibilities were.  The atty (who has been practicing Real Estate law for over 10 years) told us that he has had more calls since Jan this year re: foreclosures than he has his entire career.  
          Think that's scary - get this:
          I was talking with a Realtor yesterday; the county of Alameda regularly sends out a document of all the properties in foreclosure; normally the document is 7 or 8 pages.  
          This time it is 97 pages.  
          And we are nowhere near the apex for this.

      •  Its possible (2+ / 0-)
        Recommended by:
        kck, goon 01

        but I think we are going to near the bottom very soon, as builders aren't building, so inventories of new homes should fall, which will increase the demand on existing homes.  Also, many banks are quite reluctant to actually take a home and sell it, they are much more likely to let the homeowner try to make payments and just tack the extra onto the back end of the loan.

      •  As prices go down a little more (1+ / 0-)
        Recommended by:
        goon 01

        and foreclosures continue to rise with the peak late next year, the huge number of buyers locked out of the market due to high prices but with money for an appropriately priced home will eat up the inventory. This assume mortgage rates are not increased! The foreclosures and the price reductions are needed to complete the correction without a collapse.

        •  Any idea of how many buyers (7+ / 0-)

          are out there who weren't able to buy with zero down and no docs on an option ARM? I think that the number is greater than zero, but not by much. I think that until the condo speculators who are sitting with empty units are completely forced out of the market we are going sideways at best.

          •  Probably a lot. (2+ / 0-)
            Recommended by:
            groggy, goon 01

            SoCal is a unique market in that there are wealthy who can and do use those 100% financing as the market remains strong. It's the folks who want no docs and are looking for funny money that are being shut out which I have no problem with.

            Sorry, but I don't know anything about the condo market.  

            •  SoCal is unique with respect to prices (4+ / 0-)

              Anything less that $400k will get you a tar-paper shack on a fault line.

              Everything is funny as long as it is happening to somebody else. --Will Rogers

              by groggy on Thu May 24, 2007 at 09:43:09 AM PDT

              [ Parent ]

            •  the shut out (4+ / 0-)

              I don't know about you, and I live in a different state, but I know only a handful of people in Florida who could come up with even a 5% down payment.  Without funny money and liar loans there is no market.

              I did see a stat about Southern California that indicated that only a tiny fraction of residents could afford the median house.

              •  I think it's around 70% for over 35 yrs old (1+ / 0-)
                Recommended by:
                goon 01

                To expand home ownership in Cal is to distribute the jobs better and continue mass transit development. I was almost 40 when I bought my first home...the sad truth I see though is it's either kids or a house but both, at the same time, is for fewer than ever.

            •  Yeah, right... (2+ / 0-)
              Recommended by:
              kck, goon 01

              That's why San Diego's affordability figure is so very, very high.

              I know someone trying to sell what is a million dollar home, in a good area--they're moving out of state.  So far, they have one offer--for $100,000 less than they paid, after having put in substantial improvements (and no, it's not the nicest home in the neighborhood).

              Yeah. Riiiight.

              "I desire what is good. Therefore, everyone who does not agree with me is a traitor." King George III

              by ogre on Thu May 24, 2007 at 11:04:07 AM PDT

              [ Parent ]

              •  This is not the time to be selling a marginal (0+ / 0-)

                million dollar home, that's for sure. I know folks who are being pushed in a similar way but these are the things people need to plan for. Personally, living in a million dollar home is a choice that comes with equivalent risks incompatible with my idea of family financial & risk management. But, for folks in the market to buy a million dollar home, it's a good time for bargains!

              •  Re: those locked out of the market due to prices, (0+ / 0-)

                Most people, I think, seem to agree that less funny money foreclosures the better since the problem today is made much worse with excess debt with a miniscule chance of success.

                From the macro look the economy grows by squeezing the last drops of blood from stones, but the downstream effects are harsh albeit some were in need of learning lessons on family finances (I know lots of comfortable home owners today who lost homes & walked away leaving them to the bank in the '80s while I was renting/saving and paying for the defaulted banks), and cruel on those sick of learning lessons in a serious game where the rules keep changing, always against them.

                People power is still untapped...States used to actually do things to encourage home ownership. If states assessed their household risk they probably have 100's of improvements (e.g., developer management, taxes, fees, relocations, transportation) that exist and/or can be used to make a win-win-win for the owner-bank-municipality.

      •  NPR re Minneapolis yesterday (6+ / 0-)

        North Minneapolis is one such area: a working-class neighborhood where efforts at revitalization have been hampered by the growing number of abandoned houses and "For Sale" signs. Foreclosures in the surrounding county soared nearly 80 percent last year, and those foreclosures are clustered on the city's north side.

        "When you get those concentrations of foreclosed properties, it moves from being an individual tragedy to a challenge for the entire community," says state Rep. Jim Davnie.

        "The barbershop needs so many heads to cut. The grocery store needs so many customers. All the various businesses up and down Broadway feel this immensely," Anderson says.

        "We also have what we call the plumbing thieves, the copper thieves, they come in and strip the houses of copper," says Sherrie Pugh Sullivan, executive director of the Northside Residents Redevelopment Council. "We've had some houses that have exploded because the gas was left pouring out into the house. So we feel like we're dangerously tipping back."

        Get the rest of the story here

        Revolutionary words start revolutions

        by Catte Nappe on Thu May 24, 2007 at 09:13:39 AM PDT

        [ Parent ]

        •  Stealing around Seattle as well (0+ / 0-)

          The Pacific Northwest has a number of those copper thieves as well, but they don't limit their thefts to homes. Not too long ago, some of them stole copper wire in an electrical system (I believe it was part of a power grid) and a number of people were left in the cold and dark until the theft was discovered and repaired.

          Up here, I used to believe it was mostly the meth heads stealing copper to sell, but since I've been unemployed for several months now, I think it may just be desperate people in general who are trying to find money somewhere. Thank goodness I haven't been reduced to that yet. Yet.

    •  No reason to believe this is the bottom! (3+ / 0-)
      Recommended by:
      NYFM, goon 01, bigchin

      You'd just demonstrated the relationship between price and demand -- Lower price, higher demand.

      Happy little moron, lucky little man. I wish I was a moron, my God, perhaps I am! -- Spike Milligan

      by polecat on Thu May 24, 2007 at 08:42:49 AM PDT

      [ Parent ]

      •  Enter a new breed of speculator (1+ / 0-)
        Recommended by:
        polecat

        The last big housing slump in the mid 90's spawned groups of investors buying up McMansions in hardest hit areas, betting that the slump was temporary.

        They did rather well.

        Everything is funny as long as it is happening to somebody else. --Will Rogers

        by groggy on Thu May 24, 2007 at 09:49:24 AM PDT

        [ Parent ]

        •  No more speculators! I want a next-door neighbor (6+ / 0-)

          not the house empty for a year and a half now, rehabbed ridiculously out of line with the block (in the best neighborhood in the city but the least block in it) and overpriced for so long that it's now stale, stale. . . .  So it's finally for sale somewhere near a range that is reasonable, after dropping a hundred thousand over a year's time.  But it's too late; it's too stale, with so many good, fresh houses flooding the market here.

          And this was by a speculator -- the third in months, after others played the property-flipping game and ran up our property taxes without any of them ever living here -- who, two years ago, didn't listen to us that he was doing too much to the house.  And pricing it at more than half a million based on the best streets, several streets away, rather than on our block, with student duplexes (read, absentee landlords) including one only a few feet away.  

          So this guy who never lived here, in a National Register of Historic Landmarks neighborhood,  destroyed the beauty of the hundred-year-old house by turning it, inside, into a suburban McMansion,  granite counters and breakfast bar (instead of the mahogany-paneled dining room that was there) and all.  And all the time, he priced it based on the market two years ago, ignoring all of the warnings.

          And now -- now we wonder if the house is going to have an unfortunate fire, not that far from us.

          If he loses his shirt, fine; he should be stopped.  But these speculators have lost us, throughout my neighborhood, some lovely historic houses.  And ruined them and overpriced them and ruined some neighborhoods that had managed to improve and save themselves, not just the working-class areas.  So we won't see houses lost to foreclosures here -- my heart breaks for those families.  

          But we also will see a century of historic homes and neighborhoods lost because of the get-rich-quick gang -- and the bubble that they created also is busting some of our older neighbors who no longer can afford their property taxes.  Those will take two years to be readjusted based on the new reality of overpriced houses, empty houses -- and our older neighbors can't cover two years while they wait.

          The bubble has been a disaster for many, taking out more mortgage than they can handle and feeding the rise in property taxes being handed to longtime owners on fixed incomes, as much as the disaster of the bust.

          "Let all the dreamers wake the nation." -- Carly Simon

          by Cream City on Thu May 24, 2007 at 11:32:19 AM PDT

          [ Parent ]

    •  Slides and collapses... (3+ / 0-)

      rarely are smooth curves to the bottom.  The norm is that they display bumps, upward ticks that suggest... well, something.  But then they return to their previously scheduled slide (or collapse).

      I don't think this is the bottom.  It'd be nice, in some ways, if it were.  But fundamentally, the economy and economics don't seem to support this being the bottom.  The fantasy is leaking out of the bubble.  The dot-com delusion is evaporating.  People are beginning to suspect that there's nothing there, really, but tulips...

      "I desire what is good. Therefore, everyone who does not agree with me is a traitor." King George III

      by ogre on Thu May 24, 2007 at 10:59:54 AM PDT

      [ Parent ]

      •  There is a lot of difference between the i-tulips (0+ / 0-)

        and hosues.

        I get value from the house I live in, not so with an internet stock. I can buy and sell a stock with very little in the way of transaction costs, not so a house.

        A real bubble experiences a several hundred percent rise in value, not so with housing. Nasdaq rose 450% in 4 years, housing prices in the past 4 years are up about 40%.

        Far from being a bubble, the rising in housing prices simple reflected the workings of supply and demand.

        And now builders responded to the higher prices and overbuilt, we are well through the correction having gone from 2.2 million housing starts down to 1.5 million. There is a lot less new inventory coming on the market, and in time less supply will mean higher prices.

        •  Sure there's a difference. (0+ / 0-)

          One's a virtual flower and the other is a McMansion.

          But the truth is that empty houses aren't being used for housing, and people aren't likely to rent them to folks who can only afford a rent that's half the owner's payment.

          Past 4 years... hey, if you get to pick your frames, so do I.  The average housing price is up about 1500% since 1963.  

          I miss barrowstreetdenizen; I keenly feel the loss of another apologist....

          "I desire what is good. Therefore, everyone who does not agree with me is a traitor." King George III

          by ogre on Thu May 24, 2007 at 02:43:26 PM PDT

          [ Parent ]

          •  Actually (0+ / 0-)

            the median price of a new house is up only 1231% since 1963.  At the same time, the size of the average house has nearly doubled, cutting the size adjusted price down to just 615%.  Inflation over the same period was 575%, making the the 'real' inflation and size adjusted increase roughly 40% or less than 1% a year.

            Hardly a bubble by any standard.

            and I am not an apologist, just someone who lives in a reality based world.

    •  It's not a bottom till existing homes rebound (0+ / 0-)

      ... and they do so nationwide. This is just new home sales, which are fewer and more volatile than existing home sales. Moreover, the rising volume only came in one region, the Northeast, according to Business Week.

      "What is government itself, but the greatest of all reflections on human nature?" - J. Madison

      by berith on Thu May 24, 2007 at 12:54:15 PM PDT

      [ Parent ]

    •  only some buyers (1+ / 0-)
      Recommended by:
      Jerome a Paris

      Only some buyers can afford a home at the current price decline and only some of those fail to see the big picture.   Yeah, a few buyers were suckered in by prices that were 10% less than what they have been seeing.   Those buyers who will buy at the current price level will be exhausted and then the price will move downward again.  There might be a temporary plateau as sellers see that houses are moving again but sales will stagnate again.   Then sellers will start to realize that the price can only go down and will be desperate to minimize their losses, speculalators will stop buying and start selling, banks will realize that any loans they make will not be secured by the value of the home and loans will dry up, and even buyers who can afford the prices will start to realize that it is foolish not to wait until prices hit bottom.   The combination of these factors should lead to a precipitous drop.   Prices should fall to around $110K average, which is the long term (since WWII) inflation adjusted price and exactly what happened after the last two booms.
      http://metaphorical.wordpress.com/...

      --
      -6.25, -6.36 Worst. President. Dictator. Ever.

      by whitis on Thu May 24, 2007 at 01:00:23 PM PDT

      [ Parent ]

  •  Those price declines... (3+ / 0-)
    Recommended by:
    kck, lams712, AshesAllFallDown

    ...are reflecting changes from the exorbitant and rather artificial highs of recent years, yes?  So is this just the market returning to normal?

    "We must move forward, not backward, upward not forward, and always twirling, twirling, twirling towards freedom." - Kodos

    by Jon Stafford on Thu May 24, 2007 at 08:09:15 AM PDT

    •  The thing is (11+ / 0-)

      That just as markets overshoot, they also over correct. It would be highly surprising to see the markets manage a soft landing.

      It's like falling from a high building and saying that, when you're at the level of the front floor , that things are fine and dandy because you can safely jump from that height...

      •  I like that ! (0+ / 0-)

        Now your talkin my kind of logic.

        Looking for Good Reason

        by Clzwld on Thu May 24, 2007 at 09:24:35 AM PDT

        [ Parent ]

      •  when was the last time year over year (1+ / 0-)
        Recommended by:
        groggy

        mean prices for homes nationally fell 8%, and for median priced homes by 11%, in the U.S.?

        Every day .... will be a "Constitutional crisis" given we have a president who doesn't give a damn about the Constitution. Kos

        by billlaurelMD on Thu May 24, 2007 at 09:31:29 AM PDT

        [ Parent ]

        •  actually, I went back to the data... (4+ / 0-)
          Recommended by:
          ogre, groggy, susie dow, horatius

          and found it was in 1970, when median prices were in the low 20,000's.  Link here.

          Every day .... will be a "Constitutional crisis" given we have a president who doesn't give a damn about the Constitution. Kos

          by billlaurelMD on Thu May 24, 2007 at 09:45:00 AM PDT

          [ Parent ]

          •  So, the reality-based community ain't dead, yet. (0+ / 0-)

            Did you miss the memo?

            "I desire what is good. Therefore, everyone who does not agree with me is a traitor." King George III

            by ogre on Thu May 24, 2007 at 11:05:20 AM PDT

            [ Parent ]

          •  Yeah... (0+ / 0-)

            I remember that--my parents bought then from a seriously distressed builder.  And then held on, for some years.

            But the odds of us seeing a rollicking recovery while we're trying to shake off the Bush legacy... suck.

            "I desire what is good. Therefore, everyone who does not agree with me is a traitor." King George III

            by ogre on Thu May 24, 2007 at 11:09:44 AM PDT

            [ Parent ]

          •  Not quite apples to apples (0+ / 0-)

            Your historical data is all home sales. Today's statistics were only for new home sales. Existing home sales stats come out tomorrow.

            "What is government itself, but the greatest of all reflections on human nature?" - J. Madison

            by berith on Thu May 24, 2007 at 01:01:32 PM PDT

            [ Parent ]

      •  Nonsense Jerome (0+ / 0-)

        If you take these data at face value they show a soft landing. Builders have slashed prices to move inventory and have done so successfully. Just because Gallerie Lafayette runs a sale this month to move inventory, doesn't mean that those prices are going to be there next month. The same will be true of new home prices.

        Why do you think the stock market sold off so sharply today. The expectation that the Fed might have to cut rates again soon to help the housing market has been shattered because growth in the US is accelerating.

        We have had a soft landing, and are now on the ascent. The durable goods orders that also came out this morning further reinforced that point of view. Far from being on the verge of collapse, the US economy is getting better.

  •  I'm sure that none of that price drop had to with (2+ / 0-)
    Recommended by:
    TastyCurry, lams712

    the drop in the cost of materials, you know like copper...  Surely not.  Can't be.  Positively no way.  Can only be one possible explanation...

    The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.

    by deathsinger on Thu May 24, 2007 at 08:11:40 AM PDT

  •  Don't sales always increase in spring? (12+ / 0-)

    Nicer weather, people like to go to open houses and want everything clean and new. It might be good to compare this to spring homes sales in the last 10 years.

    I think most communities would be better off if incentives were created to keep people in homes longer, rather than moving around a lot. Increase fees for selling, base property taxes on the purchase price of homes rather than the current market rate (so that people who bought in a neighborhood while the values are low aren't forced to move when an area is gentrified), decrease fees for remodeling permits.

    Realtors and mortgage lenders would pop a vein at this idea, but I think our communities, schools, and overall social structure would be far better if people stuck with homes longer.

    •  One good idea (3+ / 0-)
      Recommended by:
      ogre, Woody, cathy b

      Somehow discounting property tax assessments on improvements to existing properties would be a good idea. The permit fees are a pittance compared to what you pay in taxes on a new valuation. Limited assessments on remodeling would promote two worthy goals: 1)as you mentioned, get people to improve property rather than moving; and 2) make it a little more likely that people will actually get building permits when they work on their house. That's one of the main reasons people don't pull permits when they're supposed to: they figure that once the building inspector and electrical inspector come through the assessor won't be far behind.

      As for increasing selling fees; I'll take a pass on that one. I already have a hard time figuring out what it is realtors do that's worth 6%. I couldn't imagine paying them more than that.

      Outside of a dog, a book is man's best friend. Inside of a dog, it's too dark to read. - Groucho Marx

      by Joe Bob on Thu May 24, 2007 at 08:44:20 AM PDT

      [ Parent ]

      •  No--not the the fees realtors get-- (0+ / 0-)

        I meant the deed transfer fees that cities take when homes are sold in their area. It is a pittance--.003 of the total or something like that, at least here it is. I think it covers the paperwork that gets done in the deed office.

        But what if cities took a bigger cut? Maybe a percentage of the sale, plus a percentage of the capital gains?

    •  That would be lovely (2+ / 0-)
      Recommended by:
      NoMoreLies, lemming22

      if the jobs stayed put too.

      They don't. People sometimes don't have a choice in moving (as in the military).  Or they get offered a much better job too far to commute.

      Most places already charge a transfer fee and other taxes/charges on the cost of buying/selling a home.

      •  Some people don't have a choice, (0+ / 0-)

        but some people do.

        Most of the moves in my neighborhood or among people I know did not involve transfers, however, just wanting a bigger or different house. In fact, all of the moves I've seen lately actually took people farther from their jobs than their previous residence had been.

    •  Its called seasonal adjustment (1+ / 0-)
      Recommended by:
      cathy b

      the government, using widely accepted statistical techniques adjusts the data for seasonal variations. They do this for virtually all of the data released by the Federal government.

  •  what about existing? (1+ / 0-)
    Recommended by:
    singing bridge

    I saw this article earlier today.. what about existing sales and prices?

  •  This is similar to a situation in... (2+ / 0-)
    Recommended by:
    Canadian Reader, Mz Kleen

    ...manufacturing where a company stops making things until it runs down its backlog of inventory. It then records a temporary spike in manufacturing as it replenishes its inventory until it works that down.

    In the housing market at present I think that is what's happening. We have a backlog of housing inventory. Prices are falling in order to sell off that backlog creating a temporary spike in the number of transactions, but not necessarily providing a rational basis for believing all is well for the future.

    "...if my thought-dreams could be seen, they'd probably put my head in a guillotine...." {-8.13;-5.59}

    by lams712 on Thu May 24, 2007 at 08:20:29 AM PDT

  •  We lose on each sale (8+ / 0-)

    but we make up for it in volume!

    You fell victim to one of the classic blunders, the most famous of which is "Never get involved in a land war in Asia".

    by yellowdog on Thu May 24, 2007 at 08:21:34 AM PDT

  •  More leverage! Free money...until it's not! (6+ / 0-)

    M-O-O-N! That spells Iran!

    by cskendrick on Thu May 24, 2007 at 08:21:44 AM PDT

    •  Junk Market in "Fantasy Land" (3+ / 0-)

      Still waiting for the High-Yield market to implode.  I know we'll be near a bottom when it does.  I can't believe the spreads are so tight.

      Great for companies staving off the final reckoning.  Bad for those negatively impacted when the bubble finally bursts.

      http://www.bloomberg.com/...

      Junk Bonds May Repeat Crash of 2002 on LBO Credits (Update2)

      By Caroline Salas

      May 15 (Bloomberg) -- Never have so many made so much money from junk bonds, and that worries Dan Fuss.

      Fuss, whose $10.7 billion Loomis Sayles Bond Fund has been the best performer among its peers the last 10 years, says high- yield, high-risk securities are showing unmistakable signs of a bubble. Yields are near record lows relative to government securities even though sales of the riskiest bonds increased 39 percent from last year, debt has grown faster than earnings and the economy is expanding at the slowest pace in five years.

      .........

      `Fantasy Land'

      More than half of the junk bonds sold this year were used to pay for leveraged buyouts and mergers and acquisitions, according to Barclays Capital. Money is so easy to come by that for the first time some investors agreed to let borrowers choose to make interest payments in cash or in additional bonds.

      .......

      Investors get an extra 2.63 percentage points in yield on average to own junk bonds rather than Treasuries, down from 3.73 percentage points at the start of 2005 and more than 10 percentage points in 2002, according to Merrill data.

      Learn about Centrist Economics, learn about Robert Rubin's Hamilton Project. http://www1.hamiltonproject.org/es/hamilton/hamilton_hp.htm

      by PatriciaVa on Thu May 24, 2007 at 08:38:06 AM PDT

      [ Parent ]

    •  print and drop from airplanes. n/t (1+ / 0-)
      Recommended by:
      cskendrick

      "You can't be neutral on a moving train." - Howard Zinn

      by bigchin on Thu May 24, 2007 at 09:12:23 AM PDT

      [ Parent ]

  •  Is it all that bad? (7+ / 0-)

    There is one category of people the drop in prices bodes ill for: those who bought houses relatively recently who now find themselves with a house worth less than their mortgage. Then again, that's not really an imminent problem unless they are trying to sell.

    As for everyone else, I don't really see a problem. In my opinion, it's a good thing if housing becomes less of an investment vehicle or a commodity and more of what it should be: a place to live. The situation of the past few years was just divorced from reality. When I look at what a building is worth there are just a few basic components that comprise its value: land (which will always be a commodity) + building materials + construction labor. If you can't add up those three things and get a number anywhere close to the sale price of a house then something is wrong.

    Outside of a dog, a book is man's best friend. Inside of a dog, it's too dark to read. - Groucho Marx

    by Joe Bob on Thu May 24, 2007 at 08:23:01 AM PDT

  •  Local anecdote (7+ / 0-)

    Here in the western suburbs of Chicago I looked at a new condo.  Price:  $245,000.  If I bought in May, however, they'd throw in $35,000 (!) worth of furniture and appliances, and pay the interest on my mortgage at 6% for 9 months (approximately another $10,000).  These prices thus don't reflect all the incentives that developers are throwing at buyers.

    •  Indeed... (1+ / 0-)
      Recommended by:
      Woody

      In new construction, it is in the seller's interest to keep the recorded price higher than what they actually get.  Comparables, y'know.

      -6.5, -7.59. I want to know who the men in the shadows are... ~Jackson Browne

      by DrWolfy on Thu May 24, 2007 at 09:45:52 AM PDT

      [ Parent ]

  •  Well, at least there is some benefit (1+ / 0-)
    Recommended by:
    Tuba Les

    from living in an area where the housing market didn't "boom" in the way it did in the coastal areas...while we had normal appreciation in values, we didn't experience the inflated increase in appreciation.  Not as many people will have the extent of debt...ofcourse, this isn't to say that people haven't been encouraged to buy more house than they could afford here as well by the same shady tricks...

    •  The problem isn't really the drop in home prices (0+ / 0-)

      The problem is what the drop in home prices to the banking system.

      If the banking system and the rest of the financial system get through this OK, well, never mind.

      If the systems suffers enough pain that the federal government has to bail it out, the way the Resolution Trust Corp. bailed out the S&Ls, then  that's a headache.

      If the collapse causes problems bigger than what the RTC dealt with, then all of this could affect people all over the world in ways that are hard to predict.

  •  Liar’s Primer (24+ / 0-)

      Having been a kid and now having been a parent I’m consider myself somewhat of an expert on the subject of lying. There are certain ground rules followed by even the most accomplished liars children, politicians, lawyers, newspaper editors everyone in the trade. First of all it’s never their fault they will never accept responsibility for anything associated with the calamity, "I wanted to be home on time Dad but I was riding with the guys and they promised me we’d be back on time."  Or "Senator I wasn’t aware of that policy I wasn’t at that meeting."

    To rise to the level of professional in the liars union you must prove yourself capable of obscuring the most obvious truth while extolling the virtues of the most pointless fact. "Dad remember how you said that was a dangerous intersection? You were right!"

    From the Associated Press,

    {Home Sales Slow as Prices Decline
    Washington – The pace of existing home sales slowed in the first quarter by almost 7 percent compared with a year ago, the National Association of Realtors said Tuesday.}

    {In the latest indication of the housing market’s slow-down, the NAR said homes sales reached a 6.4 million annual rate, compared with 6.9 million in the same quarter of 2006}

    "Dad remember all the times I drove your car without having an accident? Pretty good huh?"

    {The report came on the same day that Realtytrac Inc., an industry research firm, said mortgage lenders foreclosed on 62 percent more U.S. homes in April than a year ago.
      "We expect foreclosure activity to at least stay last year’s levels for the remainder of 2007, fueled by a combustible mix of risky loans taken out in the last few years}

    The ability to mix facts is important facet in being a good liar, last year was a record year for home foreclosures and April of this year was up 62 percent over last year but good news! We expect it to stay at last year’s levels. I’m so relieved I was afraid it was going getting bad and besides this it’s your fault anyway! "Fueled by a combustible mix of risky loans taken out in the last few years" You took out risky loans! You can’ t expect the mortgage industry to take responsibility for the risky loans you took out!  

    "Your honor my client maintains the gunshot wounds were caused by the plaintiffs negligence in not handing over his wallet in compliance with as requested and my client should not be held responsible for his negligent behavior."

    {Home prices are also still falling. The National median existing single-family home price in the first quarter was $212,300 down 1.8 percent from a year ago when the median price was $216,100}

    Funny, when I was in school math problems involving subtraction the larger number was usually listed first. But the median family home lost $3,800 in value over the year but that is an average number. The average temperature on earth is around 62 degrees remember that if your ever in lost in the Artic or the Sahara desert it might become important.

    {Regionally, existing home sale took the biggest hit in the West.} Ah the West, a liars best friend the generalization, who were you with when you had this accident! "You know Dad, the guys!" When they say "The West" you suppose the mean thinly populated Wyoming or Montana? Or do you suppose they mean California with 20 percent of the American population?

    {Where the sales pace fell 11.9 percent to an annual rate 1.3 million units and the median home price was 1.8 percent below a year ago at  $ 336,200.}

    Got your calculator? They won’t even tell you how much they lost in "The West" but it was more than $3,800 more like $6050.00 on average times every home in "The West"  

    {Existing homes sales in the South fell 7.3 percent, In the Midwest, existing home sales fell 6.1 percent, The Northeast fared the best, with sales rising at a 1.2 percent annual rate.}

    So home prices and sales fell in every region of the country save one, which was up by a whopping 1.2 percent, and they fared best! But wait their home prices fell there too down 2.5 percent. A median price of  $ 268,900. or a loss of $6,722.00 per home and they fared best!

    {As home prices slump, there has been a jump in the number of borrowers unable to meet higher payments and unable to sell there homes.
      Realtytrac said foreclosures in April spiked to 147,708, compared to with 91,168 in 2006, as lenders moved to repossess one in every 783 homes. The April figure was 1 percent lower than in March, when foreclosures hit a two-year high.}

    Once again it is the borrowers fault if they had relocated to Mexico or China when the plant closed all this could have been avoided. After all the economy is great except for Home Depot, Wal-Mart recording record losses but on average the economy is strong.

    Our economy is on track to dispossesses one family out of every 783 homeowners this year. Or if we use the April number down 1 percent from March of 147,708 times 12 you get 1,772,500 American family’s out on the street this year with an average of four members per family is over seven million Americans in the street this year! And that’s if the numbers don’t go up! And the title of the article was Homes Sales Slow as Prices Decline! How would they have described Hurricane Katrina? New Orleanians Expand Water Front Properties as Celebration of Weather Festival Continues in Superdome!

    How would they cover they tsunami in Indonesia? Hotel Occupancy Declines as Tourists Leave Suddenly Due to Wave Conditions. This article should be used in every beginners liars class held in this country from start to finish the goal was to twist and mangle the truth and to point the blame from those responsible and place it squarely on the victims. To tell the facts and figures in explicit detail and then to just drop in casually in the last paragraph "Oh yeah, by the way I wrecked your car and eight million Americans will lose their homes before Christmas."

  •  Real Estate is LOCAL. What happens in one state (2+ / 0-)
    Recommended by:
    johnnyNYC, singing bridge

    or city doesn't mean it's the same in another city or state. Prices in my county in Maine are down 2% and sales were up 6%. I am very busy and have a lot of buyers actively looking because prices are down and rates are still excellent. It's a buyers market.
    If a big company lays off hundreds of workers in a city in Michigan do you really think that effects housing in the state of Florida or the country as a whole? I think this national "bubble" panic is ridiculous as some areas of the country saw little or no change the past few years while values were shooting up in larger markets.
    To say the housing market in an entire country is going to collapse like the stock market is wrong.  Housing is a basic need and our population continues to grow at 2 million a year.

    If God keeps hanging out with politicians, it's gonna hurt his reputation. - Molly Ivins

    by fool me once umm on Thu May 24, 2007 at 08:40:01 AM PDT

    •  Local (1+ / 0-)
      Recommended by:
      Cream City

      True -- real estate markets are local.  But the ones that are suffering the most are the ones where most of the people in America live. So it will have a bigger impact than if smaller local markets had a problem.

      •  Equity refugees? (0+ / 0-)

        Here in Utah and in other places in the west; California Equity Refugees move in & drive up prices.

        And they drive too fast on Black Ice, but that's a comment for a different diary.

        So local real estate prices can be affected by events a time zone away.

        Prices here are going up, but not as fast.

        Does Maine have Equity Refugees from Boston and New York?

        •  Drives too fast on Black Ice (0+ / 0-)

          Can be someone's "Indian name."

          But most of them learn, or they do as Darwin proposed--sometimes, alas, with others....

          "I desire what is good. Therefore, everyone who does not agree with me is a traitor." King George III

          by ogre on Thu May 24, 2007 at 11:20:44 AM PDT

          [ Parent ]

        •  Here in Milwaukee, it's FIPs (0+ / 0-)

          aka foolish (:-) Illinois people who paid Chicago prices here and caused property taxes to soar, pushing out longtime residents in my neighborhood.  And then the newcomers move on again in a year or two, and we're left with the mess as houses stand empty, become rentals, etc.

          And we rarely have black ice, but FIPs don't signal worth a damn on our freeways.

          "Let all the dreamers wake the nation." -- Carly Simon

          by Cream City on Thu May 24, 2007 at 11:37:46 AM PDT

          [ Parent ]

        •  We have always had second home buyers from (0+ / 0-)

          Mass and Connecticut. They have bought up the ocean front property and the locals who were left couldn't afford the taxes. We are only an hour from Boston here in the greater Portland area and now we have Amtrak back so when things were white hot in Boston a couple years ago we did see some other New Englanders actually commuting from here. But Maine is beautiful and laid back so there are a lot of summer residents from all over. A lot of canadians too. So it makes for a fun time, eh?
          The median selling price the past year here in York County (southern most county)is $235,000 (down from $240,000 in 2005). How does that compare to where you are?

          If God keeps hanging out with politicians, it's gonna hurt his reputation. - Molly Ivins

          by fool me once umm on Thu May 24, 2007 at 06:49:27 PM PDT

          [ Parent ]

    •  Most things are local. (0+ / 0-)

      But there's a national average, and regional averages.

      And on average...

      "I desire what is good. Therefore, everyone who does not agree with me is a traitor." King George III

      by ogre on Thu May 24, 2007 at 11:19:12 AM PDT

      [ Parent ]

    •  So what you're saying is (1+ / 0-)
      Recommended by:
      snafubar

      that an average is, in fact, the quotient obtained by dividing the sum total of a set of figures by the number of figures.

      ALERT THE MEDIA.

      "Staying the course" is what sunk the Titanic.

      by PomperaFirpa on Thu May 24, 2007 at 01:03:58 PM PDT

      [ Parent ]

  •  How long would such a decrease in prices last? (1+ / 0-)
    Recommended by:
    Tuba Les

    I'm about two years from looking to buy, and while it is bad overall for prices to go down, it could benefit me greatly to buy in the near future.

  •  You are wrong. (6+ / 0-)

    It's a buyers market and smart money is taking advantage of that.

    They don't need the subprimes...

    People like myself with good credit and cash on hand to scoop up a bargin.

       *  the wealth effect: people no longer can withdraw equity from their houses to pay for spending. Thus consumptions drops;
       * the jobs effect: with so many jobs of the jobs created lately being in construction - and the financing of real estate - in recent years, it is likely that a number of them will disappear, and thus push up unemployment rates.

    Both these are wrong. A lack of home-equity loans is a GOOD thing, people aren't being as stupid about living beyond means (hopefully) and as for jobs in construction.. Again, a buyers market for home improvement.

    The inventory for new homes looks to stay high.

    My advice is not to buy a McMansion in the Exurbs.

    look at inventories and home prices

    •  your comments (1+ / 0-)
      Recommended by:
      susie dow

      I do agree with your two concluding comments.  But the part about people not living beyond their means, wow that's wrong.  Do you have any idea how long the savings rate has been negative in this country?

      My money is staying on the sidelines indefinitely.  If my wife and I have made the wrong call, that means we're not homeowners.  We sleep very well at night with that possibility, which is a lot more than I can say for people I know who bought in the last three years.

    •  Well... (0+ / 0-)

      My advice is not to buy a McMansion in the Exurbs.

      For more reasons than one, naturally.  The cost of commuting too far, the cost of heating a house that's too damn big for no good reason, the cost of having to procure more entertainment from further out because the exurbs are excruciatingly boring...

      The lack of home-equity loans is a good thing on the one hand-- people theoretically aren't spending beyond their means, which is something we do in fact want to encourage.  On the other hand, our economy is currently dependent on having people spend money that they don't have.  Which, yes, is stupid, but that would indicate that if people would stop spending theoretical money, the economy may well undergo a "correction" of its own.

      "Staying the course" is what sunk the Titanic.

      by PomperaFirpa on Thu May 24, 2007 at 12:44:26 PM PDT

      [ Parent ]

  •  Rents up (1+ / 0-)
    Recommended by:
    steelman

    I don't see rents falling, so maybe some people are thinking it's a good deal at these lower prices and historically still very low interest rates. Also agree with the thought that sellers are finally accepting lower bids as they see massive discounts offered around them from new home builders.

    •  rents are totally up (3+ / 0-)
      Recommended by:
      groggy, SecondComing, susie dow

      mine is going up 70 dollars. for a dinky dark apartment in an allegedly "low cost of living" city. LoL!

      as it's a secure access building in a fairly crime ridden city and it's close to work, like in walking distance, you know i'll just suck it up and pay it.

      all Along the Watchtower...... blogroll

      by terrypinder on Thu May 24, 2007 at 09:20:26 AM PDT

      [ Parent ]

    •  Rent and Mortgage Payments (0+ / 0-)

      have to be relatively close.  If they are not, then a correction is pending.

      Rents are much "stickier" than home prices.

      -6.5, -7.59. I want to know who the men in the shadows are... ~Jackson Browne

      by DrWolfy on Thu May 24, 2007 at 09:43:38 AM PDT

      [ Parent ]

    •  A rule of thumb (2+ / 0-)
      Recommended by:
      susie dow, hypersphere01

      is that the price/value of a house should be 10 x the yearly rent that is the norm for the same type of house.
      Here in Sacramento, I pay $1550 per month, so the house I am renting should be worth 186K.
      It is a 3 bed/2.5 bath, 2 car garage, split-level in El Dorado Hills (an affluent suburban community with an effective crime rate of ZERO) on a big corner lot, with three patio areas and an upstairs deck off the master bedroom, and a storage building in the back which has electrical power. This place selling for 186K??? Ha!
      Try right around 400K.
      If you think you are paying too much in rent, look at what a comparable place would cost to buy using the above formula. Are housing prices near that value? If so, buy. If not, keep on renting. You are not "throwing your money away". And real estate doesn't "always go up".

    •  Our rent just shot up $60 (0+ / 0-)

      On a one-bedroom.  ARGH.

      "Staying the course" is what sunk the Titanic.

      by PomperaFirpa on Thu May 24, 2007 at 01:04:48 PM PDT

      [ Parent ]

  •  Yep. (5+ / 0-)

    My husband and I couldn't leave New Orleans even if we wanted to.

    Our home, appraised at 380K 3 months ago, is currently valued at 260K.  After losing 80K to contractors and then shelling out an additional 40K to just get it livable, I'd say, we have to wait it out.

    So it goes.  On a brighter note:  Two months ago there were SEVEN homes for sale just on my block.  Now there are only FOUR.

  •  For a moment (3+ / 0-)
    Recommended by:
    ogre, Jerome a Paris, DrWolfy

    I thought I was looking at a bonddad blog...

    "Reality has a well-known liberal bias." --Stephen Colbert

    by InsultComicDog on Thu May 24, 2007 at 08:49:44 AM PDT

  •  Maybe not all bad news (2+ / 0-)
    Recommended by:
    sclminc, Wee Mama

    Housing prices have been ridiculously inflated over the last 10 years or so due to relaxed lending standards and speculative investment. This is a long overdue correction.

    The result, sadly, in the short term at least, will be many people losing their homes and their jobs. The hardest hit will be people who were not really credit worthy in th first place so maybe this corrective effect is not all that bad. But then again, many were not credit worthy due to the outrageous price of real estate rather than poor credit.

    When people have to pay 300,000 for the average home, yet have average income of less than 60,000 something is askew to begin with.

    This is very similar to what happened to the IT industry after the Dot Come bubble burst and 9/11. There had been far too much speculative investment. The IT industry was devastated for a time after that with sector unemployment reaching as high as 95% in some areas.

    That caused a lot of people to go out of the sector who had no business being involved in it in the first place. The gold diggers, the speculators, and the charletains were all cleared out.

    It was very painful for a lot of us. Many of us filed for bankruptcym lost our homes, our cars, everything. But today, after years in the wilderness, the industry has rebounded significantly. And what's really good about that is the fact that now the industry once again is based on solid fundamentals and real business need, not pie in the sky uncontrolled speculation.

    Maybe something similar will happen to the housing market, but it will take time and as the housing market effects much more of the overall economy it's effects will be pervasive. There is pain to come, but hope further out on the horizon.

    •  Housing Prices vs Income (0+ / 0-)

      When people have to pay 300,000 for the average home, yet have average income of less than 60,000 something is askew to begin with

      Ultimately, housing prices are tied to income in the long haul. When prices go up much faster than income, a correction can be expected.

      We do have the factor of material costs as well. China is building the equivelent of a city the size of Boston with 2,000,000 people every ten days. This is driving up the costs of building materials everyone, so the existing houses we have would cost more to replace. Overheated markets still have room to drop, but places where prices never got out of control will see some adjustments, if there is any demand for new housing.

      Shhhhh, don't tell anyone Al Gore is running for President. It's a secret!

      by Tuba Les on Thu May 24, 2007 at 11:55:48 AM PDT

      [ Parent ]

  •  Not exactly a collapse (0+ / 0-)

    Living in one of those ridiculously overheated markets, I've noticed a lot of houses around me that had sat on the market for months recently sold -- for about what they were worth in 2005.

    If/when they fall back to 2002 values it will hurt.

    If/when they fall back to 1999 values, the prices will be about where they should have been given 100-year historical appreciation trends...

    Anybody seen my owl?

    by Minerva on Thu May 24, 2007 at 08:56:34 AM PDT

  •  Housing stocks are up (4+ / 0-)
    Recommended by:
    fly, steelman, eightlivesleft, shaharazade

    which looks like people are thinking this increase in sales is indicative of something good. In reality, people buying houses now are suffering under the illusion that their houses will appreciate when in fact a year from now their houses will be worth less than they are now.

    Even those with a vested interest in hoping the situation will improve recognize the fact that it will get worse.

    No. 5 builder KB Home (Charts, Fortune 500) returned to an operating profit in its most recent quarter after an earlier loss, but its CEO warned in April that he expects the housing slump to get worse.

    You don't get anywhere by standing on the sidelines waiting for somebody else to take action. - Lee Iacocca

    by CanYouBeAngryAndStillDream on Thu May 24, 2007 at 08:56:39 AM PDT

    •  Surgest against what? (0+ / 0-)

      It's at 92.32 Against the Canadian Dollar.  

      Not good for exports from us up here, but good for my US denominated debts...  :)

      -6.5, -7.59. I want to know who the men in the shadows are... ~Jackson Browne

      by DrWolfy on Thu May 24, 2007 at 09:41:51 AM PDT

      [ Parent ]

  •  Collapsing? (2+ / 0-)
    Recommended by:
    sclminc, Tuba Les

    I don't know about that. In some areas, home values have gone down quite a bit, but in most areas they are stagnant or dropping only slightly. Of course, the areas where prices are going down most are making headlines, which makes it seem more dramatic. However, most Americans will not be impacted much by falling housing values.  Government has already picked up a lot of the construction slack. You should see all of the road projects here in Northern California. Builders are putting projects on hold or modifying them to be smaller and cheaper and selling off excess land, which is causing land values to become a bit more realistic. The more irresponsible lending agencies have gone out of busines, and the rest are fighting government regulation tooth and nail. Some borrowers are losing their homes, but mostly people who speculated in the market or people who really couldn't afford the home they bought to begin with.

    Bubble is really a bad metaphor for the housing economy over the last few years. In a true bubble, values escalate then crash, leaving nothing, or virtually nothing in their wake. The classic example is the Dutch tulip bulb bubble in the 1800's. When the craze ended, people were left with lots of worthless bulbs. Nobody thinks that housing values are going to drop to anywhere close to zero. We had an inflated housing market for years, and now we are settling into a deflating market, and eventually will settle into a "normal" market for a while before things get crazy again.

  •  No signs of a "collapse" in Seattle (0+ / 0-)

    We are having a normal springtime, no catastrophic weather, and housing prices continue their modest increases. Real estate is not a bubble, because of the reality that housing, unlike tech stock, is a fundamental need.

    I prefer to save my doom and gloom for thinking about the war.

    You can't get away with the crunch, 'cuz the crunch always gives you away

    by dnamj on Thu May 24, 2007 at 09:06:05 AM PDT

    •  Yeah, right. (12+ / 0-)

      Housing prices in Seattle will continue to increase by double digits FOREVER, until the meanest tar-paper shacks cost 20 million dollars and only the five richest kings of Europe will be able to afford them.

      Either that or a lot of people around here are in for an incredibly unpleasant surprise. My money's on the latter.

      •  seattle (2+ / 0-)
        Recommended by:
        groggy, steelman

        is gonna be the most expensive place in the world to live. people just wanna get high on the caffeine, and it rains caffeine in seattle.

        those were good times, as far as we knew --colbert

        by AmericanHope on Thu May 24, 2007 at 09:20:22 AM PDT

        [ Parent ]

        •  I live in Portland (0+ / 0-)

          and we get lots of people from Seattle and California moving here. It's much cheaper to live here and buy here, but the job market isn't as vibrant as Seattle's is. I would also like to point out that in Portland we have Stumptown Coffee Roasters and it really is the best I've ever had. I lived in Seattle for ten years and no coffee roasters have been able to compete with the fullness of Stumptown!

        •  We are also sheltered (0+ / 0-)

          We don't have nearly the pollution or bad weather that many other big cities have. Just the occasional earthquake.

          You can't get away with the crunch, 'cuz the crunch always gives you away

          by dnamj on Thu May 24, 2007 at 12:53:48 PM PDT

          [ Parent ]

      •  No problem (4+ / 0-)
        Recommended by:
        phenry, groggy, eightlivesleft, DrWolfy

        When gas prices fall back to 30¢/gallon all will be well.

      •  Ding (4+ / 0-)
        Recommended by:
        phenry, sclminc, groggy, tcdup

        I'm increasingly reminded of the idiocy of the dotcom era bubble. One clever guy at my office did a quick spreadsheet run on the DOW to shut up an idiot marketing guy. He took the rate of growth and ran it over a 20 year cycle, informing everyone that the result was the DOW would be worth 10 times the globe's GDP in inflation controlled dollars.

        Same thing now with real estate. Anything other than effective stagnation (be it a drop followed by return to inflation tracking growth, or just stagnation) for the next 5-7 years means we have a secular shift to pricing out half the country.

        Given that would mean a lot of vacant proerties, I doubt that's likely.

        •  Beads for Manhattan (3+ / 0-)
          Recommended by:
          phenry, Jerome a Paris, susie dow

          Say Europeans bought Manhattan from Native Americans for a nice bead necklace worth about $60 in 1626.

          Say the current value of Manhattan is about $1 trillion.

          It would be great if someone could check my math, but, if the value of the beads were invested and increased 7% per year, compounded annually, ever year since 1626, I think the beads would have a value of about $9 trillion, which is far greater than my estimate of the value of Manhattan.

          If the investment increased 6% per year, compounded annually, then the value would still be about $150 billion, or comparable to the value of Manhattan.

          In the real world, I can vaguely imagine that a very smart, lucky investor who invested $60 in 1626 might now have, say, $19 million, which would imply an annual interest rate of 4.5%.

          In the real real world, maybe the necklace would sell for about $500,000 at an auction, which would imply an annual rate of return of about 3.5%.

          Assuming that Manhattan was really worth about $10,000 even in 1626, I think (if I'm doing the math right) that means the actual value of Manhattan has increased an average of just 5% per year since 1626.

          Moral: over the long run, even before you take inflation into account, getting a 3.5% rate of return is OK, getting a 4.5% rate of return is great, and getting a 6% rate of return is spectacular.

          To the extent that the value of anything we own has increased more than 5% per year since we bought it, that extra value is a gift from fate (or the gods, or whatever) that could be yanked away at any time.

      •  I do not hope for double digits (0+ / 0-)

        Double digit increases are horrible for first time buyers when they happen year after year, which has happened for many years in Seattle. Fortunately, our housing prices didn't go up as much as California's in the 80s. Given the broader west coast market, the prices were low at the beginning of the 90s. I would love to see them level off, but the reality is that the job market keeps improving in Seattle. We've replaced the stanglehold Boeing had on the local market with a lot of Biotech jobs (which are possibly doomed because they all revolve around the corrupt drug marketing schemes controlling health care in America), internet businesses like Amazon, a substantial telecom sector, and a healthy tourism sector. Plus, a lot of people want to live here, because it doesn't get too hot or too cold, and there is decent air quality and a lot of recreational options. We also have a giant amount of waterfront property (some of which may collapse physically due to increased erosion from rising sea levels). It just adds to to a situation where "collapse" is not likely, although a little "correction" would be in order. As it is now, people are paying 10 times their annual income for little houses. It's crazy. On a personal scale, it makes no sense. But looking at the market, there are always going to be buyers.

        You can't get away with the crunch, 'cuz the crunch always gives you away

        by dnamj on Thu May 24, 2007 at 12:52:56 PM PDT

        [ Parent ]

    •  And yet, across the water... (2+ / 0-)
      Recommended by:
      groggy, averybird

      Here in Bremerton, nothing's moving. Most of the "FOR SALE" signs now have prominent "REDUCED PRICE" hangers.

      That reminds me, I should go wander by and see if that $200K mobile home is still on the market.

      •  Things in the burbs (0+ / 0-)

        like Kirkland, Bellevue and Redmond are doing really well. I wonder why it's different in Bremerton?

        •  Military families? (0+ / 0-)

          Aren't there a lot of military personnel in Bremerton? Maybe that's the difference. Those long-term deployments are hard on lots of things, including mortgages. From what I've seen advertised (and I'm only looking at rental properties), rents are pretty cheap there compared to Bellevue, Redmond, or Seattle proper, and they are willing to do 3-month leases that are just about unheard of in town. Again, perhaps for the convenience of the military.

    •  In most places, cars are an essential need. (0+ / 0-)

      Don't see everyone willing to pay $100,000 for a used Ford Taurus, though.

      "Staying the course" is what sunk the Titanic.

      by PomperaFirpa on Thu May 24, 2007 at 01:08:12 PM PDT

      [ Parent ]

      •  You can always make more cars. (0+ / 0-)

        They quit making real estate a while ago (except new high rises, which are not appreciating the same way a piece of ground is).

        You can't get away with the crunch, 'cuz the crunch always gives you away

        by dnamj on Thu May 24, 2007 at 01:10:09 PM PDT

        [ Parent ]

        •  Yeah, that's real cute. (0+ / 0-)

          I think you're failing to appreciate just how ridiculously overpriced things are in a lot of places.  What the hell good does it do for (in a grossly oversimplified, downscaled example) 100 houses to be worth $200K if there are only 50 people who can afford to live in them?

          "Staying the course" is what sunk the Titanic.

          by PomperaFirpa on Thu May 24, 2007 at 01:17:52 PM PDT

          [ Parent ]

          •  I'm not saying it does any good at all (0+ / 0-)

            For all I know, the escalation in prices will mean that the 1% ends up owning everything, and we return to a shitty feudal system. If there are 100 houses "worth" 200K, and 50 people can 49 people can afford 1 house each, but the last guy could "afford" 1,000 houses, then the whole system is f*cked. That might happen. But as long as there is still a market, and things are still selling, and where I am in Seattle that is totally true regardless of how overpriced it is, then the prices won't go down. It is a finite stock in a global market.

            It could happen that all real estate become a luxury item, who knows? It could be that it really takes a diverse market to maintain the selling prices people are getting now, and that the concentration of wealth eventually torpedoes the real estate market. In many places, that is certainly true, and already happening.

            But even if the prices go down by 20% in Seattle, there will be a "land rush" because of the desirability of living here.

            The negative impacts on individuals, and I mean me too, of foreclosures, lost equity, and all of that just don't matter to the market. There is always another buyer for real estate with a nice view and close to the water, and that describes most of Seattle, and the few other cities that are stuck in real estate inflation. This is purely speculation on my part, and I admit it. To me, the bottom doesn't look like it can fall out with just the factors we are talking about here.

            You can't get away with the crunch, 'cuz the crunch always gives you away

            by dnamj on Fri May 25, 2007 at 11:27:06 AM PDT

            [ Parent ]

  •  I, for one (1+ / 0-)
    Recommended by:
    averybird

    would love a housing collapse. Mr. JMS and I have been wanting to move to a bigger house for years now, but when housing prices started skyrocketing in our neighborhood, we decided we couldn't stomach such outrageous prices. Collapse, collapse, collapse...go collapse...

    We won--get out of the way

    by JMS on Thu May 24, 2007 at 09:20:20 AM PDT

    •  Is this one of those things... (1+ / 0-)
      Recommended by:
      groggy

      ...that sounds like bad news when you hear it on Marketplace, but then you realize you actually feel better and benefit from it? Like those 40,000 AT&T employees who were laid off a few years ago...think they felt better that the company's stock price soared after that move?

      All I know is I can buy a house and get a good deal, give it some TLC for a few years and be in good shape if we can get some people in office who give a damn about THIS country instead of THAT one.

      T.

    •  Be (2+ / 0-)
      Recommended by:
      sclminc, Cream City

      careful what you wish for....

    •  Yes, be careful; my stepsons in construction (0+ / 0-)

      who were going to become homeowners themselves have put off that now.  Fewer buyers for you.

      Housing prices are indicators of the economy because they foretell so much about the job market -- not just in construction but all those salespeople in stores that were waiting to sell them appliances and drywall and . . . well, you know, you're homeowners.

      But now, they won't be, because the construction job market report showed a serious drop this week.

      "Let all the dreamers wake the nation." -- Carly Simon

      by Cream City on Thu May 24, 2007 at 11:42:16 AM PDT

      [ Parent ]

  •  Wealth effect (6+ / 0-)

    And -- of course -- with housing prices down, the guys who got their refinancing loans for consumption last year now have negative equity in their homes.

    Really bad news.

  •  Don't forget the oil/gas effect (5+ / 0-)

    People have less to spend because they are putting it in their tanks.

    -6.5, -7.59. I want to know who the men in the shadows are... ~Jackson Browne

    by DrWolfy on Thu May 24, 2007 at 09:38:28 AM PDT

  •  Seems to me (1+ / 0-)
    Recommended by:
    sclminc

    The typical cycle in a house bubble is that transactions first freeze as buyers become unwilling or unable to pay the high market prices.

    that this bubble is far from typical.  Whereas in past bubbles people could simply withdraw an offer and continue living in homes, we have a situation where many people have more than one home because they thought they could collect rent as income.  Now, they're in a situation where they live one place and own another but can't collect the income to cover the payments and may very well still be in hock on their actual residence.  This situation could have a double effect, no?  That is, people may not only lose their income investment but, as they have to foreclose on a second property, they may very well end up with an extra bounty on their first property or an extra claim which could force them out of both.

    Any comments?

    Give me ten lines from a good man and I'll find something in there to hang him. - Cardinal Richelieu

    by lgrooney on Thu May 24, 2007 at 09:54:06 AM PDT

    •  You just described my sister and BIL (0+ / 0-)

      although they have a long-term renter in their second home.  Sis is renting, and had hoped to sell the second home to the renter.  Renter has poor credit and was relying on 2 years of stable rental history + 5% down with a subprime lender to buy the home this past March.

      Guess what happened.  So now no one will give the renter a mortgage loan, and my sister owns the house outright but wanted the full equity to buy her own house (she sold her former house but had little equity in it).  She's OK, but trapped.

      Proud liberal, secular homeschooler.

      by mbzoltan on Thu May 24, 2007 at 10:14:56 AM PDT

      [ Parent ]

    •  Here's another observation (0+ / 0-)

      People this time around were also draining equity from their homes to an insane degree. Elderly people, who had purchased for 15K in this area 50 years ago were taking out HELOCs. And regular folks were cashing out their equity to buy cars, vacations, new furniture .... and God help us, granite countertops. The magic phrase! "new cabinets and granite countertops". That should make the old place worth easily another 200K, huh?
      I think an awful lot of people behaved very foolishly, and that most of our economic growth in the past 4 years has been equity and credit spending.
      I am currently tracking several homes on the resale market in Sacramento, and half of them were purchased several years ago for less than half what the asking price is. All of the owners are "motivated"; yet they're only dropping the asking price in 5 or 10k increments and then they'll pull it off the market and relist it in a month. I think they are desperate, and I think they do have to sell, but they can't drop the price to where anyone will buy because they took out all the equity. It's the only explanation. And so far as I know, that has never happened before.

  •  Good. (1+ / 0-)
    Recommended by:
    roonie

    I am not sure why we should be crying about housing prices returning to something more sane.

    Will this hurt people who took out stupid loans at the height of an obvious bubble?  Probably.  Will this hurt the banks that were stupid enough to make these loans?  Probably.

    Should we be upset about the housing market revaluing to a more reasonable level?  Probably not.

    One factual point.  

    The increase in NEW HOME sale does not mean

    "that more people are accepting the reality of lower prices when selling, and make is unlikely that the trend will change."

    It means that developers are taking the hit, or, alternatively, that they finally started building smaller houses.  It means nothing for existing homes nor for those selling them.  These markets, those for new and those for existing homes, often move independently.

    The welfare of humanity is always the alibi of tyrants. A. Camus

    by TastyCurry on Thu May 24, 2007 at 09:54:12 AM PDT

  •  Another Consequence (1+ / 0-)
    Recommended by:
    sclminc

    Tax dollar receipts also drop as the prices drop.  If the economy stumbles, local government might have to rely on increases in property taxes to help pay for everyday things.  This could lead to a serious circular problem as less people want to buy expensive houses and be stuck paying higher taxes.

    Al Gore received more votes, Ohio was stolen. This isn't a democracy.

    by Deadicated Marxist on Thu May 24, 2007 at 10:03:07 AM PDT

  •  This seems to be true everywhere except (1+ / 0-)
    Recommended by:
    dnamj

    the Seattle area.

    "I don't think I intended to break the law." - Monica Goodling

    by Bob Love on Thu May 24, 2007 at 10:15:35 AM PDT

  •  Jumbo Interest Only Loan My Ass! (1+ / 0-)
    Recommended by:
    Catte Nappe

    I almost fell for that crap, too.  Rock Financial wanted me to unload a 15 year fixed 5.8% last summer for one of those "exotic" pieces of crap.  They acted like I was an idiot when I said no thanks and just took out a small loan instead.  

    "But oh-ho-ho, who's got the last laugh now..."

    Now, Rock's on the TV acting like they're the guys who warned everyone against them.

    What a load of unmitigated poop.

    .

  •  Still waiting here in WNC for lower prices (0+ / 0-)

    Seems like they just keep going up to me -- at least in Asheville NC. Our little bubble amidst the "collapse"...

    Come on collapse!! I want in on a house that isn't inflated in value.

  •  good analysis from Bonddad a Paris! (1+ / 0-)
    Recommended by:
    Jerome a Paris
  •  Long term, I want the END of Realors (1+ / 0-)
    Recommended by:
    SkiBumLee

    Price comes down, sales go up.  That's the nature of a cyclical market like housing.  The real question is will prices continue to decline, or are they starting to flatten out?

    Ok, great.  But here's something else I've seen.

    More of the houses in my neighborhood which are for sale are FSBO.  That is, For Sale By Owner.  Cut out the 5% fee of the realtor who doesn't provide you any value.

    It was the Realtors who pushed prices up in the first place, as people sold they have to get a minimum of 6% gain in order to cover the costs of realtors.  Then ther'es the other 3-4% for closing costs on the new place.

    The costs are WAY too expensive.  And the fact is, these leeches on our society add no value.

    •  Add no value??? (2+ / 0-)
      Recommended by:
      sclminc, Catte Nappe

      If you think realtors add no value... then don't use them!

      I sold my house last year with a realtor (5% commission) and consider it money well spent. (I also bought two houses in the last two years with realtors)

      Sure, use the "Help-U-Sell's" (1%) or pure FSBO all you want. But there is a whole lot more to getting a house sold than putting a sign in the yard.

      You may notice that the FSBO's are the houses selling the slowest, and for good reason. Even with realtors the myriad of paperwork involved in what is for most people the largest investment of their life is staggering, and there are so many loopholes. Most simply do not want to take the risk of buying a FSBO.

      Some realtors are better than others of course. You still have to keep them on a tight leash to make sure they represent you properly.

      •  There are good real estate agents and bad (0+ / 0-)

        ones, as with everything else. But I think it's unfair to blame agents, even rotten no good ones, for the Fed creating a real estate bubble.

        •  The flipfloppers suck; the good realtors gave me (0+ / 0-)

          more than my six percent was worth to get me and my children into a home of our own, working overtime to get a single mom a mortgage (third bank finally came through).  So when I remarried and sold that home, you can bet that realtor and bank got my business again.

          Find good, hardworking, ethical realtors.  They are out there -- and they are worth every percentage point.

          "Let all the dreamers wake the nation." -- Carly Simon

          by Cream City on Thu May 24, 2007 at 11:45:20 AM PDT

          [ Parent ]

      •  Oh, bugger (0+ / 0-)

        You've got no clue.

        All realtors do is put a sign in your yard, put the listing up on MLS, and then sit at home watching Jerry Springer episodes wiating for a phone call.

        It's the most worthless job I've ever seen.  People getting paid $10k or more for 5 hours of work.

        and the paperwork, it's handled by the title companies.  Those bastards are also on my list.

    •  new outfits are showing up (1+ / 0-)
      Recommended by:
      The Other Steve

      all over the place offering a flat fee service. The downside is you might have to take over some of the work that realtors traditionally handle such as marketing, open houses, etc. And you have to deal with the fact that tradional agents will avoid showing their customers your house because they know they'd be getting a lower commission. Still, I hope this will be a long term trend as it does not make sense in terms of service provided to charge 3 times the fee for a house with some land going for 600K compared to a 200K condo.

    •  Think outside the box (1+ / 0-)
      Recommended by:
      The Other Steve
  •  Worse than that (0+ / 0-)

    is the number of foreclosures (and unsold foreclosed homes) due to predatory lending, for example in on Minneapolis' north side which was the subject of an NPR story on Wednesday.

    Forewarned, forearmed; to be prepared is half the victory. ~ Cervantes

    by Deep Harm on Thu May 24, 2007 at 10:35:01 AM PDT

  •  Robert Schiller (2+ / 0-)
    Recommended by:
    Woody, sclminc

    is talking about a bubble, just like the 2000 stock bubble.  There's a chart of home prices stretching for over 100 years.

    It's a very specious reasoning that there can't be a bubble in real estate.  It has already happened in Japan 2 decades ago.

    In many respect, a housing bubble is actually worse than a hi-tech stock bubble.

    1. If a hi-tech stock goes to zero, you lose all your money (for people buying on margin they lose all their money when it goes down 30% unless they do something very stupid).  However, if someone puts 10% down on a home and it goes down 10% he loses all his equity, if he can't afford to pay (due to ARM adjustment) and has to sell he will lose extra on the sale commission as well.
    1. There's no maintenance fee on stocks.  Currently, the cost of owning a house is much higher than the cost of renting one of the same value.  That cost would be the equivalent of "maintenance fee" on your "investment", bleeding your net worth every day.

    Example of this "maintenance fee equivalent" from Money magazine.  From this planning:

    To supplement their retirement savings of $260,000, they figured they'd buy fixer-upper homes to renovate, then sell at a profit in the state's hot housing market. "We thought we'd make $100,000 without batting an eye," says Carol.

    To this "maintenance fee" albatross:

    The couple are pulling out $15,000 a month from savings to cover their expenses, and they've already run through more than half of their nest egg.

    1. The argument that "housing is a fundamental need" is only correct on two conditions: 1) when there are actually people who need those vacant houses (there are approximately 2M vacant houses for sale due to the recent speculative boom) and 2) when people figure that buying a house will be more financially beneficial than renting one (i.e. the fundamental need can be satisfied by another means, as it has been for centuries, not necessarily by buying a house).  Both conditions are not true these days.  BTW, hi-tech companies are needed too.  Anybody who think that Cisco and  Intel are not needed must be living on another planet.  So their stocks did not exactly go to zero either, but definitely enough to call it a bubble.
    1. In the worst case scenario, if some people borrow money to buy stocks and get totally busted, they can just file for bankruptcy.  For people buying houses, whether for living beyond their means or for "investment", when their values go down not only they lose all their equities; their savings; but may owe the IRS taxes on the amount the banks forgive them as well.  They can't file bankruptcy to avoid paying taxes which could be a significant amount.  If they are "forgiven" 300K on a house, then all that will add to the income for that year and they will have to pay the highest tax rates for the money they never received and had in the first place.

    300K is not too much of an exaggeration anyway.  It's getting there, even for relative modest homes around here (Sacramento, SF bay area):

    "Of 23 houses on Richfield Way, five went into default in just the first three months of this year. ‘It seems like I post (an auction listing) every other day on Richfield,’ said auctioneer Bryan Moulton."

    "At a recent courthouse auction, a five-bedroom, four-bathroom 3,500 square foot house on Richfield Way that sold in July 2005 for $526,000 was offered by the bank for $295,000. There were no takers."

  •  They haven't collapsed in San Francisco (0+ / 0-)

    or New York. In San Francisco prices have gone up more than 6% this year. So where, exactly, is this "collapse" taking place?

    •  miami (1+ / 0-)
      Recommended by:
      susie dow

      Las Vegas
      Denver
      Detroit (though they were never there)
      Texas
      there was an article not too long ago that showed some stunning falls in prices percentage wise in a lot of the nation. I don't see this as a bad thing, unless you're trying to sell your house to move.

      oh and toll brothers (who builds(built) a ton of houses in my area and everywhere else) reported profit falls today.

      The number of contracts the company obtained in the quarter plunged 40 percent in Florida, North Carolina and South Carolina and Texas. Contracts in Arizona, California, Colorado and Nevada tumbled 37 percent. The company's north region, which includes Connecticut, New York and New Jersey, performed the best with a decline in contracts of 6.7 percent.

      that should give you an idea as to where the "collaspe" is. it's everywhere, except in those few bubble markets that still exist like New York and San Francisco (though reported in thread, forclosures are up hugetime in California, and everywhere else too.)

      all Along the Watchtower...... blogroll

      by terrypinder on Thu May 24, 2007 at 10:50:08 AM PDT

      [ Parent ]

      •  I feel immune (0+ / 0-)

        from all of this. Housing prices in places like New York and San Francisco never decline, partly because the speculative "bubble" you speak about doesn't exist here. The average number of purchasers of condos who flipped them within 6 months of purchase in San Francisco is less than 5%. I think we're going to ride this out just fine.

        •  If you're being ironic, never mind, but, if not, (1+ / 0-)
          Recommended by:
          susie dow

          have you heard of 1991?

          If you know regular people in New York who are now real estate rich, there's a good chance they bought some time around 1991.

        •  ohh they decline in both places (0+ / 0-)

          i believe in San Fran, they declined (predictably) in the fiscal year 90-91 and in New York in response to the speculative bubble caused by the Japanese buying everything not nailed down in 91-92.

          you're not immune in NYC, trust me on that.

          all Along the Watchtower...... blogroll

          by terrypinder on Thu May 24, 2007 at 11:48:41 AM PDT

          [ Parent ]

    •  New Yorkers probably expected 16% gains, so, to (1+ / 0-)
      Recommended by:
      Shane Hensinger

      them, a 6% gain means they really have lost 10 percentage points relative to what they were expecting to get.

      •  Well (1+ / 0-)
        Recommended by:
        dnamj

        I have an apartment in New York but a house in San Francisco. I don't expect the value to decline on either property - ever. Price gains are relative. In SF we're used to more than 10% per year so if it drops below that we feel like they're falling. But my broker told me that even during the recession you mentioned prices fell only on high-end properties (those over $10 million.) Perhaps it's foolhardy but in a space as constrained as Manhattan and San Francisco, places people always aspire to want to live, I just cannot see the bottom falling out of the market.

        •  I don't think any bottoms will fall out (1+ / 0-)
          Recommended by:
          dnamj

          because of a real estate crisis, especially if you can wait to sell, but I think the point is just that you shouldn't try to flip the places and shouldn't take out home equity loans unless you have a lot of equity built up.

          The market slump is an opportunity for regular buyers, a challenge for typical owners and sellers, and just a crisis for very aggressive borrowers and sellers and, possibly, for the financial system.

          •  Good points (1+ / 0-)
            Recommended by:
            dnamj

            I agree with all of them. I own both properties because I use both properties, I didn't purchase them to make a quick buck - they're both my home. I approach real estate from that perspective which probably is why I have so little sympathy for people who don't. A quick buck is always much more dangerous than settling in, being patient and holding out for the long-term.

            •  Of course, what will insulate (0+ / 0-)

              New York against anything against catastrophes (e.g., nuclear war, gigantic global warming storms) is the fact that so many people with decent incomes have roommates.

              In New York, someone with an annual income of $60,000 might be paying $1,000 a year for a small bedroom in a 3-bedroom apartment that doesn't even have a living room.

              But, of course, that might not be much comfort to some company that based on mortgage-backed securities based on a formula that said it was impossible for the national median price of U.S. homes to drop more than 5 percent in a given year.

    •  Or in Seattle (3+ / 0-)

      $325000 for a 600 sq. ft. condo. Twice that for small, old, wooden houses.

      Yeah, that's some collapse all right.

      Take the fight to them. Don't let them bring it to you. - Harry S. Truman

      by jgoodfri on Thu May 24, 2007 at 11:44:19 AM PDT

      [ Parent ]

  •  We live in an area (2+ / 0-)
    Recommended by:
    SkiBumLee, Cream City

    that boomed soon after we moved here 18 years ago.  We got the 3-bedroom, 1 1/2 bath house, and thought from time to time about moving to the 4 bedroom 2 1/2 bath house.  Thank god we didn't, because those overpriced houses have flattened out.  Ours is a bit snug with 2 kids, but I'm perfectly happy.

  •  A question: Are houses the new farms? (1+ / 0-)
    Recommended by:
    sclminc

    Farm failures used to be (19th up to mid 20th century) a forerunner/harbinger of recession and sometimes depression.  Have houses taken the farms place?

    When decisions are made now in the Bush attorney general's office, politics is the primary consideration. The rule of law goes out the window. US Attny Eubanks

    by sailmaker on Thu May 24, 2007 at 10:47:07 AM PDT

    •  timing (0+ / 0-)

      Right. If you lose your home and savings and are out on the street, you're gonna be much like the farmer who lost the farm and family home. A 21st Century Okie.

      I'm certainly forecasting a severe Recession -- one always comes sooner or later. My only hope is that this next one will reach its worst point in the fall of 2008.

  •  the only good thing... (2+ / 0-)
    Recommended by:
    SkiBumLee, steelman

    will be to watch the wealthy suffer as the "investment" they made in an orgy of birthing McMansions based on greed fueled speculation collapses in a sea of red ink that hopefully drowns them financially as they struggle to hold on to something of declining value whilst spending profusely to power their environmental-disasters-in-motion SUVs to maintain a sense of pride in the face of their own self-recognized inadequacies.

  •  How does this corresepond (0+ / 0-)

    with high housing prices in other markets around the world? Any idea? I know, for example, that economists have been warning that housing prices in Auckland, NZ are outpacing wages by a considerable margin.

    Is there any relationship between what's happening in the US and elsewhere in the world? London? Paris? Sydney?

    "Nothing more completely baffles one who is full of trick and duplicity than straightforward and simple integrity."--C.C. Colton

    by rcvanoz on Thu May 24, 2007 at 11:01:17 AM PDT

  •  So much for 'single-state recession' in Michigan (0+ / 0-)

    'single-state recession' is the Michigan GOP's favorite line.

  •  Sadly, reading between the lines is strictly (0+ / 0-)

    required in approaching every instance of economic reporting on the wall street journal, as well as on any other US-based business publication. They all have their agenda, and it's not to keep their readers well informed.

  •  Thanks as always, Jerome (1+ / 0-)
    Recommended by:
    Jerome a Paris

    Sounds ominous, but certainly not unexpected (maybe "expected" is a more appropriate choice of terms).

    Note:

    The average price of a home last month decreased to $299,100, down from $324,700 in March and $310,300 in April 2006. The median price was $229,100, lower than $257,600 in March and $257,000 in April 2006.

    So, average prices are down 8% (on both last month and on a year ago) and median prices are down 11% (on both last month and on a year ago).

    Weren't average prices only down 4% year-to-year ($299,100 vs $310,300 = -3.74%)?

    Keep up the good work, and congrats on your projects across the pond!

    God bless our troops. GODDAMN THEIR 'COMMANDER'!

    by grndrush on Thu May 24, 2007 at 12:28:15 PM PDT

  •  As a former housing writer: Excellent, Jerome (5+ / 0-)

    I was at one time (15 plus years ago) a consumer finance columnist for magazines in the "shelter" field: HOME, Family Handyman, and others.  I have not been following the field closely in recent years, but tales of current lending/underwriting practices have made my blood run cold.  Jerome's comments are pithy and to the point. However, a few additional observations.

    --This fall may be a one-month blip, but I don't believe it, prices are probably falling substantially.

    --Sounds like to me that builders MAY have been slashing prices to get rid of inventory.  They have large construction loans to pay off. Once the inventory clears, prices might stabilize.  But builders aren't then going to be running out and building a lot of homes.  And some overextended builders are going to go under (They always do in a housing slump).

    --The kicker is existing home sales.  At what rate are these prices falling? How many homes out there are now worth less than the mortgages on them?  This figures are still to come.

    --One major source of growth for the economy in recent years results from interest rates that have fallen for more than a decade with concomitant refinancing of high-rate mortgages. Refinancing existing loans at a lower interest rate increased disposable incomes and thus non-housing purchases.  Many people have also increased the mortgages at refinancing to pay off consumer debt and/or finance other purchases.  This can't happen as easily if the values of homes are falling.  There might then be insufficient equity to refinance.
      Net result, a hit on consumer buying power (due anyway, not much push left as most loans had already been refinanced at low rates).  The hit on buying power would quickly be transmitted to overall consumer purchases causing a stagnation or drop in overall levels of economic output.

    --Construction expenditures have a very high "multiplier effect" on the overall economy.  In other words, a dollar spent on construction (business and housing combined) will create more jobs and cause money to circulate faster, than a dollar spent on hot dogs. The reasons for this are complex, but just take my word for it; it's an economic truism.  At least the housing portion of the equations looks like it's about to fall.  Also, the 900,000 new units sold annually (April rate) is a rather middling pace when considered historically.

    --"More first home buyers," isn't that a good thing," someone asked?  Maybe yes.  But the bad thing is that they can now afford the homes because the economy is taking a drubbing--it's a symptom.  Fever is also a symptom resulting from the immune system fighting off an infection--the immune system is more effective at higher body temperatures.  But the reason one has a fever--the infection--is a bad thing.  Thus a fever (or first time home buyer purchases) in these cases a good thing, is a signal that something fundamentally bad is happening.

    I could add other points, but this is already much longer than I intended and is written totally off the top of my head.

  •  "Not a long term problem" {/smirk} (1+ / 0-)
    Recommended by:
    Jerome a Paris

    the jobs effect: with so many jobs of the jobs created lately being in construction - and the financing of real estate - in recent years, it is likely that a number of them will disappear, and thus push up unemployment rates.

    This is only a short-term problem in the US. Once you've exhausted your unemployment benefits, (and, I believe) unless you're using government agencies to try and find employment, according to the US government, you AREN'T IN THE WORKFORCE. Hence, no effect on unemployment rates! Nothing to see here, move along!

    {/snark}

    I believe the phrase "Let 'em eat cake!" STARTED on your side of the pond...

    God bless our troops. GODDAMN THEIR 'COMMANDER'!

    by grndrush on Thu May 24, 2007 at 12:44:32 PM PDT

  •  This headline is a little more credible: (0+ / 0-)

    Big drop in home prices predicted.

    Dave Wyss, an economist from S&P, is predicting an 8 percent drop in median home prices for all homes (not just new homes) from 2006:Q4 to 2008:Q4. Note that he places the bottom somewhere around the end of 2008, rather than early 2008 like the cheerleaders at the National Association of Realtors.

    In my judgment, Wyss's forecast is still too optimistic because he doesn't forecast a U.S. recession in 2007 or 2008. A recession lowers demand for housing and will therefore lead to even deeper losses in housing prices.

    "What is government itself, but the greatest of all reflections on human nature?" - J. Madison

    by berith on Thu May 24, 2007 at 01:22:23 PM PDT

  •  Income of top 1% = rise in housing prices? (0+ / 0-)

    Strange parallel of two charts.

    Income of the top 1% (red triangles) vs housing prices.

    Congress represents the people and the people want the troops home.

    by susie dow on Fri May 25, 2007 at 03:16:54 AM PDT

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