Worst case happened back in 1990 - 1994, more specifically during 1993 when many military bases were closed which effected communities on a local micro-scale. Recovery was very nice; much money was made by those of us with sense enough to swoop in like vultures.
Perhaps some select rural areas might display diminishing prices, but unlikely.
Real estate prices, in most areas, will continue to display growth rates of ten percent to thirty percent per year, which are directly proportionate to population growth with some effect by job growth. Demand outstrips supply by ten to one or more.
Southern California and similar socioeconomic regions will continue a double digit value growth, with most over twenty percent growth per year.
On this, Buffet and Munger are hyping the worst case fabricated senario to garner an audience.
I think they plan to sell Buff & Mung bobble heads.
Rich pompous bozos, I say. Has-beens no longer in touch with reality. I mean how realistic can they be with promulgating all companies should be banned from being publically traded as they did over in England?
"Some systems should be made deliberately unfair to individuals because they'll be fairer on average for all of us."
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WASHINGTON (Reuters) - "U.S. construction spending jumped a surprisingly large 0.5 percent to a record high in March as home building also hit record levels, a government report showed on Monday.
Construction outlays in March climbed to a seasonally adjusted annual rate of $1.052 trillion from a revised $1.047 trillion in February, the Commerce Department said. Wall Street analysts polled by Reuters had expected a 0.3 percent gain.
Total private construction rose 0.5 percent to $816 billion from $811 billion the previous month while private residential construction climbed 0.3 percent to $585 billion from a revised $584 billion in February. Both figures were fresh record highs.
Construction spending has been toppling records every month since February 2004...."
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Something has to give.... most simply, housing prices are rising faster than peoples incomes, that can't go on forever.... it just can't all the houses will just go to CEO's then
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Housing supply is very low and demand is very high. Additionally, raw land is becoming increasingly scarce, causing competition between commerce and the residential housing industry, further driving prices up for both commerce and housing.
There are still a lot of affordable homes but are located in perimeter suburban and rural areas.
We went out to Thousand Palms, a desolate desert area not far from Palm Springs. While talking to a property owner out there, he said he paid a tidy sum of $150,000 for a half acre of sand and rock, literally sand and rock in the middle of nowhere where the sun and wind never quit.
The wood on the home there was completely bleached out white and sandblasted clean. Only plants which survive are cactus and similar. Nearest shopping area is a good fifteen miles away. Homes out there always have tile floors because so much sand and dust makes it impossible to keep carpet clean.
A true Catch-22 situation. People have to buy homes way out from cities in harsh environment areas to be affordable, and have to pay high fuel costs to commute to job centers.
What is taking place is a continuance of the Bush "caste system" policy to create two classes of people, the minority rich in charge, and a majority poor being taxed farther into abject poverty.
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it will give. just a matter of time. to many investors just flipping properties and raising the prices in too short of a period. count on it. even though the population has been increasing every year, but it has not increased that dramatically as the boom. it is not natural for prices to increase at this pace. even though incomes have gone up, but they are not in pace with the housing prices. both husband and wife have to work. mostly a combination of low interest inticing people who were renting to finally buy a house and a lot of investors who pulled their money out of the stock market the last two years. almost about 30% or greater of the house plans that we engineer are either spec or investor related.
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even though incomes are going higher. the next generation coming out of college is going to have a harder time affording a house unless the move out to the boonies.
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Real estate agents, here in Californicated, are now kicking back part of their commissions to buyers to close deals. Agents can afford to do this with home prices so very high.
Lot of competition in the mortgage market, as well.
Nonetheless, at worst, housing prices will level off for a period of time, but they will never fall.
We have stop buying for rentals and have moved into simply "flipping" homes for profit. There is a reason for this.
Here in Riverside, an average home, two bedroom, one bath, ok looking house in a clean neighborhood, start at $300,000 and most up. Rent has to be kept in the $1000 to $1200 range to retain renters, to stay below monthly mortgage payment amounts. After property taxes and landlord liability insurance, a profit margin becomes quite narrow, especially when you factor in expenses for upkeep and for cheaper "fixer uppers." Homes are simply too expensive to remain lucrative as typical income property investment.
Flipping is very lucrative. We have bought a few homes and condos before being built. Not such a nice thing to do, but hey, we like the money.
High housing costs, high energy costs, high cost for literally everything.
Should we argue gas and food MUST become cheaper?
This principle of rising costs and, de facto, lowering wages applies to all retail products, not just rentals and housing. People should not be arguing home prices need to come down, people should be arguing wages need to increase.
That won't happen under a republican administration. The Bush policy is to enrich the rich at the dire expense of the working class.
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exactly. the rent doesn't even cover the mortgage. houses being flipped with no one renting or living in them. once flipping slows down. there is going to be extra inventory of houses. especially condos. housing industry will definitely flat line for a while and may be even drop a little bit in price if there is extra inventory.
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I think we have a few (2-3) years of up trend then somewhere around 2007, 2008 a slight correction say 10-20% then back up till around 2009-2010 and then the crash I got that from reading the book "the next great bubble boom' I'm trying to think of what the authors name is I think it is allen keys but not sure. All I am sure is Im glad I bought my house 2 years ago in the Bay Area bought it for $486,957.00 my neighbor behind me just closed for $783,000.00
$300,000.00 tax free in 2 years I consider that not bad. Im happy Bush is in office =-)
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In fairness, I need to bash Bobble Head Buffet.
News out of the Omaha Cultists prayer meeting.
Buffet, robed and pontificating from his alter,
"Insurers were 'sensitized' by disclosures about unseemly practices and financial manipulation, and industry executives have substantially curtailed the practices that have drawn regulatory scrutiny...."
Sensitized? SENSITIZED!
Mule manure! The thought of hefty fines and sharing a cell with Bubba, scared the crap out of those bozo Wall Street crooks. They did not become more "sensitive" nor more compassionate; they do not want to be Bubba's bitch in the Gray Bar Hotel!
"Unseemly practices and financial manipulation...."
Excuse this slovenly servant of yours, my Great Lord Bobble Head Buffet, don't you mean they were engaging in "criminal fraud?"
* Omaha Cult is bound to kneecap me *
I have heard the word! I see the light! Thank Lord Bobble Head Buffet Almighty!
Wall Street tycoons are now "sensitive" to our needs!
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More Purl Gurl "Class A" share of blasphemy,
"Regulators including the U.S. Securities and Exchange Commission have met with Buffett to discuss some transactions involving Berkshire's General Re Corp. unit, and U.S. and Australian regulators are examining General Re's activities." - Reuters
"We love the insurance business. It’s been very good to us."
Yes, my Lordship, the insurance business has been very good to you, by defrauding millions and millions of hard working Americans!
Bid Rigging, gotta love it if you are the crook.
Securities Fraud, crooks love that as well!
For those interested in Bobble Heads Munger and Buffet, here is a fresh news story hinting at how those two bozos became Bill Gates wealthy by stealing from the salt of the earth, by stealing from less fortunate American families,
"...The number of areas across the United States with real estate booms grew nearly two-thirds last year to 55, the Federal Deposit Insurance Corp. said, warning that these booms may be followed by busts...The study also cited more purchases of homes strictly for investment as a sign of increased speculation...."
When bubbles break, the aftershocks don't just hit the speculators and the fools. They hit everybody. Check what's going on in Australia and could soon happen here.
By Bill Fleckenstein
This year is shaping up a lot like 1987. Back then, we saw speculation in commodities and stocks in general (though in a much, much milder form than exists now). We also had a new Fed chairman -- Easy Al Greenspan succeeded Paul Volcker as chairman that summer. And, ultimately, we had a stock-market crash.
Longtime readers know that I have been expecting a stock dislocation to mark the end of our long-running mania. I can certainly make the case for that happening this year (though I could also see how it might have happened in a few of the last several years). Just because a dislocation hasn't happened doesn't mean that it won't. (See "The odds of a crash are higher than you think.") To me, in fact, the probability has only ratcheted higher.
Taking into account an ugly confluence For such an event to happen, a number of market forces will need to align themselves in a certain way. Given the impossibility of predicting when that alignment will occur, we can only try to position ourselves as it develops -- though, in the very short run, I have almost no shorts, as the path of least resistance seems higher for the moment. (For a detailed explanation of why, please see my Feb. 8 daily column.)
(Editor's note: Normally, Fleckenstein's site requires a log-in and password. For one week, you can use MSN as a log-in and MSN as a password.)
Turning to one potential catalyst in that alignment -- the unwinding of the housing bubble -- we have been given hints. Homebuilder Toll Brothers (TOL, news, msgs) provided one last Tuesday when it cut its forecast for home "deliveries" and said that signed contracts declined 21% in the first quarter from a year ago. Thus, more evidence of what we have been seeing: The housing ATM is slowly creaking to a halt.
Certainly, there have been plenty of data points suggesting trouble in various formerly hot markets of the U.S., including Massachusetts, San Diego, Las Vegas and Miami.
Housing harbinger from another hemisphere And last week brought evidence of how the problem has affected Australia. This, from "Slump hits home," a story in the Sydney Morning Herald. As writer Matt Wade chronicles, the slow unwinding of that country's housing bubble is starting to hurt a bit, after having been somewhat benign last year:
"The casualty list from Sydney's property boom is growing. First, a generation of first-home seekers found itself priced out of the market. Then, as house prices finally sagged, thousands of overstretched investors and owner-occupiers fell into trouble."
He goes on to point out the insidious nature of bubbles, which I railed at constantly in our last equity mania -- and which is why I detest the Fed so much, because of its role in aiding and abetting idiotic activities that ultimately harm society:
"Now, even vulnerable people who had nothing to do with the fluctuations of property prices could be hurt. As the State Government struggles to repair the holes in the budget caused by stagnant property revenue, the aftermath of the boom could be painful for bystanders like the old, the sick, the disabled and the poor. The suffering would occur if the Government were forced to cut services and lift charges for these groups as it covers the shortfall in property taxes."
Unfortunately, that's what governments do. The spending rises to meet the level of the income they receive, and they never recognize that the "windfall" is in the form of ephemeral bubble revenues. We also saw this happen in the wake of our last stock bubble.
Continuing on, Wade's article cites last year's record number of mortgage defaults, whose emotional impact is described by attorney Katherine Lane of the Consumer Credit Legal Centre:
"Investors are part of this, but in my experience from advising people here at the centre, it's mums and dads as well. The cost to these families is horrendous -- there is great financial loss, there is stress, there is the embarrassment of losing their house and then they have to move out of their community."
And, from the director of a social-services organization: "It's a terrible irony. The low- and modest-income earners who were not able to build up the value of their assets through the housing boom, and who have not been able to reap the benefits of more than a decade of growth, are the ones who will experience the pain of cuts."
The long arm of ARMs The point being: No one is shocked when speculators and people who acted like fools get hurt in a bubble. But as I have said, the cost to society is far higher. Australia and the United Kingdom are canaries in the coal mine, as they have been raising interest rates longer than we have. We are behind them in the unwinding process because we acted later. We're also behind them because of the lag effect of all the floating-rate mortgages that were used at the end of the boom.
But I believe that the prospective pain for us will be far greater, due to the absurdity of our lending practices and the sheer number of people doing the speculating -- which will unfortunately insure a horrendous fallout. Furthermore, if the timing of our real-estate bubble's unwind coincides with other bubbles' unwinding, it doesn't take much imagination to see how the financial environment could get extremely ugly
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Read sumpin yesterday to the effect that realtors and moving companies are seeing folks selling those homes that have tripled and quadrupled and moving to less volatile markets; this allows them to buy anew without "downsizing" and pocket some nice change...
in other words, moving away from the "ripest" bubbles, which suggests continued opportunities in states that still have value markets...
-------------------- Nashoba Holba Chepulechi Adventures in microcapitalism...
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