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Housing collapse
Is a housing collapse gonna overtake the US like Katrina took New Orleans? I really think it might. Im thinking of selling out, and get double what I paid, and move to a small mining comunity with my 200K profit and dredge my 1/2 oz per day.
In California, a middle-class family with two earners each making $50,000 a year now owns, on average, an $830,000 home. In the late 80s, the last time these eight states saw price-to-income ratios this high, the real estate market collapsed. In a healthy market, driven by demand, rents and sale prices ought to track roughly together. But while sale prices have soared, rents have stayed flat; and in some of the most overheated markets, like San Francisco and Seattle, they have actually been declining. When housing bubbles burst, they can hurt more than their sector of the economy. Studies have shown that they exercise twice the effect on consumer spending as comparable declines in stock prices. So, a 20 percent drop in housing prices would have the same, shriveling effect on the economy as a 40 percent crash in the stock market. When investors lose value in their houses, many of them pull money out of other investments, like stocks. Then, too, jobs in construction, real estate, and other fields that depend on new home sales die off. Industry analysts have estimated that between 15 and 30 percent of houses nationally are over-valued. |
Re: Housing collapse
Any advice or ideas? appreciated.
Interest rates going back up. When rates go from 5% to 7%, that's a 40% increase in the amount of interest a buyer has to pay. House prices must drop proportionately to compensate. 82% of recent San Fransisco Bay Area loans are adjustable, not fixed. This means a big hit to the finances of many owners every time interest rates go up, and this will only get worse as more adjustable rate mortgages (ARMs) get adjusted upward. Nationally, about $3,000,000,000,000 (that's trillion) of ARMs will adjust their rates to much higher levels this year and next. |
Re: Housing collapse
Every new release of data on the housing market provides more evidence that the housing bubble is finally bursting. Compared with year-ago levels, nationwide housing starts are down 18 percent, sales of existing homes are down 13 percent, and new homes sales are down 17 percent. Inventories of both unsold new and existing homes are at record levels. Prices have already begun to fall in many parts of the country, and seem certain to fall much further before the market stabilizes.
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Re: Housing collapse
Will there be a hard landing? No!
Will there be a crash landing? Absolutely! Despite September�s short covering of home builders and value buyers trying to cash in on low P/Es and stocks selling at or below book value, a hard landing is now out of the question. We�re in for a market crash. Read between the lines, or read actual comments for content. Here�s what Robert Toll, CEO of Toll Brothers said at the Credit Suisse conference. �The market got ahead of itself in recent years, citing "greed on the part of buyers and sellers, and that the current level of speculative inventory is probably the largest ever.� And how about Don Tomnitz, CEO of D.R. Horton. �We have never seen housing prices and demand slow as quickly as they have during this down cycle." Take it a step further and look at the statistics. Never before have we seen inventories at these levels. Recently NAR finally admitted home price are coming down. Never before have we seen home prices fall. And RealtyTrac just announced that foreclosures are up 53% from a year ago. For those �value investors� buying the home builders because the P/Es are so low, I ask, �What happens when there are no earnings?� And for those �value investors� buying for the book value, I ask, �What happens when the builders take massive write downs to land, and burn up cash with carrying costs of unsold inventory?� But that�s not even the heart of the current problems. For the last two weeks I�ve been receiving daily calls from desperate mortgage brokers, real estate attorneys, insurance brokers, title companies and subcontractors looking for deals and work. This week I spoke with a real estate attorney closing his office and returning to the corporate world. And several of the smaller builders have called me offering triple commissions to entice sales of their inventory. It doesn�t end there. Who will the housing crash effect? Everyone. Real estate agents will be first. As a group, they�ve made a ton of money during the housing boom, and they�ve spent millions on new cars, vacations, restaurants, clothes, and everything else that comes with excessive discretionary income. That�s over now. Agents are not buying the luxury items that helped feed the economic boom, and they are cutting back on business spending like advertising and marketing. That hits the vendors and newspapers revenues. Take it a step further. With sales off 50% and more, all of the industries that have benefited from the boom, will suffer loss of revenue and jobs at accelerated rates and massive proportions. Home builders and condo developers have been announcing cancellations of projects and cut backs in spec building. The flippers fed the housing boom, and they�re washed up right now. In fact, they are making the crash much worse than it should have been. Many flippers bought multiple properties. When in the history of the world have we ever seen the housing industry conduct business like a stock exchange. We had bidding wars. We had lotteries on new developments, just like we had allocations for new tech offerings during the late 90�s. And just like the tech boom, the buyers were not making decisions based on fundamentals. Take a look at the recent Vonage offering, where buyers don�t want to pay for their stock, because the price dropped after the public offering. The same thing is happening in the housing market, with thousands of buyers walking away from deposits, refusing to close on homes. That adds to the woes of the builders. And just like we saw a tech crash with everyone rushing to sell, we�re now just starting to see flippers dump properties for 200-400% losses on their deposits. Add to the woes, the fact that interest rates are up and most flippers bought using creative financing and low rate ARMs. But this is all old news for us. The other shoe is dropping now. Loss of hundreds of thousands of jobs created from housing will act like a virus and spread throughout our economy. As real estate agents, attorneys and mortgage brokers reign in their spending, it will effect restaurants, car dealers, advertising companies, jewelers, remodeling contractors, furniture manufacturers, bank profits, electronic retailers, clothing and the list goes on and on and on. As the primary players are effected, and they cut back on spending, so will the secondary players in this market. These companies will be forced to lay off employees, and the cycle will grow like a virus. Is that it? Not a chance. The housing market benefits most when rates are low and jobs are being created. With rates rising and job loss skyrocketing, the affordability index for homes drops in step. The buyers that are still in the market can not afford the same home they could a year ago. On average, with the rise in interest rates, the buyer that could afford a $500,000 home a year ago, can now only afford a $425,000 home. But with the loss of jobs growing, there are fewer buyers that can afford the $425,000 home and many existing homeowners that can no longer afford to make their monthly mortgage payments. So now we have a third group of sellers scrambling for the ever dwindling buyers� market. You�ve got the flippers desperate to sell. You�ve got the builders stuck with inventory of unsold homes, and now you have the group of sellers that are being foreclosed or simply decide to sell because they can no longer swing the monthly mortgage payments after losing their jobs. Nonsense? Hardly. I spoke with a real estate agent the other day that has not sold a home in three months. His wife works for a title company and was just laid off. He�s now sending out applications for a job in his former field of banking. Lots of luck. He�s been out of the field for five years, and he�s 54 years old. They have two kids in college and a hefty mortgage. Oh, by the way, did I mention they own three flip properties that they can�t sell. How about the attorney that is closing his office and returning to the corporate world. He�s laying off six people in his office. And how about the builder that called me this week. He employs about a dozen people, as well as a small army of subcontractors. He�s closing up, and he has unsold inventory that he cannot sell at a profit. That means the dozen employees are out of work, and his army of subcontractors are out of work for the first time in four years. And how about my office. I�ve decided to lay off one of my team members. She�s a single Mom, but as much as it hurts to break the news to her, I have no choice. If things don�t pick up within the next 30 days, I will be forced to lay off a second team member. When you do the math, the choice is survival. It doesn�t end there. Realistically, if things do not pick up within 90 days, I will close my office and concentrate on my other businesses. This is reality, and you�re hearing it from the horse�s mouth. Multiply these four scenarios by thousands and you have a crash. A hard landing is out of the question at this point. The economists should be talking about how devastating the crash will be. Mish: It is a pleasure working with Mike Morgan. I have had on average twice weekly conversations with Morgan since December 2005. I called him up out of the blue one Sunday morning pretending to be a buyer for one of his listings. That lasted about 30 seconds because the approach simply was not me. I tried a different tact and stopped Mike cold and said, "To be honest, I really am not interested in buying a house in Florida, but I am interested in what is happening in Florida and why". I was surprised when I was not hung up on. Mike told me what he knew and I have been writing about it ever since. He is not so easy to get a hold of now because he has a consulting business going, but he still is willing to share data with me. When we last talked we were both laughing about the Senate Hearings on the Housing Industry. All of the negative comments were sugar coated. Both of us think this is the tip of the iceberg. This mess is going to spread to subprime lenders, mortgage companies offloading mortgages to pension plans, and all sorts of other fiascos that neither of us can clearly see at the moment. Senate hearings have just begun. The USA Today is reporting More fall behind on mortgages. Calls to the Homeownership Preservation Foundation, which provides free credit counseling, hit a record 2,464 in August, a 25% jump over July. More than half of the distressed callers had ARM loans. "It's alarming. It really is," says Pam Canada, executive director of the NeighborWorks Homeownership Center in Sacramento. Her non-profit counseling center used to receive two or three calls a week from homeowners in financial quicksand; now, it's 20 a week. More homeowners with shaky credit are falling behind on their mortgage payments, especially in such states as Ohio, Alabama, Tennessee, Michigan and West Virginia, where job losses have struck the local economies, the Mortgage Bankers Association said Wednesday. The problem is the worst for those with subprime credit who pay higher-than-usual interest rates and who have adjustable loans that have been resetting to higher rates. About 12.2% of such borrowers were late paying their loans in April through June, the highest level since the end of 2003. In Ohio, which has lost thousands of manufacturing jobs, the foreclosure process was already underway for 11% of homeowners with subprime ARMs � the nation's highest rate. In California, which had the nation's highest number of risky ARM loans, delinquency rates are still near historic lows. "There's no place to go but up," says Doug Duncan, the MBA's chief economist.Foreclosures and delinquencies have "no place to go but up". That is the key message that Morgan, Duncan, and I have been saying for quite some time. No, there will not be a hard landing. We will crash. |
Re: Housing collapse
Real estate is a local thing, but in general it does appear that we're cooling off. If you're place is worth that much more than you paid for it I'd sure sell and buy something that sounds a lot better to me, like half an ounce a day.
I didn't own a home till this year but I did similar anyway. I was renting an apartment downtown for quite a lot of money. I bought a small farm that costs me the same they were going to up my rent to, and my place on a few acres here was bought for just over half the average US home price. Like the small scale mining you're talking about my small farm will produce a trickle of income in the form of food. Apartments don't do that, cookie cutter homes in deed restricted subdivisions don't do that. I say go for it and give us updates on your adventures! The worst thing I see the false housing boom doing is creating ghettos in failed developments to be filled by illegals after cheap housing and bankrupting many foolish investors. |
Re: Housing collapse
Rev. Thanks for responding. It is local.
I live in a big gold mining town and I cant figure out if my RE prices here will get hit. with employeement super high, and 25$ an hour wages. Housing is in a shortage with the gold boom goin on. Im getting sick of the routine and the high dessert. Kinda thinkin of doin one more year, Commodity prices should fall in a recession/deppression, thus gold could go back down, just dont know. I wana get back in the trees and mountains. |
Re: Housing collapse
Everybody -- everybody -- is saying "It will be different where I live." The crisis may be experienced locally, but the phenomenon at its root is monetary and multinational and very basic to our current way of life. Think about it. Viewed in conjunction with Peak Oil (whether you believe in that or not), we're witnessing the early symptoms of a kind of perpetual recession.
You want a crystal ball? Look to the charts of the homebuilders. Look at the "Price Reduced" signs in your neighborhood. Look at retail. Roughly half the people in my current lectures at the local university work in something tied to homebuilding. The rest are government (so contribute nothing to GDP), work in banks, fix computers or wait tables. I sat in a donut shop last weekend listening to some lady talk about a bidding war for five contractors who wanted to do some work in her kitchen. She and her friend were celebrating. This downturn is in its very early stages. |
Re: Housing collapse
Lore; The problem being National and monetary is an excellent point.
Eventually everthing is gonna get hit in some degree. 40 % of the workers here are miners, 30% are mine support based employement. The remaining is Gov. and casinos and retail. Shortage of housing now and 100 residences are being built now. I cant get any data on whether or not a Real estate collapse will happen here if gold stays above $600.00 an ounce. Could be a revaluation of the dollar or some Govt emergency, so many variables. I know 2 things for sure; I need to move , and I need to downsize before the inevitable collapse. |
Re: Housing collapse
I am convinced that the housing bubble is gigantic and will burst before long with massive implications here and abroad. In fact, it's the key to the global economic outlook.
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Re: Housing collapse
There�ll be no soft landings. This is the Big One; Real Estate Armageddon followed by a plague of locusts.
JUST LOOK AT THE NUMBERS! There�s a $10 trillion difference between the aggregate in 2000 and 2006! $4.5 trillion of that is new mortgage-debt! That�s more than a little �froth� as Greenspan likes to say. In an economy that�s currently growing at a feeble 1.6%, a plummeting housing market could pave the way for another (dare I say it) Great Depression. $10 trillion!?! Some things are worth repeating. First of all, (if we compare our situation to what happened in Japan during the 1990s) we can expect that prices will continue to fall for years to come, perhaps, a decade or more. Many of the slower markets are already showing a decline of 10% to 20%. This is a trend that is likely to speed up dramatically in 2007 when $1 trillion in ARMs reset. That�s when we�ll begin to see a truly new phenomenon in the US, that is, people who�ve always been solid members of the middle class sliding downwards into the ranks of the working poor. By 2008, if the present trend-lines persist, housing prices will probably drop to 25% to 30% of their 2005 value; diminishing equity value by approximately 45% to 50% for most homeowners. If you own your home outright; you can sweat it out, but if you got into the market late; you�re toast. You�ll be joining the throng of mortgage-slaves who are shackled to loans that are significantly higher than the current value of their house. Imagine paying off a loan for $400,000 when your house has been reassessed at $250,000 or $300,000; that�ll be the reality for an estimated 30 million Americans. Meanwhile, inventory will continue to grow (already at an 8 month backlog) the economy will continue to contract, and the dollar will continue to weaken. (Many of the major home builders; Centex, Beazer and Toll Bros, are reporting that profits are down by nearly 65%.) At the same time the Fed just issued another $10 billion in Treasury Bonds last week raising the national debt to a mind-boggling $8.6 trillion. This loosey-goosey approach to printing fiat money and creating debt explains the recent surge in the markets. As �The Daily Reckoning�s� Richard Daughty says, the �bull market is manufactured from rampant government deficit-spending and financed by the Federal Reserve creating the money.� Amen. Its all fluff and there's nothing to it. It's just loose money finding a temporary perch before the approaching squall. Don�t trust the smoke and mirrors. Behind the merriment and gusto, Wall Street analysts are expecting a collapse�and soon. |
Re: Housing collapse
Yes, and for those who think alternate currencies are the refuge, remember that the phenomenon is monetary - as in 'currency' - as in everybody will inflate the bejeezus out of their paper in order to maintain their trade balances. The entire system is getting ready to go haywire, but it's not going to show up in mainstream news for at least another year.
And that's assuming that nobody does something really stupid geopolitically, false flag or otherwise. Nugget, your situation is unique to some extent. Did you say that you have a mortgage? Are the residential areas mature, or do many people have mortages? How long will mine development continue in your area? I'm reminded of the oilsands projects at Fort MacMurray, where construction will continue for about a decade. The cost of living will be insane as the currency inflates, but wages should keep up and most of the people who have jobs are likely to keep them for at least that period. |
Re: Housing collapse
Well I don't know your exact situation but I know if I had the opportunity to dredge 1/2oz a day and take a $200,000 k profit on my home I would go for it. I don't think you have to worry about gold going down too much, I am pretty sure it will be going higher from here. Also I bet you will be able to avoid a lot of taxes by going that route.
I know what you mean about getting out in the mountains and trees. This city life is driving me nuts almost. Hopefully I will be able to escape this next spring or summer, we will see...... |
Re: Housing collapse
Thorgrim. Well the gold dredging lasts 7 months, And Id rent a 600 square foot cabin for 500$ a month.
And look for a few acres to build my own cabin. I make 58K$ ayear now with the same construction co. , lotta miles on the road. River gold is 86% , so refiners pay about 80%. Im single no kids, no hassles, and production gold dreging isnt an old mans thing. I just feel like IM ageing really fast with no dreams anymore. Not really sure. I know were gonna have a societal change overhaul and Im trying to position myself according. |
Re: Housing collapse
housing starts info out today yet? betcha they're down but not plummetting
there are lots of structural things holding up housing in this country. millions of illegal immigrants being one; taxpayer subsidized federal home mortgage insurance being another. the true "bursting real estate bubble" will not happen unless and until Fannie Mae comes clean on their accounting shenanigans and we get a read on how bad the situation really is. For now they are still hiding the ball. |
Re: Housing collapse
NH,
By most of the standards, I am an old (ish) man at 53. I retired this year. I worked for more than thirty years. A lot of that time was either as contract or for myself. I could never go back to working for someone else. I do appreciate your circumstances, but while all this looks like a great idea right now, you need to consider stretching your outlook and planning a little further down the road. Ten years from now, where do you want to be? Twenty years from now, where do you want to be? Thirty years from now, where do you want to be? The reason I ask, in the great scheme of things, real estate goes up, real estate goes down. If you sell now and take the $200k and either drop it in the bank or purchase PMs or whatever and then market takes a dump of 20%, you would have lost $40k on paper had you kept your home. If you purchase those few acres and build that little cabin, great. But twenty years from now you will be that old man that you admit won't be up to dredging for gold. Then what will you do? Starve? Move back to the city, only to find that housing is now over $1.5M? I have a friend who lives in Newport Beach, Ca. She purchased her place in a gated community for about $500k back in 1999. The last place that went for sale, sold for over $1.8, $300k higher than the asking price. And that was over a year ago and no other places have gone up for sale since. Even if the market dips 50% of where it is now, her place is still worth at least $750k. So she's way ahead of the curve. Don't be in a huge rush. Unless you are instead of trying to 'get ahead', trying to convince yourself of a good reason to quit your job and just get away from it all. If that's the case, instead of panning for gold, consider taking your windfall and go someplace where the weather is warm, the beaches are empty and you can pick up a place on the cheap. There are a lot of other places other than Cali to live in. And most of those that are on the water can be had on the cheap. Especially if you don't have a need to live in a city, but away from it all. There are a lot of options, but you seem narrow in on a small part of the country, where costs of living are about the highest in the world. So plan for a long term. Widen your horizons a bit. You might be surprised what life has in store for you. You say you are single and have no kids. Is this the way you want to live for the rest of your life? I'm married, no kids. We rescue animals and currently have five. So plan for your future, or it will be upon you before you can blink an eye. Trust me, growing old by yourself ain't a bowl of cherries. I've got several friends that are in that boat right now and it's no fun. If nothing else, they talk to themselves A LOT. Not a healthy habit to get into. ESPECIALLY when you start answering yourself. LOL!! |
Re: Housing collapse
Thanks Wallew. The furture 20 years out is on my mind as well.
Like you said ' widen horizons' , but a person has to take the first step. Ill consider it, Thanks for your experiences. |
Re: Housing collapse
Anybody here every see the movie called 'Silverado'? Twenty ish years ago?
After cleaning out the town of Silverado of bad guys, the good guys start to go their seperate ways. Paden (Kevin Kline) stays in Silverado. As the others ride off, one of them says "Yeah, I can see where you would make a good farmer". Paden responds with "I got a job" and as he puts his hands on his hips, it pulls back his coat to reveal him wearing the Sheriffs badge. So there are LOTS of options. Go read the 'Novice Farmer Needs Help' thread here in Survival Prep. On the other hand, my retirement education was to add a second degree to my knowledge base. The degree I got? A vocational degree as a gunsmith. While I only do work for a handfull of customers now, this knowledge has given me the ability and confidence to do things my computer degree never gave me. So get out there. Take a few risks. Plan for your future because no one else will. Not criticism, just a hard cold fact. |
A Public Service Message: ein unendliche kette
People are talking about kids for a second. Well let me tell ya. Best thing in the world. I'd trade every FRN and oz of PM and life itself for my kids just to know they would be ok. There is no describing what you feel for kids to those who don't have them, a love like no other. Dont deprive yourself of this greatest gift.
And lo, you cant have em by yourself. Hence the "women, cant live with em, cant live without em" saying. So figure that out and git er done. Women are hard work but bring many satisfactions. Now let me speak to my people, people of European ancestry everywhere. You have an obligation to our kind to propagate even as we sink under a sea of "diversity." Individual survival is not good enough of a goal for us. Look beyond your own concerns to the future. Give to others what your ancestors gave to you. This public service announcementy was brought to you by, TCAWAG* -- The Council of Aging White Amerikwan Gentiles |
Re: Housing collapse
I could buy a house now, but where's the sense in it? Better to lay low while disinflation sweeps the nation. No, NOT deflation.
:wink: You have to decide what you believe. I believe my coins, bars and associated paper will buy more house in 5-10-20 years than they will today. |
Re: Housing collapse
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Re: Housing collapse
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Assuming you have regular work and make debt elimination a priority, you should be okay to the extent that anyone is 'okay' during socioeconomic upheaval. I would sure work to pay off that mortgage as soon as possible and avoid new debt: NEEDS versus WANTS, and all that. |
Re: Housing collapse
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I know you have some of my ideas, but what about a few acres of land where you can dredge and a 5th wheel with your truck? That way you can sorta play everything out, and if you have to get up and leave, you're free to do so and you still have your "home" at the least. Or, if things get really bad, I suppose you could leave it. But being single, no kids, nice 5th wheel could give you lots of options of where to go and what to do providing you have cash/gold set aside to get you where you're going. If I were in your shoes, and really just wanted to dredge, I'd buy the land as cheaply as possible (or lease it even for awhile while prices are dropping with a short-term lease of course) and do the 5th wheel so that if things turned sour, at least you could take your "home" with you to go to another location and work and/or dredge. Can always find a spot to park a 5th wheel if you have the $$$$ for gas/maintenance to get yeah where you're going. At least that way you're not tied down entirely, AND if you can pick up the 5th wheel cheaply (maybe needs some cosmetic repairs) you would not have lost a shitload of money on real estate, saving your cash for the "right" time to buy. If it were just me and my hubby and no pets, no kids, we'd probably go this route right now for the flexibilty it would give us in employment (can go anywhere) and reduced cost of living until this economy totally bottoms out. Lots of people needing extra $$$$ would welcome your 5th wheel on their property. Now you're technically a Gypsy until you know which way the wind is blowing, which probably isn't a bad way to go since no one seems to know for sure when and how this is all going to pan out; and frankly owning real estate right now, well if it's not paid for, you're in a very very risky situation (I know we are). The jobs are going bye-bye fast, and yes, who really knows for sure what gold/silver is going to do, it may seem like a 99.9% sure thing at least while it's rising, but the government could screw us on this, big time, so just say it went down 50%, but you're still dredging 1/2 oz per day; that's still enough to live off off if your "real estate" is paid for and you don't have a heavy tax burden (or maintenance costs). And you're self-employed. Just some ideas. |
Re: Housing collapse
Thanks for the input Silverstone.
Life is good . I think the real fun in life is figuring out the plan and aproach. I think a lot of us arent happy unless were creating things , took after our creator I guess. Like father like son. http://antwrp.gsfc.nasa.gov/apod/ima...nguyen_big.jpg Is there gold at the end of this rainbow? its in the mail, NH |
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