Free Republic
Browse · Search
News/Activism
Topics · Post Article

Skip to comments.

Housing Bubble the Sequel: Here we go again
Townhall ^ | 08/22/2013 | Bill Tatro

Posted on 08/22/2013 8:14:07 AM PDT by SeekAndFind

Here we go again.  Having just recently endured a one-hour phone conversation with my friend Steve, a mortgage broker, I’m a little bit confused and somewhat worried.  Since most of the houses sold in the past year have been “all-cash” transactions, combined with the fact that mortgage applications have fallen off the cliff, I asked Steve if that means that the average person is no longer a buyer.  Steve replied, “Define the average person.”  I articulated, “It’s not someone who pays “all-cash” because I know that’s the technique on Wall Street, and I also know it’s a select few because mortgage applications are few and far between.”  Steve then pressed me, “Define average.”  I replied, “In the past, it’s always been a young man with a good job, he has a wife and two kids, and he’s looking for a nice home.”  Steve laughed, “Really Opie, how’s Aunt Bee?”  Taken slightly aback, I said, “Okay, Andy, who’s the new buyer?”  Steve answered with the sound of deep concern in his voice, “Think 2006 all over again.  The NINJA loan, which had been languishing in the auto sales arena, is starting to get life again.  The so-called house ‘flippers’ are back with a vengeance.  And those that walked away with a short-sale are now well rested, they’re alive and well and back in the game.  In other words, it’s déjà vu all over again.”  

It would appear to me — with all political rhetoric aside — that the players who benefitted the most from the last housing debacle are definitely back in action.  It’s a notorious group that includes the brokers, the banks, and of course, Wall Street.  This infamous gang is also currently singing the familiar song of “this time, it’s different,” and regrettably, it appears that the general public has once again fallen in love with this very memorable tune.  

Steve’s final conclusion was quite simple.  The number of people who are buying at these artificially induced price levels are the same people he dealt with several years ago — they’re a little older and grayer, but still none the wiser.  

If Steve is right, and I have no reason to doubt him, then this most recent ever-increasing housing bubble will result in falling rents, Wall Street IPOs, bank inventory dumping, and then homeowners will be subjected to concern, worry, and outright panic.  Oh, wait a minute, isn’t that what’s happening right now?  Yet, after the dust has settled, according to Steve, “Maybe the average guy will emerge and all the others who surrounded him will have fallen by the wayside.”  My response: Yeah, right.  

Indeed, for all that to happen, we would need Gomer Pyle to wave his magic wand and shout “Shazam!”  





TOPICS: Business/Economy; Culture/Society; Government; News/Current Events
KEYWORDS: bubble; homeprices; housing; housingbubble; mortgage

1 posted on 08/22/2013 8:14:07 AM PDT by SeekAndFind
[ Post Reply | Private Reply | View Replies]

To: SeekAndFind

Housing Bubble Redux...


2 posted on 08/22/2013 8:17:04 AM PDT by AngelesCrestHighway
[ Post Reply | Private Reply | To 1 | View Replies]

To: SeekAndFind

ANYBODY who believed the White House Crap story on the economy and housing recovery has “thit” for brains!


3 posted on 08/22/2013 8:18:56 AM PDT by AngelesCrestHighway
[ Post Reply | Private Reply | To 1 | View Replies]

To: SeekAndFind

People need to fully understand what will happen to the equity in their homes when interest rates rise.


4 posted on 08/22/2013 8:21:40 AM PDT by Vince Ferrer
[ Post Reply | Private Reply | To 1 | View Replies]

To: SeekAndFind
I saw a friend over the weekend. When a bank sells a mortgage to someone else his job is to audit the mortgage, etc to make sure there are no problems for the third-party purchaser.

I told him it was my understanding the heat up in housing was due largely to investors. He said that was the case up to 3-4 months ago. Now, it's an awful lot of people buying for their primary residence.

Which is, of course, a good sign.

5 posted on 08/22/2013 8:22:22 AM PDT by gdani
[ Post Reply | Private Reply | To 1 | View Replies]

To: gdani
Which is, of course, a good sign.

Unless they have an ARM and the Interest Rates go up. DUH!

6 posted on 08/22/2013 8:30:38 AM PDT by sr4402
[ Post Reply | Private Reply | To 5 | View Replies]

To: gdani
I bought a house in SE Texas a year ago after sitting out for 17 years after a near total financial catastrophe in 94 and not being psychologically capable of buying anything in the D.C. area again afterwards. First time I've ever timed anything like that the right way....

There was no warning for the people who got killed in the early 90s, nobody had ever lost a dime in Northern Va. real estate prior to that time. I have a much harder time feeling sorry for anybody who's been upside down since then.

7 posted on 08/22/2013 8:36:17 AM PDT by varmintman
[ Post Reply | Private Reply | To 5 | View Replies]

To: sr4402
Unless they have an ARM and the Interest Rates go up. DUH!

Uhhh, yeah. That's always the case, no matter who is purchasing & for what purpose. But you get a gold star today for pointing out the obvious.

8 posted on 08/22/2013 8:36:47 AM PDT by gdani
[ Post Reply | Private Reply | To 6 | View Replies]

To: SeekAndFind

I do real estate in Las Vegas. I am gearing up for the rush as investors see the current top and panic so they are on the last musical chair.


9 posted on 08/22/2013 8:44:13 AM PDT by DaxtonBrown (http://www.futurnamics.com/reid.php)
[ Post Reply | Private Reply | To 1 | View Replies]

To: SeekAndFind

I just don’t believe in theories based on anecdotal stories.

This blip of an article is based on a phone call between two people that we have to assume existed. Neither person has full information on what’s happening in the broader economy or even in the next town over.


10 posted on 08/22/2013 9:02:30 AM PDT by AlmaKing
[ Post Reply | Private Reply | To 1 | View Replies]

To: DaxtonBrown

Our house has been on the market for 15 days now without a serious bite. Supposedly the Phoenix housing market is hot but we have only had one call this week.


11 posted on 08/22/2013 9:05:21 AM PDT by ChocChipCookie ("Demons run when a good man goes to war.")
[ Post Reply | Private Reply | To 9 | View Replies]

To: gdani

Recently a realtor in Central Florida told my BIL (who was selling his house) that 70% of the sales in CF were FHA 3% down.

My nephew, who makes good money but carries a lot of credit card debt & is always two paychecks away from broke, bought a home a few months ago on an FHA 3% down & 3.75% interest 30 year loan.....with a Beacon score of barely 650.

The wife & I have scores over 800 and had to put 20% down when we bought in 2006. Refinanced a few months ago and had to have 20% equity in the house.

Is this Looking Glass Land?

With FHA giving out 3% down mortgages it’s not going to take much of a downturn in housing prices to wreck havoc in Central Florida.


12 posted on 08/22/2013 9:08:42 AM PDT by ChildOfThe60s (If you can remember the 60s.....you weren't really there)
[ Post Reply | Private Reply | To 5 | View Replies]

To: DaxtonBrown

Sales of foreclosed or marginal properties effect the comps and appraisals of homes sold that are in top condition in the same neighborhoods.

That’s not to say that the later sells for the price of the former, but it does cut 5% off the top in my experience recently selling a home.

There is a lot of foreclosed property in some of the bigger markets that has been sat on or rented. As that comes on the market, it will help keep the prices from getting too heated, but yes, we are seeing the flippers again.


13 posted on 08/22/2013 9:10:01 AM PDT by KC Burke (Officially since Memorial Day they are the Gimmie-crat Party.)
[ Post Reply | Private Reply | To 9 | View Replies]

To: SeekAndFind
This on Yahoo front page from a hour ago:

Wells Fargo to lay off 2,300 mortgage workers Wells Fargo is laying off workers from its mortgage unit, the latest sign that the mortgage refinancing boom has cooled. The San Francisco-based bank said it sent 60-day notices to about 2,300 mortgage ... Associated Press56 mins ago

Seems to me with interest rates going up 30 year mortgage applications go down ....and everyone jumps on an ARM mortgage.

14 posted on 08/22/2013 9:43:58 AM PDT by spokeshave (While Zero plays silly card games like Spades - Putin plays for keeps.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: AngelesCrestHighway

>>Housing Bubble Redux...<<

In my opinion, the start of the last housing bubble was the passage of the tax law that let people cash in on the sale of their house tax-free after living in it for only two of the past five years. That change in tax law made housing, at the time and at those prices, one of the best investments out there. This was preordained. Changing to a much more favorable tax treatment will nearly always lead to an upward repricing of an asset class.

Unfortunately, it also often leads to a bubble, as more and more people pile into the investment just because “it keeps going up.” And in the case of housing, it nearly always had gone up, so the people who warned of unsustainable prices were simply ignored with a “never happened, never will” sort of comment.

Unfortunately, Congress left the existing law in place, so the same incentives are in place. A house remains one of the most tax-favored investment vehicles in the country, and so people are going to invest in it for reasons beyond simply having a place to live. So, you’re right, it’s “housing bubble redux” time. However, it’s probably way too early in the process to call a top. I suspect it’s really just getting started again.

For info purposes: The old tax law was already favorable in that people got a one-time forgiveness of capital gains tax and could avoid any tax owed on previous sales if they re-invested in a new house at a higher price within a certain period of time. The effect of that law was to have most people defer the tax until retirement when they moved into a smaller residence. This made housing a good long-term investment, but not suitable for the sort of flipping that the present law encourages. Today, you could own several houses simultaneously and eventually avoid the taxes on all of them simply by moving into each for a couple of years before selling them.


15 posted on 08/22/2013 10:54:11 AM PDT by Norseman (Defund the Left-Completely!)
[ Post Reply | Private Reply | To 2 | View Replies]

To: ChocChipCookie
Our house has been on the market for 15 days now without a serious bite. Supposedly the Phoenix housing market is hot but we have only had one call this week.

If the market is indeed "hot" then you are overpriced. Simple as that.

Selling stuff is easy if you are pragmatic about it. Price it at a dollar and it will sell immediately, price it at a billion dollars it will never sell. Somewhere in between is the sweet spot, and the closer you are to the sweet spot the quicker it will sell. If you are in a hurry to sell lower your price.

16 posted on 08/22/2013 12:11:14 PM PDT by BlueMondaySkipper (Involuntarily subsidizing the parasite class since 1981)
[ Post Reply | Private Reply | To 11 | View Replies]

To: Norseman

Spot on and thanks Bill Clinton. That’s when RE went from a narrow elite investment to a mania.


17 posted on 08/22/2013 6:09:20 PM PDT by 1010RD (First, Do No Harm)
[ Post Reply | Private Reply | To 15 | View Replies]

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
News/Activism
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson