fdl

U.S. home prices soar-- and no end in sight

Friday, September 2, 2005 Page B8

Reuters

Average U.S. home prices soared more than 13 per cent over the past year and showed no sign of peaking as low mortgage interest rates and speculative buying boosted demand, a government report showed yesterday. In the year-long period through June, 2005, home prices jumped 13.43 per cent, the U.S. Office of Federal Housing Enterprise Oversight said. That marked the biggest increase over a 12-month period since the second quarter of 1979. Home values climbed 3.2 per cent during the second quarter of 2005, compared with the first quarter, or at an annualized rate of 12.8 per cent, the data showed. "There is no evidence here of prices topping out," said Patrick Lawler, chief economist at the government regulator for mortgage finance giants Fannie Mae and Freddie Mac. Reuters

03typeS6spd

I know this could go into the housing bubble thread... but it deals with a few things slightly different... so move if necessary but I just thought it might lead to some other discussion (article below)



1. Does talking about the bubble happening make it more likely to happen?

2. Could those cloesly tied with the stock market be hoping / helping the bubble to occur?

I happen to think the answer to both questions is yes, but still find them interesting theories whether they are provable (or correct) or not...






http://www.philly.com/mld/inquirer/c...e/12525205.htm

By Al Heavens

Inquirer Columnist


A couple of weeks back, I was having lunch with some real estate industry folks when one of them, a developer, asked me why the media were so focused on the "bubble."

"You know," he said, "the more you talk about something, the more likely it is to become a self-fulfilling prophecy." The developer quickly added that he did not believe in the bubble.

That afternoon, I was channel-surfing and landed on Fox News, where a few of the shouting heads were suggesting that the bubble was, in fact, simply a creation of the media.

I'm not sure who these experts were - the cable news shows must be collaring people in suits at bus stops to keep their schedules filled. I watched for the whole six minutes of discussion and still couldn't figure out how they came to the media-conspiracy conclusion. Since they were on TV, where everything is right and true all the time, they probably knew what they were talking about.

A couple of days later, a broker I know faxed me something about an entrepreneur who had been making lots of money with his "Mr. Housing Bubble" T-shirt. Somewhere down the page was a quote by a real estate expert I know who contended that the bubble idea was invented by stockbrokers trying to scare real estate investors back into the stock market.

At first, I thought it was really funny, until I repeated it to two people whom I consider so level-headed that I'd be willing to balance glassware on them. Both replied that they wouldn't be surprised if that were true.

Think of a problem, and there's a matching conspiracy theory. Look at the number of people who thought The X-Files was fact-based, who believe that the folks on Gilligan's Island remain stranded, and - well, you name the difficulty and there's got to be someone or some group causing it.

Have the stockbrokers been influencing the media to fabricate a bubble? You can believe it or not. I'll admit I don't, not being a big believer in conspiracies. But I promise that if I'm wrong, I'll be the first to acknowledge it.

No matter how much we try to look at residential real estate as a national phenomenon, it remains local, or at the most regional. California and the Middle Atlantic are both on coasts, but there are different economic and social factors affecting how and where housing is built, bought and sold there.

Economist Mark Zandi insists, and I believe correctly, that metropolitan Philadelphia's great strength, and what keeps us bobbing back after a one-two of a downturn, is its economic diversity.

The education and health-care industries are growing and continue to employ huge numbers of people who need housing, whether they buy or rent. People move into the region to work in those industries, and that helps fuel the demand.

It's not the same everywhere.

Between 1995 and 2000, the dot.com boom propelled residential development in San Francisco. Vacant buildings either became residential lofts or housed dot.com companies, which gave the landlords - who spent their own money retrofitting warehouses and factories to the needs of computer geekdom - stock options instead of rent.

Few of these Web creatures made money, a flaw that finally proved fatal when, in April 2000, investors looking for some return began pulling their money out of tech stocks. It also meant there were a lot of empty buildings and landlords holding a lot of worthless paper.

There might have been some good news for the artists and others whom the dot.coms had displaced had they been able to reclaim their former homes. But the tech boom had pushed housing prices beyond reach. And prices have increased since. Although some estimates are that 300,000 jobs have been lost in the Bay Area since 2000, wages for those that remained were high enough, and interest rates low enough, to sustain high prices.

The Office of Federal Housing Enterprise Oversight has reported a "deceleration" of housing-price increases nationwide. That means housing prices continue to increase, but not at the same pace as last year or 2003.

Harvard's Joint Center for Housing Studies doubts that the bubble will burst, noting that the housing boom is now 13 years old while decrying the fact that the boom has made home ownership unaffordable for an increasing number of Americans.

Economist Dean Baker is a bubble advocate. When the bubble bursts, according to excerpts from his "Housing Bubble Fact Sheet" reported by Rismedia, the collapse will have a larger impact than the stock-bubble collapse.

Why? Because housing wealth is far more evenly distributed and the bursting bubble likely will throw the economy into a recession and require a federal bailout of the mortgage market. It could lead to a loss of 3.6 to 4.5 percentage points of GDP.

Given how far out of line house prices have grown from fundamentals, Baker said, there is no way to avoid enormous economic damage when the bubble collapses. However, the sooner house prices drop, the less damage there will be.

Or not.

GreenMonster

I don't think talking about it is going to do anything. If people are willing to pay more than asking prices on houses, that's going to create a bigger bubble.

Doom878

I do notice that more people are fixing up their house rather than buying a new one and getting killed on taxes. Maybe it'll eventually catch up. But if you want to fix up your house do it now since demand is there.

Fibonacci

Does the U.S. Residential Boom Have Legs to Last?: John Wasik
2005-09-12 00:09 (New York)


(Commentary. John F. Wasik, author of ``The Bear-Proof
Investor,'' is a columnist for Bloomberg News. The opinions
expressed are his own.)

By John F. Wasik
Sept. 12 (Bloomberg) -- What if U.S. housing bears are wrong
and the home market is not peaking?
Let's assume for a moment that homebuyers and investors will
not be too chastened by high energy bills and mortgage rates will
stay about the same.
If the boom hangs in there, thank local economic growth and
job creation, low mortgage rates and demographics.
Housing is still appreciating, and U.S. home prices rose
13.4 percent as of June 30 from the same period a year earlier,
according to the Office of Federal Housing Enterprise Oversight,
the agency regulating the mortgage corporations Fannie Mae and
Freddie Mac. That was the largest annual increase recorded by
Ofheo in 25 years. New home sales also set a record in July.
Population increases generally follow local job growth,
although some high-growth regions are certainly not mentioned in
the same breath as bubble markets.
Some of the strongest housing growth, with the exception of
Las Vegas and surrounding Clark County, is not in any of the
glamor havens on the coasts.
In examining the 100 fastest-growing counties tallied by the
U.S. Census Bureau from 2000 to 2003, Georgia easily led the pack
with the most new housing units. Almost one quarter (24) of the
fastest-growing counties on this list were in the state, with 21
of those counties concentrated in the Atlanta area.

Fast Growth

Predictably, Florida was second on the list, with 10 of the
highest-growth counties, followed by Colorado and Virginia with 9
each, Texas with 7 and Minnesota with 6.
From 1990 to 2000, Georgia's population grew 26 percent to 8
million, with most of the gain in the Atlanta area. That's twice
the rate of increase for the U.S. at large during that period.
With all of its robust growth, why is Atlanta not on the
list of likely bubble cities?
There's plenty of land that can be developed, few geographic
or government restrictions and a much lower median home price
than in the Northeast or on the West Coast -- $166,829 as of the
second quarter, according to the National Association of
Realtors, an industry trade association.
Compare Atlanta to pricey San Diego, at an average home
price of $605,600 or Orange County, California, at $696,100 and
it's clear that several areas in the sunny Southeast offer
palpable potential gains for investors, homebuyers and employers.
As most savvy homebuyers in the Northeast or California can
tell you, building and geographic restrictions have curtailed the
amount of developable property. That has translated into higher-
than-average appreciation and a greater likelihood that bubbles
have formed.

Jobs Drive Homebuilding

What may bolster or stabilize housing prices over the longer
term, even if rates head north? Steady job creation that fuels
population growth and homebuilding.
Placer County, California, for example, an area straddling
the Sierra Nevada Mountains 100 miles northeast of San Francisco,
is a case in point. As the only California county on the Census
Bureau's top-100 growth list, Placer is benefiting from new job
creation and the exodus of Silicon Valley technology jobs.
Buoyed by robust employment growth, jobs in Placer County
grew 25 percent from 1998 through 2003, compared with 1.6 percent
for the San Francisco Bay area and 8 percent for the state as a
whole.
``Job growth has been running from 4.5 percent to 5 percent
the last six or seven years,'' says Ed Graves, director of
economic development for the county. ``We led the U.S. in job
growth from 2002 to 2003.''

Bolstering Prices

New jobs bring people who can then bid up housing prices.
Placer County, which is partially included in Ofheo's Sacramento
statistical area, showed a housing price gain of 121 percent over
the past five years and 25 percent through the second quarter.
Employment growth also correlates with home price gains in
the Washington, D.C.; New York, Phoenix, Los Angeles and Las
Vegas areas, which were the top-five job producing areas in July
among the largest metropolitan areas, according to the U.S. Labor
Department.
By comparison, slow or negative job growth often holds back
housing prices.
The Detroit area, for example, lost more than 6,000 jobs
during the last year and 7.5 percent of its population over the
decade. As a result, housing prices in the Motor City area rose
only 3.4 percent over the past year, lagging the national average
for home-price growth by a factor of four.

No Reason for Change

Even if 30-year mortgage rates rise above 7 percent and job
growth slackens, there's no reason to believe that patterns of
population migration will change quickly.
Aging Americans in the Midwest and Northeast will continue
to move to Sun Belt locales because of lower taxes and living
costs.
That doesn't mean that the hottest markets won't see a nasty
shift in prices should mortgage rates head north. Speculators are
bidding up housing values in the most torrid markets, leading to
volatility in prices. The U.S. median home prices slipped to
$203,800 in July, versus $219,500 the previous month, according
to the U.S. Commerce Department.
Cheap mortgage money may eventually evaporate and housing
bubbles will burst. Those not interested in quick profits can buy
low and profit in the markets most favored by population and job
growth rather than buy high and get burned in the priciest
markets.

--Editor: Greiff, Wolfson

Story illustration: To graph annual sales of new and existing
homes, {HSANTOSL <INDEX> GP <GO>}.

Source: Bloomberg.com

zamo

http://www.foxnews.com/story/0,2933,169730,00.html

Fibonacci

Real estate: When booms go bust...
Home prices can and do go down. Here's what declines have looked like in the past.
September 19, 2005: 6:21 PM EDT
By Les Christie, CNN/Money staff writer



NEW YORK (CNN/Money) - Across America, real-estate prices continue to confound the skeptics. Many Americans have come to think of their homes as rock-solid investments with little downside.

And why not: For the past 40 years, national home prices have surpassed inflation by a percentage point or two on average and there has never been a national real-estate bust.

But are people ignoring the risks?

"I think Americans are not well aware that many markets are risky," says Ingo Winzer, president of Local Market Monitor, which sells real-estate market analysis to corporate and consumer clients.

Those investors should realize that price reversals do happen, even if only locally rather than nation-wide. A look at the not so distant past reveals numerous examples of cities that went through housing busts -- followed by years of falling prices. Some have never fully recovered.

Once hot, then not
Take Los Angeles, where real estate has been turbocharged for nearly 10 years. But the early 1990s were a different story; the average house price in L.A. dropped from $222,200 in 1990 to $176,300 in 1996, a loss of 20.7 percent.

Furthermore, those are nominal prices, not real values. To calculate the loss more realistically you would have to figure in the cost of inflation: $222,200 in 1990 would have been worth $266,700 in 1996 dollars, which means the actual loss for homeowners buying in 1990 and selling in 1996 was closer to 34 percent.

Not exactly the Nasdaq meltdown for investors, but getting closer.

But that's L.A., where the aerospace- and film and television production-based economy can be a bit volatile. What about cities in more traditional areas? How did things play out in Peoria, Ill. for instance?

Not well, not in the early 1980s at least. Peoria experienced real-estate price drops amounting to more than 15 percent tied, in part, to strikes and lay-offs at Caterpillar, the city's biggest employer. In 1981, the average home there sold for $60,800. By 1985, that had dipped to $51,400.

"Oil patch" cities, suffered even sharper declines. In Oklahoma City prices plummeted 26 percent from 1983 to 1988. It took 15 years for prices there to return to nominal 1983 levels.

Houston home prices fell 22 percent from $111,000 to $86,800, and also took 15 years to rebound.

Counting inflation, the average Houston home, which cost just $159,700 in 2004, is actually worth less now than it was 22 years ago. When, adjusted for inflation, a home cost about $219,000 in 1983. In Oklahoma City, the inflation-adjusted price in 1983 was $196,600. Today, it's just $135,100.

The boom will end, but when?
History seems to dictate that the current price boom is at risk.

One factor is that real-estate investing has spiked, pressuring prices upward.

In Phoenix, according to Bill Jilbert, president and COO of the Coldwell Banker brokerage there, investors from Nevada and California have invaded the Arizona market, and "affordable housing has been pushed to extremes." That story is echoed in many local markets.

Low interest rates have also kept real estate bubbling. Cheap mortgages enable entry level buyers to get into the market and wealthier ones to afford more expensive houses.

That means higher demand and higher prices at all market levels.

Winzer says that low rates "have extended the cycle."

Winzer assesses local market risk by taking into account economic and population growth, construction costs, vacancy rates, and, especially, income.

He also considers such factors as density and access to open land. Prices in densely settled New York have always been higher than those of cities with lots of space for new housing.

Winzer considers real estate "very risky right now." And because the price run up has been so high he expects the adjustment period ?where home prices stagnate as income catches up -- to take a very long time. Before they purchase a home, buyers better figure on scenario of many years of little or slow home-price appreciation. Counting on home price increases could be a big mistake.

The boom has already gone on longer than Winzer thought it would. "Bubbles do tend to last longer than most people expect," he says, "and end quicker."


http://money.cnn.com/2005/09/19/real...ines/index.htm

fdl

U.S. housing market shows cooling signs

WASHINGTON — Construction of new homes in the United States edged down in August for a second consecutive month, providing evidence that the nation's red-hot housing market may finally be cooling a bit.

The Commerce Department reported that construction of new homes and apartments dropped 1.3 per cent last month after a decline of 1.5 per cent in July. The decrease was larger than had been expected and it marked the first back-to-back declines in housing starts in 17 months.

Analysts have for some time been forecasting that the supercharged housing market would slow, but they are not forecasting a repeat of the dramatic plunge in stock prices that occurred in 2000 with the bursting of a speculative bubble.

Instead, analysts believe that housing activity will post a more moderate slowdown with sales tapering off and the gains in home prices slowing and perhaps falling in some of the hottest sales areas.

http://www.thestar.com/NASApp/cs/Con...=1127211477692

zamo

http://www.sun-sentinel.com/business...business-front

SpeedyV6

September 25, 2005
Is It Better to Buy or Rent?
By DAVID LEONHARDT

THE thought has occurred to just about everybody who owns a home in a hot housing market: maybe it's time to cash out.

The hard part is figuring out how to do so. Only a few families can actually pick up their life in, say, California and move it to Nebraska. The other option - renting - has long been derided as the equivalent of throwing money away.

But renting might deserve another look right now. After five years in which rents have barely budged while house prices in New York, Washington, Los Angeles and elsewhere have doubled, renting has become a surprisingly smart option for many people who never would have considered it before.

Owning a home often ties up hundreds of thousands of dollars that might be invested more safely and more lucratively elsewhere over the next decade. And while real estate brokers may hate to acknowledge it, home ownership involves its own versions of throwing money away, like property taxes and the costs of borrowing.

Add it all up - which The New York Times did, in an analysis of the major costs and benefits of owning and renting, including tax breaks - and owning a home today is more expensive than renting in much of the Northeast, Florida and California. Only if prices rise well above their already lofty levels will home ownership turn out to be the good deal that it is widely assumed to be.

In the Bay Area of California, a typical family that buys a $1 million house - which is average in some towns - will spend about $5,000 a month to live there, according to the Times analysis. The family could rent a similar house for about $2,500, real estate records show, and could pay part of that bill with the interest earned by the money that was not used for a down payment.

This gaping difference helped persuade Eloise Christensen to sell her century-old Victorian cottage in downtown Larkspur, Calif., for $1.05 million this year. Now she rents a two-story house in Stinson Beach for $2,400 a month. From her living room, she can sip tea and watch the waves from the Pacific Ocean.

"It just seems out of control," said Ms. Christensen, 43, a massage therapist and graphic designer. "It didn't seem to me that the market was going to be able to sustain these high prices."

There are obviously benefits to home ownership beyond the financial, like peace of mind and a feeling of stability. Owners cannot have their home yanked away by a landlord who has decided to move back in. Owners can also change the color of their living room walls or fix a draft seeping through their windows without asking permission.

Surrounding her Larkspur cottage, Ms. Christensen had built a garden with rosemary, lavender and boxwood hedges to complement the pear and fig trees already there. She is not doing anything like that in Stinson Beach.

Combine these benefits with the transaction costs of a house sale, and renting probably does not make sense for most people who already own their home and feel settled in it.

But the calculation can look quite different for those who are considering a move anyway or who do not yet own a home. At the very least, renters in boom markets, who often lament that they are wasting money, should know that their choice has as powerful an economic rationale as buying does right now.

"I am a proponent of buying," said Tchaka Owen, 37, a loan officer and licensed real-estate agent in Miami who is renting a two-bedroom apartment overlooking the bay there. "But you can get so much more for your money, renting instead of buying. We're paying half the amount we would be paying if we owned this place."

In Manhattan, 1,000-square-foot, two-bedroom apartments on the Upper East Side now rent for about $3,700 a month. Buying a similar apartment costs around $1.1 million, which can translate into monthly payments of $6,000 or so.

To determine the cost of renting, the Times analysis added monthly rent and renters' insurance. For owning, the analysis included typical costs for home insurance, major repairs, property taxes and mortgage payments, as well as the tax deductions they create.

Renters were given credit for a small return - about 4 percent, after taxes - on the money they could have invested in bonds or stocks instead of spending it on a down payment and closing costs. Buyers received credit for the portion of the mortgage they were paying off, as opposed to the interest costs.

When the net costs of owning are less than those of renting, as is the case in Chicago, Dallas, St. Louis and much of the middle of the country, the argument for buying becomes overwhelming. So long as home prices do not fall sharply, home buyers in these places will do much better than renters.

But when owning is more expensive every month, buyers are betting entirely on price appreciation.

For new home buyers, prices in New York would need to rise roughly another 13 percent over the next five years for the average buyer to do better than the average renter over that span. In Northern California, where the gap between house prices and rents is largest, home values would need to go up about 19 percent by 2010.

Over the next decade, the break-even increase is about 25 percent in New York and 40 percent in California.

Such increases have been easily achieved in the recent past. But even economists who do not consider the real estate market to be in a bubble predict that price gains will slow. Other forecasters argue that values will fall, as they did on the coasts in the early 1990's, or be stuck near their current levels for years to come. No matter who is right, the buy-versus-rent debate is a closer call than it has been in years.

"If you believe you'll be moving in the next four or five years, I'd rent," said Thomas Z. Lys, an accounting professor at the Kellogg School of Management at Northwestern University . "If you're a long-termer, I still would buy."

The single biggest misconception about home ownership, some brokers and economists say, might revolve around tax deductions. Many people seem to believe that buying a home can actually save them money because the interest on their mortgage is tax deductible.

But all that deduction does is reduce the cost of borrowing the money - a cost that would not exist if the family were not buying the home. Families spend about six years in a house, on average, according to the National Association of Realtors. In that time, the interest on a $600,000 mortgage would add up to about $120,000, even at today's low rates and even after the tax deduction, according to National City Corporation, a large lender.

"Don't be buying a house because you think you're saving on the taxes," said Frank Borges LLosa, owner of FranklyRealty.com, a brokerage in Arlington, Va. "You'll save even more by not buying and renting."

Mr. LLosa added: "I'm not saying not to buy. I'm saying don't buy just for the tax reasons."

Many homeowners also do not receive the full deductions from home ownership. In the Northeast and California, homeowners now have so many deductions that some must pay the alternative minimum tax. This tax effectively wipes out part of their property-tax deduction, further cutting into the benefits of home ownership.

Other homeowners do not itemize their deductions or, if they do so, end up with total deductions only a little larger than the standard deduction that the government offers to all taxpayers, even renters.

"A lot of people hugely overvalue the mortgage deduction," said Dean Baker, co-director of the Center for Economic and Policy Research, a liberal group in Washington, "because they compare it to no deduction instead of comparing it to the standard deduction."

Mr. Baker is one of the avant garde renters. He and his wife sold their condominium in Washington last year for $445,000 and now rent a similar one nearby for $2,200 a month.

The Times analysis made a number of assumptions favorable to buyers, like giving them full credit for the deductions for mortgage interest and property taxes, noted Mark Zandi, chief economist of Economy .com, a research company. Still, the monthly costs of buying were more expensive than those for renting in any market where the price of a typical house was more than 20 times larger than the annual rent to live in it.

In the Bay Area, this "rent ratio" exceeds 33. In New York, Boston, Los Angeles and Miami, it is just above 25. A typical four-bedroom house in Brookline, Mass., for example, costs about $1.2 million to buy and $4,500 a month to rent, according to Chobee Hoy Associates Real Estate, a brokerage there.

At 20, Washington is right near the cutoff. But renters who live in apartment buildings, like Mr. Baker, often get an extra benefit: some portion of their utilities bill is typically covered by the building's owner.

Mr. Owen, the loan officer in Miami, and his girlfriend, Polly Thompson, pay $1,700 a month for a top-floor apartment that has views of both the city's skyline and the Atlantic Ocean. After talking to brokers, he said he thought that the apartment would sell for close to $650,000, giving it a rent ratio of more than 30.

"It's obvious," he said, "that renting is such a better deal."

But to many people, the psychological benefits of buying are almost impossible to overcome. Owning makes them feel that they have achieved the American dream, or it gives them the secure sense that, if nothing else, they have a tangible asset where they can sleep at night.

Those are nice feelings, indeed. The question is how much they are worth to you.
http://www.nytimes.com/2005/09/25/re...edc696&ei=5070

Fibonacci

Greenspan Says Speculation Adds to Home-Price Surge (Update2)
2005-09-26 14:41 (New York)


(Updates markets in seventh paragraph.)

By Carlos Torres and Craig Torres
Sept. 26 (Bloomberg) -- Federal Reserve Chairman Alan
Greenspan said speculative home buying may be driving the surge
in housing prices and creating greater risk for homeowners who
rely on interest-only mortgages.
Sales of vacation houses, or homes that aren't always
occupied by owners, are ``arguably at historically unprecedented
levels,'' Greenspan said in the text of a speech to the American
Bankers Association annual convention in Palm Desert, California.
``This suggests that speculative activity may have had a greater
role in generating the recent price increases than it customarily
has had in the past.''
Sales of previously owned homes unexpectedly surged in
August, and prices reached an all-time high, a report from the
National Association of Realtors today showed. The median price
rose 15.8 percent in the last 12 months, the biggest jump since
1979, to a record $220,000.
Greenspan drew his conclusions in part from an 83-page
research paper he published today on the Fed's website with staff
member James Kennedy, only the second time since 1996 that
Greenspan has published his research.
The ``froth'' in housing markets may now be spilling over
into mortgage markets, Greenspan said. The abundance of interest
only loans and the introduction of ``exotic'' variable-rate
mortgages ``are developments that bear close scrutiny,'' he said.

Exotic Loans

Adjustable-rate mortgages now represent 29.8 percent of all
applications, according to a weekly survey covering about half of
all mortgages that is conducted by the Mortgage Bankers
Association. Two years ago at the same time, adjustable-rate
mortgages were 22.7 percent of the market.
Housing stocks erased gains after the Greenspan speech. The
Standard & Poor's Supercomposite Homebuilding Index of 15
companies was up 0.1 percent at 2:39 p.m. after rising as much as
1.9 percent after today's housing report.
The Fed chairman concluded that a fourth to a third of home
equity cashed out by households is being used to finance consumer
spending, the biggest driver of U.S. economic growth. Another 25
percent goes to repay credit card debt for goods and services
already purchased.

Consumer Spending

``The implied increase over the past decade in consumption
expenditures financed by home equity extraction, rather than by
income and other assets, would account for much of the decline in
the personal savings rate since 1995,'' Greenspan noted.
Greenspan said if home purchases or refinancing declined,
consumption would probably retrench, and the savings rate would
rise. This would also point to larger adjustments in the U.S.
economy, he noted. Greenspan said there is also a risk to
institutions specializing in interest-only and other non-
traditional forms of home loans.
``Imports of consumer goods would surely decline as would
those imported intermediate products that support them,'' he
said. ``And one would assume that the U.S. trade and current-
account deficits would shrink as well, all else being equal.''
How ``disruptive'' such developments would be is ``an open
question,'' he said.
Greenspan last co-authored a Federal Reserve in 1996. The
title: ``Motor Vehicle Stocks, Scrappage, and Sales.''
Greenspan, 79, has been chairman of the Fed Board for 18
years. His non-renewable term as a governor expires in January.
The White House hasn't named a successor, or nominated candidates
to fill vacancies for two Board governors.


Source: Bloomberg.com


For those of you investing noobs who don't have the benefit of experience or are not students of history. Our friend Alan is saying in no uncertain terms, the good times (easy money) are gone. The oldest adage on the street is "Don't fight the Fed". Be prepared to unwind your real estate gains if you are a speculator, or watch the market do it for you.

moeronn

^^ Slightly different take on same meeting:

http://news.yahoo.com/s/ap/20050926/ap_on_bi_ge/economy

Greenspan: Most Homeowners in Good Shape By JEANNINE AVERSA, AP Economics Writer
Mon Sep 26, 5:05 PM ET

WASHINGTON - While the high-flying housing market still holds risks, especially for the financially stretched, most homeowners are in a fairly good position to weather a shock if prices drop, Federal Reserve Chairman Alan Greenspan said Monday.

"The vast majority of homeowners have a sizable equity cushion with which to absorb a potential decline in house prices," he said in remarks delivered via satellite to a banking conference in Palm Desert, Calif.

Still, Greenspan, who has repeatedly warned about the potential perils if the housing market were to suddenly go south, also made clear that there are several factors — risky mortgages and speculative activity in particular — that warrant close scrutiny.

The quicker turnover of second homes — such as for investment or vacation purposes — appears to be feeding the surge in house prices, Greenspan said.

"Speculative activity may have had a greater role in generating the recent price increases than it customarily has had in the past," he said.

Greenspan's latest thoughts on the housing market came after the National Association of Realtors reported that sales of previously owned homes in August posted their second-highest level on record. Home prices, meanwhile, increased by the largest amount in 26 years.

Sales rose 2 percent in August to a seasonally adjusted annual rate of 7.29 million units; that was second only to the all-time high pace of 7.35 million units in June.

Low mortgage rates have been powering home sales, which hit record highs four years in a row and are expected to set a new record this year.

Median house prices climbed to a record of $220,000 in August, a gain of 15.8 percent from the same month a year ago. That was the biggest 12-month increase since July 1979.

Sales were up in all regions of the country except for the South, where they dipped. Because Hurricane Katrina hit in late August, its full brunt was not completely captured in the August sales figures, the association said.

On Wall Street, the Dow Jones industrials gained 24.04 points to close at 10,443.63,

Although his speech was devoted almost totally to the housing market, Greenspan did briefly mention that the Fed will be watching carefully the aftermath of hurricanes Katrina and Rita.

"In the weeks and months ahead, the Federal Reserve will continue to closely follow the consequences of the recent devastating events in the Gulf Coast region in order to assess their implications for our economy," he said.

Citing a research paper he co-wrote, Greenspan said the run-up in house prices has left households with a substantial pool of available home equity. Four-fifths of the increase in home-mortgage debt has come from people taking cash out of their appreciated homes through refinancings, home-equity loans and other things, he said.

"After discussing all the risks, Greenspan summed up by saying the share of households who are very highly leveraged is lower than expected and is not correlated closely with high home price states, other than California," said Doug Duncan, chief economist at the Mortgage Bankers Association.

Greenspan continued to register concerns about soaring house prices and risky mortgages on expensive homes. He also repeated his warning about signs of "froth" developing in some local markets that may be driving house prices to "unsustainable levels."

But Greenspan said it was unclear whether such exuberance would spread to more local markets.

"It is still too early to judge whether the froth will become evident on a widening geographic scale or whether recent indications of some easing of speculative pressures signal the onset of a moderating trend," he said.

An end to the housing boom could have a silver lining, the Fed chairman added, because it probably would be accompanied by a moderation in the growth of consumer spending. That could lead to a boost in Americans' personal savings rate, which has been dismally low, and could curb Americans' insatiable appetites for foreign-made goods, helping to narrow the United States' bloated trade deficit, he said.

"Housing is a fault line in the economy that Greenspan is indeed worried about, but he doesn't think a housing (slowdown) will undermine the expansion," said Mark Zandi, chief economist at Economy.com.


______
I don't think it's time to panic sell, but a little more caution should be used if you're looking to buy.

Fibonacci

The Big Real Estate Riddle -- Is Now a Good Time?: Chet Currier
2005-09-27 00:04 (New York)


(Commentary. Chet Currier is a Bloomberg News columnist. His
opinions are his own.)

By Chet Currier
Sept. 27 (Bloomberg) -- To all would-be home sellers who aim
to time the top in real estate prices, best of luck.
In even the most liquid and transparent investment market,
catching just the right moment to jump this way or that is a dicey
proposition. And real estate is a whole lot less liquid and
transparent than most.
No matter how many stories you hear about fortunes made
trading houses like bubble-gum cards, it's a market particularly
ill-suited to the making of short-term timing moves.
Costs of selling are high, and complications can be many. I
can testify to this first hand, being in the process of selling a
home myself for personal and family reasons -- not because I have
any special insight into whether it's ``a good time to sell'' or
not.
To be sure, evidence abounds of a manic, overheated market in
many places. A recent letter to the Wall Street Journal proudly
proclaimed that ``1.2 million Americans are Realtors,'' which
according to Labor Department data means they now outnumber
doctors, police officers, bartenders and even lawyers.
An e-mail crossed my desk recently from a real estate
investment outfit that says it has figured out how to keep
profiting even after ``the real-estate bubble bursts.''
Newspapers and other media brim over with expanded coverage
of real estate and all its trappings, including cable TV shows
celebrating the game of flipping -- buying houses, fixing them up,
and selling them again in short order for a handy profit.

Fantasy

``Such programs are yet another attempt to cash in on the
widespread misconception that real estate is the road to easy
riches,'' says John T. Reed in his Real Estate Investor's Monthly
newsletter.
The frenzy in real estate is not without some solid
underpinning. They don't call it ``real property'' for nothing --
it has great human utility as well as investment appeal. Houses
can be much nicer to look at and cozier to occupy than a bond or a
stock certificate.
As long as the economy prospers and grows, it figures that
demand will be strong for the limited supply of desirable places
to live.
All the same, any market can get overextended, especially one
that is turbocharged by easy credit. The issue of whether a
letdown is coming in the housing market is hard enough on its own
to answer. The question of when is tougher still.

History Lesson

Recall the last ``bubble'' that investors experienced, the
famous boom-bust of technology stocks in the late 1990s and early
2000s. Hardly a person now alive admits to putting his faith in
that oh-so-obvious chase after fool's gold.
Sure enough, before the mania broke there were countless
voices raised in warning that the market advance had gone to
absurd extremes. Getting the timing right was another matter.
In one of the most celebrated moments of his almost-two
decades as chairman of the Federal Reserve, Alan Greenspan pointed
in December 1996 to the dangers of ``irrational exuberance.'' The
Dow Jones Industrial Average finished that year at 6,448 and, as
it turned out, was just getting warmed up.
By the end of 1999, it had climbed to 11,497 -- a 78 percent
gain in three years. As bad as the comedown of the 2000-2002 bear
market was, the Dow never got back to 6,500 again. By the end of
August 2005, according to my Bloomberg, the average showed a 92
percent return, including dividends, since December 1996 -- for a
payoff that works out to 7.8 percent a year.

Hindsight

There is little dispute today that Greenspan was right, that
the stock market was building up excesses that would lead
inevitably to trouble. And yet interpreting his warning as a
signal to dump all your stocks and stock mutual funds might have
proved a most regrettable thing to do.
Today, some say the stock market is still irrationally
exuberant. Maybe so. Still, a person could grow old waiting for a
better time to buy.
Likewise, homeowners could tie themselves in knots trying to
decide when the absolute top of the market for their properties
will be seen. The best time to sell, or buy, a house may be
whenever you are ready to move.


Source: Bloomberg.com

SpeedyV6

US housing boom vexes the Fed
By Will Smale
BBC News business reporter

As the Federal Reserve raises interest rates in the US for the 10th time, its inability to control accelerating house price inflation is worrying analysts.

Put simply, in many parts of the US buying a home is now unaffordable for all but the most wealthy, and the Fed hopes a rates rise will help to start cool things down.

The boom has been fuelled by the record low mortgage rates, which fell sharply when the Fed cut rates after 9/11.

But so far, long-term interest rates, which determine mortgage rates, have stubbornly refused to move despite the Fed's 2.5% increase in base rates.

Housing affordability crisis


BIGGEST HOUSE PRICE GROWTH
Bakersfield, Calif. - 101.% five year growth
Las Vegas - 89.1%
Reno, Nev. - 85.2%
Visalia, Calif. - 77.3%
Palm Bay, Fla. - 98.4%
Source: US Office of Federal Housing Enterprise Oversight

So from San Francisco in the west, to Palm Bay, Florida in the east, and New York City in the north, key members of the middle class such as teachers, firefighters and nurses now have little hope of buying a property.

In California it is estimated that only 17% of the population can afford the price of a new home.

For the US as a whole, while the average wage of a nurse has rise by 10% over the last two years, the average price of a home in the US has leaped by 20% during the last 18 months alone, according to a report by the Centre for Housing Policy.

For middle income earners hoping to get on the housing ladder the maths does not add up anymore - with an average US property now costing $225,000 (£126,000), you require an annual salary of $71,000, substantially higher than the average household income of $40,000.

This disparity is much worse in the expensive places named above, and other fast-growing or popular towns and cities where housing supply is struggling to keep up with demand.

Hot cities

In Las Vegas - the fastest growing city in the US - house prices have increased by 89.1% over the last five years, and in Bakersfield, California, now a suburb of Los Angeles despite being 100 miles away, prices have more than doubled since 2000, increasing by 101.6%, according to the US Office of Federal Housing Enterprise Oversight.

Prices are rising fastest in the "sunbelt" between Florida and California, where job growth and retirement migration has meant a fast-growing population.

In such places middle income earners hoping to get on the housing ladder can at present forget fulfilling the American dream of property ownership.

They could of course relocate to the vast swathes of the American Midwest, where house prices remain low, such as states like Ohio and Iowa, but job opportunities can be very limited in such places.

And expensive cities obviously cannot do without their nurses, firefighters and other key workers.

Treasury bond effect

The problem for the Federal Reserve is that continuing to raise interest rates may not have much effect on reducing house price inflation in the short or even medium term.

Unlike in the UK, where a rise in the core interest rate is quickly replicated by mortgage lenders, this is not currently the case in the US.

In America the long term interest rates of lenders are equally likely to follow the rates offered by US Treasury bonds, which are currently stubbornly low.

While the Fed can obviously raise the base interest rates, those of bonds are out of its control as they are traded and so the rates are determined by the marketplace.

And economists are still not sure why the so-called "yield curve" has narrowed so much.

It could be a positive sign that long-term inflationary expectations are low - or it could mean there is a lack of worldwide investment opportunities.

Or it could be a signal that a recession is around the corner.

In any case, the resulting low, low mortgage rates for US homes have further fuelled the boom in US house prices, with homeowners re-mortgaging their properties to fund home improvements or other consumer spending, or borrowing more money to buy more properties.

And with the US economy booming, and other inflationary pressures like the oil price on the horizon, the Fed is likely to continue its policy of interest rate increases for some time to come.

The problem is that at some point, the higher rates could produce more pain for other sections of the economy - or burst the housing bubble too sharply.
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/1/h...ss/4135442.stm

Published: 2005/08/09 18:20:59 GMT

© BBC MMV

Fibonacci

Manhattan Apartment Prices Fell 13% in 3rd Quarter, Report Says
2005-10-04 00:04 (New York)


By Kathleen M. Howley
Oct. 4 (Bloomberg) -- Manhattan apartment prices fell 13
percent in the third quarter, the most in 16 years, evidence the
most expensive market in the U.S. may have peaked.
The average apartment price dropped to $1.15 million from a
record $1.32 million in the second quarter, according to a
report today from Miller Samuel Inc., the borough's largest
appraiser, and Prudential Douglas Elliman, a Manhattan real
estate broker. Prices had soared 30 percent in the previous
three months.
``You simply cannot have prices that go up forever,'' said
Paul Purcell, 53, a partner at Braddock & Purcell LLC, a New
York real estate consulting company. ``This is not bad -- it's
what a more normalized market looks like.''
The decline in apartment prices was the sharpest since
1989's fourth quarter, when they fell 24 percent, the start of a
six-year slide. It came even as the city's economy got a boost
from the five biggest securities firms, including Merrill Lynch
& Co. and Goldman Sachs Group Inc., which expanded payrolls 5
percent in the past year.
The biggest drop was among units with four or more
bedrooms, as the wealthiest New Yorkers took a ``wait and see''
attitude about the economy, Jonathan Miller, president of Miller
Samuel, said in an interview. The average price for the largest
units fell 36 percent to $6.82 million from a high of $10.6
million in the second quarter.
``New Yorkers have lost some of their enthusiasm for real
estate in the near term because of energy prices and concerns
about inflation, but it's just a pause,'' said Miller, 45.

Longer to Sell

There were 1,997 sales in the quarter, the first with fewer
than 2,000 since the beginning of 2004, the report said. The
number of apartments on the market rose 16 percent to 5,764. It
took an average 133 days to sell a unit, compared with 102 days
in the second quarter. The so-called ``discount,'' the
difference between the asking and selling price, was 2.2
percent, rising from 1.7 percent.
``I know agents who are panicking, thinking the world is
coming to an end,'' Purcell said. ``They're used to selling an
apartment in two days.''
The median price, the point at which half the apartments
sold for more and half for less, was $750,000, a decline of 3.2
percent from a record $775,000 in the second quarter, Miller
said.
Manhattan's apartment prices are the highest in the U.S.,
topping San Francisco's median for condominiums of $715,000. The
U.S. median price for an existing home, including houses,
cooperatives and condominiums, was $220,000 in August, according
to the National Association of Realtors.

Entry Level

The strongest segment of the Manhattan market was studio
apartments, gaining 13 percent in the quarter to an average
price of $428,831, the report said. The only other segment to
see an increase was one-bedroom units, which rose 9.8 percent to
an average $687,744.
``We saw a surge in entry-level apartment buying, with
people thinking this is their last chance to get into the market
before mortgage rates go up,'' Miller said. The U.S. average
rate on a 30-year mortgage was 5.76 percent in the quarter,
compared with 5.72 percent three months earlier.
``The market probably will slow down, because it's been
going crazy,'' said Darren Stein, 30, who bought a one-bedroom
apartment on the Upper East Side in March. ``But I don't think
it will go backwards for long because of supply and demand --
it's tough finding a place to live in Manhattan.''
The average price for a two-bedroom apartment fell 3.4
percent to $1.49 million, and the average price for a three-
bedroom apartment dropped 9 percent to $3.23 million, the report
said.
For cooperatively owned Manhattan apartments, the average
sale price was $956,490, a loss of 13 percent from the previous
quarter, and the condominium average was $1.39 million, a
decline of 11 percent, according to the report.
The average sale price for lofts, primarily found in the
area near the site of the former World Trade Center, was $1.56
million, a drop of 8.6 percent, the report said. There were 439
lofts available for sale, 22 percent more than in the second
quarter.

source: bloomberg.com

Fibonacci

Slowing Is Seen in Housing Prices in Hot Markets
By DAVID LEONHARDT and MOTOKO RICH
A real estate slowdown that began in a handful of cities this summer has spread to almost every hot housing market in the country, including New York.

More sellers are putting their homes on the market, houses are selling less quickly and prices are no longer increasing as rapidly as they were in the spring, according to local data and interviews with brokers.

In Manhattan, the average sales price fell almost 13 percent in the third quarter from the second quarter, according to a widely followed report to be released today by Miller Samuel, an appraisal firm, and Prudential Douglas Elliman, a real estate firm. The amount of time it took to sell a home was also up 30.4 percent over the same period.

In another sign that the housing market might have reached a peak, executives at big home builders have sold almost $1 billion worth of company stock this year. [Page C1.]

Outside Washington, in Fairfax County, Va., the number of homes on the market in August rose nearly 50 percent from August 2004. In the Boston suburb of Brookline, Mass., where many three-bedroom houses cost $1 million or more, the inventory of homes for sale has increased in just the last few weeks, said Chobee Hoy, a broker there.

For-sale listings have also swelled throughout California, according to the California Association of Realtors. In the San Francisco Bay area, they have increased 16 percent in the last year, Coldwell Banker Residential Brokerage said.

"We are seeing a market in transition," Leslie Appleton-Young, the association's chief economist, said.

Brokers said that some houses seemed to be on the market longer because sellers priced them too high, assuming that their value was still rising sharply. In other cases, people who otherwise would have waited a year or two to sell their homes - like empty nesters ready to move into smaller quarters - had listed them now out of fear that prices would soon fall.

The question remains whether all of this represents a momentary cooling off of some overheated housing markets, or it presages a more pronounced downturn that would end a decade-long boom.

Some economists and commentators have for years predicted the bursting of a real estate bubble, and previous slowdowns have turned out to be relatively brief pauses before prices started accelerating again.

But with mortgage rates now rising, the cost of gasoline hovering at or near $3 a gallon and house prices in some areas out of reach for many families, brokers and analysts said they thought that this slowdown could be the real thing.

For now, the change remains a far cry from the bursting bubble that some have predicted.

In Massachusetts, for example, the median house price remained flat from July to August, and the median condominium price fell only slightly, according to the Realtors' association there. At the start of the year, prices had been rising at an annual rate of more than 15 percent.

If anything, some brokers said, the recent slowdown meant a return to a healthier, more sustainable market.

"What we had was abnormal," said Dottie Herman, chief executive of Prudential Douglas Elliman. "People get used to abnormal times and then when they're normal, they think there's something wrong."

Alexander Shakhov, 47, listed his two-bedroom house in Frederick, Md., an outer suburb of Washington, for $529,000 in July, and it remained unsold for the rest of the summer. A

month ago, he reduced the price to $499,000 at the suggestion of a broker. A week ago, Mr. Shakhov accepted an offer at the lower price.

The market "is not as hot as the last two years," Mr. Shakhov, a scientist at a biotechnology company, said, "but I'm pretty happy."

He bought the house three years ago for $230,000. He now lives in Cleveland, where he has bought a home that is nearly twice as large as his Frederick house for less money.

The cooling off has forced both sellers and real estate agents to begin changing their attitudes about residential property, many said.

Houses that are priced too high are sometimes on the market for weeks or months now, rather than fetching even more money than their owners had imagined they could get.

In Manhattan, the average sales price of co-op and condominium apartments fell 12.7 percent, to $1.15 million, in the three months that ended on Sept. 30 compared with the second quarter, according to the Prudential Douglas Elliman report. The median sales price - which means half of homes sold for more and half for less - fell 3.2 percent, to $750,000.

Still, the average sales price was 10 percent higher this summer than it was a year earlier, according to the study.

Nationally, housing prices rose at the fastest rates since 1979 in the 12 months through August, the National Association of Realtors said last week.

But the changes that real estate agents have seen in recent weeks - increased inventories and longer sales times - have often preceded market slowdowns in the past.

One reason properties are remaining on the market longer is that sellers still expect to reap double-digit price appreciation each year.

"What will slow this market down, and has slowed certain segments of the market down, is overpricing," said Pamela Liebman, chief executive of the Corcoran Group, a large real estate firm in New York. "Back in the spring, there was such a frenzy that very pedestrian product was drawing multiple bids."

Some of today's sellers appear to be pricing their homes as if the frenzy were continuing.

"Their neighbors sold their house when the market was red-hot, and everybody thinks their house is better than their neighbor's house," said Maggie Tomkiewicz, the president of the Massachusetts Association of Realtors and a broker in South Dartmouth. "But when the neighbor sold, there may not have been five other houses on the market" in the area.

The slowdown has also jolted the thousands of people who have become licensed brokers in the last few years. Until now, many of them knew only galloping price appreciation.

"I've gotten these calls from newer agents saying: 'I've had this property on the market for 60 to 90 days. What do I do?'" related Buzz Mackintosh, an owner of Mackintosh Realtors in Frederick, who has been selling houses for two decades. "And I say, 'It's called, 'Reduce your price.' "

Indications of a slowdown have appeared before. Jonathan Miller, president of Miller Samuel, said the last time that average and median sales prices dropped below those the previous quarter at the same time that inventories and sales duration rose in Manhattan was in the fourth quarter of 2002. But by the end of 2003, the market had come back.

An important difference now, though, is that mortgage rates are creeping up, whereas previous comebacks have been fueled by ever-lower rates.

On five-year adjustable-rate mortgages - a popular loan with a fixed interest rate for the first five years - the initial rate has risen to 5.59 percent on average, from 5.14 percent in June, according to BankRate.com.

What is more, some mortgage lenders have started to tighten credit standards, making it harder for buyers to get loans.

"Low interest rates and easy credit standards are just about over," said Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley.

Ron Nixon, in New York, and Matt Richtel, in San Francisco, contributed reporting for this article.

http://www.nytimes.com/2005/10/04/re...e/04reals.html

zamo

http://www.sun-sentinel.com/business...business-front

Fibonacci

Deliberate Acts of Kindness

Bill Gross
10/01/2005


An old and wise friend gave me some sage advice recently. “Be kind,” he said, “everyone you meet is fighting a battle.” Life is a battlefield, although for some of us, including yours truly, it seems that fate has chosen marshmallows or water balloons instead of hand grenades and M-16s as the weapons of destruction. Still, we all suffer. Coming into this world must have been no treat, going out most definitely won’t be, and everything in between—well, the “eat, drink, and be merry” of Omar Khayyam is often overwhelmed by the pain of loss, personal debilitation, or simply the overwhelming deluge of circumstance. It’s under these conditions, as my friendly advice-giver would agree, that kindness is the temporary salve that heals. My wife Sue is the kindest person I have ever known; not because of publicized acts of generosity of which there have been some, but because of everyday acts of kindness, of which there have been multitudes. There are hundreds and hundreds of people who would choose to be one of her best friends if the time were available—some on the A-list, but most of them category B’s and C’s—waiters, repairmen, average people with greater-than-average battles being fought behind sometimes cheerful facades. Sue brings music to their quiet desperation.



I have observed through her that being kind involves sacrificing the inward/personal moment for an outward reaching smile. It includes a heartfelt, not conversationally correct, “How are you” with more listening than talking. And it can involve, given enough hours in the day, a follow-up good deed or a simple reminder of empathy and caring. Kindness comes in other forms too. Jonas Salk was very kind, as are doctors, teachers, or any working person whose outward reach often exceeds personal gain. Lovingly raising a family is an act of kindness. People that write checks for Katrina or African relief are kind as well. I guess when you get down to it, kindness comes in many shapes, but the important thing is that it keeps coming. We’re all fighting a battle whether it be in New Orleans, Darfur, or Newport Beach, California. I’m going to try to be more like Sue, smile more often, extend an ear even during my busy day, and set a goal to become an Empathy Prince in addition to a Bond King. (Talk about reach exceeding your grasp!) Join me, if you’re not already there.



Interest rate markets can be kind or unkind depending—as Shakespeare might have intoned—whether you “a borrower or a lender be.” The last few years have been magnificent ones for many homeowners as yields came down from their turn of the century peaks and landed in a valley so low that the lure of assuming a mortgage became irresistible. Houses were then turned into ATM machines as refinancing, equity extraction, and a plethora of funny money mortgage innovations placed cash in the hands of consumers. The U.S. and global economic recovery over the past four years, as detailed in previous Outlooks, has thus been asset-based with housing leading the pack. Central banks worldwide, through both historically low real policy rates (Fed Funds) and the recycling of reserves into longer-dated U.S. Treasuries (Bretton Woods II) bear responsibility for much of the froth. Ordinary citizens with a capitalist bent—gettin’ while the gettin’ is good—must own up to the remainder. Combined, they have produced a growing economy but one which is acutely dependent on housing continuing to go up, equity continuing to be extracted, and consumption continuing to be motivated by what seems to be an endless chain of paper prosperity.



Wiser and more experienced counsel know that such a foundation for wealth generation is really a castle built on sand instead of granite, and the only question is when the tide will rush in to wash it away. Last month, Alan Greenspan finally rang the warning bell with his admonition about risk premiums, as detailed in my September Outlook. More recently through the E-mail pipes have appeared two Federal Reserve studies that cast considerable light on when the housing bubble might pop, and when our specious prosperity might lose a touch of its luster. Before I speak to them directly, let me summarize my sequence for house bubble popping or froth skimming, and then blend in the Federal Reserve studies for illumination.





Housing prices will cool/stop going up very much/even go down in some cities, WHEN:
Interest rates rise to a high enough level to make the purchase of a new home a burden instead of a boon for first-time buyers.
Mild regulatory pressure begins to reduce the amount of funny-money lending.
Speculators sniff the beginning of the end.
Home equitization should retreat shortly thereafter.
Consumption/the U.S. economy will then weaken when the house ATM starts running out of fresh new $25,000/$50,000/$100,000 home equity loan dollar bills.
The Fed will cut interest rates in order to start the game all over again.


Let me state categorically that the above sequence is barely questionable, almost inevitable, 99% unavoidable, and in modern parlance—“slam-dunk.” In so saying, I hope I am not being unkind to those of you who think otherwise—I’m trying to do you a favor! What I can’t do is tell you how soon all of this unfolds which I admit is a critical variable. The following from the aforementioned Federal Reserve research could provide some clues however.



The Board of Governors of the Federal Reserve System have just released Discussion Paper #841 entitled “House prices and Monetary Policy: A Cross-Country Study,” a project covering 18 major country housing markets since 1970. The paper cites many influences for housing prices including demographics and financial deregulation (funny-money mortgages) but the title gives away the dominant culprit—interest rates. After chasing through the 68 pages of this paper, I will cut to it—the chase, that is. Housing prices chase interest rates: when yields go down (short nominal rates, longer real rates) real housing prices go up. When yields go up, they go down. Could have told you that I guess without the study—common sense and all—but it helps to have the Fed’s imprimatur attached to an opinion—with no guarantees of course. They/I cite the following charts as confirmation, broken into two distinct time periods—pre and post 1985—covering housing prices and policy rates (Fed Funds) for 18 countries.









While their written conclusions are not as definitive as my own, which follow, I think it’s pretty clear that real housing prices have peaked on average four to six quarters after the central bank first raises interest rates and following what appears to be 200 basis points of short-term rate hikes. The tightening then continues (too much exuberance!) another two quarters thereafter for what looks like a total cyclical increase of 300 basis points or so. With the caveat that many countries in this study have housing markets with greater sensitivity to short rates than our own, I find it illuminating that our own Fed has raised policy rates for nearly five quarters now to the tune of 275 basis points, dead on the average point where real housing prices have peaked over the past 35 years.



Additional studies have shown that the current level of short rates is beginning to eliminate many first time buyers from the market since they have increasingly used adjustable-rate mortgages to squeeze through the door. Affordability indices, primarily a function of mortgage rates, are hitting 15-year lows, and banks’ willingness to lend—a function to some extent of regulatory pressure—is going down as well. Because upwards of 20% of new home purchases now are either for second homes or for condo flipping to a hoped for “bag holder,” speculators cannot be sleeping easily these nights. Combined with the dominant influence of still rising short rates, condition #1 of my froth-skimming scenario cannot be far away.



Condition #2 referenced a retreat in home equitization and it is here where a September 2005 study by Alan Greenspan himself (along with Fed staffer James Kennedy) comes in handy. That this is only the second study to which he has attached his name during his entire Chairmanship tells you something about the importance of this paper that focuses on equity extraction financed by home mortgages. Greenspan, in his typical style, draws no conclusions but simply lays out the evidence presented below in Chart III.




Greenspan states that homeowners borrowed $600 billion last year against the growing equity in their homes made possible by the annual gains in housing prices of near double-digits in recent years. That $600 billion amounts to nearly 7% of disposable personal income. While Greenspan again does not take the risky step of suggesting how much of that flows through to spending, private economists and good old common sense suggest at least 50% and maybe more. People don’t borrow money to deposit it in the bank. They borrow money to spend. If so, and using a conservative 50% figure, the chart points out that home equitization has added ½% to 1% annually to the U.S. GDP growth rate in recent years. Should home prices stop going up at recent rates, equity extraction will become more difficult. Studies by Goldman Sachs on other home asset-based economies, such as Australia’s, point to retail sales slowdowns of as much as 4% once equitization rolls over. This week’s consumer reports from the U.K. point to the same conclusion. Even Greenspan himself in a speech last week said that “should mortgage interest rates rise…mortgage refinancing cash-outs would decline as would equity extraction and presumably consumption expenditure growth.” Conditions #2 and #3 in my housing timetable then, seem likely to unfold within perhaps the next three to six months.



How weak the U.S. economy gets will depend on numerous factors: oil/natural gas prices, China’s continuing growth miracle, and of course the level of U.S. interest rates—themselves a function of the Fed and foreign willingness to buy our Treasury and corporate bonds. But make no mistake about it, the froth in the U.S.housing market is about to lose its effervescence; the bubble is about to become less bubbly. If real housing prices decline in the U.S.in 2006 or 2007, a recession is nearly inevitable. If higher yields simply slow the pace of appreciation to a more rational single-digit number, then we could escape with a 1%-2% GDP economy. In either case, however, our Fed with its new Chairman will likely be in the enviable position of lowering rates come mid-year 2006. Currently ogreish central bankers within 12 months time will thus be responsible for some rather deliberate acts of kindness: lowering yields to keep our asset-based economy alive and kicking. Whether in the fullness of time that will be judged to be kind is another question, but it appears that this overwhelming deluge of circumstance will require lower yields at least one more time.


http://www.allianzinvestors.com/comm...ource=hpbanner

fdl

More and more evidence of the housing market deflating. Not every market will be affected in the same way, but hope everyone is ready. Hang on tight.




Empty houses, falling prices: A boom dies

You can see how the housing bubble is bursting in places like Columbus, Ohio, where builders and lenders threw common sense away and enticed people to buy homes they couldn't afford.

Regular readers know that since early 2004, I have described the housing ATM as what's allowed the economy to move forward. In June, I suggested that Time magazine's cover story, "Home Sweet Home: Why We're Going Gaga Over Real Estate," might be signaling the peak. It's looking more and more like June was the peak (witness last week's disappointing new-home sales, pre-Katrina), as various problems begin to surface around the country.

http://moneycentral.msn.com/content/...4.asp?GT1=7160

Fibonacci

The hidden risk of a housing slowdown
Home-equity 'wealth effect' fuels consumer spending, Greenspan finds

By Martin Wolk
MSNBC
Updated: 4:59 p.m. ET Sept. 30, 2005



Many analysts and investors are busy trying to understand the economic impact of hurricanes Katrina and Rita, and rightfully so. But Fed Chairman Alan Greenspan made clear this week that he and other central bankers are keeping their eye on an even more powerful force of nature: the red-hot housing market.

Katrina’s impact began to grow clear Friday as the government reported an unexpectedly sharp decline in personal spending and income in August, even though the monster storm only came ashore in the final days of the month. By all measures consumer sentiment has plunged in the aftermath of the storm, possibly signaling a tough holiday retail season ahead as consumers grapple with fuel costs that are far higher than they were a year ago.

Meanwhile the Fed chairman, whose term is ending in January, is stepping up the pace of remarks warning about the potential for a housing slowdown to act as a drag on economic growth. This week Greenspan revealed the depth of his interest in the economic impact of housing by unveiling a dense study on home equity drawdowns, only the second research paper he has put his name on in his 18 years as Fed chief.

The sharply rising value of housing in recent years has created a “wealth effect” that has contributed significantly to consumer spending growth — not unlike that created in the late 1990s by the boom in stock prices. In fact the housing wealth effect is even more powerful, with homeowners spending an average of 5 cents for every dollar in increased home value they enjoy, compared with 3 cents for every dollar in the increased value of stocks and bonds, said Richard DeKaser, chief economist for National City, a Cleveland-based bank.


One reason is that it has become easier than ever to turn home equity into cash, either through cash-out refinancing or by drawing out cash as part of a “step-up” into a new and more expensive home.

“There is no question that the ability to tap equity has supported consumption,” said Doug Duncan, chief economist of the Mortgage Bankers Association. Rising equity values kept the 2001 recession from being deeper and longer than it was, he said. “It is a very, very powerful engine for the economy,” he said.


So analysts were not surprised that Greenspan decided to take a close look at the impact of such home equity drawdowns on consumer spending, which is responsible for more than two-thirds of all U.S. economic activity.

“He is reinforcing something that a lot of economists agree with, which is that the economy is being motored by the housing sector,” said Ethan Harris, chief U.S. economist for Lehman Bros.

The conclusion of the 83-page research paper co-authored by Greenspan and Fed senior economist James Kennedy, as Greenspan explained it in a speech to a bankers conference, is that “a significant amount of consumption” has been fueled by homeowners taking equity out of their residences.



If that is true, he added, an increase in mortgage rates or decline in housing affordability presumably would result in a decline in consumer spending growth.

Greenspan’s remarks were interpreted in various and sometimes conflicting ways.

Wire reporters from both Reuters and The Associated Press focused on Greenspan’s conclusion that “the vast majority of homeowners have a sizable equity cushion” and thus are in a fairly good position to weather a shock if prices drop.

But Wall Street Journal reporter Greg Ip, considered to have sources that give him particularly strong insight into Greenspan’s thinking, took a far more cautionary tone about the potential negative impact of rising mortgage rates on consumer spending.

“He’s got a mixed message,” said Harris, referring to Greenspan. “He is saying there is no major national bubble, but on the other hand we’re going to lose some growth if the market cools.”



And certainly many analysts expect the market to cool, especially now that mortgage rates are edging up, with 30-year fixed rates having risen from about 5.5 percent in early July to 5.9 percent currently.

Goldman Sachs senior economist Jan Hatzius expects the cooling to begin in earnest in the second half of 2006, after an initial bump from hurricane-related rebuilding. Even if there is no housing collapse, a mere moderation of growth could have an outsized impact on the economy because of the loss of home-equity spending, he said in a research report.

"The potential drag on real GDP growth from the real estate sector is large," Hatzius said. He warns of a "triple whammy" in 2007 in which a housing slowdown, unless offset by other factors, would cause sharply slower growth, a deepening budget deficit and a weakening of the dollar.

So far there are few signs that the housing market is cooling. Sales of existing homes surged to the second-highest pace on record last month and prices rose at their fastest pace in a quarter-century, according to a report this week.

New-home sales fell sharply and unexpectedly, but the median sales price rose. The new-home series, based on far fewer transactions, tends to be far more volatile and subject to revision, so analysts were not quite certain how to interpret it.

DeKaser, for one, sees signs that the housing market may have peaked.

“All the data are not uniform, but if you look over the past six to eight months, one could plausibly make the case that we are seeing a moderation play out,” he said. “Frankly I think we’re starting to turn the corner.”

In any case, analysts agree that after years of paying little attention publicly to the run-up in housing prices, the Fed is showing clear signs of concern. Greenspan this year acknowledged for the first time that there are “signs of froth” in some local markets, and in August he warned that “history has not dealt kindly” with the aftermath of asset price bubbles.

“I think there has been a sea change in the Fed’s perspective on this issue over the course of this year,” said DeKaser. “I think as a result of a combination of the recent acceleration in price increases and the emergence of more serious research on this subject the Fed has gotten more concerned and is expressing that concern.”

© 2005 MSNBC Interactive
© 2005 MSNBC.com

URL: http://www.msnbc.msn.com/id/9545234/

Fibonacci

Toll Brothers Cuts Sales Forecast as Market Weakens (Update1)
2005-11-08 11:56 (New York)


(Adds housing contribution to U.S. economy in third
paragraph.)

By Kathleen M. Howley
Nov. 8 (Bloomberg) -- Toll Brothers Inc., the largest U.S.
builder of luxury homes, reduced next year's sales forecast,
saying the housing market is weakening after a five-year boom.
Its sales forecast was cut by a range of 3.8 percent to 6.9
percent because of ``some softening of demand'' and delays in
opening new communities, the Horsham, Pennsylvania-based company
said today in a statement. Its shares dropped as much as 14
percent, the most in seven years, and rivals including Pulte
Homes Inc. and D.R. Horton Inc. also fell.
Rising interest rates are starting to curb home sales,
which have hit new highs each year since 2001. The boom has been
the main driver of the U.S. economy, accounting for 50 percent
of growth and more than half of private payroll jobs created in
the past five years, according to a report by Merrill Lynch &
Co. earlier this year.
``There are two schools of thought here, and one is that
there's a housing bubble and it's going to break severely,''
said Seth Glickenhaus, senior partner at Glickenhaus & Co.,
which holds shares of Pulte, Centex Corp. and D.R. Horton. The
other believes ``demand is pretty great and the correction won't
be significant. I'm in the latter group.''
Homebuilding stocks had fallen 18 percent since their peak
in late July on concern that sales and prices were headed lower.
Today, the Standard & Poor's Supercomposite Homebuilding Index
of 16 builders lost 55.12, or 6.3 percent, to 821.77 at 11:40
a.m. New York time.

Shares Fall

Toll's shares fell $4.81 to $34.60 in New York Stock
Exchange composite trading, after declining as low as $33.71
earlier in the day. Pulte Homes Inc., the largest U.S.
homebuilder, fell 7.3 percent to $38.45. D.R. Horton Inc., the
No. 2 builder, dropped 8.1 percent to $31.03. Centex, the third-
largest, declined 5.3 percent to $67.38.
The Mortgage Bankers Association last week said its measure
of home-purchase applications dropped to the lowest level since
February. The gauge has declined in six of the last seven weeks.
``It appears we may be entering a period of more moderate
home price increases, more typical of the past decade than the
past two years,'' Robert Toll, the company's chief executive
officer, said in the statement.
Toll lowered its forecast of the number of homes it will
sell in fiscal 2006 to 9,500 to 10,200, from the 10,200 to
10,600 it projected on Aug. 25. In fiscal 2005, which ended Oct.
31, Toll sold 8,769 homes.

4th-Quarter Tally

A preliminary tally for the fiscal fourth quarter showed
revenue from home sales rose 39 percent to a record $2.01
billion from $1.44 billion a year earlier, Toll said.
Toll sold 2,957 homes in the recent quarter, 23 percent
more than a year ago. The backlog of homes ordered and not yet
delivered stood at 8,805, valued at $6.01 billion at the end of
the quarter, a gain of 36 percent from a year ago. In the
previous quarter the backlog gained 38 percent from a year
earlier.
U.S. sales of new houses probably will fall to 1.19 million
in 2006, the third-highest ever, after reaching an all-time high
of 1.27 million this year, according to a forecast by Fannie
Mae. The median price for a new home sold by the industry
probably will rise to $236,500 in 2006, a gain of 3.7 percent
from a year earlier, less than the 4.7 percent increase expected
for this year, the mortgage buyer forecast on Oct. 12.
Toll, the No. 6 U.S. homebuilder by stock market value,
typically issues preliminary revenue figures in advance of its
earnings report, scheduled for Dec. 8.

(Toll Brothers will hold a conference call to discuss
preliminary results at 2 p.m. New York time. It can be accessed
at {LIVE <GO>}.)

source: bloomberg.com

ric

Emperically, and on a very small scale, we saw the market "soften" in Philly. Our house, located in an increasingly trendy neighborhood, was on the market for about four months, competing with some new construction in the same area. Lots and lots of showing, but we sold only after dropping our price three times. Still sold at four times what we bought it for ten years ago, but it was not the cash cow it might have been a year ago.

Conversely, we rent at the moment, and can ride out the softened market, even with some of the uptic in mortgage costs, (we're looking to finance only about 1/4 of the purchase of our next place).

doopstr

http://www.msnbc.msn.com/id/9992873/

fuzzy02CLS

iTrader: (2)

With all these hurricanes in South FL I hope prices will come down now.

zamo

We are being warned.

http://www.sun-sentinel.com/business...ostemailedlink

fdl

Is there anyone who still believes house prices are not going to drop in the coming months/years?

There has been fair warning for everyone so hopefully noone gets caught with their pants down.

95gt

Here is a situation for you guys related to the housing bubble.

Live in the DC/Baltimore area. Pretty much no doubt that the prices are inflated in this area. Now I will be moving out of the country for 3 years and have to decide whether to sell the house or not sell it. My main worry is not being able to afford a house when I return in 3 years.

Area has been growing rapidly in past 3 years with new home construction, new office space and new stores all with in 1 mile of my TH. I am very close to major highways (less than 2 miles) and is a big commuter area for those that work in DC and Baltimore. One major item is that Ft Meade is less than 10 miles away. In the next 3-5 years with base closings Ft meade is expected to gain about 15k of jobs.

Even if housing market cools will it remain negative for 3 years? Would it be better to take the money and shoehorn it into a 4% cd for the 3 years (about 100k of equity right now)?

My main concern is that it will go up. Less on missing out on the money and more on the worry of not being able to buy anything when I returned.

Opinions?

fdl

Hard to say with any certainty. Real estate is very localized, so even if there is a downturn, homes in your area may not move much. The opposite can happen as well.

Personally, I would sell if I was you, especially if there was a mortgage on the home.

zamo

I will go with fdl on this one. I will rather sell the house and put the money in a high yield savings account or a CD. Going upside-down in a mortgage which might happen (or might not) is not fun.

Fibonacci

Can you rent and be cash flow positive?

95gt

No. Comparable rents are about 1700 while my mortgage payment is 1750. If i have to go thru a rental agency I will be a few hundred in the hole every month.

zamo

^^ And I guess you are not including insurance, or any monthly maintenance fees (if any). In the instance your tenants leave, you will be on your own paying that mortgage. You might wanna evaluate and make a conservative decision.

95gt

tell you the truth I did a lot of looking yesterday and man the rent vs buy is what really is getting me. I can rent a 4 bedroom SFH for just a couple hundred more than I rent right now. That is just stupid. This market, while I really don't think it will crash hard, is in for a big slow down and probably a slight reduction in value. If I am going to have to eat some money every month I will come out on the losing side of this one.

99% sure I am selling now. Take the money and run.

03typeS6spd

the more reason to rent it imo, if the prices are going down a little, and interest rates on the rise, the rental market should get a bit stronger....

especially if you could afford a 100/month hit because it doesn't sound like you are taking into consideration your tax breaks on it....

wait the slowdown out while you are not here and the rent should be going up a little bit every year, then if you come back in a few you will probably only have another couple years to a cyclical rise

pure speculation of course.... but its what im doing so i have a little bit riding on it

fdl

Housing Market Cooling, Data Say
In Washington, Sales Are Down, Inventory Is Up

Friday, November 11, 2005; Page A01

Lynn Edmonds and his wife, Sebnem, could barely wait to sign on the dotted line back in May when they committed themselves to pay $796,000 for a three-floor townhouse under construction in Alexandria's Cameron Station.

But since May, the sales prices for the development have fallen -- and units like the one the Edmonds bought are now being sold for $699,900. The Edmonds are facing the prospect of a $100,000 loss in value before they even walk through the front door.


http://www.washingtonpost.com/wp-dyn...111002241.html

----


Ouch ...

Fibonacci

Ouch may be an understatement....

Being underwater with leveraged money sucks.

95gt

God damnit market, you hold on just a few more months you bitch. Daddy needs a few more months out of you

Fibonacci

Better bust a move...


Real-Estate Speculators, Pulling Back, Help Fed Remove `Froth'
2005-11-21 00:09 (New York)


By Kathleen M. Howley and Andrew Ward
Nov. 21 (Bloomberg) -- Lisa Tershak is offering to pay
$5,500 in cash to anyone who buys her three-bedroom house in
Leesburg, Virginia, near Washington.
She's reduced the investment property's asking price five
times since July to $464,900, not far from the $450,000 she paid
for it in March. ``There's too much inventory,'' says Tershak,
35. ``Everyone felt the bust coming and decided to dump their
properties at the same time.''
Investors who helped fuel the U.S. housing boom by bidding
up prices are now so desperate for buyers that some are offering
cash bonuses in such markets as Washington. That's a sign the
Federal Reserve is succeeding in removing some of what Chairman
Alan Greenspan called ``froth'' from the market. Inventories of
unsold single-family homes are near a 17-year high as demand
from speculators wanes and mortgage rates have risen more than a
percentage point from a four-decade low reached in 2003.
``We're at the turning point,'' says Susan Wachter,
professor of real estate at the University of Pennsylvania in
Philadelphia. ``We're all hoping for a flat market, and not a
plummeting market.''
That would be welcomed by Fed policy makers as a sign that
they are succeeding in slowing the economy to a sustainable pace
of growth, Dean Maki, chief U.S. economist at Barclays Capital
Inc. in New York, said in an interview.
``We have seen a 65 basis-point rise in mortgage rates over
the last nine weeks, and this does appear to be starting to slow
mortgage purchase applications,'' Maki says. ``I would interpret
this as a sign that Fed tightening is gaining some traction in
slowing the housing market.''

Interest Rates

The Fed has raised interest rates 12 times in the past year
and a half to slow growth to a pace that won't kindle inflation.
The average rate for a 30-year fixed mortgage, at 6.37 percent,
has risen for 10 straight weeks, according to Freddie Mac, the
second-biggest purchaser of U.S. mortgages. Applications for
loans to purchase real estate are down 12 percent from the
record set in June, the Mortgage Bankers Association reports.
Declining demand from speculators will help slow home sales
to an annualized 6.77 million this quarter from a record 7.24
million in the third quarter, says David Berson, chief economist
at Fannie Mae. ``Perhaps investors have decided this is the
right time to move out of housing and into other assets,'' he
says.
The falloff in demand is already being felt in regions
such as Las Vegas, the fastest-growing housing market in the
U.S. a year earlier.

Unloading

``The mom-and-pop investors are unloading their
properties,'' says Greg Sullivan, 42, a partner in Cash Now
Vegas LLC, a Las Vegas company that buys homes from investors
and resells them. ``When home values were going up $10,000 a
month, everyone wanted in. Now, all those properties are sitting
empty.''
Nationwide, home sales probably will decline in every
quarter of 2006, Berson said. Sales in Maryland fell 3 percent
in the third quarter from a year earlier, and Virginia sales
dropped 3.6 percent, according to the National Association of
Realtors.
``The speculator has been buying 10, 15, 20 percent of the
homes in anticipation of flipping and turning them over to
others,'' Bill Gross, manager of the world's biggest bond fund
and chief investment officer at Pacific Investment Management
Co., said in a Nov. 9 interview. ``To the extent that higher
interest rates increase the cost of carrying that speculation,
they may become more reluctant to buy.''

Investment Buying

Investment buying accounted for almost a quarter of U.S.
home transactions last year, according to the Realtors group.
Investment-home purchases rose 14 percent to 1.8 million in 2004
from 1.57 million in 2003. The group doesn't have 2005 figures.
Some 2.45 million single-family houses were listed for sale
in September, and the rate of growth in the U.S. median home
price will probably slow to 5.3 percent next year from 12
percent this year, according to the Realtors.
``This is the sign of a soft landing in the marketplace,''
Nicolas Retsinas, director of housing studies at Harvard
University in Cambridge, Massachusetts, said in an interview.
``I do believe the levels of price appreciation in some of the
markets, particularly the two coasts, were unsustainable. At
some point they had to moderate.''

Less Pricey

Still, demand for less expensive housing remains strong.
The median home sales price in Washington's northern Virginia
suburbs, where Tershak is cutting her asking price, dropped to
$490,000 in October from $500,000 in July, according to
Metropolitan Regional Information Systems Inc., the regional
multiple listing service. Meanwhile, the median sales price in
the less pricey Washington suburbs in Prince George's County,
Maryland, rose to $315,000 from $305,000.
D.R. Horton Inc., which builds homes that cost less than
the national average, reported Nov. 16 that fourth-quarter
earnings soared 61 percent and raised its earnings forecast for
next year. Fort Worth, Texas-based Horton is the largest U.S.
homebuilder.
The Fed is ``getting exactly what they wanted, and that is
a little bit of the froth taken away, but still the economic
growth, and growth that supports housing,'' Bob Walters, chief
economist at Quicken Loans Inc. in Livonia, Michigan, said in an
interview.
Lyle Gramley, a former Fed governor who's now senior
economic adviser at Stanford Washington Research Group in
Washington, says market forces played a larger role than
speculation in pushing up home prices. Prices rose because of
economic growth, low interest rates and a shortage of building
lots in some markets, he says.

First to Run

``When fundamental factors drive prices up, it certainly
does encourage speculation and more buying by investors,''
Gramley says. ``And when the froth begins to come out of the
market, those are the first people who run for the hills.''
Cooling speculation is just one sign the housing market is
slowing. Toll Brothers Inc., the largest U.S. builder of luxury
homes, on Nov. 8 reduced its sales forecast for 2006 to 9,500 to
10,200 homes from as many as 10,600 projected on Aug. 25.
October housing starts fell to 2.01 million at an annual rate,
from 2.13 million the previous month.
Some experts say home prices in previously hot markets such
as Boston and Washington will fall in 2006. Gramley foresees
``declines in home prices of maybe 10, 15 or 20 percent on both
coasts on a year-over-year basis.''
``The economy can take that,'' he says. ``It won't cause a
major problem, but we don't know if it will stop there.''

source: bloomberg.com

BigPimp

^Reality needs to hit and that is what is happening now.

However, this is very localized. FL is still experiencing high demand with short supply. Rents have gone up in FL. NYC is still ok. Philly is more or less fairly valued with cheaper condos downtown flying off the market, however, more expensive homes ie 500k in the suburbs have been listed for months.

F900

Tell me about it....

I'm closing on a Condo next for for $250K here in Ft lauderdale, last week mine was apprased at $262...prices are crazy here in S Florida.