Dr. Housing Bubble 1 Million Visitors! 200th Housing Post.
When I started this site, there really wasn’t too many “bubble blogs†out there. You had a handful of bloggers yet the majority focused on general economics, gold, and other financial issues except the major housing and credit bubble that we were living in. In the matter of two years, this blogging niche exploded. It would be easy to take all credit for the explosion of traffic but realistically people hungered for an alternative source of media and many realized that this housing market had gone off track. If you were to look at it scientifically, bubble blogs exploded just about the time the housing market peaked. Now I know many other sites have surpassed that 1 million hurdle but I think this is a big moment for the site.
Now why blog about real estate especially about real estate in
What to Expect for 2008?
I’ve made multiple predictions throughout the many articles that housing was going to decline in late 2007 or early 2008. In fact, in late 2006 and early 2007 the signs were already pointing to this slowdown via leading indicators. This wasn’t rocket science. Inventories were rising, delinquencies were faltering, builders were scaling back, and yet not much was said about the impending crash since prices were still hitting record highs. At this time, many housing bulls were predicting that housing would be positive for the year and some even went out and said there would be double-digit appreciation! I kept looking at incomes and how people were financing their homes and clearly, they were stretched to the absolute credit max. In fact, even Ben Bernanke was quoted as saying that the subprime problem would be contained. The same subprime problem that brought about a credit freeze in August and the same non-problem that the central banks are now combating with and has spread into virtually every area of the credit markets; credit markets that include other areas aside from scapegoated subprime. From year-end of 2003 to about the middle of 2007 there were about 5 million subprime loans originated. Of these 5 million loans 2.5 million are still out there with $526 billion still looking to reset from high 7 to 9 percent rates to 10 to 12 percent rates. In no shape or form are we out of this mess. And many of the 2.5 million loans that are no longer on the books are no longer there because an appreciating market masked a lot of bad financial moves. People that got in trouble were able to sell in 2005, 2006, and possibly early 2007. Now, this option is off the table for many metro areas with declining housing prices. And with poor employment and stagnant wages, any housing payment is going to hurt. It just goes to show the fine line many people were walking. Going zero down or with very small amounts of money, a 5 percent decline wiped out any equity position they had in the home. Remember that surge of homeownership rates? Well we are almost back to pre-exotic financing level rates.
2008 is going to be a very busy year for the housing markets but more importantly, the overall health of the global economy. With unemployment suddenly spiking to 5 percent, it is clear that the credit contagion is spreading throughout the markets and folks are simply in debt up to their eye-balls. We are going to have a very busy year in 2008 and I appreciate you taking the time to wander on over to Dr. Housing Bubble!
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20 Responses to “Dr. Housing Bubble 1 Million Visitors! 200th Housing Post.”
You’re welcome, for reading the site… thank you for maintaining it! I work for a futures trading company, though not in this industry, and I don’t have a property affected by the bubble, but I enjoy reading here all the same. It’s sort of refreshing to get some commentary that feels a little more common sense and reality-based than all the flailing on CNBC I’m subjected to daily!
Speaking of which, I cannot find the link at the moment, but I was reading an interesting piece on Friday regarding how the CME housing derivatives market had pretty accurately nailed the bubble burst, despite everyone else being sunshine and rainbows. It’s a shame derivatives aren’t really more clear to ordinary consumers and investors, since it might maybe have helped make the situation clearer to some people, though I’m sure it wouldn’t have really stopped the mad buying sprees.
Anyways. Cheers for the blog!
hi i read your site frequently. im myself a RE investor, in Tokyo (Japan).
im a bit worried with whats going on abroad, and also some negatives here (= demographics, and prices) but i bought on the cheap side (= 2005, the bottom was 2003), and cashflow is good, and interest rate very low… so that should be the basics… and i didnt forgot to put 30% down as well… so it should be good
anyway, the problem with RE, is people dont understand what an investment is, that you can only have a long term approach with RE (cashflows), you cant flip it, if you want to flip, open a stock FX or futures account
i really think America is f*cked this time… True, the high techs business will continue to thrive, the big cities as well, but all middle-class America, is in for really bad time, i think alas..
This blog is invaluable for painting an undeniable and in-your-face picture of what is wrong with the housing market and by extension the credit markets–in CA, in the USA, hell, even in the UK. No sane California homeowner can look at one of the Real Homes of Genius without getting that “a hornet just flew up my shorts” feeling. You can dance…you can even dance real fast…but in the end you just know that you’re gonna get stung right in the ass.
You started this blog exactly 8 months after field research (driving my dad’s car around his immediate neighborhood in a “desirable” area of coastal Florida and counting the ‘for sale’ signs) told me the housing frenzy was over, that the real estate agents who had been submitting comps were blowing major smoke up my butt, and that I’d better cast around for a relatively honest sales agent who’d tell me at least part of the truth. What I did then was a short enough sale that people in the area thought I was nuts. Since then, the house has depreciated a full 20% below what I sold it for and all the signs that were in the yards back then are mostly still there, per Zillow.
I was delighted to see this blog pop up when it did, as it was an antidote to all the sunny forecasting by real estate agents who were loath to let go of the dream of an ever inflating housing market fueled by a never ending supply of bigger fools.
I’m sure you’ll hear publicly and privately from people who have stumbled onto this blog and been saved from making the biggest financial blunder of their lives, one of those nothing down, interest only jumbo mortgages, “It’s a sure thing, you can refinance on those paper profits in just two years!”
Congratulations on post #200. You’re right, spotting the end of a speculative bubble is not rocket science. However, mob psychology being what it is, sites like this one that threw some well needed cold water onto the frenzied crowds . Let’s just hope enough of it was thrown in time that this country goes into a recession, not a depression.
Thank you for this blog.
Viva DHB!
Building a readership is key. And I’m proud to be one of your many followers.
Ten million renters in LA County? This isn’t a housing bubble! It’s a correction!
Congratulations. And many thanks.
–Kibitzer
I’ve only recently discovered this blog about three days ago when I Googled the key words “housing panic.†It was the best thing I did that day.
My husband and I got married October 2007, and like most newlyweds, we share in the desire to start anew in a home of our very own. My husband and I have excellent credit, no consumer debt, own our cars, money in the bank and our combined salaries fall in the top 5% in the country. We were considered “A+†buyers and told that we would have no problem getting loan. Great news, right? So we signed up with a realtor in November and planned to buy in early 2008, with intentions to make an offer on a house at the end of this month.
We knew that the housing market had slowed, but felt somewhat confident we could take advantage of a deal during the down slope. Our sentiment was further fueled with positive rhetoric from the media, real estate professionals and even peers that have recently purchased a home – this is a “buyer’s market†and now is the time to move. We cautiously believed it too. Despite the looming likelihood of recession, we scoped out neighborhoods, walked through homes and visited the perennial open houses. We pictured ourselves in happy home, white-picket fence and all. Luckily our obsession uncovered quite a few things that just weren’t adding up.
The houses we would even consider were still holding at over a million plus with little sign of dropping their prices in the near future. At this rate, if we didn’t come up with at least 10% down ($100,000+), our loan guy tells us we are looking at 8% interest rate and above. Suddenly, with only $80,000 available for down payment, our good standing means squat in the face of an insurmountable monthly mortgage.
What was more perplexing was the high listing prices and corresponding length of time in the market given the slow down (we saw a few on for over 200 days). Although Zillow has it share of problems, we looked up sale trends as a rough guide and realized about half the houses we were interested in were purchased during the bubble. We speculated that these owners wanted to either flip or were not able to afford payment – either situation was disparate. We were surprised to still see these prices in the market. About four years ago, these same houses were going for around $300k. Too bad our salaries don’t reflect the same year over year increase.
The “buyer’s market†fantasy has been demystified. We wanted it to be true, but it wasn’t. When I landed on your site, it confirmed all of our growing concerns, but backed with the empirical evidence we’ve been seeking, presented in a logical, organized critical analysis. There’s so much clutter out there about this housing bubble, some minimize or down right deny its existence. It was absolutely refreshing to finally see in-your-face-facts. Your site is so successful because it strikes a nerve with the average Californian seeking their lot in life (literally). So there you have it, an unsolicited endorsement for your blog. Bravo, Doc. P.S. – We’re not buying any time soon.
Has anyone seen TLC’s new show? It’s called “Please Buy My House!” No joke.:) I just had to watch. It highlights 3 sellers navigating the perils of a down market. One woman couldn’t “afford” to lower her price from $967k even though she herself admitted that she has $400k in equity. I don’t think my husband and I ever laughed so hard!
Congrats and thank you for an excellent blog.
Thank you for the articles ‘Dr Housing bubble’. They are read with great interest by me (for over a year now) and many others in New Zealand (NZ).
It must take a great deal of effort, commitment and knowledge to write such informative, helpful and honest articles. For which I applaud you.
We in NZ are following the USA/California housing bust cycle (and the UK and parts of Europe) and thus it’s interesting to read what is happening ‘over there’ and watch it unfold here, with the obvious slight variations.
e.g ‘Your liar loans’ whilst ours are called ‘self certified loans’; same thing, different name, which the Realtors (Real Estate salesmen/agents over here) use to their advantage. e.g. NZ doesn’t have a problem because we don’t have ‘sub prime’……..to quote a local (beer) advert…….Yeh right !!!!
Cheers from NZ
Factboy
Thanks DHB
Thank you for sharing your wisdom and insight … i am on the East Coast but still enjoy reading the sane explanations!
DHB,
My wife and I love your blog! It is and always has been an enjoyment to read.
I was raised and still have family in SoCal and intend on moving back in 4.5 years. At the time during the run up, I could not put my finger on it, but while visiting in the past few years I was amazed that a large number of listings stated something along these lines . . . “Sellers will entertain offers between $X and $X+.” I asked my sister if this was a joke, and her reply was no, usually these people get multiple bids in excess of the $X+. My next thought was, well what the hell do these people do for a living? My discovery, as it is now common knowledge on the various blogs, media, etc. was nothing. Not a damn thing. Mmm mmm mmm, liar loans, unbelievable. Oh well, enough of that.
I am still trying to determine the extent of the losses that this deal will generate in the next few years. The lenders have made their “write-downs” for anticipated loan losses however, I believe that this is only a portion of what will truly be considered losses in the next few years.
I must split for now, but will continue to be an avid reader.
Great Blog……great potential to expand on what you do here….searchable homes of genious…..i wish you do more in other states! But i guess real estate is local ; )
The unemployment rate is small although still alarming. Hope this will not go to far to affect the real estate business. More power to you.
I am a Realtor in Conway, Arkansas and am getting rather tired of everyone talking about how bad the market is EVERYWHERE. In our market last year, the average home price rose by just over 5% from the previous year. However, I am seeing more and more people reluctant to buy and sell not because of financial condition but instead because of constantly hearing from the national media and others how bad the housing markets are. The misleading information is so overwhelming that buyers and sellers are starting to believe it.
Also, I think it is news worthy that nationally 1 in 775 homes is in foreclosure; however, only 1 in 2,323 Arkansas homes are in foreclosure. According to, http://realestate.msn.com/buying/article2.aspx?cp-documentid=4734608 .
As we start the new year, I am already seeing an increase in activity and fully expect in our market to be back on track as far as number of transactions in 2008.
Greg Moss – Crye-Lieke Realtors
1065 Skyline Drive
Conway, Arkansas 72032
(501) 733-9493
http://www.GregMossRealtor.com
http://www.MovingToConway.com
Been reading for a while, and love this blog!
‘Real Homes of Genius’ is the bomb.
Maybe you should consider making them into a book?
Go Dr HBB – congrats on #200!!
Greg, it is nice to hear that everything is good in Conway AR. I did a map quest to see where Conway was. I also looked at home prices in Conway, AR and one can get a 3000 sq home for 200k, try that in LA. If one looks at the income people make in LA, not that many people make over 100k. So you tell me how are they going to qet a 600k loan to live there. They could prob get a nice house for 100k in Conway, but not here in LA. Talk to realtors in LA and you will see how bad the market is.
G
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