Archive for June, 2006
Housing Bubble News, June 23, 2006
Date: June 23rd, 2006, Filed under Housing Bubble News
In good news for housing builders, the Mississippi Supreme Court has ruled against the growing number of municipal impact fees being charged in the state.1 These fees were always considered an illegal tax (not presented as a referendum or other acceptable tax) by home owners and developers, but the municipalities have always wanted to get their fingers in the housing bubble. The Supreme Court decision should bring a large refund to developers and severely harm the cities that are already overbudget (due to tyrannical expansion, not due to actual resident need).
Beazer Homes, a developer in Phoenix, has announced today that they’ll be putting off extending into the Tucson region.2 While not specific comments were made as to why the developer declined to buy land in the region, they pointed at a possible cooling in the area. From personal experience I know of many home owners in Arizona who were greedily waiting as the housing prices skyrocketed over the past 3 years, some even buying second speculation homes, and all of them are now fearing taking loses on their speculation. When a $10,000 granite countertop upgrade could net you $25,000 in added home sales price, you know there will be a problem ahead.
Not a day goes by that I don’t complain to the local police in my county and village about their lazy lives — instead of watching our properties and our families, they’re working solely to create a profit for the village, it seems. I’ve seen more police officers sitting and radaring speeders and looking for drivers not wearing seatbelts than I have seen officers doing what they’re meant to do: patrol neighborhoods, talk to residents, and be on the watch for real property violations. It seems that a property problem is happening in Green Bay, and the police have no desire to help: renters of garbage dumpsters are seeing huge costs from trespassers illegally using their dumpsters.3 We had a dumpster in our neighborhood (a cul de sac) that was shared by the neighbors, but we regularly saw outsiders driving in to use it. Lucky for me, my community of neighbors will stop the trespasser from leaving the cul de sac until the law can come and arrest them (for trespass). WBAY-TV’s report shows that the police don’t even care — the laws are on the books, but the police refuse to enforce them.
Some due justice may come to one of the usual suspects of the community zoning boards in Ocean City Maryland. Walt Boge, Ocean Pines Environmental Control Committee Chairman, issued a letter condemning a disabled resident as being a liar when she wanted to erect a 6 foot fence to keep her dog in her yard.4 The resident said another neighbor also had such a fence, and Boge’s letter attempted to destroy the reputation of this disabled resident without realizing that she was telling the truth. Here we see the usual tyranny that comes from the property overlords when one lives in an excessive-authority association of home owners. My neighborhood has some very basic rules (grass height, weed-and-feed twice a year, water your lawn so it doesn’t die) but nothing outrageous. The fact that a landowner can not erect a fence without approval of a committee shows that Ocean City has no belief in personal property freedoms. I hope that the lawsuit against Mr. Boge continues.
In a survey of the Sacramento housing market, up to 1 in 3 residents in the area are considering moving out of the area due to increased costs and prices.5 The survey was overseen by Amy Liu, a professor of sociology at California State University Sacramento, and the results are almost identical to last year’s survey, according to the article. Typical in California’s pro-socialism stance, 91% of homeowners believe that 15% of homes should be designed for low-income families. It has been proved time and again that these homes are never sold to the people who need them, but are just used as political ploys to gain votes and more money for the system.
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Housing Bubble Report, June 14, 2006
Date: June 14th, 2006, Filed under Housing Bubble News
Reports have been flooding in that housing prices in most regions still haven’t cooled off. While prices in the most popular regions continue to rise, this is easily explained by seeing that the Federal Reserve reports every week see an extension of consumer credit without fail. As long as new money is being created to satisfy consumer demand, prices will go up with the inflation of the new money. The longer that the Fed continues their 20 year policy of inflationary money supply creation, the bigger the crash will be when consumers can no longer pay their bills. US News and World Report’s Paul J. Lim sees the same likelihood of a severe correction or crash in his article titled Housing bubble correction could be severe.[link]
A Harvard study believes we’ll see a soft landing in a housing market correction.[link] They are basing their study on flawed government reports, such as the unemployment/employment report that is basically made out of thin air. They also are forgetting that many jobs in many markets come directly out of the job creation required for new homes being built. If the homes don’t sell, many of these jobs will be gone. My faith in Harvard’s studies has fallen significantly in the past decade, and here is another example of pro-statism that is helping to create confusion for the investors. As long as Bernanke keeps the printing presses running, the risk of a strong correction gets bigger and bigger. Many consumers are spending credit money today knowing that the same money will be worth less tomorrow, but the fear of inflation is that wages won’t rise as quickly as costs go up, leaving consumers with more income but less available money to pay down debt.
We’re also seeing that the demand for home loans is up for the first time in a month. [link] The majority of this surge in demand comes from home refinancing demand — a sign of overextended debt by consumers. The home equity extraction has always been an easy way to pay off revolving debt, but many consumers quickly run their credit cards up again. The housing bubble has allowed millions of home-”owners” the opportunity to clear out debt every few years by extracting the new equity in their home (and extending their mortgage another few years). So many borrowers believe they’re saving money when they cut out credit card debt and lower their payment, but they’re forgetting how many more year they’ll have to work to pay the new loan off. No one who wants to be stable at retirement should pay a mortgage longer than 10-15 years: once you’re in your late 40s, you’ll be tied down to your job just to pay your debts. The quicker you’re free of the mortgage, the more opportunities open up in the latter third of your work life.
National City Corp just released a report showing that 71 out of 317 metro areas are deemed overvalued, with Honolulu falling into the “extreme” overvaluation category.[link] The number of metro areas that are considered overvalued by the bank is up more than 10% from last year’s report.
For those who still believe there is no bubble, the facts are starting to weigh down that debate. We’re close to seeing a supply of over 150,000 homes,[link] which could outpace the amount of new home buyers to well over a year. This puts sellers who are not speculating in a very tough position to sell if they need to, but if they’ve recently extracted equity in a refinance they may be unable to pay off the total debt.
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