Housing Bubble News, July 14, 2006
I just noticed Terry Savage’s latest OpEd piece over at TheStreet. In Economic Issues Start Hitting Home, Miss Savage says some important things:1
Memories of recessions, job loss and home foreclosures are in the shady, distant past. Inflation, with soaring prices and interest rates, is thought of in historical terms. The word “stagflation” — a combination of inflation and higher rates, with a slowing economy — seems to have left our vocabulary.
She’s right. I talk with friends and customers each and every week who only complain about energy costs and don’t seem to realize that prices are going up all over the place, but wages are just not keeping up. I downsized my own lifestyle by over 80% in the past 2 years, but my living expenses are starting to edge up significantly over last year as a percentage of income. I have no idea how some of my friends can live with the costs of life — maybe it is home equity they’re secretly extracting.
I was also reading MoneyWeek this morning and felt like I was reading this website. In their article titled Which asset prices are heading for a correction? they cover some of the thoughts I’ve been talking about for months on the site and over a year in person:2
…the difference between mortgage borrowing and residential construction is the “largest ever” and shows by “how much housing has added to growth in recent years through mortgage borrowing (with over a third of that money flowing to non-housing spending) and construction… This is definitely true. I have at least a half dozen friends in my area who have had their homes on the market for over 6 months, with the homes totalling over US$3million to all sell. The homes were bought for about 30% less just a few years ago — but they’re not selling. On the same hand I have another dozen friends who are contemplating selling their homes based on market values they received about a year ago. I’ve explained to them that the housing market is cooling quickly, but they see many of their neighbors listing homes at the old price (and not selling).
Even the MoneyWeek article talks of the problems in the Midwest, which many analysts said were less prone to a housing market crash: In Illinois during the first three months of 2006 nearly 13,700 properties entered foreclosure, up 32% from the fourth quarter of 2005, according to an analysis by property tracker RealtyTrac Inc. The numbers are grimmer elsewhere in the Midwest. Michigan and Ohio, battered by automotive-related job losses, together recorded 45,000 mortgages entering some stage of foreclosure in the first quarter.
I’ve always said that bubbles don’t really go away — because bubbles are created by the Federal Reserve printing too much new money, that money still exists in the economy overall. Bubbles move from one market to another, with the first market bursting on the latecomers (the “suckers” in a given investment market). The Rocky Mountain News sets up the bump and set portion of this volleyball game in Denver market for commercial real estate hot:3
Investors, especially those from California, who recently have been accounting for 70 percent of the bidders, are willing to pay record prices for Denver office and retail buildings because they look cheap compared with buildings on the East and West coasts.
The spike portion of the game comes in another article, though, from NewsWire today titled Colorado Leads the Nation in Number of Foreclosures:4
Denver County tops the list with 2,703 pre-foreclosures, meaning homeowners are at least three months late paying their mortgage and there i
Or use RSS:
Subscribe in a reader
Get Daily Updates:
Leave a Reply