Housing bubble ver 2. It will bust again

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    Aug 05, 2015 6:26 AM GMT
    http://www.nationalreview.com/article/421990/housing-bubble-2-count-on-the-crash
  • bobbobbob

    Posts: 2812

    Aug 05, 2015 7:18 AM GMT
    Timely words, but too late to head off the tsunami.

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    Aug 05, 2015 3:22 PM GMT
    http://collateralanalytics.com/is-a-new-home-price-bubble-forming/
    There has been growing speculation among some economists and real estate market observers that there is another bubble forming in the U.S. housing market or in various metropolitan areas. Our analysis based on a number of approaches we have used over the years to identify home price bubbles is that we are far from bubble territory on a national or metropolitan level and that anyone claiming otherwise is looking to sensationalize an issue which does not exist. However, there are some smaller cities and/or ZIP Codes which are exhibiting frothy behavior and which will be discussed.


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    Aug 05, 2015 3:54 PM GMT
    theantijock saidhttp://collateralanalytics.com/is-a-new-home-price-bubble-forming/
    There has been growing speculation among some economists and real estate market observers that there is another bubble forming in the U.S. housing market or in various metropolitan areas. Our analysis based on a number of approaches we have used over the years to identify home price bubbles is that we are far from bubble territory on a national or metropolitan level and that anyone claiming otherwise is looking to sensationalize an issue which does not exist. However, there are some smaller cities and/or ZIP Codes which are exhibiting frothy behavior and which will be discussed.




    We're there in re commercial with unsustainable cap rates. Once interest rates rise, these 4 caps are going to look pretty silly. even sillier when they go to refi.

    Residential is going the same direction it did last time in pretty much the same markets. We have a very linear residential market here, where Cali is cyclical.
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    Aug 05, 2015 4:07 PM GMT
    I've been having this conversation with friends over the last few months. New housing is going up everywhere in the Fort Lauderdale area. I marvel there could be so many buyers for these expensive properties.

    The last bubble & bust was encouraged by lax mortgage policies (if not outright fraudulent). Despite Republican opposition I hope sufficient safeguards have been put in place. We may be overbuilding here once again, and another bubble burst is not far away.
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    Aug 05, 2015 4:15 PM GMT
    Art_Deco saidI've been having this conversation with friends over the last few months. New housing is going up everywhere in the Fort Lauderdale area. I marvel there could be so many buyers for these expensive properties.

    The last bubble & bust was encouraged by lax mortgage policies (if not outright fraudulent). Despite Republican opposition I hope sufficient safeguards have been put in place. We may be overbuilding here once again, and another bubble burst is not far away.


    Correction: the opposition to the proposed Bush admin fix in 2003 came from the house CBC, and they ain't republicans.
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    Aug 05, 2015 4:31 PM GMT
    Art_Deco saidI've been having this conversation with friends over the last few months. New housing is going up everywhere in the Fort Lauderdale area. I marvel there could be so many buyers for these expensive properties.

    The last bubble & bust was encouraged by lax mortgage policies (if not outright fraudulent). Despite Republican opposition I hope sufficient safeguards have been put in place. We may be overbuilding here once again, and another bubble burst is not far away.


    I know we are around here and it's almost all high-end product in residential. Rents on the class-A product are getting close to LA rents. We now 1 bedroom flats fro $1,500 - $1,800 per month. Hope all those H1B visas will support those rents.

    They won't though and they (developers) will do what they always do and overbuild. Then the house of cards will collapse.
  • rnch

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    Aug 05, 2015 4:34 PM GMT
    freedomisntfree said
    Art_Deco saidI've been having this conversation with friends over the last few months. New housing is going up everywhere in the Fort Lauderdale area. I marvel there could be so many buyers for these expensive properties.

    The last bubble & bust was encouraged by lax mortgage policies (if not outright fraudulent). Despite Republican opposition I hope sufficient safeguards have been put in place. We may be overbuilding here once again, and another bubble burst is not far away.


    Correction: the opposition to the proposed Bush admin fix in 2003 came from the house CBC, and they ain't republicans.




    Please explain and give a credible link (NOT a Fox Feaux News article!) to the "Bush admin fix in 2003"?

    I honestly don't recall this.
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    Aug 05, 2015 4:36 PM GMT
    rnch said
    freedomisntfree said
    Art_Deco saidI've been having this conversation with friends over the last few months. New housing is going up everywhere in the Fort Lauderdale area. I marvel there could be so many buyers for these expensive properties.

    The last bubble & bust was encouraged by lax mortgage policies (if not outright fraudulent). Despite Republican opposition I hope sufficient safeguards have been put in place. We may be overbuilding here once again, and another bubble burst is not far away.


    Correction: the opposition to the proposed Bush admin fix in 2003 came from the house CBC, and they ain't republicans.




    Please explain and give a credible link (NOT a Fox Feaux News article!) to the "Bush admin fix in 2003"?

    I honestly don't recall this.


    Sept 11, 2003. NYT. I've posted it something like 50 times.

    Let me get it.
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    Aug 05, 2015 4:37 PM GMT
    Sorry it took so long

    http://www.nytimes.com/2003/09/11/business/new-agency-proposed-to-oversee-freddie-mac-and-fannie-mae.html

    Hopefully, you'll accept NYT?
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    Aug 05, 2015 4:40 PM GMT
    And the congressional hearing



    There's much much more than this in the c-span archives.
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    Aug 05, 2015 4:45 PM GMT
    I did about 50% residential and residential investment back in those days so I pay very close attention to this stuff.
  • rnch

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    Aug 05, 2015 5:12 PM GMT
    Yes, time has shown how "reform minded" and "anti-big business/big banking" the Bush administration was.


    icon_rolleyes.gif



    Given the political climate of the time, IF the Bush Bois had been serious about banking/mortgage reform they surely could had done something about it.

    This article was just a smoke screen/PR stunt and we all know it.

    Just like "Mission Accomplished".
  • rnch

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    Aug 05, 2015 5:15 PM GMT
    freedomisntfree saidAnd the congressional hearing



    There's much much more than this in the c-span archives.


    Congressional hearing are just a bunch of hot air horse hockey; as the too-many-to-count "Benghazi" hearings (and their non-results) have proven.
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    Aug 05, 2015 5:20 PM GMT
    rnch said
    freedomisntfree saidAnd the congressional hearing



    There's much much more than this in the c-span archives.


    Congressional hearing are just a bunch of hot air horse hockey; as the too-many-to-count "Benghazi" hearings (and their non-results) have proven.


    There are hearings and/or debate on most every bill.

    Stopped this bill from moving forward.
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    Aug 05, 2015 5:22 PM GMT
    freedomisntfree saidWe're there in re commercial with unsustainable cap rates. Once interest rates rise, these 4 caps are going to look pretty silly. even sillier when they go to refi.

    Residential is going the same direction it did last time in pretty much the same markets. We have a very linear residential market here, where Cali is cyclical.


    Do I recall that in the last crash we were waiting for the commercial shoe to drop but it never really did? As I don't follow commercial pricing at all and housing just as a hobby, I seem to have a vague memory of that.

    As to housing bubble, that study I posted makes sense to me that there might be localized bubbles but not nationwide with regard to housing. The stuff I read about California sounds crazy, particularly San Fran. And in Florida Miami Beach seems bubbly but certainly not all of Miami, just waterfront, and most certainly-with few exception--not the rest of Florida were you can pretty much buy an existing house for less than the cost of construction with land tossed in for free. It is still an absolute joke here, even where we've seen some measure of recovery.

    The only good news lately has been that even with Florida's still very high foreclosure rates, those are starting to sell higher than the extreme low ball prices they had been fetching. So that might reduce downward pressures.

    As to any idea of overbuilding, it might look like a lot, coming off bottom, but stats don't seem to show craziness there:
    fredgraph.png?g=1sY8

    fredgraph.png?g=1wgS

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    Aug 05, 2015 5:30 PM GMT
    theantijock said
    freedomisntfree saidWe're there in re commercial with unsustainable cap rates. Once interest rates rise, these 4 caps are going to look pretty silly. even sillier when they go to refi.

    Residential is going the same direction it did last time in pretty much the same markets. We have a very linear residential market here, where Cali is cyclical.


    Do I recall that in the last crash we were waiting for the commercial shoe to drop but it never really did? As I don't follow commercial pricing at all and housing just as a hobby, I seem to have a vague memory of that.

    As to housing bubble, that study I posted makes sense to me that there might be localized bubbles but not nationwide with regard to housing. The stuff I read about California sounds crazy, particularly San Fran. And in Florida Miami Beach seems bubbly but certainly not all of Miami, just waterfront, and most certainly-with few exception--not the rest of Florida were you can pretty much buy an existing house for less than the cost of construction with land tossed in for free. It is still an absolute joke here, even where we've seen some measure of recovery.

    The only good news lately has been that even with Florida's still very high foreclosure rates, those are starting to sell higher than the extreme low ball prices they had been fetching. So that might reduce downward pressures.

    As to any idea of overbuilding, it might look like a lot, coming off bottom, but stats don't seem to show craziness there:
    fredgraph.png?g=1sY8

    fredgraph.png?g=1wgS



    "Do I recall that in the last crash we were waiting for the commercial shoe to drop but it never really did?"

    Sure it did, but residential preceded it by about 9 months. And lending never got quite as sloppy on the commercial side.

    It was still a bitch to get a loan or refi done. True, it got a bunch more competitive and amortization periods, interest only and LTV got pretty risky.

    Fundamental underwriting and documentation was still pretty tough, but parameters got stretched about 10% or so in an unsustainable direction,
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    Aug 05, 2015 5:33 PM GMT
    "As to housing bubble, that study I posted makes sense to me that there might be localized bubbles but not nationwide with regard to housing. "

    And true, last time it wasn't every market like it was in commercial. South FL, Phoenix, Las Vegas and the coastal markets really were the one that took it.
  • rnch

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    Aug 05, 2015 5:39 PM GMT
    [quote][cite]freedomisntfree said....And true, last time it wasn't every market like it was in commercial. South FL, Phoenix, Las Vegas and the coastal markets really were the one that took it. [/quote]



    On this we can agree.

    Here in New Orleans, prices hadn't "bubbled" as high as in the areas quoted; so the price drop wasn't as severe and recovered quicker than in other areas.
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    Aug 05, 2015 5:48 PM GMT
    freedomisntfree said"As to housing bubble, that study I posted makes sense to me that there might be localized bubbles but not nationwide with regard to housing. "

    And true, last time it wasn't every market like it was in commercial. South FL, Phoenix, Las Vegas and the coastal markets really were the one that took it.


    If true then I think that's important to qualify a bubble statement. People are still in enough of a panic. And a true bubble--think tulips or Canada--that seems a huge thing, so encompassing that you can't see outside of it. That's not a merely local market, something trending up or down, etc. I think we started overusing the word bubble, especially when you state housing bubble v2. Though someone in Calif might get burned playing musical chairs, overall this ain't that.

    Even this talk about over-building. I know this is going to come as quite a surprise, but people are still fucking. Population is still growing. More households are still forming.

    This study http://edr.state.fl.us/Content/population-demographics/data/PopulationEstimates2014.pdf shows Florida population grew from 18,801,332 in 2010 to 19,507,369 in 2014 so that's 706037/2.5 or 281,414 potential new households assuming everyone moving out of their parents' basement. or /4 = 70,353 units/year to keep up. But between 2010 & 2014 they were building between 2500 & 5000 units per month. (to qualify, that's merely ballpark and not including multi-family buildings.)

    But even qualified, that building does not look out of line with population growth here.
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    Aug 05, 2015 5:53 PM GMT
    rnch said[quote][cite]freedomisntfree said....And true, last time it wasn't every market like it was in commercial. South FL, Phoenix, Las Vegas and the coastal markets really were the one that took it.




    On this we can agree.

    Here in New Orleans, prices hadn't "bubbled" as high as in the areas quoted; so the price drop wasn't as severe and recovered quicker than in other areas.[/quote]

    We didn't much feel it on the residential side here in Columbus, but we also didn't have the big run-up in prices like we did in the cyclical markets.

    Commercial was in trouble everywhere, because unlike residential where every loan loan was fully amortizing, commercial loans were balloons. So when you had a 30 yr am based on a risky LTV on a ten year fixed or even an interest only, when refi time came, after 2008, you were fucked unless you had a whole ton of cash to put in to meet the then current underwriting requirements. Blame that piece on Glass Steagall repeal.
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    Aug 05, 2015 5:59 PM GMT
    theantijock said
    freedomisntfree said"As to housing bubble, that study I posted makes sense to me that there might be localized bubbles but not nationwide with regard to housing. "

    And true, last time it wasn't every market like it was in commercial. South FL, Phoenix, Las Vegas and the coastal markets really were the one that took it.


    If true then I think that's important to qualify a bubble statement. People are still in enough of a panic. And a true bubble--think tulips or Canada--that seems a huge thing, so encompassing that you can't see outside of it. That's not a merely local market, something trending up or down, etc. I think we started overusing the word bubble, especially when you state housing bubble v2. Though someone in Calif might get burned playing musical chairs, overall this ain't that.

    Even this talk about over-building. I know this is going to come as quite a surprise, but people are still fucking. Population is still growing. More households are still forming.

    This study http://edr.state.fl.us/Content/population-demographics/data/PopulationEstimates2014.pdf shows Florida population grew from 18,801,332 in 2010 to 19,507,369 in 2014 so that's 706037/2.5 or 281,414 potential new households assuming everyone moving out of their parents' basement. or /4 = 70,353 units/year to keep up. But between 2010 & 2014 they were building between 2500 & 5000 units per month. (to qualify, that's merely ballpark and not including multi-family buildings.)

    But even qualified, that building does not look out of line with population growth here.


    "state housing bubble v2"

    Attribute that to a little thread title drama to keep the view count up to help Jeff make a few bucks. icon_rolleyes.gificon_eek.gif

    "But even qualified, that building does not look out of line with population growth here"

    You ought to see what's in the pipeline. Will it turn into overbuilding again? Likely. It's not there yet in many markets, but if things go like they always do, it will get there.

    Plus we never have 'soft landings' in the housing market.
    It's always boom and bust cycles, appx. 12-14 years peak to peak, trough to trough.

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    Aug 05, 2015 6:13 PM GMT
    My family is in construction so I know it has always been boom/bust.

    But for Florida at least, currently neither home nor rental vacancy rates look out of whack

    fredgraph.png?g=1rEf

    fredgraph.png?g=1jaJ

    Country-wide it looks like rental vacancies are going down

    fredgraph.png?g=1wYU

    as are owned home vacancy rates

    fredgraph.png?g=1wYS

    monthly supply of homes are still down

    fredgraph.png?g=1vxF

    And here's new home inventory (though to qualify I don't know if this last pic is nationwide--it does not indicate otherwise, however)
    2015-midyear-real-estate-update-8-638.jp
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    Aug 05, 2015 6:44 PM GMT
    I don't pay as much attention as I should to Florida, but from what I see, it doesn't look too out of balance YET.

    My orientation is still to California because I also own property there and I'm licensed there plus lived there for 30 years.

    An Ohioan's orientation, if going out of state, is always Florida. Coastal California is 10x the price per ft so my income is 10x higher for the same amount of work. Land values are an even bigger difference. When the Golden State is golden, it's GOLDEN.

    I have an old client of mine from my prior business whose parents's owned a large lot with a branch on it in what is some of the most valuable RE on the west coast. Property goes back 60+ plus years with the family. Both of his parents' passed and left the property to him and his brother. They would like to have their own separate properties to pass on to their kids when they croak. We talked about putting it on the market (2008 ) about a year after his parents passed with a good deal of unexpired lease left on it.

    I told him that in this instance it would be worth far far more letting 1) the RE market improve and 2) let that lease roll off because this property will be worth lights years more as a development play to the buyer to put up a 40 story or so mixed-use tower on the property than to an investor with a long unexpired lease in place, given where this is. The lot is over 70,000 sq ft and I would guess will be worth in the range of $120 - $140 mil. You bet I want that listing when it comes time. You just don't get opportunities like that back here and if it ever comes up it will be one of the five or so developers who do everything around here and have been in business three or four generations. I was gone for 30 years so no way am I going to be able to get a part of that.

    Here and Florida are appx the same so if I'm going out of state, I'll go back (my other) home to do a deal.
  • mybud

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    Aug 05, 2015 9:48 PM GMT
    bobbobbob saidTimely words, but too late to head off the tsunami.
    Grim reaper...You'd would piss on a guys pant leg and tell him it's raining.Tsunami my ass.