Could this be the lull before the storm?

NEW -> Contingent Buyer Assistance Program
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IIIrvine_IHB

New member
Gates Foundation just dumped a lot of HB's stocks, foreclosures are rising, with layoffs in the real estate industry sure to follow. Irvine certainly employs many, many loan production-related jobs (New Century), as do other support positions in escrows, titles, appraisals, etc.
 
<p>New post on a "lull before the storm" ... hmm, maybe more like the "eye of the hurricane?" ...another article from Money... although not specifically on the OC, it seemed relevant:</p>

<p><a href="http://money.cnn.com/2007/02/16/news/economy/housingstarts/index.htm?postversion=2007021611">http://money.cnn.com/2007/02/16/news/economy/housingstarts/index.htm?postversion=2007021611</a></p>

<p>Seems a little bit different from the "all is well" homebuilder philosophy that I hear all of the time.... no, not on this site...</p>
 
Let's see:





<a href="http://money.cnn.com/2007/02/16/news/economy/housingstarts/index.htm?postversion=2007021611">Housing Starts are Dropping</a>





<a href="http://money.cnn.com/2007/02/15/real_estate/home_prices/index.htm">Housing Prices are Dropping</a>





<a href="http://www.msnbc.msn.com/id/8475364/">Affordability Index near record low</a>





<a href="http://bubbletracking.blogspot.com/2007/02/wow-just-look-at-rate-of-increase.html">Forclosures are Increasing</a>





<a href="http://money.cnn.com/2007/02/12/news/economy/subprime_realestate/index.htm?postversion=2007021214">Credit is Tightening</a>





Is it any wonder I am bearish?
 
This is a yesterday's article from NY. I actually found it hard to believe when I read the news, and I can't imagine that anything like this would happen in Irvine in near future, at least not this year. But I guess it goes to show how any housing market is local, and buyer psychology really matters.





http://www.nytimes.com/2007/02/19/nyregion/19market.html?ref=realestate


<strong>


Housing Market Heats Up Again in New York City





</strong>"The three largest real estate companies in New York agree that in January, there was a double-digit increase over the same month in 2006, both in prices and the number of signed contracts. The increase is being attributed to factors including a strong regional economy, pent-up demand and higher year-end bonuses on Wall Street… Warburg Realty Partnership, said homebuyers' psychology has changed. "For almost two years, they've been scared that the market would plummet and they'd end up like fools who paid too much."





<a href="javascript:void(0);/*1172032113640*/"></a>

 
Interesting article about NYC:





"“The plunger that freed up all the hesitation at all price levels was those bonuses,” said Diane Ramirez, the president of Halstead Property. "





Unfortunately, I don't see all the sub-prime lenders in Irvine and OC paying huge bonuses any time soon. Maybe if we could get Goldman Sachs to relocate here...
 
Let the bubble reflate. It'll be just that much more pain and that many more bargains in the future. Me and my cash can wait as long as it takes.
 
<p>Just wait until next year and see how those bonuses do with all the losses Goldman Sachs, JP Morgan, Merrill Lynch, Deutsche Bank, Morgan Stanley, Bear Stearns etc. take on the ABX indexes. Today all A to BBB- were near or set all time lows with BBB- 06-02 hit $79.04 and BBB- 07-01 hit $81.74 leading the way just proving last week was another dead cat bounce. Of course if the merger activity continues there will be nice bonuses for some in NYC.</p>

<p>oc_fliptrack - You should check the ABX later this week to do an update on your post from before. Just show that it is not getting any better. </p>
 
NovaStar took a hit, losing 30% in yesterday's trading... as did Accredited Lending (LEND), which reported a loss <strong>three times larger</strong> than the street expected.





http://biz.yahoo.com/cbsm/070220/23609bd80eed4930a729858b2d479d89.html?.v=2


http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20070214:MTFH93245_2007-02-14_21-38-28_N14296433&type=comktNews&rpc=4





Has anyone wondered how we have been financing the Iraq war and still manage this housing bubble? My theory is the real estate market has been a boon for foreign investors the last few years, providing much higher returns than they would at home. As they begin to realize this bubble is slowly, but surely, deflating, the foreign capital inflows will wither away as evidenced here:





"The drop in net US inflows was almost all the result of a sharp fall in net buying of Treasuries. Foreigners bought a net $18.3bn worth in December – the weakest in six months and down from a record $54.4bn in November."





http://www.forexblog.org/2006/02/us_capital_infl.html


http://www.ft.com/cms/s/dda665fc-9e58-11da-b641-0000779e2340.html
 
<p>Just to give you some insight about the market in the NYC area. We live in a town across the river from Manhattan in NJ, less than a mile away from Wall Street. I've been told by the realtor in our building that the market has really started to pick up again. She moved 6 condos in a week at the beginning of the month in one of the developments that our landlord owns. In the past six months, she was moving like 1 condo every other month but she did tell me that they had dropped the prices slightly but only on some north facing properties that have a view of the Holland Tunnel. Just for your point of comparison, you can get a "soho loft-like" condo apartment, approx. 1200 sq ft, 2 bdrm, 2 bth in Hoboken or Jersey City for $650,000+, not including maintenance which is anywhere from $300 and up (never understood why maintenance was so expensive here, since there is no pool, playground, landscaping. It's just a building). Anyways, that type of apartment in Manhattan proper would run you about $1.5 million+.</p>

<p>The thing about this area unlike Irvine is that it has a very diverse economy that is not so dependent on the the housing market. And there are a lot of people who make an insane amount of money which I think is why we haven't seen much of a decrease in prices. Not to say that if the bubble does crash hard, we won't be affected but perhaps, not as much as over there. The other thing about this area is that there is not a lot of new land that can be freed up for development. What you have is the tearing down of older buildings to build residential highrises. No, TIC monopoly here, although I'm sure there are some other kinds of unseemly things going on in this market, too.</p>
 
Yes, I understand Irvine is no Manhattan although both area have similarily in pent-up demand and risky loans leading to the so-called bubble.





But still, reading this artcile just shows how crazy real estate market can be in highly desirable area. Many predicted that this season is supposed to be a severe downcycle even for NYC. And now... open house attracted 100 people? And people are feeling bad because they can't find a one-bedroom apt for less than $750k? Like I said, I found it hard to believe when I read this. I thought this was a joke or something.





<em>"A week ago, one open house attracted 100 people to an Upper West Side one-bedroom; a $2.475 million house in the Park Slope neighborhood of Brooklyn sold in a day."</em>





<em>"Katalin Shavely, a 30-year-old bedding designer in Manhattan, devotes her weekends to scanning the classifieds and attending open houses, searching for just the right one-bedroom apartment for less than $750,000. She can’t find it. “I made a mistake,” she said last week. “I should have started looking before Thanksgiving.” </em>

<p><em>Mr. Miller said New Yorkers had been reluctant to buy because of the feeling of an impending crash. “Last summer, a lot of information was being dumped on the consumer: stories about the glut of condos in Miami, Washington, D.C., and Las Vegas, exacerbated by the constant debate on the blogosphere about housing bubbles, mixed together with a barrage of negative predictions,” he said in a telephone interview."</em></p>
 
Red,





I don't see the pent-up demand that you do. Irvine is certainly desirable, but there is no shortage of supply right now nor is there an excess of buyers. Perhaps I was too short with my comment about the sub-prime lenders not paying many bonuses...





The local real estate market will be severely impacted by the reduction/elimination of sub-prime lending due to the lack of available money to buy homes, but it will be impacted even more by the fact that these sub-prime lenders are important to our local economy. Orange County in general, and Irvine in particular, is heavily dependent on real estate. We are ground-zero for sub-prime lending. These businesses are not making any money; in fact, they are <a href="http://www.mortgageimplode.com/">going out of business at an astonishing rate</a>. This is not good for the local economy. Many people who are dependent upon real estate for their livelihoods are about to lose their jobs. This is not going to be good for demand. Remember desirability is not demand. Demand is measured in dollars. Dollars people are ready, willing and able to put toward real estate. These dollars are being removed from the market by a reduction in lending (current) and a reduction in employment (coming soon). These are very troubling signs.





Red, when I read your posts, I get a sense you are not really trying to form an objective view of the future of the real estate market. It seems to me (and I may be wrong) you are just looking to justify a decision you already made. I can understand that. I recently moved into a different rental, but I still occasionally check the market to see if I got a good deal or not. Doesn't really matter because what is done is done, but it is nice to feel like I made a good decision. You must have some doubts, or you probably wouldn't read and post as much as you do. I wish I could offer you comfort. I would rather do that than rain on your parade. I am just trying to be objective and truthful. And as you have probably surmised, I am putting my own money where my mouth is: I could buy in this market; I have the means, but based on what I see, I don't think it is a good idea. Whatever happens, I will be OK. I can save money on my housing costs indefinitely by renting. I hope it all works out for you as well.





Irvine is no Manhattan. It is not <a href="http://www.tax-news.com/asp/story/story_open.asp?storyname=26409">Monaco or London</a>, either (<a href="http://www.theconservativevoice.com/article/22336.html">Europe's bubble is also getting it's second wind</a>).
 
<em>"Sorry you're right. I probably shouldn't rain on your parade either."





</em>No worries. You're not raining on my parade. Hell, I work in the industry, from a job security and compensation standpoint, I would far rather the market continue to rise forever.<em></em>
 
More tidbits on ABX indexes:





" Prices for credit-default swaps linked to 20 securities rated BBB-, the lowest investment grade, and created in the second half of 2006 fell 3.9 percent to 78.59 today, and are down 19 percent since being introduced Jan. 18, according to Markit Group Ltd. The drop in the ABX-HE-BBB- 07-1 index means an investor would pay more than $1.1 million a year to protect $10 million of bonds against default, up from $389,000 last month."





http://www.bloomberg.com/apps/news?pid=20601087&sid=avEt.7ldbFGM&refer=home
 
<strong>Silicon Valley Home Price





"</strong>January's median price is approximately 9.75 percent and $80,000 lower than the market's record high of $819,950 set back in June of 2006."


<strong>


</strong>http://<a href="http://realtytimes.com/rtcpages/20070222_silicondecline.htm">realtytimes.com/rtcpages/20070222_silicondecline.htm</a>


<strong>


I</strong>s this a harbinger of things to come for OC? It appears that the Silicon Valley is rolling back prices to 2006. Could the U.S. housing bubble deflate by as much as 70% as did Japan's own bubble economy?







 
Interesting article from Wharton





Could Tremors in the Subprime Mortgage Market Be the First Signs of an Earthquake?

http://knowledge.wharton.upenn.edu/article.cfm?articleid=1664&CFID=3711685&CFTOKEN=87598350





""There's no doubt that we have already lost about 1 percentage point of [economic] growth due to the pullback in the housing market," says Wharton real estate professor <a href="http://www.wharton.upenn.edu/faculty/wachter.html">Susan M. Wachter</a>. A retrenchment after years of soaring home prices fueled by easy money has caused many economists to trim this year's growth forecasts from 4% to 3%, she adds.

<p>And it could get worse, she warns. If interest rates rise, growing numbers of homeowners could fall behind on aggressive floating-rate loans they took out in recent years, forcing their homes onto the market. The glut would depress prices of homes bought with ordinary "prime" loans as well. With home values flat or falling, owners would no longer be able to use refinancing to convert equity into cash, trimming consumer spending. The current slump in home building and sales would persist. "We could potentially have a housing-led recession," Wachter says. If this does occur, it could begin in the second half of 2007 or sometime in 2008, if interest rates rise."</p>
 
Great article! IMO, too many people and institutions were caught off guard with the abrupt change in the market and are literally left holding the bag. So they send their spinners out there to do damage control, including making statements like, "The worst is over!" (I think it barely has begun), and "Prices continue to rise", "Homebuilders' confidence rising" "Foot traffic increase", and other like statements to confuse the buyers who are sidelining. You need to be able to filter all this information, and draw your own conclusion. Another word of advice, "Watch what they do and not what they say." Ummm...





StanPac Lennar





Net Institutional Purchases: (13,505,300) (17,711,200)


Net Change In Institutional Share Held: (24.3%) (16.4%)





Net Insider Purchases/ Sales: (1.4%) NA
 
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