Come Back in 2015

According to this story, South Florida's high priced real estate market is closed for business for about a decade. The arrogance and greed are simply overwhelimg and out of control. Buyer's are beyond frustration.


"In the past five years, the housing crunch in South Florida has moved up the economic ladder from the low-income to the middle-class, pricing a whole new layer of workers -- thousands of Quintin Taylors -- out of the market. To live in a mid-priced house, a family in the Miami area earning the midpoint income must now spend 44 percent of its dollars on mortgage payments. That's double what it cost as recently as 1998 -- and close to Los Angeles at 46 percent and New York City at 49 percent. Even with the market slowing, South Florida still won't return to the affordable days of the late 1990s, economists say. Incomes are limited by a service and tourism economy that doesn't create enough high-paying jobs. Yet housing prices remain high because of money flowing in from foreign and investment buyers. That adds up to an affordability crunch through 2015, Moody's Economy.com forecasts. But change has come so fast that attitudes have yet to adjust. And so the quest for a home is turning into a hard lesson in compromise."

"But finding a single-family home to fit that budget won't be easy. A Florida International University study for release Wednesday found that Broward County buyers need household income of $100,000 to afford a mid-priced home. It's no better in Miami-Dade, where a Beacon Council study found that a household needs $117,204 to afford the average used single-family home."

'The renovated house, just east of Interstate 95 in Nichols Heights, is listed for $265,000, way out of Taylor's price range. But Taylor thinks he could negotiate. In 2002, the house sold for $91,500. Seven months later, it sold for $134,000. Current owner Domenick Vitale paid $160,000 for it last September. Two months later, in November, he listed it for $299,000. In December, the price dropped to $282,900. In late January, it was $265,000.
Still too high, say Lewis and Hernandez. For one thing, the house is listed as a four-bedroom, but two have no closets. ''This is really a two-bedroom with a den and a family room,'' Hernandez says. She says comparable recent sales in the neighborhood are in the $220,000 to $240,000 range. One estimate by an appraiser placed the value of the house closer to $220,000. The agents leave messages for Vitale for several days. No response. Then Hernandez leaves an urgent message that she has a buyer ready to make an offer.
Several days later, Vitale finally calls. But he's not ready to negotiate. Taylor isn't deterred. A second estimate comes in at $240,000. Taylor gets preapproval for a new mortgage with only 5 percent down and decides to make a verbal offer of $240,000. His monthly payments, with taxes and insurance included, would be $2,300 -- $650 more than he wanted to spend. ''I'll just have to cut back on things like shopping, eating out and going out to clubs every night,'' he says. ``The house is the goal.'' But there's still Vitale. The renovated house, just east of Interstate 95 in Nichols Heights, is listed for $265,000, way out of Taylor's price range. But Taylor thinks he could negotiate. The perceptions of sellers may not have caught up with the cooling market -- another factor that might keep the region unaffordable. As things slow down, sellers -- and builders -- will have to adjust, says Ned Murray, the FIU professor who directed the Broward affordability study."

Unreasonable sellers unwilling to make only 50% profit in 3 years. People making $100,000 priced out of the market. A doubling in inventory. If this is not a bubble tell me what is.

Livin' La Vida Loca....

I came across a few charts on one of my favorite sites, link . Recently, our new Chairman of the Federal Reserve and the White House have glossed over the fact that for the first time since the Great Depression, our nation has a negative savings rate. Several 'experts' have also parroted this view that the savings rate although negative does not account for huge wealth in assets such as stocks and Real Estate. I beg to differ with that conclusion.

Looking at our nations' debt load, in the past 5 years alone we have skyrocket from having our percentage of household debt/GDP go from 70% to 90%. But , it gets worse. This chart left off in 2004. Add on another few trillion in loans and we are now approaching 100% debt/GDP.

Isn't it a coincidence Congress just passed major bankruptcy legislation when we as a nation are essentially 'bankrupt" by definition?




Who made all of this easy borrowing possible? Why the Federal Reserve, of course. If you remember after the stock market crash, the Fed panicked and began to lower rates. After 9/11 they lowered rates to 1% and kept them there. The Fed printed up money like it was candy. Look at this chart showing the explosion in M3. I remember learning somewhere about monetary inflation? Also of note is that as of March 2006, the Fed is going to stop reporting M3. I wonder why?


Maybe this gives you a reason as to why we as a nation are bankrupt. We simply borrowed and borrowed and borrowed. Why not? The Fed printed up all of this money. It was there for the taking at 1%. Who needed a down payment or proof of income? We peaked at almost one trillion dollars worth in 2004. The Fed opened up the floodgates, people borrowed and lenders rejoiced.

And how much of this cumulative trillions did we manage to save?


This chart shows that for the first time in 40 years, the percentage of Home Mortgage Debt is greater than the owners equity..... Hmmmm. I thought I was taught that equity minus debt equal net worth....But if the debt is greater than the equity? You guessed it, a nation "upside down".

Seems to me like this 'easy money" was spent.




As I have said, Real Estate is no different than any other financial asset. Just like a stock, bond, mutual fund, commodity, or piece of art, the "value" is what the market will pay. People have used their homes as an investment, not a residence. They have replaced stocks as a means for getting rich 'quick' with real estate 'investing', reducing their homes to nothing more than a commodity to be traded. However, just like the Dot.coms of the 1990's, the value in homes will come crashing down and these people will be for the worse. We haven't saved a darn penny as a nation, we bought SUV's and boats and plasma TV's. We sucked all the equity out of our homes and then some. The party is over and the day after hangover is upon us.

Where's The Reset Button?

Starting this year and going into 2007, as much as $2.5 trillion in exotic mortgages are due to be reset, as reported here story.

"You know those cheap mortgages offered to investors for speculating on housing? With somebody at the other end of a toll-free phone number offering to lend $200,000 at a monthly payment of $678 per month? Lenders who started making those teaser-rate loans a few years ago are getting ready to charge real-world payments on them. "

"The best-case scenario for the future, the one from the real estate agents, is that prices will level out to single-digit appreciation rates. Assuming that scenario, some would-be investors — those who took out highly leveraged loans with extremely low payment options — could soon find themselves owing more on a house than it’s worth. That’s called being “upside down” in a loan. "

"Many more will simply find that their monthly bill has instantly risen by roughly the amount of a car loan. The reason is that after their initial one-, two- or five-year interest, their loans are now scheduled to “reset” at more realistic rates, and will continue to do so, usually for the life of the loan."

“We don’t have enough data to know how big a problem this will be,” said David Berson, chief economist at Fannie Mae, the nation’s largest mortgage packager. "

"John Barron is typical of the new crop of homeowner-investors. They used two separate three-year, interest-only, adjustable-rate mortgages to buy the homes within the past two years. “Besides the two ARMs, we also took out a home-equity line on the Seventh Street house to put down a deposit on the Fifth Street house. There was no cash that we had in our pockets to put down on the Fifth Street house. All we had was our shining credit record — and the faith that the banks have in this real estate market that allows you to borrow 100 percent.” If they don’t sell, with interest rates rising, the couple will have to refinance the loans. "

"Barron and Wood have a lot of company, said Paul Kasriel, chief economist at Chicago-based Northern Trust. With possibly $2.5 trillion in household debt that is going to be repriced higher “the household debt-service ratio is bound to climb to new highs,” Kasriel wrote recently. Even before the reset gets under way, households were devoting a record 13.75 percent of their after-tax income to servicing debt, including mortgage debt. " “Asset bubbles are characterized by cheap credit. Usually what bursts a bubble is higher cost of credit, because that is what inflates the bubble: cheap credit,” he said. "

"Fannie Mae looked at 2002-2004 loan data to determine what portion of the existing loan pool would be “adjusted,” and when. Fewer than 10 percent of the conventional conforming loans will reset in 2006-2007, but nearly two-thirds of sub-prime loans will.

“The estimate is that in 2007, more than a trillion dollars’ worth of hybrids are going to hit their first reset date,” he said. That one chunk of hybrid loans represents 12 percent of the $8.8 trillion in single-family home loans outstanding nationwide. "

This is the calm before the storm folks. Remember the phrase being "upside down" in a loan. You will be hearing alot of that in the years to come. Couple the explosion in listings with the soon to be increase in payments, and the soon to come mad dash to the exits will be bloody.

It's Official!!! NAR Says a "Transition To a Buyer's Market" Underway...

The nations' number one Real Estate cheerleader, chief economist at the NAR David Learah, has changed his tune on the state of the Real Estate market.....again. According to this link, Mr. Learah is quoted as saying,"It's a seller's market transitioning to a buyer's market." Sellers are reluctant to drop their asking prices, but a lot of them might have to "because the buyers now have a little more control, a little more power."

In case you haven't kept track, Mr. Learah had indicated over the past few months that;

1. There is no housing bubble.
2. There is a housing balloon, not a bubble.
3. That there will be a soft landing, not a crash in prices.
4. That the balloon was actually a ship.
5. That the Real Estate market was now cyclical.
6. That sales of existing homes are falling faster than expected.
7. Now, that there is a "transition to a buyer's market."

Remember also the prediction for 2006 that "home-price appreciation could drop to single digits this quarter, and will only be 5% for the year, down from 13% in 2005."

This raises the question, should one really listen to what the NAR says and predicts? First, read this story. I will let you be the judge.

"What NAR predicted in January 2002: Dr. David Lereah, NAR’s chief economist, said: “Total sales will be fairly even this year, with existing-home sales projected to reach 5.23 million in 2002, down a negligible 0.5 percent.”

What actually happened in 2002: There were a total of 5.6 million existing-home sales in 2002, up 5 percent from the previous record of 5.3 million in 2001.

NAR was off by 6.4 percent and got the direction of the movement wrong.

What NAR predicted in January 2003: “We project 5.34 million existing-home sales, which would be the second-best year for each of the sale series,” said David Lereah, NAR’s chief economist.

What actually happened in 2003: There were a total of 6.1 million existing-home sales in 2003, up 9.6 percent from the previous record of 5.6 million in 2002.

NAR was off by 14.2 percent.

What NAR predicted in January 2004: A growing economy will help to sustain strong home sales in 2004, but housing activity isn’t likely to match last year’s record, according to the National Association of Realtors. “Existing-home sales should come in at about 5.85 million in 2004, still the second-best on record,” David Lereah, NAR’s chief economist said.

What actually happened in 2004: Existing single-family home sales surged in 2004, well above the previous record set in 2003, according to the National Association of Realtors. There were a total of 6.7 million existing-home sales in 2004, up 9.4 percent from 2003. This is the fourth consecutive annual record.

NAR was off by 14 percent.

What NAR predicted in January 2005: After four consecutive record years, home sales should ease but remain close to record levels in 2005, according to the National Association of Realtors. Sales should decline about 2.5 percent to a total of 6.48 million in 2005.

What actually happened in 2005: There were 7.1 million existing-home sales in all of 2005, up 4.2 percent from 2004.

NAR was off by 9.6 percent, and guessed the direction wrong. "

Based on their track record, I would not place much value in what comes out of the NAR. As I learned about twenty years ago, there are no one handed economists, as they always have to be able to say, " on the other hand...."

Cheaper to Rent Than Buy?

I know we have all read the stories by the 'experts' how it is always cheaper to own than rent, how renters are losers, and that even in today's market it is cheaper to own vs. rent. The NAR predicts price appreciation as far as the eye can see.

With that in mind, I decided to run the numbers through this calculator. The calculator is offered by the Center for Economic and Policy Research in Washington, D.C.. With the median price of a house in Palm Beach County around $400,000, I was curious as to what the results would be.

I plugged in what I think are reasonable data. A $400,000 house, putting 20% down(This really doesn't change the outcome much), 6% mortgage(not an exotic 2% teaser), 28% tax bracket, not selling for 5 years. I wanted to approximate the average buyer and what he should expect the outcome to be.

Needless to say, I was floored by the results! The total net cost of owning in the next 5 years vs. renting is $177,000. That is over $32,000 a year folks. The assumptions are based on a forecasted 48% DECREASE in value of the home over the next five years.

Even if I put ZERO down, my monthly costs ( Your basic monthly costs include your mortgage, maintenance and insurance. You will also pay taxes, mortgage fees, closing costs, and have a down payment to manage.) would be $2700 a month or about $600-$1000 more than rentals in my area. Assuming you were to be optimistic and feel that values will be flat for the next five years, that is anywhere from $35,000 to $48,000 more to own than rent.

Talk about a 'scary" proposition indeed.

Too Hot To Handle?

More news today that the South Florida Real Estate market is so 'hot' that some lenders are pulling out, afraid of getting burned.

A story today in the Palm Beach Post details of the mass exodus in lenders and the glut in condos.

"Major commercial lenders are withdrawing from financing South Florida condo construction and conversion deals, another sign the overheated market may be too hot to handle. UBS AG is out of the Miami market, confirmed spokesman Peter Casey. So is GE Commercial Finance. Philadelphia-based private real estate investment firm AMC Delancey is still interested in Florida. Just not, for the time being, South Florida."

"The likely upshot: "There are many thousands of condo units announced as future projects or in the planning stages that will never get going," predicts Bradley Hunter, director of Metrostudy's South Florida Division in West Palm Beach. "They won't even get to the starting line."

"See how many are dark at night," said Jack McCabe, Deerfield Beach-based real estate prognosticator and president of McCabe Research and Consulting, of condos newly on the market. "There might be one light on for every 20 units. People are not living there. It is the height of the season, but they are sitting dark."

"Even "pre-sold" buildings are struggling. That's because would-be owners who put down deposits thinking they would secure a 2.5 percent interest rate mortgage are now facing rates of 5.5 percent and higher — just as the condo is ready for occupancy, and they have to sign mortgage papers. "Within the last three weeks, I have seen several reservation holders who walked away from earnest money deposits," McCabe said. "There was a fellow who had put over $100,000 down who walked away."

"People are not going to be able to rent these out at anywhere near the amount needed to cover" their costs, McCabe said. That's because many of the new units were designed to appeal to the luxury market, and a lease big enough to cover seven-figure mortgages is out of reach for many renters. As a result, speculators who can't quickly resell are likely to wind up renting their units at a loss."

Plan On Dying in your House?

Are 100 year loans far off? In the latest attempt to draw every last ounce of air from the bubble, lenders are giddy about the possibility to offer..... 50 year mortgages. link This is done in an efort to " help some consumers qualify for loans."

We can attribute this insanity to the reintroduction of the 30 Treasury bond. Now lenders no longer will have to price paper off of the 10 year issue, they will be able to use the 30 year. Apparantley, 40 years is not long enough to pay back a loan.

"The reintroduction of the 30-year bond means lenders — who had relied on the government's 10-year note for mortgage rate guidance — have a better idea of what to charge homebuyers for a 40-year mortgage. There is also some talk among lenders, who are always looking for new mortgage products, about creating a 50-year home loan. The longer-term mortgages would lower monthly payments."

Steve LaDue, president of Affiliated Mortgage in Wauwatosa, Wis., said, "bankers could also create a 50-year mortgage because of the Treasury's 30-year bond sale. This would be a product lenders could sell to first-time home buyers, or what LaDue calls "a gateway product."

Well, how much in savings will this mean to a homebuyer for extending out a loan to 50 years? A whopping $22 per $100,000 vs. the already ludicrous 40 year loan. Notice it doesn't say how much more in total amount financed the loan will be, having an extra ten years' interest tacked on. Here is a simple calculator that reveals that small detail calculator .. On a 50 year loan, the monthly payment for this loan would be $563.72. The total principal plus interest on this loan would be $338,232.00, of which $238232.00 would be interest. On the 40 year loan the monthly payment for this loan would be $585.46, the total principal plus interest on the 40 year loan would be $281020.80, of which $181020.80 would be interest. Over $50,000 more interest for $22 less a month in payment. And borrowers that only went 30 years? The monthly payment for this 30 year loan would be $632.07. The total principal plus interest on this loan would be $227545.20, of which $127545.20 would be interest. To put things in perspective, you are trading off paying about $60 less a month to be saddled with about double the amount in total interest amount in dollars. Such a deal!!!

"Last week, home buyers could get a 40-year $100,000 mortgage at a rate of 6.50 percent which meant their monthly loan payments were $585.00, according to HSH's Gumbinger.
A 30-year loan, meanwhile, had a 6.25 percent rate and a home buyer with a $100,000 loan had a monthly loan payment of $616. "

"The new loan products, though, could be of help for a housing market if they improve affordability at time when sales have slowed and inventories have ballooned. Chris Low, chief economist at FTN Financial, a financial services firm, said longer-dated home loans could prevent a dramatic drop in the housing market because their lengthy payback periods would lower monthly payments at a time when interest rates for other mortgages have risen from historic lows. It is a kind of a way to play games with monthly payments," said Dick Bove, banking analyst at Punk Ziegel. "Stretching out the mortgage maturity is simply a way to lower month payments and stimulate sales."

I could not agree more with Mr. Bove. It is merely playing games to stimulate sales, and it will be targeted at first-time buyers and others that otherwise could not afford to purchase.

A Must See Blog!

For those of you that are looking for great Real Estate blog to bookmark, you need to check out Bubbletown News. This is an amazing place where you will find just about anything related to Real Estate from around the United States. I highly recommend it!

SIGHT UNSEEN???

I had to re-read this story five times. If anyone had a doubt that we are in a housing bubble, this should push you into the believer camp. Perhaps they should do a follow up and see how these pre-retirees are doing as this story was first published December 18,2005.

Here are some excerpts:

"Should you purchase a retirement home years before you plan to move in Some say the time is now, before prices escalate. Alarmed by the nationwide spike in housing prices, these buyers, known as "pre-retirees," are purchasing homes years before their retirement because they fear they'll be priced out of the market if they wait. They rent the property, leave it vacant or use it as a vacation home in the interim." According to a national survey this year, 27 percent of second-home buyers said they bought the home to use as their primary residence after retirement."

"Does it really make financial sense? Experts disagree, but for Linda Ward-Willis and other pre-retirees, it's a no-brainer." "I see the prices of (homes in 55+ communities) going through the roof," says the real estate agent from Lake Worth. Ward-Willis, 49, intends to buy a home next year to use for her own retirement seven years from now."
Her reasoning is simple: "A place that costs $200,000 today might be worth $400,000 in six years." "

"VALERIE FUCHS and LAWRENCE MORAN:"
"The couple plans to trade up to their dream condo before she retires in 10 years. Their real estate agent, Frank Rao, says 80 percent of his clients who buy something small end up upgrading when they finally retire, using their first purchase as a "stepping stone." After paying $179,000 less than two years ago, similar units are listed in the $290's now, Fuchs says. She'll use the profit from the sale of her one-bedroom condo in 2006 to buy a larger condo. "To hell with stocks," she says. "I'll be waiting a long time for a bank stock to double or triple, you know?""

"LAURETTE HARPER:
"A police detective in Queens, Laurette Harper can't wait to move in to her little slice of paradise — a three-bedroom, two-and-a-half bath townhome in Jupiter, which she purchased last year for $379,900, according to the Palm Beach County Property Appraiser. By the time she closed, Harper says it appraised for $20,000 more. "The one I selected was a three-story (unit)," says Harper. "I loved it! If I could have, I would have bought the whole building." Harper, 49, plans to retire in two years after more than 20 years on the police force. Then, she'll move to the Abacoa townhome full-time. "I love my job, don't get me wrong. But I would love to get down there and relax and have some sunshine on my face," says Harper, who is renting her townhouse to a family for "a pretty fair rental price" while their own house is being built. Harper started looking for a little place to retire to after she heard some of her co-workers had already bought in Florida. She bought her retirement home sight unseen via a colleague's wife, a South Florida real estate agent."

"WILL ENGLUND and KATHY LALLY:
Married for 25 years, journalists Will Englund and Kathy Lally live in a "rambling," historic, six-bedroom home in Baltimore. This year, they bought a two-bedroom, one-bath home in Flamingo Park for $450,000, which they intend to use for their retirement. Lally works for the Washington Post. Englund, 52, works for the Baltimore Sun. After considering the "fragility of America's pension system" and the poor returns on their 401ks, the couple decided real estate was the way to go. Of course, there are ups and downs in the real estate market," says Englund. "But a real house in a real community is always going to be a good investment."Englund and Lally's plan is to keep the Florida home vacant until they retire in about 13 years, and move in full time.""We might want to try to keep both houses and use the one in West Palm Beach all or some of the time ourselves," says Englund. "We might sell the one in West Palm or the one in Baltimore. Or sell both and get someplace nicer elsewhere.""

"LINDA WARD-WILLIS:"
"As a Re-Max Southeast agent, Linda Ward-Willis sees home prices on the rise every day. Right now, she's looking for a home to invest in for retirement. In seven years, Ward-Willis intends to move into the property full-time."I want to buy something . . . before prices just go skyrocketing and I can't afford a retirement," says Ward-Willis, 49." "In two years as a Realtor, Ward-Willis saw property values increase spectacularly." "In some of the retirement communities like Aberdeen (in Boynton Beach), people were paying $10,000 to $15,000 over the asking price just to get in," she says. "And I thought, 'If it's like this now, what's it going to be like when I retire?'"

I want you to read that article again. I couldn't believe it either. They all think that they cannot lose money. Doubling or tripling of money? A stock substitute? Vacant houses for 13 years? Buying a house sight unseen? As I have said repeatedly and will say again, the Dot.com bubble HAS been replaced by the housing bubble.

Are We Over The Edge?

Anyone get the feeling that home prices have seen the peak and are about to descend like falling off a mountain? For your information, here is a news story from today's Sun-Sentinel link. Believe it or not, there are people in South Florida that might not double their money by selling their home. In fact, some might actually-gasp- lose money! And I thought this was impossible! Didn't the NAR predict sales would rise again in 2006?

"Linda Rudner of Boca Raton bought a two-bedroom condominium near the beach as an investment last year. She fixed it up, then listed it at $450,000 but later dropped her asking price to $399,000. Rudner might have to come down even more, especially now that she can't count on Scripps Florida moving to Boca Raton and raising property values. She wants to sell soon and said she's done dabbling in real estate."

"The rising inventory of existing single-family homes is slowing sales across South Florida. Closings dropped during the fourth quarter, compared with the same period a year ago, the Florida Association of Realtors said Wednesday.Sales fell by 35 percent in Broward County and 23 percent in Palm Beach County, the Orlando-based Realtors group said. Miami-Dade sales declined by 38 percent."

"Broward's median sales price rose 26 percent to $377,300, while Palm Beach's median increased 23 percent to $415,800. Miami-Dade's median rose 29 percent to $375,900."

"The median price means half the homes sold for more, half for less.Although prices rose significantly compared with the fourth quarter of 2004, they have remained flat for the past six months, and experts say that will continue in 2006."

"As inventory builds, homes sit on the market longer, causing antsy sellers to reduce their asking prices."

"Steve Petranick, a Broward real estate agent for Douglas Elliman Florida, said he used to have only three or four properties to show clients looking for homes in the $200,000 to $300,000 range. Now he has 20 or more."There are a ton of listings," he said. "It's definitely become more of a buyer's market."

"Ann DeFries, an agent with Balistreri Realty in Boca Raton, said Hurricane Wilma skewed the fourth-quarter numbers. The storm postponed sales after hitting South Florida on Oct. 24.Still, the housing market has slowed, and sellers need to be more realistic, DeFries said."They can't compare their home to a home that sold a year ago or even six or eight months ago," she said.

"And homes have to be properly marketed. The days of just putting it in the [Multiple Listing Service] or putting a sign in the front yard are over."

"Also hurting sales are rising interest rates.A 30-year fixed-rate mortgage averaged 6.22 percent in the fourth quarter, up from 5.73 percent in the fourth quarter of 2004, according to Freddie Mac. Rates are expected to inch toward 7 percent in 2006."

"As rates do go up, we'll see [fewer] people being able to buy more expensive homes," said Sara Gutierrez, founder of South Bay Lending in Miami. "If you're a wage earner, you'll be kind of limited. But I don't see the market going crazy in either direction."


Take this poor lady and mutliply her story times 100 or so.... that is what's going on in South Florida. The number of listings is exploding.( See my post below They call me Flipper for that info.) Prices have dropped and as I keep saying the rush to the exits has begun. This woman dropped her price $50,000 or 11% already and still can't sell. Hot money is already wanting to get out. I predict another three months of stagnant/falling prices and increased inventory will lead to a full on stampede.

Psst... Can I Borrow TWO MILLION???

1947 LINCOLN ST HOLLYWOOD, FL 33020
MLS ID#: D1072402
$2,000,000
6 Bed, 5 Bath1,608 Sq. Ft.
Estimated payment:$9,364 Per Month

Here is the realtor writeup," GREAT LOCATION IN THE HEART OF HOLLYWOOD! 4 LOTS TOTAL LAND 20,800 S.F. 160 X 130. GREAT FAMILY COMPOUND CONSISTING OF 2 SINGLE HOMES (ONE IS A 3/2 DIVIDED AS 2/1 & 1/1) THE SECOND IS A LARGE CHARMING AND LARGE 1/1 AND SEPERATE EFFICIENCIES ARE SHARING NICE PATIOS AND LUSH LANDSCAPE. DEVELOPMENT OPPORTUNITY! 4 LOTS TOTAL."


I am speechless...

There's a New Sheriff in Town...

OOFA...You have to hand it to our new Federal Reserve Chairman Ben Bernanke. He made his debut in front of a very partisan Congress today and walked away fairly intact. He did his best 'bob and weave' in trying not to give either political party talking points they could use. After years of Alan Greenspan's testimony in which Congress needed a Quija Board to interpret exactly what he actualy said, Bernanke tried his best to answer questions directly. For the first time in seventeen years, it didn't take a Batman decoder ring to tell us what the Chairman's remarks really meant.

That being said, Mr. B. was cornered into commenting regarding the Housing markets. The new Fed chairman mentioned the slowing housing market as one risk to the expansion, although he said a, "moderate softening'' seemed more likely than a "sharp contraction.''

"Some cooling of the housing market is to be expected and would not be inconsistent with continued solid growth of overall economic activity,'' Bernanke said. He also stated, "prices and construction could decelerate more rapidly than currently seems likely.''

The new Chaiman indicated that more interest rate hikes may be needed to tame inflation,"the risk exists that, with aggregate demand exhibiting considerable momentum, output could overshoot its sustainable path, leading ultimately -- in the absence of countervailing monetary policy action -- to further upward pressure on inflation.''

Fed futures are pricing in a 100% chance that rates will move higher in March and conensus is a 5% rate by June. As rates move higher, this decreases the amount potential buyers can afford. Equally important, there are an estimated 2.5 trillion of mortgages that are due to reset in 2006 and 2007 at higher rates. link

The Chairman's testimony came on the heels of a release by the Mortgage Bankers Association link

"The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending February 10. The Market Composite Index — a measure of mortgage loan application volume was 574.1 – a decrease of 7.3 percent on a seasonally adjusted basis from 619.3 one week earlier. On an unadjusted basis, the Index decreased 4.4 percent compared with the previous week and was down 21.7 percent compared with the same week one year earlier. "

"The seasonally-adjusted Purchase Index decreased by 7.9 percent to 391.7 from 425.1 the previous week, whereas the Refinance Index decreased by 6.5 percent to 1636.7 from 1751.0 one week earlier. Other seasonally adjusted index activity includes the Conventional Index, which decreased 7.0 percent to 847.8 from 911.2 the previous week, and the Government Index, which decreased 11.2 percent to 117.8 from 132.7 the previous week."

Mr. Bernanke has a daunting task in front of him with the housing bubble, record deficit, and inflationary pressures in the forefront.

They call me Flipper......

Remember that 60's TV show 'Flipper'? Check out this news story in the Palm Beach Post link . The current market is infiltrated with 'flippers"- people that have purchased in the hopes of selling to the next person at a profit. ( Often called the "next fool theory.)


" In third quarter of 2005 ..."

"24.4 percent of homes and condos sold in Palm Beach County had been bought in the previous two years. During the same period last year the figure was 19.3 percent, and five years ago it was just 9.4 percent."

"24.6 percent of homes and condos sold in Martin County had been bought in the previous two years. During the same period last year the figure was 22.3 percent, and five years ago it was just 10.8 percent."

"28.5 percent of homes and condos sold in St. Lucie County had been bought in the previous two years. During the same period last year the figure was 26.2 percent, and five years ago it was just 12.3 percent."

"In September 2005, about one-in-15 sales were of homes and condos that had been flipped in just six months or less. That rate was one-in-77 in September 2000."

Couple this with a huge run up in inventory.....


"Active home listings for Palm Beach County in the Regional Multiple Listing Service — including single-family homes, condominiums and townhomes — increased a startling 83 percent from August 2004 to September 2005, said veteran Realtor Randy Bianchi, co-owner of Paradise Properties in West Palm Beach. Active listings for three-bedroom, two-bath, single-family homes in Palm Beach County have risen 64 percent in the same period, to 2,364 from 1,441, he said."

As I drive around town, there are more and more "For Sale" signs popping up. Reality is starting to sink in and as I predicted, those wanting to sell are getting somewhat antsy. The rush to the exitway has begun. No one wants to be the last ones out of a sinking ship. Financial markets ( including Real Estate) are often controlled by human emotions, not fundamentals. We witnessed this time and time again, yet the media and the public fail to comprehend this. As this downward pressure accelerates, the rush to the exits will create a frenzy, feeding upon itself.

Spin Cycle?

I know that politicians are supposed to put the best "spin" on things, but this story makes you dizzy.

" The high-flying housing market should make a safe landing by gradually losing altitude, the White House suggested Monday. "

"A gradual slowing of homebuilding appears more likely than a sharp drop because the elevated level of house prices will sustain homebuilding as a profitable enterprise for some time," according to President Bush's annual economic report to Congress."

"The direction of the housing market is being closely watched. Most private analysts also are expecting gradual moderation. If the housing market were to collapse, it would pose grave dangers to the country's overall economic health."

"House prices, which have risen rapidly in value, also will probably see slower growth this year, Matthew Slaughter, a member of the White House's Council of Economic Advisers, said during a briefing on the report."

" In other matters, the report said:

"• The decline in Americans' personal savings rate "may not be cause for much alarm for retirement preparedness." The personal savings rate last year dropped to its lowest point since the Great Depression."

"The savings-rate measure doesn't provide a complete picture of households' finances because it does not capture gains from such things as higher real-estate values or financial investments, the White House report and private analysts say."

"• Limiting the massive portfolio holdings of mortgage giants Fannie Mae and Freddie Mac would decrease "the likelihood of systemic problems with little adverse impact on the liquidity of the market." Proposals before Congress would curb the mortgage giants' holdings."


Well, that clears things up! IF the housing market were to collapse, that would" pose grave dangers to the economy"? Really??? And, the United States of America does not care about savings because it does not provide a "complete" picture??? Since when are "gains from such things as higher real-estate values" included in M1, M2, or M3? (Oh I forgot.... M3 is no longer reported as.) And a quick question sir??? What happens if those "gains" go away because the "higher real-estate" prices erode? Hello??? What about the negative savings rate?( First time since the Great Depression.) And what the heck is a "safe landing" and "gradually losing altitude." Now, are we talking going from 30,000 feet to 28,000 or to sea level?- he did say "landing" Darn those little details.

This quote I thought was worth examing,"because the elevated level of house prices will sustain homebuilding as a profitable enterprise for some time." Really?? Someone forgot to tell Toll Bros. that one last week as they announced a very dissapointing quarter. And Centex has to offer $100,000 reductions in price in an attempt to "sustain" their business.

The part about "limiting" FNMA and FHLMC is just too funny. "Little adverse impact on the liquidity of the market," are they kidding? They want to curtail a trillion dollar industry with little impact. Riigghhht............. This is telling you that you are pregnant after you've had the baby. We all know that easy money has created monsters out of th GSE's. In typical government fashion, they want to put the genie back in the bottle. Nice try fellas.

So there you have it. The U.S.A. is devoid of savings, no problem. Real Estate is going to save the day for all of us with a "soft landing". Builders will continue to sell at "elevated levels", and the GSE's will be "limited" but not so much as to have an "adverse impact on the liquidity of the market." If you flash back to 2000 the same things were said about the stock market. But it's different this time, right?

Technically Speaking....

To the left is a chart from BigCharts.com that shows the NASDAQ over a 3 year period of 10/97 to 10/2000. This was during the market "bubble" and right before the proverbial fecal matter hit the fan. We all remember how it was "different this time", and how Greenspan & Co. had engineered a "new paradigm." Fundamental like earnings, sales, cash flow, were obsolete. Technical analysis was for fools. You had to buy now or pay more later for such darlings as Priceline, JDS Uniphase, and EMC.

Ok, here is a current 3 year chart of the Dow Jones Home Builders Index, again from BigCharts.com . Although not exact, the overall chart patterns are similar, characterized by huge runs to the upside at valuations that are not sustainable or explainable. Currently, the P/E on this index even after coming down some 30% off the high is around 30. We all know what happened in the year 2001 and beyond to the NASDAQ. trading patterns do tend to repeat themselves. If one were to follow this logic, then this is what one might expect to happen.


Here is a chart of the NASDAQ from the peak (March 2000) to the present. It is still some 50% off over five years later after falling over 80%. Now you might say stocks and real estate are totally different,and that stocks are more speculative. My point is charts tell us money is always flowing- either in or out of an asset. Considering real estate has morphed from being a place to live in to a place to make money on, I would not be surprised if history repeats itself.

Reality Sets In For Sellers...The Violins Please.

Has the bell rung on the seller's market in South Florida? If this news story is an indication, link , then hang on to your hat. It is going to be a wild ride folks. Reality is a hard pill to swallow when the perception has been of 20-30% annual gains as far as the eye can see.

"Four months after putting their Wellington home on the market and cutting the price $40,000, John and Mary Porter are still waiting for an offer."

"Real estate agents and home sellers throughout the county describe a dramatic shift from what only six months ago was a strong seller's market. There's no crash yet — sale prices have flattened rather than plummeted — but there's plenty of evidence the five-year boom has peaked."

"The chill came quickly. Just last year, torrid price spikes made Palm Beach County the nation's third-hottest housing market, according to the National Association of Realtors. Prices here jumped 35.9 percent from early 2004 to early 2005. The typical home's value rose at a rate of nearly $1,900 a week"

"The Porters initially asked $409,000 for their house at 627 Carnation Court, but they've cut the price to $369,000, said their real estate agent, Randy Bianchi of Paradise Properties in West Palm Beach. The Porters paid $279,000 for the house in 2004."

"Indeed, it seems as though everyone decided to sell at once. The number of homes for sale in Palm Beach County nearly tripled in the past two years, from about 7,800 two years ago to more than 20,000 today"

"Some economists warn that Palm Beach County's rapid run-up in prices makes the market ripe for a fall."

"For instance, National City Corp. of Cleveland says Palm Beach County homes are overpriced by 57 percent, while Treasure Coast houses are inflated by 72 percent. To calculate those figures, the financial services firm compared home prices with incomes."

"Others say the slowdown will lead to a soft landing rather than a crash. The National Association of Realtors last week predicted that the number of sales nationwide will dip slightly in 2006 from last year's record, while price appreciation will slow to 5 percent from last year's 12.7 percent."


Send in the violins, please. When people complain that they might only make $90,000 0r 32% on a home they purchased two years ago, I know that the top of the market is in the rear view mirror. A sense of 'entitlement" and 'investment' has turned home ownership into a quasi-casino. Houses are viewed as an appreciating asset, not a home. It is going to take a major shock to the system( in the form of substantial price reductions) to change the mindset of people back to the merits of home "ownership" again.

Home Prices Scare Away Job Seekers

A very interesting news story today, link . It seems that there may be trouble in paradise. We all know that the middle class cannot afford a home in Broward and Palm Beach county, but now it appears that " engineers, administrators and other professionals who earn above-average salaries also get priced out of the area, according to local employers struggling to fill vacancies."

""I cannot recruit people from out of state," said John Poggi, chief executive officer of REP Associates Inc., a Palm Beach Gardens consulting company. "I am not talking about $30,000- or $40,000-a-year salaries here. We are talking about people not interested in coming to Palm Beach County to make $80,000 a year.""

"Poggi said rising home prices cost REP at least 10 candidates last year to fill vacancies for engineers and scientists needed to help the company expand.That has the company, which offers salaries ranging from $60,000 to $120,000, considering moving its headquarters to a real estate market that doesn't give recruits such sticker shock, he said."


"It isn't just about teachers and firefighters and police officers. We are hearing from hospitals and law firms," said Kelly Smallridge, president of the Palm Beach County Business Development Board. "They can't fill the positions. ... We are losing opportunities for employment."

'If professionals refuse to move to a community, that area loses the economic boost that comes from the money those high-salary employees would spend. Businesses also lose out on landing the professional expertise they need to grow, said Anne Williamson, an assistant director of the University of Florida's Shimberg Center for Affordable Housing."

" Home prices remain a hurdle for companies trying to attract administrators and executives as well as engineers and computer technicians, said Howard Muti, a headhunter for the Bartech Group in West Palm Beach."They come down here and are somewhat floored by how the real estate market is," Muti said. "

" Pratt & Whitney have not been enough to persuade many job candidates to move to Palm Beach County, McAlice said."These are pretty high-paying jobs and people can't afford to live on that here," McAlice said. "Especially young people coming out of college trying to determine where they want to work. It is expensive down here.""">

""Palm Beach County salaries have not kept pace with rising home prices..Increasing salaries remains an option for local companies struggling to fill vacancies, but that can affect the bottom line. ."I am getting nowhere," said Poggi, whose company has been headquartered in Palm Beach County for 15 years. "I am at a competitive disadvantage."


Every day there is evidence that the housing bubble is unsustainable and about to burst. Homes have doubled in value. The average and now not so average person is priced out of the market or they simply refuse to live here. Companies are considering moving out as a more profitable business decision rather than stay and pay 30% higher wages. Is it really worth paying twice the national average for a home to live in South Florida? I think we will find out shortly.

A Chill in the Air?

An article in the Sun-Sentinel today link that the South Florida Real Estate Market might be 'cooling off.'

"Even the rosiest real estate analysts concede that South Florida's housing frenzy is fading after five years. The culprit? "Its own success," said Lewis Goodkin, an industry consultant in Miami."

"Goodkin and other experts say the market was destined to soften because price appreciations of 25 percent or more aren't sustainable. Prices will increase in 2006, but not at the double-digit rate of the past few years, they say."

"Goodkin estimates South Florida's home sales pace will fall by 20 percent, compared to recent years, while the overbuilt condominium markets in West Palm Beach and Miami will face "dramatic" slowdowns by the summer."

Huh? I thought in the last paragraph it said that prices will "increase in 2006."

"He said the housing forecast for South Florida is typical of what's happening in many growing cities, such as Las Vegas and San Diego."We're really coming back to a more normal market," Goodkin said."

"Here are five key indicators:

1. Sales are down. Whether you're comparing December to the same period in 2004 or looking at the past six months of 2005, the number of home sales across South Florida has dropped by roughly 40 percent, according to the Florida Association of Realtors.The Orlando-based trade group tracks single-family home sales but not condominiums, townhouses or co-ops.Certainly, Hurricane Wilma had something to do with the decline in the latter part of 2005, but agents and industry experts say the storm isn't the only reason for the slowdown. Insurance and property-tax increases are driving up monthly mortgage payments, making many people reluctant to buy."Prices just got to be too high," said Marilynn Obrig, a broker-associate with Intercoastal Realty Inc. in Fort Lauderdale. "There comes a point where buyers say, `I can't do it. I have to sit back and think about it.' ""

"2. Listings are up. It's not just your imagination: You are seeing more for-sale signs in front yards. The number of homes and condos on the market more than doubled in Broward County from July through December, according to The Keyes Co. and multiple listing services. Listings rose more than 81 percent in Palm Beach County and more than 64 percent in Miami-Dade.Speculators helped fuel the housing boom, which drove up prices to record levels, but that's changing as many speculators are leaving real estate. With fewer buyers, houses don't sell as quickly and inventory builds up.There's virtually no sense of urgency, and buyers can take their time considering multiple properties, said Richard Barkett, chief executive of the Realtor Association of Greater Fort Lauderdale."Most Realtors want to be listing agents, but you have to be out looking for buyers now," said Boynton Beach agent Bob Melzer. "With 20 homes for sale in the same community, [buyers] say, `What's my rush?' ""

"3. Prices have flattened. As demand wanes, sellers are losing leverage, and some are cutting their asking prices.Median prices across South Florida rose by more than 20 percent in December compared to the same period a year ago, according to the Florida Realtors group. But from July through December, the median increased less than 5 percent to $408,200 in Palm Beach and to $377,700 in Miami-Dade while decreasing 4.3 percent to $369,000 in Broward."A stabilization in prices has occurred," said David Dabby, a Coral Gables real estate analyst. "That doesn't mean that appreciation has stopped in all areas. It hasn't. You're just going to see more modest increases, at best.""

"4. Incentives for buyers and real estate agents are increasing. Some builders are offering free upgrades on appliances, countertops and cabinets, as well as offering to pay points and closing costs worth thousands of dollars that the new-home buyer normally would pay.Developers also are trying to lure real estate agents. At the Legacy Place condominiums in Palm Beach Gardens, for instance, agents who referred buyers received 4 percent commissions rather than the standard 2 or 3 percent."There hasn't been the necessity to do that before," said Jack McCabe, a Deerfield Beach analyst who is betting on a market slowdown and organizing investors to buy properties at reduced rates. "The environment is going to get highly competitive this year.""

"5. Interest rates are rising and credit requirements tightening. Thirty-year fixed mortgage rates are near 6 percent, and analysts predict they could inch closer to 7 percent in 2006. While still reasonable, that's enough to keep some people from qualifying for mortgages.And as interest rates increase, homeowners with adjustable-rate notes will see their monthly payments rise. That'll mean more foreclosures and distressed sales, experts say.In addition, federal regulators are forcing lenders to become more selective this year. Mortgage applicants will need higher credit scores and more proof of income, while banks are expected to scale back on risky interest-only loans."The direction of the market is clear," said Manuel Iraola, chief executive of Homekeys, a Miami-based online real estate service. "What's open for debate is the magnitude of the adjustment the market will go through.""

So now what ever blooger has been saying for about a year has hit the mainstream media front page. Basically a 20% drop in values if you are lucky.

Here are the latest Median Home Sales Prices for South Florida. The numbers speak for themselves.

Latest Median Home Prices

Hooray for HOLLYWOOD!!!

Oh yes, dear friends, we have our own little town in South FLorida called Hollywood. Now, please try not to confuse these homes with the ones you see on T.V. in California.















3325 GARFIELD HOLLYWOOD, FL 33021
MLS ID#: D1081593
$329,000
Estimated payment:$1,536 Per Month*
3 Bed, 2 Bath 1,412 Sq. Ft.

Now this little beauty was built in 1957 so it has stood the test of time. And what do you get for your $329,000? Well.. just look at that new paint...er..... ok. how about that well manicured lawn.. ooops. Maybe the garage? Spacious lot? hmmm..5590 sq. ft. (.13 acre) Nope. But, you do have a septic sewer system and thankfully pets are allowed!

Now here is the (snicker) really funny part. See the $1,536 per month payment? That assumes you put down (snicker) only $65,800 with a 30 year 5.75% mortgage of only ( snicker) $263,200! Don't have that much cash burning a hole in your pocket? Only ( snicker) put down $16450 and with 5.75% mortgage at 30 years of (snicker) $312,550 you can own this gem for just $1824 a month!! ( that is before insurance, taxes, etc).













5707 SHERIDAN ST HOLLYWOOD, FL 33021MLS ID#: F689291
$345,000
2 Bed, 1 Bath 0.14 Acres
Estimated payment:$1,611 Per Month*

Not thrilled? Ok how about this one.

Built in 1959... it's newer! Hey and look.. no messy lawn to mow! And the lot is bigger. (.14 acres) (snicker). And, 1 less bathroom to clean, WOW!
And with only ( snicker) $69,000 down, your monthly mortgage payment is just (snicker) $1,611 a month? A little short on cash? Ok, with just $17,250 down this baby is yours for the low monthly mortgage of (snicker) $1913.















706 N 31 CT HOLLYWOOD, FL 33021
MLS ID#: M1021139
$389,900
3 Bed, 2 1588 Sq. Ft .0.15 Acres

Allright then .This is the one. Look.. it has a lawn. It has a tree! Why yes, you are right. It does look like a mobile home. Built in 1958 this baby has a TWO car carport and city water & sewer!

Now I did the math and with just ( snicker) $77,800 down, your monthly mortgage is ( snicker) only $ 1,820!! Oh... I forgot. You are kinda strapped... well with only $19,495 down you can park your pickup out back and hang that old tire on the tree and call this place yers for just (snicker) $2,162 a month. ( again before taxes, insurance, and all that silly stuff.)


Well, there you have it friends. Now you have seen the "other" Hollywood. I bet you think you saw Burt Reynolds in that last one, didn't you!!! Ha ha,,, gotcha!

Comments always welcome.

Deja Vu? Again?

"It's time to party like it's 1999"..

Upon coming across the site link, I am reminded of this Prince song and the Dot.com Bubble. Remember those non-stop ads on T.V., about how Joe Blow the busboy and Jill Jones the hairdresser made a gazillion dollars trading stocks? Heck, all one had to do was pick a stock that had four letters as its symbol that had something to do with the internet, and viola, it doubled in 2 weeks! People actually quit there jobs to "day trade" and become jillionares. Ah, yes, the days of Mary Meeker and Henry Blodget. Build the infrastructure and they will come.

Then along came this little thing called a "correction." Just a small one, mind you. How much? About 60-80% in the NASDAQ, if you were lucky. And the experts? Like the "experts" of today, they were chanting the mantra of " this time it is different", and " you don't want to sell NOW do you? It ALWAYS comes back!!!" Tell that to the owners of such jewels as Priceline and JDSU.

Are you missing those Halcyon induced euphoria days like me when profits dropped from the sky like snowflakes? Well, relax my friends. Those days are back! Yes! Just listen to these people!!


Below are some of the best from the site: (substitute real estate for stock if you like)


"We Made it BIG!!! "

"NEWS FLASH: NEW PROJECTS NOT YET RELEASED TO THE PUBLIC ARE AVAILABLE...CALL TODAY! "

"In under 6 months the developer tried to buy back the unit he sold me! I was offered $40,000.00 more!!"G.Perez, Miami"

"My property has appreciated $200,000.00 in just 10 months! Preconstruction is the only way to buy..."MJ, Denver, Colorado"

""I flipped my units and made $135,000.00 in just 9 months."D. Angelo, NY"

""PreconstructionWatch.com is absolutely great. Thank you for your courtesy and professionalism. You have helped me a lot."M. Bergman, Fort Lauderdale FL""

This one is the best.....
""Your services are truly unique."A.Cohen, Aventura"My properties will be completed in 2007, by then they will be worth $300,000.00 more than I paid for them."JP, Miami"

""My unit sold for $390/Square Foot. Now new projects are selling for $700 to $1000/Square Foot!"B.Frankel, Germany"


What the heck am I waiting for with testimonials like that??!!! I am going tomorrow and shave the dog, sell the fur and go out and buy that preconstruction condo baby. Just close your eyes, put that Prince CD on and paaaaarrrtyy!!!

As always, your rockin' comments welcome

With "Good Hands" like these who needs enemies?

From the Sun-Sentinel today - link .

"Only months after declaring that Allstate Floridian Insurance Co.'s proposed rate increase could be denied, state regulators have reversed course and granted the company permission to raise homeowner premiums 20 to 30 percent in Broward and Palm Beach counties."

I found this next part especially interesting..........

"Now the company has the state's blessing to collect the additional premium. If regulators had not reached an agreement with Allstate Floridian and an arbitration panel agreed increased rates weren't justified, Allstate Floridian would have been forced to return the additional money they collected. An arbitration hearing had been scheduled for mid-January but was canceled because both sides "felt that enough progress was being made, that there was a potential to reach an agreement" on Allstate's request, said company spokesman Ryan Priest. "


"The company started charging higher rates to its 663,000 customers Oct. 3. Allstate Floridian is the third largest insurer in Florida; its highest concentration of policies is in Broward County and its third largest is in Palm Beach County.The average statewide increase is 16.3 percent for Allstate Floridian Insurance customers, and 24.4 percent for the company's Allstate Floridian Indemnity subsidiary."

"The company disclosed the increase in a conference call with investors Jan. 31. State officials had not announced the increase was approved but typically don't make such announcements. They(the state of Fl) had announced in October that they intended to deny Allstate Floridian's higher rates, unless the company provided more information."

That upset state Sen. Ron Klein, D-Boca Raton, who has advocated returning the state system to an elected insurance commissioner.

"Apparently this is how an appointed insurance commissioner does business," Klein said in written statement. "Disapprove a rate increase with great fanfare in a very public way, wait until the public isn't looking and then grant an increase without disclosing it."

Wow, let's all hurry and buy a house. Prices have doubled, taxes have doubled, insurance has doubled. This year those I/O's and ARMS are going to reset, so the payments will double. But, after all, it's going to only appreciate in value so you'd be crazy not to.

LOOKOUT BELOW!!!

I once heard a picture is worth a thousand words. Well, look at this one.

For those of you that haven't spit out your coffee on the computer screen, yes that is correct. It is the current West Palm Beach Housing Market Index, or if you might say, lack of affordability index. The average home sells for just over $400,000 ( down from $421,000 in November 2005).

But wait.... houses are still about 100 % higher than the mean. OOPS! An article in CNN(http://money.cnn.com/2006/02/03/real_estate/house_price_predictions_for_2006/index.htm) lists our area as (cough)ONLY up 31.6% in value in 1 year.

But what about the impending "bubble?" According to this article, prices are forecast to go down a mind numbing .3%. YES that's right. ... .3%. I must assume that is after they have gone down from $421,000 to $400,000. (about 5%).

So, don't worry folks. Plunge your lungs out. Buy that 2/1 in crack town next to the Airport for $300,000. Mortgage your existing house using a 125% I/O and buy 5 more pre-construction apartment conversions. Prices won't come down. They are running out of land. You don't want to get priced out. If you don't buy now you will never afford a house. Bubbles, shmubbles. Not gonna happen. See? It says so right here on CNN.

Comments welcome as always.

Palm Beach POS Parade!

Kudos to the Palmbeachpost.com for running a story on homes that have been"flipped" over the last few years.

This one is my favorite!

720 Summit Blvd., West Palm Beach 1,847 square feet

$215,000 in August 2005

$190,000 in July 2005

MOST RECENT INCREASE: Up 13.2%, or $1,923 per day

(LANNIS WATERS/Staff Photographer)

Here is the link: http://www.palmbeachpost.com/news/content/news/photos/flipped1218_pbc/

Every day I am amazed. People just do not care what the prices of homes are. They are willing to pay for fear of being "locked out" forever.... Alas, they will soon learn that not owning a home is better than owning a home that is 40-50% overvalued. Anyone remember the Dot.com crash?

As always, I want to hear your comments!!!

Ask Not Whom the Bell Tolls For...

Great article on Toll Bros. stock. Not in the article is that insiders were selling massive amounts of stock last year right around the time the stock peaked (imagine that!). For those of you not familiar with technical analysis, the current chart looks like what is called a "head and shoulders" formation, which usually signals a major move- in this case it looks like to the downside. If the stocks of homebuilders is to be used as an indicator of things to come, lookout.



February 09, 2006
The Bell Tolls For Toll Bros.by Paul Kasriel
The opening bell on Wall Street was tolling for Toll Bros., the upscale homebuilder, who announced prior to the opening of trading that its orders plunged 29% in the three months ended January 31. The homebuilder cut its forecast for sales for the second time in three months. As this is being written at about 2:30 pm EST, Toll Bros. stock was trading just under $30 a share, or down about 4% from Monday's close. As the Chart 1 shows, after going through the roof in the first half of 2005, Toll Bros. stock price topped out at $58 and change on July 20, and has been falling toward the ground floor ever since.



chart 1





It is not clear that we economists are able to contribute much toward accurately forecasting the fate of a stock, but it does seem as though the behavior of a stock can aid economists in forecasting the behavior of the economy or, at least, a sector of the economy. Chart 2 shows that the year-overyear percent change in new home sales peaked in July - coincidentally with the peak in the price of Toll Bros. stock.
Chart 2



Toll Bros. was not the only one with a downbeat forecast about new home sales today. Also, the National Association of Realtors predicted that new and existing home sales would fall by 8.5% and 4.7%, respectively, this year. A fall in sales is usually what happens to something that gets very expensive. And, make no mistake, houses have gotten very expensive. This is one of the things illustrated in Chart 3. The folks at Wells Fargo were kind enough to construct something akin to a housing affordability index. Their homebuilders housing "opportunity" index measures the percentage share of homes sold that could be considered affordable to a family earning the median income. The latest observation (Q3:2005) is 43.2% -- the lowest in the 15-year history of the series. The other thing shown in Chart 3 is the weighted-average mortgage interest rate. Despite the fact that the mortgage rate is near a 15-year low, this measure of housing affordability is at a 15-year low. The rapid rise in home prices relative to family income has rendered home purchases less affordable. A related measure of this is shown in Chart 4. The market value of residential real estate has risen to a record high 211% of disposable personal income.
Chart 3





Chart 4




The developing softness in the housing market is likely to have a significant negative impact on the economy as a whole. Some analysts have seen Asha Bangalore's 43% and raised her to 50%. That is, building on the seminal research conducted by Asha, some economists have attributed about half of the new jobs created in this economy since the end of 2001 to the boom in housing. Yesterday, I noted that households spent a record $471 billion more than they earned after taxes in 2005. Extracting equity from their appreciating home values was one of the factors enabling households to do this. If housing is weakening, so, too, will home-price appreciation. This means that those personal ATMs will not be refilling as rapidly as they had been. Finally, in the first three quarters of 2005, one hundred percent of the increase in household net worth was the result of asset-price appreciation. And 59% of the asset price appreciation came from residential real estate.
Forget about GM. The new mantra is: As goes housing, so goes the nation - or, at least, the nation's economy.

Paul L. Kasriel, Director of Economic ResearchThe Northern Trust CompanyEconomic Research DepartmentPositive Economic Commentary"The economics of what is, rather than what you might like it to be."50 South LaSalle Street, Chicago, Illinois 60675
The information herein is based on sources which The Northern Trust Company believes to be reliable, but we cannot warrant its accuracy or completeness. Such information is subject to change and is not intended to influence your investment decisions.
Copyright © 2005-2006 The Northern Trust Company

David Lereah does his best "Baghdad Bob"

I made this suggestion to Ben and he posted this on his Marin site. Post your best Captions!