Thread: The US Housing market is in deep shit

Decent metaphor Bkkandrew. But the same could be said for cars. Why is a medium-sized family car worth $50,000? That's outrageous. Why is a 4-year college education worth $150,000? Because there's someone else out there willing to pay that much for it. Basic economics.

The US mortgage feeding frenzy is exactly what the Japs experienced in the late 80s. Only about 1/2 as bad.

Witnessed that one first-hand too and fortunately wasn't in that fool's game either.

18 million empty homes in the US

Bloomberg News

^And I would estimate 25 million before the year is out...

As the bourses just keep rising, I have to admit, Im baffled by it. Last year a little bit of bad news sent my port. crashing, These days the market rallies on worse news.
I just dont get it

^Its actually more complicated than that, but I am going to bed and cannot be arsed to compose a 20 minute post. No disrespects though, remind me tomorrow and I will gather my thoughts!

Originally Posted by Bugs

The lenders took the risk to hand out loans to people with questionable means to carry the loan to completion. The reward for years was the lenders making money hand over fist – because the price of housing continued to climb.

so where's the risk for the lenders? it's all been pushed down the road, and the fed is there waiting to bail out the brokerages that invented all these investment vehicles.

The risk for lenders is millions of dubious high-interest (sub-prime) mortgages given to people who probably should have been living in thier station wagons.

Opened up an entirely new sector of people to sell profitable mortgages to. It all worked well as long as home prices appreciated.

Good post Bugs^^.

Originally Posted by Texpat

The risk for lenders is millions of dubious high-interest (sub-prime) mortgages

but where's the risk for the lenders? as far as i can see, it's been socialized.

Originally Posted by raycarey

Originally Posted by Bugs

The lenders took the risk to hand out loans to people with questionable means to carry the loan to completion. The reward for years was the lenders making money hand over fist – because the price of housing continued to climb.

so where's the risk for the lenders? it's all been pushed down the road, and the fed is there waiting to bail out the brokerages that invented all these investment vehicles.

Really ALL of it has been pushed down the road?

The FED has helped out and their help has certainly been more in favor of the lenders as apposed to borrowers, but lenders as well as the investment groups have still lost billions.

The S&P/Case-Shiller home-price index dropped 12.7 percent from a year earlier.......

Read More Here

saw somewhere today that 1 in 190 odd home owners in the States have received for closure notices

Currently viewing an auction live in the UK:

http://www.eigroup.co.uk/onlineauctions/login.asp?AuctionID=11017&c=edm

Its a bloodbath. Almost nothing selling, reserves of 600K attracting highest bids of 375K, 10% no bids AT ALL! Most lost are repos, so have v. low reserves anyway!

A random example of one that has actually sold:

Lot 36 ( Guide Price: £70k ) From: Edward Mellor Auction 01:30PM, Tuesday 29 April 2008

Address: 6 Bevan Court, Dunlop St, Warrington, Cheshire, WA4

The description from the Edward Mellor website is: Leasehold 2nd Floor Flat Two Room(s) Communal Gardens Vacant © Edward Mellor Auctions

Last Sold Price: £132,500 on 19 May 2006

Auction Result: Sold for £70,000

Today's auction price results in a Loss of £62,500 ( 47.2% ) since purchase on 19 May 2006.
( Not taking into account Stamp Duty, Legal Fees and any Estate Agency fees )

This is a very good time to have a few hundred thousand spare bucks/pounds laying around.

The smart ones are waiting in the wings, watching and ... smiling.

Originally Posted by Texpat

This is a very good time to have a few hundred thousand spare bucks/pounds laying around.

The smart ones are waiting in the wings, watching and ... smiling.

I agree. This is the time for good deals for those looking ahead for rentals, even owner-occupied, and so on.

The auction started bad, got worse, then fell off a cliff:

Lot 101 ( Guide Price: £65-70k ) From: Edward Mellor Auction 01:30PM, Tuesday 29 April 2008

Address: 39 Canada St, Manchester, Lancashire, M40

The description from the Edward Mellor website is: Freehold Terrace House Two Floor Three Room(s) Yards Let © Edward Mellor Auctions

Last Sold Price: £47,500 on 14 July 2006

Auction Result: Unsold ( Highest Bid was: £10,000 )

Today's auction price would result in a Loss of £37,500 ( 78.9% ) since purchase on 14 July 2006.
( Not taking into account Stamp Duty, Legal Fees and any Estate Agency fees )

Results all in. 115 lots. 13 sold. Unlucky for some!

If you can't sell the repo's what ya gonna do? (Sorry, just tried to make the post relevant to Americans, given the OP...)

^ No mortgages! Headlines news at ten BBC1 right now.....

BBC

some people have an idea that properties value never go down, but it does, as noted above

it's going to be brutal, eventually the market will dry up as banks will keep them on inventory and forget about selling them

Originally Posted by Texpat

The smart ones are waiting in the wings, watching and ... smiling.

people who try to catch a falling knife usually end up bleeding. this is a long way from over.

the founder of kb homes is predicting another 20% from here. jesus.

Eli Broad, a philanthropist and co- founder of KB Home, the fifth-largest U.S. homebuilder by revenue, said he expects home prices to drop another 20 percent.
"I don't think we're anywhere near a bottom in housing,'' Broad told Bloomberg TV at the Milken Institute Conference in Beverly Hills, California. "We're going to have a big inventory of unsold, unoccupied homes that's going to take three or four years to clear out.''

Bloomberg.com: News

Originally Posted by raycarey

Originally Posted by Texpat

The smart ones are waiting in the wings, watching and ... smiling.

people who try to catch a falling knife usually end up bleeding. this is a long way from over.

The smart ones are waiting ...

Just how much longer is a matter of much speculation. Banks are tighter than a Scottish coin purse at the moment. Watch for when they start lending to each other again -- a marker.

^Circa 2011?

The plain fact is, housing became too expensive compared to peoples incomes. This has been the case for almost a decade. It was explained away by lower interest rates, lower taxes, tax concessions, that sort of thing.

Don't even think of buying until rental yield exceeds what you would pay on mortgage interest rates, plus some. As recently as 1994 I was able to pick up a canal side apartment in Little Venice, London on this basis. Damn fine investment, and same story- early stages of recovery from the previous real estate bubble.