How much worse will it (the real estate foreclosure crisis) get? Plenty

[touchring]

Re: How much worse will it (the real estate foreclosure crisis) get? Plenty

2) China: With little or no real estate property tax, and with a relatively naive and financially experienced population, the bubble is in full swing in China.

Even discounting the significant foreign buying as a proxy for yuan revaluation, the reality is that prices in the major cities in China are so high as to never be economically viable.

The lack of occupancy is a fine example: how exactly can you use prices in Beijing or Shanghai as a proxy when you have both vast numbers of cheaper properties which are occupied in many cases sitting right next to large numbers of very expensive properties which are empty?

The property tax will hit speculators hard. I believe that a lot of units are bought using company cash, laundered money or money from underground money lenders. They have not factored in property tax and this may catch them by surprise.

[WDCRob]

Re: How much worse will it (the real estate foreclosure crisis) get? Plenty

Thanks for posting those charts Largo. There was a chap around here a few years ago (Charles Mackay I believe) that produced a similar chart going back to the 1600s (IIRC). And at the bottom of the cycle the average price for a house was almost always right around 100 oz of gold.

[thriftyandboringinohio]

Re: How much worse will it (the real estate foreclosure crisis) get? Plenty

Thanks for posting those charts Largo. There was a chap around here a few years ago (Charles Mackay I believe) that produced a similar chart going back to the 1600s (IIRC). And at the bottom of the cycle the average price for a house was almost always right around 100 oz of gold.

Fascinating. Right now gold is $1,377 / oz, and the median house price in Columbus Ohio (http://realestate.yahoo.com/Ohio/Columbus) is $114,900, so the median house price in my town is 83 oz gold.

[Fiat Currency]

Re: How much worse will it (the real estate foreclosure crisis) get? Plenty

Fascinating. Right now gold is $1,377 / oz, and the median house price in Columbus Ohio (http://realestate.yahoo.com/Ohio/Columbus) is $114,900, so the median house price in my town is 83 oz gold.

You can see we have quite a way to go in Metro Canada

Houses in Gold.jpg

[thriftyandboringinohio]

Re: How much worse will it (the real estate foreclosure crisis) get? Plenty

This is a fairly typical median house in our area you could buy for 83 oz gold. Notice the recent $10,000 price drop.

Columbus OH Median House.JPG

[karim0028]

Re: How much worse will it (the real estate foreclosure crisis) get? Plenty

So on this Gold/Silver home price chart, when was the last time you had a RE bubble? I dont recall any nation wide RE bubble in the 70's or 80's of the magnitude we had in this last decade? Bubbles tend to distort things on the upside as well as the down side.... I wouldnt be surprised if we get down to ~ 50oz of gold for a median house...

[touchring]

Re: How much worse will it (the real estate foreclosure crisis) get? Plenty

Thanks for posting those charts Largo. There was a chap around here a few years ago (Charles Mackay I believe) that produced a similar chart going back to the 1600s (IIRC). And at the bottom of the cycle the average price for a house was almost always right around 100 oz of gold.

What is the ratio in Detroit right now? I've always thought that Detroit is what the entire USA will look like 20 years into the future.

[ThePythonicCow]

Re: How much worse will it (the real estate foreclosure crisis) get? Plenty

I've always thought that Detroit is what the entire USA will look like 20 years into the future.

Dang, I sure hope not. That would be dismal.

[thriftyandboringinohio]

Re: How much worse will it (the real estate foreclosure crisis) get? Plenty

So on this Gold/Silver home price chart, when was the last time you had a RE bubble? I dont recall any nation wide RE bubble in the 70's or 80's of the magnitude we had in this last decade? Bubbles tend to distort things on the upside as well as the down side.... I wouldnt be surprised if we get down to ~ 50oz of gold for a median house...

Your scenario is quite plausible here.
In the midwest our housing prices didn't shoot up like in the sandy states, and they aren't falling as much. If the median house price drops another 10%, that would make the median house price $103,410. If that's 50 oz gold, then the POG would be $2,068/oz. Both numbers are believable, not really much of a stretch from prices now.

[don]

Re: How much worse will it (the real estate foreclosure crisis) get? Plenty

A dash of Tabasco on the rental question....


South Florida Sun-Sentinel.com Chaos in South Florida housing market leaves more people renting

By Paul Owers, Sun Sentinel


South Florida's rental housing market is booming as foreclosures and price declines have many residents leery of homeownership or unable to qualify for mortgages.

There are fewer empty rental apartments in Broward and Palm Beach counties this year over last year and rental rates are higher. Some new renters are former homeowners who have lost their properties to lenders, while others don't want to be shackled to homes in an uncertain economy.

Turning renters into buyers is critical to solving the nation's housing woes, analysts say. But even young professionalswho have never owned appear to have soured on the prospect of buying homes and prefer to rent.

"Their whole adult lives they've seen foreclosures and people dismayed about the values of their homes," said Tara-Nicholle Nelson, a spokeswoman for Trulia.com, a San Francisco-based real estate research firm. "They will continue to rent even after they can afford to own."

Melissa Melzer, a 32-year-old lawyer, recently renewed her lease at the Mizner Court Apartments in Boca Raton, where she has lived for nearly three years. She's not opposed to ever owning, but she doesn't think the time is right, despite affordable home prices and historically low mortgage rates.

"Everybody says this is the best time to buy, but it's a double-edged sword," Melzer said. "You could lose your job tomorrow. You just never know. If I'm renting, I could walk away if I have to. If I own, I have a problem."

The recent foreclosure freezes by major lenders also could cause more people to postpone homeownership. As banks suspend sales of foreclosed homes over paperwork concerns, prospective buyers have yet another reason to hold off.

South Florida vacancy rates are as low as they have been in three years, according to Reinhold P. Wolff Economic Research in Oakland Park.

Broward's apartment vacancy rate in August was 5.5 percent, down from 6.8 percent in August 2009. Palm Beach County's August vacancy was 5.1 percent, compared with 7.6 percent a year ago.

Helping to push down vacancy rates is a lack of new apartment construction, said L. Keith White, president of Reinhold P. Wolff. Developers aren't building rentals, in part because financing remains hard to get.

Declining vacancies allow building owners to increase rental rates. Broward's overall average rent for apartments in August was $1,228, up 2 percent from a year ago. Palm Beach County's average rent also increased 2 percent over the past year, to $1,153.

Demand for three-bedroom apartments is particularly strong, fueled in part by former homeowners who are used to having extra space, White said. Some have been through foreclosures, while others have negotiated short sales, in which they unload their homes for less than the amount of their mortgages.

Still, many former homeowners prefer to move to another home. And there is no shortage of single-family residences and condominiums for rent, real estate agents say.

"When I get a call about a rental, it's usually from someone who wants a single-family home," said Michele Hale, an agent for Balistreri Realty in Lighthouse Point.

The shift toward renting prompted Damien Barr and other real estate agents to start KangaRent, a brokerage that specializes in South Florida rentals. The Palm Beach Gardens-based firm opened Aug. 1.

"If you're a landlord or a homeowner and you have a place to rent and it's not renting, it comes down to price," Barr said.

Jill Baker and her husband and their two children rent a four-bedroom ranch house near Coral Square Mall after moving to Coral Springs two years ago following a foreclosure in Atlanta. The landlord pays for pool and lawn service. Baker, 36, said she'd like to own again someday but is content for now. "It's pretty stress-free," she said.

Because of the avalanche of foreclosures during the past four years, individual landlords are becoming more lenient with tenant applications. Landlords are more willing to overlook poor credit and instead focus on a tenant's employment history and current ability to pay.

"I'm more interested in what's going on today," said Phil Friedman, an investor who rents homes across South Florida. "Credit scores don't predict the future."

Friedman's Fort Lauderdale real estate agent, Jack Clark, saw the growing trend of former homeowners turned tenants and suggested Friedman accommodate them as a way of renting the homes more quickly.

In the past, Friedman asked for first and last months' rent and a security deposit, so a renter would have had to shell out about $6,000 to move in, Clark said. Now he asks for the first month's rent and security or lets the tenant pay the security deposit in installments.

"It makes business sense," Clark said. "People coming off a short sale or a foreclosure don't have the cash."

Friedman bought his investment properties at reduced prices, so he's able to easily find tenants whose rent will cover his mortgage payments. But homeowners who bought at the height of the housing boom in 2004 and 2005 worry they won't be as fortunate.

James Wells, a 52-year-old architect, paid $186,500 for his Miramar townhome in 2004, but it's now appraised by Broward County at $103,140.

With jobs for architects more common in places like San Francisco and Boston, Wells said he wouldn't be able to rent his Miramar digs for anything close to his $1,800 monthly mortgage payment. If he chose to rent it, he would lose money each month and be forced to live in a studio apartment on a strict budget in a new city.

"How do you advance in your career when there is no rental market to sustain you?" Wells said.

[housingcrashsurvivor]

Re: How much worse will it (the real estate foreclosure crisis) get? Plenty

What is the ratio in Detroit right now? I've always thought that Detroit is what the entire USA will look like 20 years into the future.

Right about when I intend to start wasting away in a pub in Pattaya. Not a problem.

Meanwhile...

http://www.somacon.com/p469.php

[Starving Steve]

Re: How much worse will it (the real estate foreclosure crisis) get? Plenty

A few questions while I was watching the decline of Detroit on your post: 1.) Is Silicon Valley going to be the next Detroit? 2.) What is so wrong with inter-state freeways? What is so wrong about the open road, a big Olds, and 80 MPH? 3.) Trains might be fun to ride, but how about waiting for a bus (that never comes) at night in Winnipeg at -40F? Or how about waiting for a bus in Detroit at night with gangs around that have "an attitude"? 4.) What is so wrong with urban sprawl and lower land costs? What is so wrong about plain losers like me owning a log home far out of town, or a ranchette, or maybe a McMansion?

[c1ue]

Re: How much worse will it (the real estate foreclosure crisis) get? Plenty

One of the reasons I bought here is the large & consistent renter base, being near one of the biggest universities in the country and having so many healthcare workers often too busy to deal with home ownership. Still, that's kind my point in describing this market. Maybe a lot is understandably fear, having seen what we just went through. Or the banks are not lending? Unemployment is high in the surrounding metro area but locally probably (I don't have the figures, just a feel) slightly better because of our recession resistant employment base of education and health care. I just don't know. Eveything I saw told me to buy. (Though I'm easily fooled, so don't go by that).

Your market may easily be an exception, but then again the events unfolding are not going to leave any market unscathed.

If your market didn't shoot up that much on the upside, then your downside risk is likely equally minimized (not necessarily low).

Just note that should we see significant interest rate, dollar devaluation, or other 'surprises' - the owners are the ones at risk.

Rentiers don't care because the short term income isn't relevant for them - they have more than enough to live 5 or even 10 years without rent.

Wanna-be rentiers - not so much.

[don]

Re: How much worse will it (the real estate foreclosure crisis) get? Plenty

A recent warning that Jim Sinclair posted on his blog:


I am asking for your attention again because of the depth of the fraud and now the size of the securitized mortgage debt OTC derivative pile of garbage that is in the trillions. This entire mountain of weapons of mass financial and social destruction is now in question. I have been telling you this for more than 2 years since the manufacturers and distributors of this crap were called by the NY Fed due to the loss of control over the paperwork.

I had dinner with my former partner, then lead director of and CEO of Bear Stearns. I could not contain myself so I asked him why he did so much business in OTC derivatives which were certain to bankrupt them. The answer I got was it was more than 50% of their profit. The right answer should have been it was more than 80% of their earnings.

Securitized mortgage debt is going to be the final shot that kills all kinds of financial entities in the Western world.


The biggest holder of this putrid junk is pension funds.


(The sheeple were sheared in the NINJA setup. Now, in the derivatives unveiling, they must be slaughtered...)


Meanwhile, the stock market continues to go up, up, up as if everything is right in the world and as if a juicy new bull market is now upon us.


Well, let’s all join hands and sing happy songs around the campfire.


Kumbaya

[Jay]

Re: How much worse will it (the real estate foreclosure crisis) get? Plenty

The property tax will hit speculators hard. I believe that a lot of units are bought using company cash, laundered money or money from underground money lenders. They have not factored in property tax and this may catch them by surprise.

The contractor, now our unwitting landlord, who speculated on our house, then got caught when the market dried up in 2006, rented to us hoping that the market would resume its upswing at some point and he could get out still in the black. He is now in a hard spot because property taxes have gone up (even more for him without the homestead exemption) and he is now losing money on the property. He can't raise our rent because there are now other equally solid if not even better options on the rental market that weren't there four years ago and we would move (this was the only stand alone house rental option in our neighborhood four years ago, now there are more popping up all the time). He had the place appraised last week, instead of getting 500k which was his initial dream four years ago they told him 350k max. And they also said they wouldn't take the property because they didn't think it was worth their time. I think his note is around 320k. He stripped this place down to the studs and put a ton into it too; roof, windows, kitchen, baths, insulation, plumbing, electric, etc...