Friday, May 19, 2006

Bonner on Housing

From Lew Rockwell:
Lifting IQs

"Nothing lifts I.Q.s more than a property boom."

"America's real estate bubble has created a whole nation of geniuses...people who think they are smart because their houses have gone up in price. And the smartest of them weren't content to merely watch prices rise; they took advantage of them by leveraging themselves into more and more expensive properties."

""I've watched him over the last few years. He bought one condo before it was built. He flipped it and bought another one. And then, he bought a whole bunch of them. To him, the secret of getting rich seemed so obvious. All you do is buy beachfront condo at pre-construction prices...and then flip them to someone else. And when he asked me about it, I'd just say, 'Well, I don't know how much longer this boom is going to continue.' He must have wondered what was wrong with me. He was making a fortune. I just didn't get it."

"There must be millions of real estate speculators, concentrated in the hot markets on both coasts, in similar situations. They've stretched to buy. Now they're stretched to keep up with maintenance, taxes, condo fees, and interest payments. Their neighbors bite their tongues. "I told you so," they itch to say."

"Don't worry, say the experts. The boom may have peaked out, but there should be a soft landing."

""I'm not so sure," continued our speaker. "People say the property market can't collapse, because houses are tangible and people have to live in them. They compare housing to dot.com stocks, for example. The stocks can fall 90%...or even disappear. That doesn't happen with housing."

""No, it doesn't happen the same way, but a much smaller decline in housing prices can have a much bigger impact on people like my neighbor. Let's say prices go down just 10%. That's not much. We could expect at least a decline of that much. But a lot of people don't have 10% equity in their houses. They've bought with zero-down mortgages – or maybe 5% – never expecting to have to pay off those mortgages."

""Instead, they were counting on price increases, either to refinance or to sell. If they are forced to pay a mortgage greater than the value of the house, they are going to be in big trouble. And a lot of them aren't going to make it.""

14 Comments:

Anonymous Anonymous said...

There's probably a lot of ppl like this but I would imagine majority of the ppl who bought were not. It would be interesting (probably impossible) to see some data that would show just how many were "flippers/investors" versus people who just bought a house they intended to live/stay in for the long haul. And how many overstretched versus how many will have the ability to ride it out.

5/19/2006 10:42:00 AM  
Blogger Smart Grid blogger said...

Remember why the new Bankruptcy Law was passed to prevent future massive filings ?!!!!!

read:
Greenspan: Housing calms Boom 'over'; Bernanke agrees.

5/19/2006 10:45:00 AM  
Anonymous Anonymous said...

BOYCOTT HOUSES!

No one is forcing you to pay these ripoff house prices...then DON'T DO IT!

Think!

Wiseup!

Use a little common sense.

Booooooyaaaaaaa

Bob

5/19/2006 11:51:00 AM  
Anonymous Anonymous said...

Bob
The people reading this blog are not the ones who are buying.

Think!

Wise Up!

Use a little common sense!

5/19/2006 12:38:00 PM  
Anonymous Anonymous said...

Bob has nothing better to do than post on this blog

5/19/2006 12:41:00 PM  
Anonymous Anonymous said...

I think it's just safe to say soft landing because there will be no crash i.e. tech stocks.
maybe 10% over 3 years vs 30% this year? what do you think?

5/19/2006 12:48:00 PM  
Anonymous Anonymous said...

Soft landing is a new line used by the "Shills" to train the sheople to be good zombies. Do not think. Just follow.

Boycott Ripoff Home prices.

Booooyaaaaaaa

Bob

5/19/2006 01:00:00 PM  
Anonymous Anonymous said...

Anon,

It is not impossible to see data on investors vs. actual primary (to live in) homebuyers. I have seen referenced several times, figures for the % of homebuyers from last year who not buying a primary home, ie. they were buying 2nd home or greater. I think it was something around 29%, can't remember for sure, perhaps Grim or someone else remembers.

5/19/2006 01:24:00 PM  
Anonymous Anonymous said...

What do you guys think homes that cost $600,000 now will drop to by next year?

5/19/2006 03:22:00 PM  
Anonymous Anonymous said...

The more crappy neighborhoods (Orange, Maplewood)will probably drop more than the better ones (Millburn, Short Hills). It's hard to put a dollar figure on it.

5/19/2006 03:28:00 PM  
Anonymous Anonymous said...

I was looking at West Orange and Somerset County

5/19/2006 03:31:00 PM  
Anonymous Anonymous said...

NJGal @ 4:26

It's elementary ... The top 10 reasons are.

10. There is no shortage of credit.
9. RE has always grown 15% year over year or real estate prices always go up.
8. During this period less than 1% of the homes were bought by speculators.
7. The sudden influx of immigrants after 9/11 has caused a shortage of homes.
6. Over the last two years all the buildable land in NJ has disappeared.
5. Flipped houses provide real value.
4. It is patriotic to always pay more than the list price.
3. All the 8 million people leaving in NJ travel to NY for work everyday.
2. NY moved closer to Somerset
1. Whoever bought those houses are out of their mind?

5/19/2006 06:27:00 PM  
Anonymous Anonymous said...

Hello Richard:

"Undesirables" please elaborate

R.L

5/19/2006 07:56:00 PM  
Anonymous Anonymous said...

Read between the lines...the poor people. You know who they are.

5/19/2006 08:13:00 PM  

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