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4-20-06 Pop Goes the Housing Bubble - Some say

"Bubbles burst, they really do," said Joel Naroff of Naroff Economic Advisers. "The Federal Reserve has to be concerned that just may happen, which could make them more cautious going forward."

AVOC

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April 15, 2006

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Pop Goes the Housing Bubble - Some say

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By Wendell Dawson, Editor, AVOC, Inc

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Over a 35 year career of practicing law and being involved in 1,000s of real estate transactions, I have seen several down cycles in the housing market.   From each downturn, I remember some builders (developers) (who had been “boring with a big auger”, as a friend said), just disappeared from the landscape.

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We have been on a pretty long run for about 14 years.   Metro-Atlanta flight is feeding the NEGA housing market and growth.   However, interest rates, supply and demand and other factors can cause a hic-cup or outright recession in the market.

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Some have predicted it for sometime now- just as some did about the stock market and the technology listings in the late nineties.Some win and some lose.

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A fire can only burn bright for so long!We will see over time who survives the next natural downturn.

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A downturn can also impact local governments who are now reaping windfalls from development fees and taxes.

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SEE:

9-2-05 Is There a Housing Bubble in Oconee County, Georgia & the United States?

8-16-02 - Home Building Slowing with the economy


The Los Angeles Times

http://www.latimes.com/news/columnists/la-me-only14apr14,1,339346.column?coll=la-news-columns

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April 14, 2006

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Pop Goes the Housing Bubble

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By Steve Harvey

You knew it would happen, you homeowners. But, as Mike Hickey of Monrovia wrote after receiving an "appraisal" in one real estate flier: "I always thought the end of the housing boom would be more gradual"


The Los Angeles Times

http://www.latimes.com/news/printedition/la-fi-homes13apr13,0,1375311.story?coll=la-news-columns

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April 13, 2006

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Housing Prices in L.A. Aren't Letting Up

The county median, up 15% in March, tops the half-million-dollar mark for the first time.

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By Annette Haddad
Times Staff Writer

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If this is a bubble, it's sure taking a long time to pop.
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For the first time, the median price of a Los Angeles County home topped the half-million-dollar mark last month, data released Wednesday showed.
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Four years ago, the median was half that. By doubling in such a short period, it's no wonder Los Angeles County appears on many lists of the nation's most-overvalued home markets.

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The increasing prices comfort recent home buyers such as Brian Kite. The West Los Angeles resident waited three years to buy a house because he thought prices were too high. He plunged in about a year ago, spending slightly more than the median price for a three-bedroom home not far from UCLA. The median is the level at which half the homes are sold for more and half for less.
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"I felt at the time that I was buying at the top, but I knew I had to do it," Kite says. "But in the back of my head I keep thinking: Are prices still going to go up? I wonder how they can."
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Yet they are. In March, the
median hit $ 506,000, up 15% from a year earlier and 3% above the prior month, according to DataQuick Information Systems, a La Jolla-based research firm that analyzes property transactions.
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Los Angeles County thus joined Orange, Ventura and San Diego counties in crossing the half-million-dollar mark, keeping Southern California's place among the nation's priciest housing markets. Orange and Ventura counties' medians sailed through the $00,000 level in the middle of last year, and San Diego's broke through the $ 500,000 point last fall.
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To buy a house at the median price, a household would need an annual income of at least $ 120,000 to qualify for conventional financing with a 20% down payment. The county's median household income: about $ 47,000.

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And half a million doesn't exactly get you a castle. Don't even think about Beverly Hills. Try Norwalk, South Los Angeles or Panorama City, where the median price buys 1,500 square feet with three bedrooms and two baths.
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Want something bigger? Head to Palmdale, where $ 500,000 gets you 2,200 square feet and two stories. Want ocean breezes? There's a two-bedroom condo in Playa Del Rey, built in 1971.
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Such stratospheric prices and low affordability have raised concerns about a repeat of the last time L.A.'s real estate market went from hot to cold. After a boom in the late 1980s, local home prices fell nearly 20% between 1991 and 1996 - among only a handful of regional markets to see prices fall in the decade.
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But a lot has changed since then, economists assert. The region is less dependent on any single industry, such as aerospace, where a sharp loss of jobs due to defense cutbacks sparked the early-1990s real estate collapse.
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There also has been much less home building here than 15 years ago, so vast tracts of unsold homes are hard to find. Mortgage rates are much lower. And local homeowners may have learned a few things from the last go-around. Namely, that a slowing market is not cause for panic. When the market slows, many just won't sell.
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Still, naysayers contend, history is starting to repeat itself. Sales volumes are slowing while more homes are coming on the market. In March, 9,755 homes changed hands in L.A. County, a 10.3% decline from a year earlier, and the fifth straight month of falling sales.
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Also, the rate of price appreciation throughout Southern California has slowed from its peak in mid-2004. Prices haven't risen more than 4% from one month to the next since last summer. In some cases, sellers are dropping their asking prices.

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Today's combination of prices rising more slowly, fewer sales and growing supply are typical of the first phase of a slowdown, UCLA economist Christopher Thornberg says.
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"Prices are still going up, because they always go up even when the market starts to cool," he says. "It will take six to nine months for a cooling market to start to see lower prices. It happens time after time."
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But while more homes are on the market, it's not necessarily a bad sign, other analysts say.
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If anything, these analysts say, a large percentage of homeowners may be testing the waters to see what price they can fetch. If they like it, they will sell. If they don't, they will pull the house off the market.

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Such seller psychology is translating into more homes on the market for longer periods — but not widespread price reductions.
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"Inventory is definitely up, but it's not swamping the market," says Leslie Appleton-Young, chief economist for the California Assn. of Realtors.
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Back at the start of the last real estate downturn, in February 1991, there were so many homes for sale in Los Angeles County it would have taken 28 months to sell them all, Appleton-Young recalls. Defense-industry layoffs forced many to sell. No job, no big mortgage.
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"Homeowners had to get out at any price," she says.
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That's in stark contrast to this past February, when there was a 7.2-month supply of homes for sale. "People are loath to sell if the market is softening," Appleton-Young says. "And they don't sell if they don't have to."
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The region's affordability issues work to the benefit of Mark Gilbert. The Lancaster-based real estate agent sees firsthand the vitality of the county's housing market. In his area of the Antelope Valley, most homes are valued at or below the countywide median price.
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"Every listing I've had this year has sold within two weeks - and over the asking price," he says. "If the house is priced right, it will be competitive."

Gilbert expects prices in his area to rise about 10% this year, not as fast as their 25% peak rate of appreciation, but still moving up, not down.

Even UCLA economist Thornberg - among the most pessimistic of analysts - concedes that local home prices aren't likely to fall this time around.

"We're not due for that kind of collapse," he says. Prices will probably flatten by year's end, he predicts.


That's a relief to West Los Angeles homeowner Kite.

"I'm always going to be a little nervous that prices could go down because I took a big step to get this house," Kite says. "But I'm happy with my decision and the best part is I have a great place to live."


3-24-06 New Home Sales Plummet, Housing Crash Possible

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NewsMax.Com

http://newsmax.com/

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March 24, 2006

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New Home Sales Plummet in February

Breaking from NewsMax.com & MoneyNews.com

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Sales of new homes plunged by the largest amount in nearly nine years in February while the median price of a new home dropped for the fourth straight month, providing fresh evidence that the nation's once-booming housing market is cooling off.

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The Commerce Department reported that sales of new single-family homes dropped by 10.5 percent last month to a seasonally adjusted annual sales pace of 1.08 million homes. It was the second straight monthly decline and was much bigger than the small 2 percent dip that Wall Street was expecting.

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The drop in new home sales followed news Thursday that sales of previously owned homes actually rose by a stronger-than-expected 5.2 percent last month following five straight monthly declines. Analysts said the trend in both reports pointed to a slowing housing market after five record-setting years.

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The slowdown in sales was putting pressure on prices. The median price of a new home sold last month dropped to $ 230,400, down by 1.6 percent from January and off 2.9 percent from February 2005. The median is the mid-point where half the homes sold for more and half for less.

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In other economic news, orders to U.S. factories for big-ticket manufactured goods rose by 2.6 percent last month, the biggest gain since November, reflected a surge in demand for commercial aircraft.

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Outside of the volatile transportation sector, orders actually fell by 1.3 percent, but economists said the underlying trend for manufacturing remained strong.

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The 10.5 percent drop in new home sales in February followed a 5.3 percent decline in January and was the biggest drop since a similar 10.5 percent fall in April 1997.

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Sales of new homes have fallen in four of the past five months with the sales rate of 1.08 million units the slowest pace since May 2003.

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While sales of both new and existing homes climbed to new all-time highs in 2005, the fifth consecutive annual records, analysts believe sales will decline this year as the housing boom slows under the impact of rising mortgage rates.

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By sector of the country, sales fell by the largest amount last month in the West, a drop of 29.4 percent. Sales were also down in the South, dropping 6.4 percent. Sales rose in the Northeast by 12.7 percent while sales in the Midwest were up by 5.2 percent.

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© 2006 Associated Press.


3-25-06 New Homes Sales Sagging- National Reports

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The Washington Times

http://insider.washingtontimes.com/articles/normal.php?StoryID=20060324-101346-8714r

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March 25, 2006

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New home sales slumping

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By Patrice Hill

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A home under construction is offered for sale yesterday in Palatine, Illinois.  (Getty Images)

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The downturn in the housing market is deepening, with new home sales at a nine-year low, prices down for the fourth month in a row and mortgage applications at their lowest point in three years.

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    Last month's 1.08 million rate of new home sales was 10.5 percent below January's rate and down 13.4 percent from a year ago, the Commerce Department reported yesterday.

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    New home prices have declined steadily from a median of $ 243,900 in October to $ 230,400 last month, the agency said.

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The rapidly decelerating housing market is causing concern on Wall Street and at the Federal Reserve. A collapse in the market is one of the biggest risks facing the U.S. economy because it would drag down consumer spending that has been closely linked to climbing house prices and kill thousands of high-paid jobs in the real estate industry.

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"Bubbles burst, they really do," said Joel Naroff of Naroff Economic Advisers. "The Federal Reserve has to be concerned that just may happen, which could make them more cautious going forward."

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    "We see construction diminishing somewhat and real estate prices flattening, not declining," she said. "Clearly, however, we could be wrong on the magnitudes."

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    Housing wealth, which surged by $ 5 trillion in the first half of the decade, has been a powerful generator of consumer spending since nearly 70 percent of American households own homes. Consumers liquidated as much as $ 600 billion of their home equity last year to spend and invest, according to the Federal Deposit Insurance Corp., eclipsing their $ 375 billion gain in after-tax income.

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    Mr. Naroff said the home market's steep decline since the fall may start snowballing and affecting consumer wealth. Already, sluggish sales and traffic have prompted homebuilders to offer discounts and incentives on homes for sale, but they will have to start cutting prices in earnest if they want to unload the record inventories of unsold homes they've been accumulating, he said.

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    Unsold new homes totaled 548,000 last month or 6.3 months of homes at the current sales rate -- a stunning 45 percent above year-ago levels, according to the department.

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    "The product overhang just keeps growing," in both the markets for new and existing homes, where unsold homes also are at record highs, said Mr. Naroff.

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    "Declining new home prices would ultimately spill over into the existing home market," where the consuming public would start to feel the pinch, he said.

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    Economists say falling home prices could wreak disaster on consumer finances, not only by preventing many from cashing into home equity as they have been to boost their incomes and spending, but also by putting many borrowers on shaky financial ground because they took out huge mortgages with backloaded payment schedules to purchase their homes.

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    Caught between the squeeze of rising rates and a falling market, these borrowers -- most heavily indebted segment of the consuming public -- will fall into a spending slump this year because they have taken on burdensome and risky mortgages and are too overstretched to maintain their spending and debt payments, she said.


    "The picture is getting less and less pretty," said Phillip Neuhart, economist with Wachovia Securities. But he noted that other housing reports, notably one showing a 5.6 percent boost in existing home sales in January due to unseasonably warm weather, are not signaling as profound a weakness as yesterday's report.


    "One month of surprisingly weak new home sales does not constitute a market bust," he said. "However, if new home sales were to continue their plummet and existing home sales follow suit," the Fed would have to start worrying about the health of the economy.


Norton Native Intelligence Market Watch

North Georgia's Intelligence Market Watch

http://nortonnorthga.com/content/14.htm

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The Norton Agency
The Regions Largest Real Estate and Insurance Firm

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April 19, 2006

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NATIONAL TRACTS


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Decline in Pending Home Sales Slowing

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A slide in pending home sales is beginning to level off, an indication of a more sustainable level of home sales in the month ahead, according to the National Association of Realtors.

The Pending Home Sales Index,* based on contracts signed in January, slipped 1.1 percent to a level of 116.3 from an upwardly revised index of 117.6 in December, and is 4.8 percent behind January 2005.After hitting a record of 128.2 last August, the index declined at a more rapid pace through December, averaging nearly 3 percentage points per month.

 

The index is derived from pending sales of existing homes.A sale is listed as pending when a contract has been signed but the transaction has not closed; pending home sales typically are finalized within one or two months of signing.   An index of 100 is equal to the average level of contract activity during 2001, the first year examined, and was the first of five consecutive record years for existing-home sales.

 

David Lereah, NAR's chief economist, had foreseen a flattening in the index."This looks like we're touching down for the soft landing we've been expecting," he said."We are at a much more sustainable level of home sales now, a welcome cooling from the super-heated conditions that were driving exceptional price gains.This will give people the time to be more thoughtful about a process that is the biggest single investment most of us make in our lifetime."

 

 

 

 


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