drbubb

Well done, GW. I wonder if the London falls will pick up pace in the second half of 2008. This from Fred Harrison: Some advice he has for UK authorities: "First, they should avoid making the downturn even worse. If, for example, the Treasury sticks with its plan to level down the tax rate on capital gains, there will be a sharp drop in prices in the summer. Owners of buy-to-let properties are waiting for the new tax year to offer their apartments for sale, when the CGT rate will be cut from 40% to 18%. The effect will be a crash in prices, denting confidence even further."

I wonder how you feel now about having sold to buy gold?

(From Mish Shedlock): The epicenter of real estate fallout has to be Florida. A 25 member committee is now addressing Florida Taxation and Budget Reform. Good luck with that. This quick review clearly shows that Minyan Peter was spot on with his assessment that 2008 will be a year of choices: personal choices, household choices, city choices, state choices, and even national choices /: http://www.howestreet.com/articles/index.php?article_id=5390

Let's look at the UK. Here's up-to-date, what's happening: "House prices are crashing - asking prices were down 3.2% in December from November, housing website Rightmove reported, way down from the 0.7% fall in November. Prices in London, center of the U.K. bubble and of world capital flows, fell by an average of $56,000 in December, the worst in Britain: /see: http://www.inteldaily.com/?c=140&a=4603

(From MarketOracle's 5 Mega-trends): Mega-Trend #1: The Housing Downturn Will Drag On ... And On ... And On A few years ago, I started warning that the housing market was a dangerous bubble, destined to pop with devastating consequences. I highlighted predatory mortgage lending, ridiculous speculation, out-to-lunch regulators, and dramatically overvalued homes as threats to the entire housing system — and told you to expect those problems to come home to roost. Boy, have they ever. To recap some of the major points ... Sales and construction activity have collapsed: Existing home sales have plunged 31% from their 2005 peak. New home sales are down even more — around 48%. Meanwhile, single family housing construction activity has tanked 55%. And the decline isn't over: The issuance of new building permits — an indicator of future housing starts — has dropped to its lowest level since 1991. ((1991: time of the last bottom)) The outlook has worsened as empty homes have piled up: An index that measures home builder optimism, buyer traffic, and expected sales has plunged from the 70s during the boom to 19, a record low. And the nationwide home vacancy rate has surged to a near-record 2.7%, a testament to the dramatic glut of empty, depreciating homes sitting on the market. Mortgage performance has suffered: An alarming 5.6% of the nation's homeowners have fallen behind on their mortgage payments — up from roughly 4.7% a year earlier and the most since 1986. The percentage of homes in any stage of foreclosure has jumped to 1.7%, the highest since the Mortgage Bankers Association began tracking it in 1972. According to some estimates, as many as 2.2 million homeowners could lose their houses over the next 24 months! We've already seen the price of an American home lose 6.1% from a year ago, according to the well-respected research group S&P/Case-Shiller. The Census Bureau shows the price of new homes down even more — 13% in October, the sharpest drop in 37 years. I fully expect more declines in 2008. Home values will likely fall by the mid-single digits nationwide, and more in select markets. Longer-term, the downturn in construction activity will eventually cut housing inventory to a more manageable level, while lower prices will entice more buyers to step up to the plate. But it'll take a good long while to get housing supply and housing demand into better alignment. I don't expect the overall market to start a gradual recovery until late 2008 at the earliest. More than likely, it will take until 2009. Mega-Trend #2: Commercial Real Estate Ready For Its Turn On The Chopping Block In May, a Moody's commercial real estate analyst declared ... "Underwriting has gotten so frothy that we have to take a stand ... the industry was heading to Niagara Falls." But by the time Moody's took its stand, the frothy underwriting in the commercial sector was too far gone. As on the residential side, the industry was already plagued by interest-only financing ... loans with huge balloon payments ... hasty and shoddy due diligence ... scrimping on tax, insurance, and maintenance reserves by landlords ... little or no equity contribution from purchasers ... not to mention loan-to-value ratios of 80%, 90%, even 120%. Commercial lenders are now attempting to get their arms around the problems. But they waited too long /more: http://www.marketoracle.co.uk/Article3205.html

(from a GHPC thread about "most rapid price falls"): QUOTE (gone west @ Dec 29 2007) I like to look at housingtracker.net as it has a broader scope of cities than Case/Schiller. Over the past few weeks the weighted increase (decrease) in average house prices has remained constant at around -0.3% to -0.4% per week. UNQUOTE That is FAST! Remember, the Case-Schiller data stops in October 2007- that was reported last week. So I think you will see a speed up in the rate of decline (as I have predicted) as we head towards a possible low in 2009.

The LOW for the Schiller index, was like this : Index--------: Centex (CTX).... : 10-cities-composite : 20-cities-composite : First Low..... : $2.1x / nov.1990 : 76.87 / apr.1991... : N/avail. until 1/2000 First High.... : $4.5x / may 1991 : 78.93 / aug.1991... : Second Low : $3.7x / aug.1991 : 77.31 / mar.1991... : An initial low, then a small bounce, and a slightly higher high (+0.57%) about one year later. By comparison, the second low for CTX came six months after the first low, and at a level that was +78% higher. This suggest that there was plenty of time to buy US property AFTER the CTX share price had made an important low. By comparison, here's the pattern for various stocks back in 1989-91: - for Ryland (RYL) ... recent .. - for Pulte Homes (PHM) ... recent .. - for Toll Brothers (TOL) ... recent .. - for St. Joe (JOE) ... recent .. Note: St.Joe, the Florida landowner, lagged behind the builders ! =LINKS== US Builder charts : http://www.advfn.com/cmn/fbb/thread.php3?id=16027246

I like that CTX monthly chart. (have added other links above too.) Here's a similar one for St.Joe (JOE) ... update-2006-8 : weekly : daily Notice how JOE bottomed right ON the 200mo.MA !

Builder Low in place? Somehow, I dont think so, the downside volume looks too big for an important low. But I'm still trying to put the picture together. Some interesting stats from the WSJ article on the Schiller index: + S&P/Case_Schiller national index rose 74% in the six years thru 2006 ... 1.74 + During the same time, USmedian household income rose only 15% ....... 1.74 / 1.15 = 1.51 + Since the peak we've seen a 6% fall, narrowing the gap to 42% ............ 1.51 / 1.06 = 1.425 + A 12% fall in the index is expected by 2009, narrowing the gap further .. 1.51 / 1.12 = 1.35 + Mark Zandi of Economy.com expects a 12% rise in incomes by 2009 ...... 1.35 / 1.12 = 1.205 Putting it all together, and you are left with an expected gap of only 20.5% by 2009. I wonder if that 20% gap will remain too big, with pressure continuing on America's share of global wealth, and competition for scarce oil resources. But inventories remain high, and will likely get higher still ,as foreclosures dump more properties ontoi the market.

Friday, December 21, 2007 Palm Beach Post - "Market won't bottom out until '09, analyst predicts" (12-21-07) "The housing market won't 'hit bottom' until 2009 - a year later than previously predicted, the chief economist for the National Association of Home Builders said Thursday." /: http://thenorrisgroup.blogspot.com/

BIG FLORIDA HOUSES - who will buy them...? *** “Florida doesn’t tax income,” explained a friend yesterday. “But they hit you hard on property taxes. I pay close to 2% of market value. And market values have gone way, way up. So, even though I don’t have a mortgage, I end up paying the equivalent of a mortgage on a reasonably-priced house. See what I mean? My house has doubled in price in the last five years...actually much more than that, but let’s keep it simple. So if I pay 2% on the value of my house today, it’s the same as 4% on what the house is really worth. I’m protected a bit because I’ve owned this for a long time...and it takes them a while to catch up to the market. But imagine some fellow who bought recently. He paid top dollar...and he’s got the property taxes to pay too. And, of course, that’s just the beginning. If I want to ensure against hurricane damage...that’s thousands more. And then there’s regular maintenance, utilities...etc. etc. Home ownership is a big pain in the neck.” “I’ll tell you what’s going to happen. People are going to turn away from big, expensive houses. I feel it happening. It’s part of a change in sentiment. The baby boomers who’ve been buying these things are running out of money and credit. They’re going to be forced to cut back. And I remember you wrote once something that stuck in my mind – ‘people come to think what they have to think when they have to think it’ – or something like that. That’s what I expect. People without money are going to come to think that not having money is cool. They’re going to downsize. And they’re going to think that people who drive big, expensive cars...or live in big, expensive houses are uncool. Already, when I drive around in my 12-cylinder BMW I feel my neighbors laughing at me. It was cool a couple of years ago to have a car like that. Now, it’s uncool. Everybody thinks you’re out-of-style; it’s as if you had a mullet...or a polyester leisure suit, but those are probably coming back in style. And they think you’re destroying the environment too.” /more: http://www.howestreet.com/articles/index.php?article_id=5348

(I am changing the name of the thread, and pinning it) St.Joe (JOE) : Best way to speculate on Florida Property? St. Joe (JOE) a huge property owner in Florida, + Has fallen dramatically in price: from $80, to under $30, + Owns property at historical prices, well below current market JOE ... update : Weekly : Daily : Updating charts = = (Here's what was said about St.Joe back in 2003, before it ran up to $80): Shares of St. Joe (NYSE: JOE) are currently selling for about $32. In Dan's latest Extreme Value newsletter, he calls the stock a "buy" up to $59. So that tells me he considers St. Joe to STILL be an "extreme value" even if it nearly doubles from here. Conservative Dan will even tell you that he expects to quadruple his money in the next few years with this investment. So what's the story? Developing 15,911 Acres of Pure Profits "St. Joe owns a significant portion of the remaining developable coastal land in the state of Florida," Dan tells us. It owns 428,000 acres of land within 10 miles of the Gulf Coast in Florida's panhandle, including 39 miles of coastline. In addition, St. Joe has 261 miles of waterway frontage near the coast and an additional 249 miles of waterway frontage accessible by recreational boats. With nearly a million total acres, St. Joe owns about 3% of the state. Today St. Joe's main business, as Dan says, is "milking the value out of its vast land holdings in northwest Florida." And business is good. Dan says, "All along the Florida panhandle, from Pensacola to Panama City, waterfront homes are appreciating at 10 to 20% a year." Dan then continues: St. Joe has developed or is currently building about 19 developments on a total of 15,911 acres... Beachfront homes and condos at St. Joe's WaterColor development sell for between $500,000 and $1.4 million. Empty lots at WaterColor are worth around $61 per square foot. That's just under $2.7 million per acre... Empty lots at St. Joe's WindMark Beach already sell for more than $1 million an acre. Buying this Stock Is Like Paying 10 Cents on the Dollar! Dan does some fancy math, settling on a conservative guess for the value of all of St. Joe's land at just over $20,000 an acre - which means St. Joe is worth about $20 billion (actually Dan believes it's worth more than that). Yet the stock is only valued at closer to $2 billion. If Dan is even close, buying St. Joe now is the equivalent of buying into the largest chunk of available waterfront land in Florida at nearly 10 cents on the dollar. I don't know how you can beat that. In addition to St. Joe, Dan identified similar property opportunities at similar discounts - the largest private landowner in California... in Hawaii... and more. If you are interested in diversifying some of your investment dollars into property and property development, but you don't want to have to take out a big loan or go deep into debt, and you want to get in at an extraordinary price, you may want to consider the land stocks that Dan recommends... stocks like St. Joe. = = = = = LINKS: Corporate website : http://www.joe.com/web/corporate/investorrelations/ Yahoo profile, JOE : http://finance.yahoo.com/q/pr?s=JOE

Now that's what I call a "Bonanza grade"!

A COLD WINTER COMING for UK Property 'The graph below shows the number of houses per agent, rebased to zero at the beginning of each year, for the last 3 years. The usual pattern, of more houses being offered for sale as we head into the spring and summer occurred again in 2007. But what has NOT happened this year is the fall in supply, as: + Properties get bought in the fall, and + Unsold supply gets withdrawn Are we seeing more-than-usual seasonal supply because BTLers are pushing properties into the market? /source: http://www.housepricecrash.co.uk/forum/ind...showtopic=63295

"...I dont think it works that way for the Economist covers." = = Let's look back... 1/ 2nd Dec. 2006 (A very temporary bounce in the dollar followed) 2/ From John Mauldin: The current cover of The Economist highlights the falling dollar. That reminds me of a very bearish cover story by The Economist of December 4, 2004. "What happened after that? The dollar was 8.6% higher six months later. When these trades make the cover of major magazines, and every article in the Financial Times is almost uniformly bearish, it should give you pause. For the dollar to fall even more, there has to be someone on the other side of the trade. And for now, almost everyone is bearish. It would not surprise me to see the dollar strengthen, or the fall to stop for a period of time before slowly resuming its natural downward course. Of course, good friend Addison Wiggin would see a far more dire future for the dollar. For a less sanguine view try his recent book, The Demise of the Dollar, at www.amazon.com. It is a cautionary tale." - John Mauldin Trade-weighted Dollar chart = = My opinion: The Dollar Bounce may be nearly over by the time this later Economist cover was published. Too many observers are now sounding the same tune, saying "The Dollar may be due for a bounce" Surely, we have seen some dollar short-covering (especially in A$ and C$) in recent weeks. But the A-B-C pause in the Dollar's weakening may be finishing here, and a renewed decline may be starting even as they would-be Dollar Bulls are just sending out their opinions to their readers AFTER the dollar bounce has happened.

If this was the Cover of Time ...then you should be buying the dollar. But I dont think it works that way for the Economist covers

Thanks for the tip. I will have a look at it. Greatland Gold = ??? : symbol? where does it trade? link to article?

UPDATE on Fred Harrison's 18 year cycle My model suggests that the property market runs in 18-year cycles. There have been three in the postwar years (1956-74, 1975-1992 and 1993-2010). The operating mechanism is shown in the graph above. Earnings across the economy rose roughly in line with national income, as did the cost of building homes (including materials, and wages and profits in the construction sector). House prices, however, rose much faster, to disruptive heights, peaking in the booms that result in busts. The cause of this instability is the out-of-control rise in the cost of land. The supply of land is fixed, so when the economy is growing, it has to become more expensive. Rising land prices squeeze corporate profits, reducing the money available for wages, until prices simply can’t go any higher because most people can no longer afford to buy. The phenomenal rise in land prices since 1993 is the main reason why the next downturn will turn into a depression. That may sound extreme. After all, most of us could relax if the only issue was the trend in house prices. Negative equity will burden only those who are forced to sell properties bought in the past three years or so. But much more is at stake. Forecasters base their optimistic outlook on the belief that the “fundamentals” rule out a recession, claiming a strong labour market will offset the pain of falling house prices. In fact, causation runs in the opposite direction. The fall in house prices creates the conditions for recession, as is now clear in the US. Lay-offs in the construction industry and related sectors are curbing consumption, which discourages investment and ends in a recession. Look what happened when the last real estate cycle exhausted itself at the end of the 1980s. In Japan, the authorities mishandled the biggest postwar boom in property prices. Bad loans to land speculators were allowed to blight the balance sheets of banks that should have been allowed to fail. The outcome? A decade-long depressed economy. Much the same happened in Germany, and it looks like the US and the UK will make the same mistakes. /more: http://www.moneyweek.com/file/37485/house-...-the-worst.html

IT STILL LOOKS GRIM So what are rents saying about home values today? To answer that question, Fortune worked with Moody's Economy.com to estimate adjustments needed to get prices and rents back in balance. We'll go into detail below, but the headline is gloomy: According to our calculations, prices in most markets will fall by double digits over the next five years. Here's how we reached that disturbing conclusion. We started with the median price of existing homes in 54 metropolitan areas, using numbers from the National Association of Realtors. We then compared those prices with the annual rent on similar properties - houses, condos, and apartments with the same number of square feet as the median-priced house in each market - using figures prepared by Property & Portfolio Research, a commercial real estate research firm. That gave us a price/rent ratio for each area. Economy.com then compared the current P/R ratio with its average over the past 15 years and calculated how much it would have to decline to return to its historical norm. The average drop for all the markets we surveyed is 28%. But that's not the whole story. The adjustment doesn't come exclusively from a fall in prices - rising rents also help close the gap. To complete the picture, Economy.com assembled a forecast of rental growth in each market; the average rise in our 54 markets is a total of 12% over the next five years. So to reach the average correction of 28%, prices need to drop only about 16%. Of course, that's still a big bite. And in many areas the outlook is far worse. In the major Florida cities, Orlando, Miami, and Tampa, prices need to fall 28% to 34%. It's a similar story in inland California markets such as Sacramento (-26%) and the East Bay (-31%). In East Bay boom towns like Walnut Creek, a four-bedroom house that might have fetched $1.56 million in the spring may go for less than $1.1 million in five years. In a handful of cities, our formula suggests that prices will actually rise. Home values should increase slightly in Dallas, Indianapolis, Cleveland, and a few other locales the bubble missed. In Detroit houses are so cheap - the median is around $100,000 - that even a shift in the economy from disastrous to mediocre is all that's needed to lift both rents and prices. // table : You can see the results for 54 areas around the country in this table -see: money.cnn.com/2007/11/06/real_estat...rtune/index.htm

HOPEFUL SPIN from, Mr.Slipshod... "Prices are set to flatline in 2008," said Miles Shipside, commercial director of Rightmove. "While we do not expect a price drop overall, there will be parts of the country that are over-priced and over-supplied for the likely levels of affordability and demand next year. "In these areas, motivated sellers are starting to cut their prices and will need to be the cheapest on the street to sell. "While bargain hunters will be paying less for these properties, prices will rise where demand continues to outstrip supply in quality areas close to major conurbations, especially London." /see: http://www.housepricecrash.co.uk/forum/ind...showtopic=61388

from the BDEV thread on Adfn: (Finally, posters her are acknowleding what is really going on): tara7 - 17 Nov'07 - 17:28 - 485 Sorry mate, just my view, the world has changed. Money is drying up fast, house prices are going far lower than most think. Real estate [comm property has come off 16% in 10 weeks. House prices are falling very fast Now, today. Look at the last two property busts, 1974, and 1998. See just how low shares will fall. Forced sellers are hitting the market, and by the spring, will be in droves. Housebuilders are a one way bet, down,cos they will not make a profit on thr high price land they have. That land seemed cheap a year ago, however, now is falling like a stone. Losses for the next few years the pain has yet to start. Trust me, i saw a run on the banks comming. see thread , [RUN ON THE BANKS]. = = Whodathunkit? Barratt and other UK builders can now sell only at a loss. And are beginning to rent properties out in order not to take the hit on their balance sheets. A sad, but predictable state of affairs

Sorry, i dont have one, though I wish I did. Behind your question, lurks a very important issue- i suspect. CAUTION !! I believe we would find that US property prices are proving very sticky on the downside. The US builders have collapsed in price, and many, many months ago, but the downward thrust in US prices is nowhere as large- at least not yet. So it may be that: this index has correlated reasonably well with prices on the way up, but on the way down, the slides in UK prices will be far less than the huge percentage drops that we have seen in the UK builders. If this supposition proves correct, then I still think the BBI has great value as a timing tool. it seems to prediction turns (in both the US and the UK) with a 6 - 9 months lead. Let's se how things play out. But do not expect the UK to give up all the gains since 2003 in only 6-9 months- which is what the index hgas been suggesting.

Guess who said this?: Silver has just made an Upside Breakout above $15/oz. Not everybody will recognize the importance of silver's Upside Breakout, for which we have been patiently watching like a cat outside a mouse's hole. For a long time sellers have repulsed silver's rises at 15 but, now that 15 has been achieved, it implies that the sellers have exhausted their holdings, and are sold out, liberating silver to continue its Major bull market ... silver has languished far below its own high at $50/oz, and is overdue for a catch-up that could result in serious profits ... We totally discourage you away from the silver futures markets unless you are a professional, because it is an arena for the quick and the bankrupt -- stay with our carefully selected silver shares.

FADING "THE LITTLE GUY" IN SILVER - Small Specs are too Bearish The latest COTs report issued last Friday, Nov. 9, shows the small traders in silver futures and options hitting a historically bearish extreme in their net position as a percentage of the total open interest. The “dumb money” little guys have suddenly reduced their net long position to the lowest it’s been since Nov. 2005. Shortly after, silver exploded out of an 18-month trading range, nearly doubling in price over the ensuing half-year. The latest positioning of the wrong-way crowd, whom I trade opposite to in my setup for silver, has given me a renewed bullish signal for silver. This means I’m staying long iShares Silver (SLV). Sadly, the COTs numbers show in grim relief what’s going on as the little investors try to outguess the markets—and end up losing their shirts. /more Alex Rosin : http://www.kitco.com/ind/roslin/nov122007.html

From Bearish article about US housing on the BBC website: http://news.bbc.co.uk/1/hi/business/7078492.stm chart: "average house prices across the US are declining for the first time since the Great Depression in the 1930s, and the magnitude of the collapse has surprised experts." LOL The only "experts" who were surprised by the falls... were the ones taking their views from spin-ridden media (er, ah, like the BBC, I suppose.) Alternative economic observers saw this slide coming long ago and prepared for it. Now they are talking and writing about how a severe property slide will soon visit the UK too, with a lag of about one year to what is happening in the US.