As to the funky loans, Seattle is in the top SEVEN cities in the US for Neg Am’s and risky ARM’s BOTH!

That quote struck me too. The senior Fed guys seem to be all over the place. Every once in a while they come up with something really important. Other times, it’s hard to say just what they were thinking.

re: The Chicago Fed’s “there is no bubble!”
The Dallas Fed disagrees.

Full transcript here:
http://dallasfed.org/news/speeches/fisher/2006/fs060816.cfm

Excerpt:
…
The key area of concern in the real estate markets is the housing market. You know the facts here, so I’ll make this brief by repeating what a friend who has been a major homebuilder since 1973 recently told me: “This is the roughest, most sudden correction we have ever seen in the housing market.”
…

My husband got in an argument with someone from Seattle, who assured him that the Seattle market remains “stable”- there is no bubble. I felt obligated to try and rise to the challenge.

Thanks for the link. I ran into Seattle Bubble while doing my research- I enjoyed your site- and you’ve joined the blogroll on our sidebar.

By the way, I just recently discovered your blog, and am now linking to it on Seattle Bubble. Keep up the good work!

(Dr Demento used to have a period parody of “Prosperity is Just Around the Corner” with a bubblehead spouting prosperity platitudes being answered by a Depression homeless man in the street.)

My goodness, is that ever a lame excuse.

Of course, you realize that many real estate brokers are going to deny the existence of any bubble until it has finished popping.
“Bubble, what bubble? Oh, pish-posh! Our people was on vacation, is all..!”

Then, once the bubble is done… “Oh yeah! THAT bubble! Well, now that it is over, it is time for you to BUY!”

I think it is going to hit places where little speculation has occurred because I believe the people buying with IO’s and ARMs are themselves speculators. I am sure Seattle has had a number of those.

Small aside, I am going out to PHX with my brother in law in about 3-4 weeks. I will be meeting some of the big developers out there, I will report back to you all (youse if you are from NYC, y’all for the southerners)on what they are saying.

Sorry- the ever prudish Twist and her asterisks strikes again. I have to admit though, the same thought crossed my mind.

Seattle has not seen the level of speculators that some of us in the formerly “hot” markets have- so I think they may be a little more symmetrical in their drop than Phoenix, San Diego, etc.

However, I have been looking hard at the vacancy numbers. Inventory in Phoenix is north of 53,000- vacancy is at 44%. There are nearly 5000 empty builder inventory homes as well. Given all the nearly completed inventory here, and the amount being built- that number is undoubtedly low.

If you consider the housing market to be like the stock market- who is the largest “shareholder”? The builders. They need to dump those homes to survive. The high numbers of vacant home sellers will need to follow in order to unload their homes. That is going to drive the market for everyone else. (Check out these numbers from the NAR)

http://www.realtor.org/rmodaily.nsf/pages/News2006082202

The serious potential for a “dead cat drop” is here.

Sorry I did not see the link. I agree, we live in interesting times. Btw, isn’t that a curse in Chinese?

I have a question to pose to readers. Since I know I am not a genius, nor am I a finance guru, how is it that I saw this coming and saw the bad loans out there ready to blow up in owner’s faces? My only mistake as I see it was in guessing someone would be responsible and put the kibash on it sooner. Imho, 1/4 BPS moves by the fed was too timid for too long.

How do other “Doomers” see this thing playing out over the next 3-5 years. The part of the article above suggests that the fall is symetrical to the rise. I do not see it that way at all. I think that applied in previous RE cycles when conventional loans were the norm. They did not need exotic loans as an affordiblity vehicle. People did not have IO or ARM resets biting them in the butt and people did not use them in the same numbers. So I submit to the “Doomers” that it will be a hard and fast landing because of the stress of making payments on the resets. I also think lenders and Congress knew this cataclysm was in the making and saw this coming when they passed the new bankruptcy laws.

http://www.cartoonbank.com/product_details.asp?mscssid=PUTS7C4AXCVS8LL3E2EWPCV2663PAK7E&sitetype=1&did=4&sid=24852&pid=&advanced=1&keyword=lemmings&artist=&section=prints&caption=&artID=&topic=&pubDateFrom=&pubDateTo=&pubDateMon=&pubDateDay=&pubNY=&color=0&title=undefined&whichpage=1&sortBy=popular

I’ve thrown the central CA story onto the side-bar. The flood of significant bubble stories is just so great this month it’s hard to keep up. Samuelson’s op-ed (just under your story) is significant in that it has a widely syndicated economic pundit calling an end to easy credit in America. Interesting times indeed!

http://www.centralvalleybusinesstimes.com/stories/001/?ID=2790

“Both Las Vegas and Phoenix were impacted by speculators,” says Ms. McGee, and more than 25 percent of new home sales in both markets were going to out of state investors who had no intention of ever occupying the homes they purchased.

Now those who came late to the party find themselves squeezed by rising interest rates and resulting negative cash flows, she says.

“The speculators are definitely on the run, and walking away from properties they cannot afford to hold and cannot sell at a profit,” says Ms. McGee.