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All Housing Bubbles Are Local And Collapse At Different Rates

The old axiom is “All real estate is local”, and the same can be said for housing bubbles.  The magnitude, duration and timing have varied from metropolitan area to metropolitan area, and from community to community.  Here’s how I described this trend back in 2008:

The real estate bust has played out like a roller coaster- cities that rose dramatically early in the game- Miami, Las Vegas, Phoenix, San Diego, were also where the cracks first started to show.  Other markets around the nation ignored the warning signs however, feeling that somehow their markets were “bullet-proof”.  Buyers looked at above average appreciation and decided to buy, not wanting to believe that their market would follow the same pattern as others.

Because the rate of decline has slowed in areas that experienced serious declines, there have been those who felt that communities that held up when others were failing wouldn’t be able to dodge the worst of the storm.  According to yesterday’s New York times though, we are seeing serious declines in places many didn’t expect:

The rolling real estate crash that ravaged Florida and the Southwest is delivering a new wave of distress to communities once thought to be immune — economically diversified cities where the boom was relatively restrained.

In the last year, home prices in Seattle had a bigger price decline than in Las Vegas. Minneapolis dropped more than Miami, and Atlanta fared worse than Phoenix.

The bubble markets, where builders, buyers and banks ran wild, began falling first, economists say, so they are close to the end of the cycle and in some cases on their way back up. Nearly everyone else still has another season of pain.

“When I go out and talk to people around town, they say, ‘Wow, I thought we were going to have a 12 percent correction and call it a day,’ ” said Stan Humphries, chief economist for the housing site Zillow, which is based in Seattle. “But this thing just keeps on going.”

Seattle is down about 31 percent from its mid-2007 peak and, according to Zillow’s calculations, still has as much as 10 percent to fall. Mr. Humphries estimates the rest of the country will drop a further 5 and 7 percent as last year’s tax credits for home buyers continue to wear off.

Continue reading All Housing Bubbles Are Local And Collapse At Different Rates

NAR: Obama Administration Wants To Make Us A Nation Of Renters

The Obama administration is releasing a white paper today with it’s suggestions to reform the housing market, and the National Association of Realtors is up in arms. It’s been circulating some “talking points” and it has some dire predictions:

The Obama Administration and some members of Congress want to turn the clock back on the housing market to the 1930s, turning us into a nation of renters and making home ownership something that only the rich can afford. Obama is turning the American Dream into the American Nightmare for the nation’s middle- and lowerincome earners.

– Joe T. Plumber, who makes $25 an hour, won’t be able to own a home under some of the policies being debated/considered by President Obama and the U.S. Congress.

It’s not exactly easy for Mr. Plumber to buy a house in the current market, and it’s hard to see why this would be worse, but that doesn’t stop the NAR from offering this rather shameless bit of self promotion:

– There is no one standing up for America’s 75 million home owners in this debate except the NATIONAL ASSOCIATION OF REALTORS®, the nation’s leading advocate on home ownership.

The NAR is afraid of what will happen should the government’s involvement in the mortgage market be scaled back. Here’s what they say will happen if the government were to reduce it’s 90% share of the mortgage market:

Cutting back significantly on Fannie Mae and Freddie Mac’s involvement in the mortgage
market will:

1. Reduce housing access and affordability for those who are willing and able to
become home owners

2. Create higher profits for America’s big banks.

3. Create more “too big to fail” banks, leading to greater consumer risk and taxpayer exposure

4. Hurt the economy and hinder job creation and growth

I would counter with the following– Continue reading NAR: Obama Administration Wants To Make Us A Nation Of Renters