Wednesday, September 06, 2006

What Will Happen When the Bubble Bursts

A depressing article from Prudent Bear

snip...

"The fragility and risk associated with housing gains is very serious. The Office of Federal Housing Enterprise Oversight (OFHEO) releases a housing price index (HPI) for every quarter. In the 21 most recent quarters (Q12001-Q12006), the mean annual increase measured each quarter was 9.32%. In the 21 proceeding quarters the mean quarterly increase was 4.8%. Thus, as economic growth and labor earnings growth cooled, housing price appreciation rates doubled. In the last 5 years the average house has increased in price by 57%. Over the same period real GDP growth was 15%. The most optimistic White House Estimate of real after tax compensation increased by 8%. Unreal estate price increases are just that. Brace yourself for a dose of reality that will fall heavy on the shoulders of those least able to bare the load."

Full article...

6 Comments:

Anonymous Anonymous said...

A dose of reality is starting to occur in Cape May county. I see a bunch of sheriff sales this month. One in Ocean City and one in N Wildwood are in default of over $500k.

Thursday, September 07, 2006 1:11:00 PM  
Anonymous toshiro_mifune said...

Does anyone have a guess as to when this downturn will hit the DJIA ? Its been awfully high considering the news from housing, auto and retail.

anon @ 11:29 - I noticed the jump in central Jersey as well, I get the feeling this is just the tip of the iceberg though.

Thursday, September 07, 2006 2:31:00 PM  
Anonymous Anonymous said...

Cape May county real estate prices have just started to decline. It has been real slow [a few grand at a time]. If sellers really want to move these homes they will need to adjust the asking prices dramatically. I wonder how much of a market still exists for those seeking to purchase a second home. Probably not enough to make a dent in the 4000+ inventory that now exists in the county.

Thursday, September 07, 2006 2:41:00 PM  
Anonymous Anonymous said...

It's a bad investment right now to buy at the shore. Given where prices remain, most 2nd homes are money losers. Prices are depreciating and you can't get close to positive cash flow unless you put 50% down.

Friday, September 08, 2006 8:11:00 AM  
Anonymous Anonymous said...

And with 50% down to realize positive cash flow, isn't that really just paying a slow dime to earn a fast nickle?

Friday, September 08, 2006 9:16:00 AM  
Anonymous Anonymous said...

Do you know what newspaper publishes Cape May County foreclosure listings? Waiting for an Avalon bargain.

Wednesday, September 13, 2006 12:43:00 PM  

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