By Franklin Paul 19 minutes ago
NEW YORK (Reuters) - Not since Alexander Graham Bell has so much attention been lavished on a phone.
But the hype surrounding Apple Inc.'s media-playing iPhone could be a prelude to disappointment if it does not capture a wide market, technology veterans say.
As the press feeds the iPhone frenzy ahead of its U.S. launch on Friday, experts say the wireless device could easily top a long list of digital duds, all of them once touted as "The Next Big Thing."
"God himself could not design a device that could live up to all the hype that the iPhone has gotten," said David Platt, a computer science professor at Harvard University.
Since its existence was announced in January, more than 1 million people have told exclusive carrier AT&T that they are interested in a phone that costs as much as $600. In that time, Apple shares have risen 35 percent.
Comedian Conan O'Brien has spoofed it as the answer to all human needs, and rumor has it multimedia mogul Oprah Winfrey wants one. Blogs chronicle leaks about the phone like children plotting Santa's path from the North Pole.
"This is the most expected phone since Alexander Graham Bell's. Expectations are just off the charts," Jupiter Research analyst Michael Gartenberg said. "All anyone wants to talk about these days -- not just technology people, but mainstream consumers -- is the iPhone."
Apple is likely to sell a lot of phones on Friday, particularly as die-hard gadget fans angle for bragging rights to be among the first iPhone owners, he said. But the real test for Apple is whether it appeals to a mass market of consumers, not unlike the company's best-selling iPod music player.
"The ultimate success is how quickly Apple builds this into a family -- how quickly prices come down and models become more affordable," Gartenberg said. "It is what happens beyond the first 90 days that is really important."
Few people have actually seen an iPhone, whose main differentiating feature is a smooth glass touch screen that replaces number keys.
The device can surf the Internet, play music and video like an iPod, and perform other digital duties -- as well as make phone calls. Chief Executive Steve Jobs hopes Apple will ship 10 million in its first year.
SAME EMPEROR, NEW CLOTHES
To be sure, even the most pedestrian mobile phone can sell hundreds of thousands of units, in a phone market where some 1 billion units are sold each year around the globe.
The iPhone would be a replacement to products many people already have, forcing some users to switch mobile carriers and trade in devices with a full keyboard like the BlackBerry.
Unlike a new video-game console, high-definition DVD or flat-screen TV, the iPhone is relatively old technology with an attractive new package.
Platt, author of "Why Software Sucks...And What You Can Do About It," says the iPhone will likely miss the mark despite its cool look in TV commercials, because it was designed more to please engineers than a regular consumer.
"It is really easy to fall in love with a Playboy (magazine) centerfold when you are just looking at it," he said of the iPhone's flash.
"You can imagine iPhone will be the miracle box that solves all problems ... but when you actually have your hands on it and realize it takes five or six button presses to get something, then you start to get annoyed," he said.
Apple has not been immune to flops. After delivering the "Apple II" in 1977 -- its first popular microcomputer -- Steve Jobs' next project was "Lisa," a business computer labeled by many as late-arriving and expensive.
A $6,000, 20-pound Mac "Portable" met with a similar fate in 1989, followed by the Newton handheld device in 1993 and in 2000, the G4 Cube that critics said was a triumph of design over practicality.
IPhone isn't even Apple's first crack at a phone -- the ROKR, its collaboration in 2005 with Motorola, was critically panned and yielded disappointing sales.
More recently, handheld computer maker Palm Inc. stirred up talk about a genre-changing new device, only to unveil "Foleo" -- a mini-computer -- to a collective ho-hum from investors and gadget-watching blogs.
Still on the flop fence is Microsoft's Zune. Introduced last November as a potential iPod-killer, the digital music player is expected by the end of this month to sell a million total units, a fraction of iPod's business.
"What is a failure is often in the eye of the beholder," said Ross Rubin, an analyst at research firm NPD Group. "Even though the Zune is often considered a failure, Microsoft says it is happy with where the product is in the marketplace."
(Additional reporting by Scott Hillis in San Francisco)
Monday, June 25, 2007
Wednesday, June 20, 2007
Where Housing Prices Are The Most Likely to Fall
By Lauren Baier Kim
Here's a look at what's new in real-estate markets across the U.S. from around the Web.
Most overvalued U.S. markets
As the housing slowdown continues, which state has the greatest threat of experiencing home-price declines? California, according to a new report by National City Corp and Global Insight, a CNNMoney.com article says. The survey, which determines what housing prices should be using factors such as selling prices, population density, interest rates and income levels, ranks Bend, Ore., as having the most "overvalued" (i.e., overpriced) housing market. Overvalued markets -- where housing prices are most likely to fall -- tend to be in places that saw big price run-ups during the boom, including California, Florida, New York and Massachusetts, the article says. The survey, which looked at fourth quarter 2006 data for 317 top metro markets, found that 157 of the cities had seen price drops during that quarter. The report ranks Dallas as the most undervalued city in the U.S.; Texas lays claim to four of the most undervalued. For an interactive map of housing markets by median price and valuation, visit National City's Web site.
Most expensive city
If you're going to transfer overseas, you might not want to live in Moscow. For the second year in a row, the city has been ranked as the world's most expensive, according to a survey of 143 international cities by Mercer Human Resource Consulting, the Associated Press says. Contributing to Moscow's high cost of living is the appreciating ruble, the AP says. London ranked as the next most expensive city, followed by South Korea's Seoul. An expatriate can expect to shell out $4,000 a month for a luxury two-bedroom apartment in Russia's capital, the Associated Press says.
It's elementary
The better the local elementary school, the more house hunters will pay to purchase a neighborhood home, says an article by the New York Times. The article points to a Trinity College study that looked at 8,736 home sales between 1996 and 2005 and compared selling prices against grade-school test scores in 11 school districts in West Hartford, Conn., a blue ribbon school district. The study found that every 12% difference in exam scores for a standardized test taken by Connecticut students in grades three through eight secured a rise in selling price of $5,065, the newspaper says. For example, homes in an area that sends students to West Hartford's Lloyd H. Bugbee School (where 99% of fourth graders scored at or above proficiency in math, 93% scored as such for reading and 87% scored at that level for writing) tend to sell for more than houses in an area served by the Whiting Lane School, which has lower test scores (87% scored at or above proficiency in math, 66% scored at that level in reading and 68% for writing) -- despite the similarity of the two neighborhoods, the article says.
Open House 'junkies'
Been to an open house lately? If you have, it's possible you're not even looking to buy a new home, says an article by the Buffalo News. While 87% of 2004 home buyers found open houses to be "very useful" in their house search -- according to data by the National Association of Realtors -- some who go to these events aren't serious house hunters. Instead, they are attracted by the "snoop factor" or are looking to fill their Sunday afternoon, the newspaper says. Open houses can be a way to gauge what's going on in the neighborhood, or just to see what your neighbor's kitchen looks like, the News says.
Bogged down in Bay Area
In May, home sales saw a year-over-year drop of 17.4% in the San Francisco Bay Area, reaching the lowest level in 12 years, according to an article by the San Francisco Chronicle. Meanwhile, the median price increased by 5.9% to $720,000, the newspaper says. The price increase doesn't reflect a rise in home prices, but signals a trend in which more high-end homes are selling than lower-cost ones, the Chronicle says. Local neighborhoods experiencing slower sales include sections of Richmond, Oakland and Santa Rosa, among others, while Belvedere, Tiburon and Cupertino are included in areas seeing increased buyer interest, the paper says.
-- Ms. Kim is a senior editor at RealEstateJournal.com
Here's a look at what's new in real-estate markets across the U.S. from around the Web.
Most overvalued U.S. markets
As the housing slowdown continues, which state has the greatest threat of experiencing home-price declines? California, according to a new report by National City Corp and Global Insight, a CNNMoney.com article says. The survey, which determines what housing prices should be using factors such as selling prices, population density, interest rates and income levels, ranks Bend, Ore., as having the most "overvalued" (i.e., overpriced) housing market. Overvalued markets -- where housing prices are most likely to fall -- tend to be in places that saw big price run-ups during the boom, including California, Florida, New York and Massachusetts, the article says. The survey, which looked at fourth quarter 2006 data for 317 top metro markets, found that 157 of the cities had seen price drops during that quarter. The report ranks Dallas as the most undervalued city in the U.S.; Texas lays claim to four of the most undervalued. For an interactive map of housing markets by median price and valuation, visit National City's Web site.
Most expensive city
If you're going to transfer overseas, you might not want to live in Moscow. For the second year in a row, the city has been ranked as the world's most expensive, according to a survey of 143 international cities by Mercer Human Resource Consulting, the Associated Press says. Contributing to Moscow's high cost of living is the appreciating ruble, the AP says. London ranked as the next most expensive city, followed by South Korea's Seoul. An expatriate can expect to shell out $4,000 a month for a luxury two-bedroom apartment in Russia's capital, the Associated Press says.
It's elementary
The better the local elementary school, the more house hunters will pay to purchase a neighborhood home, says an article by the New York Times. The article points to a Trinity College study that looked at 8,736 home sales between 1996 and 2005 and compared selling prices against grade-school test scores in 11 school districts in West Hartford, Conn., a blue ribbon school district. The study found that every 12% difference in exam scores for a standardized test taken by Connecticut students in grades three through eight secured a rise in selling price of $5,065, the newspaper says. For example, homes in an area that sends students to West Hartford's Lloyd H. Bugbee School (where 99% of fourth graders scored at or above proficiency in math, 93% scored as such for reading and 87% scored at that level for writing) tend to sell for more than houses in an area served by the Whiting Lane School, which has lower test scores (87% scored at or above proficiency in math, 66% scored at that level in reading and 68% for writing) -- despite the similarity of the two neighborhoods, the article says.
Open House 'junkies'
Been to an open house lately? If you have, it's possible you're not even looking to buy a new home, says an article by the Buffalo News. While 87% of 2004 home buyers found open houses to be "very useful" in their house search -- according to data by the National Association of Realtors -- some who go to these events aren't serious house hunters. Instead, they are attracted by the "snoop factor" or are looking to fill their Sunday afternoon, the newspaper says. Open houses can be a way to gauge what's going on in the neighborhood, or just to see what your neighbor's kitchen looks like, the News says.
Bogged down in Bay Area
In May, home sales saw a year-over-year drop of 17.4% in the San Francisco Bay Area, reaching the lowest level in 12 years, according to an article by the San Francisco Chronicle. Meanwhile, the median price increased by 5.9% to $720,000, the newspaper says. The price increase doesn't reflect a rise in home prices, but signals a trend in which more high-end homes are selling than lower-cost ones, the Chronicle says. Local neighborhoods experiencing slower sales include sections of Richmond, Oakland and Santa Rosa, among others, while Belvedere, Tiburon and Cupertino are included in areas seeing increased buyer interest, the paper says.
-- Ms. Kim is a senior editor at RealEstateJournal.com
Tuesday, June 19, 2007
Wall Street Digest Hotline Update
This is The Wall Street Digest Hotline Update for Tuesday, June 19, 2007, at 6:00 p.m. EST.
After a seesaw session, the major indices finished in the black today. At the close, the Dow gained 22 points, to close at 13,635, while the Nasdaq remained flat at 2,627. Oil closed up $0.01 to $69.10 per barrel, and gold closed up $4.80 at $664.70 an ounce.
New homes sales were down 2.1 percent in May, but permits were up 3.0 percent, which helped to relieve investors’ concerns, as did declining Treasury yields. The yield of the 10-year Note fell to 5.09 percent after hitting a five-year high last week. The decline in yields helped to alleviate worries about high interest rates further hurting the nation's sluggish housing market.
For the next few weeks, Wall Street will be focusing more on corporate news and pre-announcements ahead of the second-quarter reporting period. And although many companies have already lowered their earnings outlook, the U.S. economy is still showing signs of faster growth in the second quarter.
Record global liquidity of two trillion dollars is the key to this bull market. You should remain fully invested, with at least 50 to 75 percent of your portfolio allocated to our recommended global/international investments. The U.S. stock market is still substantially undervalued at 22 percent. Stay close to our telephone/e-mail/website Hotline Updates.
The next Hotline Update will be on Friday, June 22, 2007, at 6:00 p.m. EST.
After a seesaw session, the major indices finished in the black today. At the close, the Dow gained 22 points, to close at 13,635, while the Nasdaq remained flat at 2,627. Oil closed up $0.01 to $69.10 per barrel, and gold closed up $4.80 at $664.70 an ounce.
New homes sales were down 2.1 percent in May, but permits were up 3.0 percent, which helped to relieve investors’ concerns, as did declining Treasury yields. The yield of the 10-year Note fell to 5.09 percent after hitting a five-year high last week. The decline in yields helped to alleviate worries about high interest rates further hurting the nation's sluggish housing market.
For the next few weeks, Wall Street will be focusing more on corporate news and pre-announcements ahead of the second-quarter reporting period. And although many companies have already lowered their earnings outlook, the U.S. economy is still showing signs of faster growth in the second quarter.
Record global liquidity of two trillion dollars is the key to this bull market. You should remain fully invested, with at least 50 to 75 percent of your portfolio allocated to our recommended global/international investments. The U.S. stock market is still substantially undervalued at 22 percent. Stay close to our telephone/e-mail/website Hotline Updates.
The next Hotline Update will be on Friday, June 22, 2007, at 6:00 p.m. EST.
May housing starts fall 2.1 percent
56 minutes ago
WASHINGTON (Reuters) - The pace of U.S. home construction fell 2.1 percent in May to a slightly lower rate than analysts had expected while building permit activity, a signal of future building plans, increased more than anticipated, a government report showed on Tuesday.
The Commerce Department said housing starts set an annual pace of 1.474 million units in May compared with a 1.506 million unit pace in April. Economists had forecast May housing starts to drop sharply to a 1.480 million unit pace from the 1.528 million rate originally reported for April last month.
Building permits, which signal future construction plans, rose in May by 3.0 percent to a pace of 1.501 million units. Economists had been expecting the permits to hit a 1.471 million unit rate. Permits for single-family homes fell 1.8 percent to their lowest level since July 1997 but permits for multi-family units jumped 16.5 percent.
Tuesday's data comes a day after a report indicating that home-builder confidence is at its lowest level in over 16 years.
The National Association of Homebuilders/Wells Fargo Housing Market Index dropped two points to 28 in June. The index of builder sentiment had not dipped that low since it reached 27 in 1991. Readings below 50 indicate more builders view market conditions as poor rather than favorable.
The dollar was little changed while the Treasury market showed little reaction to the data. U.S. stock futures briefly pared losses.
Analysts saw Tuesday's data as suggesting the moribund housing market could be showing faint signs of life.
"On balance while the report does not yet make the case we are out of he woods, it does suggest that the inventory drawdown is running its course and points to stabilization in housing," said Alex Beuzelin, senior market analyst with Ruesch International in Washington.
Many economists have extended their timeline for a housing market recovery in light of growing foreclosures among borrowers with damaged credit and climbing mortgage rates.
Mortgage rates have risen sharply in recent weeks along with yields on the benchmark 10-year Treasury note. The benchmark 10-year note reached a five-year high of 5.33 percent last week.
The once-thriving West Coast has felt some of the worst of the housing market downturn. Housing starts there were off 38 percent in May from a year ago -- the largest year-on-year drop since a 49 percent decline in March 1991.
WASHINGTON (Reuters) - The pace of U.S. home construction fell 2.1 percent in May to a slightly lower rate than analysts had expected while building permit activity, a signal of future building plans, increased more than anticipated, a government report showed on Tuesday.
The Commerce Department said housing starts set an annual pace of 1.474 million units in May compared with a 1.506 million unit pace in April. Economists had forecast May housing starts to drop sharply to a 1.480 million unit pace from the 1.528 million rate originally reported for April last month.
Building permits, which signal future construction plans, rose in May by 3.0 percent to a pace of 1.501 million units. Economists had been expecting the permits to hit a 1.471 million unit rate. Permits for single-family homes fell 1.8 percent to their lowest level since July 1997 but permits for multi-family units jumped 16.5 percent.
Tuesday's data comes a day after a report indicating that home-builder confidence is at its lowest level in over 16 years.
The National Association of Homebuilders/Wells Fargo Housing Market Index dropped two points to 28 in June. The index of builder sentiment had not dipped that low since it reached 27 in 1991. Readings below 50 indicate more builders view market conditions as poor rather than favorable.
The dollar was little changed while the Treasury market showed little reaction to the data. U.S. stock futures briefly pared losses.
Analysts saw Tuesday's data as suggesting the moribund housing market could be showing faint signs of life.
"On balance while the report does not yet make the case we are out of he woods, it does suggest that the inventory drawdown is running its course and points to stabilization in housing," said Alex Beuzelin, senior market analyst with Ruesch International in Washington.
Many economists have extended their timeline for a housing market recovery in light of growing foreclosures among borrowers with damaged credit and climbing mortgage rates.
Mortgage rates have risen sharply in recent weeks along with yields on the benchmark 10-year Treasury note. The benchmark 10-year note reached a five-year high of 5.33 percent last week.
The once-thriving West Coast has felt some of the worst of the housing market downturn. Housing starts there were off 38 percent in May from a year ago -- the largest year-on-year drop since a 49 percent decline in March 1991.
Tuesday, June 12, 2007
Economists See Housing Slump Enduring Longer Than Expected
By James R. Hagerty and Jonathan Karp and Mark Whitehouse
From The Wall Street Journal Online
Economists are giving up on the idea that the U.S. housing slump will be quick and relatively painless.
Instead, more are concluding, the downturn that began nearly two years ago will last at least through the end of 2007, remaining a major drag on the U.S. economy. The culprits: a glut of homes for sale and growing caution among lenders who now regret being so free with their mortgages during the boom.
Most forecasters still expect the economy to regain some momentum this year after a slow first quarter. Recent data have shown manufacturing, business investment and trade on track to help offset the negative effects of falling home values on consumer spending. Even so, some economists expect economic growth this year to remain tepid, largely because of the weak housing market.
This worry coincides with a surge of inflation anxiety that has roiled stock and bond markets in recent days. Yields on 10-year Treasury bonds, which influence the cost of various forms of borrowing throughout the economy, have risen above the psychologically important 5% level to the highest point in nearly 11 months. That in turn has led to a big drop in stock prices: Both the Dow Jones Industrial Average and the Standard & Poor's 500 fell nearly 2% for the week after hitting all-time highs early on.
The rise in interest rates is only adding to the gloom. The average rate for 30-year fixed-rate mortgages stood at about 6.65% Friday, up from 6.35% in early May, according to HSH Associates, a financial-publishing firm in Pompton Plains, N.J. Though that rate remains far below the 8.2% average of the 1990s, the recent jump makes it harder for many Americans to afford new homes. "That's putting more pressure on housing and delays its ultimate recovery," says Andrew Tilton, a senior economist at Goldman Sachs in New York.
Federal Reserve Chairman Ben Bernanke acknowledged in a speech Tuesday that the housing market remains weak, and warned that residential construction "will likely remain subdued for a time, until further progress can be made in working down the backlog of unsold new homes."
The market started to cool in mid-2005 after a buying frenzy that drove up the average U.S. home price nearly 60% in the first half of the decade and more than doubled prices in many areas near the East and West coasts.
Late last year, some economists were saying the market would start bouncing back by the middle of 2007. That hasn't happened, partly because inventories of unsold houses have continued to grow and a surge in mortgage defaults has made lenders much more reluctant to grant credit to people with spotty payment histories.
David Resler, chief economist at Nomura Securities International Inc. in New York, says he is surprised by the degree to which speculation caused builders to overestimate demand, leaving a glut of houses and condominiums.
That means single-family housing starts, which have declined 33% since early 2006 to a seasonally adjusted annual rate of about 1.2 million in April, will remain low, around the current level, through the first quarter of 2008 before starting to recover gradually, Mr. Resler predicts. Goldman's Mr. Tilton thinks single-family starts will drop to an annual rate of one million or so before bottoming out in the second half of this year.
Reflecting this worse-than-expected slump, Mr. Resler recently trimmed his forecast for economic growth in the second half of this year to an annual rate of 2.8% from 3%. He sees about a 33% chance that the U.S. economy will slip into a recession in the next year. If it does, he says, the weak housing market would be largely to blame. Among the risks, he says, are that depreciating home values will make consumers more cautious in spending and that many more housing-related jobs will be lost.
Ian Shepherdson, chief U.S. economist for High Frequency Economics, a research firm in Valhalla, N.Y. , doesn't expect a recession but says weakness in housing will help keep U.S. economic growth at a sluggish pace averaging less than 2% for the next several quarters.
Housing accounts for a lot of jobs, not only in construction but in related areas such as mortgage finance and furniture sales. Zoltan Pozsar, senior economist at Moody's Economy.com, estimates that housing-related sectors created nearly 1.3 million jobs between January 2003 and March 2006. Since then, he says, housing jobs have declined by almost 300,000. He sees more losses to come during the summer, which is usually a big building season.
Home values can also influence consumer spending, as people use cash-out mortgage refinancings and home-equity loans to pull money out of their houses. At the peak of the housing boom in the third quarter of 2005, people were taking cash out of their homes at an annual rate of $709 billion, according to Michael Feroli, an economist at J.P. Morgan Chase & Co in New York. As of the first quarter of 2007, that number had fallen to $178 billion.
A prolonged housing slump would be particularly painful for retailers of the kinds of things people often buy when they move, such as building and gardening supplies. According to the Commerce Department, those retailers saw sales drop by 6% in the year ending April.
Meanwhile, empty houses are multiplying. A recent Merrill Lynch report tallies a record 2.2 million vacant single-family homes and condos for sale nationwide, about one million above the norm. Florida's Miami Dade County has a 31-month supply of existing condos on the market. About 20,000 new ones will be completed by the end of 2008, says Jack McCabe, a consultant in Deerfield Beach, Fla. He says about two-thirds of those have been sold, but many buyers are canceling orders rather than taking possession of a depreciating asset.
Some local markets remain strong. Prices have continued to rise in Manhattan, Seattle, Houston and some other areas. But in much of the country, home prices have been flat to moderately lower over the past year.
Economists at Merrill Lynch admit it is hard to predict how the slump will play out from here. "We are not sure how deflating a $23 trillion asset class -- the value of real-estate assets on the household balance sheet -- will end, but we doubt that it will end well," Merrill economists wrote in their recent report.
The outlook is confusing for the average home shopper, too. Bill Shakespeare, a marine-engine salesman who doesn't mind the inevitable jokes about his name, attended an auction of foreclosed homes in San Diego last month, hoping for a steep bargain. Wearing a red baseball cap and windbreaker, the 74-year-old Mr. Shakespeare made an initial offer of $140,000 for a 600-square-foot condominium. Then he gave up when the bidding spiraled to the winning level of $180,000.
Mr. Shakespeare, one of more than 1,000 people who turned up at the auction, notes that there are plenty of other condos on the market, some of which have been unoccupied for months. "We're not going to be rushed into anything," he insists.
The auction in San Diego was one of three held in Southern California last month by Real Estate Disposition Corp. of Irvine, Calif. The auctions, at which a total of about 280 homes were offered, attracted several thousand people, demonstrating that there are lots of bargain hunters waiting to pounce on the right deal. But the auctions also underlined the trouble some of those opportunists have in obtaining credit. In several-dozen cases at these auctions, homes had to be put back on the block after initial winners failed to qualify for a loan.
Lenders have eliminated most no-money-down "subprime" loans for people with weak credit records. That means many people who hoped to buy homes this year will have to wait until they can clean up their credit records and save for a down payment.
At a conference of mortgage lenders in May, David Lowman, head of the mortgage business at J.P. Morgan Chase & Co., warned: "The largest part of the problem in the subprime space is ahead of us, not behind us." Many borrowers who got loans the past couple of years are still paying the low initial monthly payments and have yet to face the steeper adjustable rates that kick in after two or three years. Once they do, foreclosures are sure to rise.
Mark Zandi, chief economist of Moody's Economy.com, a research firm in West Chester, Pa., expects lenders to acquire about 900,000 homes this year and roughly the same number next year through foreclosures, up from an average of about 500,000 a year from 2000 through 2006. That will add to the glut of homes on the market, further depressing prices in some areas.
At the San Diego auction, homes typically sold for around 25% less than their most recent sales prices or appraised values. (The comparison includes a 5% commission paid by winning bidders.) Demand seemed stronger at another recent auction of foreclosed homes in Los Angeles and Orange counties. Many of the houses offered there sold for about 85% to 95% of previous prices or appraisals.
At the Los Angeles auction, Suresh Gupta, a condo developer, made the winning bid of about $1.2 million for a three-bedroom home in Pasadena, where he and his family plan to move. The house had a previous value of $1.5 million. Mr. Gupta thinks the auction price compares favorably with what he could get through a conventional purchase. "There is no justification for the prices many homeowners are asking for," he says. "They are living in a dreamland."
Email your comments to rjeditor@dowjones.com.
-- June 12, 2007
Reader discussion on the U.S. housing market.
Has your bubble popped? Discuss whether recent changes in the housing market have affected your plans to buy or sell a home.
22990 Messages: Most Recent | < 1-10 > | Oldest
post my message
Boston Market - Jun 12, 2007 Reply
Read this
Just one example: This is a house which sold for $385,000 almost 4 years ago. By Happy's calculation, The house should be selling for $798,336. That is assuming Happy's guaranteed 20% year over year return. 292 days on the market and 5 price reductions later, the value of this house is unchanged over a 4 year period Like so many others and the buyer is losing a substantial amount of money after all costs are factored in. I don't need to rely on some dopey "expert" to tell me what is going on. Groucho Marx said it best: "Who are you going to believe, me or your lyin' eyes?"
PapaSmurf - Jun 12, 2007 Reply
NAR is full of you know what. By now I'm used to taking their worst case scenario numbers and tripling them to get a more realistic prognosis. Their outright lies are a glimpse of what the real estate business has been turned into over the past half dozen years. It sucks because it makes many honest and hard working real estate professionals bad.
Jack - Jun 12, 2007 Reply
So the toxic loan market is "vanished." Well, good! But how is that revelant 2 years after the boom and with prices only 0.1% off the peak of 2005? Could it be that the toxic loan problem wasn't so much of a problem then? Ouch, I know it hurts when you can't save to finance your house but you can pick up more skills at your local community college and volunteer for overtime work at your employer. We all did, and now own 80% equity. It's easy if you put your mind to it.
blindedbythehype - Jun 12, 2007 Reply
So if I overpay by 100k and hold for 20 years, it will not matter.
How about the extra 100K, is that not a loss, even if I ultimately sell the house for more, will I not always be down that extra 100k, plus the investment return on that 100k? How about the interest I pay on that extra 100k for 20 years, is that not too a loss?
That fact that some people cannot seem to fathom this is truly amazing to me.
Do the Math - Jun 12, 2007 Reply
Middle: Shoot the messenger when you don't like the message. You want to win but can you do it from your rental by the railroad tracks? I own, you don't. If you're feeling age discriminated because we say you're going to be old when you pay off your 30-year mortgage, so be it. It hurts to be reminded of the inevitable things huh? I know.
Do the Math - Jun 12, 2007 Reply
If anyone wants free advice on how to become wealthy and invest in RE please let me know. One condition: you will refrain from saying that the RE market or the economy or anything else is overpriced or inaccessible. I bought when I had very little savings but I was fully employed and in the process of updating my job skills. Now I own 80% in my home. In any era, in any market, the RE will be inflated if your personal situation is out of line. Let's look at how to fix you up to become wealthy. I'm sure my friend Response wouldn't mind teaming up with me to help out those of you who really need help. We wait.
Rhaze - Jun 12, 2007 Reply
Not to dance on your parade, but in a normal year there are 500,000 foreclosures so in 2.5 years, one would expect 1.250 million foreclosures. Obviously, that will be expected to go up, whether it will go up enough to contribute another 250,000 foreclosures a year, it very well could. But even if it does, it probably won't have long-term negative affects on RE. 2.5 years is a pretty small window for real estate. Plus, the feds and banks will help keep some of those foreclosures from happening. The banks will because they don't want the feds messing with their way of life and they don't want to get hammered by Wall Street any more than they have to. No, I'm not a RE agent, I do invest and have for 25 years in RE and I'll ride this one out, just like I did the 1990s in SoCal.
Another Wise Old Man - Jun 12, 2007 Reply
Mr Bubble News gloated: "I don't know about you but I'm going to bring a bottle of Bubbe-ly and will dance in the street...Dance and drink to the demise of the hucksters, frauds, charlatons, and flippers who ripped a lot of innocent people off."
Have some compassion for those who innocently are being run over by this train-wreck.
Tony - Jun 12, 2007 Reply
You don't speak for me Middle. I just sold my house for 12% more what I paid for in 2004. I had bought $400,000, sold $448,000 and the buyer paid all the closing costs and split a small commission we paid to the broker. You do make money off RE depending on your local market.
Rags to Riches - Jun 12, 2007 Reply
Shamboo: Thank you it is your posts that keep me motivated. I agree with your post. I'm not a Realtor just a guy who took ownership and I have made serious money doing so. I too was suprised that a Father would tell his daughter to rent. It is a sad day when I read that one. I believe many apartment landlords are spreading fear to keep their apartments full. It is obvious that the bears are just apartment landlords, that could be the only motivation, keep the underclass in the rental apartments.
From The Wall Street Journal Online
Economists are giving up on the idea that the U.S. housing slump will be quick and relatively painless.
Instead, more are concluding, the downturn that began nearly two years ago will last at least through the end of 2007, remaining a major drag on the U.S. economy. The culprits: a glut of homes for sale and growing caution among lenders who now regret being so free with their mortgages during the boom.
Most forecasters still expect the economy to regain some momentum this year after a slow first quarter. Recent data have shown manufacturing, business investment and trade on track to help offset the negative effects of falling home values on consumer spending. Even so, some economists expect economic growth this year to remain tepid, largely because of the weak housing market.
This worry coincides with a surge of inflation anxiety that has roiled stock and bond markets in recent days. Yields on 10-year Treasury bonds, which influence the cost of various forms of borrowing throughout the economy, have risen above the psychologically important 5% level to the highest point in nearly 11 months. That in turn has led to a big drop in stock prices: Both the Dow Jones Industrial Average and the Standard & Poor's 500 fell nearly 2% for the week after hitting all-time highs early on.
The rise in interest rates is only adding to the gloom. The average rate for 30-year fixed-rate mortgages stood at about 6.65% Friday, up from 6.35% in early May, according to HSH Associates, a financial-publishing firm in Pompton Plains, N.J. Though that rate remains far below the 8.2% average of the 1990s, the recent jump makes it harder for many Americans to afford new homes. "That's putting more pressure on housing and delays its ultimate recovery," says Andrew Tilton, a senior economist at Goldman Sachs in New York.
Federal Reserve Chairman Ben Bernanke acknowledged in a speech Tuesday that the housing market remains weak, and warned that residential construction "will likely remain subdued for a time, until further progress can be made in working down the backlog of unsold new homes."
The market started to cool in mid-2005 after a buying frenzy that drove up the average U.S. home price nearly 60% in the first half of the decade and more than doubled prices in many areas near the East and West coasts.
Late last year, some economists were saying the market would start bouncing back by the middle of 2007. That hasn't happened, partly because inventories of unsold houses have continued to grow and a surge in mortgage defaults has made lenders much more reluctant to grant credit to people with spotty payment histories.
David Resler, chief economist at Nomura Securities International Inc. in New York, says he is surprised by the degree to which speculation caused builders to overestimate demand, leaving a glut of houses and condominiums.
That means single-family housing starts, which have declined 33% since early 2006 to a seasonally adjusted annual rate of about 1.2 million in April, will remain low, around the current level, through the first quarter of 2008 before starting to recover gradually, Mr. Resler predicts. Goldman's Mr. Tilton thinks single-family starts will drop to an annual rate of one million or so before bottoming out in the second half of this year.
Reflecting this worse-than-expected slump, Mr. Resler recently trimmed his forecast for economic growth in the second half of this year to an annual rate of 2.8% from 3%. He sees about a 33% chance that the U.S. economy will slip into a recession in the next year. If it does, he says, the weak housing market would be largely to blame. Among the risks, he says, are that depreciating home values will make consumers more cautious in spending and that many more housing-related jobs will be lost.
Ian Shepherdson, chief U.S. economist for High Frequency Economics, a research firm in Valhalla, N.Y. , doesn't expect a recession but says weakness in housing will help keep U.S. economic growth at a sluggish pace averaging less than 2% for the next several quarters.
Housing accounts for a lot of jobs, not only in construction but in related areas such as mortgage finance and furniture sales. Zoltan Pozsar, senior economist at Moody's Economy.com, estimates that housing-related sectors created nearly 1.3 million jobs between January 2003 and March 2006. Since then, he says, housing jobs have declined by almost 300,000. He sees more losses to come during the summer, which is usually a big building season.
Home values can also influence consumer spending, as people use cash-out mortgage refinancings and home-equity loans to pull money out of their houses. At the peak of the housing boom in the third quarter of 2005, people were taking cash out of their homes at an annual rate of $709 billion, according to Michael Feroli, an economist at J.P. Morgan Chase & Co in New York. As of the first quarter of 2007, that number had fallen to $178 billion.
A prolonged housing slump would be particularly painful for retailers of the kinds of things people often buy when they move, such as building and gardening supplies. According to the Commerce Department, those retailers saw sales drop by 6% in the year ending April.
Meanwhile, empty houses are multiplying. A recent Merrill Lynch report tallies a record 2.2 million vacant single-family homes and condos for sale nationwide, about one million above the norm. Florida's Miami Dade County has a 31-month supply of existing condos on the market. About 20,000 new ones will be completed by the end of 2008, says Jack McCabe, a consultant in Deerfield Beach, Fla. He says about two-thirds of those have been sold, but many buyers are canceling orders rather than taking possession of a depreciating asset.
Some local markets remain strong. Prices have continued to rise in Manhattan, Seattle, Houston and some other areas. But in much of the country, home prices have been flat to moderately lower over the past year.
Economists at Merrill Lynch admit it is hard to predict how the slump will play out from here. "We are not sure how deflating a $23 trillion asset class -- the value of real-estate assets on the household balance sheet -- will end, but we doubt that it will end well," Merrill economists wrote in their recent report.
The outlook is confusing for the average home shopper, too. Bill Shakespeare, a marine-engine salesman who doesn't mind the inevitable jokes about his name, attended an auction of foreclosed homes in San Diego last month, hoping for a steep bargain. Wearing a red baseball cap and windbreaker, the 74-year-old Mr. Shakespeare made an initial offer of $140,000 for a 600-square-foot condominium. Then he gave up when the bidding spiraled to the winning level of $180,000.
Mr. Shakespeare, one of more than 1,000 people who turned up at the auction, notes that there are plenty of other condos on the market, some of which have been unoccupied for months. "We're not going to be rushed into anything," he insists.
The auction in San Diego was one of three held in Southern California last month by Real Estate Disposition Corp. of Irvine, Calif. The auctions, at which a total of about 280 homes were offered, attracted several thousand people, demonstrating that there are lots of bargain hunters waiting to pounce on the right deal. But the auctions also underlined the trouble some of those opportunists have in obtaining credit. In several-dozen cases at these auctions, homes had to be put back on the block after initial winners failed to qualify for a loan.
Lenders have eliminated most no-money-down "subprime" loans for people with weak credit records. That means many people who hoped to buy homes this year will have to wait until they can clean up their credit records and save for a down payment.
At a conference of mortgage lenders in May, David Lowman, head of the mortgage business at J.P. Morgan Chase & Co., warned: "The largest part of the problem in the subprime space is ahead of us, not behind us." Many borrowers who got loans the past couple of years are still paying the low initial monthly payments and have yet to face the steeper adjustable rates that kick in after two or three years. Once they do, foreclosures are sure to rise.
Mark Zandi, chief economist of Moody's Economy.com, a research firm in West Chester, Pa., expects lenders to acquire about 900,000 homes this year and roughly the same number next year through foreclosures, up from an average of about 500,000 a year from 2000 through 2006. That will add to the glut of homes on the market, further depressing prices in some areas.
At the San Diego auction, homes typically sold for around 25% less than their most recent sales prices or appraised values. (The comparison includes a 5% commission paid by winning bidders.) Demand seemed stronger at another recent auction of foreclosed homes in Los Angeles and Orange counties. Many of the houses offered there sold for about 85% to 95% of previous prices or appraisals.
At the Los Angeles auction, Suresh Gupta, a condo developer, made the winning bid of about $1.2 million for a three-bedroom home in Pasadena, where he and his family plan to move. The house had a previous value of $1.5 million. Mr. Gupta thinks the auction price compares favorably with what he could get through a conventional purchase. "There is no justification for the prices many homeowners are asking for," he says. "They are living in a dreamland."
Email your comments to rjeditor@dowjones.com.
-- June 12, 2007
Reader discussion on the U.S. housing market.
Has your bubble popped? Discuss whether recent changes in the housing market have affected your plans to buy or sell a home.
22990 Messages: Most Recent | < 1-10 > | Oldest
post my message
Boston Market - Jun 12, 2007 Reply
Read this
Just one example: This is a house which sold for $385,000 almost 4 years ago. By Happy's calculation, The house should be selling for $798,336. That is assuming Happy's guaranteed 20% year over year return. 292 days on the market and 5 price reductions later, the value of this house is unchanged over a 4 year period Like so many others and the buyer is losing a substantial amount of money after all costs are factored in. I don't need to rely on some dopey "expert" to tell me what is going on. Groucho Marx said it best: "Who are you going to believe, me or your lyin' eyes?"
PapaSmurf - Jun 12, 2007 Reply
NAR is full of you know what. By now I'm used to taking their worst case scenario numbers and tripling them to get a more realistic prognosis. Their outright lies are a glimpse of what the real estate business has been turned into over the past half dozen years. It sucks because it makes many honest and hard working real estate professionals bad.
Jack - Jun 12, 2007 Reply
So the toxic loan market is "vanished." Well, good! But how is that revelant 2 years after the boom and with prices only 0.1% off the peak of 2005? Could it be that the toxic loan problem wasn't so much of a problem then? Ouch, I know it hurts when you can't save to finance your house but you can pick up more skills at your local community college and volunteer for overtime work at your employer. We all did, and now own 80% equity. It's easy if you put your mind to it.
blindedbythehype - Jun 12, 2007 Reply
So if I overpay by 100k and hold for 20 years, it will not matter.
How about the extra 100K, is that not a loss, even if I ultimately sell the house for more, will I not always be down that extra 100k, plus the investment return on that 100k? How about the interest I pay on that extra 100k for 20 years, is that not too a loss?
That fact that some people cannot seem to fathom this is truly amazing to me.
Do the Math - Jun 12, 2007 Reply
Middle: Shoot the messenger when you don't like the message. You want to win but can you do it from your rental by the railroad tracks? I own, you don't. If you're feeling age discriminated because we say you're going to be old when you pay off your 30-year mortgage, so be it. It hurts to be reminded of the inevitable things huh? I know.
Do the Math - Jun 12, 2007 Reply
If anyone wants free advice on how to become wealthy and invest in RE please let me know. One condition: you will refrain from saying that the RE market or the economy or anything else is overpriced or inaccessible. I bought when I had very little savings but I was fully employed and in the process of updating my job skills. Now I own 80% in my home. In any era, in any market, the RE will be inflated if your personal situation is out of line. Let's look at how to fix you up to become wealthy. I'm sure my friend Response wouldn't mind teaming up with me to help out those of you who really need help. We wait.
Rhaze - Jun 12, 2007 Reply
Not to dance on your parade, but in a normal year there are 500,000 foreclosures so in 2.5 years, one would expect 1.250 million foreclosures. Obviously, that will be expected to go up, whether it will go up enough to contribute another 250,000 foreclosures a year, it very well could. But even if it does, it probably won't have long-term negative affects on RE. 2.5 years is a pretty small window for real estate. Plus, the feds and banks will help keep some of those foreclosures from happening. The banks will because they don't want the feds messing with their way of life and they don't want to get hammered by Wall Street any more than they have to. No, I'm not a RE agent, I do invest and have for 25 years in RE and I'll ride this one out, just like I did the 1990s in SoCal.
Another Wise Old Man - Jun 12, 2007 Reply
Mr Bubble News gloated: "I don't know about you but I'm going to bring a bottle of Bubbe-ly and will dance in the street...Dance and drink to the demise of the hucksters, frauds, charlatons, and flippers who ripped a lot of innocent people off."
Have some compassion for those who innocently are being run over by this train-wreck.
Tony - Jun 12, 2007 Reply
You don't speak for me Middle. I just sold my house for 12% more what I paid for in 2004. I had bought $400,000, sold $448,000 and the buyer paid all the closing costs and split a small commission we paid to the broker. You do make money off RE depending on your local market.
Rags to Riches - Jun 12, 2007 Reply
Shamboo: Thank you it is your posts that keep me motivated. I agree with your post. I'm not a Realtor just a guy who took ownership and I have made serious money doing so. I too was suprised that a Father would tell his daughter to rent. It is a sad day when I read that one. I believe many apartment landlords are spreading fear to keep their apartments full. It is obvious that the bears are just apartment landlords, that could be the only motivation, keep the underclass in the rental apartments.
Friday, June 1, 2007
U.S. Home Prices Fall For First Time Since 1991
By Rex Nutting
From MarketWatch
U.S. home prices dropped 1.4% in the first quarter compared with a year earlier, the first year-over-year decline in national home prices since 1991, according to the S&P/Case-Shiller index released Tuesday.
A year ago, home prices were rising at an 11.5% pace. Prices have been falling for the past three quarters.
The Case-Shiller indexes cover three geographical areas. The national index is released quarterly, while the 10-city and 20-city indexes are released each month.
The 10-city Case-Shiller price index fell 1.9% year-on-year through March, while the 20-city index dropped 1.4%. The 10-city index has fallen nine months in a row, while the 20-city index has fallen for eight straight months.
All three Case-Shiller indexes show continued deterioration in home prices. Prices were falling or rising slower in most U.S. cities.
The national decline "is reaffirmation of the pullback in the U.S. residential real estate market," said Robert Shiller, chief economist for MacroMarkets LLC, and co-inventor of the index.
"This fall is consistent with the ongoing trend that has developed over the past year," wrote Goldman Sachs economists, who said they believe the Case-Shiller index is the best gauge of home values. "We remain comfortable with our forecast of house prices falling by 5% over 2007."
Falling home prices have squeezed many borrowers who have been able to extract equity from their homes or refinance their loan to avoid a sudden increase in mortgage payments as their adjustable-rate loan reset.
As a result of falling prices, foreclosures are rising nationally, especially in regions with a weak economy, such as the Midwest, and in the bubble regions of Southern California, Florida, Nevada and Arizona.
Thirteen of 20 cities in the Case-Shiller index have seen falling prices in the past year, led by Detroit (down 8.4%) and San Diego (down 6%). Home prices rose 10% in Seattle, 7.4% in Charlotte, N.C., and 7% in Portland, Ore.
Prices in Phoenix and Las Vegas, Nev., have fallen the furthest from their peak. After growing at a 49.3% pace in September 2005, home prices in Phoenix are now down 3% year-on-year. In Las Vegas, price gains went from 53.2% in September 2004 to negative 1.6% in March 2007.
Among other major cities tracked by the index, home prices are down 4.9% in Boston, down 4.8% in Washington, down 3% in Tampa, Fla., down 2.4% in Cleveland, and down 2.3% in San Francisco. Prices fell 2% in Denver, 1.9% in Minneapolis, 1.4% in Los Angeles and 1.1% in New York.
In addition to the price gains in Seattle, Charlotte and Portland, prices rose 2% in Atlanta, 1.6% in Dallas, 1.3% in Chicago and 1% in Miami.
The Case-Shiller index is considered a superior gauge of home prices compared to the median sales-price data released by the Commerce Department or National Association of Realtors, because it tracks multiple sales on the same property and is therefore not influenced by a different mix of homes sold in a period.
Unlike the price index produced by the Office of Federal Housing Enterprise Oversight, the Case-Shiller index does not include refinancings. And, also unlike the OFHEO index, it includes homes with mortgages larger than the conforming limit of $417,000.
The OFHEO index for the first quarter will be released on Thursday. Through the fourth quarter, home price gains had slowed to 5.9% year-on-year from 13.3% a year earlier. The OFHEO purchase-only index (which excludes refinancings) had risen 4.1% year-over-year.
Lehman Bros. economists said their forecast for a 0.5% gain in the first-quarter OFHEO price index remains on track. That would put the year-over-year gain at 4%.
Email your comments to rjeditor@dowjones.com.
-- June 01, 2007
From MarketWatch
U.S. home prices dropped 1.4% in the first quarter compared with a year earlier, the first year-over-year decline in national home prices since 1991, according to the S&P/Case-Shiller index released Tuesday.
A year ago, home prices were rising at an 11.5% pace. Prices have been falling for the past three quarters.
The Case-Shiller indexes cover three geographical areas. The national index is released quarterly, while the 10-city and 20-city indexes are released each month.
The 10-city Case-Shiller price index fell 1.9% year-on-year through March, while the 20-city index dropped 1.4%. The 10-city index has fallen nine months in a row, while the 20-city index has fallen for eight straight months.
All three Case-Shiller indexes show continued deterioration in home prices. Prices were falling or rising slower in most U.S. cities.
The national decline "is reaffirmation of the pullback in the U.S. residential real estate market," said Robert Shiller, chief economist for MacroMarkets LLC, and co-inventor of the index.
"This fall is consistent with the ongoing trend that has developed over the past year," wrote Goldman Sachs economists, who said they believe the Case-Shiller index is the best gauge of home values. "We remain comfortable with our forecast of house prices falling by 5% over 2007."
Falling home prices have squeezed many borrowers who have been able to extract equity from their homes or refinance their loan to avoid a sudden increase in mortgage payments as their adjustable-rate loan reset.
As a result of falling prices, foreclosures are rising nationally, especially in regions with a weak economy, such as the Midwest, and in the bubble regions of Southern California, Florida, Nevada and Arizona.
Thirteen of 20 cities in the Case-Shiller index have seen falling prices in the past year, led by Detroit (down 8.4%) and San Diego (down 6%). Home prices rose 10% in Seattle, 7.4% in Charlotte, N.C., and 7% in Portland, Ore.
Prices in Phoenix and Las Vegas, Nev., have fallen the furthest from their peak. After growing at a 49.3% pace in September 2005, home prices in Phoenix are now down 3% year-on-year. In Las Vegas, price gains went from 53.2% in September 2004 to negative 1.6% in March 2007.
Among other major cities tracked by the index, home prices are down 4.9% in Boston, down 4.8% in Washington, down 3% in Tampa, Fla., down 2.4% in Cleveland, and down 2.3% in San Francisco. Prices fell 2% in Denver, 1.9% in Minneapolis, 1.4% in Los Angeles and 1.1% in New York.
In addition to the price gains in Seattle, Charlotte and Portland, prices rose 2% in Atlanta, 1.6% in Dallas, 1.3% in Chicago and 1% in Miami.
The Case-Shiller index is considered a superior gauge of home prices compared to the median sales-price data released by the Commerce Department or National Association of Realtors, because it tracks multiple sales on the same property and is therefore not influenced by a different mix of homes sold in a period.
Unlike the price index produced by the Office of Federal Housing Enterprise Oversight, the Case-Shiller index does not include refinancings. And, also unlike the OFHEO index, it includes homes with mortgages larger than the conforming limit of $417,000.
The OFHEO index for the first quarter will be released on Thursday. Through the fourth quarter, home price gains had slowed to 5.9% year-on-year from 13.3% a year earlier. The OFHEO purchase-only index (which excludes refinancings) had risen 4.1% year-over-year.
Lehman Bros. economists said their forecast for a 0.5% gain in the first-quarter OFHEO price index remains on track. That would put the year-over-year gain at 4%.
Email your comments to rjeditor@dowjones.com.
-- June 01, 2007
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