Real Estate Connect – The Housing Debate: Bulls vs. Bears

Thank you for sharing, Lucas. Awesome interview. I tend to side with Dottie only because I consider myself to be more of an optimist Bull (after all, I’m a Taurus). However, everyone has certainly hit the nail as far as where the market is and where is probably going.

Certainly, 5-10 more years of this is foreseable based on all information shared. However, I feel Dottie also hinted that the most hurt are the short term type investors and homeowners who thought they would buy and flip, making thousands (some were probably counting on tens and even hundreds of thousands in income now awash). Those who bought their “home” and purchased a property early on, thinking in staying for the long haul will probably fare well, as long as they did not over extend themselves by refinancing and eating up or dancing away their now evaporated equity.

Yet, with well over 20k new units of condos coming on to our market in 2008, it is scary to think where things will turn out like in Miami.

Most certainly, Ritzholtz analogy of the stock and real estate markets to the different psychological stages of grief and how sellers are anchoring was trully enlighting. Certainly something worth paraphrasing with sellers at the kitchen table as you discuss how to price their home.

MiamiRealEstateKing,

Dottie did have a few insightful comments. I think one thing that she touched upon, which I feel she didn’t elaborate enough on, is that prior to the 1980s people didn’t view their properties as an investment. This is the type of mindset that people need to get back into. A property is something that you can own and have the right to change the cosmetic look of the property as you see fit. It is not something that you should purchase in hopes to flip it for large profits within the next year.

Pretty much all of the closings that I’ve had within the past month are from non-local buyers that want to have a place in Miami and aren’t looking to necessarily catch the market bottom. They just want a place to enjoy while they stay in Miami 2-3 months out of the year. This is the mindset that we need to return to if we are to enjoy a healthy market in Miami.

A good movie for I think for some MB realtors to see as the 04-06 hyperbole still encourages the “attachment” that precludes the detachmnet required by some sellers to move MB condos in 08 & beond. Yes everyone is informed these days but realtors have to reallign how they look at comps that closed months before & represent less than 1.2 % of building inventory in some cases when the are advising on current listing levels.

Here is Roubini’s outlook for 2008.
It looks like ‘doom and gloom’ to me.
He thinks only 1/10 of the problem has been written-off so far!

Europe Will Be Hard Hit by the Recessionary Storm Now Sweeping the U.S.

Nouriel Roubini | Jan 15, 2008
The United States has now effectively entered into a serious and painful recession. The debate is not anymore on whether the economy will experience a soft landing or a hard landing; it is rather on how hard the hard landing recession will be. The factors that make the recession inevitable include the nation’s worst-ever housing recession, which is still getting worse; a severe liquidity and credit crunch in financial markets that is getting worse than when it started last summer; high oil and gasoline prices; falling capital spending by the corporate sector; a slackening labor market where few jobs are being created and the unemployment rate is sharply up; and shopped-out, savings-less and debt-burdened American consumers who — thanks to falling home prices — can no longer use their homes as ATM machines to allow them to spend more than their income. Indeed holiday sales in the US were much lower in real terms than in 2006. As private consumption in the US is over 70% of GDP the US consumer now retrenching and cutting spending ensures that a recession is now underway.

On top of this recession there are now serious risks of a systemic financial crisis in the US as the financial losses are spreading from subprime to near prime and prime mortgages, consumer debt (credit cards, auto loans, student loans), commercial real estate loans, leveraged loans and postponed/restructured/cancelled LBO and, soon enough, sharply rising default rates on corporate bonds that will lead to a second round of large losses in credit default swaps. The total of all of these financial losses could be above $1 trillion thus triggering a massive credit crunch and a systemic financial sector crisis.

There is now some delusional hope in Europe and in the European Central Bank that this region can shelter itself – or decouple itself – from the effects of the US hard landing. But 2008 will be the year of re-coupling rather than decoupling for Europe.

Let us discuss next why, the detailed channels of transmission from the US to Europe and the other internal vulnerabilities of the European economies…