A commentary on the bubble

[Smiling JOe]

This has been like pulling teeth....is skier's property in WC? This has been like some state secret!

Yes, Skier says his house is in WaterColor. I can understand why he is not placing the specific info on this board. He sees how critical we are, and he does not want to get drilled on minor things. I would not want to either. I don't believe he is fearful that we will do harm to his house. If it is listed in the MLS as he states, just look through all 79 listings and you will find his. If memory serves me correctly, you should be able to go back through his posts and get a basic price range based on the other prices he mentions. Then, if you are still interested, you can look to see which properties in WC dropped in price in the past few weeks. Should be fairly easy to find out which house is his. Personally, I don't know why you would want to do so. I don't care. Skier describes his house very nicely and I am sure it is a lovely place. I like the looks of most homes in WaterColor. Let's not beat up on him and Shelly too much. Stick with the facts or insight. Anyone can guess what the market will do in the future, but the truth is, we have no accurate way of knowing until that point in time comes about.

 

[Miss Kitty]

Yes, Skier says his house is in WaterColor. I can understand why he is not placing the specific info on this board. He sees how critical we are, and he does not want to get drilled on minor things. I would not want to either. I don't believe he is fearful that we will do harm to his house. If it is listed in the MLS as he states, just look through all 79 listings and you will find his. If memory serves me correctly, you should be able to go back through his posts and get a basic price range based on the other prices he mentions. Then, if you are still interested, you can look to see which properties in WC dropped in price in the past few weeks. Should be fairly easy to find out which house is his. Personally, I don't know why you would want to do so. I don't care. Skier describes his house very nicely and I am sure it is a lovely place. I like the looks of most homes in WaterColor. Let's not beat up on him and Shelly too much. Stick with the facts or insight. Anyone can guess what the market will do in the future, but the truth is, we have no accurate way of knowing until that point in time comes about.

I hear you SJ...I just didn't understand why things got so out of hand. I have asked skier some ?'s in the past and he has basically ignored them. Some people can dish it out, but can't take it in.

 

[Bob]

Skier, I hope you find a seller for your house. I like arguing your points. I have learned some info along the way. I do believe you will be OK, but may have to market your home more/drop price somewhat. Shelley, you need a vacation, or a move from the panhandle, because hurricanes are in your future.

 

[Robert]

Is this ludicrous or plausable?

To start with, I feel sorry for all the folks that got hit by Katrina. I even sent in a donation to the Red Cross. I know this is a sensitive subject for everybody and my heart goes out to all of the effected people. That being said, So. Walton is mostly a destination location. We know that some of the people/investors/retirees around the US will look elsewhere because of Katrina. I mean who wants to be hit by a hurricane.

However, on the other side of the coin, many will look at this as a buying opportunity. Also, and this is just speculation but think about this;

If New Orleans population was around 600,000 and you add the other effected towns and cities of about 100,000, that's 700,000 people that need a new place to live. If 75% decide to rebuild in the same place, that leaves 175,000 that will go elsewhere. Divide that number by the average size of a family household (2.5) and you get 28,000 families. Now of these families lets say 2/3 decide to leave the coastal area altogether and 1/3 love the coast. That means that 9,240 families will be looking for a new home or a place for a new home in a coastal area. To be on the safe side, lets cut that number in half and say 4,620 families will be looking for a place to live or build along the coast. That's 4,600 new buyers that have been injected into the coastal market that will need to find a place to be.

I don't think this will happen in the next week but I do think it could happen. They have to find a place to live. The devastated areas will not be ready for a long while. This would be a good time for the sellers to clean up their properties. Again, this Katrina storm is the most awful and terrible thing that I have ever seen. I am not trying to be insensitive to this at all. I am just an optimist and am looking for any ray of sunshine about it.

BTW, I just heard on the news that Greenspan is going to halt raising interest rates until we recover from this disaster. Good for the market? Should be.

 

[FoX]

I can't believe I am arguing about a real estate bubble with all the tragedy unfolding in New Orleans, Miss and Ala. Sorry.

That's it for me. I'll lurk from time to time. But, no more arguing. Good luck everyone.

We know you love it.

 

[Bob]

Greenspan will not be Fed Chairman by the time NO is rebuilt.

 

[Robert]

Greenspan will not be Fed Chairman by the time NO is rebuilt.

True, but I think after the meeting with Bush today, he decided to suspend the three scheduled rate hikes for this year. Check the news.

 

[SHELLY]

>>Is this ludicrous or plausable?<<

Yes...no


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WARNING: WEAK COMEBACK AHEAD
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>>Shelley, you need a vacation, or a move from the panhandle, because hurricanes are in your future.<<

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>>BTW, I just heard on the news that Greenspan is going to halt raising interest rates until we recover from this disaster. Good for the market? Should be.<<

All the human suffering and destruction of Katrina aside, the economics of the situation is yet to be realized--especially due to the current trend of the areas' over leveraged homeowners who tragically lost their homes. The recent trend of diversifying risk by bundling and selling mortgages and equity loans to investors and the effect of their subsequent defaults or early pay-backs will play out in the months to come. But that won't concern Greenspan in the short time he's got left.

Greenie "claims" he'll only dink with the interest rates to keep inflation in check. He raises Fed fund rates to slow down the economy headed for inflation or lower rates to ramp up the economy when heading for recession. He started cranking down rates after the "tech bubble burst" and then after "9-11" to keep the economy moving. As a result of cheap money, the focus switched from the "Tech Bubble Weenies" trading on margin to "Real Estate Vultures" leveraging real estate (same greed, different melody).

With corporate profits moving up in the past couple of years (believe it or not) he started raising the rate (measured of course) to keep inflation in check. Additionally, he needed to continue to raise rates because at 1% to 2% the Fed had no cushion to rely on should there be another major economic catastrophe. By raising the Fed funds rate, he was counting on the long-term interest rates to increase (that's what Economics textbooks say they should do)--but that didn't happen (a conundrum) and the yield curve flattened. So to this day he keeps increasing the rate hoping the long-term rates will cry "uncle."

With the high gas prices, the cost of everything will start going up (retailers and manufacturers can't keep eating the costs forever) and we'll experience inflation--just the kind of thing Greenie wants to avoid.

If Greenie sticks by his guns, he should continue to raise interest rates to keep inflation in check. He may skip the next interest rate increase to make Bush look like a hero in the face of his administration's screw-up in the New Orleans, but those rate hikes have gotta start moving the long-term rates (which drive the mortgage rates). Of course if the long-term rates continue to stay low (or worse, fall) we will find ourselves in a recession which isn't good for the economy either.

My guess is Greenie wants to stick to his guns and continue his increases. If he does stop, he'll identify a reason like some "lower than expected X-economic indicator..blah..blah..blah." But with the 10-year yield down to 4.03% today, I don't any reason for him to stop raising the rates.
Either way, some investors may find it prudent to think about putting their money into the "Bank of Serta" until the economy settles.

 

[Smiling JOe]

...
With the high gas prices, the cost of everything will start going up (retailers and manufacturers can't keep eating the costs forever) and we'll experience inflation--just the kind of thing Greenie wants to avoid.

If Greenie sticks by his guns, he should continue to raise interest rates to keep inflation in check....

I believe I follow you. I have a question, though. With the forthcoming increase of the price of construction materials, due to the upcoming demand in materials and cost of fuel, if interest rates go up to keep inflation in check, do you think that people will stop building altogether? After all, you have suggested that property values will be decreasing in the near future. It seems to me that if construction stops, there will be less supply, thereby increasing demand and prices, even with increased interest rates.

 

[Bob]

True, but I think after the meeting with Bush today, he decided to suspend the three scheduled rate hikes for this year. Check the news.

The Fed is likely to pause politically for this crisis, but if you check their stated intentions, the short term interest rates hikes were in response to OPEC driven inflation. The hillarity of the scenario is that the FED holds no sway over the cost of light sweet crude, not now, not 20+ years ago when Paul Volker, as Fed chairman, dismantled our economy with crushing interest rates. The prime, I believe touched 18 percent. Volker used the same excuse[opec driven inflation] to raise rates. The truth is that the Fed can do nothing about oil, with the recent hikes allowing room to ease credit later when our economy eventually slows. The thinking here is, the Fed has no hammer later if they don't raise now. I recently had an email published on Bankrate.com on this very subject.