Thursday, July 21, 2005

Real estate booms not always followed by busts

Economists weigh in on debate

WASHINGTON, D.C. – How do you define a housing boom? Does a bust always follow a boom? What's the difference between a significant slowdown and an absolute bust?

With real home-growth prices (appreciation minus inflation) rising to their highest levels since the data was first collected in 1977, the Federal Deposit Insurance Corp. has brought some definition to the amazing national housing picture, announcing that there were 55 boom metro markets at the end of 2004, up from 32 a year earlier.

Boom markets, where real price-growth increases at least 30 percent over three years, were heavily concentrated in California (21), the Northeast (18) and Florida (11). And, according to the FDIC, boom does not necessarily lead to bust – only 17 percent of all housing booms ended in busts. Most busts were preceded by a significant stress in local economies, such as loss of jobs. A bust is defined as a nominal drop of 15 percent over five years.

Read the entire article at Inman News

Sunday, July 10, 2005

Prices top $1 Million for Mobile Homes in Malibu

So it has come down to this, you pay $1 Million for a home and you are still considered "Trailer Trash".

Malibu, California is a place where the average list price for a single family home is a whopping big $4.4 million smackers. There on the other side of the tracks is the eyesore Point Dume Club, the local trailer park.

In the park a 2 bedroom, 2 bathroom mobile home is selling for $1.4 million. Two others have sold recently for $1.3 million and $1.1 million and there is a listing for $2.7 million.

I think Warren Buffett was right. It is time to get out of ocean front property in California.

Friday, July 08, 2005

Port St. Lucie, Fla., is Fastest-Growing City Census Bureau Says

Port St. Lucie, Fla., had the nation’s fastest growth rate among large cities (100,000 or more population) between July 1, 2003, and July 1, 2004, according to new U.S. Census Bureau population estimates.

Located along the Atlantic coast between Cape Canaveral and West Palm Beach, and spring training home of the New York Mets, Port St. Lucie saw its population increase 12 percent during the period, to 118,396. It was joined on the list of the 10 fastest-growing cities by two others in the Sunshine State: Cape Coral (ranking fifth) and Miramar city (eighth).

California had four cities in the top 10: Elk Grove (second), Moreno Valley (sixth), Rancho Cucamonga (ninth) and Roseville (10th). Two cities in Arizona were in the top 10 — Gilbert (fourth) and Chandler (seventh) — and, relatively nearby, North Las Vegas, Nev., was third.

Elk Grove, Miramar and Roseville each became eligible for this list for the first time, as all three cities passed the 100,000 population threshold between 2003 and 2004.

New York City continued to be the nation’s most populous city, with 8.1 million residents. This was more than twice the population of Los Angeles, which ranked second at 3.8 million. The estimates show that among the 10 largest cities, only one change has occurred in the rankings: San Jose, Calif., has replaced Detroit, as the nation’s 10th most populous city.

Phoenix had the largest population increase between 2003 and 2004, adding 29,826 people. Los Angeles; San Antonio; Las Vegas; and Fort Worth, Texas, rounded out the list of the five biggest numerical gainers.

In addition to the estimates for the nation’s 19,465 incorporated places, the Census Bureau also released estimates for the nation’s general purpose minor civil divisions — those that have functioning governments. Incorporated places include cities, towns, villages and boroughs in most states.

For more information about the geographic areas for which the Census Bureau produces population estimates, see <>.

Thursday, July 07, 2005

What does Buffett think of the Bubble?

Warren Buffett, the second richest man in the world, recently had a few things to say about the Real Estate Bubble at a meeting of his shareholders.

"A lot of the psychological well being of the American public comes from how well they've done with their house over the years. If indeed there's been a bubble, and it's pricked at some point, the net effect on Berkshire might well be positive [because the company's financial strength would allow it to buy real-estate-related businesses at bargain prices]....

"Certainly at the high end of the real estate market in some areas, you've seen extraordinary movement.... People go crazy in economics periodically, in all kinds of ways. Residential housing has different behavioral characteristics, simply because people live there. But when you get prices increasing faster than the underlying costs, sometimes there can be pretty serious consequences."

"I recently sold a house in Laguna for $3.5 million. It was on about 2,000 square feet of land, maybe a twentieth of an acre, and the house might cost about $500,000 if you wanted to replace it. So the land sold for something like $60 million an acre."

There are some very extreme housing price bubbles going on.

Sunday, July 03, 2005


Mortgage rates fell this week, as they have 12 times in the previous 14 weeks. The average 30-year fixed rate mortgage dropped from 5.66 percent to 5.61 percent, according to's weekly national survey of large lenders.

The 30-year fixed rate mortgages in this week's survey had an average of 0.36 discount and origination points.

The 15-year fixed rate mortgage, popular for refinancing, declined from 5.28 percent to 5.23 percent. The average rate for the jumbo 30-year fixed rate mortgage dipped from 5.93 percent to 5.9 percent. Adjustable rate mortgages were no different, with the average 5/1 adjustable rate mortgage sliding from 5.2 percent to 5.16 percent, while the one-year ARM inched lower from 4.69 percent to 4.68 percent.

Mortgage rates have moved in a narrow range in the past month, with the average 30-year fixed rate ranging from 5.61 percent to 5.73 percent. This week was no exception, with rates fluctuating very little in response to gyrating oil prices and an upcoming announcement by the Federal Reserve on June 30. Oil prices first exceeded, then retreated from, the $60 per barrel mark. The Fed is expected to boost short-term interest rates for the ninth time in the past year, a series of events that have had no effect on fixed mortgage rates. In fact, fixed mortgage rates have fallen throughout the past year. One year ago, the 30-year fixed rate mortgage was 6.3 percent. The unprecedented decline in fixed mortgage rates amid successive Fed interest rate hikes has soothed the sting of rising home equity and credit card rates for many borrowers, as refinancing at low fixed rates locks in monthly payments.

Mortgage rates remain near the lowest point of 2005. As a result, monthly mortgage payments are very affordable. One year ago, the average 30-year fixed mortgage rate was 6.3 percent. At the time, the monthly payment on a $165,000 loan was $1,021.31. With the average rate now 5.61 percent, the monthly payment on the same $165,000 loan is $948.27. Refinancing now would save $73 each month or more than $26,000 over the loan term.

Friday, July 01, 2005

Federal Reserve Raises Interest Rates for a Ninth Time

The U.S. Federal Reserve raised an important interest rate by another quarter-point on Thursday.

The action pushed the federal funds rate up to 3.25 per cent. It marked the ninth increase in the interest that banks charge each other on overnight loans and left this benchmark rate at its highest level since August 2001.

In a carefully phrased document, the Fed says that, "even after this action, the stance of monetary policy remains accommodative and, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity."

"Although energy prices have risen further, the expansion remains firm and labor market conditions continue to improve gradually. Pressures on inflation have stayed elevated, but longer-term inflation expectations remain well contained."

Voting for the FOMC monetary policy action were: Alan Greenspan, Chairman; Timothy F. Geithner, Vice Chairman; Susan S. Bies; Roger W. Ferguson, Jr.; Richard W. Fisher; Edward M. Gramlich; Donald L. Kohn; Michael H. Moskow; Mark W. Olson; Anthony M. Santomero; and Gary H. Stern.

In a related action, the Board of Governors unanimously approved a 25-basis-point increase in the discount rate to 4-1/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco.