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Everyone Is Looking For A Bubble

A weekend topic starting with the Tampa Bay Times in Florida. “If you own a house in the Tampa Bay area, chances are you’ve received at least one ‘Dear Homeowner’ letter offering to buy it for cash, ‘as is’ and with no closing costs or commissions. And if it’s a somewhat tired-looking house worth less than $125,000, chances are you get enough solicitations to paper an entire wall.”

“Despite rising prices, this has been a banner year for HomeVestors of America, known for its ‘We Buy Ugly Houses’ slogan. So far this year, the 34 Tampa Bay franchisees have bought a total of 420 houses — twice the number as last year.”

The New York Times. “Interest rates have started to rise, and the housing market is cooling off, a combination that is putting a squeeze on mortgage lenders. Now, some of them are turning to more complicated loans, a remnant of the last housing boom, to bolster their business.”

“These risky offerings fall under the umbrella of non-qualifying loans, meaning they do not conform to standards set by the Consumer Financial Protection Bureau. But lenders are starting to push the loans on borrowers, who are using them to get into homes that may be bigger and more expensive than what they could otherwise afford.”

“Even a conscientious borrower faces risks with these types of loans, said Susan M. Wachter, professor of real estate and finance at the Wharton School at the University of Pennsylvania. Dr. Wachter said in hot markets like San Francisco, where home values are growing so quickly, an interest-only loan may be the only feasible way to buy a house.”

“‘In markets like San Francisco, the correction is going to be more severe,’ Dr. Wachter said. ‘These are the properties that are going to be the most volatile and have the most price risk. The price falls will be higher because of the expectation that prices always go up.'”

From Bisnow. “The end of the cycle is inevitable, right? Across the industry, experts are pondering what will be the catalyst to shock the cycle into its next downturn or recession. Will the market fall to another oil bust? Or will it come from the single-family housing market like 2008?”

“‘Everyone is looking for a bubble,’ Bay Mountain Capital Chief Investment Officer Will Dyer said during Bisnow’s Capital Markets event in Houston. “

“The amount of alternative debt capital for real estate has increased, The Hanover Co. CEO Brandt Bowden said. ‘It is not going to get bad in one year,’ he said. ‘But you could see a scenario where one year of good results compounds to another good year of good results … [But,] If anything goes wrong, it gets really bad really fast. That’s where I am kind of concerned.'”

The Wall Street Journal. “When Lambo? It was around the peak of bitcoin’s value a year ago at just below $20,000 that this obnoxious question entered the Urban Dictionary: How long would it take to amass enough cryptowealth to buy a Lamborghini?”

“Now, those bitcoin owners still holding on for dear life after an 82% decline are putting on a brave face, but there is no more denying that we have witnessed the popping of a classic bubble.”

“A speculative craze isn’t defined by its frequency or even its amplitude, which makes defining a bubble tricky. When bitcoin had appreciated by more than 1 million percent, an expert in manias said it didn’t meet his criteria for a bubble.”

“Months later, bitcoin finally ticked nearly all of his boxes.”

“The use of leverage is another of his telltale signs. Stories of people selling all of their possessions to invest in cryptocurrencies or buying with credit cards cropped up around the peak.”

“Buyers of bitcoin near the top weren’t just overconfident—a hallmark of bubbles—but were dismissive of skeptics as Luddites who just didn’t get it. Bulls said the same thing in 1999 during the tech boom.”

“The bitcoin bubble, following the housing bubble and the tech bubble, is the third in less than 20 years. Clearly, bursting bubbles don’t inoculate us against falling for another one.”


This Post Has 45 Comments
  1. ‘lenders are starting to push the loans on borrowers, who are using them to get into homes that may be bigger and more expensive than what they could otherwise afford’

    Ahem…

    IMO, we should consider an alternative to the “interest rates popped the bubble” thing the REIC is creating. It could be they just ran out of buyers.

    1. Why are there never conversations about how wildly overpriced and unaffordable houses are? Sure, we’ll get something like a “prices were rising too quickly so it’s natural for them to take a break” or some BS, but nothing that details the fact that incomes by no means support these insane prices.

      We are not only in a bubble, it’s an insane bubble.

      1. “incomes by no means support these insane prices.”

        +1

        It may not happen fast or it may, but at some point they WILL have to support incomes or no one will buy. It’s sad that many people believe all the hype and RE tied “experts” lies. Housing is supposed to be used as a shelter not a piggy bank or a trophy. The latitude that has been reached with pricing is parabolic and realtors and brokers did nothing but support it and glamorize it for profit without any care or remorse that they have coincidentally begun the first step to ruining families and our economy. It all makes me sick

        1. The need for a relationship between incomes and prices was one of the lessons the world “learned,” for like about five months, in 2008.

      2. Hell .. The tax payments on these prices are a small mortgage payment to begin with !! I guess a lot of people make a half mill a year 💰💰💰

    2. “It could be they just ran out of buyers.”

      This can’t be separated from prices that rapidly climbed beyond end-user purchase budgets. Once prices drop back to levels consistent with household incomes and loan amounts they can finance at present interest rates, the buyers will magically resurface.

      1. But that’s not considered acceptable to the Fed, the government, the REIC, or anybody who has already purchase or who owns a house. Prices MUST be levitate to their bubble levels at all costs because, well, I’m not exactly sure why anymore….

      2. loan amounts they can finance

        Having sat out the housing bubble for over a decade, many like you won’t want a 30 yr debt, even if they can qualify, because 10 or more years of that short career are behind. Not to mention a whole new crop of folks who will conclude that long term debt is not a good thing.

        1. If I ever got a mortgage again, which I highly doubt I will, it would be a 15 year which I’d pay off early.

          1. “If I ever got a mortgage again, which I highly doubt I will, it would be a 15 year which I’d pay off early.”

            I got a 30-yr conforming mortgage and paid it off in 9-yrs without any penalties. If you hit a rough patch the payments will be low enough to muddle through.

    3. On Friday I got an email stating Subprime was back. Among the highlights was
      “No Income Verification
      That is not a good sign

  2. Dr. Wachter said in hot markets like San Francisco, where home values are growing so quickly, an interest-only loan may be the only feasible way to buy a house.”

    Or you could just refuse to overpay, sit out the madness, and wait for the inevitable cratering.

    1. “Dr. Wachter said in hot markets like San Francisco, where home values are growing so quickly, an interest-only loan may be the only feasible way to buy a house.”

      Then you’re not really buying a house, are you, Dr.? Because just making interest payments with nothing to principle buys you NOTHING in the short run or long run. How this ignoramus became a doctor is beyond me.

      1. Yes, but not necessarily much different than a conventional mortgage since early payments are weighted much more toward interest than toward principal.

        The really bad one is the negative amatorizig loans, the so called doctor’s loans, since the low initial payments results in a principal balance which increases. Ok if you expect rapidly increasing earnings in the future.

  3. “Buyers of bitcoin near the top weren’t just overconfident—a hallmark of bubbles—but were dismissive of skeptics as Luddites who just didn’t get it. Bulls said the same thing in 1999 during the tech boom.”

    “Don’t you love the sound…of the last laugh going down.” (Mark Knopfler/Van Morrison)

    https://www.youtube.com/watch?v=qb-Ht5JwX0k

    1. The current price of Bitcoin, hovering around $3,000, is still fantastically high for something with a true value of $0. Get out now, alphonso, before you lose everything.

      1. With Bitcoin achieving a new annual low on nearly a daily basis with no end in sight, you’d think the HODLers would get a clue and cut their losses before it goes all the way down to $0.

        6,658 views|Dec 15, 2018,1:20 pm
        Bitcoin Marches Toward $3,000 As Bloodletting Continues
        Charles BovairdContributor
        Crypto & Blockchain
        I am a financial writer and consultant who focuses on investments.
        Bitcoin’s free fall continues, pushing the crypto to its latest annual low.
        Credit: Getty Royalty FreeGetty

        Bitcoin suffered further losses today, hitting a fresh, 2018 low and approaching the key $3,000 price level.

        The digital currency dropped to as little as $3,122.34 at roughly 10:20 a.m. EST, according to CoinDesk bitcoin price data.

        At this point, it was down 3.63% over the last 24 hours, trading at its lowest point since late last year.

        Further, bitcoin only needed to lose another $125, or in this case, roughly 3.9% of its value, to hit $3,000, a price level that has drawn attention from technical analysts.

        1. Let’s see – I could buy over 2 ounces of gold, with $500 left over, or a single Bitcoin. Gee, it’s such a hard decision I just don’t know what to do….

        2. “Bloodletting”

          Bitcoin “owners” go draw yourself a warm bath, pour a glass of wine, pop a few xanax, and slice those veins, knowing that your “investment” like your existence, is inevitably approaching zero 🙂

          1. Bitcoin “owners” go draw yourself a warm bath, pour a glass of wine, pop a few xanax, and slice those veins, knowing that your “investment” like your existence, is inevitably approaching zero

            Sounded like a nice relaxing night until the suicide part creeped in… 🙂

      2. Bitcoin – The Meltdown Continues
        Bob Mason
        FX Empire
        December 14, 2018, 5:35 PM PST
        Down, but not out as the Bears take another bite out of Bitcoin and the cryptomarket.

        Bitcoin fell by 2.16% on Friday, following on from a 5.13% slide on Thursday, to end the day at $3,281.7.

        It’s been a tough week, month and year for the Bitcoin bulls, with Bitcoin down 6.4% for the current week, 18.7% for the current month and a whopping 76.2% for the current year. If you take the peak, the bulls are down 83.5%.

        In the words of Isaac Newton, ‘what goes up must come down’ and nothing has proven Isaac Newton’s theory more than the cryptomarket.

          1. I sure hope that he doesn’t post that on social media. The mental image is plenty horrible without the added prospect of video documentation.

      3. How many $uckers $t!ll believe this bull$h!t art!$t?

        Cryptocurrencies
        Unabashed Bitcoin Bull Thomas Lee Says the Market Is Wrong
        By Eddie van der Walt
        December 13, 2018, 6:56 AM PST
        – Fundstrat research head says fair value is around $14,800
        – Lee had predicted Bitcoin would be worth $25,000 by year-end

        It’s hard to keep a Bitcoin bull down.

        Back in May, Thomas Lee, head of research at Fundstrat Global Advisors was predicting a rally to $25,000 by the end of the year. And despite things not playing quite in his favor — the cryptocurrency is currently trading below $3,400 — he’s sticking to his guns.

        Bitcoin’s fair value, given the number of active wallet addresses, usage per account and factors influencing supply, is between $13,800 and $14,800, he said in a note Thursday. His explanation for the divergence include last year’s meteoric rally, a “meltdown” in the macroeconomic climate and treasury sales during initial coin offerings.

          1. That’s what’s so hilarious about this whole thing – they’re all wanting DOLLARS for their Shitcoin. Losers…

    1. Hey Mortgage Watch, I have some new headlines you can use:

      “Colorado Springs housing prices drop 11% as despairing realtors turn to cannibalism.”

      “Manitou Springs prices crater by 13% as FBs flee town under cover of darkness to escape debtors’ prisons.”

      “Denver shack prices implode as greedhead murder-suicide pacts explode.”

        1. “Chris and Shanann Watts filed for bankruptcy in June 2015, according to documents in the court record. That was after they bought their house, an asset valued at $400,000, records show.”

          End result of paying more than $50/sq ft? Chris Watts. Who in their right mind would pay $400k for a rapidly depreciating asset like a houses.

          There’s a whole bunch of Chris Watts out there. Suicide, drug addiction, alcoholism, is the end result of degenerate gambling.

        2. “Chris and Shanann Watts detailed their life on social media. They shared photos of beach vacations to San Diego and screengrabs of lovey-dovey text messages. They gushed about their daughters and posted photos of the little girls’ gap-toothed grins and funny dances.”

          “Chris and Shanann Watts filed for bankruptcy in June 2015, according to documents in the court record. That was after they bought their house, an asset valued at $400,000, records show.”

          “The year prior to the bankruptcy filing, the couple had a combined income of $91,000 — most of it earned by Chris Watts, who made about $63,000 from his job at Anadarko Petroleum, records show. The rest was earned by Shanann Watts, who worked in 2014 at Children’s Hospital Colorado.”

          “Still, they were about $70,000 in debt, most of it from student loans and credit card purchases, according to the filings. The couple reported two savings accounts with a total of $9.51 and a joint checking account with $864.”

          Another couple living well beyond their means.

      1. “Colorado Springs housing prices drop 11% as despairing realtors turn to cannibalism.”

        Haven’t they been doing this all along?

  4. “Despite rising prices, this has been a banner year for HomeVestors of America, known for its ‘We Buy Ugly Houses’ slogan. So far this year, the 34 Tampa Bay franchisees have bought a total of 420 houses — twice the number as last year.”

    What will happen to all of these houses once this firm sustains massive losses and declares bankruptcy in the next housing bust? Will they sell them off by Dutch auction, like tulip bulbs were after the collapse of Tulipmania?

    1. the 34 Tampa Bay franchisees

      Franchises. So these 34 people or couples went to a seminar on how to make money flipping houses and wrote a big check to get in on the scheme. The “firm” behind this will be just fine.

      1. LOL. That was my thought too. I live in Tampa and haven’t gotten one of those letters, but I do have regular solicitations from homebuilders and real estate salespeople rubber-banded on my doorknob, offering to buy or sell our house.

      2. Do not see any of those “we buy ugly houses” billboards anymore. Used to see them all the time. Appears they have been scaling back although the numbers repot ed are pretty significant.

        Like the president or not, he said that he buys properties when there is blood in the streets. The ugly house model will be a good idea again in a few years. I wonder what the relationship is between the parent company and franchisees. Financing? Don’t know. Will probably go sour pretty soon.

  5. More good news on house prices – there’s no sign of them picking up soon
    By: John Stepek
    14/12/2018
    Estate agent’s window
    © Getty Images
    Will Britain avoid an actual house price crash?
    You could make our housing system worse, but you’d have to try hard

    Let’s turn away from the fun of Brexit for the time being.

    Let’s look at something far more important.

    Let’s have an update on how the UK housing market is doing.

    British house prices are far from being the world’s most important asset class. But the statistics tell me, that in the eyes of our readers and most of the British public, a spike in the ten-year US Treasury yield, a plunge in the price of oil, or a slide in the Chinese yuan, are as nothing compared to a blip in the fortunes of the most coveted asset in the UK.

  6. Are you missing the massive rally in long-term Treasurys due to HODLing too much of your wealth portfolio in high-risk assets (stocks, housing, crypto, etc.)?

    Credit Markets
    U.S. Government Bonds Strengthen on Soft Overseas Data
    Investors also focus on next week’s Federal Reserve meeting
    Yield on the 10-year U.S. Treasury note
    Source: Tullett Prebon
    By Sam Goldfarb
    Updated Dec. 14, 2018 3:37 p.m. ET

    U.S. government-bond prices rose Friday as investors sought safer assets following a batch of soft economic data from China and Europe.

    The yield on the benchmark 10-year U.S. Treasury note settled at 2.891%, compared with 2.911% Thursday.

    Yields, which fall when bond prices rise, declined overnight with global stocks after new data showed that Chinese industrial production slowed in November to its lowest level since early 2016, while retail sales dropped to the lowest level in more than 15 years.

    Further damping investors’ appetite for riskier assets, a survey of purchasing managers indicated that French business activity unexpectedly contracted in December for the first time in 2½ years. A purchasing managers index for Germany also fell to its lowest level in four years, defying expectations that it would pick up this month.

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