New home sales unexpectedly fall in October- Reuters

http://finance.yahoo.com/news/New-home-sales-unexpectedly-rb-579554621.html?x=0&sec=topStories&pos=2&asset=&ccode=

WASHINGTON (Reuters) - New U.S. single-family home sales fell unexpectedly in October and prices dropped to a seven-year low, a government report showed on Wednesday, pointing sustained weakness in the housing market following the end of a home-buyer tax credit. Analysts polled by Reuters had forecast new home sales rising to a 310,000 unit pace in October. Compared to October last year, sales were down 28.5 percent.
  
    The clowns continue to get it wrong. You could have walked on the sidewalk on any street in America and asked 10 random people if they thought houses were going to be selling in October. None of them would have said yea. Analysts are useless. Get rid of them. Smoke 'em out if they won't leave because none of them are going to walk away from a bullshit job on their own volition. Alas, that will never happen because the system is broken and a broke-ass system needs its army of touters, patzers, and imbeciles to continue marching.

Panama City Beach Luxury Home Foreclosure of the Day

   Youtube has become the spamming ground of choice for businesses seeking to gain exposure for the products that they sell. I look at the daily foreclosure offerings from time to time and this one caught my eye. As an added bonus, a midi version of Lady Gaga's "Poker Face" kicks the video off. From the video's sparse description:

"2,700 square foot home in The Preserve coming on the market in Panama City Beach, Florida."

   The guy in the video mentions that the house was built in 2005. That was the height of the boom when cheap construction materials were used to build homes as soon as possible to fill demand. Were substandard materials used to build this house? Who knows. I know I wouldn't buy a house that was built in the past 10 years. The house looks okay from the outside but the dining room that they show isn't a selling point with its green walls and droopy hanging light from Home Depot.

Pace of new home sales second slowest on record

   The AP article which is tied to the headline listed above begins with:

"New homes sold at the second-slowest pace on record in August, signaling that the housing market will remain a drag on the economy."

   I guess printing news stories that state the obvious are good because they remind everyone that the real estate market continues to be in a funk and that no one should get their speculative juices boiling yet. The return of manic real estate speculation isn't coming back for at least another decade. During the course of the next decade when price appreciation in real estate is kept in check, credit-worthy young families looking to buy their first home should be able to afford said home without breaking the bank. That's how it should be and perhaps the death of the real estate market is a good thing in that it allows people who want to buy a home and live in it (instead of flipping it), are able to raise their families in a house of their own.

10 Reasons To Buy a Home - WSJ

   Man, this one's a doozy from Brett Arends for the Wall Street Journal. And I quote:

"Brett Arends explains why owning a home is a good thing.
Enough with the doom and gloom about homeownership.
Sure, maybe there's more pain to come in the housing market. But when Time magazine starts running covers that declare "Owning a home may no longer make economic sense," it's time to say: Enough is enough. This is what "capitulation" looks like. Everyone has given up."
Link: http://finance.yahoo.com/real-estate/article/110685/10-reasons-to-buy-a-home?mod=realestate-buy

  Brett, you done got facked up again. Anyone who's seen True Romance knows that line. Yeah Brett, you're grasping at straws when you try to make a convincing argument that it's alright to buy a home right now. Pointing to a magazine cover as a contrary indicator stopped working during the crash of 2008-2009. Magazine cover after magazine cover decried the health of the market before the first crash in late 2008. You know what those contrarian magazine covers did? Nothing. The market continued crashing and crashed again in March of 2009.

   I'm going to go through Brett's ten reasons why it's good to buy a home now and smash them to pieces:

1. You can get a good deal
   Hey, I can get a good deal on a house. Let me take out a $380,000 mortgage from banks that won't approve my application because I don't have a job. Good one, Brett.

2. Mortgages are cheap
   Shut up. Get out of here!? Morgages are cheap? Holy shit, now I can run out and get myself a house.

3. You'll save on taxes
   This one is so stupid that I'm not going to bother humiliating him.

4. It'll be yours
   Will it still "be yours" after it's foreclosed on?

5. You'll get a better home
   This guy is a genius. By genius, I mean idiot.

6. It offers some inflation protection
   People aren't worried about inflation when they're on unemployment.

7. It's risk capital
   WTF is he smoking? No, I don't want any of it.

8. It's forced savings
   Um, what savings? "Hey Marge, let's put some money from the unemployment check into our savings instead of buying food for the kids."

9. There is a lot to choose from
   This guy has a knack for stating the obvious. I hope he's not getting paid for that article because he has to be writing for free. You know the phrase, "Beating a dead horse" right? I don't want to beat Brett anymore.

10. Sooner or later, the market will clear
   Thanks Brett. You're like Nostradamus with your pronouncement that the market will clear. Will it clear in time for people who just bought homes and lost their jobs to pay the mortgage?

   I will now read all of Brett's future articles in the WSJ with a jaundiced eye and a suspicion that he's got a screw or two loose. Those screws lost their threads and are spinning.

Glimmer of Hope

An AP article released this morning proclaims:

Home prices rise in 17 cities in June

   The relevant snippet from the article is as follows:

"The Standard & Poor's/Case-Shiller 20-city home price index released Tuesday posted a 1 percent increase in June from May and was up 4.2 percent from a year ago."

   Someone might ask, "So, out of the thousands of cities across America, prices rose in 17 cities?" Well, the Case-Shiller 20-city home price index only tracks 20 major cities. If you look at the national data, prices were up 4.4% from April to June 2010 thanks to the $8,000 government tax credit which has expired. Without the tax credit subsidy, prices are expected to trend downwards in the next few months. As I've mentioned earlier, the turn is coming but it won't be a V-shaped rebound. It'll look more like a hockey stick with the stick portion tilted slightly upwards.

   I thought the following snippet from the article was amusing:

"Pam Geller and her husband have been trying to sell their two-bedroom condominium in Los Angeles so they can buy a house. It remains unsold after more than two months on the market, even after the couple lowered the price to $359,000 from $399,000.
They're close to completing the purchase of their next home. But the deal will collapse unless they find a buyer in two weeks. Geller said she's unwilling to slash the price further.

With home prices likely to fall, Geller wonders if it might be better to wait to buy another home. "What I see is houses still dropping" in value, she said."

   I'm of the belief that writers for the AP make up people like Pam Geller out of thin air to support a supposition or a point in their articles. How was Pam Geller contacted? Were any of her quotes edited by the writer? Why would she be buying a home when she sees "houses still dropping?" None of it makes sense and I'm going to call B.S. on the existence of Pam Geller.

Home prices on the mend? Nah.

   A Reuters article this morning reads as follows:

PREVIEW-US home prices to eke out small June gain

   Looking at the article, one poignant quote follows below:

"U.S. home prices likely eked out a small gain in June, but a rise would represent the final tail-winds of the homebuyer tax credit that ended in April rather than housing market improvement, economists said."

   Economists have a knack for stating the obvious and getting outfits like Reuters to trumpet the obvious across newspapers online and offline. Housing on a national scale won't recover for at least another 10-15 years. At that point, the recovery won't even be appreciable. I'm talking sustained back-to-back 1-2% price increases instead of the drops and flatlines we've been seeing for the past few quarters. Markets have a way of destroying value just when everyone's all in. In the recent real estate bubble, plumbers and truck drivers became real estate moguls. That's reminiscent of the dot-com bubble when UPS drivers and Barbara Streisand day-traded their accounts and earned a few thousand dollars every day on E-Trade, Datek (now part of Ameritrade), and Schwab.

   Of course, it all ended in tears because not everyone can be a millionaire. Who'll serve coffee at Starbucks if everyone's got a few million tucked in the savings account? Who's going to get me a burger and a side of fries?

   Home prices won't recover appreciably anytime soon but the recovery is coming. That's how markets work - they destroy excess and reset to zero before growing again. We're still in the destruction phase but the reset will happen in the next few years. That's why I started this blog so I can map the recovery and offer anecdotal evidence and share any of my potential investments in real estate as the economy in the United States picks up again.

The Seven Stages of Grief

   The real estate market in the United States is dead. Long live the real estate market. No really, just because the market is dead doesn't mean that all opportunities are gone. It just takes a lot more legwork, diligence, and savvy than the days when buyers snapped up anything and everything that was offered for sale. The days of shacks in California selling for $750,000 are over and will likely never reappear in our lifetimes.

   I'm going to begin our real estate venture with the Seven Stages of Grief and pinpoint where the nation collectively is at as of August 29, 2010.

1) Shock or Disbelief - The stock and debt market plunge of 2008-2009 was the trigger that opened up the shock stage. As markets around the world plunged and fear was everywhere, real estate froze and deals were broken. Banks walked away from loan obligations and capital dried up very quickly.

2) Denial - As markets continued to go on a tumultuous roller coaster ride from late 2008 to early 2009, home owners looking to sell and home buyers were looking for some solace. They would find none. In the space of one year, the booming real estate market had become dead man walking. Mega banks like Citibank and Bank of America were on the ropes and even JP Morgan looked vulnerable. No loans = no mortgages.

3) Bargaining - Home owners blinked and prices began to fall. Despite the discounts and incentives, buyers became scarce. At one point, some home owners were willing to include a brand new Lexus to buyers who closed on a deal. Home stagers enjoyed a revival in their business but the malaise would continue because no loans = no mortages.

4) Guilt - Remember that commercial at the height of the boom where the wife says to the husband, "I want that house" while the agent is on the phone and the hen-pecked hubby eventually accedes to her demands? Who's feeling more guilty now? The wife who got the family into a house they can't afford or the husband who relented and potentially ruined his family's finances and future?

5) Anger - Yes, there was anger and tears as the real estate market got demolished; the anger flared up when buyers lost houses to foreclosure. Home sellers aren't necessarily angry but more frustrated that they can't sell property and move on with their lives and plans.

6) Depression - I'm not sure that "depression" factors very large in buyers who have lost their houses. There's remorse and misgivings about buying a house that they couldn't afford but depression? Maybe, but I'd change this to "Regret" or "Remorse" for real estate. I believe that we are in this stage of the Seven Stages of Grief.

7) Acceptance and Hope - For some people who lost their homes, "acceptance" was forced upon them but home sellers have not accepted the crash yet. Many still think that a few years is all that we'll need to reach the heady highs of 2006-2007 again. That was when homes sold in 15 minutes after being listed and hundreds of people lined up for the right to buy into a new development. As I mentioned earlier, those days are over in our lifetimes. If you are 40-60 years of age now, you will never see those types of prices again in your lifetime. So, don't keep hope alive because housing prices are never rocketing into the stratosphere again for the next 30-40 years.