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Thursday, December 28, 2006

More Later, But Two Things

Neither the existing home sales release or the new home release looked very encouraging to me. I'm with Rosenberg, per Sperling, hat tip The Housing Bubble Blog:
In a Nov. 27 comment, Rosenberg notes that in addition to the record 4.3 million residential units for sale as of October, there were 1.95 million home completions, the 12th-highest month since 1979. Units under construction were through the roof as well. Rather than seeing supply dwindle and prices start to firm up in early 2007, Rosenberg says ``it could be a year before the reduction in starts begins to put a meaningful dent into the inventory backlog.''

John Mauldin, an investment adviser and frequent contributor to Investors Insight, a financial-data publisher, throws an extra log on the fire. According to Mauldin, even the current projection of housing sales may be overstated and thus the existing supply of homes greater than what is reported in the official data. The reason is that the Census Bureau, one of the Commerce Department's statistical agencies, fails to account for cancellations in home sales contracts. Cancellations ran as high as 40 percent for some major homebuilding firms last quarter.
More about the actual releases later, but for now I encourage you to check reality through the Housing Tracker, which aggregates list prices. Check out San Diego, for example, and see what a 3.1% year over year decline in price actually means.
In general, you can expect to pay 6% commission when selling real estate. So if you took out one of those adjustable loans with a $25,000 downpayment, and now are looking to sell a house you bought in August of 2005 for $545,000, your minimum loss is likely to be somewhere around $65,000 - $85,000. You will probably have to bring upwards of $40,000 in cash to the table in order to pay off your loan balance and the real estate commission. That's assuming that you had an amortizing loan, and that you can sell at the average listing, and that you are not also paying seller's closing costs, which is probably not so.

The carnage in the funny money capitals is just beginning. This will be historic.

If you need a good laugh after that, Casey Serin just discovered that a bank might offset overdue payments on a credit line with funds in his checking account.... He's outraged! The bank picked his pocket!

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