US Housing Market (Foreclosures, ARM's ,& Bankrupcies)

[A2]

I just want some feedback from the group as to what you think about rising rates, and a stagflating housing market abroad & what will its impact mght mean to Charlotte?

Will rising rates put the brakes on the announcement and completion of Charlotte Condos?

Will soaring forclosures in other markets create doubt in the Charlotte Development community that we are developing too quickly and producing too much supply?

Are use of ARM's and 0 downpayment options, strapping our fellow Charlotteans with too much debt and increasing the potential for Bankrupcies?

Will we see a completon of such prolific projects such as the VUE, or 210?

Do you see Charlotte as a protected market, or does a rising and lowering tide really float or sink all ships?

Is the affodabilty factor going to dampen more high end projects?

One thing is for sure, the Housing Boom is over and potentially in crisis if you follow Greenspans' latest speech. Plus a great deal of other data is beginning to point towards a loomng crisis.

http://wallstreetexaminer.com/index.php?itemid=2610

Please feel free to elaborate as I have turned a bit more pessimistic in my views. I am not the same A2 as of late , and would love to hear arguements in favor of the boom continung.

A2

[Charlotte_native]

I think one of the major factors that will keep us from experiencing a burst in the housing market is the number of people moving here. If this market were being supported only by current residents moving about or moving up from place-to-place it would be a different story. But a net 4000 +/- people move here monthly -- those people have to live somewhere regardless of interest rates or other factors.

We also have fairly low home prices compared to other metropolitan areas so we are still attractive to developers, homeowners, investors.

Considering the slip on wall street this past week, and an upcoming election, the Fed might hold off on immediate rises in interest rates anyway. Maybe not, but maybe.

Overall I think Charlotte is a fairly insulated and safe market and has proven to be so for a few years now.

[kennethlin]

I agree with most of your opinions about the Charlotte market, and that it remains quite insulated. However, I would like to point out that, nevertheless, the market and interest rise HAS put a damper on many RE investors from taking advantage of the uncharacteristic low rates we've been lucky to experience in the last 2 years+. Perhaps this is a GOOD thing, as I think it is. This rate rise and the slowdown of potentially ANYONE taking advantage of low rates eliminate the amateur investors from the savvy investors, and honestly, I think that plays a healthier market.

One thing I noticed in Charlotte is that there are many homes that used to be in run-down, undesirable areas. Investors in the last several years have bought many of these houses for just about next-to-nothing, and some have been able to fix it up and sell for major profits. That was 2 years ago. Now, it is MUCH harder to do, and many buyers today aren't are happy triggered as they used to be. You have to credit these housing investor sharks in reshaping the surrounding areas of Charlotte. Places like Sedgefield, Wilmore, Wesley Heights, NoDA, Plaza-Midwood, Elizabeth, Chantilly, Steele Creek, etc, except for Ballantyne, has mostly been upscaled by these investors.

With interest rates rising as they have been the last couple of years, I think the entire nation, including Charlotte will see a steady slowdown. Some areas like NYC, LA, Miami, LV, NJ will likely see a larger correction, but like the poster above said, Charlotte is mostly insulated from that. A slowdown will occur no matter what, as it become much more costly to borrow, and even loan programs and lenders are adding more restrictions from the buyer. Many are tacking on incredibly high rates for 100% loans these days, and some don't even allow it anymore unless collateral is added.

One thing you will realize about Charlotte, the longer you live here, is that it is a city that will do well for you in the long-term. Honestly, if you have the time, any real estate property you treat as investment will do well for you in the long run. As long as you can wait, it will pay off. However, I can also tell you that Charlotte will NEVER see increases you've seen in NY, LA, LV, or Miami. But, you will see a steady rise of roughly 6-10% per year depending on your locale, and that includes an economic downturn too. Can you say the same for NYC and the likes? Actually, cities like that have been experiencing a 15-20% correction for its peak last year (I have a relative who's a realtor in the City who's been telling me).

That poses an even more interesting question. What happens to the property owners in those areas? Well, believe it or not, you are seeing a mass exodus of investors cashing out of properties in cities like NYC, LA, Miami, and LV, some even to major losses. What do they do with that extra equity? Many (if they have come out ahead), are putting their chips in markets like NC, SC, TX, KY, etc...where home prices are still relatively inexpensive and below the national average. Charlotte is getting HUGE publicity lately with projects such as the VUE, 210 Trade (which both will be built, as work has already commenced), NASCAR Hall of Fame, Carolina Panthers NFL success, Whitewater park, Wachovia/BOA banking centers, light rail system, etc. With all of those SET to commence, Charlotte will be even more insulated from the price drop in real estate, in addition to its relatively average value to live here. However, don't be surprised to see the avg. home price to go up in the 2006 census, as places like Wilmore, Sedgefield, Dilworth, Uptown CLT, Wesley Heights, NoDa, Elizabeth, and P.Midwood, which used to average less than $100k/home is now averaging over $275k/home. I would NOT be surprised if Charlotte's real estate market statistic comes out with a double digit jump from last year.

I, for one, know, since my home in Sedgefield, which I bought 3 years ago for less than $100k, has now appraised for over $250k with only $10k work to it. That is about as good as what the Charlotte market can offer you. Don't expect to make $100k+ in Charlotte anymore, as many places have peaked, and with the rising interest rate, you will likely see it steady. Wait another 2 years, and you'd likely see some homes come on the market for 20-30% below market value as many sellers need to get rid of their properties just to make the payments. I'm a FP, so I would know. JMHO from a fellow member.

[monsoon]

I have seen this happen before when I was growing up in the 70s in Myrtle Beach which has more highrise condos than anywhere else in the Carolinas including Charlotte. There are a lot of similarities to the economy now to the economy of Nixon and Ford. Energy had gotten very expensive, materials were in short supply, gold was rising to new highs, we were getting burned in the Middle East, and the stock market had become stagnant.

Despite the woes of the USA, Myrtle Beach was in a middle of boomtime during the 70s. Keep in mind that in 1970, Myrtle Beach was still mostly mom & pop hotels that were 3 stories or less and beach houses. I don't think there were 10 elevators in the entire city. So there was a huge boom going on where these places were being bought out and replaced by the first set of highrises. There were construction cranes all over the place and nobody thought it would stop. However in 1975 or so, boom, was the sound of the economy crashing there, and it all came to a halt.

For several years after that the place was littered with half completed buildings, and there wasn't even any money to take down the cranes. There was a rather infamous crane near 21st Ave N. that got nicked named the Myrtle Beach Christmas tree. It wasn't until the easy money of the 80s when construction got back underway. It is noteworthy that for many years after that Myrtle Beach/Horry county has been #2 or #3 for growth in the entire country.

The moral of that story is that Charlotte is not immune to the economic perils of the rest of the country. Keep in mind that much of the housing in the towers in downtown Charlotte, like the ones in 1970s Myrtle Beach, are not satisifying housing "needs" but rather housing "wants". It's important to understand the difference we determining if a failing economy is going to affect a project.

[MZT]

There is a subtle threadjoin here with the "Vertical McMansion" topic that metro started. The uptown condo market is not a diverse market that covers lots of family sizes and incomes. That makes it vulnerable, and I do think we'll see some developers stumble in the next few years.

Overall, Charlotte has not experienced exhorbitant price rises and will remain fairly stable. But the national economy will have an effect of some kind if there is a downturn.

I'll close with a link, to just such a developing national story. The secondary mortgage market:

Washington Post Editorial

Read this, and let those numbers sink in. $800 m-i-l-l-i-o-n simply to investigate this mess. 2,500 auditors. Watch for this story to grow bigger, as we head into the elections.

[crispin]

Charlotte has become a huge center for the mortgage industry. It's true our market hasn't seen much of a bubble, but if the tide turns in other places, many local companies will suffer.

We already have a big foreclosure problem. The reason, ironically, is that we haven't seen much appreciation. When prices go up, people can simply refinance loans they can't afford.

[A2]

Get ready guys.

India's stock market crashed today. In terms of a percentage drop, it was at one point during the day, the worse fall the entire exchanges' history!

http://sify.com/finance/fullstory.php?id=14209918

The Pacific realm fared horribly as well.

Hang Seng down over 500 points!

and other markets around the world are falling precipitously...

http://quote.bloomberg.com/apps/news?pid=1...efer=news_index

I have been warning about this for some time. This is JUST the tip of the iceburg. The only reason I put it here is simply because Housing is the last shoe to fall in the US, and then it is bye bye birdie.

And just so no one calls me a doomsdayer here is a quote from a man in the Know (kind of a scary pic, aint it!)

[monsoon]

This is the largest failed skyscraper project in the world. (105 stories)

You can see a high res photo at this link.

And more here.

[A2]

I hope that we don't have a bunch of unfinished buildings around here if the bubble does pop. BTW, speaking of unfinished projects, Does anyone know what the heck is going on with the project on Central??? It has completely stalled out. I think it is Central 27?? It looks like they literally have stopped all construction. Did the project fail to raise enough capital? It is right next to Fuels Pizza and Thomas street.

A2

[dubone]

Projects can fail regardless of national economic situation. Projects can survive regardless of national economic situation.

I sure hope you are wrong, buddy, but if you're right, there will still be people with capital, there will still be capital trying to find growth to invest in, and there will still be projects that get built. Concrete and steel will sure get a lot cheaper .

[A2]

Projects can fail regardless of national economic situation. Projects can survive regardless of national economic situation.

I sure you are wrong, buddy, but if you're right, there will still be people with capital, there will still be capital trying to find growth to invest in, and there will still be projects that get built. Concrete and steel will sure get a lot cheaper .

True, but if those investors build with no market to sell too then we just stagnate.

But if we look at things optomistically, then D ,you would be right. Heck, even the EmpireState bldg was built in the Great Depression (in 13 months no less) and Japan in its great collapse from 1989 never ceased constuction of housing and office towers. Hopefully, Charlotte will continue its boom in the face of any tough times ahead.

Here is to hoping.

A2

Please enjoy this guys. Direct from Columbia Business School students regarding the new FED chairman , Ben Bernake (Greenspan's replacement). Turn up those speakers ! It is truth.

A2

[ilektronik]

A2 are you really that doomsday ranting dude with the mic on Trade & Tryon???

This may be somewhat offtopic, but there are bunch of Wachovia I work with in India right now overseeing some offshoring project and they were all calling in telling us how everyone is freaking out in Bombay right now. They said like the police are all on "suicide watch".

I agree with dubone, I don't think we'll tank so dramatically. The American economy as of late seems to rebound quickly. Think about the fact that only a handfull of years ago the DJ was under 8K.

[A2]

A2 are you really that doomsday ranting dude with the mic on Trade & Tryon???

This may be somewhat offtopic, but there are bunch of Wachovia I work with in India right now overseeing some offshoring project and they were all calling in telling us how everyone is freaking out in Bombay right now. They said like the police are all on "suicide watch".

I agree with dubone, I don't think we'll tank so dramatically. The American economy as of late seems to rebound quickly. Think about the fact that only a handfull of years ago the DJ was under 8K.

No, I am not the doomsdayer outside at T&T

But..........

We shall crash harder to be honest.

Think Dow 4000. Sorry, but I am big into technicals and economics. I have been out of the market for the last month and have avoided the latest rounds of global market sell offs. Gold, Silver, and some Bonds (key word some), is what I have my primary holdings in. I am just praying that we can curb what I think we are all in for by 2007-2009. The markets can't handle the strain much longer.

Babyboomers leaving will deflate GDP enormously (There are approxomitely 75-100,000,000 boomers set to retire by 2014 taking with them their purchasing power and a lot of stock)

Dollar is collapsing

Fed has totally erased M3 as of March from public view. That is VERY scary. I guess the printing presses are getting ready to print some more greenbacks.

Commoidities are racing to a new Bull Market

Inflation is definately here and only getting started in taking a foothold.

Energy Prices are just getting started to affect the nation's commerce and economy.

The current debt to equity ratio on US housing has inverted for the first time in our recorded history

The US is over $9,000,000,000,000 in debt and no real way to pay it off (actually Bush and his backwards arithmatic has decided to CUT taxes. That just makes a ton sense, way to go Bush )

Personal Savings Rate is NEGATIVE for the first time in US history.

Markets

We will get some bounces over the next few months, but think of them as just that, bounces. It is really going to get ugly.

I know I sound like a mad man. But I am just warning of a crisis that the FED will not be able to avoid in the coming months and years. Heck even my fellow employees think I am being extreme, but I really see no way out of what is looming around the next bend.

And as for the suicide watch, I spoke with a fellow friend of mine, he is a bond trader, who also mentioned of suicides in India and riots. The only reason you do not hear more about it, is becasue the Gov't is doing ALL they can to keep you from hearing what is shaking the global economy.

We are looked at as the main culpret in face of a global meltdown.

When the US sneezes, the whole world will catch a cold.............................

A2

[Charlotte_native]

I hope that we don't have a bunch of unfinished buildings around here if the bubble does pop. BTW, speaking of unfinished projects, Does anyone know what the heck is going on with the project on Central??? It has completely stalled out. I think it is Central 27?? It looks like they literally have stopped all construction. Did the project fail to raise enough capital? It is right next to Fuels Pizza and Thomas street.

A2

I was beside it the other day at the Tattoo Shop, they were in full swing working on the foundation (last week)

[monsoon]

Babyboomers leaving will deflate GDP enormously (There are approxomitely 75-100,000,000 boomers set to retire by 2014 taking with them their purchasing power and a lot of stock)

Keep in mind that the term babyboomer is used to enclose the group of people born across the span of two decades, 1945 - 1964. They are not all going to retire at the same time so the economy will absorb this bunch into retirement over the same set of decades. The youngest baby boomers will just be in their early 50s in 2014 and no doubt still working to pay bills like sending their kids through college. Also, people are working longer now because pensions have disappeared and anyone born after 1959 will have to wait longer until they can collect social security.

[Charlotte_native]

Keep in mind that the term babyboomer is used to enclose the group of people born across the span of two decades, 1945 - 1964. They are not all going to retire at the same time so the economy will absorb this bunch into retirement over the same set of decades. The youngest baby boomers will just be in their early 50s in 2014 and no doubt still working to pay bills like sending their kids through college. Also, people are working longer now because pensions have disappeared and anyone born after 1959 will have to wait longer until they can collect social security.

I am no economic expert, but do we really think that when these folks retire they will all stop spending money? I don't think the ones I know will. I have had an uncle retire recently as well as a few neighbors. They seem to be on a spending frenzy, and NO, they are not wealthy by any means, they just saved and have equity in their homes and are doing things like tons of travel, home improvements, a new trailer and a boat, etc. The uncle is working in the side and started a little business that he says pays the bills so he hasn't dipped into any retirement though he retired two years ago.

I suspect a lot of people will tighten up, but maybe a lot won't. I know when I retire I won't hoard what I have so I can die on a pile of gold! Zero coming in, Zero going out (obviously I don't have kids!)

[Charlotte_native]

http://realtytimes.com/rtcpages/20060522_linearmarkets.htm

The link above was sent to me by a friend in Miami...this seems to hit on a lot of what this discussion talks about -- check out the references at the bottom of the article.