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Remember Susan Wachter?


It's just a healthy correction!!


Alright, so Susan Wachter is not a name pasted on your refrigerator door. She is the Wharton's professor misquoted by Mr. Toll at the height of his delusions of grandeur, for the proposition that U.S. home prices were on their way to match European home prices. Don't think Mr. Toll will be quoting the esteemed professor any time soon, considering her recent opinion that the US real estate market is "at a turning point. We're all hoping for a flat market, and not a plummeting market."

That strenuous hoping on the part of many real estate "investors" is not without good reason. Last week Pepe pointed out a Boston Globe article citing some less than happy home sellers. Isolated market you say? Uuhmm, let's see. According to recent data I gathered from various newspapers,

  • Inventory in the Phoenix area has risen from 8,600 units is April to a cool 22,340 in October;

  • Cancellation rates for San Diego condos jumped to 47% in the third quarter;

  • Cash buyers of investment properties (a/k/a "vultures") in Las Vegas report small investors unloading their properties;

  • In this week-end Washington Post there were less than a handful of new home sales ads without incentives, no doubt offers stemming from the good will of the Holiday season;

  • The University of California, Los Angeles' quarterly Anderson Forecast sees a downturn of several years that will put 500,000 in the construction business out of work, and 300,000 in the finance sector. Too pessimistic? Ok, I offer you

  • Ned Davis research's comments that "we are considerably more concerned about conditions in the housing market than we were two years ago. Affordability has begun to break down, particularly for first time home buyers. . . ". They foresee a decline of 5% in home sales and flattish prices.

  • What about just a "healthy correction"? Sure one can hope that the speculators who bought 20% of the homes recently sold will just sit tight and watch their equity position go upside down. And we can also hope that those who required sub-prime loans to play the mania (the pctg. of sub-prime loans jumped to 19% of all mortgage applications in 2004, nearly double the historical average) will discover new-found wealth under the pillows.

I will stop now, before mentioning more gory details, like how over the last two years FBI prosecutions for mortgage fraud have nearly tripled. I tell ya, those insider sales by Mr. Toll and Mr. Hovnanian sure look like a real stroke of good fortune. I can just hear them say "Merry Christmas to all, and to all a good night."

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Position in TOL
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