John Murphy Reports

John Paulson is now one of the richest men in the world and one of the most successful Wall Street traders based upon his bet that the housing market was going to come a part.  According to the Wall Street Journal, John Paulson is now taking some of those winnings and building an investment portfolio with the belief that gold is going much, much higher than $1,150 per ounce.

While the gold supporters are happy to hear this news, the one thing I keep thinking about is that when he “shorted the housing market” in a massive way in 2008, I don’t recall hearing much about him and his investment beliefs.  Now that it’s out in the open, perhaps it’s just too conventional.

There are those who believe the U.S. Dollar is going to collapse and that gold is going to the moon.  Perhaps those folks are right, but it seems like the whole world believes the U.S. Dollar is going to zero and every other ad on the radio is some vendor selling gold.

Let’s see…conventional wisdom in 1999 is that the internet changed everything and that earnings no longer mattered.  It was a New Economy.   Then after than crashed and everyone moved in to real estate, people said that housing never goes down….and then that crashed and about put us in to a Depression.   Now they say that the U.S. Dollar is going to collapse and that gold is going to $2,000, or $5,000 or $10,000 per ounce.   This last scenario has yet to play out fully.   I can see why people think this is going to happen because of the way the Obama Administration and Congress are spending money, but when the whole world is on one side of the trade, I say beware!

There’s been a piece of land for sale for a number of years at the northeast corner of Peony Lane and Schmidt Lake Road in NW Plymouth just across from the new Wayzata High School and within one mile of Providence Academy.  Most of the land is wet, but clearly there is enough to develop a neighborhood.   Pulte has broken ground on a new neighborhood called Elm Creek Highlands.   There isn’t a lot of information available yet.   When I called the company they said pricing hasn’t been set yet, but they plan to have homes available by March 2010 – I’m sure in time for the Spring Parade of Homes Tour.  If I had to guess, I would imagine they will have prices between $550,000 – $725,000.

There are a number of projects underway in NW Plymouth and SW Maple Grove because both of those areas are in the highly sought after Wayzata School District.   These new construction neighborhoods are going to continue to put heavy pricing pressure on existing home sellers who are trying to unload their older houses.

Given that the U.S. Government just allowed for a billion dollar plus tax refund for many of the national homebuilders, Pulte’s pockets should be plenty deep at this point to be able to weather any additional price competition either from the local builders or Lennar which is very active in NW Plymouth and SW Maple Grove.

One could look at Pulte’s move a couple of ways.  Perhaps this is a sign that they see an improving marketplace in the northwest suburbs of the Twin Cities and so they are moving forward in a big way to lead the market out of this morass.  Or, perhaps another way to look at it is this was a highly visible piece of land that would be great for any builder to develop regardless of the soft market conditions because they want to have a foothold in the Wayzata School District.

Pulte CEO Richard Dugass was just quoted by Market Watch that things remain choppy and it’s difficult for move up buyers to be able to sell their existing homes in order to move in to a new Pulte home.

Just a quick note to say that if you are trying to do a short sale with Bank of America, you will need to have lots and lots of patience.   Recently I’ve had the opportunity to attend a few short sale events and trainings for real estate agents.  If there is a bank that has the absolute worst reputation amongst real estate agents, it’s Bank of America.

Generally speaking, most of us get little information and guidance from Bank of America and it can take months to move a short sale along.

I heard today that perhaps they were in the middle of reorganizing their short sale department.  Perhaps it will get better, but for the past year, it’s been terrible dealing with them.

Calculated Risk has some excellent excerpts from a writer in Minneapolis discussing the latest goings on with rental pricing in Minneapolis.

Based upon this commentary, it sounds like the $8,000 first time home buyer tax credit is definitely having a negative impact on the landlords trying to rent their properties.