“Going Back To More Normal Times” In Kansas
The Tonganoxie Mirror reports from Kansas. “Whether the signs say ‘For Sale’ or ‘For Rent,’ owners report it’s taking longer to move houses these days. For instance, Realtor Dan Lynch said in 2005, he sold 21 single-family homes in the Tonganoxie subdivision Jackson Heights. ‘This year I think we sold half that,’ Lynch said.”
“Lynch noted, since summer, Tonganoxie area home sales have been a little slower than in the past four years. ‘Probably, we’re going back to more normal times,’ Lynch said. ‘The sales of the past are cooling off a little bit.’”
“‘It’s a little slower than it’s been and I think that’s pretty much maybe nationwide if not just in Kansas,’ said Steve Jones, a Lawrence Realtor. ‘But we’re still pretty positive and there’s still property moving.’”
“However, he said sometimes that takes some enticement. ‘Many sellers both of new and existing homes have either lowered their prices or are offering various incentives such as paying closing costs and prepaid items, part of the first year’s insurance premium, appraisals, various items that would come up on their loan application,’ he said.”
“Jones said he was showing homes in Tonganoxie that had been on the market since early summer. The homes, he said ranged from $159,900 to $169,000. ‘It’s a terrific time for homebuyers, it really is,’ Jones said.”
“Situations like this hurt builders who must pay interest on the money they borrowed to build the homes. Sam Wiles, who’s been building Tonganoxie houses for more than 30 years, sees the other side of the housing market, the side that builders fear, speculative homes that take longer than expected to sell.”
“‘There’s too many houses on the market,’ said Wiles, who finished his last spec home about a year ago. It’s still for sale.”
“A builder’s wait for a buyer can be costly. There’s utility payments, as well as taxes, insurance and interest. ‘Three months on a house will run you about $3,500 in interest so it doesn’t take long to eat your profit up,’ Wiles said.”
“For instance, Wiles said he lost about $40,000 on one of his spec homes.”
“Tonganoxie builder Richard Faherty was concerned a house he’d built through Joy Contracting wouldn’t sale, or rent. After months of not selling, Faherty put the house up for rent. And eventually a renter came around. ‘The Lord sent me mine,’ Faherty said of the person who rented a new house. ‘All I know is pray hard.’”
“Jeanne and Frank Smith have five rental houses in Tonganoxie. Of those, one has been vacant for a month. ‘The rental market has definitely changed,’ Jeanne Smith said. ‘I’d say eight years ago we would be getting a million calls and we’d have the pick of a lot of good renters.’”
“When interest rates for home loans plummeted several years ago, things started to change. People who had rented suddenly qualified for home loans, so they were able to buy rather than rent. ‘It was like lifting the drain out of a sink of water,’ said Smith, who has been in the rental business with her husband for about 18 years.”
“Compounding that, a building boom exploded in Tonganoxie, particularly with new duplexes and townhomes. ‘And then it was just totally flooded,’ Smith said of the rental market.”
“As landlords they know how much they can charge for rent. ‘You can’t go over the ceiling,’ Smith said. ‘If you do you can’t get renters. They can go and buy a house for that price. I feel like we’re stuck, not raising the rent. And taxes and insurance continue to rise.’”
“‘The costs, carpet, everything has gone up in price, everything,’ Smith said. ‘But you can’t really raise the rent.’”
“Marilee and David Drennan own five Tonganoxie rental houses. Like the Smiths, they own older Tonganoxie homes. They don’t have much problem finding renters. ‘Everything that we have is under $600 a month,’ Marilee Drennan said. ‘I think that’s a big part of it.’”
“The Drennans have one house that’s vacant and she expected it would be a month or two before they’re able to rent it. ‘I would probably buy more rentals,’ Drennan said. ‘It’s just sometimes you hit a few bumps. They’re a very good investment…if you can buy real estate under the appraised value.’”
“Susan Nester sees another side of the market, home mortgage foreclosures. Nester oversees sheriff’s sales for the Leavenworth County sheriff’s department. The number of sales, countywide, increased to 153 in 2006, compared to 109 in 2005.”
“‘Most of these are all mortgage foreclosures, people that are not able to pay their mortgages,’ Nester said.”
“Jerry McPherson, a loan officer at Community National Bank, said he understands why there’s an increase in mortgage foreclosures. ‘The economy is not quite as strong, and I think sometimes people fall for the low rates,’ McPherson said.”
“Depending on the type of loan, low interest rates can climb, leaving homeowners with higher payments than they’d planned on. ‘We’ve been pretty lucky for we haven’t had to take back a lot of houses,’ McPherson said. ‘We’re keeping our fingers crossed on that one.’”
‘Workers at Anderson Corp. said they’ve been notified that the window and door maker will lay off more than 400 workers by the end of the year.
‘It’s Black Tuesday,’ Bayport Mayor-elect Jon Nowaczek said. ‘We’re concerned for the workers who are going to be losing their livelihoods and for their families - the Twin Cities area has taken some hits, with Ford and their plant, 3M, Northwest. It’s kind of a grim picture out there.’
‘Many companies have been hurt by the downturn in the home construction industry. Housing starts and sales of existing homes are down significantly from recent years.’
It’s starting to trickle down…..layoffs at Anderson Windows, lots of companies make building products.
Lots of workers with no jobs, cant pay their mortgages, cant pay their car loans.
finnman: trickle down, domino effect, whatever it is, it is going to come with a vengeance. And what is there to replace it? Are there any bubbles remaining? I feel like those of us here have been beating our heads against a wall. This should come as no surprise to anyone, and yet people still want to stick their heads in the sand.
We will profit from our persistent belief in the tenets of Ben’s blog. We didn’t try to screw anybody; we just waited on the sidelines while the pigs fed at the trough. Nothing to feel guilty about in that. Best not to gloat, of course, but I think we should all be able to enjoy immensely the treasure of properties that will be available to us before long, at the prices we all along knew they should command.
‘Probably, we’re going back to more normal times,’
If only that were true. I think there will be more blight….
“As landlords they know how much they can charge for rent. ‘You can’t go over the ceiling,’ Smith said. ‘If you do you can’t get renters.
Has there been a better time to be a cash rich renter?
Coming soon: Money magazine’s profile of the intelligent investor - a renter socking away huge savings.
Could happen. I love this. I could afford to pay twice what my rent is but my landlord is limited to what the market will bear. It’s like all the people who max at their credit cards just to get by are negotiating for me.
thought rents were supposed to skyrocket- if you’re near new contruction you can squat for free
“Jeanne and Frank Smith have five rental houses in Tonganoxie. Of those, one has been vacant for a month. ‘The rental market has definitely changed,’ Jeanne Smith said. ‘I’d say eight years ago we would be getting a million calls and we’d have the pick of a lot of good renters.’”
Heck, in some states, if you squat for long enough, you can legally obtain title to the place for free:
http://en.wikipedia.org/wiki/Adverse_possession
Yeah, but you gotta be there a long time for that to go into affect. And you have to show that you put some skin into the game usually, like paying property taxes or making improvements. By putting money in, you are giving constructive notice to the owner of title. But the process is not as easy as it sounds.
Tonganoxie??? I thought that’s what you get when you eat those green onions at Taco Bell!
Weren’t they supposed to get that shiny new supercollider?
No, that’s called Waxahachie.
Actually, I knew that.
Maybe they can finish the thing, then use it to ram all those vacant houses into each other at the speed of light. Would do wonders for all that excess inventory.
The fallout from the supercollider got me some $50K lots for $5-8K.
LOL - good one!
The Lord sent me mine,’ Faherty said of the person who rented a new house. ‘All I know is pray hard.’
_____________________________________________________
The Lord Giveth and He taketh away!
So you want God to find some fool to take you out of your bad decision? Not the kind of religion I want to be part of!
All I can say is, I hope this guy’s tenant continues to be an angel. Because there are a lot of devilish tenants out there…
The St. Joseph statue lifts the whole burden off your back, but I think Faherty is going to need help from the “Toxic Loan” gods, which is very un-Christian (not allowed in Kansas…. just ask Bill Maher).
Oh, these evangelical corporate types. I wonder about the priced-out people who pray that they’ll some day be able to afford a house. Faherty’s God probably doesn’t listen to those prayers.
No he doens’t. He only wants to help out the “rich” and those that already have plenty - or at least that is what they would have you believe
Faherty’s God is the “Jabez Prayer”/Prosperity Gospel God. You know, the one that says it’s “ok” to molest and/or cheat as long as you’re a corporate bigwig, televangelist or Congressman. And says that material prosperity is *always* a mark of superior virtue, and being poor is a curse due to one’s own lack of faith in the Prosperity God.
If Jesus were alive today, he’d be the one cast out of the Temple by the moneychangers, not the other way around.
Harm -
Well said!
The Bible is full of rock-solid advice for living, but it’s based on sacrifice, deferred gratification, sound stewardship of the talents and resources you’e given, and the value of seeking wisdom and integrity over material, temporal things (especially unearned riches). Today’s pulpit prostitutes (a few names come to mind) shamelessly teach that it’s all about what God can do for you, rather than obedience to God’s laws (which make a lot of sense, by the way). No wonder most churches are half-empty today.
Stagflation:
“As landlords they know how much they can charge for rent. ‘You can’t go over the ceiling,’ Smith said. ‘If you do you can’t get renters. They can go and buy a house for that price. I feel like we’re stuck, not raising the rent. And taxes and insurance continue to rise.’”
I can recall my last landlady weeping such crocodile tears. As she raised my rent…
Anyone in Arizona today can find plenty of choices.
January is the new Spring. For Sale signs are being printed faster than dollars as you read this.
“January is the new Spring.”
LOL
NOTHING is being printed faster than dollars!
“NOTHING is being printed faster than dollars! “
Exactly!
I know. Lots of houses (4 br / 2+ ba) for rent for less than $1200. Never been lived in either! and are great neighborhoods.
Where?
(Just curious…)
“The homes, he said ranged from $159,900 to $169,000. ‘It’s a terrific time for homebuyers, it really is,’ Jones said.”
Uh, were’nt those prairie shacks out there like, $60k, a couple of years ago?
So even Kansas has had bubbling.
If houses priced at $159K are sitting, how much (or little in this case) does the average Tonganoxian make? You can finance that whole amount at 6% and your monthly payment is below $1,000/month.
Just a few miles from Kansas City, maybe $15-$20 an hour on average.
It’s between Lawrence and Leavenworth. Officially the Middle of Nowhere. Here are the stats:
Population (year 2000): 2,728.
Estimated population in July 2005: 3,774 (+38.3% change)
Males: 1,306 (47.9%), Females: 1,422 (52.1%)
Leavenworth County
Zip code: 66086
Median resident age: 32.2 years
Median household income: $44,278 (year 2000)
Median house value: $93,700 (year 2000)
Median house costing 2x median income. Hum, so no different in Kansas than California.
Yup. Except that in your example, the Californian needs to be a heart surgeon while the Kansasite just needs a paper route. But we’re in parity.
I think its Kansan. I got this vision of a parasite dressed as a Jayhawk with symptoms that include:
1) A desire for wide open space
2) Turning blue and sprouting a beak on occassion
3) Mumbling to oneself about Roy Williams coming back to revive the glory days.
No slight to KSU but when I picture a Kansasite I think of the Jayhawks.
Wages in Kansas are surprisingly high given the affordable housing. In fact, memory serves me that its largest county (population 450,000) in the state is among the top twenty counties in the US in per-capita income, only a couple of thousand below OC. Johnson county Kansas is where all the rich executives in KC live. And, the place is a lot less slimy than OC.
“It’s between Lawrence and Leavenworth. Officially the Middle of Nowhere.”
But it’s only about a 20 mile commute to KC.
“‘There’s too many houses on the market,’ said Wiles, who finished his last spec home about a year ago. It’s still for sale.”
Brilliant. I imagine he spent the same amount of time researching the market as he did paying attention in high school English class.
Funny, six months ago all the aricles Ben posted were California and some Florida, possible Boston New York. Now Ben is reporting articles from small town hinterlands. Small bubbles popping, or the media just reporting it?
BTW, is a “spec” house a speculator house or a specification house? Seems to me like both. Those spec houses are built to specifications. The. exact. same. specifications.
A spec house is one without a buyer lined up ahead of time - build it and they will come sort of thing.
That is to say (for the benefit of oxide), the house was built on the SPECulative idea that a customer would appear.
No, a spec house is one built according to plan (specification), i.e without customizations like granite countertops. Often, but not always these are built without a pre-existing buyer.
It’s very hard to build custom homes without a buyer lined up. Hence a “spec” home.
I vote with sf and az. It is on SPECulation that someone will buy, not a question of custom/specification.
Just listen to the way that builders talk. If they didn’t SPECulate that someone would buy a house later that they built today, they wouldn’t be bitching about all of these SPEC homes that won’t sell.
Great. Just great. Once the last remaining equity locusts see 150K for a home in Kansas, there goes the neighborhood for sure! Kansas, welcome to dingbat land! Here come the NYer’s and Clownifornians looking for that mansion for a sweet 150K. Tragically, that same mansion could have been had for less than 100K a couple of years ago. Those locusts all think they are so smart. Kiss your whatever your tax base was/is goodbye. These knuckleheads are going to drive you nuts. BTW, I hope, at least the Clownifornians, realize what winters are like across the open lands of Kansas. Bone Chilling to say the least, not the 75 degrees we had today in South OC!
Our nephew left upstate NY a couple of years ago for beautiful Parsons, Kansas. Also gave Topeka area a try.
Got married to a nice Dorothy Gale type, had two beautiful fresh-faced babies, and guess what? They’re moving home where the action is. She couldn’t stand it there anymore after coming back to NY with him a couple of times.
I actually liked it out there when we visited. Got up at 7 am in a little town, walked through big, clean and empty streets with no lights and had the best breakfast at some little diner that was recently remodeled…like 1952…they were still proud.
But think about it. How can they move to KS if they can’t sell in CA or NY (or wherever)?????????????????????
It’s a terrific time for Nortel buyers - it’s bottomed out at $60, and people should buy now, before the price goes back up and they can’t afford it.
I’m having the hardest time getting my head around the idea of a bubble in Kansas. Don’t get me wrong, the numbers show there is one there… but how did a housing bubble get traction in Kansas?!? (Ok, I know the answer is easy credit… but still…)
I’m waiting to see an article in the WSJ on tightening credit. Its coming… but when? I think the article will lag reality by only 30 days (my best guess). Hmmm… it could be a very interesting spring. However, I still predict 2Q 2007 is when it *really* gets interesting.
Neil
kansas is not immune to bubbles.
In terms of real dollars (adjusting for inflation), the price of farmland in Kansas peaked in the 1880’s. Yup, that’s NOT a typo.
Back then, there was a boom in KS because the railroad had just been built, and the price of KS wheat soared.
Even today, 120 years later the price of farmland has not completely recovered. Then again, if this bubble spreads from KC far enough, there is hope
link to the bill bonner article I read this in — http://www.lewrockwell.com/bonner/bonner167.html
oh, it gets even better. From the article: “… Kansas farmland sells for an average of $800 per acre. Adjusted to 1880 prices, that is only about $20, or barely 10% of the peak prices set 120 years ago.”
In other words, even today, Kansas farmland is STILL 90% underwater (in real terms) after 120 YEARS!
That would be like the median house in the OC dropping to $60K (in real terms) and staying there until about 2126.
You can buy lots of houses in Buffalo and Rochester now for $30K. Who says SoCal can’t crash and stay there? In 50 years, we may view it as just an extension of Tijuana.
I thought you could get farmland for free back then via the Homestead Act.
Only in the territories - the Dakotas. Oklahoma, etc.
“There is no place like Home ”
Remember the Wizard of Oz .
Okay! Let us chant the realtor mantra! All together now! “It’s a terric time for buyers - it really is.” I don’t know if any of you saw that Frasier episode when they were watching, “Antique Road Show” a couple of years back. Every time someone said, “Veener,” they all raised their wine glasses and toasted in unison, “VEENER!” That’s what I’m going to do as I read Ben’s blog. I’m going to have a glass of Merlot at the ready and when I read, “It’s a terrific time for buyers,” I’m going to offer up a toast. Problem is, I’ll probably be soused by the end of the day with all these idiot realtors chanting the realtors mantra, “It’s a terrific time for buyers. It really is.”
I agree. Especially with the el primo stuff going into boxes. Boxes are for you if you’re toasting cheerleader rah rah.
Hiccup.
http://www.philly.com/mld/philly/entertainment/16172705.htm
Oh come on don’t act so suprised. I’ve been on this blog for nearly a year and I’ve repeatedly told you all that there is a bubble in MO (KC is in MO). I live 3 hours south of KC in a dumpy little town of 4,000 people and the bubble is popping here. All it took was a few people from CA/MA etc. moving here and overpaying and the builders went nuts building McMansions that none of the locals could afford. In Republic, a “suburb” of Springfield, MO there are supposedly 400 spec homes with no buyers.
“In Republic, a “suburb” of Springfield, MO there are supposedly 400 spec homes with no buyers” In the last crash (90s) they found large phantom condo complexes sold out to phantom buyers. This is just the beginning….like I use to say, “I can’t sell all these homes!”
Ben,
I grew up in Kansas and just helped my mom sell her house in Wichita. I don’t think Kansas is worth your time. There is no real bubble there. Housing hasn’t risen much.
Kansas is definitely an improvement over the likes of, say, Fresno and Bakersfield. At least the prices are one-third of the Central Valley and the air isn’t polluted. Even many of the coastal California cities are dumps, filled with homeless people and illegals.
I’m a credit analyst in Overland Park and specialize in RE credits. I would would not say we have had a bubble here. Prices have moved up, but not at the pace of the coastal markets. The main reason for that dirt in Kansas is cheap and plentiful. You can always build a little farther out of town. We are becoming more cautious about financing spec (speculative) houses and our smarter builders reduced their inventories on their own this year. Some of our larger builders are moving their ’sitters’ into the secondary market on 30 year mortgages and are looking for renters and then will offer the homes to the renters at a later date.
As far a Tonganoxie goes, we passed on a development deal in that area. That town is a little too far out of the perimeter of KC to absorb another 50 lots at an acceptable rate. The interesting thing was that the applicant was a classic creature of the ‘bubble’. He had no real experience in construction or RE development, limited financial resources and was looking to make an easy buck with no clue about the required skill, effort and risk involved. We see these types more and more often. Actually, I’d like to see things stay tough for another year just to wash out the novices and get them back into mutual funds where they belong.